[Sketch of L. Roy Papp appears here]
PAPP AMERICA-ABROAD FUND, INC.
A No-Load Fund
ANNUAL REPORT
DECEMBER 31, 1999
Managed by:
L. Roy Papp & Associates
6225 North 24th Street
Suite 150
Phoenix, AZ 85016
(602)956-1115 Local
(800)421-4004
E-mail: [email protected]
Web: http://www.roypapp.com
----------------------
<PAGE>
CHART
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PAPP
AMERICA-ABROAD FUND, INC. AND MORGAN STANLEY WORLD INDEX
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year Since Inception
Papp America-Abroad Fund 14.0% 26.3% 19.0%
Morgan Stanley World Index 24.9% 19.8% 15.7%
Year Papp America-Abroad Fund Morgan Stanley World Index
12/6/91 $10,000 $10,000
1991 10,944 10,720
1992 11,811 10,158
1993 11,803 12,450
1994 12,725 13,079
1995 17,440 15,848
1996 22,262 17,985
1997 28,910 20,817
1998 35,799 25,882
1999 40,815 32,338
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE
The investment return and principal value of an investment in the Fund will
fluctuate so that Fund shares, when redeemed, may be worth more or less than
their original cost. This Fund's performance is measured against that of the
Morgan Stanley World Index. Approximately 46% of the earnings of the companies
in the Fund's portfolio are derived from foreign sources and 54% are derived
from United States sources. The Morgan Stanley World Index is an unmanaged
[market-weighted] index that includes 50% foreign companies and 50% United
States companies. The values shown include reinvested dividends.
2
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
Dear Fellow Shareholder:
Our Fund had a decent year in 1999 being up 14.0%. However, we lagged
both the Morgan Stanley World Index, against which we compare ourselves, which
was up 24.9% and the Standard & Poor's 500 Stock Index which was up 21.0%. Since
inception in late 1991 we have done considerably better than the World Index as
is shown by the chart on the opposite page.
Both the larger and smaller companies in our Fund had so-so years
performance wise because we did not own the speculative Internet stocks which
traded on multiples of sales even though there were no earnings. Also, there was
some concern that the multi-national companies would be negatively impacted by
Y2K problems. Of course, this turned out to be a false alarm.
Year-end results are now being reported by many of our companies and
for the most part they appear to be most satisfactory. This does not come as a
surprise because we emphasize ownership of companies with a long history of
increased earnings. In fact, our disappointments tend to occur when the Wall
Street analysts become overly optimistic and project unrealistic earnings
increases.
Our Fund is designed to provide long-term investors with the
opportunity to own multinational companies that will fully participate in the
growth of international commerce that we foresee. For the most part these
necessarily are larger companies with the financial strength necessary to
compete around the globe, but we also buy smaller multinationals providing they
have a unique product in demand and provided they have the same growth patterns
as our larger companies. To a large extent we will continue to avoid foreign
companies because we are aware that stock markets outside the United States are
far different than our own. Many of their companies are small and
undercapitalized. In some cases their markets are rigged and their accounting is
not up to American standards. They are subject to political tinkering and lack
SEC disclosure requirements.
It appears to us that many of the concerns American investors have had
about multi-national companies are now subsiding. The Asian economies appear to
be slowly recovering although one should not be deceived by the bullish tone of
their stock markets. The same holds true for Europe where the markets were quite
buoyant in 1999. Of more importance to us, however, is the message we have been
receiving from our companies that business is good and getting better.
Under these circumstances we believe the year 2000 will be a good one
for patient long-term shareholders.
Warmest regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
February 8, 2000
P.S. As of today, our Fund is up 4.9% this year while the World Index is down
-- ----
4.0% and the S&P 500 is down 1.8%.
