UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number 811-3888
Combined Penny Stock Fund, Inc.
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Exact name of registrant as specified in charter)
6180 Lehman Drive #103, Colorado Springs, CO 80918
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(Address of principal executive offices) (Zip code)
John R Overturf
6180 Lehman Dr #103
Colorado Springs, CO 80918
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(Name and address of agent for service)
Registrant's telephone number including area code:(719)593-2111
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Date of fiscal year end: 09/30
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Date of reporting period: 03/31/01
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles. A registrant is required to disclose the
information specified by Form N-CSR, and the Commission will make this
information public. A registrant is not required to respond to the collection of
information contained in Form N-CSR unless the Form displays a currently valid
Office of Management and Budget ("OMB") control number.
Please direct comments concerning the accuracy of the information collection
burden estimate and any suggestions for reducing the burden to Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC
20549-0609. The OMB has reviewed this collection of information under the
clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS
Combined Penny Stock Fund, Inc.
2001 Semi-Annual Report
The Company
Combined Penny Stock Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end investment company.
Shares of the Fund are bought and sold over-the-counter on the Bulletin Board
under the symbol "PENY". All, or nearly all, capital gains and dividends are
reinvested in the Fund.
To Our Shareholders
During the past six months we have seen the largest decline in the NASDAQ in
history. We did reasonably well in light of the circumstances. While the NASDAQ
was off nearly 60% the Fund was only off 14%.
We hold positions in companies that we consider to be good opportunities and are
confident that upward movement in the NASDAQ and small-cap markets will allow us
to post attractive gains by year end.
Whether or not the U.S. economy goes into a recession remains to be seen. We do
know, however, that the Federal Reserve continues to reduce interest rates to
try to divert a possible recession. In general, rate reductions are good for the
equity markets as returns on fixed rate investments decline.
The Board of Directors has once again authorized the repurchase of up to five
percent (5%) of the outstanding shares at or below net asset value for this
fiscal year.
Sincerely,
John R. Overturf, Jr.
President
Combined Penny Stock Fund, Inc.
May 14, 2001
Corporate Information
Officers and Directors Independent Auditors
John R. Overturf, Jr., President/Director Stockman Kast Ryan & Company, LLP
Dr. A. Leonard Nacht, Secretary/Director 102 North Cascade Avenue, Suite 450
Jeffrey J. Kormos, Director Colorado Springs, CO 80903-1418
Brian E. Power, Director
Stock Transfer Agent Custodian of Portfolio Securities
Computershare Investor Services US Bank
12039 West Alameda Parkway
Suite #Z-2
Lakewood, CO 80228
Corporate Headquarters Counsel
Combined Penny Stock Fund, Inc. Brennan, Key & Broomberg
6180 Lehman Drive, Suite 103 Mellon Financial Center
Colorado Springs, CO 80918-3415 1775 Sherman Street, Suite 1001
Denver, CO 80203
2
Assets and Liabilities as of March 31, 2001
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Assets
Investments:
Investments in securities of unaffiliated issuers
(identified cost $1,680,827) $ 694,831
Cash and Equivalents 496,537
Receivables - Investment Securities Sold 9,339
Other Assets 5,946
Total Assets 1,206,653
Liabilities
Payables:
Accounts Payable 1,223
Total Liabilities 1,223
Net Assets $ 1,205,430
Net Asset Value per Share $ .024
Capital Stock and Accumulated Loss as of March 31, 2001
