Life is full of surprises and having someone guide you through difficult
financial circumstances that may surface as a result can be comforting. Leslie
Meyers got a few of life's surprises in 1993 - she was diagnosed with a
life-threatening disease and was told she had very little time let to live.
However, Leslie proved her doctors wrong and beat the odds with the help of her
friends, family, inner strength and determination.
Tough decisions aren't so tough with the help of someone you trust. . .
The Dilemma
Imagine having a life-threatening disease with very unpleasant side effects,
some of which include crippling of the body, difficulty walking and the
inability to work. It may be hard for some of us to imagine, but Leslie didn't
have to - she was living it. Due to her health problems, Leslie was offered
early retirement from her employer, but wasn't certain if that was the right
option for her. At the time, she was only 51 and worried about how she would
provide for herself and her family without working. Leslie needed to know if her
retirement funds would last, if she would be penalized for early withdrawals and
if her money would continue to grow so she could have something to leave her
family.
Now What?
The answers to her questions became evident when she met with a registered
representative from Princor Financial Services Corporation. Since Leslie was not
legal retirement age yet, her first question was whether or to she would have to
pay penalty taxes if she started withdrawing from her retirement account. After
several discussions and further investigation, the registered representative
realized that Leslie didn't have to worry about penalty taxes because she was
classified by Social Security as disabled. Leslie was relieved to learn that if
she withdrew her retirement money she would only have to pay income tax and not
the penalty tax. With that issue resolved, Leslie could concentrate on an
investment plan.
How Did She Do It?
Because she wasn't comfortable with a lot of risk, Leslie wanted to invest very
conservatively. Her two main investment goals were to make her money last the
rest of her life and to leave an estate for her son. Leslie decided, with the
guidance of her registered representative, on an investment mix where her money
would work for her to help reach her investment goals.
Leslie's investment portfolio consisted of four domestic growth funds (Principal
Utilities, Principal Balanced, Principal Capital Value, and Principal MidCap
Funds), two income-oriented funds (Principal Government Securities Income and
Principal Bond Funds), and one international growth-oriented fund (Principal
International Fund), all Class A shares. The funds Leslie chose are mostly
conservative funds with a few more aggressive funds interspersed to allow for
diversification and additional growth potential.
The Results
Leslie is extremely happy with the results her investments have given her over
the last seven years. On June 30, 1993, Leslie established her account with
$175,000, investing $25,000 in each of the funds previously mentioned. One month
later, Leslie started withdrawing $185 from each fund for a monthly total of
$1,295. Even with the total withdraws equaling $112,665, Leslie's account
balance as of September 30, 2000, was $183,489 - almost $8,500 more than she
initially invested! According to Leslie, her financial goals have been achieved.
Happily Ever After
No matter what surprise life may throw at Leslie next, she feels secure knowing
that her money is invested, providing her income and growing. And, even though
she is comfortable with this knowledge, Leslie periodically meets with her
registered representative to: review her account to make sure she is on track;
evaluate her investment portfolio and discuss possible changes; and review her
beneficiaries and trust provisions.
As you can see, Leslie's tough decisions weren't so tough with a registered
representative from Princor Financial Services Corporation helping her along the
way.
This story does not represent an actual investor, but does reflect the actual
investment results of the Principal Mutual Funds mentioned. Past results do not
guarantee future performance. Share values fluctuate so that the value at
redemption may be more or less than original cost. IRA withdrawals made before
age 59-1/2 may be subject to tax penalties. Investors should consider their own
investment objectives when considering which funds to purchase, rather than
relying on the scenario presented here.
<TABLE>
<CAPTION>
--------------------------------------------- -------------------------------------------------------------------------
Average Annual Returns through September 30, 2000
Including Sales Charges
-------------------------------------------------------------------------
Inception Date 1 yr. 5 yr. 10 yr. Since Inception
<S> <C> <C> <C> <C> <C>
Principal Balanced Fund-A 12/18/1987 -0.03% 8.68% 11.32% 9.69%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
Principal Bond Fund-A 12/18/1987 -1.44% 4.14% 7.34% 7.74%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
Principal Capital Value Fund-A 08/19/1969 -7.99% 10.11% 13.29% 11.95%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
Principal Gov. Sec. Inc. Fund-A 05/21/1985 1.86% 5.24% 7.27% 8.27%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
Principal International Fund-A 08/12/1982 1.68% 10.63% 12.16% 9.90%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
Principal MidCap Fund-A 12/18/1987 30.54% 12.45% 18.10% 18.10%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
Principal Utilities Fund-A 12/16/1992 15.94% 16.19% N/A 12.63%
--------------------------------------------- ------------------ ----------- ----------- ----------- ------------------
<FN>
Class A share returns assume the reinvestment of all distributions, the maximum
4.75% sales charge and a .25% annual distribution fee. Prior to 12/9/94, the
maximum sales charge was 5%. The figures represent returns that take this sales
charge into account prior to that date.
Investments in Principal MidCap Fund may be subject to more abrupt or erratic
market movements and greater risks than other stock fund investments. Principal
International Fund shares are subject to volatility caused by exchange rates,
foreign economies and taxation. Principal Utilities Fund is subject to market
conditions directly related to the utilities industry. While the underlying
securities of Principal Government Securities Income Fund are guaranteed by the
U.S. Government as to the timely payment of principal and interest, Fund shares
are not.
</FN>
</TABLE>
A Message To Shareholders
Dear Shareholder:
More than thirty years in business has given Principal Mutual Funds a long
history and a solid foundation of which we are very proud. In order to continue
to provide innovative solutions to your investing needs, we recognized that some
changes were necessary. Here is a summary of the changes that Principal Mutual
Funds implemented over the past six months.
Expanded our line of investment managers. We expanded our Principal Partners
Funds (funds managed by advisors unaffiliated with the Principal Financial
Group(R)) to include Turner Investment Partners (Principal Partners MidCap
Growth Fund), and Duncan Hurst Capital Management (Principal Partners LargeCap
Growth Fund). These additions, along with Principal Partners Aggressive Growth
Fund managed by Morgan Stanley Dean Witter Investment Management, offer you more
ways to diversify by management style. These managers were selected for a
variety of reasons, including their proven investment track records.
In addition, we began offering two more international funds (Principal European
Equity Fund and Principal Pacific Basin Fund) managed by BT Funds Management
(International) Ltd. BT Funds Management, located in Sydney, Australia, is
Australia's largest mutual fund company, and a member of the Principal Financial
Group.
Added desired investment funds. You asked for it, and we delivered. Principal
LargeCap Stock Index Fund was introduced in March 2000. This fund invests
primarily in the common stocks of those firms included in the Standard & Poor's
500 Stock Index.
Hired new portfolio managers. As part of our continued efforts to incorporate
the expertise of managers around the globe, we welcomed Mary Sunderland as the
new Portfolio Manager for the Principal Growth Fund. Mary and her New York-based
staff have experienced success since assuming portfolio control. In addition,
Bill Nolin was named manager of the Principal MidCap Fund, and Tom Morabito was
named Co-Manager of the Principal SmallCap Fund.
Revised and improved investment processes. We took a hard look at the investment
processes used in our funds. As a result, the processes for some funds were
modified. For example, the stock selection process for Principal Capital Value
Fund was altered to screen a stock's price earnings ratio relative to its
industry rather than the market as a whole. Principal Blue Chip Fund changed its
focus on equities with a rising dividend stream to stocks with good long-term
growth potential.
New senior executives. Three new executives were added recently and several
others were named to key positions. At Principal Mutual Funds, Ron Danilson came
to us as Executive Vice President and Chief Operating Officer, and Kirk Tibbetts
was named Senior Vice President and Chief Financial Officer.
At Invista Capital Management, a fellow member of the Principal Financial Group
and provider of portfolio management services for many of our funds, Rollin
Woltjen was appointed President, Scott Opsal was named Chief Investment Officer
and Mark Williams became Director of Research. Scott and Mark previously were
seasoned members of Invista's portfolio management team. Prior to joining
Invista, Rollin was President of a prominent investment consulting firm.
Looking forward. This has been a busy year, but we're not finished yet. More
great things lie ahead, including additional Partners Funds that will include
new investment management firms.
We understand what you're working for and believe that by providing a broad
array of investment styles, managers, asset classes, allocation services, and
investment options we can help you achieve your financial goals. We live in a
world of dynamic, global financial markets and understand that innovative change
is required to compete in those markets. We embrace that philosophy and
incorporate it into how we run our business each day. We appreciate your
continued confidence.
