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Previous: BENTHOS INC, PRE 14A, 1997-02-25 |
Next: BOEING CO, PRRN14A, 1997-02-25 |
A MESSAGE FROM THE PRESIDENT
To Principal Mutual Life Insurance Company Customers
Through year-end, U.S. financial markets turned in positive results. However,
there were some bumps along the way. Mid-year, equity and fixed-income investors
experienced a rather precipitous decline fueled by mixed economic data and
concerns about rising interest rates. These fears were quelled when the Federal
Reserve met December 17 and chose to leave interest rates unchanged. As a
result, both equity and fixed-income markets ended the year well.
Through December 31, 1996, the Dow Jones Industrial Average returned 28.79% and
the Standard & Poor's 500 Index returned 22.96% (the Dow Jones Industrial
Average and the S&P 500 are unmanaged indexes comprised of common stocks. One
cannot invest directly into these or any other index). Markets outside the U.S.
showed mixed results. Included among the regions which posted strongest returns
were Europe, Asia (excluding Japan) and Latin America. Most market experts do
not expect domestic inflation rates to elevate in 1997. Assuming this proves
true, investors should continue to enjoy a relatively stable market environment
though past performance is never a guarantee of future investment results.
The Principal Mutual Funds are used exclusively as underlying investments within
several different Principal Mutual Life Insurance Company variable insurance
products. Please see your contract prospectus for a description of the Funds
specifically available in your contract.
Principal Mutual Life Insurance Company continues to seek to provide our
customers with top-level service and good quality variable annuity and variable
life contracts. We are pleased to have you as a contract owner, and look forward
to a successful 1997.
Sincerely,
/s/ Stephan L. Jones
Stephan L. Jones
President
<PAGE>
CONTENTS
Page
Financial Statements and Financial Highlights
Statements of Assets and Liabilities.......................... 2
Statements of Operations ..................................... 4
Statements of Changes in Net Assets........................... 6
Notes to Financial Statements................................. 10
Schedules of Investments
Principal Aggressive Growth Fund, Inc..................... 18
Principal Asset Allocation Fund, Inc...................... 19
Principal Balanced Fund, Inc.............................. 26
Principal Bond Fund, Inc.................................. 29
Principal Capital Accumulation Fund, Inc.................. 31
Principal Emerging Growth Fund, Inc....................... 33
Principal Government Securities Fund, Inc................. 36
Principal Growth Fund, Inc................................ 36
Principal High Yield Fund, Inc............................ 39
Principal Money Market Fund, Inc.......................... 40
Principal World Fund, Inc................................. 42
Financial Highlights.......................................... 46
Report of Independent Auditors................................ 52
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal
Aggressive Asset Principal Principal
Growth Allocation Balanced Bond
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C>
Investment in securities -- at cost................... $78,439,912 $55,636,193 $84,420,596 $61,453,159
Assets
Investment in securities -- at value (Note 4)......... $86,237,711 $59,227,847 $93,206,906 $62,634,312
Cash ................................................. 4,786,330 4,571,515 10,351 81,407
Receivables:
Dividends and interest........................... 188,774 317,109 751,024 1,223,103
Investment securities sold....................... 179,111 134,816 -- --
Capital Stock sold............................... 384,877 799 214,787 90,272
Total Assets 91,776,803 64,252,086 94,183,068 64,029,094
Liabilities
Accrued expenses...................................... 18,905 18,593 14,885 8,448
Payables:
Dividends and distributions to shareholders...... 1,582,605 2,553,927 1,008,939 633,016
Investment securities purchased.................. 69,744 48,428 -- --
Capital Stock reacquired......................... -- -- 1,575 1,069
Total Liabilities 1,671,254 2,620,948 1,025,399 642,533
Net Assets Applicable to Outstanding Shares ....... $90,105,549 $61,631,138 $93,157,669 $63,386,561
Capital Stock (par value: $.01 a share)
Shares authorized..................................... 100,000,000 100,000,000 100,000,000 100,000,000
Shares issued and outstanding......................... 6,204,681 5,369,370 6,452,156 5,596,601
Net Asset Value Per Share .......................... $14.52 $11.48 $14.44 $11.33
Net Assets Consist of:
Capital Stock......................................... $ 62,047 $ 53,693 $ 64,522 $ 55,966
Additional paid-in capital............................ 79,340,934 56,841,171 84,240,355 62,384,524
Accumulated undistributed net investment income....... 4,793 18,594 23,644 36,471
Accumulated undistributed net realized
gain (loss) from:
Investment transactions ......................... 2,899,976 1,126,026 42,838 (271,553)
Foreign currency transactions.................... -- -- -- --
Net unrealized appreciation of investments............ 7,797,799 3,591,654 8,786,310 1,181,153
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies.. -- -- -- --
Total Net Assets $90,105,549 $61,631,138 $93,157,669 $63,386,561
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal Principal
Capital Emerging Government Principal
Accumulation Growth Securities Growth
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C>
Investment in securities -- at cost................... $174,212,683 $109,056,629 $84,463,498 $86,112,332
Assets
Investment in securities -- at value (Note 4)......... $206,483,512 $136,886,546 $85,325,737 $98,944,796
Cash ................................................. 10,932 16,620 2,332 36,055
Receivables:
Dividends and interest........................... 340,103 99,086 813,492 116,039
Investment securities sold....................... -- -- -- --
Capital Stock sold............................... 484,518 199,597 6,295 543,229
Total Assets 207,319,065 137,201,849 86,147,856 99,640,119
Liabilities
Accrued expenses...................................... 21,554 20,199 11,346 12,189
Payables:
Dividends and distributions to shareholders...... 154,951 20,592 54,266 15,763
Investment securities purchased.................. 2,124,032 -- 981,875 --
Capital Stock reacquired......................... -- 177 511 257
Total Liabilities 2,300,537 40,968 1,047,998 28,209
Net Assets Applicable to Outstanding Shares ....... $205,018,528 $137,160,881 $85,099,858 $99,611,910
Capital Stock (par value: $.01 a share)
Shares authorized..................................... 100,000,000 100,000,000 100,000,000 100,000,000
Shares issued and outstanding......................... 6,869,636 4,611,789 8,255,462 7,222,342
Net Asset Value Per Share .......................... $29.84 $29.74 $10.31 $13.79
Net Assets Consist of:
Capital Stock......................................... $ 68,696$ 46,118 $ 82,555 $ 72,223
Additional paid-in capital............................ 165,254,680 108,816,480 84,726,691 86,696,904
Accumulated undistributed net investment income....... 35,319 13,018 45,745 7,936
Accumulated undistributed net realized
gain (loss) from:
Investment transactions ......................... 7,389,004 455,348 (617,372) 2,383
Foreign currency transactions.................... -- -- -- --
Net unrealized appreciation of investments............ 32,270,829 27,829,917 862,239 12,832,464
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies.. -- -- -- --
Total Net Assets $205,018,528 $137,160,881 $85,099,858 $99,611,910
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
STATEMENT OF NET ASSETS
Principal Principal
High Money Principal
Yield Market World
Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost................... $12,972,448 $46,091,909 $60,080,919
Assets
Investment in securities -- at value (Note 4)......... $13,432,735 $46,091,909 $71,842,712
Cash ................................................. 19,746 50,823 49,386
Receivables:
Dividends and interest........................... 291,159 135,595 144,486
Investment securities sold....................... -- -- --
Capital Stock sold............................... 243 229,207 57,322
Total Assets 13,743,883 46,507,534 72,093,906
Liabilities
Accrued expenses...................................... 3,540 9,317 33,160
Payables:
Dividends and distributions to shareholders...... -- -- 27,452
Investment securities purchased.................. -- -- 351,045
Capital Stock reacquired......................... -- 253,968 234
Total Liabilities 3,540 263,285 411,891
Net Assets Applicable to Outstanding Shares ....... $13,740,343 $46,244,249 $71,682,015
Capital Stock (par value: $.01 a share)
Shares authorized..................................... 100,000,000 500,000,000 100,000,000
Shares issued and outstanding......................... 1,575,423 46,244,249 5,503,994
Net Asset Value Per Share .......................... $8.72 $1.000 $13.02
Net Assets Consist of:
Capital Stock......................................... $ 15,754 $ 462,443 $ 55,040
Additional paid-in capital............................ 14,248,237 45,781,806 59,603,313
Accumulated undistributed net investment income....... 11,449 -- 24,004
Accumulated undistributed net realized
gain (loss) from:
Investment transactions ......................... (995,384) -- 246,459
Foreign currency transactions.................... -- -- (9,568)
Net unrealized appreciation of investments............ 460,287 -- 11,761,793
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies.. -- -- 974
Total Net Assets $13,740,343 $46,244,249 $71,682,015
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996
STATEMENTS OF OPERATIONS
Principal Principal
Aggressive Asset Principal Principal
Growth Allocation Balanced Bond
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C> <C>
Dividends................................ $ 930,715 $ 753,540 $ 934,378 $ --
Less: Withholding tax on foreign dividends -- -- -- --
Interest................................. 237,430 1,547,262 1,923,042 3,923,811
Total Income 1,168,145 2,300,802 2,857,420 3,923,811
Expenses:
Management and investment advisory
fees (Note 3)........................ 491,699 425,427 420,010 260,242
Custodian fees........................... 20,187 29,779 11,314 5,711
Directors' fees.......................... 7,904 7,930 7,927 7,830
Other.................................... 1,331 1,332 1,502 1,327
Total Expenses 521,121 464,468 440,753 275,110
Net Investment Income 647,024 1,836,334 2,416,667 3,648,701
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Net
realized gain (loss) from:
Investment transactions.................. 10,016,661 4,149,766 4,291,386 24,994
Foreign currency transactions............ -- -- -- --
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments ............................. 5,099,753 715,006 3,030,866 (1,454,206)
Translation of assets and liabilities in
foreign currencies.................. -- -- -- --
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency 15,116,414 4,864,772 7,322,252 (1,429,212)
Net Increase in Net Assets
Resulting from Operations $15,763,438 $6,701,106 $9,738,919 $2,219,489
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996
STATEMENTS OF OPERATIONS
Principal Principal Principal
Capital Emerging Government Principal
Accumulation Growth Securities Growth
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C> <C>
Dividends................................ $ 4,025,859 $ 754,816 $ -- $ 971,440
Less: Withholding tax on foreign dividends -- -- -- --
Interest................................. 324,117 879,048 5,055,471 556,688
Total Income 4,349,976 1,633,864 5,055,471 1,528,128
Expenses:
Management and investment advisory
fees (Note 3)........................ 816,437 606,697 360,968 357,833
Custodian fees........................... 6,391 8,735 7,542 4,742
Directors' fees.......................... 7,877 7,905 7,887 7,602
Other.................................... 1,376 1,550 1,351 1,276
Total Expenses 832,081 624,887 377,748 371,453
Net Investment Income 3,517,895 1,008,977 4,677,723 1,156,675
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Net
realized gain (loss) from:
Investment transactions.................. 26,628,772 1,954,051 98,466 242,899
Foreign currency transactions............ -- -- -- --
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments ............................. 6,846,493 15,461,368 (1,337,219) 7,550,339
Translation of assets and liabilities in
foreign currencies.................. -- -- -- --
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency 33,475,265 17,415,419 (1,238,753) 7,793,238
Net Increase in Net Assets
Resulting from Operations $36,993,160 $18,424,396 $ 3,438,970 $8,949,913
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996
STATEMENTS OF OPERATIONS
Principal Principal
High Money Principal
Yield Market World
Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................ $ -- $ -- $ 1,385,001
Less: Withholding tax on foreign dividends -- -- (169,435)
Interest................................. 1,241,012 2,321,335 381,561
Total Income 1,241,012 2,321,335 1,597,127
Expenses:
Management and investment advisory
fees (Note 3)........................ 75,111 208,822 376,123
Custodian fees........................... 3,517 13,843 65,966
Directors' fees.......................... 7,851 8,091 7,915
Other.................................... 1,332 1,490 1,357
Total Expenses 87,811 232,246 451,361
Net Investment Income 1,153,201 2,089,089 1,145,766
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Net
realized gain (loss) from:
Investment transactions.................. 210,672 -- 875,641
Foreign currency transactions............ -- -- (9,568)
Net increase (decrease) in unrealized
appreciation/depreciation on:
Investments ............................. 218,620 -- 9,714,799
Translation of assets and liabilities in
foreign currencies.................. -- -- 495
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency 429,292 -- 10,581,367
Net Increase in Net Assets
Resulting from Operations $1,582,493 $2,089,089 $11,727,133
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Aggressive Growth Asset Allocation
Fund, Inc. Fund, Inc.
1996 1995 1996 1995
Operations
<S> <C> <C> <C> <C>
Net investment income....................... $ 647,024 $ 302,552 $ 1,836,334 $ 1,387,625
Net realized gain (loss) from
investment transactions 10,016,661 4,905,174 4,149,766 1,628,048
Net increase (decrease) in unrealized appreciation/
depreciation on investments and translation of
assets and liabilities in foreign currencies 5,099,753 2,660,711 715,006 3,340,632
Net Increase in Net Assets
Resulting from Operations 15,763,438 7,868,437 6,701,106 6,356,305
Dividends and Distributions to Shareholders
From net investment income.................. (642,821) (305,795) (1,837,566) (1,398,405)
From net realized gain on investments and foreign
currency transactions................. (8,672,973) (3,377,897) (3,447,188) (1,026,374)
(9,315,794) (3,683,692) (5,284,754) (2,424,779)
Capital Share Transactions (Note 5)
Shares sold................................. 54,678,368 14,807,229 20,370,526 7,552,421
Shares issued in reinvestment of dividends
and distributions...................... 7,733,190 3,683,692 2,730,827 2,424,779
Shares redeemed............................. (12,396,594) (2,803,211) (3,960,605) (875,745)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 50,014,964 15,687,710 19,140,748 9,101,455
Total Increase 56,462,608 19,872,455 20,557,100 13,032,981
Net Assets
Beginning of period......................... 33,642,941 13,770,486 41,074,038 28,041,057
End of period (including undistributed net
investment income as set forth below).. $90,105,549 $33,642,941 $61,631,138 $41,074,038
Undistributed Net Investment Income......... $ 4,793 $ 3,483 $ 18,594 $ 19,826
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Balanced Bond
Fund, Inc. Fund, Inc.
1996 1995 1996 1995
Operations
<S> <C> <C> <C> <C>
Net investment income....................... $ 2,416,667 $ 1,419,736 $ 3,648,701 $ 1,790,567
Net realized gain (loss) from
investment transactions 4,291,386 1,509,204 24,994 (178,683)
Net increase (decrease) in unrealized appreciation/
depreciation on investments and translation of
assets and liabilities in foreign currencies 3,030,866 4,627,533 (1,454,206) 3,151,543
Net Increase in Net Assets
Resulting from Operations 9,738,919 7,556,473 2,219,489 4,763,427
Dividends and Distributions to Shareholders
From net investment income.................. (2,404,163) (1,419,914) (3,612,230) (1,807,251)
From net realized gain on investments and foreign
currency transactions................. (5,078,241) (1,126,793) -- --
(7,482,404) (2,546,707) (3,612,230) (1,807,251)
Capital Share Transactions (Note 5)
Shares sold................................. 51,227,505 18,469,155 38,212,107 15,942,301
Shares issued in reinvestment of dividends
and distributions...................... 6,103,434 1,530,787 2,979,214 1,815,744
Shares redeemed............................. (11,833,111) (4,649,589) (12,289,678) (1,944,884)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 45,497,828 15,350,353 28,901,643 15,813,161
Total Increase 47,754,343 20,360,119 27,508,902 18,769,337
Net Assets
Beginning of period......................... 45,403,326 25,043,207 35,877,659 17,108,322
End of period (including undistributed net
investment income as set forth below).. $ 93,157,669 $45,403,326 $ 63,386,561 $35,877,659
Undistributed Net Investment Income......... $ 23,644 $ 11,765 $ 36,471 $ --
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
STATEMENTS OF CHANGES IN NET ASSETS
Principal
Capital Accumulation
Fund, Inc.
1996 1995
Operations
<S> <C> <C>
Net investment income....................... $ 3,517,895 $ 2,706,864
Net realized gain (loss) from
investment transactions 26,628,772 11,294,865
Net increase (decrease) in unrealized appreciation/
depreciation on investments and translation of
assets and liabilities in foreign currencies 6,846,493 19,225,574
Net Increase in Net Assets
Resulting from Operations 36,993,160 33,227,303
Dividends and Distributions to Shareholders
From net investment income.................. (3,541,996) (2,707,756)
From net realized gain on investments and foreign
currency transactions................. (22,300,640) (10,552,706)
(25,842,636) (13,260,462)
Capital Share Transactions (Note 5)
Shares sold................................. 81,833,141 38,113,651
Shares issued in reinvestment of dividends
and distributions...................... 25,659,931 13,137,194
Shares redeemed............................. (49,264,748) (56,149,805)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 58,228,324 (4,898,960)
Total Increase 69,378,848 15,067,881
Net Assets
Beginning of period......................... 135,639,680 120,571,799
End of period (including undistributed net
investment income as set forth below).. $205,018,528 $135,639,680
Undistributed Net Investment Income......... $ 35,319 $ 59,420
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Emerging Growth Government Securities
Fund, Inc. Fund, Inc.
1996 1995 1996 1995
Operations
<S> <C> <C> <C> <C>
Net investment income........................................ $ 1,008,977 $ 502,095 $ 4,677,723 $ 2,727,198
Net realized gain (loss) from investment transactions........ 1,954,051 1,202,668 98,466 (41,117)
Net realized (loss) from foreign currency transactions....... -- -- -- --
Net increase (decrease) in unrealized appreciation/depreciation
on investments and translation of assets and
liabilities in foreign currencies....................... 15,461,368 8,417,614 (1,337,219) 4,199,844
Net Increase in Net Assets Resulting from Operations 18,424,396 10,122,377 3,438,970 6,885,925
Dividends and Distributions to Shareholders
From net investment income................................... (1,000,544) (496,559) (4,644,240) (2,764,369)
Excess distribution of net investment income (Note 1)........ -- -- -- --
From net realized gain on investments
and foreign currency transactions (2,245,806) (473,643) -- --
(3,246,350) (970,202) (4,644,240) (2,764,369)
Capital Share Transactions (Note 5)
Shares sold.................................................. 78,710,392 33,010,562 47,002,706 24,755,653
Shares issued in reinvestment of dividends
and distributions....................................... 3,177,572 825,122 4,589,974 2,708,209
Shares redeemed.............................................. (18,425,569) (8,379,384) (15,367,021) (17,627,312)
Net Increase in Net Assets from
Capital Shares Transactions 63,462,395 25,456,300 36,225,659 9,836,550
Total Increase 78,640,441 34,608,475 35,020,389 13,958,106
Net Assets
Beginning of period.......................................... 58,520,440 23,911,965 50,079,469 36,121,363
End of period (including undistributed (overdistributed) net
investment income as set forth below)................... $137,160,881 $58,520,440 $ 85,099,858 $50,079,469
Undistributed (Overdistributed) Net Investment Income........ $ 13,018 $ 6,354 $ 45,745 $ 16,895
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Growth High Yield
Fund, Inc. Fund, Inc.
1996 1995 1996 1995
Operations
<S> <C> <C> <C> <C>
Net investment income........................................ $ 1,156,675 $ 572,297 $ 1,153,201 $ 976,414
Net realized gain (loss) from investment transactions........ 242,899 298,608 210,672 (49,300)
Net realized (loss) from foreign currency transactions....... -- -- -- --
Net increase (decrease) in unrealized appreciation/depreciation
on investments and translation of assets and
liabilities in foreign currencies....................... 7,550,339 5,280,826 218,620 664,483
Net Increase in Net Assets Resulting from Operations 8,949,913 6,151,731 1,582,493 1,591,597
Dividends and Distributions to Shareholders
From net investment income................................... (1,148,740) (566,536) (1,116,648) (991,915)
Excess distribution of net investment income (Note 1)........ -- -- -- (25,104)
From net realized gain on investments
and foreign currency transactions (240,516) (294,742) -- --
(1,389,256) (861,278) (1,116,648) (1,017,019)
Capital Share Transactions (Note 5)
Shares sold.................................................. 55,634,083 29,355,706 437,560 673,188
Shares issued in reinvestment of dividends
and distributions....................................... 1,373,493 753,669 1,116,648 1,017,019
Shares redeemed.............................................. (7,663,844) (5,778,425) (109,643) (131,664)
Net Increase in Net Assets from
Capital Shares Transactions 49,343,732 24,330,950 1,444,565 1,558,543
Total Increase 56,904,389 29,621,403 1,910,410 2,133,121
Net Assets
Beginning of period.......................................... 42,707,521 13,086,118 11,829,933 9,696,812
End of period (including undistributed (overdistributed) net
investment income as set forth below)................... $99,611,910 $42,707,521 $13,740,343 $11,829,933
Undistributed (Overdistributed) Net Investment Income........ $ 7,936 $ 5,761 $ 11,449 $ (25,104)
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Money Market World
Fund, Inc. Fund, Inc.