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Common Stock, $.001 par value, 100,000,000 shares
authorized, 49,391,000 issued and outstanding $ 49,391
Additional paid-in capital 5,908,901
Accumulated loss:
Net investment loss (3,178,126)
Accumulated realized loss (588,741)
Net unrealized depreciation of investments (985,995)
Total accumulated loss (4,752,862)
Total Capital Stock and Accumulated Loss $ 1,205,430
See notes to financial statements
3
Statement of Investments in Unaffiliated Issuers as of March 31, 2001
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Units,
Shares or
Warrants Value (a)
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Common Stocks - 49.40%
Capital Goods - 1.41%
20,000 International Airline Support Group, Inc. $ 17,000
Communications - 6.99%
2,000 Worldcom, Inc. $ 37,375
9,000 CMGI, Inc. 22,860
4,000 Ericsson LM Telephone Co 22,375
5,000 MDU Communication Int'l, Inc. 1,600
5,682 Voice It Worldwide, Inc. - units 0
Group Subtotal: 84,210
Data Processing\Computer - 5.36%
4,000 Atmel Corporation $ 39,250
10,000 High Speed Access Corporation 13,125
5,000 Cray, Inc. 9,219
10,000 Syscomm International Corporation 2,813
7,500 Prism Software Corporation 234
Group Subtotal: $ 64,641
Electronics - 3.14%
3,000 Lucent Technologies, Inc. $ 29,910
5,800 Surge Components, Inc. 7,975
Group Subtotal: $ 37,885
Entertainment - 5.58%
22,500 American Coin Merchandising, Inc. $ 64,687
60,210 Global Casino's, Inc. 1,882
13,000 IRV, Inc. 666
Group Subtotal: $ 67,235
4
Statement of Investments in Unaffiliated Issuers as of March 31, 2001
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Units,
Shares or
Warrants Value (a)
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Common Stocks - 49.40% (Continued)
Finance - 4.33%
5,000 Netbank, Inc. $ 43,750
10,000 Gobal Capital Partners, Inc. 8,438
Group Subtotal: $ 52,188
Food & Beverage - 0%
184 Charlie O' Beverage, Inc. $ 0
Hobbies/Collectors - 2.75%
20,000 Collectors Universal, Inc. $ 33,125
Manufacturing - 2.18%
3,333 Training Devices, Inc. (b) $ 12,500
36,500 Veritec, Inc. 7,701
2,500 Zapworld.com 3,438
10,000 Luxor Industrial Corporation 2,161
800 Aura Systems, Inc. 312
135,000 Cable & Co Worldwide, Inc. 135
600 Sooner Holdings, Inc. 11
10,000 Grip Technologies, Inc. 0
Group Subtotal: $ 26,258
Medical Services & Research - 1.10%
2,500 Siga Technologies, Inc. $ 5,234
4,900 Healthwatch, Inc. 4,134
20,000 Miracor Diagnostics, Inc. 2,900
25,000 MicroSure, Inc. 625
10,000 White Wing Labs, Inc. 400
65,000 Organic Solutions, Inc. 0
Group Subtotal: $ 13,293
5
Statement of Investments in Unaffiliated Issuers as of March 31, 2001
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Units,
Shares or
Warrants Value (a)
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Common Stocks - 49.40% (Continued)
Mining - .21%
19,500 Globex Mining Enterprises, Inc. $ 2,479
800 Exprofuels, Inc. 0
Group Subtotal: $ 2,479
Oil & Gas - 11.90%
23,000 The Exploration Company $ 93,437
8,000 Petroleum Development Corporation 50,000
Group Subtotal: $ 143,437
Retail - 4.45%
10,000 OfficeMax, Inc. $ 37,500
2,500 Petsmart, Inc. 10,000
4,000 HomeBase, Inc. 5,440
928 Premier Concepts, Inc. 638
27,000 Product Express com EBusiness 135
Group Subtotal: $ 53,713
TOTAL COMMON STOCKS (Cost $1,581,460) $ 595,464
6
Statement of Investments in Unaffiliated Issuers as of March 31, 2001
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Principal Value (a)
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Notes Receivable - 8.24%
54,367 Global Casinos, Inc., 12% per annum due
September 30, 2001 (cost $54,367) $ 54,367
45,000 Sea Ranch Lodge & Village, LLC, 12% per annum due
September 30, 2001 (cost $45,000) 45,000
$ 99,367
Total Investments in Securities, Notes Receivable, Restricted Stock, & Other
Investments of Unaffiliated Issuers (Cost $1,680,827) $ 694,831
(a) See Note 1 and 2 of notes to financial statements. (b) Restricted
security, see Note 2 of notes to financial statements.