----
3
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<TABLE>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks of Shares Value
------------- ------------ ------------
<S> <C> <C>
COMPUTER EQUIPMENT (21.2%)
EMC Corp. *
(Manufacturer of enterprise computer storage systems) 56,000 $ 6,118,000
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical electronic equipment) 95,000 10,824,063
Intel Corporation
(Manufacturer of microprocessors, microcontrollers, and memory chips) 367,000 30,208,687
International Business Machines Corporation
(Global provider of information technology, hardware, software,
and services) 40,000 4,320,000
------------
51,470,750
------------
FINANCIAL SERVICES (16.3%)
American International Group
(Major international insurance holding company) 56,250 6,082,031
General Electric Co.
(Diversified financial and industrial company) 93,000 14,391,750
State Street Corporation
(Provider of U.S. and global securities custodial services) 260,000 18,996,250
------------
39,470,031
------------
ELECTRONIC EQUIPMENT (16.0%)
American Power Conversion *
(Leading producer of uninterruptible power supply products) 1,036,300 27,332,412
Molex, Inc.
(Supplier of interconnection products) 253,000 11,448,250
------------
38,780,662
------------
Industrial Services (14.3%)
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 565,000 32,593,438
Omnicom Group, Inc.
(Worldwide advertising agencies) 20,000 2,000,000
------------
34,593,438
------------
Software (10.6%)
BMC Software, Inc. *
(Develops data and application management software) 68,000 5,435,750
Microsoft Corporation*
(Personal computer software) 173,000 20,197,750
------------
25,633,500
------------
Pharmaceutical (6.9%)
Merck & Company
(Prescription pharmaceuticals) 248,000 16,631,500
------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
------------------------- ------------ ------------
<S> <C> <C>
RESTAURANTS (4.2%)
McDonald's Corporation
(Fast food restaurants and franchising) 254,000 $ 10,239,375
------------
SPECIALTY RETAILING (3.8%)
Office Depot *
(Leading retailer and direct marketer of office supplies) 840,500 9,192,969
------------
MEDICAL PRODUCTS (3.5%)
Johnson & Johnson
(Healthcare products) 86,500 8,055,313
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 10,000 364,375
------------
8,419,688
------------
TELECOMMUNICATIONS (1.3%)
Cisco Systems, Inc. *
(Leading supplier of computer internetworking systems) 20,000 2,142,500
L.M. Ericsson Telephone AB
(Manufacturer of telecom systems and cellular handsets) 15,000 985,312
------------
3,127,812
------------
MISCELLANEOUS (1.3%)
Gillette Company
(Personal care products and batteries) 22,000 906,125
Steiner Leisure Ltd. *
(Provider of spa services, beauty salons, and health clubs on cruise ships) 160,750 2,682,516
------------
3,588,641
------------
TOTAL COMMON STOCKS - 99.4% 241,148,366
CASH AND OTHER ASSETS, LESS LIABILITIES - 0.6% 1,461,979
------------
NET ASSETS - 100% $242,610,345
============
NET ASSET VALUE PER SHARE
(Based on 6,882,729 shares outstanding at December 31, 1999) $ 35.25
============
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
5
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<TABLE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31,1999 AND 1998
ASSETS
1999 1998
------------- -------------
<S> <C> <C>
Investment in securities at market value (original
cost $128,437,747 and $248,043,277 at December 31,
1999 and 1998, respectively) (Note 1) $ 241,148,366 $ 338,929,906
Cash 1,043,700 6,522,782
Dividends and interest receivable 182,268 361,875
Receivable for investment securities sold 236,011 -
------------- -------------
Total assets $ 242,610,345 $ 345,814,563
============= =============
LIABILITIES
Redemptions payable $ - $ 240,533
Payable for investment securities purchased - 2,759,394
------------- -------------
Total Liabilities $ - $ 2,999,927
============= =============
NET ASSETS
Paid-in capital $ 130,597,831 $ 252,595,092
Accumulated undistributed net realized gain
on sale of investments 219 371
Accumulated undistributed net investment loss (698,324) (667,456)
Net unrealized gain on investments 112,710,619 90,886,629
------------- -------------
Net assets applicable to Fund shares outstanding $ 242,610,345 $ 342,814,636
============= =============
Fund shares outstanding 6,882,729 10,670,513
============= =============
Net Asset Value Per Share (net assets/shares
outstanding) $ 35.25 $ 32.13
============= =============
The accompanying notes are an integral part of these financial statements.