Sincerely,
/s/ Ralph C. Eucher /s/ Ron Danilson
Ralph C. Eucher Ron Danilson
President Executive Vice President
Principal Mutual Funds Principal Mutual Funds
Principal Mutual Funds Performance
Average Annual Total Returns
As of October 31, 2000
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
with without with without with without
sales sales sales sales sales sales
A Shares of: charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C>
Balanced (2.44)% 2.40% 8.64% 9.71% 11.38% 11.92%
Blue Chip (7.23) (2.60) 13.44 14.55 12.16(a) 12.73(a)
Bond (1.66) 3.23 3.69 4.71 7.23 7.76
Capital Value (10.67) (6.20) 11.01 12.09 13.91 14.46
European Equity (17.24)(b)(13.10)(b)
Government Securities Income 2.04 7.09 5.19 6.21 7.22 7.74
Growth 7.29 12.64 15.77 16.90 18.91 19.49
High Yield (7.72) (3.12) 2.92 3.92 7.69 8.22
International (1.85) 3.04 10.64 11.71 11.26 11.80
International Emerging Markets (2.53) 2.36 (3.12)(c) (1.63)(c)
International SmallCap 15.48 21.21 20.33(c) 22.18(c)
LargeCap Stock Index 3.42(d) 4.96(d)
Limited Term Bond 4.30 5.94 4.94(e) 5.28(e)
MidCap 23.07 29.21 12.45 13.56 18.23 18.81
Pacific Basin (18.00)(b)(13.90)(b)
Partners Aggressive Growth 8.19(f) 13.60(f)
Partners LargeCap Growth (24.32)(d)(20.55)(d)
Partners MidCap Growth (16.83)(d)(12.68)(d)
Real Estate 16.01 21.86 (2.23)(g) (0.53)(g)
SmallCap 4.63 9.89 6.13(g) 7.96(g)
Tax-Exempt Bond 0.81 5.81 3.87 4.89 6.25 6.76
Utilities 6.77 12.09 14.85 15.98 12.02(h) 12.71(h)
</TABLE>
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
with without with without with without
B Shares of: CDSC* CDSC* CDSC* CDSC* CDSC* CDSC*
<S> <C> <C> <C> <C> <C> <C>
Balanced (2.22)% 1.61% 8.56% 8.84% 10.53%(i) 10.63%(i)
Blue Chip (7.13) (3.30) 13.42 13.66 16.00(i) 16.08(i)
Bond (1.40) 2.45 3.59 3.90 6.11(i) 6.24(i)
Capital Value (10.40) (7.03) 10.86 11.12 13.50(i) 13.59(i)
European Equity (16.86)(b)(13.40)(b)
Government Securities Income 2.32 6.32 5.12 5.44 7.16(i) 7.28(i)
Growth 7.79 11.79 15.96 16.18 18.90(i) 18.97(i)
High Yield (7.56) (4.04) 2.67 2.95 4.40(i) 4.52(i)
International (1.09) 2.43 10.61 10.88 10.79(i) 10.90(i)
International Emerging Markets (2.47) 1.53 (3.14)(c) (2.20)(c)
International SmallCap 16.43 20.43 20.96(c) 21.58(c)
LargeCap Stock Index 3.41(d) 4.66(d)
Limited Term Bond 4.44 5.69 4.79(e) 4.88(e)
MidCap 24.63 28.63 12.72 12.97 16.71(i) 16.79(i)
Pacific Basin (17.34)(b)(13.90)(b)
Partners Aggressive Growth 8.80(f) 12.80(f)
Partners LargeCap Growth (24.10)(d)(20.94)(d)
Partners MidCap Growth (16.63)(d)(13.16)(d)
Real Estate 17.00 21.00 (2.10)(g) (1.13)(g)
SmallCap 5.21 9.14 6.33(g) 7.27(g)
Tax-Exempt Bond 1.69 5.69 3.99 4.33 6.48(i) 6.61(i)
Utilities 7.30 11.30 14.90 15.12 16.83(i) 16.91(i)
<FN>
* Contingent Deferred Sales Charge
</FN>
</TABLE>
Average Annual Total Returns
As of October 31, 2000
1 Year 5 Year
with without with without
sales sales sales sales
C Shares of: charge charge charge charge
Balanced (0.92)% 0.03% (3.49)%(j) (3.49)%(j)
Blue Chip (4.23) (3.27) (3.40)(j) (3.40)(j)
Bond 0.26 1.22 0.61(j) 0.61(j)
Capital Value (9.26) (8.43) (11.62)(j) (11.62)(j)
European Equity (14.37)(b)(13.50)(b)
Government Securities Income 4.41 5.41 4.88(j) 4.88(j)
Growth 10.38 11.38 5.34(j) 5.34(j)
High Yield (7.50) (6.64) (5.71)(j) (5.71)(j)
International 0.52 1.40 4.02(j) 4.02(j)
International Emerging Markets 0.64 1.64 (2.18)(j) (2.18)(j)
International SmallCap 17.71 18.71 28.51(j) 28.51(j)
LargeCap Stock Index 4.26(d) 4.76(d)
Limited Term Bond 5.22 5.72 4.90(j) 4.90(j)
MidCap 25.78 26.78 11.87(j) 11.87(j)
Pacific Basin (14.86)(b)(14.00)(b)
Partners Aggressive Growth 11.80(f) 12.80(f)
Partners LargeCap Growth (21.73)(d)(20.94)(d)
Partners MidCap Growth (14.03)(d)(13.16)(d)
Real Estate 20.01 21.01 6.41(j) 6.41(j)
SmallCap 8.06 9.04 7.91(j) 7.91(j)
Tax-Exempt Bond 2.64 3.63 0.70(j) 0.70(j)
Utilities 8.78 9.78 6.85(j) 6.85(j)
R Shares of: 1 Year 5 Years
Balanced 1.92% 8.39%(e)
Blue Chip (3.07) 12.80(e)
Bond 2.85 4.41(e)
Capital Value (6.66) 9.73(e)
European Equity (13.40)(b)
Government Securities Income 6.63 5.61(e)
Growth 12.09 15.44(e)
High Yield (3.78) 2.31(e)
International 2.54 10.12(e)
International Emerging Markets 2.04 (1.76)(c)
International SmallCap 21.01 22.21(c)
LargeCap Stock Index 4.56(d)
Limited Term Bond 5.38 4.75(e)
MidCap 28.63 11.78(e)
Pacific Basin (13.90)(b)
Partners Aggressive Growth 13.10(f)
Partners LargeCap Growth (20.74)(d)
Partners MidCap Growth (12.97)(d)
Real Estate 21.40 (0.75)(g)
SmallCap 9.53 7.74(g)
Utilities 11.43 14.73(e)
(a) Partial period, from effective date 3/1/91
(b) Partial period, from effective date 5/1/00
(c) Partial period, from effective date 8/29/97
(d) Partial period, from effective date 3/1/00
(e) Partial period, from effective date 2/29/96
(f) Partial period, from effective date 11/1/99
(g) Partial period, from effective date 12/31/97
(h) Partial period, from effective date 12/16/92
(i) Partial period, from effective date 12/9/94
(j) Partial period, from effective date 6/30/99
Total return represents the overall performance of an investment for a specific
period of time, assuming the reinvestment of dividends and capital gains and
after applicable expenses. Average annual total returns for A shares are with
and without maximum 4.75% (1.50% for the Limited Term Bond and LargeCap Stock
Index Funds) sales charge. Average annual total returns for B shares are with
and without maximum 4.0% (1.25% for the Limited Term Bond and LargeCap Stock
Index Funds) contingent deferred sales charge. The returns for Class C shares
are shown with and without maximum 1.00% (0.50% for the Limited Term Bond and
LargeCap Stock Index Funds) contingent deferred sales charge. The returns
reflect past performance. Past performance does not predict future performance.