1996 1995 1996 1995
Operations
<S> <C> <C> <C> <C>
Net investment income........................................ $ 2,089,089 $ 1,502,142 $ 1,145,766 $ 519,182
Net realized gain (loss) from investment transactions........ -- -- 875,641 174,169
Net realized (loss) from foreign currency transactions....... -- -- (9,568) (5,526)
Net increase (decrease) in unrealized appreciation/depreciation
on investments and translation of assets and
liabilities in foreign currencies....................... -- -- 9,715,294 2,574,265
Net Increase in Net Assets Resulting from Operations 2,089,089 1,502,142 11,727,133 3,262,090
Dividends and Distributions to Shareholders
From net investment income................................... (2,089,089) (1,502,142) (1,149,902) (506,808)
Excess distribution of net investment income (Note 1)........ -- -- -- --
From net realized gain on investments
and foreign currency transactions -- -- (750,235) (23,834)
(2,089,089) (1,502,142) (1,900,137) (530,642)
Capital Share Transactions (Note 5)
Shares sold.................................................. 119,544,896 94,151,329 38,889,383 15,630,379
Shares issued in reinvestment of dividends
and distributions....................................... 1,914,643 1,130,170 1,849,921 530,642
Shares redeemed.............................................. (107,885,209) (91,983,464) (9,449,905) (2,072,943)
Net Increase in Net Assets from
Capital Shares Transactions 13,574,330 3,298,035 31,289,399 14,088,078
Total Increase 13,574,330 3,298,035 41,116,395 16,819,526
Net Assets
Beginning of period.......................................... 32,669,919 29,371,884 30,565,620 13,746,094
End of period (including undistributed (overdistributed) net
investment income as set forth below)................... $ 46,244,249 $32,669,919 $71,682,015 $30,565,620
Undistributed (Overdistributed) Net Investment Income........ $ -- $ -- $ 24,004 $ 12,505
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
December 31, 1996
NOTES TO FINANCIAL STATEMENTS
Principal Aggressive Growth Fund, Inc.
Principal Asset Allocation Fund, Inc.
Principal Balanced Fund, Inc.
Principal Bond Fund, Inc.
Principal Capital Accumulation Fund, Inc.
Principal Emerging Growth Fund, Inc.
Principal Government Securities Fund, Inc.
Principal Growth Fund, Inc.
Principal High Yield Fund, Inc.
Principal Money Market Fund, Inc.
Principal World Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal Aggressive Growth Fund, Inc., Principal Asset Allocation Fund, Inc.,
Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal High
Yield Fund, Inc., Principal Money Market Fund, Inc. and Principal World Fund,
Inc. (the "Funds") are registered under the Investment Company Act of 1940, as
amended, as open-end diversified management investment companies and operate in
the mutual fund industry.
Principal Money Market Fund, Inc. values its securities at amortized cost, which
approximates market. Under the amortized cost method, a security is valued by
applying a constant amortization to maturity of the difference between the
principal amount due at maturity and the cost of the security to the fund.
The other funds value securities for which market quotations are readily
available at market value, which is determined using the last reported sale
price or, if no sales are reported, as is regularly the case for some securities
traded over-the-counter, the last reported bid price. When reliable market
quotations are not considered to be readily available, which may be the case,
for example, with respect to certain debt securities and preferred stocks, the
investments are valued by using market quotations, prices provided by market
makers or estimates of market values obtained from yield data and other factors
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by each fund's Board of Directors.
Securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market.
With respect to Principal World Fund, Inc., the value of foreign securities in
foreign currency amounts is expressed in U.S. dollars at the closing daily rate
of exchange. The identified cost of the portfolio holdings is translated at
approximate rates prevailing when acquired. Income and expense amounts are
translated at approximate rates prevailing when received or paid, with daily
accruals of such amounts reported at approximate rates prevailing at the date of
valuation.
Since the carrying amount of the foreign securities in the Principal World Fund,
Inc. is determined based on the exchange rate and market values at the close of
the period, it is not practicable to isolate that portion of the results of
operations arising as a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of securities during the
period.
The Funds record investment transactions generally one day after the trade date.
The identified cost basis has been used in determining the net realized gain or
loss from investment transactions and unrealized appreciation or depreciation of
investments. The Funds record dividend income on the ex-dividend date, except
dividend income from foreign securities whereby the ex-dividend date has passed;
such dividends are recorded as soon as the Funds are informed of the ex-dividend
date. Interest income is recognized on an accrual basis.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amount of dividends and foreign withholding taxes recorded on the fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
With respect to Principal Money Market Fund, Inc., all net investment income and
any realized gains and losses from investment transactions are declared as
dividends daily to shareholders of record as of that day. Dividends and
distributions to shareholders of the other funds are recorded on the ex-dividend
date.
Dividends and distributions to shareholders from net investment income and net
realized gain from investment and foreign currency transactions are determined
in accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. To the extent these "book/tax"
differences are permanent in nature (i.e. that they result from other than
timing of recognition - "temporary"), such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Reclassifications made for the
years ended December 31, 1996 and 1995 were not material.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) are recorded for
financial statement purposes by the fund. The differences between the income and
gains distributed on a book versus tax basis are shown as excess distributions
of net investment income and net realized gain on investments in the
accompanying Statements of Changes in Net Assets.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 -- Federal Income Taxes
No provision for federal income taxes is considered necessary because each fund
is qualified as a "regulated investment company" under the Internal Revenue Code
and intends to distribute each year, substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
approximately the same for both federal income tax and financial reporting
purposes.
At December 31, 1996, Principal Bond Fund, Inc. had a net capital loss
carryforward of approximately $272,000 expiring in 2002 and 2003. Principal
Government Securities Fund, Inc. had a net capital loss carryforward of
approximately $617,000 expiring in 2002 and 2003. Principal High Yield Fund,
Inc. had a net capital loss carryforward of approximately $995,000 expiring in
1999 through 2003.
Note 3 -- Management Agreement and Transactions With Affiliates
The Funds have agreed to pay investment advisory and management fees to Princor
Management Corporation (wholly owned by Princor Financial Services Corporation,
a subsidiary of Principal Mutual Life Insurance Company) (the "Manager"),
computed at an annual percentage rate of each fund's average daily net assets.
The annual rate used in this calculation for Principal Bond Fund, Inc.,
Principal Capital Accumulation Fund, Inc., Principal Government Securities Fund,
Inc., Principal Growth Fund, Inc. and Principal Money Market Fund, Inc. is .50%
of the first $100 million of the fund's average daily net assets, .45% of the
next $100 million of the fund's average daily net assets and .40% of the next
$100 million of the fund's average daily net assets. The annual rate used in
this calculation for Principal Asset Allocation Fund, Inc. and Principal
Aggressive Growth Fund, Inc. is .80% of the first $100 million of the fund's
average daily net assets. With respect to Principal Balanced Fund, Inc. and
Principal High Yield Fund, Inc., the annual rate used is .60% of the first $100
million of the fund's average daily net assets. With respect to Principal
Emerging Growth Fund, Inc. the annual rate used is .65% of the first $100
million of the fund's average daily net assets and .60% of the next $100 million
of the fund's average daily net assets. With respect to Principal World Fund,
Inc., the annual rate used is .75%, of the first $100 million of the fund's
average daily net assets.
Brokerage commissions were paid to affiliates by certain of the funds, as
follows:
Year Ended Year Ended
December 31, December 31,
1996 1995
Principal Balanced Fund, Inc. $ 1,300 $ 219
Principal Capital Accumulation
Fund, Inc. 10,262 3,885
Principal Emerging Growth
Fund, Inc. -- 910
Principal Growth Fund, Inc. 438 4,252
Principal World Fund, Inc. 3,176 2,207
All of the shares of the Funds are owned by Principal Mutual Life Insurance
Company and/or one or more Separate Accounts sponsored by Principal Mutual Life
Insurance Company.
Note 4 -- Investment Transactions
For the year ended December 31, 1996, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Funds were as follows:
Purchases Sales
Principal Aggressive Growth Fund, Inc. $133,717,949 $93,952,732
Principal Asset Allocation Fund, Inc. 65,579,307 48,240,538
Principal Balanced Fund, Inc. 37,879,789 13,472,831
Principal Bond Fund, Inc. 29,553,087 573,288
Principal Capital Accumulation Fund, Inc. 115,353,668 79,662,349
Principal Emerging Growth Fund, Inc. 61,139,785 7,036,586
Principal Government Securities Fund, Inc. 22,704,172 3,422,418
Principal Growth Fund, Inc. 45,840,119 1,232,775
Principal High Yield Fund, Inc. 4,387,611 3,785,289
Principal World Fund, Inc. 35,669,393 5,508,800
At December 31, 1996, net unrealized appreciation of investments held by the
Funds was composed of the following:
<TABLE>
<CAPTION>
Gross Unrealized Net Unrealized
------------------------------------ Appreciation
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Aggressive Growth Fund, Inc. $ 9,867,696 $ (2,069,897) $ 7,797,799
Principal Asset Allocation Fund, Inc. 5,545,004 (1,953,350) 3,591,654
Principal Balanced Fund, Inc. 10,173,472 (1,387,162) 8,786,310
Principal Bond Fund, Inc. 1,802,455 (621,302) 1,181,153
Principal Capital Accumulation Fund, Inc. 36,534,795 (4,263,966) 32,270,829
Principal Emerging Growth Fund, Inc. 32,122,187 (4,292,270) 27,829,917
Principal Government Securities Fund, Inc. 1,617,334 (755,095) 862,239
Principal Growth Fund, Inc. 17,905,917 (5,073,453) 12,832,464
Principal High Yield Fund, Inc. 518,776 (58,489) 460,287
Principal World Fund, Inc. 13,790,582 (2,028,789) 11,761,793
</TABLE>
Principal Government Securities Fund, Inc. may trade portfolio securities on a
"to-be-announced" (TBA) basis. In a TBA transaction, the fund commits to
purchase or sell securities for which all specific information is not known at
the time of the trade. Securities purchased on a TBA basis are not settled until
they are delivered to the fund, normally 15 to 30 days later. These transactions
are subject to market fluctuations and their current value is determined in the
same manner as for other portfolio securities. As of December 31, 1996, TBA
purchase commitments involved securities with a face amount of $1,000,000, cost
of $981,875 and market value of $978,180. Principal Government Securities Fund,
Inc. has set aside investment securities and other assets in excess of the
commitments to serve as collateral.
At December 31, 1996, Principal Asset Allocation Fund, Inc., Principal Balanced
Fund, Inc., Principal Emerging Growth Fund, Inc., Principal High Yield Fund,
Inc. and Principal World Fund, Inc. held the following securities which may
require registration under the Securities Act of 1933 or an exemption therefrom
in order to effect a sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of Dec. 31, Percentage of
Fund Security Description Acquisition Cost 1996 Net Assets
<S> <C> <C> <C> <C> <C>
Principal Asset Alps 96 1 PT; Pass Through 5/22/96 $ 74,973 $ 77,754 .13%
Allocation Fund, Inc. Certificates
Brooks Fiber Properties; Step-Up
Senior Discount Notes 11/1/96 39,393 44,625 .08%
CIA Brasilia De Distribuicao; 5/30/96 48,825 55,192 .09%
GDR 5/31/96 49,987 57,418 .10%
7/17/96 42,550 40,949 .07%
Centrais Electricas De
Santa Catarin ADR 10/4/96 18,296 19,215 .03%
Cole National Group, Inc.; 11/13/96 29,775 30,900 .05%
Senior Subordinated Notes 11/14/96 24,969 25,750 .04%
First Nationwide 9/13/96 25,000 27,000 .05%
Fomento Economico Mexicano 5/30/96 100,040 111,664 .19%
5/31/96 90,900 102,132 .17%
Globo Communicacoes Part.
Notes 12/10/96 39,776 40,150 .07%
Grupo Financiero Bancomer 5/30/96 99,375 84,832 .14%
SA, ADR 5/31/96 93,125 80,030 .14%
International Home Foods;
Senior Subordinated Notes 10/29/96 30,000 31,200 .05%
Israel Electric Corp.; Senior
Notes 12/11/96 249,525 249,615 .42%
Maxxam Group Holdings, Inc.;
Senior Notes 12/18/96 40,000 40,500 .07%
Netsat Servicos LTDA; Senior 7/26/96 40,000 41,950 .07%
Notes 12/2/96 10,525 10,487 .02%
Paging Network, Inc.; Senior
Subordinated Notes 10/10/96 60,000 60,525 .10%
Parker Drilling Company; Senior 11/5/96 10,038 10,525 .02%
Notes 11/5/96 19,843 21,050 .04%
PTTEP International, Ltd.;
Yankee Dollar Notes 11/8/96 259,810 256,425 .43%
Tevecap SA; Senior Notes 11/21/96 50,000 51,125 .09%
U.S. Can Corp; Senior
Subordinated Notes 10/10/96 15,000 15,750 .03%
12/02/96 15,788 15,750 .03%
1,602,513 2.72%
<CAPTION>
Value at Value as a
Date of Dec. 31, Percentage of
Fund Security Description Acquisition Cost 1996 Net Assets
Principal Balanced Federal-Mogul Corp.; Series D
<S> <C> <C> <C> <C>
Fund, Inc. Convertible 10/15/92 $248,325 $ 260,150 .28%
Principal Emerging Ciba-Geigy Corp.; Exchangeable
Growth Fund, Inc. Subordinated Debentures 3/20/91 150,000 150,000 .11%
Sierra On Line; Convertible
Subordinated Debentures 8/17/94 100,375 345,125 .25%
495,125 .36%
Principal High Yield Cole National Group, Inc.;
Fund, Inc. Senior Subordinated Notes 11/13/96 198,500 206,000 1.50%
Euramax International PLC;
Senior Subordinated Notes 9/18/96 50,000 51,625 .38%
Motors & Gears, Inc.; Series A
Senior Notes 11/1/96 200,000 207,000 1.51%
Parker Drilling Co.; Senior Notes 11/5/96 99,215 105,250 .77%
956,125 4.16%
Principal World Alfa SA; Convertible 9/25/95 398,000 438,000 .61%
Fund, Inc. Subordinated Debentures 11/20/96 329,254 328,500 .46%
Fokus Bank 6/25/96 645,965 818,135 1.14%
Hyundai Motor Co. Ltd. GDR 9/3/96 307,688 173,750 .24%
Kemira OY 12/9/96 314,077 327,185 .46%
12/10/96 131,955 133,391 .19%
12/11/96 241,385 244,131 .34%
Royal Plastics Group 6/25/96 272,357 334,757 .47%
7/2/96 91,512 110,969 .15%
Voest-Alpine Stahl 10/30/95 280,007 326,936 .46%
3/27/96 146,558 159,915 .22%
6/25/96 256,094 273,632 .38%
6/27/96 145,930 152,807 .21%
3,822,108 5.33%
</TABLE>
The Fund's investments are with various issuers in various industries. The
Schedules of Investments contained herein summarize concentrations of credit
risk by industry.
Note 5 -- Capital Share Transactions
Transactions in Capital Stock by fund were as follows:
<TABLE>
<CAPTION>
Principal Aggressive Principal Asset Principal Balanced
Growth Fund, Inc. Allocation Fund, Inc. Fund, Inc.
Year Ended December 31, 1996:
<S> <C> <C> <C>
Shares sold................................... 3,918,263 1,770,239 3,602,550
Shares issued in reinvestment of
dividends and distributions.................. 547,658 239,060 424,022
Shares redeemed............................... (860,656) (337,801) (825,489)
Net Increase 3,605,265 1,671,498 3,201,083
Year Ended December 31, 1995:
Shares sold................................... 1,161,931 692,541 1,392,999
Shares issued in reinvestment of
dividends and distributions.................. 287,452 219,390 115,881
Shares redeemed............................... (211,535) (78,261) (354,061)
Net Increase 1,237,848 833,670 1,154,819
<CAPTION>
Principal Principal Capital Principal Emerging
Bond Fund, Inc. Accumulation Fund, Inc. Growth Fund, Inc.
Year Ended December 31, 1996:
<S> <C> <C> <C>
Shares sold................................... 3,340,011 2,763,121 2,884,710
Shares issued in reinvestment of
dividends and distributions.................. 262,934 868,606 110,728
Shares redeemed............................... (1,065,373) (1,641,040) (693,851)
Net Increase 2,537,572 1,990,687 2,301,587
Year Ended December 31, 1995:
Shares sold................................... 1,388,036 1,462,128 1,443,488
Shares issued in reinvestment of
dividends and distributions.................. 155,537 493,432 32,984
Shares redeemed............................... (174,815) (2,220,452) (363,945)
Net Increase (Decrease) 1,368,758 (264,892) 1,112,527
<CAPTION>
Principal Government Principal Growth Principal High
Securities Fund, Inc. Fund, Inc. Yield Fund, Inc.
Year Ended December 31, 1996:
<S> <C> <C> <C>
Shares sold................................... 4,520,032 4,289,963 50,390
Shares issued in reinvestment of
dividends and distributions.................. 445,172 99,697 128,056
Shares redeemed............................... (1,457,956) (604,413) (12,523)
Net Increase 3,507,248 3,785,247 165,923
Year Ended December 31, 1995:
Shares sold................................... 2,389,165 2,597,297 77,400
Shares issued in reinvestment of
dividends and distributions.................. 258,394 61,037 121,455
Shares redeemed............................... (1,752,028) (517,157) (15,228)
Net Increase 895,531 2,141,177 183,627
<CAPTION>
Principal Money Principal World
Market Fund, Inc. Fund, Inc.
Year Ended December 31, 1996:
<S> <C> <C>
Shares sold................................... 119,544,896 3,308,501
Shares issued in reinvestment of
dividends and distributions.................. 1,914,643 144,196
Shares redeemed............................... (107,885,209) (800,955)
Net Increase 13,574,330 2,651,742
Year Ended December 31, 1995:
Shares sold................................... 94,151,329 1,566,265
Shares issued in reinvestment of
dividends and distributions.................. 1,130,170 49,808
Shares redeemed............................... (91,983,464) (202,182)
Net Increase 3,298,035 1,413,891
</TABLE>
Note 6 -- Line of Credit
The Funds have an unsecured line of credit with a bank which allows each fund to
borrow up to $500,000. Borrowings are made solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund, based on its borrowings, at a rate equal to the bank's Fed Funds
Unsecured Rate plus 100 basis points. Additionally, a commitment fee is charged
at the annual rate of .25% on the line of credit. At December 31, 1996, the
Funds had no outstanding borrowings under the line of credit.
SCHEDULES OF INVESTMENTS
PRINCIPAL AGGRESSIVE GROWTH FUND, INC.