Total Investments in Securities of Unaffiliated Issuers
(cost $1,680,827) 57.64% $ 694,831
Other Assets, Net of Liabilities 42.36% 510,599
Total Net Assets 100.00% $1,205,430
See notes to financial statements
7
Statement of Operations for the Six Months Ended March 31, 2001
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Investment Loss:
Interest income $ 24,642
Misc Income 1,578
Total income 26,220
Expenses:
Salaries 25,836
Accounting services and administration 21,000
Other professional fees 8,494
Director's fees 8,000
Reports to shareholders 6,890
Transfer fees 3,357
Custodian fees 1,311
Other 2,467
Total expenses 77,355
Net Investment Loss (51,135)
Net Realized Gain and Unrealized Depreciation on Investments:
Net realized gain from investment transactions 88,085
Net unrealized depreciation of investments (219,832)
Net Realized Gain and Unrealized Depreciation on Investments (131,747)
Net Decrease in Net Assets from Operations $ (182,882)
Statement of Changes in Net Assets for the Six Months Ended March 31, 2001 and
for the Years Ended September 30, 2000 and 1999
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For the Unaudited
Six Months Ended 2000 1999
March 31, 2001
From Operations:
Net investment loss $ (51,135) $ (103,689) $ (87,346)
Net realized gain from investment transactions 88,085 196,735 269,007
Net unrealized appreciation (depreciation)
of investments (219,832) 24,507 84,360
Net increase (decrease) in net assets from
operations (182,882) 117,553 266,021
From Capital Stock Transactions:
Purchase of treasury stock (1,380,000 shares for the Six Months Ended March 31,
2001 and 1,150,000 and 2,640,000 shares in Years 2000 and 1999,
respectively) (32,304) (23,825) (55,768)
Net Assets - beginning of period 1,420,616 1,326,888 1,116,635
Net Assets - end of period $ 1,205,430 $ 1,420,616 $ 1,326,888
See notes to financial statements
8
Financial Highlights
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For the For the Years Ended
Unaudited Six September 30...
Months Ended
March 31, 2001 2000 1999 1998 1997
Per Share:
Income from Investments $ .001 $ .001 $ .001 $ .001 $ .001
Expenses (.002) (.003) (.003) (.002) (.002)
Net Investment Loss (.001) (.002) (.002) (.001) (.001)
Net Realized Gain and unrealized
appreciation (depreciation) of
investments (.003) .004 .008 (.013) .004
Net increase (decrease) in net asse (.004) .002 .006 (.014) .003
value
Net Asset Value:
Beginning of year .028 .026 .020 .034 .031
End of Year $ .024 $ .028 $ .026 $ .020 $ .034
Total investment return\(loss) (1) (14.29)% 7.69% 30.00% (41.18%) 9.68%
Ratios:
Expenses to average net assets 6.18% 11.81% 10.74% 8.23% 7.87%
Net investment loss to average net
assets 4.09% 7.25% 7.03% 6.09% 3.33%
Portfolio turnover rate (2) 40.87% 95.72% 33.00% 67.13% 96.88%
(1) Based on the change in net asset value considering there has been no
distributions during the period presented. The Fund does not believe that a
presentation based on changes in the market value of the Fund's common stock is
appropriate considering the limited market for the Fund's stock.
(2) The lesser of purchases or sales of portfolio securities for a period
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities for the six months ended March 31, 2001 were
$521,959 and $276,876, respectively.
See notes to financial statements
9
Notes to Financial Statements
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1. Summary of Significant Accounting Policies Combined Penny Stock Fund, Inc.
(the Fund) was incorporated September 7, 1983 and is registered under the
Investment Company Act of 1940, as amended, as a closed-end investment company.
The Fund invests in a broad range of small, speculative stocks traded in the
over-the-counter market and is being managed by the Board of Directors of the
Fund. The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Investment Valuation - Investments in securities traded on national exchanges
and NASDAQ are valued at last reported sales prices. Investments in securities
traded in the over-the-counter market on the Electronic Bulletin Board or Pink
sheets are valued at the quoted bid as obtained from NASDAQ or at the quoted bid
prices from the brokers that make markets in such securities, on the last
business day of the period. Investments in restricted securities, as well as
certain thinly traded securities and corporate notes, are valued at their fair
value as determined in good faith under procedures established by and under the
direction of the Fund's Board of Directors.
Federal Income Taxes - The Fund has not elected to be treated for Federal tax
purposes as a "regulated investment company" under Subchapter M of the Internal
Revenue Code. Consequently, investment income and realized capital gains are
taxed to the Fund at tax rates applicable to corporations.