The investment return and principal value of an investment will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Table of Contents
Page
Portfolio Managers' Comments........................................ 5
Growth Funds (Domestic) Financial Statements and Highlights
Statements of Assets and Liabilities............................. 30
Statements of Operations......................................... 34
Statements of Changes in Net Assets.............................. 38
Notes to Financial Statements.................................... 42
Schedules of Investments
Balanced Fund.................................................. 52
Blue Chip Fund................................................. 57
Capital Value Fund............................................. 58
Growth Fund.................................................... 60
LargeCap Stock Index Fund...................................... 61
MidCap Fund.................................................... 69
Partners Aggressive Growth Fund................................ 71
Partners LargeCap Growth Fund.................................. 73
Partners MidCap Growth Fund.................................... 74
Real Estate Fund............................................... 76
SmallCap Fund.................................................. 77
Utilities Fund................................................. 80
Financial Highlights............................................. 82
Growth Funds (International) Financial Statements and Highlights
Statements of Assets and Liabilities............................. 110
Statements of Operations......................................... 112
Statements of Changes in Net Assets.............................. 114
Notes to Financial Statements.................................... 116
Schedules of Investments
European Equity Fund........................................... 126
International Emerging Markets Fund............................ 128
International Fund............................................. 131
International SmallCap Fund.................................... 133
Pacific Basin Fund............................................. 136
Financial Highlights............................................. 138
Income Funds Financial Statements and Highlights
Statements of Assets and Liabilities............................. 150
Statements of Operations......................................... 152
Statements of Changes in Net Assets.............................. 154
Notes to Financial Statements.................................... 156
Schedules of Investments
Bond Fund...................................................... 164
Government Securities Income Fund.............................. 167
High Yield Fund................................................ 168
Limited Term Bond Fund......................................... 170
Tax-Exempt Bond Fund........................................... 172
Financial Highlights............................................. 176
Money Market Fund Financial Statements and Highlights
Statement of Assets and Liabilities.............................. 188
Statement of Operations.......................................... 189
Statements of Changes in Net Assets.............................. 190
Notes to Financial Statements.................................... 192
Schedule of Investments
Cash Management Fund........................................... 196
Financial Highlights............................................. 200
Report of Independent Auditors...................................... 203
Federal Income Tax Information...................................... 204
Principal Mutual Funds.............................................. 205
MANAGER'S COMMENTS
Principal Management Corporation, the manager of the Principal funds, is staffed
with investment professionals who manage several of the funds. In addition, the
Manager has selected a Sub-Advisor for certain funds based on the Sub-Advisor's
experience with the investment strategy for which it was selected. In the
following paragraphs, comments by the individuals who are responsible for the
day-to-day portfolio management summarize in capsule form the general strategy
and recent results of each fund over the past six months. We believe any
Principal fund should, under normal circumstances, represent only a portion of
an investor's total investments. For most investors a portfolio should be
balanced among stocks, bonds, and cash reserves to fit their own needs and risk
tolerance. Those who maintain this balanced approach should be aware of the
short-term results, but focus on the long term. Past performance is no guarantee
of future results. Fund values will fluctuate so that the shares, upon
redemption, may be worth more or less than their original cost.
GROWTH-ORIENTED FUNDS
DOMESTIC GROWTH FUNDS
Principal Balanced Fund, Inc.
Marty Schafer
Mary Sunderland
Judi Vogel
The year ended October 31, 2000 had a Jekyll and Hyde complexion about it. For
the first five months of the year the stock market soared, led by technology,
telecommunications, Internet and media stocks that had high projected earnings
growth rates and price momentum. Bonds essentially marked time during this
period. In the spring months, with robust economic growth causing heightened
inflation worries, the U.S. Federal Reserve raised interest rates three times in
an effort to slow things down. Seeing no immediate effect on real economic
activity, the markets expected that additional rate hikes would follow. This
prospect of continued rising rates took the wind out of the sails of
high-flying, high P/E stocks, especially those without earnings.
As technology and telecom stock prices fell 25-30% or more, the personality
(psychology) of the market changed. Investors turned their attention to other
areas of the market that were previously neglected. Utilities, healthcare,
consumer staples and financials benefited as the focus turned to companies with
stability of earnings and reasonable prices, rather than those with the highest
projected earnings growth rates at any price. While growth stocks led the market
through March, value and defensive characteristics thereafter took the fore,
staging a powerful rotation in leadership as signs of economic slowdown emerged.
Bonds performed better in the second half of the year, but concerns about
earnings, both domestically and abroad, caused declines in the equity markets
through the end of October.
The Fund performed poorly in the early part of the year when growth and momentum
drove the markets to unsustainable levels. Due to their high valuations, the
Fund did not hold enough large technology stocks, and it held none of the
speculative dot.coms and companies with no earnings that led the markets through
March. When the growth to value rotation occurred mid-year, the Fund was
positioned to benefit, and domestic equity performance improved. However,
foreign equities began to struggle at about the same time under the weight of
higher oil prices, weak currencies and slowing global economic conditions,
negatively impacting total returns. The Fund's fixed income portfolio performed
in line with the fixed income indices for the full year.
There is no independent market index against which to measure returns of
balanced portfolios; however, the S&P 500 stock index and the Lehman Brothers
Government/Corporate bond index are presented for your information.
Comparison of Change in Value of $10,000 Investment in the Balanced Fund Class
A, Lipper Balanced Fund Average, Morningstar Domestic Hybrid Category, Lehman
Brothers Government/Corporate Bond Index and S&P 500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 2.40% 9.71% 11.92%
B 1.61% 8.84% - 10.63%*
C 0.03% - - -3.49%**
R 1.92% - - 8.39%***
Standard & Lehman Brothers Morningstar Lipper Balanced
Poor's 500 Government/Corporate Domestic Hybrid Balanced Fund
Stock Index Bond Index Average Fund Average Class A
Thousands
10 10 10 10 9.521
"1991" 13.351 11.537 12.537 12.848 12.767
"1992" 14.682 12.751 13.747 13.97 14.281
"1993" 16.871 14.489 15.901 16.04 16.029
"1994" 17.522 13.817 15.801 15.926 16.18
"1995" 22.15 16.05 18.601 18.692 18.474
"1996" 27.484 16.915 21.233 21.466 21.264
"1997" 36.306 18.405 25.252 25.654 24.641
"1998" 44.29 20.297 27.406 27.996 27.352
"1999" 55.655 20.163 30.234 31.165 28.679
"2000" 59.044 21.601 32.656 33.618 29.367
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal Blue Chip Fund, Inc.
Mark Willams
Principal Blue Chip Fund's investment strategy during the
previous year continued to concentrate on companies with significant operating
histories, well-capitalized balance sheets and a history of consistent earnings
increases. One change we did make during the past year was to de-emphasize our
focus on consistent dividend increases. In our 1999 Annual Report, we discussed
research being completed regarding our dividend focus in the technology sector.
After extensive study, we determined the dividend focus was jeopardizing our
ability to generate superior returns in the technology sector. These findings
led us to immediately de-emphasize dividends in our technology stock selection
criteria. However, the Fund's performance continued to be penalized during the
latter part of 1999 and the first three months of 2000, while we were refocusing
the Fund's holdings.
Performance during the past year is best understood by separating the yearly
returns into two time periods. The first time period represents the final two
months of 1999 and the first quarter of 2000. During this period, the fund
underperformed relative to the S&P 500. The main culprit for this
underperformance continued to be an underweight in technology. During this time
period we were increasing the Fund's technology weighting, but not fast enough
to keep up with the sector's strong returns. At the same time, the Fund had an
overweight in the poorly performing, but consistent dividend paying, consumer
staples sector. These two relative weighting differences contributed the
majority of the Fund's first-half shortfall.
The second time period is from the end of March 2000 until the end of October
2000. By the end of March, the Fund's holdings had been redirected to more fully
reflect our dividend study findings. During this period, the Fund outperformed
the S&P 500 by several percentage points. Additionally, the technology sector
relative return went from being one of the worst to being the best.
For the year, the Fund's good relative performance in the second half was not
able to overcome the deficit that was created during the first half. The Fund's
technology sector return was approximately twice that of the S&P 500 technology
sector return for the entire year. However, the Fund's average weighting in the
technology sector during the year was substantially less than the benchmark.
This underweight was responsible for approximately two-thirds of the Fund's
entire performance shortfall.
While we are disappointed that our dividend study confirmed our suspicions for
investing in the technology area, i.e., consistent dividend increases can not be
used as a criteria, we are confident the portfolio is better positioned for the
coming year because of it. The adjustments we have made to our dividend focus
will allow us to better pick those stocks that will outperform the index,
regardless of each company's dividend history.
Comparison of Change in Value of $10,000 Investment in the Blue Chip Fund Class
A, Lipper Large-Cap Value Fund Average, Morningstar Large Blend Average and S&P
500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year Since Inception
A -2.60% 14.55% 12.73%*
B -3.30% 13.66% 16.08%**
C -3.27% - -3.40%***
R -3.07% - 12.80%****
Standard & Morningstar Lipper Blue Chip
Poor's 500 Large Value Large-Cap Value Fund
Stock Index Average Fund Average Class A
Thousands
10 10 10 9.524
"1991" 10.911 11.009 10.544 10.131
"1992" 11.999 11.994 11.499 11.136
"1993" 13.788 13.957 13.424 11.765
"1994" 14.32 14.256 13.764 12.539
"1995" 18.102 17.36 16.511 15.379
"1996" 22.461 21.042 20.013 18.178
"1997" 29.671 26.894 25.641 22.281
"1998" 36.196 30.646 28.177 26.621
"1999" 45.484 37.587 33.139 31.147
"2000" 48.254 40.887 35.436 30.337
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 3/1/91
** Since inception date 12/9/94
*** Since inception date 6/30/99
**** Since inception date 2/29/96
Principal Capital Value Fund, Inc.