6
</TABLE>
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<TABLE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,700,480 $ 2,686,890
Interest 65,112 224,020
Foreign taxes withheld (9,894) (20,469)
------------- -------------
Total investment income 1,755,698 2,890,441
------------- -------------
EXPENSES:
Management fee (Note 3) 2,877,790 3,292,225
Filing fees 52,812 116,312
Printing and postage fees 41,376 46,725
Custodial fees 35,688 28,994
Transfer agent fees 31,635 40,994
Accounting fees 16,000 14,500
Directors' attendance fees 10,800 6,300
Legal fees 4,957 4,534
Other fees 2,197 14,073
------------- -------------
Total expenses 3,073,255 3,564,657
------------- -------------
Net investment loss (1,317,557) (674,216)
------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 145,756,212 92,997,025
Cost of securities sold (135,222,930) (92,579,267)
------------- -------------
Net realized gain on investments sold 10,533,282 417,758
Net change in unrealized gain on investments 21,823,990 65,360,302
------------- -------------
Net realized and unrealized gain on investments 32,357,272 65,778,060
------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 31,039,715 $ 65,103,844
============= =============
The accompanying notes are an integral part of these financial statements.
7
</TABLE>
<PAGE>
<TABLE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (1,317,557) $ (674,216)
Net realized gain on investments sold 10,533,282 417,758
Net change in unrealized gain on investments 21,823,990 65,360,302
------------- -------------
Increase in net assets resulting from
operations 31,039,715 65,103,844
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (9,235,258) (417,387)
------------- -------------
Decrease in net assets resulting from
distributions to shareholders (9,235,258) (417,387)
------------- -------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 63,363,641 168,123,001
Net asset value of shares issued to shareholders
in income and net realized gain on investments sold 8,582,551 374,828
Payments for redemption of shares (193,954,940) (178,618,944)
------------- -------------
Decrease in net assets resulting
from shareholder transactions (122,008,748) (10,121,115)
------------- -------------
Total (decrease)/increase in net assets (100,204,291) 54,565,342
Net assets at beginning of the period 342,814,636 288,249,294
------------- -------------
Net assets at end of period $ 242,610,345 $ 342,814,636
============= =============
The accompanying notes are an integral part of these financial statements.
8
</TABLE>
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp America-Abroad Fund, Inc. (the Fund) was incorporated on August 15, 1991,
and is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Operations of the Fund commenced on
December 6, 1991. The Fund invests with the objective of long-term capital
growth in the common stocks of United States companies that have substantial
international activities and, to a much lesser extent, in the common stocks of
foreign enterprises that are traded publicly in United States securities
markets.
The policies described below are followed by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
INVESTMENT IN SECURITIES
For purposes of computing the net asset value of a share of the Fund, securities
traded on securities exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales prices at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Other securities traded over-the-counter are valued at the most
recent bid quotations. Securities for which quotations are not available and any
other assets are valued at a fair value as determined in good faith by the Board
of Directors. The price per share for a purchase order or redemption request is
the net asset value next determined after receipt of the order.
The Fund's net asset value per share (NAV) is the value of a single share. It is
computed by dividing the market value of a Fund's assets, less its liabilities,
by the number of shares outstanding, and rounding the result to the nearest full
cent. The NAV is determined as of the close of trading on the New York Stock
Exchange, currently 4:00 p.m. New York City time, on any day on which that
Exchange is open for trading.
Investment transactions are accounted for on the trade date (the date the order
to buy or sell is executed). Dividend income is recorded on the ex-dividend date
and interest is recorded on the accrual basis. Realized gains and losses from
investment transactions and unrealized appreciation or depreciation are
calculated on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code which are applicable to regulated investment companies. The Code requires
that substantially all of the Fund's taxable income, as well as any net realized
gain on sales of investments, are to be distributed to the shareholders. The
Fund has complied with this policy and, accordingly, no provision for federal
income taxes is required.