Shares
Held Value
Common Stocks (95.71%)
Advertising (0.15%)
Catalina Marketing Corp. 2,500(a) $ 137,812
Air Transportation, Scheduled (0.67%)
AMR Corp. 6,800(a) 599,250
Aircraft & Parts (7.33%)
Allied Signal, Inc. 14,100 944,700
Boeing Co. 7,957 846,426
General Dynamics Corp. 7,400 521,700
Gulfstream Aerospace Corp. 7,000(a) 169,750
McDonnell Douglas Corp. 12,300 787,200
Rockwell International Corp. 8,800 535,700
Sunstrand Corp. 2,400 102,000
United Technologies Corp. 40,900 2,699,400
6,606,876
Bakery Products (1.09%)
Einstein/Noah Bagel Corp. 11,900(a) 354,025
Interstate Bakeries 12,700 623,888
977,913
Beverages (0.40%)
Coca-Cola Enterprises 7,500 363,750
Cigars (0.92%)
Consolidated Cigar Holdings, Inc. 33,600(a) 831,600
Congeneration -
Small Power Producer (0.49%)
AES Corp. 9,500(a) 441,750
Commercial Banks (3.91%)
Chase Manhattan Corp. 7,812 697,221
Citicorp 2,100 216,300
Wells Fargo & Co. 9,683 2,611,989
3,525,510
Communications Equipment (1.44%)
Larscom, Inc. 16,000(a) 182,000
U.S. Industries, Inc. 21,000(a) 721,875
U.S. Robotics Corp. 5,500(a) 396,000
1,299,875
Computer & Data Processing
Services (6.56%)
Adobe Systems, Inc. 9,800 366,275
First Data Corp. 13,500 492,750
GTECH Holdings Corp. 85,600(a) 2,739,200
Microsoft Corp. 12,200(a) 1,008,025
Netscape Communications 6,300(a) 358,313
Oracle Systems Corp. 11,100(a) 463,425
Sterling Commerce, Inc. 13,600(a) 479,400
5,907,388
Computer & Office Equipment (4.35%)
Cisco Systems 10,400(a) 661,700
International Business
Machines Corp. 6,300 951,300
International Game Technology 126,400 2,306,800
3,919,800
Consumer Products (13.28%)
Philip Morris Cos., Inc. 42,600 $4,797,825
RJR Nabisco 210,900 7,170,600
11,968,425
Cutlery, Handtools, & Hardware (0.98%)
Gillette Co. 11,300 878,575
Drug Stores & Proprietary Stores (0.43%)
CVS Corp. 9,300 384,787
Drugs (1.26%)
American Home Products Corp. 7,900 463,138
Pfizer, Inc. 5,800 480,675
Schering-Plough Corp. 3,000 194,250
1,138,063
Eating & Drinking Places (3.07%)
Boston Chicken, Inc. 32,600(a) 1,169,525
Brinker International, Inc. 25,200(a) 403,200
Cracker Barrel Old Country
Store, Inc. 43,600 1,106,350
Foodmaker Inc. 9,800(a) 86,975
2,766,050
Electrical Industrial Apparatus (0.47%)
Emerson Electric Co. 4,400 425,700
Electronic Components &
Accessories (1.69%)
Intel Corp. 11,600 1,518,875
Federal & Federally Sponsored
Credit (1.02%)
Student Loan Marketing Association 9,900 921,937
Fire, Marine, & Casualty
Insurance (5.95%)
Aetna, Inc. 15,300 1,224,000
Berkshire Hathaway, Inc. 44(a) 1,500,400
Cigna Corp. 2,650 362,056
Loews Corp. 24,100 2,271,425
5,357,881
Grain Mill Products (0.23%)
Ralston-Ralston Purina Group 2,800 205,450
Grocery Stores (1.68%)
Dominicks Supermarkets, Inc. 20,700(a) 450,225
Food Lion, Inc. 104,600 1,059,075
1,509,300
Hospitals (0.62%)
Columbia/HCA Healthcare Corp. 13,700 558,275
Hotels & Motels (0.71%)
Hilton Hotels Corp. 24,600 642,675
Industrial Inorganic Chemicals (1.32%)
Monsanto Co. 14,300 555,913
Olin Corp. 16,900 635,862
1,191,775
Insurance Agents, Brokers, &
Services (0.52%)
Exel Ltd. 12,300 465,862
Lumber & Other Building
Materials (0.79%)
Home Depot, Inc. 14,200 711,775
Medical Instruments &
Supplies (1.47%)
Acuson Corp. 8,900(a) 216,938
Becton, Dickinson & Co. 19,000 824,125
U.S. Surgical Corp. 7,300 287,437
1,328,500
Miscellaneous Amusement,
Recreation Service (0.44%)
Family Golf Centers, Inc. 13,100(a) 394,637
Miscellaneous Apparel &
Accessories (0.33%)
Designer Holdings, Ltd. 18,200(a) 293,475
Miscellaneous Business
Services (0.74%)
CUC International, Inc. 19,775(a) 469,656
Viad Corp. 12,100 199,650
669,306
Miscellaneous Electrical
Equipment & Supplies (0.27%)
Motorola, Inc. 4,000 245,500
Miscellaneous Food
& Kindred Products (3.87%)
Campbell Soup Co. 41,600 3,338,400
McCormick & Co. 6,200 146,088
3,484,488
Miscellaneous Investing (6.74%)
HFS, Inc. 101,600(a) 6,070,600
Miscellaneous Manufacturers (0.59%)
WMS Industries, Inc. 26,400(a) 528,000
Motion Picture Production &
Services (1.00%)
Film Roman, Inc. 11,400(a) 86,925
Viacom, Inc. 8,100(a) 282,488
Walt Disney Company 7,600 529,150
898,563
Motion Picture Theaters (0.02%)
AMC Entertainment 1,400(a) 20,125
Motor Vehicles & Equipment (0.47%)
Ford Motor Co. 13,300 423,937
Newspapers (1.00%)
Gannett Co. 5,600 419,300
Hollinger International, Inc. 17,100 196,650
New York Times Co. 7,500 285,000
900,950
Periodicals (2.75%)
K III Communications 230,100(a) 2,473,575
Personal Credit Institutions (2.07%)
American Express Co. 23,500 1,327,750
Dean Witter, Discover & Co. 8,200 543,250
1,871,000
Photographic Equipment &
Supplies (0.90%)
Eastman Kodak Co. 10,050 806,513
Plastic Materials & Synthetics (0.39%)
Hercules, Inc. 8,100 350,325
Radio & Television
Broadcasting (3.16%)
Clear Channel Communications 60,100(a) 2,171,113
Heftel Broadcasting Co. 8,200(a) 258,300
Infinity Broadcasting 12,500(a) 417,187
2,846,600
Real Estate Operators &
Lessors (0.28%)
Insignia Financial Group 11,100 249,750
Refrigeration & Service
Machinery (0.01%)
American Standard Inc. 100(a) 3,825
Retail Stores, NEC (0.95%)
PETsMART, Inc. 39,300(a) 859,687
Sanitary Services (0.50%)
WMX Technologies, Inc. 13,800 450,225
Search & Navigation
Equipment (0.58%)
Loral Space Communications 28,600(a) 525,525
Security & Commodity
Services (1.62%)
Franklin Resources, Inc. 21,400 1,463,225
Special Industry Macinery (0.27%)
Applied Materials, Inc. 6,800(a) 244,375
Surety Insurance (2.46%)
Ace Ltd. 21,500 1,292,688
The PMI Group, Inc. 16,800 930,300
2,222,988
Telephone Communication (0.80%)
Airtouch Communications, Inc. 11,300(a) 285,325
Worldcom, Inc. 16,800(a) 437,850
723,175
Tires & Inner Tubes (0.70%)
Goodyear Tire & Rubber Co. 12,300 631,913
Total Portfolio Investments (95.71%) 86,237,711
Cash and receivables, net of
liabilities (4.29%) 3,867,838
Total Net Assets (100.00%) $90,105,549
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL ASSET ALLOCATION FUND, INC.
Shares
Held Value
Common Stocks (68.92%)
Advertising (0.03%)
Catalina Marketing Corp. 300 $ 16,537
Air Transportation, Scheduled (0.90%)
AMR Corp. 1,600(a) 141,000
British Airways PLC ADR 1,400 143,850
Cathay Pacific Airways ADR 8,500 67,033
KLM Royal Dutch Airlines 7,380 205,717
557,600
Aircraft & Parts (2.07%)
Allied Signal, Inc. 1,600 107,200
Boeing Co. 942 100,205
General Dynamics Corp. 800 56,400
Gulfstream Aerospace Corp. 2,200(a) 53,350
McDonnell Douglas Corp. 2,200 140,800
Rockwell International Corp. 2,500 152,188
Sunstrand Corp. 200 8,500
United Technologies Corp. 10,000 660,000
1,278,643
Automotive Rentals, No
Drivers (0.10%)
Ryder Systems, Inc. 2,100 59,063
Bakery Products (0.23%)
Einstein/Noah Bagel Corp. 2,200(a) 65,450
Interstate Bakeries 1,500 73,688
139,138
Beverages (1.34%)
Bass PLC ADR 5,000 138,750
CIA Cervecerias Unidas ADR 4,080 65,790
CIA Cervejaria Brahma ADR 7,750 84,728
Coca-Cola Enterprises 600 29,100
Coca-Cola Femsa S.A. ADR 2,350 67,856
Fomento Economico Mexicano 62,800(c) 213,796
Kirin Brewery 2,300 226,550
826,570
Blast Furnace & Basic Steel
Products (0.37%)
Australian National Industries 8,960 35,582
British Steel PLC ADS 3,500 96,250
Tubos De Acero De Mexico ADR 6,200(a) 98,425
230,257
Books (0.07%)
McGraw-Hill Companies, Inc. 1,000 46,125
Cable & Other Pay TV Services (0.14%)
Multicanal Participacoes ADR 6,800(a) 87,125
Chemicals & Allied Products (1.41%)
Asahi Chemical Industry Co. ADR 4,100(a) 231,722
Bayer AG Sponsored ADR 10,735 437,449
Mitsubishi Chemical Corp. 6,100 197,079
866,250
Cigars (0.30%)
Consolidated Cigar Holdings, Inc. 7,400(a) 183,150
Clay, Ceramic &
Refractory Minerals (0.08%)
English China Clays ADR 5,300 52,338
Congeneration - Small
Power Producer (0.13%)
AES Corp. 1,700(a) 79,050
Combination Utility Services (0.26%)
CIA Energetica De Minas
Cemig ADR 1,880 $ 64,048
NIPSCO Industries, Inc. 2,450 97,081
161,129
Commercial Banks (4.52%)
ABN-AMRO Holdings NV ADR 7,385 479,884
Allied Irish Banks ADR 2,900 113,825
Banco Central ADR 6,500 84,500
Bank of Boston Corp. 1,100 70,675
BankAmerica Corp. 550 54,862
Banker's Trust 950 81,937
Barclays PLC ADS 5,571 383,006
Brierly Investments Ltd. ADR 5,550 102,737
Chase Manhattan 1,940 173,145
Citicorp 600 61,800
Commerzbank AG ADR 3,600 91,337
First of America Bank Corp. 1,700 102,213
HSBC Holdings ADR 600 128,378
Mellon Bank Corp. 1,100 78,100
National Westminster ADR 1,900 132,050
PNC Financial Corp. 2,000 75,250
Wells Fargo & Co. 1,600 431,600
Westpac Banking ADR 4,900 139,650
2,784,949
Commercial Printing (0.31%)
DAI Nippon Printing Co. 1,100 192,384
Communications Equipment (0.84%)
Alcatel Alsthom ADR 4,700 75,200
Hanson PLC ADR 2,950 19,912
Harris Corp. 1,350 92,644
Larscom, Inc. 1,800(a) 20,475
Matsushita Electrical ADR 800 130,600
U.S. Industries, Inc. 3,800(a) 130,625
U.S. Robotics Corp. 700 50,400
519,856
Computer & Data Processing
Services (1.51%)
Adobe Systems, Inc. 1,200 44,850
First Data Corp. 1,600 58,400
GTECH Holdings Corp. 17,800(a) 569,600
Microsoft Corp. 1,400 115,675
Netscape Communications 700 39,812
Oracle Systems Corp. 1,250 52,188
Sterling Commerce, Inc. 1,500(a) 52,875
933,400
Computer & Office Equipment (1.61%)
Apple Computer Inc. 1,400(a) 29,225
Cisco Systems 1,200 76,350
Hitachi Ltd. ADR 2,900 268,250
International Business
Machines Corp. 1,300 196,300
International Game Technology 23,100 421,575
991,700
Concrete, Gypsum & Plaster
Products (0.30%)
Cementos De Mexico SA ADR 16,000 114,837
Italcementi Fabriche S P A ADR 13,000 72,673
187,510
Concrete Work (0.12%)
Pioneer International Ltd. ADR 25,000 74,460
Construction & Related
Machinery (0.63%)
Kajima Corp. ADR 2,900 206,875
Komatsu Ltd. ADR 1,100 180,064
386,939
Consumer Products (4.66%)
American Brands, Inc. 900 44,663
Philip Morris Cos., Inc. 9,850 1,109,356
RJR Nabisco 50,500 1,717,000
2,871,019
Crude Petroleum &
Natural Gas (0.38%)
Broken Hill Proprietary Ltd. ADR 2,200 62,150
Petrofina SA ADR 2,900 92,210
Societe Generale ADR 3,600 77,695
232,055
Cutlery, Handtools &
Hardware (0.16%)
Gillette Co. 1,300 101,075
Department Stores (0.28%)
Marui Corp. ADR 2,800 100,836
Penney (J.C.) Co. 1,500 73,125
173,961
Drug Store & Proprietary Stores (0.07%)
CVS Corp. 1,000 41,375
Drugs (1.03%)
American Home Products Corp. 800 46,900
Hafslund ADR 13,172 90,096
Novo Nordisk ADR 3,200 149,600
Nycomed 13,172 197,580
Pfizer, Inc. 700 58,013
Schering-Plough Corp. 300 19,425
Smithkline Beecham PLC ADR 1,100 74,800
636,414
Drugs, Proprietaries &
Sundries (0.26%)
Amway Japan Ltd. ADS 6,833 113,599
Grupo Casa Autrey ADR 2,500 48,750
162,349
Eating & Drinking Places (1.08%)
Boston Chicken, Inc. 5,900(a) 211,662
Brinker International, Inc. 4,200(a) 67,200
Cracker Barrel Old Country Store, Inc. 7,500 190,313
Foodmaker Inc. 1,100(a) 9,763
Host Marriott Corp. 11,600 185,600
664,538
Electric Services (1.71%)
Centrais Electricas Brasileiras S/A -
Electrobras ADR 4,300 79,867
Centrais Electricas De Santa
Catarin ADR 210(a)(c) 19,215
Centrais Electricas Brasileiras
ADR 16,800 300,723
Empresa Nacional De
Electricidad SA ADR 1,400 98,000
EVN Energie-Vansorgung Nied ADR 3,600 108,270
GPU, Inc. 2,600 87,425
National Power ADR 3,300 111,788
Northeast Utilities, Inc. 1,400 18,550
Pinnacle West Capital Corp. 2,400 76,200
Shangdong Huaneng Power
Development Ltd. ADS 8,000 $ 78,000
Texas Utilities Co. 1,800 73,350
1,051,388
Electrical Industrial Apparatus (0.08%)
Emerson Electric Co. 500 48,375
Electronic Components &
Accessories (0.91%)
Intel Corp. 2,200 288,063
Kyocera Corp. ADR 1,500 183,000
Texas Instruments 1,374 87,592
558,655
Electronic Distribution
Equipment (0.45%)
Phillips NV ADR 6,969 278,760
Family Clothing Stores (0.01%)
Stage Stores, Inc. 500(a) 9,125
Farm & Garden Machinery (0.12%)
Deere & Co. 1,800 73,125
Federal & Federally Sponsored
Credit (0.45%)
Student Loan Marketing Association
(Non-Voting) 3,000 279,375
Ferroalloy Ores, Exept Vanadium (0.27%)
Novartis A G Sponsored ADR 2,879(a) 164,405
Finance Services (0.75%)
Grupo Financiero Bancomer SA ADR 20,600(a)(c) 164,862
Nomura Sec. Co. Ltd. ADR 2,000 299,819
464,681
Fire Marine & Casualty
Insurance (2.30%)
Aetna, Inc. 2,900 232,000
Berkshire Hathaway, Inc. 10,000(a) 341,000
CIGNA Corp. 350 47,819
Loews Corp. 5,400 508,950
St. Paul Cos., Inc. 1,300 76,212
Tokio Marine & Fire Insurance ADR 4,600 214,475
1,420,456
Footwear, Except Rubber (0.23%)
Ollivetti Inc. Cos. 396,825(a) 139,603
General Industrial Machinery (0.66%)
Amer Group Ltd. ADR 5,500 56,682
S K F AB ADR 15,370 359,274
415,956
Grain Mill Products (0.35%)
Grupo Indl Maseca Sade CV ADR 9,636 184,289
Ralston-Ralston Purina Group 400 29,350
213,639
Groceries & Related Products (0.16%)
Fleming Cos., Inc. 5,550 95,738
Grocery Stores (0.71%)
Dominicks Supermarkets, Inc. 2,400(a) 52,200
Food Lion, Inc., Class B 16,900 171,113
Koninklijke Bijenkorf
Beheer NV ADR 2,400 86,371
Santa Isabella SA ADR 5,635 127,492
437,176
Holding Offices (0.59%)
Jardine Strategic Holdings Ltd.
ADR 10,000 $ 72,400
Trizec Hahn Corp. 13,134 288,948
361,348
Hospitals (0.10%)
Columbia/HCA Healthcare Corp. 1,500 61,125
Hotels & Motels (1.31%)
Bristol Hotel Co. 2,300(a) 73,025
Hilton Hotels Corp. 4,300 112,338
John Q. Hammons Hotels, Inc. 17,400(a) 147,900
Ladbroke Group ADR 37,000 146,265
Servico, Inc. 11,500(a) 185,437
Suburban Lodges of America 8,900(a) 142,400
807,365
Household Audio & Video
Equipment (0.27%)
Sony Corp. ADR 2,500 164,063
Individual & Family Services (0.01%)
Assisted Living Concepts, Inc. 600(a) 9,150
Industrial Inorganic Chemicals (0.86%)
AKZO ADR 4,283 289,103
Eastman Chemical Co. 1,050 58,012
Monsanto Co. 1,600 62,200
Olin Corp. 3,200 120,400
529,715
Industrial Organic Chemicals (0.10%)
Nova Corp. ADR 6,700 58,625
Insurance Agents, Brokers &
Services (0.09%)
EXEL Ltd. 1,400 53,025
Investment Offices (0.48%)
American General Hospitality Corp. 12,400 294,500
Iron & Steel Foundries (0.61%)
Kawasaki Steel Corp. ADR 7,900 226,647
Kubota Ltds. ADR 850 81,600
Siderar S.A.I.C. Sponsored
ADR-144A 3,000 69,132
377,379
Life Insurance (0.23%)
American General Corp. 1,700 69,487
Lincoln National 1,400 73,500
142,987
Lumber & Other Building
Materials (0.13%)
Home Depot, Inc. 1,600 80,200
Management & Public
Relations (0.13%)
Ogden Corp. 4,300 80,625
Meat Products (0.49%)
Groupe Danone 10,764 299,394
Medical Instruments &
Supplies (0.31%)
Acuson Corp. 1,000(a) $ 24,375
Baxter International, Inc. 1,500 61,500
Becton, Dickinson & Co. 1,700 73,738
U.S. Surgical Corp. 800 31,500
191,113
Metalworking Machinery (0.30%)
Makita Corp. ADR 13,000 182,000
Miscellaneous Amusement, Recreation
Service (0.11%)
Family Golf Centers, Inc. 2,200(a) 66,275
Miscellaneous Apparel &
Accessories (0.06%)
Designer Holdings, Ltd. 2,200(a) 35,475
Miscellaneous Business
Services (0.12%)
CUC International, Inc. 2,250 53,437
Viad Corp. 1,400 23,100
76,537
Miscellaneous Chemical
Products (0.01%)
Millenium Chemicals, Inc. 196(a) 3,479
Miscellaneous Converted Paper
Products (0.04%)
P. T. Inti Indorayon Utama ADR 10,000 24,531
Miscellaneous Electrical Equipment &
Supplies (0.34%)
Motorola, Inc. 400 24,550
TDK Corp. ADS 2,800 184,100
208,650
Miscellaneous Food & Kindred
Products (1.35%)
Campbell Soup Co. 8,800 706,200
McCormick & Co. 700 16,494
Nestle Reg. ADR 2,000 107,021
829,715
Miscellaneous Investing (8.83%)
Avalon Properties 3,400 97,750
Bedford Property Investors 9,800 171,500
Brandywine Realty Trust 18,000 351,000
Burnham Pacific Properties 19,400 291,000
Capstar Hotel Co. 2,400(a) 47,100
Chateau Properties 6,200 164,300
Duke Realty Investments, Inc. 4,500 173,250
East Group Properties 6,700 183,413
Essex Property Trust 7,500 220,313
Evans Withycombe Residential 1,400 29,400
Healthcare Realty Trust, Inc. 300 7,950
HFS, Inc. 21,300 1,272,675
Irvine Apartment Community 9,800 245,000
Koger Equity, Inc. 1,800(a) 33,750
LTC Properties, Inc. 3,100 57,350
Meridian Industrial Trust 13,500 283,500
Merry Land & Investment Co. 5,100 109,650
Oasis Residential, Inc. 8,400 191,100
Omega Healthcare Investors 5,600 186,200
Paragon Group, Inc. 10,800 191,700
Prentiss Property Trust 10,700 $ 267,500
ROC Communities 9,200 255,300
Shurgard Storage Center 6,300 186,637
South West Property Trust 7,300 123,187
Taubman Centers 2,300 29,612
Urban Shopping Centers 9,300 269,700
5,439,837
Miscellaneous Manufacturers (0.15%)
WMS Industries, Inc. 4,700(a) 94,000
Miscellaneous Non-Durable
Goods (0.46%)
DESC ADR 2,500 55,000
Mitsubishi Corp. ADR 11,000 227,448
282,448
Miscellaneous Special Trade
Contractors (0.17%)
Hang Lung Development Co. ADR 9,400 103,297
Motion Picture Production &
Services (0.16%)
Film Roman, Inc. 1,300(a) 9,913
Viacom, Inc.; Class B 900 31,387
Walt Disney Company 800 55,700
97,000
Motion Picture Theaters (0.01%)
AMC Entertainment 200(a) 2,875
Motor Vehicles & Equipment (1.52%)
Chrysler Corp. 2,100 69,300
Fiat SPA ADR 4,700 71,675
Ford Motor Co. 1,500 47,813
General Motors Corp. 1,400 78,050
Siderurgica Venezuelana Saica ADR 16,000 60,134
Toyota Motor Corp. ADR 8,600 494,500
Volkswagen AG ADR 1,400 116,280
937,752
Newspapers (0.16%)
Gannett Co. 600 44,925
Hollinger International, Inc. 1,800 20,700
New York Times Co. 900 34,200
99,825
Non-Classifiable
Establishments (0.11%)
Keppel Corp. Ltd. ADR 4,300 67,013
Nonresidential Building
Construction (0.03%)
Emprasas ICA Sociedad
Controladora SA ADR 1,170(a) 17,111
Ophthalmic Goods (0.14%)
Bausch & Lomb 2,450 85,750
Paper Mills (0.12%)
Willamette Ind., Inc. 1,100 76,587
Periodicals (0.86%)
K III Communications 49,200(a) 528,900
Personal Credit Institutions (0.41%)
American Express Co. 3,400 192,100
Dean Witter, Discover & Co. 900 59,625
251,725
Petroleum Refining (1.54%)
Ashland, Inc. 4,400 $ 193,050
Atlantic Richfield Co. 1,600 212,000
Exxon Corp. 2,400 235,200
Mobil Corp. 1,600 195,600
Total SA IE Francaise ADR 2,800 112,700
948,550
Photographic Equipment &
Supplies (0.93%)
Eastman Kodak Co. 1,650 132,412
Fuji Photo Film 8,800 290,400
OCE Van Der Grinten NV ADR 1,400 151,200
574,012
Plastic Materials & Synthetics (0.18%)
Hercules, Inc. 800 34,600
Shanghai Petrochemical Co. Ltd. ADR 2,600 76,375
110,975
Primary Nonferrous Metals (0.11%)
Phelps Dodge Corp. 1,050 70,875
Radio & Television
Broadcasting (1.09%)
Clear Channel Communications 11,200 404,600
Grupo Radio Centro SA ADR 1,970(a) 13,544
Grupo Televisa SA GDR 6,200(a) 158,875
Heftel Broadcasting Co. 1,600(a) 50,400
Infinity Broadcasting 1,400 46,725
674,144
Railroads (0.18%)
Nagoya Railroad Co. Ltd. 2,900 111,183
Real Estate Agents & Managers (0.11%)
Atlantic Gulf Communities Co. 15,900(a) 68,569
Real Estate Operators &
Lessors (2.36%)
Alexander Haagen Properties 11,200 165,200
Arden Realty Group, Inc. 9,400 260,850
Catellus Dev. Corp. 9,000(a) 102,375
FAC Realty, Inc. 4,200 27,825
Insignia Financial Group 1,200 27,000
IRT Property Co. 800 9,200
Nationwide Health Properties 10,700 259,475
Pacific Gulf Properties 10,400 202,800
Parkway Properties, Inc. 6,300 163,800
Sekisui House Ltd. ADR 2,300 233,824
1,452,349
Refrigeration & Service
Machinery (0.01%)
American Standard, Inc. 100(a) 3,825
Retail Stores, NEC (0.48%)
CIA Brasileira De Distribuicao GDR 8,625(a)(c) 153,559
PETsMART, Inc. 6,600 144,375
297,934
Sanitary Services (0.08%)
WMX Technologies, Inc. 1,600 52,200
Sawmills & Planning Mills (0.14%)
Louisiana Pacific Corp. 4,000 84,500
Search & Navigation
Equipment (0.18%)
Loral Space Communications 6,200 113,925
Security & Commodity
Services (0.50%)
Franklin Resources, Inc. 4,500 $ 307,687
Soap, Cleaners & Toilet Goods (0.62%)
KAO Corp. ADR 2,200 255,880
Shiseido Co. Ltd. ADR 11,000 126,992
382,872
Special Industry Machinery (0.05%)
Applied Materials, Inc. 800(a) 28,750
Subdividers & Developers (0.10%)
Singapore Land ADR 11,600 64,267
Sugar & Confectionary
Products (0.13%)
Perlis Plantations ADR 25,000 77,705
Surety Insurance (0.69%)
ACE Ltd. 4,200 252,525
The PMI Group, Inc. 3,100 171,662
424,187
Telephone Communication (3.17%)
Airtouch Communications, Inc. 1,300(a) 32,825
AT&T Corp. 2,000 87,000
BCE, Inc. 8,590 410,173
Compania Anonima Telefonos
De Venezuela ADR 5,740(a) 161,438
Sprint Corp. 1,600 63,800
Telebras GDR 18 1,377
Telecommunicacoes
Brasileiras SA ADR 5,080 388,620
Telefonica de Argentina ADR 13,050 337,669
Telefonica de Espana SA ADS 2,500 173,125
Telefonica Del Peru ADR 10,330 194,978
U.S. West Communications Group 1,700 54,825
Worldcom, Inc. 1,900 49,518
1,955,348
Tires & Inner Tubes (0.45%)
Bridgestone ADR 1,100 208,495
Goodyear Tire & Rubber Co. 1,400 71,925
280,420
Variety Stores (0.12%)
Woolworth Corp. 3,350(a) 73,281
Water Transportation of Freight,
NEC (0.18%)
Penninsular & Oriental
Steamships ADR 5,400 109,044
Total Common Stocks 42,475,414
Preferred Stock (0.39%)
Cable & Other Pay TV Services (0.09%)
TCI Pacific 580 52,998
Medical Instruments & Supplies (0.06%)
Fresenius Medical Care Cap 35(a) 35,612
Periodicals (0.24%)
Time Warner; Series M 140(a) $ 151,900
Total Preferred Stocks 240,510
Principal
Amount Value
Bonds (10.36%)
Airports, Flying Fields &
Services (0.13%)
Alps 96 1 PT
Pass Through Certificates;
12.75%; 6/15/06 $ 74,943(c) $ 77,754
Blast Furnace & Basic Steel
Products (0.03%)
Ivaco Senior Notes;
11.50%; 9/15/05 20,000 19,850
Business Credit Institutions (0.53%)
AT&T Capital Corp. Medium-Term
Notes; 5.85%; 1/5/99 330,000 329,472
Cable & Other Pay TV
Services (0.80%)
Cablevision Systems Corp.