Scott Opsal The Principal Capital Value Fund's results this year were
clearly segmented into two periods. The first half of the year saw the Fund
trail its index as the technology driven growth stock period of strong
performance reached its zenith. From the Fall of 1999 until March 2000, tech
stocks outperformed every other market sector by a wide margin. During the
second half of this year, the tech driven growth mania reversed, as companies
began to miss their earnings and growth targets. Since the March peak, market
sentiment has increasingly favored stable, well-managed companies carrying
reasonable prices. This has proven to be a positive environment for the Fund's
rebound in performance.
The Capital Value Fund lagged noticeably during the tech upswing. The Fund has
always been managed as a value fund, with an investment process designed to
capture the historical drivers of value returns, that being a reliance on low
price to earnings ratios and low price to book ratios to identify the best
opportunities. The end result of this process was that the Fund owned virtually
no tech stocks during the upswing, while our peer group appears to have owned
more than 10% in tech stocks. That weighting difference in the market's hottest
sector proved to be a heavy drag on returns. Other than tech companies, our
sector and stock selection added value over the index, but our belief that high
flying tech stocks did not belong in a value portfolio was too much to overcome.
Our research indicated that tech stocks were overpriced and should be expected
to underperform at some point. This began to occur in March, when many tech
indexes turned down. At this point, the Fund began to outperform its index and
finished the year with a strong rally. By sticking to our belief that the
fundamentals of value investing would continue to hold true, we were able to
bounce back nicely as the year drew to a close. Overall, our non-tech,
non-growth positioning produced underperformance for the entire year, but we are
pleased that the Fund performed well once value stocks returned to favor.
Our current strategy remains focused on maintaining the Fund's value
characteristics. We have not and will not chase the tech sector but will buy
tech as it returns to fair valuation levels. There are also many other well
managed companies with solid growth profiles available to us, including
companies in the consumer staples, health care, and financial sectors. In
addition, we have positions in energy and utility companies on the belief that
energy shortages in North America will produce higher than normal energy prices,
leading to a profit boom for these companies.
Comparison of Change in Value of $10,000 Investment in the Capital Value Fund
Class A, Lipper Large-Cap Value Fund Average, Morningstar Large Value Category
and S&P 500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A -6.20% 12.09% 14.46%
B -7.03% 11.12% - 13.59%*
C -8.43% - - 11.62%**
R -6.66% - - 9.73%***
Standard & Morningstar Lipper Capital Value
Poor's 500 Large Value Large-Cap Growth Fund
Stock Index Category Fund Average Class A
Thousands
10 10 10 9.523
"1991" 13.351 13.399 13.35 13.392
"1992" 14.682 14.657 14.56 14.955
"1993" 16.871 17.285 16.997 16.513
"1994" 17.522 17.762 17.425 17.614
"1995" 22.15 21.426 20.903 20.774
"1996" 27.484 26.159 25.337 26.26
"1997" 36.306 33.486 32.462 32.92
"1998" 44.29 36.66 35.672 38.052
"1999" 55.655 41.199 41.954 39.194
"2000" 59.044 44.33 44.861 36.764
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal Growth Fund, Inc.
Mary Sunderland
Over the past year, the Principal Growth Fund gained 12.64%,
easily beating the 6% return logged by the S&P 500 Index. Performance was driven
by strong performance in the technology and financial sector. In the last few
months of 1999, technology had very strong gains but many tech stocks gave back
those gains this year. Interestingly, the hardest hit technology stocks have
been some of the largest. In fact, Lucent and Microsoft alone accounted for most
of the decline in the technology indexes and for growth stocks overall in 2000.
Principal Growth side-stepped these companies. Companies that are building the
Internet such as EMC, Sun Microsystems and Cisco have shown solid results. As
always, earnings drive price appreciation in growth stocks and companies
registering consistent growth continue to be rewarded.
Our financial exposure also added to performance so far this year. Inflation
fears earlier in the year receded as the year progressed leading to a more
benign interest rate outlook. Accordingly, financial stocks have shown solid
progress for most of 2000.
We believe the secular decline in inflation will make growth stock investing
very rewarding in the 2000's. In an environment that limits corporations'
ability to raise prices, growth becomes a valuable commodity. The U.S. corporate
world continues its resurgence in innovation and productivity that is leading to
high quality earnings in many sectors. Technology, health care, financials,
consumer cyclicals and communications will offer above average growth over the
long term.
Technology will continue to drive the U.S. economy. The Internet continues to
change the way people work and communicate, driving new applications and global
demand for infrastructure products. Spending on Internet infrastructure,
applications and commerce should surge over the next ten years.
With an aging worldwide population, we think pharmaceuticals and medical devices
will enhance lives and reduce the need for costly hospitalizations. The
financial sector also offers solid growth potential thanks to favorable
demographics. We think rising household wealth as baby boomers save for
retirement will lead to growing demand for mutual funds and retirement savings
products.
Retailers focused on the needs of an aging population will also benefit over the
long term. With rising incomes as the workforce matures, we think recreation and
spending on home improvements will be rewarding sectors.
Comparison of Change in Value of $10,000 Investment in the Growth Fund Class A,
Lipper Large-Cap Growth Fund Average, Morningstar Large Growth Category and S&P
500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 12.64% 16.90% 19.49%
B 11.79% 16.18% - 18.97%*
C 11.38% - - 5.34%**
R 12.09% - - 15.44%***
Standard & Morningstar Lipper Growth
Poor's 500 Large Growth Large-Cap Growth Fund
Stock Index Category Fund Average Class A
Thousands
10 10 10 9.527
"1991" 13.351 14.47 14.134 15.177
"1992" 14.682 15.576 15.245 17.417
"1993" 16.871 18.268 17.847 19.129
"1994" 17.522 18.695 18.122 21.007
"1995" 22.15 23.313 22.468 25.9
"1996" 27.484 27.589 26.618 28.645
"1997" 36.306 34.864 33.879 37.11
"1998" 44.29 40.219 37.138 42.74
"1999" 55.655 55.349 45.724 50.202
"2000" 59.044 64.631 52.747 56.548
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal LargeCap Stock Index Fund, Inc.
Robert Baur
Rhonda VanderBeek
The Principal Large Cap Stock Index Fund seeks investment results that
correspond to the total return performance of the Standard & Poor's 500 Index.
The percentage of total assets of the Fund allocated to each of the 500 stocks
closely follows the weighting of each of the stocks in the S&P 500 Index. The
Fund was initiated on March 1, 2000. The total return from inception through
October 31, 2000 was 4.96%.
The economic backdrop for investors has been good in recent periods, but some
slowing of economic growth is evident. The economy has grown 5% over the last
year, but rising interest rates and higher prices for oil and natural gas are
taking a toll on business profitability and consumer spending. Economic growth
in the third quarter slowed to 2.7%. The Federal Open Market Committee (FOMC),
which sets the short-term rates that banks charge for overnight reserve loans,
has raised interest rates six times over the past 18 months. Officials at the
FOMC have been concerned that economic growth was too fast and that inflation
would become a problem.
Rising interest rates and soaring energy prices have kept investors on the edge
of their seats over the last year. The stock market also added to the edginess
with powerful rallies as well as disquieting price swoons. After the dust
cleared, major stock indices spent most of the past year in a broad trading
range. In general, rising interest rates are detrimental to stock market
performance and anticipation of slowing corporate profit growth has added to
investor concerns. The extreme volatility of the past several months is related
to investor reaction to conflicting signals from different pieces of economic
data and as well as from the Federal Reserve. Since the Fund attempts to mirror
the performance of the S&P 500 Index, Fund performance has been similarly
volatile.
Comparison of Change in Value of $10,000 Investment in the LargeCap Stock Index
Fund Class A, Lipper S&P 500 Fund Average, Morningstar Large Blend Category and
S&P 500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class Since Inception
A 4.96%*
B 4.66%*
C 4.76%*
R 4.56%*
Standard and Morningstar Lipper LargeCap Stock
Poor's 500 Large Blend S&P 500 Funds Index Fund
Stock Index Category Average Class A
Thousands
10 10 10 9.85
"2000" 9.599 9.646 10.595 10.339
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 3/1/2000
Principal MidCap Fund, Inc.
William Nolin
We employ fundamental analysis in managing the Principal MidCap Fund. We believe
the future cash flow a business will generate will ultimately determine the
value of that business today. Within this framework we search out companies that
have competitive advantages which can be sustained and improved upon. We then
buy those companies at discounts to their future value.