9
<PAGE>
(2) DIVIDENDS AND DISTRIBUTIONS:
Dividends and capital gain distributions are reinvested in additional shares of
the Fund unless the shareholder has requested in writing to be paid by check.
Dividends and distributions payable to its shareholders are recorded by the Fund
on the ex-dividend date.
On December 29, 1999, a distribution was declared from net realized long-term
capital gains of approximately $1.39 a share aggregating $9,235,258. The
distribution was paid on December 31, 1999, to shareholders of record on
December 29, 1999.
On December 28, 1998, a distribution was declared from net realized long-term
capital gains of approximately $.04 a share aggregating $417,387. The
distribution was paid on December 31, 1998, to shareholders of record on
December 29, 1998.
(3) TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management services agreement with L.
Roy Papp & Associates (Manager). The Manager receives from the Fund, as
compensation for its services, a fee accrued daily and payable monthly at an
annual rate of 1% of the Fund's net assets. The Manager will reimburse the Fund
to the extent the Fund's regular operating expenses during any of its fiscal
years exceed 1.25% of its average daily net asset value in such year. The Fund
incurred fees of $31,635 and $40,994 in 1999 and 1998, respectively, from the
manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $1,100 for each meeting of the Board of
Directors attended on behalf of the Fund. Certain officers and/or directors of
the Fund are also partners of the Manager and shareholders in the Fund. The Fund
made no payments to its officers or directors, except to independent directors
as stated above.
(4) PURCHASES AND SALES OF SECURITIES:
For the years ended December 31, investment transactions excluding short-term
investments were as follows:
1999 1998
------------ -----------
Purchases at cost $ 15,617,400 $80,372,065
Sales 145,756,212 92,997,025
10
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1999, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
------------- ----------
Year ended December 31, 1999
Shares issued $ 63,363,641 2,000,223
Dividends and distributions reinvested 8,582,551 242,584
Shares redeemed (193,954,940) (6,030,591)
------------- ----------
Net decrease $(122,008,748) (3,787,784)
============= ==========
Year ended December 31, 1998
Shares issued $ 168,123,001 6,037,848
Dividends and distributions reinvested 374,828 11,761
Shares redeemed (178,618,944) (6,473,298)
------------- ----------
Net decrease $ (10,121,115) (423,689)
============= ==========
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows at December 31:
1999 1998
------------- -------------
Market value $ 241,148,366 $ 338,929,906
Original cost (128,437,747) (248,043,277)
------------- -------------
Net unrealized appreciation $ 112,710,619 $ 90,886,629
============= =============
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $114,096,795 and gross unrealized losses on
investments in which cost exceeded market value totaled $1,386,176.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $104,546,063 and gross unrealized losses on
investments in which cost exceeded market value totaled $13,659,434.
11
<PAGE>
(7) SELECTED FINANCIAL HIGHLIGHTS:
The following selected per share data has been calculated using revenues and
expenses for the periods indicated, divided by the weighted average number of
shares outstanding during the periods. The ratios are calculated using the
revenues and expenses for the periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997 1996 1995
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 32.13 $ 25.98 $ 20.11 $ 16.47 $ 12.24
Income from operations:
Net investment (loss)/income (0.23) (0.05) 0.01 0.01 0.04
Net realized and unrealized gain
on investments 4.74 6.24 6.00 4.48 4.52
------------ ------------ ------------ ----------- -----------
Total from operations 4.51 6.19 6.01 4.49 4.56
Less distributions:
Dividend from net investment
Income - - (0.01) (0.01) (0.04)
Distribution of net realized gain (1.39) (0.04) (0.13) (0.84) (0.29)
------------ ------------ ------------ ----------- -----------
Total distributions (1.39) (0.04) (0.14) (0.85) (0.33)
Net asset value, end of period $ 35.25 $ 32.13 $ 25.98 $ 20.11 $ 16.47
============ ============ ============ =========== ===========
Total return 14.01% 23.83% 29.92% 27.65% 37.05%
Ratios/Supplemental Data:
Net assets, end of period $242,610,345 $342,814,636 $288,249,294 $29,623,497 $15,988,267
Expenses to average net
assets(A) 1.07% 1.08% 1.11% 1.25% 1.22%
============ ============ ============ =========== ===========
Investment income to
Average net assets (B) 0.61% 0.82% 1.24% 1.30% 1.50%
Portfolio turnover rate 5.47% 24.97% 4.71% 12.29% 26.65%
(A) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment adviser, this ratio would have been 1.30%
for the year ended December 31, 1996.