Senior Subordinated Notes;
9.25%; 11/1/05 35,000 34,650
9.88%; 5/15/06 105,000 107,756
Comcast Corp. Senior Subordinated
Notes; 9.13%; 10/15/06 20,000 20,450
Marcus Cable Company Step-Up
Senior Discount Notes; 12/15/05 150,000(b)* 107,625
Netsat Servicos LTDA Senior Notes;
12.75%; 8/5/04 50,000(c) 52,437
Rogers Cable Systems Ltd.
Senior Notes; 10.00%; 3/15/05 100,000 106,750
TCI Communications Inc. Debentures;
7.88%; 2/15/26 75,000 64,875
494,543
Chemicals & Allied Products (0.10%)
ISP Holdings Senior Notes;
9.00%; 10/15/03 60,000 60,900
Commercial Banks (0.49%)
First Nationwide Holdings I;
9.13%; 1/15/03 35,000 35,350
First Nationwide; 10.63%; 10/1/03 25,000(c) 27,000
Nationsbank Corp. Senior Notes;
5.70%; 2/9/01 250,000 241,725
304,075
Communications Equipment (0.19%)
Globo Communicacoes Part Note;
10.50%; 12/20/06 40,000(c) 40,150
Rogers Communications, Inc.
Senior Note; 9.13%; 1/15/06 25,000 24,750
Tevecap SA Senior Notes;
12.63%; 11/26/04 50,000(c) 51,125
116,025
Communications Services, NEC (0.49%)
Dial Call Communications, Inc.
Senior Discount Notes, Series B;
12/12/05 $375,000(b) $ 249,375
IXC Communications, Inc. Note;
12/50%; 10/1/05 50,000 55,000
304,375
Computer & Office Equipment (0.03%)
Quest Diagnostic Senior
Subordinated Notes;
10.75%; 12/15/06 20,000 21,000
Crude Petroleum & Natural
Gas (0.21%)
Flores & Rucks Senior Subordinate
Notes; 9.75%; 10/1/06 50,000 52,875
Nuevo Energy Co. Senior
Subordinated Notes;
9.50%; 4/15/06 70,000 74,200
127,075
Electric Services (0.12%)
Midland Cogeneration Debentures;
10.33%; 7/23/02 7,204 7,673
Midland Cogent Debentures;
10.33%; 7/23/02 42,670 45,444
Midland Funding II Notes;
11.75%; 7/23/05 20,000 22,400
75,517
Electronic Components &
Accessories (0.17%)
Advanced Micro Devices, Inc.
Senior Secured Notes;
11.00%; 8/1/03 70,000 75,950
Digital Equipment Debenture Notes;
8.63%; 11/1/12 30,000 29,330
105,280
Electronic Distribution
Equipment (0.41%)
Israel Electric Corp. Senior
Notes; 7.25%; 12/15/06 250,000(c) 249,615
Finance Services (0.93%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.25%; 4/15/03 500,000 503,028
TLC Beatrice International
Finance Senior Notes;
11.50%; 10/01/05 65,000 69,063
572,091
Fire, Marine & Casualty
Insurance (0.03%)
Home Holdings Inc. Senior Notes;
8.63%; 12/15/03 80,000 17,600
Gas Production & Distribution (0.15%)
Cleveland Electric Illum Co.;
9.50%; 5/15/05 85,000 91,375
General Government, NEC (0.55%)
Republic of Columbia
8.70%; 2/15/16 95,000 94,461
Republic of Colombia Yankee
Dollar Bond Note;
7.25%; 2/23/04 250,000 241,629
336,090
Glass & Glassware, Pressed or
Blown (0.17%)
Owens-Ill. Inc. Debentures;
11.00%; 12/01/03 $ 95,000 $ 105,925
Hotels & Motels (0.39%)
Boyd Gaming Corp. Senior Notes;
9.25%; 10/1/03 50,000 48,750
Courtyard by Marriott Senior
Notes; 10.75%; 2/1/08 90,000 94,950
Host Marriott Travel Plaza
Senior Notes; 9.50%; 5/15/05 95,000 99,156
242,856
Metal Cans & Shipping
Containers (0.05%)
U.S. Can Corp. Senior Subordinated
Notes; 10.13%; 10/15/06 30,000(c) 31,500
Metal Mining Services (0.42%)
PTTEP International, Ltd. Yankee
Dollar Notes; 7.63%; 10/1/06 250,000(c) 256,425
Miscellaneous Amusement, Recreation
Service (0.19%)
Grand Casinos Inc. First Mortgage;
10.13%; 12/1/03 95,000 95,950
Station Casinos, Inc. Senior
Subordinated Notes;
9.63%; 6/1/03 20,000 19,800
115,750
Miscellaneous Converted Paper
Products (0.12%)
SD Warren Co. Senior Subordinated
Notes; 12.00%; 12/15/04 70,000 75,600
Miscellaneous Food &
Kindred Products (0.05%)
International Home Foods Senior
Subordinated Notes;
10.38%; 11/1/06 30,000(c) 31,200
Miscellaneous Investing (0.17%)
HMC Acquisition Properties Senior
Notes; 9.00%; 12/15/07 65,000 65,975
Maxxam Group Holdings, Inc.
Senior Notes; 12.00%; 8/1/03 40,000(c) 40,500
106,475
Miscellaneous Publishing (0.02%)
Marvel Parent Holding; 4/15/98 100,000(b) 14,000
Miscellaneous Shopping Goods
Stores (0.16%)
Southland Corp. Senior
Subordinated Debentures;
5.00%; 12/15/03 119,000 98,472
Mortgage Bankers & Brokers (0.04%)
Homeside, Inc. Senior Notes;
11.25%; 5/15/03 20,000 22,300
Oil & Gas Field Services (0.05%)
Parker Drilling Company Senior
Notes; 9.75%; 11/15/06 30,000(c) 31,575
Paperboard Mills (0.30%)
Gaylord Container Senior Notes;
11.50%; 5/15/01 $120,000 $ 127,650
Gaylord Container Senior
Subordinated Debentures;
12.75%; 5/15/05 20,000 22,050
Stone Container Financial Co.;
11.50%; 8/15/06 35,000 35,962
185,662
Personal Credit Institutions (0.40%)
GMAC Medium-Term Notes;
6.10%; 12/06/00 250,000 245,925
Radio & Television
Broadcasting (0.55%)
Echostar Satellite Broadcasting
Step-Up Senior Discount
Notes; 3/15/04 190,000(b)* 145,350
Viacom Subordinated Debentures;
8.00%; 7/7/06 200,000 191,365
336,715
Retail Stores, NEC (0.09%)
Cole National Group, Inc. Senior
Subordinated Notes;
9.88%; 12/31/06 55,000(c) 56,650
Sanitary Services (0.18%)
Norcal Waste Systems Inc. Step-Up
Senior Notes; 11/15/05 100,000* 111,000
Soap, Cleaners & Toilet Goods (0.15%)
Revlon Worldwide Corp. Senior
Discount Notes; 3/15/98 105,000(b) 91,087
Surety Insurance (0.06%)
Teleport Communications Step-Up
Bond; 7/1/07 55,000(b) 37,675
Telephone Communication (1.24%)
Brooks Fiber Properties Step-Up
Senior Discount Notes; 11/1/06 70,000(c)(b) 44,625
Comcast Cellular Notes:
3/5/00 100,000(b) 72,000
3/5/00 40,000(b) 28,750
Comcast Corp. Senior Subordinated
Debentures; 9.38%; 5/15/05 115,000 119,313
Lenfest Communications
Senior Notes;
8.38%; 11/1/05 90,000 86,962
MFS Communications Inc. Step-Up
Senior Discount Notes; 1/15/06 190,000(b) 139,888
Occidente Y Carbide Cellular
Step-Up; 3/15/01 130,000(b)* 76,375
Occidente T Carbide Warrants; 520(b)* 0
Paging Network, Inc. Senior
Subordinated Notes;
10.00%; 10/15/08 60,000(c) 60,525
10.13%; 8/1/07 20,000 20,475
Philippine Long Distance Telephone
Co. Notes;
9.25%; 6/30/06 10,000 10,650
9.25%; 6/30/06 25,000 26,625
Telewest PLC Step-Up Debentures;
10/01/07 $110,000(b) $ 76,450
762,638
Variety Stores (0.20%)
DR Structured Finance
Pass thru Certificates;
7.60%; 8/15/07 134,430 120,514
Total Bonds 6,382,581
U.S. Government Treasury Notes (14.88%)
8.00%; 1/15/97 500,000 500,156
6.38%; 5/15/99 2,000,000 2,017,500
6.25%; 5/31/00 3,000,000 3,013,125
6.25%; 4/30/01 2,000,000 2,004,376
7.88%; 11/15/04 1,500,000 1,636,875
Total U.S. Government Treasury Notes 9,172,032
Government National Mortgage Association (GNMA)
Certificates (1.55%)
Description of Issue Principal
Type Rate Maturity Amount Value
GNMA I 6.00% 6/15/11 $991,302 $ 957,310
Total Portfolio Investments (96.10%) 59,227,847
Cash and receivables, net of
liabilities (3.90%) $2,403,291
Total Net Assets (100.00%) $61,631,138
(a) Non-income producing security - No dividend paid during the past twelve
months.
(b) Non-income producing security - zero-and zero-step coupon bonds.
(c) Restricted Security - See Note 4 to the financial statements.
* Variable Rate
PRINCIPAL BALANCED FUND, INC.
Shares
Held Value
Common Stocks (56.09%)
Advertising (0.26%)
Interpublic Group of Cos., Inc. 5,100 $ 242,250
Bakery Products (0.87%)
Sara Lee Corp. 21,700 808,325
Beverages (0.79%)
Pepsico, Inc. 20,100 587,925
Universal Foods Corp. 4,300 151,575
739,500
Combination Utility Services (0.55%)
Cinergy Corp. 15,400 513,975
Commercial Banks (6.13%)
Banc One Corp. 22,013 $ 946,559
Bank of Boston Corp. 13,900 893,075
Corestates Financial Corp. 22,500 1,167,188
First of America Bank Corp. 7,600 456,950
Fleet Financial Group, Inc. 11,600 578,550
KeyCorp. 16,800 848,400
Marshall & Ilsley Corp. 6,000 207,750
Nationsbank Corp. 6,200 606,050
5,704,522
Commercial Printing (0.63%)
R. R. Donnelley & Sons Co. 18,700 586,712
Communications Equipment (1.00%)
Allen Group, Inc. 4,200 93,450
DSC Communications Corp. 15,000(a) 268,125
General Instrument Corp. 26,100(a) 564,413
925,988
Computer & Office Equipment (1.79%)
Hewlett-Packard Co. 9,700 487,425
International Business
Machines Corp. 7,800 1,177,800
1,665,225
Consumer Products (0.36%)
Philip Morris Cos., Inc. 3,000 337,875
Crude Petroleum & Natural
Gas (1.18%)
Texaco, Inc. 11,200 1,099,000
Dairy Products (0.31%)
Dean Foods Co. 9,000 290,250
Drug Stores & Proprietary
Stores (0.61%)
Rite Aid Corp. 14,200 564,450
Drugs (6.22%)
Abbott Labs 17,000 862,750
American Home Products Corp. 11,500 674,188
Bristol-Myers Squibb Co. 5,000 543,750
Merck & Co., Inc. 12,400 982,700
Pharamacia & Upjohn, Inc. 27,000 1,069,875
Schering-Plough Corp. 14,300 925,925
Warner-Lambert Co. 9,800 735,000
5,794,188
Electric Services (2.40%)
Dominion Resources, Inc. 13,600 523,600
FPL Group, Inc. 9,300 427,800
Houston Industries, Inc. 38,100 862,012
Potomac Electric Power Co. 16,400 422,300
2,235,712
Electrical Industrial Apparatus (0.57%)
Emerson Electric Co. 5,500 532,125
Electronic Distribution
Equipment (1.03%)
General Electric Co. 9,700 959,088
Fats & Oils (1.24%)
Archer Daniels Midland Co. 52,695 1,159,290
General Industrial Machinery (0.61%)
BW/IP Holdings, Inc.; Class A 6,400 $ 105,600
Pall Corp. 18,200 464,100
569,700
Grain Mill Products (0.66%)
Ralston-Ralston Purina Group 8,300 609,012
Greeting Cards (0.67%)
American Greetings Corp. 22,100 627,088
Grocery Stores (2.52%)
Albertson's, Inc. 16,800 598,500
American Stores Co. 16,000 654,000
Sysco Corp. 33,500 1,092,937
2,345,437
Household Furniture (1.59%)
Masco Corp. 41,100 1,479,600
Industrial Inorganic Chemicals (0.66%)
Dow Chemical Co. 5,300 415,388
Eastman Chemical Co. 3,550 196,137
611,525
Jewelry, Silverware & Plated
Ware (0.22%)
Jostens, Inc. 9,700 204,913
Management & Public
Relations (1.39%)
ACNielson Corp. 6,966(a) 105,361
Cognizant Corp. 20,900 689,700
Dun & Bradstreet Corp. 20,900 496,375
1,291,436
Meat Products (1.28%)
ConAgra, Inc. 4,141 206,015
Tyson Foods, Inc. 28,900 989,825
1,195,840
Medical Instruments &
Supplies (0.67%)
St. Jude Medical, Inc. 14,750(a) 628,718
Medical Service & Health
Insurance (1.18%)
AON Corp. 8,750 543,593
Foundation Health Corp. 15,800(a) 501,650
Physicians Corp. of America 5,000(a) 50,000
1,095,243
Metal Forgings & Stampings (0.60%)
Newell Co. 17,600 554,400
Metalworking Machinery (0.06%)
Giddings & Lewis 4,600 59,225
Miscellaneous Business
Services (0.24%)
Safety-Kleen Corp. 13,600 222,700
Miscellaneous Converted Paper
Products (1.10%)
Minnesota Mining & Mfg. Co. 12,400 1,027,650
Miscellaneous Electrical Equipment
& Supplies (0.78%)
Motorola, Inc. 11,800 724,225
Miscellaneous Fabricated Metal
Products (0.18%)
Keystone International, Inc. 8,500 $ 171,063
Miscellaneous Plastics Products,
NEC (0.20%)
Rubbermaid, Inc. 8,300 188,825
Miscellaneous Shopping Goods
Stores (1.27%)
Toys 'R' Us, Inc. 39,400(a) 1,182,000
Motor Vehicles, Parts &
Supplies (0.98%)
Grainger (W. W.), Inc. 11,400 914,850
Paper Mills (1.08%)
Kimberly Clark Corp. 10,600 1,009,650
Petroleum Refining (2.87%)
Atlantic Richfield Co. 10,900 1,444,250
Exxon Corp. 12,500 1,225,000
2,669,250
Plastic Materials & Synthetics (0.10%)
Wellman, Inc. 5,600 95,900
Sanitary Services (2.50%)
Browning-Ferris Industries, Inc. 43,600 1,144,500
WMX Technologies, Inc. 36,400 1,187,550
2,332,050
Security Brokers & Dealers (0.34%)
Edwards (A.G.), Inc. 9,500 319,437
Soap, Cleaners & Toilet Goods (2.04%)
Avon Products 19,900 1,136,787
Colgate-Palmolive Co. 8,300 765,675
1,902,462
Telephone Communication (2.50%)
AT&T Corp. 23,400 1,017,900
MCI Communications Corp. 40,100 1,310,769
2,328,669
Variety Stores (1.86%)
Dayton-Hudson Corp. 25,500 1,000,875
Wal-Mart Stores, Inc. 31,800 727,425
1,728,300
Total Common Stocks 52,247,643
Preferred Stocks (1.39%)
Motor Vehicles & Equipment (1.39%)
Federal-Mogul Corp.
Series D Convertible 4,300(b) 260,150
Ford Motor Co.
Series A Convertible 10,000 1,037,500
Total Preferred Stocks 1,297,650
Bonds (1.64%)
Blast Furnace & Basic Steel
Products (0.22%)
Quanex Corp. Convertible
Subordinated Debentures;
6.88%; 6/30/07 $200,000 $ 204,000
Electric Lighting & Wiring
Equipment (0.24%)
Cooper Industries, Inc.
Convertible Subordinated
Debentures; 7.05%; 1/1/15 208,000 222,560
Electric Industrial Apparatus (0.31%)
Liebert Co. Convertible Subordinated
Debentures; 8.00%; 11/15/10 80,000 289,100
Engines & Turbines (0.21%)
Outboard Marine Corp. Convertible
Subordinated Debentures;
7.00%; 7/1/02 200,000 195,250
Lumber & Other Building
Materials (0.16%)
Hechinger Co. Convertible
Subordinated Debentures;
5.50%; 4/1/12 425,000 148,219
Petroleum Refining (0.33%)
Pennzoil Co. Senior Exchangeable
Debentures; 6.50%; 1/15/03 200,000 308,500
Trucking & Courier Services, Ex.,
Air (0.17%)
Builders Transport, Inc.
Convertible Subordinated
Debentures; 6.50%; 5/1/11 306,000 162,945
Total Bonds 1,530,574
U.S. Government Treasury Notes & Bonds (37.02%)
5.13%; 2/28/98 2,500,000 2,476,563
5.13%; 11/30/98 3,000,000 2,957,814
6.38%; 1/15/00 1,900,000 1,916,625
5.50%; 4/15/00 3,500,000 3,440,937
6.13%; 9/30/00 3,500,000 3,497,813
6.25%; 4/30/01 3,000,000 3,006,564
6.38%; 8/15/02 2,000,000 2,013,126
6.25%; 2/15/03 3,000,000 2,997,189
5.75%; 8/15/03 4,800,000 4,656,000
7.25%; 8/15/04 1,500,000 1,579,219
7.50%; 2/15/05 800,000 855,750
5.63%; 2/15/06 2,000,000 1,892,500
7.25%; 5/15/16 1,000,000 1,055,938
7.50%; 11/15/16 1,000,000 1,082,188
7.25%; 8/15/22 1,000,000 1,057,813
Total U. S. Government Treasury
Notes & Bonds 34,486,039
Commercial Paper (3.91%)
Business Credit Institutions (2.94%)
General Electric Capital Corp.;
6.65%; 1/2/97 $2,740,000 $2,740,000
Personal Credit Institutions (0.97%)
Ford Motor Credit Co. ;
5.91%; 1/2/97 905,000 905,000
Total Commercial Paper 3,645,000
Total Portfolio Investments (100.05%) 93,206,906
Liabilities, net of cash and receivables (-0.05%) (49,237)
Total Net Assets (100.00%) $93,157,669
(a) Non-income producing security - No dividend paid during the past twelve
months.