During the past fiscal year, investors have looked beyond the largest companies
to find good value. As a result, the S&P 400 Midcap Index outperformed the S&P
500. The S&P 400 was up 31.65% and the S&P 500 was up 6.09%. The Fund was up
29.21%, yet trailed the S&P 400 Index slightly. The Fund's exposure to
technology during the early spring sell-off contributed to this
underperformance.
The economic backdrop for investors started out very strong last year, but
became less favorable as the year rolled on. The economy has been
extraordinarily robust, yet recently has shown clear signs of weakening.
Inflation has been and continues to be modest, although benefit costs have been
trending higher. Corporate profit growth set records early in the year, but now
is slowing. Expectations of a slowing economy and a slower profit growth led us
to cut back on companies that would be impacted by the slowing in late summer.
Sectors of cyclical exposures that were reduced included retailers, capital
goods companies, and technology companies. We expect to maintain this position
until the fundamentals improve or the stock prices adjust to account for a
slowing economy.
Fund strategy continues to focus on solid credit quality evaluation to seek out
the best value among municipal securities that deliver competitive levels of
income free from federal tax.
Comparison of Change in Value of $10,000 Investment in the MidCap Fund Class A,
Lipper Mid-Cap Core Fund Average, Morningstar Mid-Cap Blend Category, S&P
Mid-Cap 400 Index and S&P 500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 29.21% 13.56% 18.81%
B 28.63% 12.97% - 16.79%*
C 26.78% - - 11.87%**
R 28.63% - - 11.78%***
Standard & Standard & Morningstar Lipper MidCap
Poor's Mid-Cap Poor's 500 Mid Blend Mid-Cap Core Fund
400 Index Stock Index Category Fund Average Class A
Thousands
10 10 10 10 9.527
"1991" 16.108 13.351 14.488 15.989 16.691
"1992" 17.848 14.682 16.098 17.118 18.632
"1993" 21.685 16.871 19.606 21.267 22.297
"1994" 22.199 17.522 20.169 21.718 23.824
"1995" 26.903 22.15 24.045 27.041 30.116
"1996" 31.565 27.484 28.662 31.981 35.203
"1997" 41.874 36.306 37.418 39.273 46.207
"1998" 44.684 44.29 36.935 38.138 41.688
"1999" 54.094 55.619 43.472 50.167 44.006
"2000" 70 59.006 51.645 67.309 56.86
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal Partners Aggressive Growth Fund, Inc.
William Auslander
Philip Friedman
The Principal Partners Aggressive Growth Fund seeks to provide long-term capital
appreciation by investing primarily in growth-oriented common stocks of large
capitalization U.S. corporations and, to a limited extent, foreign corporations.
The Fund's portfolio generated excellent returns over the past twelve months
ended October 31, 2000. The portfolio appreciated 14.26% versus 6.09% for the
S&P 500.
Since the beginning of the year we have seen investor interest rotate from
technology to healthcare, and most recently financials and utilities. In 1999
the market had become extremely narrow with only a few large capitalization
technology stocks, such as Microsoft, Cisco and Intel, responsible for most of
the outperformance of the S&P 500. In 2000 the market has broadened
significantly, with 60% of the stocks in the S&P 500 with positive returns,
about double 1999's level despite more subdued returns. Overall, small to mid
capitalization stocks have outperformed large capitalization stocks as measured
by the Russell 2000 Index, returning 5.89% versus 1.82% for the Russell 1000
Index.
Over 85% of the Portfolio's outperformance relative to the S&P 500 was driven by
stock selection versus sector allocation. The fund maintained and benefited from
its philosophy of opportunistic concentration driven by bottom-up fundamental
company analysis and an emphasis on gaining an "information edge" in the sectors
and companies in which we invest. Major contributors to the strong performance
results were Tyco, Ciena, Cisco, JDS Uniphase and Warner Lambert. Major
detractors to performance over the past twelve months were Proctor & Gamble,
Oracle Systems, Nortel Networks, EMC Corp and Hewlett Packard.
We made a strategic decision to continue to add to our already overweight
position in healthcare from late in the first quarter of 2000. This was based on
our belief that the group's consistent earnings growth will be increasingly
valuable to investors as overall S&P 500 earnings growth moderates from
unsustainably high levels. The decision proved prudent, as healthcare was our
second best performing sector for the period. Large positions in American Home
Products, Pfizer and Johnson & Johnson drove this strong performance.
Although large-cap pharmaceutical stocks dramatically outperformed the market in
the quarter, Pfizer outperformed its peers. The acquisition of Warner Lambert
was formally completed in mid-June, but integration planning was already well
underway. We believe cost-cutting targets will be accomplished earlier than
expected and their size could ultimately prove conservative, as projected now.
Prescription volume growth for most of the company's major drugs remains robust.
Consensus earnings expectations do not fully reflect the faster than expected
cost-cutting or the growth in sales volumes, in our view. A supposed lack of
pipeline depth is a frequent criticism of skeptics, but we believe Pregabalin,
Valdocoxib, and inhaled insulin (diabetes; launch in 2002-03) all have
tremendous market potential. With no major patent expirations until 2006, the
industry's fastest projected earnings growth rate over the next several years, a
strong potential for additional co-marketing deals with other drug companies and
for non-core asset divestitures once pooling accounting restrictions are lifted
in two years, and the sectors lowest p/e-to-growth ratio, we believe Pfizer
remains a compelling investment and is a core holding in our portfolio.
Our outlook for the balance of this year and next year is generally favorable
for growth stocks. We base this on the economic backdrop of stable to declining
interest rates, moderate inflation and the Fed's continued success in managing
to a soft landing. The earnings outlook for growth sectors such as technology
and health care is generally favorable. We are aware of the potential pitfalls
and believe that our emphasis on fundamental research and knowing our companies
well will benefit our investors
Comparison of Change in Value of $10,000 Investment in the Partners Aggressive
Growth Fund Class A, Lipper Large-Cap Growth Fund Average, Morningstar Large
Growth Category and S&P 500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class Since Inception
A 13.60%*
B 12.80%*
C 12.80%*
R 13.10%*
Standard and Morningstar Lipper Large-Cap Partners
Poor's 500 Large Growth Growth Fund Aggressive Growth
Stock Index Average Average Fund Class A
Thousands
10 10 10 9.525
"2000" 10.609 11.677 11.536 10.82
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 11/1/99
Principal Partners LargeCap Growth Fund, Inc.
David Magee
The year 2000 has been an extremely challenging environment for equity managers,
but growth managers in particular. Since the inception of the Principal Partners
LargeCap Growth Fund, the NASDAQ Composite Index dropped 27.0%, while the Dow
Jones Industrial Average rose 8.7% and the S&P 500 rose 5.9%. On the year, value
stocks outperformed growth stocks by 11.9%, as measured by the Russell 1000
Growth and the Russell 1000 Value Indexes. In fact, using these same benchmarks,
value outperformed growth by 17.6% in the last seven months, with the period
ending October 31, 2000.
During the first half of 2000, from approximately mid-March until the end of
May, the stock market corrected sharply. The primary cause of this rapid decline
was a sudden reversal of monetary conditions by the Federal Reserve. The
monetary base had been allowed to grow excessively from October 1999 until early
February 2000 to provide banks with adequate liquidity in the event that the Y2K
computer problem disrupted normal banking activity and created a banking panic.
When the Fed removed the excess liquidity in early 2000, equity prices deflated.
To a smaller degree, the markets were also negatively impacted by the Fed's
raising of interest rates in its continuing battle with perceived, but
insignificant, inflation risks. During this period, our exposure to technology
stocks dropped slightly, and health care and energy stocks were added, as
earnings acceleration appeared imminent in these areas.
The Fund rebounded in the third calendar quarter, benefiting from holdings in
the technology sector and the energy/electrical power sector. The conclusion of
a series of interest rate hikes by the Federal Reserve caused a rally in the
quarter. Data storage remains our favorite technology group, followed by
telecommunications equipment. Our energy weightings increased slightly during
the third quarter. Power demand is being spurred on by the large array of
computing and communication infrastructure that has been put into service over
the last couple of years, while power generation capacity has remained static.
Furthermore, due to deregulation, the electric industry will reform to address
newly present market opportunities. Risk intermediation and market making in the
power industry will become a huge opportunity.
Looking ahead, mild U.S. and global economic deceleration will likely cause a
brief technology shakeout during the 2000 - 2001 transition period. Stock
selection will be crucial. As we move forward, we are prepared to benefit from a
broader range of stock market themes.