(B) Computed giving effect to investment adviser's expense limitation
undertaking.
12
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp America-Abroad Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of the
Papp America-Abroad Fund, Inc. as of December 31, 1999 and 1998, including the
schedule of portfolio investments as of December 31, 1999, and the related
statements of operations and changes in net assets for the two years then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999 and 1998 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Papp America-Abroad Fund, Inc. as of December 31, 1999 and 1998, and the results
of its operations and changes in its net assets for the two years then ended,
and its financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
January 27, 2000.
13
<PAGE>
FACTS ABOUT THE FUND
INVESTMENT OBJECTIVE - The Fund, which commenced operations December 6, 1991,
invests with the objective of long-term capital growth in the common stocks of
United States companies that have substantial international activities and, to a
much lesser extent, in the common stocks of foreign enterprises that are traded
publicly in United States securities markets.
THE INVESTMENT ADVISER - The Fund's assets are managed by L. Roy Papp &
Associates, the largest investment counseling firm in Arizona, with over $1.2
billion in total assets managed for individuals, trusts, corporations, and
charitable and educational institutions. Founded in 1978, the Firm is solely in
the investment management business. The Firm is an independent general
partnership. Of its ten general partners, seven are Chartered Financial Analysts
(CFAs).
EXPERIENCED MANAGEMENT - The securities portfolio of the Fund is managed by L.
Roy Papp and Rosellen C. Papp. Mr. Papp, the founder of L. Roy Papp &
Associates, has over 45 years experience in the field of investment management.
Prior to founding L. Roy Papp & Associates, he was a senior partner of a large
investment counseling firm in Chicago, Illinois and the United States Director
and Ambassador to the Asian Development Bank, Manila, Philippines. He received
his M.B.A. degree from the Wharton School, University of Pennsylvania and his
A.B. degree from Brown University.
Rosellen C. Papp, the director of research at L. Roy Papp & Associates, has over
22 years experience in security and financial analysis. She holds a Master of
Management degree in Finance from the Kellogg Graduate School of Management,
Northwestern University and a B.B.A. degree from the University of Michigan. She
is a Chartered Financial Analyst and member of the International Society of
Financial Analysts.
"PURE" NO-LOAD - The Fund is a "pure" no-load fund in that there are no
"loading" charges or sales commissions paid in connection with the purchase of
its shares. In addition, there are no deferred sales loads, no redemption fees,
and no 12b-1 fees. The Fund's investment adviser receives an annual management
fee of 1%, which is based on the Fund's average daily net asset value. Other
expenses such as auditing charges, legal fees, and custodial expenses are
limited to 1/4% of the Fund's average daily net asset value; therefore, the
Fund's annual expenses may not exceed 1 1/4%.
SUITABILITY - The Fund is suitable only for long-term investors seeking capital
appreciation over time. Included are individuals of most ages, institutional
accounts such as pension and profit sharing plans, retirement accounts such as
IRA's, educational accounts for young children, and many personal trusts. The
Fund is not suitable for those with high current income needs, aggressive
investors who desire maximum short-term results and are willing to assume the
attendant risks, and those with relatively short time horizons who may require
their capital in the near-term.