(b) Restricted Security - See Note 4 to the financial statements.
PRINCIPAL BOND FUND, INC.
Principal
Amount Value
Bonds (95.83%)
Air Transportation, Scheduled (1.59%)
Federal Express Corp.,
Pass-Through Cert.;
7.96%; 3/28/17 $500,000 $ 514,735
7.58%; 7/2/19 500,000 491,800
1,006,535
Aircraft & Parts (0.52%)
Textron, Inc. Medium-Term Notes,
Series C; 9.55%; 3/19/01 300,000 331,469
Auto & Home Supply Stores (0.94%)
Pep Boys-Manny, Moe & Jack Notes;
7.00%; 6/1/05 600,000 597,691
Bakery Products (1.47%)
Nabisco, Inc. Notes;
7.05%; 7/15/07 950,000 930,984
Beverages (2.71%)
Joseph E. Seagram & Sons
Guaranteed Debentures;
8.88%; 9/15/11 1,500,000 1,714,734
Broadwoven Fabric Mills,
Cotton (2.32%)
Burlington Industries, Inc. Notes;
7.25%; 9/15/05 1,500,000 1,472,342
Cable & Other Pay TV
Services (1.55%)
TCI Communications, Inc. Senior
Notes; 8.00%; 8/1/05 1,000,000 982,799
Combination Utility Services (0.43%)
Public Service Electric & Gas
Medium-Term Notes;
8.16%; 5/26/09 $250,000 $ 270,577
Consumer Products (1.25%)
Philip Morris Cos. Notes;
6.80%; 12/1/03 500,000 492,748
RJR Nabisco Capital Corp. Senior
Notes; 8.75%; 4/15/04 300,000 302,625
795,373
Copper Ores (0.48%)
Asarco, Inc. Notes; 7.38%; 2/1/03 300,000 306,900
Crude Petroleum & Natural
Gas (1.26%)
Occidental Petroleum Corp.
Medium-Term Notes;
9.73%; 6/15/01 250,000 278,929
Union Oil of California
Medium-Term Notes;
7.77%; 4/19/05 500,000 522,791
801,720
Deep Sea Foreign Transportation of
Freight (1.54%)
American President Cos., Ltd.
Senior Notes; 7.13%; 11/15/03 1,000,000 978,094
Department Stores (4.07%)
Dillard Investment Co. Notes;
9.25%; 5/1/97 200,000 202,202
Harcourt General, Inc. Subordinated
Notes; 9.50%; 3/15/00 350,000 376,948
J. C. Penney Co., Inc. Medium-
Term Notes, Series A;
6.88%; 10/15/15 1,500,000 1,414,743
Sears Roebuck Co. Medium-Term
Notes; 9.05%; 2/6/12 500,000 586,503
2,580,396
Drug Stores & Proprietary
Stores (2.17%)
Rite Aid Corp. Senior Debentures;
6.88%; 8/15/13 1,500,000 1,373,653
Eating & Drinking Places (2.44%)
Marriott International, Inc.
Notes; 6.75%; 12/15/03 200,000 196,846
Senior Notes; 7.88%; 4/15/05 1,300,000 1,350,384
1,547,230
Electric Services (2.16%)
Cleveland Electric Illuminating Co.
First Mortgage Bonds;
8.75%; 11/15/05 400,000 409,000
Southern California Edison Co.
Notes; 6.38%; 1/15/06 1,000,000 957,500
1,366,500
Engines & Turbines (1.53%)
Brunswick Corp. Debentures;
7.38%; 9/1/23 1,000,000 972,673
Fabricated Rubber Products,
NEC (0.44%)
M. A. Hanna Co. Senior Notes;
9.38%; 9/15/03 250,000 279,712
Farm & Garden Machinery (2.26%)
Case Corp. Notes; 7.25%; 1/15/16 $1,500,000 $1,431,972
Gas Production & Distribution (2.52%)
Enron Corp. Notes;
7.13%; 5/15/07 750,000 754,409
Tennessee Gas Pipeline Co. Notes;
9.00%; 1/15/97 400,000 400,319
Transco Energy Co. Notes;
9.38%; 8/15/01 400,000 440,197
1,594,925
General Government, NEC (1.67%)
Ontario Hydro Debentures;
7.45%; 3/31/13 500,000 516,525
Province of Saskatchewan, Canada
Global Notes; 8.00%; 2/1/13 500,000 538,930
1,055,455
Gold & Silver Ores (1.17%)
Placer Dome, Inc. Notes;
7.13%; 6/15/07 750,000 741,332
Grain Mill Products (1.60%)
Ralston Purina Co. Debentures;
7.75%; 10/1/15 1,000,000 1,012,928
Groceries & Related Products (2.27%)
Supervalu, Inc. Medium-Term Notes,
Series B; 6.49%; 12/12/05 1,500,000 1,436,113
Highway & Street
Construction (2.91%)
Foster Wheeler Corp. Notes;
6.75%; 11/15/05 1,900,000 1,842,021
Hospitals (0.88%)
Columbia/HCA Healthcare Corp.
Medium-Term Notes;
8.70%; 2/10/10 500,000 559,390
Hotels & Motels (2.43%)
Hilton Hotels Corp. Notes;
7.70%; 7/15/02 1,500,000 1,539,246
Household Appliances (0.88%)
Maytag Corp. Medium-Term Notes;
8.62%; 11/15/07 500,000 556,271
Household Furniture (0.77%)
Masco Corp. Debentures;
7.13%; 8/15/13 500,000 486,540
Industrial Inorganic Chemicals (3.57%)
FMC Corp. Senior Notes;
6.38%; 9/1/03 200,000 191,316
7.75%; 7/1/11 1,500,000 1,541,657
Grace (W.R.) & Co. Guaranteed
Notes; 8.00%; 8/15/04 500,000 527,870
2,260,843
Lumber & Construction
Materials (2.61%)
Crane Co. Notes; 8.50%; 3/15/04 1,524,000 1,655,833
Machinery, Equipment &
Supplies (1.15%)
AAR Corp. Notes; 7.25%; 10/15/03 $750,000 $ 729,422
Metalworking Machinery (0.31%)
Black & Decker Corp. Notes;
7.00%; 2/1/06 200,000 198,156
Millwork, Plywood & Structural
Members (1.75%)
Georgia-Pacific Corp.
Debentures; 9.50%; 12/1/11 100,000 118,281
Senior Debentures; 7.70%; 6/15/15 1,000,000 990,371
1,108,652
Miscellaneous Chemical
Products (0.63%)
Ferro Corp. Senior Debentures;
7.63%; 5/1/13 400,000 399,922
Miscellaneous Investing (2.76%)
Washington Real Estate Investment
Trust Senior Notes;
7.25%; 8/13/06 1,000,000 985,787
Weingarten Realty Investors
Medium-Term Notes;
7.29%; 5/23/05 750,000 762,774
1,748,561
Miscellaneous Metal Ores (1.84%)
Amax, Inc. Notes; 9.88%; 6/13/01 100,000 111,490
Cyprus Amax Minerals Notes;
7.38%; 5/15/07 650,000 655,273
Cyprus Minerals Co. Notes;
10.13%; 4/1/02 350,000 397,742
1,164,505
Motion Picture Production &
Services (0.57%)
Columbia Pictures Entertainment, Inc.
Senior Subordinated Notes;
9.88%; 2/1/98 350,000 363,499
Motor Vehicles & Equipment (1.31%)
TRW, Inc. Medium-Term Notes;
9.25%; 12/30/11 700,000 827,859
Newpapers (2.54%)
News America Holdings, Inc.
Guaranteed Senior Notes;
8.50%; 2/15/05 1,500,000 1,609,261
Operative Builders (2.44%)
Pulte Corp. Senior Notes;
8.38%; 8/15/04 1,000,000 1,054,329
7.30%; 10/24/05 500,000 492,016
1,546,345
Paper Mills (5.30%)
Bowater, Inc. Debentures;
9.38%; 12/15/21 200,000 238,208
Champion International Corp. Notes;
9.88%; 6/1/00 250,000 274,675
7.10%; 9/1/05 875,000 872,241
Chesapeake Corp. Notes;
7.20%; 3/15/05 1,400,000 1,403,112
Potlatch Corp. Medium-Term Notes;
8.75%; 1/14/22 $500,000 $ 572,901
3,361,137
Personal Credit Institutions (1.62%)
General Motors Acceptance Corp.
Medium-Term Notes;
8.25%; 2/24/04 500,000 539,421
Notes; 6.63%; 10/15/05 500,000 485,609
1,025,030
Petroleum Refining (4.43%)
Ashland Oil, Inc. Medium-Term Notes;
7.71%; 5/11/07 500,000 523,198
7.73%; 7/15/13 250,000 257,824
Series F; 8.54%; 1/13/05 250,000 274,043
Pennzoil Co. Debentures;
10.13%; 11/15/09 325,000 380,621
Phillips Petroleum Co. Notes;
9.38%; 2/15/11 500,000 601,111
Sun Co., Inc.
Debentures; 9.00%; 11/1/24 500,000 573,617
Notes; 7.13%; 3/15/04 200,000 199,148
2,809,562
Plastic Materials & Synthetics (3.06%)
Geon Company Notes;
6.88%; 12/15/05 2,000,000 1,939,110
Primary Nonferrous Metals (1.06%)
Reynolds Metals Co.
Medium-Term Notes;
8.34%; 5/22/07 500,000 544,565
7.65%; 2/4/08 125,000 129,958
674,523
Pulp Mills (0.35%)
International Paper Co. Medium-Term
Notes; 9.70%; 8/15/00 200,000 220,139
Railroads (1.51%)
Union Pacific Corp. Notes;
6.40%; 2/1/06 1,000,000 954,162
Refrigeration & Service
Machinery (0.55%)
Westinghouse Electric Corp.
Debentures; 8.63%; 8/1/12 350,000 351,264
Rental of Railroad Cars (1.73%)
Gatx Capital Corp. Medium-Term
Notes, Series C; 6.86%; 10/13/05 1,000,000 984,838
Signal Capital Corp. Equipment Trust
Cert.; 9.95%; 2/1/06 109,000 114,360
1,099,198
Sanitary Services (1.72%)
Laidlaw, Inc. Senior Notes;
7.88%; 4/15/05 1,045,000 1,092,578
Sawmills & Planning Mills (1.26%)
MacMillan Bloedel Delaware
Guaranteed Notes; 8.50%; 1/15/04 750,000 798,000
Telephone Communication (2.38%)
Sprint Corp. Notes; 8.13%; 7/15/02 500,000 531,471
U.S. West Capital Funding, Inc.
Medium-Term Notes;
6.83%; 11/15/07 1,000,000 978,829
1,510,300
Variety Stores (1.15%)
Dayton-Hudson Corp. Debentures;
9.63%; 2/1/08 $150,000 $ 176,937
Dayton-Hudson Corp. Sinking Fund
Debentures; 9.50%; 10/15/16 55,000 57,476
Shopko Stores, Inc. Senior Notes;
9.00%; 11/15/04 500,000 496,463
730,876
Total Bonds 60,744,312
Commercial Paper (2.98%)
Business Credit Institutions (2.98%)
General Electric Capital;
6.65%; 1/2/97 1,890,000 1,890,000
Total Portfolio Investments (98.84%) 62,634,312
Cash and receivables, net of liabilities (1.19%) 752,249
Total Net Assets (100.00%) $63,386,561
PRINCIPAL CAPITAL ACCUMULATION
FUND, INC.
Shares
Held Value
Common Stocks (98.79%)
Beverages (2.95%)
Anheuser Busch Cos., Inc. 100,000 $ 4,000,000
Pepsico, Inc. 49,000 1,433,250
Universal Foods Corp. 17,200 606,300
6,039,550
Combination Utility Services (1.73%)
Cinergy Corp. 58,200 1,942,425
Montana Power Co. 75,000 1,603,125
3,545,550
Commercial Banks (10.69%)
Banc One Corp. 123,940 5,329,420
Bank of Boston Corp. 38,300 2,460,775
Corestates Financial Corp. 104,000 5,395,000
First of America Bank Corp. 28,700 1,725,588
KeyCorp 103,000 5,201,500
Nationsbank Corp. 18,400 1,798,600
21,910,883
Commercial Printing (2.56%)
R. R. Donnelley & Sons Co. 167,000 5,239,625
Communications Equipment (1.61%)
Allen Group, Inc. 16,000(a) 356,000
DSC Communications Corp. 52,800(a) 943,800
General Instrument Corp. 92,800(a) 2,006,800
3,306,600
Computer & Office Equipment (2.37%)
Hewlett-Packard Co. 33,400 1,678,350
International Business
Machines Corp. 21,000 3,171,000
4,849,350
Crude Petroleum & Natural
Gas (1.89%)
Texaco, Inc. 39,400 $ 3,866,125
Dairy Products (0.67%)
Dean Foods Co. 42,500 1,370,625
Drug Stores & Proprietary Stores (1.12%)
Rite Aid Corp. 58,000 2,305,500
Drugs (9.02%)
Abbott Labs 66,000 3,349,500
American Home Products Corp. 45,000 2,638,125
Bristol-Myers Squibb Co. 18,000 1,957,500
Merck & Co., Inc. 37,000 2,932,250
Pharmacia & Upjohn, Inc. 137,000 5,428,625
Warner-Lambert Co. 29,200 2,190,000
18,496,000
Electric Services (4.81%)
Dominion Resources, Inc. 44,400 1,709,400
FPL Group, Inc. 38,500 1,771,000
Houston Industries, Inc. 231,000 5,226,375
Potomac Electric Power Co. 45,000 1,158,750
9,865,525
Electrical Industrial Apparatus (1.28%)
Emerson Electric Co. 27,090 2,620,958
Electronic Distribution
Equipment (1.40%)
General Electric Co. 29,000 2,867,375
Farm & Garden Machinery (2.24%)
Tenneco, Inc. 101,600 4,584,700
Fats & Oils (1.99%)
Archer Daniels Midland Co. 185,010 4,070,220
Gas Production & Distribution (0.23%)
El Paso Natural Gas 9,448 477,124
General Industrial Machinery (0.56%)
BW/IP Holdings, Inc., Class A 23,000 379,500
Pall Corp. 30,100 767,550
1,147,050
Grain Mill Products (1.02%)
Ralston-Ralston Purina Group 28,600 2,098,525
Greeting Cards (2.48%)
American Greetings Corp. 179,000 5,079,125
Grocery Stores (3.23%)
Albertson's, Inc. 40,600 1,446,375
American Stores Co. 60,000 2,452,500
Sysco Corp. 83,400 2,720,925
6,619,800
Household Furniture (2.60%)
Masco Corp. 148,200 5,335,200
Industrial Inorganic
Chemicals (1.24%)
Dow Chemical Co. 22,000 $ 1,724,250
Eastman Chemical Co. 14,900 823,225
2,547,475
Industrial Organic Chemicals (0.70%)
Ethyl Corp. 150,000 1,443,750
Jewelry, Silverware & Plated
Ware (0.33%)
Jostens, Inc. 31,700 669,662
Life Insurance (2.55%)
American General Corp. 128,000 5,232,000
Management & Public
Relations (1.35%)
ACNielson Corp. 14,966(a) 226,361
Cognizant Corp. 44,900 1,481,700
Dun & Bradstreet Corp. 44,900 1,066,375
2,774,436
Meat Products (1.47%)
Tyson Foods, Inc. 88,000 3,014,000
Medical Instruments &
Supplies (1.10%)
St. Jude Medical, Inc. 53,100(a) 2,263,388
Medical Service & Health
Insurance (1.63%)
AON Corp. 31,050 1,928,981
Foundation Health Corp. 37,400(a) 1,187,450
Physicians Corp. of America 22,900(a) 229,000
3,345,431
Metal Forgings & Stampings (0.98%)
Newell Co. 64,000 2,016,000
Metalworking Machinery (0.14%)
Giddings & Lewis 23,000 296,125
Miscellaneous Business
Services (0.35%)
Safety-Kleen Corp. 43,500 712,312
Miscellaneous Converted Paper
Products (1.27%)
Minnesota Mining & Mfg. Co. 31,400 2,602,275
Miscellaneous Electrical Equipment &
Supplies (0.94%)
Motorola, Inc. 31,400 1,927,175
Miscellaneous Fabricated Metal
Products (0.27%)
Keystone International, Inc. 27,300 549,413
Miscellaneous Shopping Goods
Stores (1.59%)
Toys 'R' Us, Inc. 108,700(a) 3,261,000
Motor Vehicles, Parts &
Supplies (1.42%)
Grainger (W. W.), Inc. 36,400 2,921,100
Newspapers (2.48%)
Dow Jones & Co., Inc. 150,000 $ 5,081,250
Paper Mills (1.72%)
Kimberly Clark Corp. 37,000 3,524,250
Petroleum Refining (4.35%)
Atlantic Richfield Co. 40,000 5,300,000
Exxon Corp. 37,000 3,626,000
8,926,000
Plastic Materials & Synthetics (0.19%)
Wellman, Inc. 23,000 393,875
Sanitary Services (4.37%)
Browning-Ferris Industries, Inc. 203,900 5,352,375
WMX Technologies, Inc. 110,600 3,608,325
8,960,700
Security Brokers & Dealers (0.59%)
Edwards (A.G.), Inc. 36,015 1,211,004
Ship & Boats Building &
Repairing (0.15%)
Newport News Shipbuilding, Inc. 20,320(a) 304,800
Soap, Cleaners, & Toilet Goods (2.99%)
Avon Products 63,600 3,633,150
Colgate-Palmolive Co. 27,000 2,490,750
6,123,900
Telephone Communication (5.21%)
AT&T Corp. 52,000 2,262,000
MCI Communications Corp. 101,500 3,317,781
US West Communications Group 158,000 5,095,500
10,675,281
Variety Stores (2.96%)
Dayton-Hudson Corp. 81,000 3,179,250
Wal-Mart Stores, Inc. 126,000 2,882,250
6,061,500
Total Common Stocks 202,533,512
Principal
Amount Value
Commercial Paper (1.92%)
Business Credit Institutions (0.83%)
General Electric Capital;
6.65%; 1/2/97 $1,710,000 $ 1,710,000
Personal Credit Institutions (1.09%)
Ford Motor Credit Co.;
5.91%; 1/2/97 2,240,000 2,240,000
Total Commercial Paper 3,950,000
Total Portfolio Investments (100.71%) 206,483,512
Liabilities, net of cash and receivables (-0.71%) (1,464,984)
Total Net Assets (100.00%) $205,018,528
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL EMERGING GROWTH FUND, INC.