Comparison of Change in Value of $10,000 Investment in the Partners LargeCap
Growth Fund Class A, Lipper Large-Cap Growth Fund Average, Morningstar Large
Growth Category, S&P 500 Stock Index and Russell 1000 Growth Index
Average Annual Total Returns
as of October 31, 2000
Class Since Inception
A -20.55%*
B -20.94%*
C -20.94%*
R -20.74%*
Russell Standard and Morningstar Lipper Partners
Growth Poor's 500 Large Growth Large-Cap Growth LargeCap Growth
Index Stock Index Category Fund Average Fund Class A
Thousands
10 10 10 10 9.525
"2000" 8.771 9.599 9.023 9.307 7.568
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 3/1/2000
Principal Partners MidCap Growth Fund, Inc.
Christopher McHugh
For the period from its inception on February 29, 2000 to October 31, 2000, the
Principal Partners MidCap Growth Fund returned a negative 9.10%. The Fund's
results outperformed the 11.48% loss of the Russell Midcap Growth Index, the
benchmark index, by 2.38 percentage points.
MidCap Growth's performance was hurt by a market that was inhospitable to growth
stocks (value stocks were up and growth stocks were down during the period) and
to a loss of more than 10% in October, which helped erase earlier gains. In
light of the stock market's behavior in October, anxiety now seems to be the
prime growth industry on Wall Street. Investors are jittery about these
prospects, among others: that higher interest rates will crimp economic growth;
that higher oil prices will fuel inflation; and that a record-low Euro -- the
common European currency -- will hurt the profits of U.S. companies doing
business overseas.
Three of MidCap Growth's 10 sector investments outperformed their corresponding
Russell Midcap Growth Index sectors. By far, our technology holdings (which
represented the Fund's largest single sector weighting, about 40%) contributed
the most to performance. The technology sector of the market fell, but our own
tech holdings dropped about half as much as the sector did. Why were we so
heavily invested in tech stocks? The reason is simple: tech stocks are a big
part of the Russell Midcap Growth Index. In following our sector-neutral policy,
we keep the sector weightings of MidCap Growth close to those of that index. (A
brief explanation: our holdings in each of the 10 market sectors are "sector
neutral," meaning that their sector weightings resemble those of the indexes.
It's been our experience that such a strategy makes sense because the
performance advantage in the market can shift swiftly from sector to sector:
today's mutt of a sector can be tomorrow's purebred.) Since we keep the sector
weightings of MidCap Growth close to those of the index, a big index sector like
technology results in our having similarly big holdings in technology stocks.
In our judgment, our active trading practices were especially helpful in
minimizing losses in tech stocks. Some of our best relative performers were
broadband-related, data-storage, and software companies.
Comparison of Change in Value of $10,000 Investment in the Partners MidCap
Growth Fund Class A, Lipper Mid-Cap Growth Fund Average, Morningstar Mid-Cap
Growth Category and Russell MidCap Growth Index
Average Annual Total Returns
as of October 31, 2000
Class Since Inception
A -12.68%*
B -13.16%*
C -13.16%*
R -12.97%*
Russell Morningstar Lipper Partners
MidCap Growth Mid Growth MidCap Growth MidCap Growth
Index Category Fund Average Fund Class A
Thousands
10 10 10 9.525
"2000" 8.844 9.13 8.422 8.317
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 3/1/2000
Principal Real Estate Fund, Inc.
Kelly Rush
Real estate stocks provided robust investment performance for the twelve-month
period that ended October 31, 2000. Principal Real Estate Fund's 21.9% return
easily outdistanced the S&P 500's 6.1%. This was a reversal of fortunes from the
prior twelve months when the S&P 500 was up 24.1% while the Fund lagged at
-4.4%.
Triggering this reversal was a decline in enthusiasm for high-growth,
technology-oriented stocks. Nervous that technology stock prices had over
inflated, investors sought attractively valued sectors with reliable earnings
growth. Real estate stocks fit this profile. Real estate stock prices looked
cheap because they had been on a declining trend since peaking in October 1997.
Meanwhile, earnings growth had been solid in 1998 and 1999, and the outlook for
2000 and beyond was favorable.
We recognized these attributes and pointed them out in last year's annual
report. In the report, we said, "Investors who seek some exposure to companies
providing reliable earnings growth, above average dividend yields and selling at
historically cheap prices may find the Fund attractive." What we did not realize
then was how soon market sentiment would shift to appreciate these attributes.
Following the recent stock price run-up, investors are asking whether real
estate stocks are now over-extended. We do not think so. Prices that were
"historically cheap" a year ago appear to be at "reasonable levels" today. They
appear reasonable because the stocks rebounded from such a low level, the
companies experienced stronger than expected earnings growth and the real estate
outlook remains sound.
Relative performance for the Fund remained strong in the past twelve months. The
Principal Real Estate Fund outperformed both peer funds and its benchmark index
by 2.7% and 3.7% respectively. Portfolio over weightings in owners of
multi-family, office and industrial properties drove superior returns. We also
emphasized companies owning real estate in strong coastal markets, especially
San Francisco. This strategy also helped to propel relative returns.
Comparison of Change in Value of $10,000 Investment in the Real Estate Fund
Class A, Lipper Real Estate Fund Average, Morningstar Real Estate Category and
Morgan Stanley REIT Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year Since Inception
A 21.86% -0.53%*
B 21.00% -1.13%*
C 21.01% 6.41%**
R 21.40% -0.75%*
Morgan Stanley Morningstar Lipper Real Estate
REIT Real Estate Real Estate Fund
Index Category Fund Average Class A
Thousands
10 10 10 9.521
"1998" 8.346 8.61 8.318 8.05
"1999" 7.824 8.255 7.976 7.697
"2000" 9.248 9.899 9.509 9.38
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/31/97
** Since inception date 6/30/99
Principal SmallCap Fund, Inc.
John McClain
Mark Williams
The Principal SmallCap Fund began the year strongly but as the year progressed
the market fled the growth areas where the Fund had overweighted its holdings.
As a result, performance suffered and the Fund underperformed its benchmark
indices. The account returned 9.89% compared to 25.3% for the S&P 600, 16.6% for
the Russell 2000, and 26.6% for the Lipper SmallCap Core category.
During the year, the Fund increased its exposure to more growthy sectors such as
technology and communications. This was based on the expectation that the
economy would moderate from its very high growth rates of the first half of the
year, such that fears of further increases of interest rates by the Fed would
prove unfounded. As the year progressed, energy prices spiked higher, putting
additional pressure on global economic growth. Simultaneously, the Euro weakened
significantly putting even more pressure on companies who do business in that
region. The cumulative effect of these developments was to shift market worries
from too-rapid growth to earnings fears, completely bypassing the middle ground
scenario (moderate growth) which we had anticipated. As a result, the market
fled the sectors we had overweighted and gravitated to more traditional value
sectors (such as homebuilders), which we had underweighted. As these trends
became apparent, we shifted the portfolio back towards value but remained
overweight in technology.
As discussed above, the market action early in the year favored our growthier
posture and the Fund did well. However, towards year-end, several blue chip
technology companies announced weaker than expected results, frequently citing
weaker than expected growth in Europe. This weakness was probably due to the
negative impact of higher energy prices and a sharp decline in the Euro.
Earnings fears built as the year closed. Small technology stocks were hit
particularly hard as downward price movements were exaggerated by tax loss
selling.
Exiting the year, the Fund had moderately shifted away from growth toward value
but remained overweight in technology. Energy prices remain a significant risk
which is why we have somewhat reduced our growth weighting. Fortunately, the
evidence strongly shows crude oil inventories should begin to build in the near
term and by the middle of next year, crude oil prices should be noticeably lower
than they are currently, possibly falling below $25/barrel.
If the economy can achieve a soft landing (moderate growth), spending on areas
such as technology and communications should continue to be strong providing a
solid foundation for a rebound in the stock prices of many of the Fund's
holdings.
Comparison of Change in Value of $10,000 Investment in the SmallCap Fund Class
A, Lipper Small-Cap Core Fund Average, Morningstar Small Blend Category and S&P
600 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year Since Inception
A 9.89% 7.96%*
B 9.14% 7.27%*
C 9.04% 7.91%**
R 9.53% 7.74%*
Standard and Morningstar Lipper SmallCap
Poor's 600 Small Blend Small-Cap Fund Fund
Stock Index Category Average Class A
Thousands
10 10 10 9.527
"1998" 8.783 8.736 8.683 8.007
"1999" 9.835 9.997 10.631 10.771
"2000" 12.32 12.56 13.463 11.836
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/31/97
** Since inception date 6/30/99
Principal Utilities Fund, Inc.
Catherine Zaharis
The utilities industry again has been marked by returns that are dramatically
different from other industries. Returns were stronger than the broader market,
with one year utility returns nearly twice the S&P 500 returns. However, the
Principal Utilities Fund, as well as our peers, dramatically lagged the Utility
benchmark. The benchmark excludes telephone companies, which were impacted in a
negative fashion by market events. The Dow Jones Utility Index represents
electric and gas utility companies. These firms have been beneficiaries of
several scenarios in the U.S. that have been quite positive for this sector in
the past year.