14
<PAGE>
AN INTRODUCTION TO THE PAPP MUTUAL FUNDS
The Papp Mutual Funds invest in high quality common stocks carefully selected
for the possibility of long-term capital growth. All the funds are "pure"
no-load in that there are no sales commissions, redemption fees, or 12b-1
charges. Because the Funds invest for the long-term, portfolio turnover is low
and the Funds do not ordinarily produce large taxable capital gains. They are
designed for the long-term (3 to 5 years) investor and are not appropriate for
those with short-term time horizons. The partners and employees of L. Roy Papp &
Associates have invested a significant part of their own assets in the Funds,
either personally or through the Firm's 401K Plan.
The Papp Stock Fund is structured to provide a comprehensive investment for the
common stock portion of an investment program through the purchase and retention
of a diversified, high quality group of securities. It owns the common stocks of
very large United States companies, many of which derive a large percentage of
their earnings from overseas activities where we believe the strong growth of
recent years will continue. It also owns large and medium sized American
companies which have all of their operations within our country.
Papp America-Abroad Fund invests primarily in United States companies, a large
portion of whose earnings come from foreign countries. It is our belief that it
is far safer to participate in the increased globalization of the world's
economies through ownership of multinational U.S. companies, thereby avoiding
many risks and expenses associated with the direct purchase of foreign stocks
such as different accounting and financial reporting standards, lack of
liquidity, greater price volatility, and lack of SEC protection. While the Fund
owns some medium sized companies, for the most part it invests in large
companies that have the experience and expertise to successfully compete on the
international level.
Papp America-Pacific Rim Fund reflects our belief that the best prospect for
growth over the next several decades lies in our large and rapidly growing trade
with the nations bordering the Pacific Ocean. Like our other Funds, the Pacific
Rim Fund invests mainly in American companies, but its primary thrust is to seek
out and purchase those companies that have established a strong and growing
presence in the Pacific Rim area. We believe this Fund is appropriate for that
part of an investor's assets dedicated to long-term growth.
Papp Focus Fund is a non-diversified investment company that will own a maximum
of 16 stocks under normal market conditions. While we believe that a strategy of
investing in a limited number of securities has the potential for higher total
returns, this may increase volatility, so prospective shareholders should
carefully consider whether their investment strategy parallels that of the Fund.
Papp Small & Mid-Cap Growth Fund invests primarily in the common stocks and
securities convertible into common stocks of small and medium sized companies.
We believe that carefully selected small and medium sized companies offer
attractive capital growth possibilities significantly above that of the general
U.S. economy. While these companies, during some periods, will perform better
than the stocks of large companies, they also may involve greater volatility and
be subject to competitive pressures.
15
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
DIRECTORS
James K. Ballinger L. Roy Papp
Amy S. Clague Rosellen C. Papp
Robert L. Mueller Bruce C. Williams
Harry A. Papp
OFFICERS
Chairman - L. Roy Papp President - Harry A. Papp
VICE PRESIDENTS
Victoria S. Cavallero Julie A. Hein
George D. Clark, Jr. Robert L. Mueller
Jeffrey N. Edwards Rosellen C. Papp
Robert L. Hawley Bruce C. Williams
Secretary - Robert L. Mueller
Treasurer - Rosellen C. Papp
Assistant Treasurer - Julie A. Hein
INVESTMENT ADVISER
L. Roy Papp & Associates
6225 North 24th Street, Suite 150
Phoenix, AZ 85016
Telephone: (602) 956-1115
Web address: http//www.roypapp.com
Email address: [email protected]
CUSTODIAN
Founders Bank of Arizona
7335 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
SHAREHOLDER SERVICES AND TRANSFER AGENT
L. Roy Papp & Associates
6225 North 24th Street, Suite 150
Phoenix, AZ 85016
Telephone: (602) 956-1115
(800) 421-4004
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
501 North 44th Street, Suite 300
Phoenix, Arizona 85008
LEGAL COUNSEL
Bell, Boyd & Lloyd
70 West Madison Street
Chicago, Illinois 60602
This report is submitted for the general information of the shareholders of the
Fund. The report is not authorized for distribution to prospective investors in
the Fund unless it is accompanied or preceded by a currently effective
prospectus of the Fund. No sales charge to the shareholder or to the new
investor is made in offering the shares of the Fund.
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