Shares
Held Value
Common Stocks (85.53%)
Blast Furnace & Basic Steel
Products (0.99%)
Lukens, Inc. 67,300 $ 1,354,413
Carpets & Rugs (0.85%)
Shaw Industries, Inc. 99,300 1,166,775
Chemicals & Allied Products (0.46%)
Sigma-Aldrich Corp. 10,000 624,375
Commercial Banks (6.55%)
Boatmen's Bancshares, Inc. 6,100 393,450
First Commerce Corp. 15,600 606,450
First Federal Capital Corp. 40,665 955,627
Independent Bank Corp. Michigan 26,460 893,025
Mercantile Bancorp., Inc. 20,960 1,076,820
Merchants Bancorp., Inc. 21,500 666,500
National City Corp. 20,100 901,988
North Fork Bancorp., Inc. 33,700 1,200,562
Peoples Heritage Financial
Group, Inc. 33,300 932,400
Princeton National Bancorp., Inc. 36,000 666,000
Summit Bancorp. 15,900 695,625
8,988,447
Commercial Printing (0.37%)
Merrill Corp. 22,300 512,900
Computer & Data Processing
Services (7.71%)
American Management Systems, Inc. 84,500(a) 2,070,250
Bitstream 102,000(a) 663,000
Cerner Corp. 116,200(a) 1,801,100
HBO & Co. 31,500 1,870,312
Microsoft Corp. 29,600(a) 2,445,700
National Processing, Inc. 21,300(a) 340,800
Sunquest Information Systems, Inc. 97,300(a) 1,386,525
10,577,687
Computer & Office Equipment (3.09%)
EMC Corp. 81,700(a) 2,706,312
Optika Imaging Systems 75,000(a) 376,172
Seagate Technology 4,000(a) 158,000
Systemsoft Corporation 67,000(a) 996,625
4,237,109
Construction & Related
Machinery (2.26%)
Energy Ventures, Inc. 61,000(a) 3,103,375
Crude Petroleum & Natural
Gas (1.52%)
Devon Energy Corp. 60,000 2,085,000
Dairy Products (0.39%)
Dreyer's Grand Ice Cream, Inc. 18,200 527,800
Drugs (2.36%)
Alliance Pharmaceutical Corp. 30,000(a) $ 408,750
Forest Laboratories, Inc. 17,400(a) 569,850
Genzyme Corp. - General Division 7,182 156,208
Genzyme Corp. - Tissue Repair 255(a) 1,817
Merck & Co., Inc. 10,000 792,500
Pharmacia & Upjohn, Inc. 32,400 1,283,850
Seragen, Inc. 20,000(a) 20,000
3,232,975
Electronic Components &
Accessories (7.18%)
Intel Corp. 37,900 4,962,531
Linear Technology Corp. 46,800 2,053,350
Solectron Corp. 53,100(a) 2,834,213
9,850,094
Engineering & Architectural
Services (1.14%)
Paychex, Inc. 30,400 1,563,700
Finance Services (1.31%)
First Financial Corp. 73,250 1,794,625
Fire, Marine, & Casualty
Insurance (2.19%)
Avemco Corp. 35,000 546,875
Berkley W.R. Corp. 48,500 2,461,375
3,008,250
Footwear, Except Rubber (0.78%)
Nine West Group, Inc. 22,900(a) 1,061,988
General Industrial Machinery (5.00%)
Flow International Corp. 101,500(a) 926,187
Kaydon Corp. 45,600 2,148,900
Pentair, Inc. 54,600 1,760,850
Roper Industries, Inc. 51,500 2,014,938
6,850,875
Grocery Stores (0.88%)
Casey's General Stores, Inc. 64,500 1,209,375
Hardware Stores (0.91%)
Central Tractor Farm & Country, Inc. 90,500(a) 1,244,375
Holding Offices (0.46%)
ISB Financial Corp. 35,400 637,200
Hose, Belting, Gaskets &
Packing (0.97%)
Mark IV Industries 58,875 1,332,047
Hospitals (1.91%)
Humana, Inc. 62,300(a) 1,191,488
Universal Health Services, Inc.;
Class B 50,000(a) 1,431,250
2,622,738
Insurance Agents, Brokers &
Services (1.33%)
Equifax, Inc. 59,400 1,819,125
Investment Offices (1.21%)
Invesco PLC ADS 31,300 $ 1,388,938
Invesco FDG LLC Sponsored ADR 6,260 272,310
1,661,248
Iron & Steel Foundries (0.39%)
Atchison Casting Corp. 30,000(a) 540,000
Laundry, Cleaning & Garment
Services (1.02%)
G & K Services, Inc.; Class A 37,225 1,405,244
Management & Public Relations (0.68%)
Complete Management, Inc. 72,000 927,000
Measuring & Controlling
Devices (1.68%)
ISCO, Inc. 22,513 202,612
Millipore Corp. 37,100 1,535,013
Photon Dynamics 73,600(a) 561,200
2,298,825
Meat Products (0.88%)
Michael Foods, Inc. 95,200 1,213,800
Medical Instruments &
Supplies (4.65%)
Boston Scientific Corp. 35,200(a) 2,112,000
Nellcor Puritan Bennett 84,000(a) 1,837,500
Steris Corp. 55,700(a) 2,422,950
6,372,450
Medical Service & Health
Insurance (4.65%)
Alternative Living Services 93,700(a) 1,358,650
Foundation Health Corp. 40,500(a) 1,285,875
Health System International, Inc. 52,200(a) 1,291,950
Orthofix International NV 77,600(a) 640,200
Patient Info Systems 59,000(a) 545,750
United Healthcare Corp. 27,900 1,255,500
6,377,925
Metal Services, NEC (1.88%)
BMC Industries, Inc. 81,900 2,579,850
Miscellaneous Chemical
Products (3.67%)
Cytec Industries 48,200(a) 1,958,125
H. B. Fuller Co. 20,000 940,000
Loctite Corp. 35,100 2,136,712
5,034,837
Office Furniture (1.28%)
Chromcraft Revington, Inc. 36,200(a) 1,004,550
Kimball International, Inc.; Class B 18,200 753,025
1,757,575
Office & Clinics of Medical
Doctors (0.09%)
FHP International Corp. 3,400(a) 126,225
Oil & Gas Field Services (1.40%)
Diamond Offshore Drilling 33,700(a) 1,920,900
Operative Builders (1.32%)
D. R. Horton, Inc. 131,200 1,426,800
Pulte Corp. 12,621 388,096
1,814,896
Paints & Allied Products (0.89%)
RPM, Inc. 71,700 1,218,900
Plastic Materials & Synthetics (0.91%)
A. Schulman, Inc. 51,000 $ 1,249,500
Plumbing, Heating,
Air-Conditioning (1.71%)
Apogee Enterprises, Inc. 57,000 2,265,750
Metalclad Corp. 45,600(a) 82,650
2,348,400
Refrigeration & Service
Machinery (0.60%)
Tecumseh Products Co.; Class A 14,400 826,200
Sanitary Services (1.03%)
Browning-Ferris Industries, Inc. 46,600 1,223,250
USA Waste Services, Inc. 5,847(a) 186,373
1,409,623
Savings Institutions (1.08%)
North Side Savings Bank 15,000 817,500
Sterling Financial Corp. 46,900(a) 662,463
1,479,963
Screw Machine Products, Bolts,
Etc. (1.00%)
TriMas Corp. 57,500 1,372,812
Security Brokers & Dealers (0.66%)
Jefferies Group, Inc. 22,400 904,400
Telephone Communication (0.83%)
McLeod, Inc. 44,500(a) 1,134,750
Toys & Sporting Goods (1.05%)
Mattel, Inc. 51,700 1,434,675
Trucking & Courier Services, Ex.
Air (0.36%)
J. B. Hunt Transport Services, Inc. 35,500 497,000
Total Common Stocks 117,312,246
Preferred Stock (0.44%)
Offices & Clinics of Medical
Doctors (0.44%)
FHP International Corp.
Series A Convertible 20,000(a) 610,000
Principal
Amount Value
Bonds (1.55%)
Computer & Data Processing
Services (0.25%)
Sierra On Line Convertible
Subordinated Debentures;
6.50%; 4/1/01 $110,000(b) $ 345,125
Industrial Inorganic Chemicals (0.35%)
Ciba-Geigy Corp. Exchangeable
Subordinated Debentures;
6.25%; 3/15/16 150,000(b) 150,000
ICN Pharmaceuticals, Inc. Convertible
Subordinated Debentures;
8.50%; 11/15/99 $300,000 $ 325,500
475,500
Management & Public
Relations (0.73%)
Complete Management, Inc. Convertible
Debentures; 8.00%; 12/15/03 1,000,000 1,005,000
Nursing & Personal Care
Facilities (0.14%)
Greenery Rehabilitation Group, Inc.
Convertible Senior Subordinated
Notes; 8.75%; 4/1/15 250,000 192,187
Sanitary Services (0.08%)
Enclean, Inc. Convertible Subordinated
Debentures; 7.50%; 8/1/01 100,000 102,339
Total Bonds 2,120,151
Commercial Paper (12.28%)
Business Credit Institutions (4.27%)
American Express Credit Corp.;
5.50%; 1/10/97 2,850,000 2,846,517
General Electric Capital Corp.;
5.78%; 1/7/97 3,015,000 3,012,579
5,859,096
Personal Credit Institutions (2.97%)
Beneficial Corp;
5.80%; 1/8/97 1,460,000 1,458,589
Household Finance Corp.;
5.62%; 1/6/97 2,610,000 2,608,370
4,066,959
Security Brokers & Dealers (5.04%)
Merrill Lynch & Co.;
5.85%; 1/3/97 2,830,000 2,829,540
5.95%; 1/9/97 1,250,000 1,248,554
Smith Barney, Inc.;
5.60%; 1/2/97 2,840,000 2,840,000
6,918,094
Total Commercial Paper 16,844,149
Total Portfolio Investments (99.80%) 136,886,546
Cash and Receivables, net of liabilities (0.20%) 274,335
Total Net Assets (100.00%) $137,160,881
(a) Non-income producing security - No dividend paid during the past twelve
months.
(b) Restricted Security - See Note 4 to the financial statements.
PRINCIPAL GOVERNMENT SECURITIES
FUND, INC.
Description of Issue Principal
Type Rate Maturity Amount Value
Government National Mortgage Association (GNMA)
Certificates (32.28%)
GNMA I 6.50% 5/15/26 $1,000,000 $ 955,380
GNMA I 7.00 1/15/24 844,300 830,107
GNMA I 8.00 10/15/16-6/15/17 1,916,985 1,985,086
GNMA I 8.50 2/15/17-5/15/21 1,862,038 1,962,849
GNMA II 6.00 6/20/24-9/20/26 19,468,917 17,972,068
GNMA II 6.50 12/20/25-2/20/26 3,958,038 3,770,587
Total GNMA Certificates 27,476,077
Federal National Mortgage Association (FNMA)
Certificates (18.45%)
FNMA 5.50 5/1/24 1,177,323 1,051,491
FNMA 6.00 11/1/23-3/1/26 4,062,985 3,779,118
FNMA 6.50 11/1/23-6/1/26 6,613,120 6,323,071
FNMA 7.00 TBA* 1,000,000 978,180
FNMA 7.00 8/1/23 786,901 772,926
FNMA 7.50 4/1/22 1,051,299 1,058,395
FNMA 8.00 6/1/17-11/1/21 793,649 816,254
FNMA GL 6.50 8/15/25 963,731 920,642
Total FNMA Certificates 15,700,077
Federal Home Loan Mortgage Corporation (FHLMC) Certificates (16.69%)
FHLMC 5.50 2/1/24-3/1/24 1,511,637 1,378,673
FHLMC 6.00 12/1/23-1/1/26 2,819,464 2,627,584
FHLMC 6.50 4/1/24-5/1/26 5,298,220 5,078,155
FHLMC 7.00 9/1/23-1/1/24 2,565,534 2,530,318
FHLMC 7.50 2/1/22-6/1/24 1,499,723 1,509,795
FHLMC 8.00 11/1/21 752,170 772,531
FHLMC GL 7.50 3/1/23 301,178 302,910
Total FHLMC Certificates 14,199,966
Principal
Amount Value
Student Loan Marketing Association (SLMA)
Certificates (16.19%)
Student Loan Marketing Association
Debentures;
7.30%; 8/1/12 $10,000,000 $10,316,899
8.47%; 12/1/08 1,000,000 1,136,995
9.15%; 12/1/04 1,200,000 1,381,893
Notes; 6.13%; 12/1/05 560,000 537,816
Notes; 9.25%; 6/1/04 350,000 403,353
Total SLMA Certificates 13,776,956
Private Export Funding Corporation (PEFCO)
Certificates (15.60%)
Private Export Funding Corp.
Secured Notes;
6.62%; 10/1/05 $2,000,000 $1,985,080
9.45%; 12/31/99 4,500,000 4,894,200
Series SS, Senior Secured Notes;
5.50%; 3/15/01 3,325,000 3,225,849
5.80%; 2/1/04 2,200,000 2,140,292
7.03%; 10/31/03 1,000,000 1,027,240
Total PEFCO Certificates 13,272,661
Federal Agency Short-Term Obligations (1.06%)
Federal Home Loan Mortgage Corp.;
1/2/97 900,000 900,000
Total Portfolio Investments (100.27%) 85,325,737
Liabilities, net of cash and receivables (-0.27%) (225,879)
Total Net Assets (100.00%) $85,099,858
* Securities purchased on a to-be-announced basis.
PRINCIPAL GROWTH FUND, INC.
Shares
Held Value
Common Stocks (91.96%)
Advertising (1.20%)
Interpublic Group of Cos., Inc. 25,300 $1,201,750
Beverages (1.70%)
Coca-Cola Co. 8,800 463,100
Pepsico, Inc. 42,100 1,231,425
1,694,525
Blast Furnace & Basic Steel
Products (0.68%)
Lukens, Inc. 33,600 676,200
Carpets & Rugs (0.64%)
Shaw Industries, Inc. 54,800 643,900
Cash Grains (1.92%)
Pioneer Hi-Bred International 27,400 1,918,000
Commercial Banks (6.21%)
Banc One Corp. 16,500 709,500
Bank of Boston Corp. 11,000 706,750
Barnett Banks Inc. 10,000 411,250
Boatmen's Bancshares, Inc. 18,700 1,206,150
CoreStates Financial Corp. 12,300 638,063
First of America Bank Corp. 11,700 703,462
Firstar Corp. 15,000 787,500
Firstmerit Corp. 14,600 518,300
Princeton National Bancorp., Inc. 27,300 505,050
6,186,025
Communications Equipment (3.99%)
General Instrument Corp. 75,800(a) $1,639,175
Northern Telecom Ltd. 18,700 1,157,063
Octel Communications Corp. 67,200(a) 1,176,000
3,972,238
Computer & Data Processing
Services (3.01%)
GTECH Holdings Corp. 47,800(a) 1,529,600
Microsoft Corp. 17,800(a) 1,470,725
3,000,325
Computer & Office Equipment (6.12%)
Automatic Data Processing, Inc. 20,000 857,500
Bay Networks 45,600(a) 951,900
Ceridian Corp. 37,400(a) 1,514,700
Digital Equipment Corp. 30,800(a) 1,120,350
Hewlett-Packard Co. 27,500 1,381,875
Pitney Bowes, Inc. 5,000 272,500
6,098,825
Department Stores (0.60%)
May Department Stores 12,800 598,400
Drugs (7.52%)
Alliance Pharmaceutical Corp. 10,000(a) 136,250
Bristol-Myers Squibb Co. 10,000 1,087,500
Genzyme Corp. - General Division 9,500(a) 206,625
Johnson & Johnson 20,000 995,000
Lilly (Eli) & Co. 20,000 1,460,000
Merck & Co., Inc. 14,600 1,157,050
Pharmacia & Upjohn, Inc. 27,500 1,089,687
Smithkline Beecham PLC ADR 20,000 1,360,000
7,492,112
Eating & Drinking Places (0.32%)
McDonald's Corp. 7,000 316,750
Electrical Goods (0.73%)
Avnet, Inc. 12,500 728,125
Electronic Components &
Accessories (3.94%)
Intel Corp. 17,300 2,265,219
Linear Technology Corp. 37,800 1,658,475
3,923,694
Electronic Distribution
Equipment (0.50%)
General Electric Co. 5,000 494,375
Federal & Federally Sponsored
Credit (0.41%)
Federal National Mortgage Association11,000 409,750
Footwear, Except Rubber (1.70%)
Stride Rite Corp. 169,300 1,693,000
General Industrial Machinery (2.85%)
Flow International Corp. 42,100(a) 384,163
Ingersoll-Rand Co. 20,400 907,800
Tyco International Ltd. 29,200 1,543,950
2,835,913
Grain Mill Products (1.39%)
Ralcorp Holdings, Inc. 15,000(a) 316,875
Ralston-Ralston Purina Group 14,600 1,071,275
1,388,150
Grocery Stores (0.40%)
Casey's General Stores, Inc. 21,200 $ 397,500
Hose, Belting, Gaskets &
Packing (1.33%)
Mark IV Industries 58,500 1,323,562
Hospitals (2.75%)
Columbia/HCA Healthcare Corp. 24,900 1,014,675
Humana, Inc. 45,500(a) 870,188
Universal Health Services, Inc.;
Class B 30,000(a) 858,750
2,743,613
Household Furniture (1.26%)
Masco Corp. 34,900 1,256,400
Investment Offices (1.12%)
Invesco FDG LLC Sponsored ADR 4,200(a) 182,700
Invesco PLC ADS 21,000 931,875
1,114,575
Knitting Mills (0.30%)
Russell Corp. 10,000 297,500
Lumber & Other Building
Materials (1.38%)
Home Depot, Inc. 27,400 1,373,425
Management & Public
Relations (2.37%)
ACNielson Corp. 1,666(a) 25,198
Cognizant Corp. 5,000 165,000
Dun & Bradstreet Corp. 5,000 118,750
Medaphis Corp. 183,000(a) 2,047,313
2,356,261
Medical Instruments &
Supplies (4.89%)
Becton, Dickinson & Co. 20,000 867,500
Boston Scientific Corp. 41,100(a) 2,466,000
Nellcor Puritan Bennett 70,200(a) 1,535,625
4,869,125
Medical Service & Health
Insurance (3.43%)
AON Corp. 11,700 726,862
Foundation Health Corp. 31,600(a) 1,003,300
Health System International, Inc. 21,000(a) 519,750
United Healthcare Corp. 15,000 675,000
Value Health, Inc. 25,000(a) 487,500
3,412,412
Millwork, Plywood & Structural
Members (1.01%)
Georgia-Pacific Corp. 14,000 1,008,000
Miscellaneous Chemical
Products (0.61%)
Loctite Corp. 10,000 608,750
Miscellaneous Converted Paper
Products (0.54%)
Minnesota Mining & Mfg. Co. 6,500 538,687
Miscellaneous Electrical Equipment &
Supplies (1.68%)
Motorola, Inc. 27,300 1,675,537
Miscellaneous Fabricated
Metal Products (0.95%)
Parker-Hannifin Corp. 24,300 $ 941,625
Miscellaneous Plastics Products,
NEC (0.23%)
Rubbermaid, Inc. 10,000 227,500
Miscellaneous Shopping Goods
Stores (0.45%)
Toys 'R' Us, Inc. 15,000(a) 450,000
Motor Vehicles & Equipment (3.35%)
Chrysler Corp. 60,200 1,986,600
Dana Corp. 41,300 1,347,413
3,334,013
Offices & Clinics of Medical
Doctors (0.98%)
FHP International Corp. 26,200(a) 972,675
Office Furniture (0.42%)
Chromcraft Revington, Inc. 15,100(a) 419,025
Operative Builders (0.60%)
Pulte Corp. 19,300 593,475
Paints & Allied Products (0.43%)
RPM, Inc. 25,000 425,000
Petroleum Refining (2.23%)
Atlantic Richfield Co. 5,800 768,500
Exxon Corp. 14,800 1,450,400
2,218,900
Photographic Equipment &
Supplies (0.01%)
Imation Corp. 380(a) 10,688
Plastic Materials & Synthetics (0.83%)
A. Schulman, Inc. 33,600 823,200
Preserved Fruits & Vegetables (0.86%)
CPC International, Inc. 11,100 860,250
Radio, Television & Computer
Stores (0.22%)
Tandy Corp. 5,000 220,000
Radio & Television
Broadcasting (0.91%)
Sinclair Broadcasting Group 35,000(a) 910,000
Refrigeration & Service
Machinery (0.97%)
Tecumseh Products Co.; Class A 16,800 963,900
Rubber & Plastics Footwear (1.20%)
Nike, Inc. 20,000 1,195,000
Sanitary Services (1.26%)
Browning-Ferris Industries, Inc. 29,300 769,125
WMX Technologies, Inc. 15,000 489,375
1,258,500
Security Brokers & Dealers (0.97%)
Salomon, Inc. 20,400 $ 961,350
Shoe Stores (0.06%)
Payless Shoesource Inc. 1,600(a) 60,000
Soap, Cleaners & Toilet Goods (3.11%)
Colgate-Palmolive Co. 11,700 1,079,325
Ecolab, Inc. 46,400 1,745,800
International Flavors & Fragrances, Inc. 6,000 270,000
3,095,125
Toys & Sporting Goods (1.00%)
Mattel, Inc. 35,950 997,612
Variety Stores (0.34%)
Wal-Mart Stores, Inc. 15,000 343,125
Women's & Children's
Undergarments (2.08%)
Warnaco Group; Class A 69,800 2,067,825
Total Common Stock 91,596,192
Preferred Stock (0.37%)
Offices & Clinics of Medical
Doctors (0.37%)
FHP International Corp.;
Series A Convertible 12,182 371,551
Principal
Amount Value
Commercial Paper (7.00%)
Business Credit Institutions (1.90%)
American Express Credit Corp.;
5.80%; 1/7/97 $1,900,000 $1,898,469
Personal Credit Institutions (3.34%)
Beneficial Corp.;
5.95%; 1/3/97 1,255,000 1,254,793
Ford Motor Credit Co.;
5.91%; 1/2/97 2,070,000 2,070,000
3,324,793
Security Brokers & Dealers (1.76%)
Merrill Lynch & Co., Inc.
6.20%; 1/6/97 1,755,000 1,753,791
Total Commercial Paper 6,977,053
Total Portfolio Investments (99.33%) 98,944,796
Cash and receivables, net of liabilities (0.67%) 667,114
Total Net Assets (100.00%) $99,611,910
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL HIGH YIELD FUND, INC.
Principal
Amount Value
Bonds (90.48%)
Aircraft & Parts (2.03%)
Rohr Industries, Inc. Subordinated
Debentures; 9.25%; 3/1/17 $300,000 $ 279,000
Blast Furnace & Basic Steel
Products (3.24%)
Ivaco Senior Notes;
11.50%; 9/15/05 150,000 148,875
Weirton Steel Corp. Senior Notes;
10.75%; 6/1/05 300,000 297,000
445,875
Broadwoven Fabric Mills,
Cotton (2.21%)
J.P. Stevens & Co. Inc.
Sinking Fund Debentures;
9.00%; 3/1/17 300,000 303,750
Cable & Other Pay TV
Services (3.72%)
Jones Intercable, Inc. Senior Notes;
9.63%; 3/15/02 300,000 315,000
TCI Communications, Inc. Debentures;
8.75%; 8/1/15 200,000 196,656
511,656
Cogeneration - Small Power
Producer (3.50%)
AES Corp. Senior Subordinated
Notes; 10.25%; 7/15/06 300,000 322,500
California Energy Co., Inc.
Ltd. Resource Senior Secured
Notes; 9.88%; 6/30/03 150,000 158,250
480,750
Computer & Data Processing
Services (2.41%)
Tenet Healthcare Corp.