Demand growth for electricity has begun to rise in this New World economy.
Massive amounts of energy are needed to provide proper cooling and
electrification to high tech facilities. New major power plants to produce
electricity have been virtually non-existent in the U.S. for over 10 years. So
as demand has grown, supply has not. This was acceptable in the early 1990's, as
there was more than enough electricity to go around. However, we have now used
up that extra supply and find ourselves short of what is needed on the hottest
days. Prices have spiked from $30 per megawatt hour to over $1,000 per megawatt
hour. Those companies who have power to sell into the market and have undertaken
a generation strategy have performed quite well. Those companies having to
purchase power in these markets have suffered. Our goal is to find those
companies that have the best strategies and have exhibited the ability to
execute those strategies effectively.
The telecom industry has been in a very different environment. This industry is
one where although usage is growing dramatically, huge amounts of funding are
needed to keep up with the most current technology. So although demand is
growing, money is continually needed to plow back into the business to continue
to grow. This has hurt many of these companies. Also, traditional areas of
growth, such as long distance phone calls, have slowed noticeably, hurting the
traditional bellwethers of this industry. During this past year, we have focused
more on electricity and gas, and have sold some of the telephone companies and
as they continued to struggle in this environment.
We continue to monitor industry conditions and look for any opportunities in
either sector.
Fund strategy continues to focus on solid credit quality evaluation to seek out
the best value among municipal securities that deliver competitive levels of
income free from federal tax.
Comparison of Change in Value of $10,000 Investment in the Utilities Fund Class
A, Lipper Utilities Fund Average, Morningstar Utilities Category, Dow Jones
Utilities Index with Income and S&P 500 Stock Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year Since Inception
A 12.09% 15.98% 12.71%*
B 11.30% 15.12% 16.91%**
C 9.78% - 6.85%***
R 11.43% - 14.73%****
Standard and Dow Jones Morningstar Lipper Utilities
Poor's 500 Utilities Index Utilities Utilities Fund
Stock Index with Income Category Fund Average Class A
Thousands
10 10 10 10 9.524
"1993" 10.979 11.658 11.781 11.575 11.04
"1994" 11.403 9.349 10.811 10.475 9.362
"1995" 14.415 11.81 12.586 12.325 11.643
"1996" 17.886 13.217 14.202 13.733 12.59
"1997" 23.627 14.88 16.831 16.179 14.385
"1998" 28.823 19.029 20.611 19.721 19.003
"1999" 36.219 20.072 24.663 23.334 21.804
"2000" 38.425 26.796 28.16 26.526 24.44
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/16/92
** Since inception date 12/9/94
*** Since inception date 6/30/99
**** Since inception date 2/29/96
INTERNATIONAL GROWTH FUNDS
Principal European Equity Fund, Inc.
Crispin Murray
European equity markets were not immune to global equity
market volatility over the past six months, although a number of positive
regional developments reinstated some renewed buying support towards the end of
the period. Key constraining factors were:
o poor sentiment in the global telecom sector, due to the
high prices paid for third generation spectrum licences
and the potential supply pressures this creates;
o continued weakness in the Euro;
o higher oil prices, which touched $37/barrel. Oil price strength has been a
major factor capping European share performance over the last few months as
the region is viewed as being more sensitive and less structurally flexible
to combat the inflationary follow through; and
o earnings downgrades for the overall market, reflecting higher input costs and
slowing growth.
BT's European share portfolio underperformed the index over the last six months.
This was mainly due to holdings in the following companies, which underperformed
the broader market. In most cases, we continue to have confidence in the medium
term outlook for these holdings.
Nokia's (Finland) share price weakness stemmed from a downward revision to
earnings expectations in the third quarter. Margins in the handset business were
expected to fall due to a later than expected launch of some phones and mix of
new product.
Ericsson (Sweden) announced disappointing earnings results in the cellular
handset division due to poor inventory management that led to inventory
write-downs. While there are no short term catalysts to boost performance in the
handset division, Ericsson's infrastructure business continues to perform very
well. Until handset business issues are resolved, we maintain a neutral exposure
to the company.
Holdings in Granada and Compass also impacted performance following their
announced merger. As a whole, we remain confident that the Granada Compass
entity will have an excellent franchise in catering services and roadside
restaurants and that management has a strong track record in integrating other
companies.
Within the technology sector, an underweight (zero) exposure to Alcatel
detracted from performance. Whilst the company recently performed well, we
continue to question its ability to compete in the global environment given
extreme competitive pressures from companies such as Nortel and Cisco.
Our holdings in IT service companies (Tietoenator and Getronics) also
underperformed the broader market.
We are currently experiencing a period where there is a lack of sector
leadership, as investors await further clarity on issues surrounding the Euro,
oil prices and the cyclical nature of global expenditures. In this environment,
we are not holding aggressive sector positions and are therefore positioned in a
relatively defensive manner.
Over the past six months, exposure was raised in the area of: the financial
sector through a new holding in Deutsche Bank, and services, reflecting our view
that some domestic economic sensitive companies such as media and services are
trading at attractive valuations.
Comparison of Change in Value of $10,000 Investment in the European Equity Fund
Class A, Lipper European Region Funds Average, Morningstar Europe Category and
MSCI Europe (15) Index
Average Annual Total Returns
as of October 31, 2000
Class Since Inception
A -13.10%*
B -13.40%*
C -13.50%*
R -13.40%*
Morgan Stanley Morningstar Lipper European Equity
Capital International Europe European Region Fund
Europe (15) Index Category Fund Average Class A
Thousands
10 10 10 9.525
"2000" 9.319 9.039 9.178 8.277
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 5/1/2000
Principal International Emerging Markets Fund, Inc.
Kurt Spieler
Even with strong performance in the first half of the fiscal year, emerging
markets finished slightly down during the last year. In general, the drivers of
equities in developed markets were magnified in emerging markets. As in the
U.S., technology, media and telecommunications (`TMT') corrected sharply after
the liquidity rally. Emerging markets are heavily exposed to cyclical sectors
such as commodities, telecommunications and technology. This leads to strong
performance when global economic growth is accelerating and increased concerns
when growth is slowing. The impact of higher oil prices also negatively impacted
the oil importing nations in Asia.
Latin America performed well during the year, up 11%. Positive factors included
a lower risk premium in Mexico and Brazil and continued strong economic growth.
Eastern Europe, Middle East and Africa also reported positive returns, up 7%.
Russia and Israel were the best performing markets within emerging countries.
Asia was the weakest performing region, down 25% in the last year. Negative
sentiment occurred from higher oil prices, impact of a slowdown in the
electronic industries and lack of progress with restructuring in many countries.
The Principal International Emerging Markets Fund's relative performance during
the year was solid outperforming the MSCI EMF (Emerging Markets Free) benchmark
by around 7%. This outperformance was primarily from stock selection in Mexico,
Brazil, South Korea and Taiwan. The Fund also benefited from its overweight
position in telecommunication services and underweight position in industrials.
On the negative side, our underweight position in Russia cost the Fund around 1%
in performance.
Emerging markets remain an incredibly cheap asset class trading on a P/E of 12x
with expected earning growth of 15%. Our strategy remains to focus on high
quality companies with solid growth rates. Our fundamental approach takes
advantage of the volatility in emerging markets as we buy these companies at
cheap prices.
Comparison of Change in Value of $10,000 Investment in the International
Emerging Markets Fund Class A, Lipper Emerging Markets Fund Average, Morningstar
Diversified Emerging Market Category and MSCI EMF Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year Since Inception
Class A 2.36% -1.63%*
Class B 1.53% -2.20%*
Class C 1.64% -2.18%**
Class R 2.04% -1.76%*
<TABLE>
<CAPTION>
Morgan Stanley Morningstar Lipper International
Capital International Diversified Emerging Emerging Markets Emerging Markets
EMF (Emerging Markets) Index Market Category Fund Average Fund Class A
<S> <C> <C> <C> <C>
Thousands
10 10 10 9.524
"1997" 8.57 8.75 8.816 8.554
"1998" 5.752 5.976 6.01 6.748
"1999" 8.157 8.191 8.159 8.832
"2000" 7.438 7.925 7.936 9.04
</TABLE>
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 8/29/97
** Since inception date 6/30/99
Principal International Fund, Inc.
Scott Opsal
Kurt Spieler
Global equity markets experienced strong performance during the last quarter of
1999 and beginning of 2000. In particular, technology, media and
telecommunications (`TMT') led markets upward. Drivers of performance of growth
stocks included strong economic conditions and the seemingly insatiable demand
for telecommunication services, which drove valuations in TMT stocks to high
levels. During the spring, several risks appeared in the economic environment.