The Fund accounts for income taxes in accordance with the Statement of Financial
Accounting Standards (SFAS) No 109, "Accounting for Income Taxes." Under SAFS
No. 109, a current or deferred income tax liability or asset is recognized for
timing differences which exist in the recognition of certain income and expense
items for financial statement reporting purposes in periods different than for
income tax reporting purposes. The provision for income taxes is based on the
amount of current and deferred income taxes payable or refundable at the date of
the financial statements as measured by the provisions of current tax laws.
Other - Investment transactions are accounted for on the date the investments
are purchased or sold (trade date). Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments are
reported on a first-in, first-out basis.
All of the Fund's equity securities as of March 31, 2001, are non-income
producing securities.
Concentration of Cash - As of March 31, 2001, the Fund had a money market
deposit at a bank of $482,365 which is in excess of the federally insured limit.
Use of Estimates - The preparation of the Fund's 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 income and expenses during
the reporting period. Actual results could differ from those estimates.
10
2. Restricted and Thinly-traded Securities Restricted securities are those
securities which have been acquired from an issuer without registration under
the Securities Act of 1933. Restricted securities generally cannot be sold by
the Fund except pursuant to an effective registration statement or in compliance
with Rule 144 of the Securities Act of 1933. The following schedule provides
certain information with respect to restricted security held by the Fund as of
March 31, 2001. This security comprised approximately 1% of the Fund's net
assets at such time.
Description Date of Acquisition Cost Value
Training Devices, Inc. February 20, 1997 $ 12,500 $ 12,500
The Fund has no right to require registration of the above restricted security.
Valuations for the restricted security, as well as certain thinly-traded
securities and corporate notes, have been determined in good faith by the Fund's
Board of Directors, in the absence of readily ascertainable market values. Such
investments were valued at $135,415 as of March 31, 2001, representing 11.23% of
the Fund's net assets. Because of the inherent subjectivity of these valuations,
it is reasonably possible that a change in such valuations could occur in the
near term.
3. Unrealized Gains and Losses At March 31, 2001, the net unrealized
depreciation of investments of $985,995 was comprised of gross appreciation of
$72,515 for those investments having an excess of value over cost and gross
depreciation of $1,058,510 for those investments having an excess of cost over
value.
4. Income Taxes There was no income tax provision as of March 31, 2001 as the
deferred tax assets relating to accumulated losses and unrealized depreciation
of $710,000 continue to be fully reserved. The deferred tax assets related
valuation allowance each decreased $105,000 during the six months ended March
31, 2001 due to the utilization of operating loss carryovers. Accumulated net
investment loss carryovers for income tax purposes total $920,000 at March 31,
2001, and will expire in varying amounts through 2008.
5. Purchase and Retirement of Treasury Stock During the period ended March 31,
2001, the Fund purchased 1,380,000 shares of its common stock at a cost of
$32,304 for the purpose of reducing the number of outstanding shares.
End of notes to financial statements
11
PRSRT STD
U.S. POSTAGE
PAID
Co. Spgs., CO
Permit No. 440
Combined Penny Stock Fund, Inc.
6180 Lehman Drive, Suite 103
Colorado Springs, Colorado 80918-3415
12
ITEM 2. CODE OF ETHICS. Not applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable
ITEM 4.PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED COMPANIES. Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable - schedule filed with Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END FUNDS.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUNDS. Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 10. CONTROLS AND PROCEDURES. (a) Based on an evaluation of the registrant's
disclosure controls and procedures within 90 days of filing date of this Form
N-CSR, the disclosure controls and procedures are reasonably designed to ensure
that the information required in filings on Forms N-CSR is recorded, processed,
summarized, and reported on a timely basis. (b) There were no significant
changes in the registrant's internal control over financial reporting that
occurred during the registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Not Applicable
(a)(2) Certifications by the registrant's principal executive officer and
principal financial officer, pursuant to Section 302 of the Sarbanes- Oxley Act
of 2002 and required by Rule 30a-2under the Investment Company Act of 1940 are
filed herewith.