Senior Subordinated Notes;
10.13%; 3/1/05 300,000 331,500
Consumer Products (2.92%)
RJR Nabisco, Inc. Senior Notes;
8.75%; 8/15/05 400,000 401,641
Crude Petroleum & Natural
Gas (4.22%)
Chesapeake Energy Corp.
Senior Notes; 9.13%; 4/15/06 150,000 155,625
Nuevo Energy Co.
Senior Subordinated Notes;
9.50%; 4/15/06 400,000 424,000
579,625
Electric Services (1.15%)
El Paso Electric Co.
First Mortgage Bonds, Series D;
8.90%; 2/1/06 150,000 158,250
Electrical Industrial Apparatus (1.51%)
Motors & Gears, Inc.,
Series A Senior Notes;
10.75%; 11/15/06 200,000(a) 207,000
Electronic Components &
Accessories (2.37%)
Advanced Micro Devices, Inc.;
11.00%; 8/1/03 $300,000 $ 325,500
Engines & Turbines (2.03%)
Outboard Marine Corp. Debentures;
9.13%; 4/15/17 300,000 279,000
Footwear, Except Rubber (0.73%)
Brown Group, Inc. Senior Notes;
9.50%; 10/15/06 100,000 100,750
Forest Products (2.04%)
Doman Industries, Ltd. Senior Notes;
8.75%; 3/15/04 300,000 279,750
Fuel Dealers (2.23%)
Petroleum Heat & Power Co., Inc.
Subordinated Notes;
10.13%; 4/1/03 300,000 306,000
General Government, NEC (1.04%)
Republic of Argentina Global Bonds;
8.38%; 12/20/03 150,000 142,500
Groceries & Related Products (2.07%)
Rykoff-Sexton, Inc. Senior
Subordinated Notes;
8.88%; 11/1/03 300,000 285,000
Grocery Stores (3.51%)
Dominick's Finer Foods, Inc.
Senior Subordinated Notes;
10.88%; 5/1/05 150,000 166,500
Ralph's Grocery Co.
Senior Subordinated Notes;
11.00%; 6/15/05 300,000 315,750
482,250
Hotels & Motels (2.17%)
John Q. Hammons Hotels, L.P. &
Finance Corp. First Mortgage
Notes; 8.88%; 2/15/04 300,000 297,750
Industrial Inorganic Chemicals (1.51%)
PT Tri Polyta Indonesia TBK;
11.38%; 12/1/03 200,000 208,000
Knitting Mills (2.36%)
Tultex Corp. Senior Notes;
10.63%; 3/15/05 300,000 324,750
Miscellaneous Amusement, Recreation
Service (1.15%)
Rio Hotel & Casino, Inc.
Senior Subordinated Notes;
10.63%; 7/15/05 150,000 157,500
Miscellaneous Plastics Products,
NEC (2.17%)
Congoleum Corp. Senior Notes;
9.00%; 2/1/01 300,000 298,500
Motor Vehicles & Equipment (2.58%)
Blue Bird Body Company Senior
Subordinated Notes;
10.75%; 11/15/06 $50,000 $ 52,500
Lear Seating Corp. Subordinated
Notes; 8.25%; 2/1/02 300,000 302,250
354,750
Nonferrous Foundries
(Casting) (1.19%)
Howmet Corp. Senior Subordinated
Notes; 10.00%; 12/1/03 150,000 163,500
Nursing & Personal Care
Facilities (2.14%)
Mariner Health Group, Inc. Senior
Subordinated Notes; 9.50%; 4/1/06 300,000 294,000
Oil & Gas Field Services (0.77%)
Parker Drilling Company Senior Notes;
9.75%; 11/15/06 100,000(a) 105,250
Petroleum Refining (2.23%)
Crown Central Petroleum Corp.
Senior Notes; 10.88%; 2/1/05 300,000 306,750
Primary Nonferrous Metals (0.38%)
Euramax International PLC Senior
Subordinated Notes;
11.25%; 10/1/06 50,000(a) 51,625
Pulp Mills (2.64%)
Magnetek, Inc. Senior Subordinated
Debentures; 10.75%; 11/15/98 350,000 363,125
Radio, Television & Computer
Stores (2.24%)
Compusa, Inc. Senior Subordinated
Notes; 9.50%; 6/15/00 300,000 307,500
Radio & Television
Broadcasting (3.24%)
American Radio Systems
Senior Subordinated Notes;
9.00%; 2/1/06 300,000 295,500
Sullivan Broadcasting Inc.
Senior Subordinated Notes;
10.25%; 12/15/05 150,000 150,375
445,875
Retail Stores, NEC (1.50%)
Cole National Group, Inc. Senior
Subordinated Notes;
9.88%; 12/31/06 200,000(a) 206,000
School Buses (1.51%)
Lamar Advertising Company Senior
Subordinated Notes;
9.63%; 12/1/06 200,000 207,000
Soap, Cleaners & Toilet Goods (2.32%)
Coty, Inc. Senior Subordinated
Notes; 10.25%; 5/1/05 300,000 318,750
Telephone Communication (10.79%)
360 Communications Co.
Senior Notes; 7.50%; 3/1/06 $150,000 $ 148,813
Paging Network, Inc. Senior
Debentures; 8.88%; 2/1/06 300,000 286,125
Rogers Cablesystems Ltd. Senior
Secured Second Priority Notes;
9.63%; 8/1/02 250,000 261,250
Rogers Cantel Inc. Senior Secured
Debentures; 9.75%; 6/1/16 300,000 315,000
Telecom Argentina Stet-France
Telecom SA Senior Notes;
12.00%; 11/15/02 150,000 168,375
Vanguard Cellular Systems, Inc.
Senior Debentures; 9.38%; 4/15/06 300,000 303,000
1,482,563
Textile Finishing, Except Wool (2.23%)
Dominion Textile (USA) Inc.
Guaranteed Senior Notes;
9.25%; 4/1/06 300,000 306,000
Water Supply (2.43%)
California Energy Casecnan Water &
Energy Co., Inc. Senior Secured
Bonds Series B; 11.95%; 11/15/10 300,000 333,750
Total Bonds 12,432,735
Commercial Paper (7.28%)
Federal & Federally Sponsored
Credit (7.28%)
FHLMC Commercial Paper;
5.40%; 1/2/97 1,000,000 1,000,000
Total Portfolio Investments (97.76%) 13,432,735
Cash and receivables, net of liabilities (2.24%) 307,608
Total Net Assets (100.00%) $13,740,343
(a) Restricted Security - See Note 4 to the financial statements.
PRINCIPAL MONEY MARKET FUND, INC.
Principal
Amount Value
Commercial Paper (84.65%)
Asset Backed Securities (8.89%)
Corporate Asset Funding Co.;
5.55%; 1/28/97 $500,000 $ 497,996
5.55%; 1/29/97 275,000 273,855
Retailer Funding Corp. Notes;
5.65%; 1/23/97 500,000 498,352
5.60%; 1/30/97 750,000 746,733
Ciesco L.P.;
5.50%; 1/16/97 850,000 848,182
5.65%; 1/22/97 500,000 498,431
5.60%; 1/31/97 750,000 746,617
4,110,116
Business Credit Institutions (7.74%)
AON Corp.;
5.31%; 1/17/97 $750,000 $ 748,340
5.30%; 2/7/97 600,000 596,820
CIT Group Holdings, Inc.;
5.31%; 2/28/97 400,000 396,637
5.28%; 6/2/97 750,000 733,390
General Electric Capital Corp.;
5.29%; 1/24/97 500,000 498,384
International Lease Finance Corp.;
5.55%; 1/17/97 605,000 603,601
3,577,172
Computer & Office Equipment (3.83%)
Xerox Credit Corp.;
5.38%; 1/24/97 180,000 179,409
5.65%; 1/22/97 475,000 473,509
5.32%; 2/4/97 125,000 124,390
5.50%; 2/5/97 1,000,000 994,806
1,772,114
Department Stores (1.49%)
Sears Roebuck Acceptance Corp.;
5.31%; 3/11/97 350,000 346,489
5.39%; 5/19/97 350,000 342,821
689,310
Drugs (0.79%)
Abbott Laboratories;
5.95%; 1/9/97 365,000 364,578
Electric Services (5.75%)
AES Shady Point, Inc.;
5.42%; 1/10/97 500,000 499,398
5.42%; 1/13/97 150,000 149,751
Commed Fuel Co., Inc.;
LOC Canadian Imperial Bank of
Commerce;
5.31%; 2/26/97 125,000 123,986
5.32%; 2/25/97 400,000 396,749
5.31%; 2/25/97 400,000 396,814
LOC Credit Suisse; 5/37%; 2/11/97 750,000 745,525
Florida Power Corp.;
5.55%; 1/28/97 350,000 348,597
2,660,820
Finance Services (4.62%)
Mitsubishi International Corp.;
5.34%; 1/27/97 700,000 697,404
5.40%; 2/10/97 500,000 497,075
5.32%; 3/3/97 325,000 322,118
5.35%; 3/3/97 375,000 371,656
5.43%; 3/17/97 250,000 247,210
2,135,463
Foregin Banks, Branches &
Agencies (2.97%)
Barclays U.S. Funding;
5.73%; 1/3/97 625,000 624,901
5.50%; 1/21/97 750,000 747,823
1,372,724
Forest Products (2.15%)
Weyerhaeuser Co.;
5.50%; 2/6/97 1,000,000 994,653
Gas Production & Distribution (0.99%)
Washingtron Gas Light Co.;
5.65%; 2/7/97 460,000 457,401
Investment Offices (3.99%)
Morgan Stanley Group, Inc.;
5.43%; 1/7/97 $500,000 $ 499,623
5.43%; 1/15/97 600,000 598,824
5.37%; 2/12/97 750,000 745,413
1,843,860
Miscellaneous Investing (1.62%)
MLTC Funding, Inc.;
LOC Citibank, N.A.;
5.32%; 1/21/97 400,000 398,877
5.33%; 1/24/97 350,000 348,860
747,737
Mortgage Bankers & Brokers (0.56%)
Countrywide Home Loan, Inc.;
5.46%; 1/15/97 260,000 259,487
Motor Vehicles & Equipment (4.73%)
Echlin, Inc.;
5.40%; 1/6/97 250,000 249,850
5.34%; 1/16/97 350,000 349,273
5.38%; 1/16/97 300,000 299,372
5.42%; 1/29/97 400,000 398,374
5.36%; 3/14/97 500,000 494,715
5.41%; 3/18/97 400,000 395,492
2,187,076
Personal Credit Institutions (7.77%)
Comoloco Inc.;
5.40%; 2/10/97 500,000 497,075
5.32%; 2/27/97 500,000 495,862
5.50%; 5/23/97 250,000 244,615
5.38%; 7/24/97 500,000 484,831
Ford Motor Credit Co.;
5.34%; 1/30/97 250,000 248,962
General Motors Acceptance Corp.;
5.35%; 1/17/97 150,000 149,666
5.45%; 1/24/97 150,000 149,501
5.60%; 3/3/97 125,000 123,833
5.67%; 3/7/97 400,000 395,968
5.70%; 3/10/97 200,000 197,878
5.68%; 3/14/97 250,000 247,199
Norwest Financial, Inc.;
5.30%; 2/18/97 360,000 357,509
3,592,899
Real Estate Operators &
Lessors (3.02%)
Towson Town Center, Inc.; LOC
Bank of Tokyo-Mitsubishi, Ltd.;
5.60%; 1/16/97 400,000 399,128
5.40%; 1/17/97 200,000 199,550
5.40%; 1/17/97 300,000 299,325
5.55%; 2/19/97 500,000 496,300
1,394,303
Security Brokers & Dealers (14.42%)
Bear Stearns Cos.;
5.50%; 1/31/97 700,000 696,899
Goldman Sachs Group, L.P.;
5.45%; 1/8/97 575,000 574,478
5.35%; 2/14/97 825,000 819,728
5.37%; 2/14/97 400,000 397,434
5.32%; 3/21/97 375,000 370,677
Security Brokers & Dealers (Con't)
Merrill Lynch & Co., Inc.;
5.45%; 1/9/97 $500,000 $ 499,470
5.34%; 1/13/97 150,000 149,755
5.33%; 1/22/97 225,000 224,334
5.33%; 1/23/97 500,000 498,445
5.33%; 1/23/97 200,000 199,378
5.35%; 2/13/97 575,000 571,411
Smith Barney Inc.;
5.42%; 1/2/97 700,000 700,000
5.40%; 1/3/97 500,000 499,925
5.45%; 1/3/97 300,000 299,955
5.55%; 1/3/97 170,000 169,974
6,671,863
Soap, Cleaners & Toilet Goods (0.49%)
Procter & Gamble Co.;
5.55%; 1/7/97 225,000 224,827
Subdividers & Developers (4.41%)
Hartz 667 Commercial Paper Corp.;
LOC Bank of Tokyo-Mitsubishi, Ltd.;
5.42%; 1/14/97 1,000,000 998,193
5.67%; 2/3/97 750,000 746,220
5.40%; 2/3/97 300,000 298,560
2,042,973
Tires & Inner Tubes (4.42%)
Bridgestone/Firestone;
LOC Sumitomo Bank Ltd.;
5.55%; 1/6/97 750,000 749,538
5.50%; 1/8/97 400,000 399,633
6.00%; 1/9/97 400,000 399,533
5.37%; 1/13/97 500,000 499,180
2,047,884
Total Commercial Paper 39,147,310
Bank Notes (4.00%)
Commercial Banks (4.00%)
LaSalle National Bank;
5.56%; 3/6/97 300,000 300,000
5.47%; 3/15/97 300,000 300,000
5.77%; 4/25/97 350,000 350,000
5.72%; 4/30/97 400,000 400,000
6.20%; 8/21/97 500,000 500,000
Total Bank Notes 1,850,000
Bonds (9.61%)
Business Credit Institutions (2.16%)
John Deere Capital Corp.
Medium-Term Notes, Series C;
5.95%; 6/30/97 1,000,000 999,444
Electric Services (1.09%)
Southern California Edison Co. Ref.
Mortgage; 6.13%; 7/15/97 500,000 501,335
Personal Credit Institutions (6.36%)
American General Finance Corp.;
7.70%; 11/15/97 $500,000 $ 508,455
Associates Corp. of North America
Senior Notes;
8.63%; 6/15/97 1,000,000 1,012,035
6.75%; 7/15/97 500,000 502,280
Ford Motor Credit Co.;
5.63%; 3/3/97 415,000 415,074
Household Finance Corp. Notes;
6.25%; 10/15/97 500,000 501,899
2,939,743
Total Bonds 4,440,522
U.S. Government Treasury Bill (1.41%)
Treasury Bill (1.41%)
U.S. Government Treasury Bill;
5.09%; 3/6/97 660,000 654,077
Total Portfolio Investments (99.67%) 46,091,909
Cash and receivables, net of liabilities (0.33%) 152,340
Total Net Assets (100.00%) $46,244,249
PRINCIPAL WORLD FUND, INC.
Shares
Held Value
Common Stocks (94.61%)
Aircraft & Parts (0.03%)
Cemex SA 6,936 $ 24,891
Beverages (1.21%)
Lion Nathan 362,000 867,047
Blast Furnace & Basic Steel
Products (1.27%)
Voest-Alpine Stahl 25,700(b) 913,290
Cement, Hydraulic (0.06%)
Apasco SA 6,320 43,354
Central Reserve Depositories (5.23%)
Banco Totta & Acores 23,000 433,185
Barclays PLC 83,048 1,421,911
Ergo Bank 3,800 192,611
Union Bank of Norway 12,800 400,916
Wing Hang Bank 286,000 1,297,816
3,746,439
Combination Utility Services (2.51%)
ABB AG 905 1,122,218
Iberdrola 1 SA 47,600 673,334
1,795,552
Commercial Banks (7.62%)
ABN-AMRO Holdings NV 12,235 795,042
Bank of Ireland 116,449 1,063,155
Fokus Bank 119,000(b) $ 818,135
Grupo Financiero Bancomer;
Series B 235,000(a) 94,036
National Australia Bank Ltd. 89,885 1,056,606
Siam City Bank 555,000 519,500
Svenska Handelsbanken AB Free 40,500 1,115,110
5,461,584
Communications Services,
NEC (1.03%)
KPN Royal PTT Nederland 19,389 738,688
Computer & Office Equipment (0.12%)
Canon, Inc. 4,000 88,222
Concrete, Gypsum & Plaster
Products (0.02%)
Cementos de Mexico SA 3,200 12,439
Construction & Related
Machinery (0.78%)
Powerscreen International PLC 58,100 561,760
Consumer Products (1.90%)
Imasco Ltd. 55,700 1,365,422
Crude Petroleum & Natural
Gas (0.62%)
Hardy Oil & Gas 86,200 443,280
Deap Sea Foreign Transportation
of Freight (0.50%)
Van Ommeren NV 7,900 356,239
Department Stores (0.75%)
Vendex International 12,500 534,041
Drugs (4.05%)
Elan Corp. PLC ADR 23,400(a) 778,050
Galenica Holdings AG 480 170,877
Roussel-Uclaf 2,970 872,364
Teva Pharmaceutical ADR 21,500 1,080,375
2,901,666
Electric Light & Wiring
Equipment (0.33%)
Clipsal Industries Holdings 25,000 91,000
Otra NV 8,300 142,513
233,513
Electric Services (1.12%)
Korea Electric Power Corp. 8,100 235,671
Korea Mobil Telecommunications
Corp. 290 156,404
Northern Ireland Electric 63,400 413,372
805,447
Electronic Components &
Accessories (2.71%)
Amtek Engineering 391,250 777,567
Elec & Eltek International 268,000 1,018,400
Murata Mfg. 1,000 33,170
Varitronix 63,000 114,027
1,943,164
Electronic Distribution
Equipment (3.42%)
Amper SA 38,000 869,114
Phillips Electronics 28,900 $1,169,542
Techtronic Industries Co. 2,800 416,290
2,454,946
Engines & Turbines (2.38%)
Mabuchi Motor 1,400 70,320
PT United Tractors 372,000 779,428
Scapa Group PLC 204,000 855,308
1,705,056
Farm & Garden Machinery (1.31%)
New Holland NV 45,000(a) 939,375
Finance Services (1.34%)
MBF Capital Berhad 592,000 961,075
Foreign Banks, Branches &
Agencies (0.05%)
Shinhan Bank 2,740(a) 37,268
Forest Products (0.17%)
Metsa-Serla 16,000 119,765
Functions Closely Related to
Banking (0.87%)
Liechtenstein Global Trust AG 1,225 625,856
Gas Production & Distribution (1.62%)
Hafslund ASA 5,467 37,415
OMV AG 9,950 1,120,800
1,158,215
Highway & Street
Construction (0.38%)
BAU Holdings AG 3,030 151,227
Edrasis Psallidas 14,664 124,820
276,047
Holding Offices (1.21%)
First Pacific Co. Ltd. 666,382 865,824
Household Appliances (1.00%)
Fisher & Paykel 182,086 714,012
Household Audio & Video
Equipment (0.88%)
SKF 'B' Free 26,800 633,888
Industrial Inorganic Chemicals (2.12%)
Bayer AG 20,100 814,507
Kemira OY 56,000(a)(b) 704,707
1,519,214
Investment Offices (1.41%)
Invesco Funding 37,800(a) 167,863
Invesco PLC 189,000 839,316
1,007,179
Meat Products (7.06%)
AFFCO Holdings 1,147,265 502,562
Danisco AS 22,000 1,335,163
Davomas Abadi 780,000 701,587
Orkla B Ordinary Shares 21,300 1,350,977
Unilever NV 6,630 1,171,350
5,061,639
Medical Instruments &
Supplies (0.12%)
Nycomed 5,467 83,905
Miscellaneous Chemical
Products (3.43%)
Hoechst AG 22,500 $1,040,971
Novartis AG 1,238 1,414,204
2,455,175
Miscellaneous Durable Goods (1.02%)
Hagemeyer NV 9,175 732,520
Miscellaneous Equipment Rental &
Leasing (1.36%)
Insituto Mobiliane Italian 114,000 974,679
Miscellaneous Food & Kindred
Products (0.57%)
Burns, Philp & Co., Ltd. 230,631 410,322
Miscellaneous Furniture &
Fixtures (0.08%)
Pt Surya Toto 29,000 57,693
Miscellaneous Manufacturers (0.57%)
Carter Holt Harvey Ltd. 181,000 410,504
Miscellaneous Non-Durable
Goods (1.97%)
Grand Metropolitan PLC 179,500 1,409,949
Miscellaneous Plastics Products,
NEC (0.62%)
Royal Plastics Group 24,100(b) 445,725
Miscellaneous Textile Goods (0.72%)
Espirit Asia 1,158,000 512,754
Miscellaneous Transportation
Equipment (0.54%)
Autoliv AB 8,900 389,732
Miscellaneous Transportation
Services (0.23%)
Koninklijke Pakhoed NV 5,281 164,865
Miscellaneous Wood Products (0.25%)
Enso OY 22,300 179,019
Motor Vehicles & Equipment (1.74%)
E.C.I.A. Equipment & Composants 4,600 709,634
Hyundai Motor Co. Ltd. GDR 25,000(b) 173,750
Volvo AB 16,450 362,583
1,245,967
Motor Vehicles, Parts &
Supplies (1.06%)
Dahl International AB 36,000(a) 756,588
Newspapers (1.57%)
Marcoiberica Distribucion de
Edicioues 58,500 618,393
Publishing & Broadcasting Ltd. 104,000 505,527
1,123,920
Oil & Gas Field Services (1.55%)
Repsol Petroleo SA 28,960 1,108,751
Personal Credit Institutions (0.28%)
Manhattan Card Co. 402,000 $ 203,988
Plastic Materials & Synthetics (1.21%)
Astra AB 18,000 867,308
Primary Nonferrous Metals (0.46%)
British Steel PLC 121,300 333,167
Pulp Mills (1.65%)
Lassila & Tikanoja Ltd. OY 10,700 677,890
UPM-Kymmene OY 24,140 505,425
1,183,315
Railroad Equipment (0.23%)
Vae AG 1,470 166,670
Security Brokers & Dealers (1.27%)
Peregrine Investment Holdings 526,000 901,035
Peregrine Investment - Warrants 38,800(a) 12,415
913,450
Security & Commodity
Services (1.62%)
Corporacion Bancaria de Espania SA 26,000 1,161,330
Ship & Boat Building &
Repairing (0.21%)
Unitor Ships Service 11,930 153,203
Soap, Cleaners, & Toilet Goods (1.29%)
Reckitt & Colman PLC 74,350 921,183
Special Industry Machinery (1.21%)
Bobst SA 205 276,342
IHC Caland NV 7,700 439,367
Sulzer AG 290 154,641
870,350
Sugar & Confectionary
Products (3.23%)
Nestle 1,125 1,203,992
Tate & Lyle 137,000 1,111,284
2,315,276
Telephone Communication (6.69%)
Cable & Wireless PLC 64,000 531,735
Investec Consultadoria
Internacional 8,600(a) 265,894
Nokia Corp.; Class A ADR 23,800 1,371,475
Tele Danmark B 8,500 468,307
Telecom Italia-DI 448,200 872,523
Telefonica de Espana SA 49,700 1,151,993
Telefonos de Mexico SA ADR 4,050 133,650
4,795,577
Water Supply (0.26%)
Wessex Water PLC 28,596 184,005
Water Transportation of Freight,
NEC (0.52%)
ICB Shipping AB 'B' Free 32,000 374,925
Total Common Stocks 67,821,212
Bonds (1.07%)
Fire, Marine & Casualty
Insurance (1.07%)
Alfa SA Convertible Subordinated
Debentures; 8.00%; 9/15/00 $700,000(b) $ 766,500
Commercial Paper (4.54%)
Business Credit Institutions (2.93%)
General Electric Capital Corp.;
6.65%; 1/2/97 2,100,000 2,100,000
Personal Credit Institutions (1.61%)
Ford Motor Credit Co.;
5.91%; 1/2/97 1,155,000 1,155,000
Total Commercial Paper 3,255,000
Total Portfolio Investments (100.22%) 71,842,712
Liabilities, net of cash and receivables (-0.22%) (160,697)
Total Net Assets (100.00%) $71,682,015
(a) Non-Income producing security - No dividend paid during the period.