(a)(3)Not Applicable
(b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Combined Penny Stock Fund, Inc. By By * /s/ John R Overturf
John R Overturf, President Date 11/15/04
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By * /s/ John R Overturf
John R Overturf, President Date 11/15/04
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Fund Directors
Business Experience
and Directorships
Name, Age and Address Position During the Past 5 Years
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John R. Overturf*(41) President, Mr. Overturf serves as President
6180 Lehman Dr 103 since of the Combined Penny Stock Fund,
Colorado Springs, August 1996 Inc., a closed-end stock fund, a
Colorado 80918 Director position he has since August 1996.
From March From September 1993 until September
1996 1996, Mr. Overturf served as Vice-
President of the Rockies Fund, Inc.
A closed-end stock market fund. Mr.
Overturf serves as the President
Of R.O.I., Inc., a private
Investment company, a position he
Has held since 1993. From June 1984
until February 1992, Mr. Overturf
served as Vice-President of Colorado
National Bank. Mr. Overturf holds a
Bachelor of Science degree in
Finance from the University of
Northern Colorado. Mr. Overturf
also is a director of BioSource
International, Inc. a California
Corporation.
A. Leonard Nacht*(73) Secretary From April 1990 to October 1991, P.O. Box 1679
since April Dr. Nacht was Secretary of Redwood Edwards, CO 81632 1990 MicroCap
Fund, Inc. ("RWCF"). From
Director 1957 to 1994, Dr. Nacht was in the
since private practice of denistry. Dr.
February Nacht is currently retired as a
1990 dentist. Dr. Nacht has a DDS degree
from the University of Washington
and is a member of the American and
Colorado Dental Asociations.
Jeffrey J. Kormos (61) Director From August, 2001 until present, Mr.
8751 N 51st Ave 115 since Kormos has been employed as an
Glendale, Az 85302 July 1997 account executive with Samco
Financial Services, Inc. From
August 1994 to August 2002, he was
employed as an account executive
with Yee, Desmond, Schroeder & Allen
Inc., an NASD member stockbrokerage
firm. From March 1993 to August
1994, he was employed as an account
executive with G. R. Stuart &
Company, Inc. From December 1992 to
March 1993, Mr. Kormos was employed
as an account executive with
Financial Securities Network, Inc.,
and from April 1987 to December 1992
he was employed as an account
executive with Affiliated Securities
Rolf L. Lichtenberg (53)Director Mr. Lichtenberg joined the Portland
956 SE Ankeny St. #1 since staff of Cascadia Revolving Fund in
Portland, OR 97214 August October 2000. Cascadia is a private
2002 non-profit community development financial
institution making loans and providing
technical assistance to small businesses
unable to access credit from traditional
sources. From 1998 to the summer of 2000 He
worked in the Mortgage Loan Department of
Vectra Bank of Colorado in Colorado Springs.
His background consists of seventeen years of
banking knowledge including 12 years as a
commercial lender, loan department head and
branch manager. Mr. Lichtenberg's lending
background began at Security Pacific Bank's
Los Angeles headquarters and continued at
banks in Washington DC, Canada and Colorado.
He also spent five years as a small business
owner/manager in Colorado and several years
as an account executive in the securities
industry. Mr. Lichtenberg received Master of
Business Administration from the University
of Colorado in Boulder in 1976 and a
Bachelor's Degree in Finance also from the
University of Colorado in 1974. He
has served as the president of the
Colorado Springs chapter of the National
Kidney Foundation and as treasurer of the
Chamber of Commerce in Fountain,
Colorado.
* Mr. Overturf and Dr. Nacht may be deemed interested persons as that term is
defined under Section 2(a)(19) of the Investment Company Act of 1940, as
amended, by virtue of their being officers as well as directors of the Fund.
The Fund Statement of Additional Information includes additional information
about Fund directors and is available by calling the Fund's phone number, at
719-593-2111.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available calling the Fund
phone number, (719-593-2111.
The Fund has adopted a code of ethics applicable to its principal executive
officer and principal financial officer. A copy of this code is available by
calling the Fund phone number, (719)593-2111.
Combined Penny Stock Fund, Inc
6180 Lehman Drive, Suite 103
Colorado Springs, CO 80918
Phone: (719) 593-2111
Fax: (719) 593-2342
Board of Directors
John R. Overturf
A. Leonard Nacht
Jeffrey J. Kormos
Rolf L. Lichtenberg
Officers
John R Overturf, President
A. Leonard Nacht, Secretary