(b) Restricted security - See Note 4 to the financial statements.
Principal World Fund, Inc. Investments by Country
Total Market Percentage of Total
Country Value Market Value
Australia $ 1,972,456 2.75%
Austria 2,351,987 3.27
Canada 1,811,148 2.52
Denmark 1,803,470 2.51
Finland 3,558,281 4.95
France 1,581,998 2.20
Germany 1,855,478 2.58
Greece 317,431 0.45
Hong Kong 4,324,148 6.02
Indonesia 1,538,708 2.14
Israel 1,080,375 1.50
Italy 1,847,203 2.57
Japan 191,712 0.27
Korea 603,094 0.84
Malaysia 961,075 1.34
Mexico 1,074,869 1.50
Netherlands 7,183,542 10.00
New Zealand 2,494,126 3.47
Norway 2,844,551 3.96
Portugal 699,079 0.97
Singapore 1,886,967 2.63
Spain 5,582,915 7.77
Sweden 4,500,134 6.26
Switzerland 4,968,129 6.92
Thailand 519,500 0.72
United Kingdom 11,035,336 15.36
United States 3,255,000 4.53
Total Market Value $71,842,712 100.00%
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
Income from
Investment Operations Less Distributions
---------------------------------------- ---------------------------------
Net Realized
and
Net Asset Net Unrealized Total Dividends
Value at Invest- Gain from from Net Distributions
Beginning ment (Loss) on Investment Investment from
of Period Income Investments Operations Income Capital Gains
PRINCIPAL AGGRESSIVE GROWTH FUND INC.
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
1996 $12.94 $.11 $3.38 $3.49 $(.11) $(1.80)
1995 10.11 .13 4.31 4.44 (.13) (1.48)
Period Ended December 31, 1994(d) 9.92 .05 .24 .29 (.05) (.05)
PRINCIPAL ASSET ALLOCATION FUND, INC.
Year Ended December 31,
1996 11.11 .36 1.06 1.42 (.36) (.69)
1995 9.79 .40 1.62 2.02 (.40) (.30)
Period Ended December 31, 1994(d) 9.98 .23 (.18) .05 (.23) --
PRINCIPAL BALANCED FUND, INC.
Year Ended December 31,
1996 13.97 .40 1.41 1.81 (.40) (.94)
1995 11.95 .45 2.44 2.89 (.45) (.42)
1994 12.77 .37 (.64) (.27) (.37) (.18)
1993 12.58 .42 .95 1.37 (.42) (.76)
Six Months Ended December 31, 1992(a) 12.93 .23 .75 .98 (.47) (.86)
Year Ended June 30, 1992 11.33 .47 1.61 2.08 (.48) --
PRINCIPAL BOND FUND, INC.
Year Ended December 31,
1996 11.73 .68 (.40) .28 (.68) --
1995 10.12 .62 1.62 2.24 (.63) --
1994 11.16 .72 (1.04) (.32) (.72) --
1993 10.77 .88 .38 1.26 (.87) --
Six Months Ended December 31, 1992(a) 11.08 .45 .13 .58 (.89) --
Year Ended June 30, 1992 10.64 .91 .46 1.37 (.93) --
PRINCIPAL CAPITAL ACCUMULATION FUND, INC.
Year Ended December 31,
1996 27.80 .57 5.82 6.39 (.58) (3.77)
1995 23.44 .60 6.69 7.29 (.60) (2.33)
1994 24.61 .62 (.49) .13 (.61) (.69)
1993 25.19 .61 1.32 1.93 (.60) (1.91)
Six Months Ended December 31, 1992(a) 26.03 .31 1.84 2.15 (.64) (2.35)
Year Ended June 30, 1992 23.35 .65 2.70 3.35 (.67) --
PRINCIPAL EMERGING GROWTH FUND, INC.
Year Ended December 31,
1996 25.33 .22 5.07 5.29 (.22) (.66)
1995 19.97 .22 5.57 5.79 (.22) (.21)
1994 20.79 .14 .03 .17 (.14) (.85)
1993 18.91 .17 3.47 3.64 (.17) (1.59)
Six Months Ended December 31, 1992(a) 15.97 .10 3.09 3.19 (.21) (.04)
Year Ended June 30, 1992 13.93 .21 2.04 2.25 (.21) --
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
Ratios/Supplemental Data
---------------------------- -------------------------------
Excess Net Asset Ratio of
Distributions Value at Net Assets at Expenses to
from Total End of Total End of Period Average
Capital Gains Distributions Period Return (in thousands) Net Assets
PRINCIPAL AGGRESSIVE GROWTH FUND INC.
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
1996 $ -- $(1.91) $14.52 28.05% $90,106 .85%
1995 -- (1.61) 12.94 44.19% 33,643 .90%
Period Ended December 31, 1994(d) -- (.10) 10.11 2.59%(c) 13,770 1.03%(b)
PRINCIPAL ASSET ALLOCATION FUND, INC.
Year Ended December 31,
1996 -- (1.05) 11.48 12.92% 61,631 .87%
1995 -- (.70) 11.11 20.66% 41,074 .89%
Period Ended December 31, 1994(d) (.01) (.24) 9.79 .52%(c) 28,041 .95%(b)
PRINCIPAL BALANCED FUND, INC.
Year Ended December 31,
1996 -- (1.34) 14.44 13.13% 93,158 .63%
1995 -- (.87) 13.97 24.58% 45,403 .66%
1994 -- (.55) 11.95 (2.09)% 25,043 .69%
1993 -- (1.18) 12.77 11.06% 21,399 .69%
Six Months Ended December 31, 1992(a) -- (1.33) 12.58 8.00%(c) 18,842 .73%(b)
Year Ended June 30, 1992 -- (.48) 12.93 18.78% 17,344 .72%
PRINCIPAL BOND FUND, INC.
Year Ended December 31,
1996 -- (.68) 11.33 2.36% 63,387 .53%
1995 -- (.63) 11.73 22.17% 35,878 .56%
1994 -- (.72) 10.12 (2.90)% 17,108 .58%
1993 -- (.87) 11.16 11.67% 14,387 .59%
Six Months Ended December 31, 1992(a) -- (.89) 10.77 5.33%(c) 12,790 .62%(b)
Year Ended June 30, 1992 -- (.93) 11.08 13.57% 12,024 .62%
PRINCIPAL CAPITAL ACCUMULATION FUND, INC.
Year Ended December 31,
1996 -- (4.35) 29.84 23.50% 205,019 .49%
1995 -- (2.93) 27.80 31.91% 135,640 .51%
1994 -- (1.30) 23.44 .49% 120,572 .51%
1993 -- (2.51) 24.61 7.79% 128,515 .51%
Six Months Ended December 31, 1992(a) -- (2.99) 25.19 8.81%(c) 105,355 .55%(b)
Year Ended June 30, 1992 -- (.67) 26.03 14.53% 94,596 .54%
PRINCIPAL EMERGING GROWTH FUND, INC.
Year Ended December 31,
1996 -- (.88) 29.74 21.11% 137,161 .66%
1995 -- (.43) 25.33 29.01% 58,520 .70%
1994 -- (.99) 19.97 .78% 23,912 .74%
1993 -- (1.76) 20.79 19.28% 12,188 .78%
Six Months Ended December 31, 1992(a) -- (.25) 18.91 20.12%(c) 9,693 .81%(b)
Year Ended June 30, 1992 -- (.21) 15.97 16.19% 7,829 .82%
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
-------------------------------
Ratio of Net
Investment
Income to Portfolio Average
Average Turnover Commission
Net Assets Rate Rate
PRINCIPAL AGGRESSIVE GROWTH FUND INC.
Year Ended December 31,
<S> <C> <C> <C>
1996 1.05% 166.9% $.0541
1995 1.34% 172.9% N/A
Period Ended December 31, 1994(d) 1.06%(b) 105.6%(b) N/A
PRINCIPAL ASSET ALLOCATION FUND, INC.
Year Ended December 31,
1996 3.45% 108.2% .0497
1995 4.07% 47.1% N/A
Period Ended December 31, 1994(d) 4.27%(b) 60.7%(b) N/A
PRINCIPAL BALANCED FUND, INC.
Year Ended December 31,
1996 3.45% 22.6% .0417
1995 4.12% 25.7% N/A
1994 3.42% 31.5% N/A
1993 3.30% 15.8% N/A
Six Months Ended December 31, 1992(a) 3.71%(b) 38.4%(b) N/A
Year Ended June 30, 1992 3.80% 26.6% N/A
PRINCIPAL BOND FUND, INC.
Year Ended December 31,
1996 7.00% 1.7% N/A
1995 7.28% 5.9% N/A
1994 7.86% 18.2% N/A
1993 7.57% 14.0% N/A
Six Months Ended December 31, 1992(a) 8.10%(b) 6.7%(b) N/A
Year Ended June 30, 1992 8.47% 6.1% N/A
PRINCIPAL CAPITAL ACCUMULATION FUND, INC.
Year Ended December 31,
1996 2.06% 48.5% .0426
1995 2.25% 49.2% N/A
1994 2.36% 44.5% N/A
1993 2.49% 25.8% N/A
Six Months Ended December 31, 1992(a) 2.56%(b) 39.7%(b) N/A
Year Ended June 30, 1992 2.65% 34.8% N/A
PRINCIPAL EMERGING GROWTH FUND, INC.
Year Ended December 31,
1996 1.07% 8.8% .0379
1995 1.23% 13.1% N/A
1994 1.15% 12.0% N/A
1993 .89% 22.4% N/A
Six Months Ended December 31, 1992(a) 1.24%(b) 8.6%(b) N/A
Year Ended June 30, 1992 1.33% 10.1% N/A
<FN>
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each period:
Income from
Investment Operations Less Distributions
--------------------------------------- -------------------------------
Net Realized
and
Net Asset Net Unrealized Total Dividends
Value at Invest- Gain from from Net Distributions
Beginning ment (Loss) on Investment Investment from
of Period Income Investments Operations Income Capital Gains
PRINCIPAL GOVERNMENT SECURITIES FUND, INC.
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
1996 $10.55 $.59 $ (.24) $ .35 $(.59) $ --
1995 9.38 .60 1.18 1.78 (.61) --
1994 10.61 .76 (1.24) (.48) (.75) --
1993 10.28 .71 .33 1.04 (.71) --
Six Months Ended December 31, 1992(a) 10.93 .40 .04 .44 (.78) --
Year Ended June 30, 1992 10.24 .80 .71 1.51 (.81) --
PRINCIPAL GROWTH FUND, INC.
Year Ended December 31,
1996 12.43 .16 1.39 1.55 (.16) (.03)
1995 10.10 .17 2.42 2.59 (.17) --
Period Ended December 31, 1994(e) 9.60 .07 .51 .58 (.08) --
PRINCIPAL HIGH YIELD FUND, INC.
Year Ended December 31,
1996 8.39 .80 .30 1.10 (.77) --
1995 7.91 .76 .51 1.27 (.77) (.02)
1994 8.62 .77 (.72) .05 (.76) --
1993 8.38 .80 .23 1.03 (.79) --
Six Months Ended December 31, 1992(a) 8.93 .45 (.10) .35 (.90) --
Year Ended June 30, 1992 8.28 .92 .66 1.58 (.93) --
PRINCIPAL MONEY MARKET FUND, INC.
Year Ended December 31,
1996 1.000 .049 -- .049 (.049) --
1995 1.000 .054 -- .054 (.054) --
1994 1.000 .037 -- .037 (.037) --
1993 1.000 .027 -- .027 (.027) --
Six Months Ended December 31, 1992(a) 1.000 .016 -- .016 (.016) --
Year Ended June 30, 1992 1.000 .046 -- .046 (.046) --
PRINCIPAL WORLD FUND, INC.
Year Ended December 31,
1996 10.72 .22 2.46 2.68 (.22) (.16)
1995 9.56 .19 1.16 1.35 (.18) --
Period Ended December 31, 1994(e) 9.94 .03 (.33) (.30) (.05) (.02)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
---------------------------------
Excess Net Asset
Distributions Value at
from Total End of Total
Capital Gains Distributions Period Return
PRINCIPAL GOVERNMENT SECURITIES FUND, INC.
Year Ended December 31,
<S> <C> <C> <C> <C>
1996 $ -- $ (.59) $10.31 3.35%
1995 -- (.61) 10.55 19.07%
1994 -- (.75) 9.38 (4.53)%
1993 -- (.71) 10.61 10.07%
Six Months Ended December 31, 1992(a) (.31) (1.09) 10.28 4.10%(c)
Year Ended June 30, 1992 (.01) (.82) 10.93 15.34%
PRINCIPAL GROWTH FUND, INC.
Year Ended December 31,
1996 -- (.19) 13.79 12.51%
1995 (.09) (.26) 12.43 25.62%
Period Ended December 31, 1994(e) -- (.08) 10.10 5.42%(c)
PRINCIPAL HIGH YIELD FUND, INC.
Year Ended December 31,
1996 -- (.77) 8.72 13.13%
1995 -- (.79) 8.39 16.08%
1994 -- (.76) 7.91 .62%
1993 -- (.79) 8.62 12.31%
Six Months Ended December 31, 1992(a) -- (.90) 8.38 4.06%(c)
Year Ended June 30, 1992 -- (.93) 8.93 20.70%
PRINCIPAL MONEY MARKET FUND, INC.
Year Ended December 31,
1996 -- (.049) 1.000 5.07%
1995 -- (.054) 1.000 5.59%
1994 -- (.037) 1.000 3.76%
1993 -- (.027) 1.000 2.69%
Six Months Ended December 31, 1992(a) -- (.016) 1.000 1.54%(c)
Year Ended June 30, 1992 -- (.046) 1.000 4.64%
PRINCIPAL WORLD FUND, INC.
Year Ended December 31,
1996 -- (.38) 13.02 25.09%
1995 (.01) (.19) 10.72 14.17%
Period Ended December 31, 1994(e) (.01) (.08) 9.56 (3.37)%(c)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
Ratios/Supplemental Data
--------------------------------------------------------------
Ratio of Net
Ratio of Investment
Net Assets at Expenses to Income to Portfolio Average
End of Period Average Average Turnover Commission
(in thousands) Net Assets Net Assets Rate Rate
PRINCIPAL GOVERNMENT SECURITIES FUND, INC.
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C>
1996 $85,100 .52% 6.46% 8.4% N/A
1995 50,079 .55% 6.73% 9.8% N/A
1994 36,121 .56% 7.05% 23.2% N/A
1993 36,659 .55% 7.07% 20.4% N/A
Six Months Ended December 31, 1992(a) 31,760 .59%(b) 7.35%(b) 34.5%(b) N/A
Year Ended June 30, 1992 33,022 .58% 7.84% 38.9% N/A
PRINCIPAL GROWTH FUND, INC.
Year Ended December 31,
1996 99,612 .52% 1.61% 2.0% $.0401
1995 42,708 .58% 2.08% 6.9% N/A
Period Ended December 31, 1994(e) 13,086 .75%(b) 2.39%(b) 0.9%(b) N/A
PRINCIPAL HIGH YIELD FUND, INC.
Year Ended December 31,
1996 13,740 .70% 9.21% 32.0% N/A
1995 11,830 .73% 9.09% 35.1% N/A
1994 9,697 .73% 9.02% 30.6% N/A
1993 9,576 .74% 8.80% 28.7% N/A
Six Months Ended December 31, 1992(a) 8,924 .77%(b) 10.33%(b) 20.6%(b) N/A
Year Ended June 30, 1992 8,556 .77% 11.00% 31.3% N/A
PRINCIPAL MONEY MARKET FUND, INC.
Year Ended December 31,
1996 46,244 .56% 5.00% N/A N/A
1995 32,670 .58% 5.32% N/A N/A
1994 29,372 .60% 3.81% N/A N/A
1993 22,753 .60% 2.64% N/A N/A
Six Months Ended December 31, 1992(a) 27,680 .59%(b) 3.10%(b) N/A N/A
Year Ended June 30, 1992 25,194 .57% 4.54% N/A N/A
PRINCIPAL WORLD FUND, INC.
Year Ended December 31,
1996 71,682 .90% 2.28% 12.5% .0120
1995 30,566 .95% 2.26% 15.6% N/A
Period Ended December 31, 1994(e) 13,746 1.24%(b) 1.31%(b) 14.4%(b) N/A
<FN>
See accompanying notes.
</FN>
</TABLE>
Notes to Financial Highlights
(a) Effective July 1, 1992 the fund changed its fiscal year end from June 30 to
December 31.
(b) Computed on an annualized basis.
(c) Total return amounts have not been annualized.
(d) Period from June 1, 1994, date shares first offered to public, through
December 31, 1994. Net investment income, aggregating $.01 per share for
Principal Aggressive Growth Fund, Inc. and $.01 per share for Principal
Asset Allocation Fund, Inc. for the period from the initial purchase of
shares on May 23, 1994 through May 31, 1994, was recognized, none of which
was distributed to the sole stockholder, Principal Mutual Life Insurance
Company, during the period. Additionally, Principal Aggressive Growth Fund,
Inc. and Principal Asset Allocation Fund, Inc. incurred unrealized losses
on investments of $.09 and $.03 per share, respectively, during the initial
interim period. This represented activities of each fund prior to the
initial public offering of fund shares.
(e) Period from May 1, 1994, date shares first offered to public, through
December 31, 1994. Net investment income, aggregating $.01 per share for
Principal Growth Fund, Inc. and $.04 per share for Principal World Fund,
Inc. for the period from the initial purchase of shares on March 23, 1994
through April 30, 1994, was recognized, none of which was distributed to
the sole stockholder, Principal Mutual Life Insurance Company, during the
period. Additionally, Principal Growth Fund, Inc. and Principal World Fund,
Inc. incurred unrealized losses on investments of $.41 and $.10 per share,
respectively, during the initial interim period. This represented
activities of each fund prior to the initial public offering of fund
shares.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors and Shareholders
Principal Aggressive Growth Fund, Inc.
Principal Asset Allocation Fund, Inc.
Principal Balanced Fund, Inc.
Principal Bond Fund, Inc.
Principal Capital Accumulation Fund, Inc.
Principal Emerging Growth Fund, Inc.
Principal Government Securities Fund, Inc.
Principal Growth Fund, Inc.
Principal High Yield Fund, Inc.
Principal Money Market Fund, Inc.
Principal World Fund, Inc.
We have audited the accompanying statements of assets and liabilities of
Principal Aggressive Growth Fund, Inc., Principal Asset Allocation Fund, Inc.,
Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal High
Yield Fund, Inc., Principal Money Market Fund, Inc., and Principal World Fund,
Inc., including the schedules of investments, as of December 31, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for the period of two years then ended and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Funds' 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. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodians 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
Principal Aggressive Growth Fund, Inc., Principal Asset Allocation Fund, Inc.,
Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal High
Yield Fund, Inc., Principal Money Market Fund, Inc., and Principal World Fund,
Inc. at December 31, 1996, and the results of their operations for the year then
ended, the changes in their net assets for the period of two years then ended
and the financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
January 17, 1997
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