Oil prices spiked up, leading to concerns about consumption. Interest rates from
both the U.S. and Europe continued their upward move as central banks became
focused on inflation. This led to increased volatility in equity markets.
During the second half, an aggressive sector rotation occurred from TMT to
defensive stocks and financials. Investors outperformed by buying consumer
staples, utilities and pharmaceuticals. Evidence of a slowing economic
environment contributed to the underperformance of cyclical stocks and emerging
markets. The other major risk in global markets continued to be the steady
decline of the Euro. High oil prices, capital outflows from mergers and
acquisitions, and concerns with the European Central Bank led to currency
weakness.
The Principal International Fund's relative performance during the year was
solid, outperforming the MSCI EAFE (Europe, Asia and the Far East) benchmark by
around 7%. This outperformance was primarily from stock selection in banks,
diversified financials and household durables. The Fund also benefited from its
low weighting in Japan, which underperformed developed markets. On the negative
side, currency exposure cost the Fund 2% as our overweight position in Europe
and underweight position in Japan cost us returns.
Currently, we are finding the best opportunities in financials and consumer
staples. We are negative on cyclical stocks, especially autos and capital goods.
Our strategy is to continue to invest in high quality companies at discounts to
fair value. We find these companies through our bottom-up, borderless investment
approach.
Comparison of Change in Value of $10,000 Investment in the International Fund
Class A, Lipper International Fund Average, Morningstar Foreign Category and
MSCI EAFE Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 3.04% 11.71% 11.80%
B 2.43% 10.88% - 10.90%*
C 1.40% - - 4.02%**
R 2.54% - - 10.12%***
Morgan Stanley
Capital International EAFE Morningstar Lipper International
(Europe, Austrailia Foreign International Fund
and Far East) Index Category Fund Average Class A***
Thousands
10 10 10 9.53
"1991" 10.695 10.9 10.852 10.847
"1992" 9.282 10.38 10.32 10.677
"1993" 12.759 13.697 13.768 15.096
"1994" 14.046 15.191 15.225 16.545
"1995" 13.994 15.117 15.132 16.715
"1996" 15.459 16.913 16.756 19.784
"1997" 16.175 18.74 18.497 23.832
"1998" 17.734 19.467 19.25 24.292
"1999" 21.82 24.842 24.165 28.222
"2000" 21.187 25.995 24.817 29.08
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal International SmallCap Fund, Inc.
Darren Sleister
International small capitalization stocks tend to outperform in periods of
increasing global growth and loosening of global monetary policy. Most of 1999
fit this description with economic growth in Asia ex-Japan, strong growth in
Europe and the U.S., a huge surge in the supply of internet-related stocks and
increased liquidity flows. This carried over briefly into the first few months
in 2000, however the rest of 2000 has been spent in a reversion to the mean,
seeing valuation compressions in technology-related stocks, slowing global
economic growth, tightening monetary supply and increasing interest rates to
ward off inflation.
The Principal International SmallCap Fund benefited from the boom in emerging
technologies early in the year. However, we gave some of these returns back, as
the valuation compression affected the equity markets in general. We have
benefited largely from oil service companies as the price of oil increased
dramatically, giving rise to the need for capacity expansion and an increasing
demand for oil. Biotechnology, medical technology and alternative energy have
been recent themes in the portfolio as direct exposure to telcos, Internet and
semis have largely been sold down as we continue to see weakness in these areas.
For much of the year we overweighted Europe, Australia and Canada which worked
well for us as these regions faced economic prosperity and the macro conditions
were much more favorable than in the Asian region. We continue to closely
monitor the Asian region, watching for signs of favorable governmental
legislation. However, we have chosen to underweight the region due to the lack
of reform. We believe the Fund's outperformance versus the benchmark came from
the ability to underweight Asia for much of the year.
Going forward we expect oil prices to remain higher than investors would like
for longer than most presently anticipate. Global growth will continue to slow
and technology valuations remain at risk. We continue to look for high quality
growth opportunities that have attractive valuation parameters. It is possible
that value stocks will periodically outperform, but over the long term we remain
committed to growth at a reasonable price as a means for long-term equity
appreciation.
Comparison of Change in Value of $10,000 Investment in the International
SmallCap Fund Class A, Lipper International Small-Cap Fund Average, Morningstar
Foreign Category and MSCI EAFE Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year Since Inception
A 21.21% 22.18%*
B 20.43% 21.58%*
C 18.71% 28.51%**
R 21.01% 22.21%*
Morgan Stanley Lipper
Capital International EAFE Morningstar International International
(Europe, Australia and Foreign Small Cap SmallCap Fund
Far East) Index Category Fund Average Class A
Thousands
10 10 10 9.524
"1997" 9.748 9.83 9.736 9.572
"1998" 10.689 10.211 9.774 9.601
"1999" 13.151 13.03 14.102 14.835
"2000" 12.77 13.635 16.528 17.982
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 8/29/97
** Since inception date 6/30/99
Principal Pacific Basin Fund, Inc.
Dean Cashman
Even though weak fund returns over the period reflected very volatile trading
conditions in both Japan and Asia, the Principal Pacific Basin Fund outperformed
its benchmark due to strong stock selection in Japan, Australia and Hong Kong.
In Japan, weakness in global equity markets weighed heavily on share performance
over the period. In particular, investors feared that a `hard landing' in the
U.S. would potentially derail the recovery process in Japan. In addition to
global concerns, the domestic market experienced certain negative developments,
which were somewhat tempered by a number of positive events, including upward
earnings revisions across a broad range of sectors and further signs of domestic
recovery.
Most Asian equity markets weakened over the period amidst volatile global equity
market conditions. A combination of factors weighed on performance, including:
o concerns over the longevity of the technology cycle, which adversely impacted
sentiment given that Asia is a large exporter of certain of these products;
o continued oil price strength, which is a major concern for the large
industrial economies of Korea and Taiwan; o weakness in the NASDAQ, to which
Asian equity markets remain closely correlated; and o a deteriorating political
landscape in Taiwan and political concerns in Southeast Asia.
Financial sector stocks benefited from a rotation into interest rate sensitive
securities, as evidence of a slowdown in the U.S. economy cemented expectations
for steady monetary policy over the remainder of the year. This was positive for
our banking holdings.
The Australian equity market strengthened over the period. Its resilience in the
face of global equity market weakness was due to its relatively low weighting to
technology stocks, which experienced considerable selling pressure during the
period.
While company earnings results were strong in absolute terms, the market was
focused on downward revisions to some earnings forecasts. As a result, the
equity market tone was defensive, as companies falling short of expectations
were punished harshly by the market while companies with perceived stable
earnings were rewarded.
Many of the Fund's Australian holdings performed well, although performance was
constrained by an underweight exposure to the region.
Comparison of Change in Value of $10,000 Investment in the Pacific Basin Fund
Class A, Lipper Pacific Region Fund Average, Morningstar Diversified
Pacific/Asia Category and MSCI Pacific Free Index
Average Annual Total Returns
as of October 31, 2000
Class Since Inception
A -13.90%*
B -13.90%*
C -14.00%*
R -13.90%*
Morningstar
Morgan Stanley Diversified Lipper
Capital International Pacific/Asia Pacific Region Pacific Basin
Pacific Free Index Category Fund Average Fund Class A
Thousands
10 10 10 9.525
"2000" 7.82 8.642 7.878 8.201
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 5/1/2000
Important Notes on the Growth-Oriented Funds:
* Duration is the dollar weighted, present value of cash flows, principal and
interest, expressed in time.
The values of these indexes will vary according to the aggregate value of the
common equity of each of the securities included. The indexes represent asset
types which are subject to risk, including possible loss of principal. You
cannot invest directly in an index. An index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
Principal international funds' shares are subject to volatility caused by
exchange rates, foreign economies and taxation.
Investments in Principal MidCap, Principal SmallCap and Principal International
SmallCap Funds involve more abrupt or erratic market movements and may involve
greater risk than other stock fund investments.
Principal Real Estate Fund investing involves risks inherent to the real estate
industry and REITs, such as general and local economic conditions.
Principal Utilities Fund is subject to market conditions directly related to the
utilities industry.
Dow Jones Utility Index with Income: This average is a price-weighted average of
15 utility companies that are listed on the New York Stock Exchange and are
involved in the production of electrical energy.
Lehman Brothers Government/Corporate Bond Index: This index consists of publicly
issued securities from the Government Index and the Corporate Index. The
Government Index includes U.S. Treasuries and Agencies. The Corporate Index
includes U.S. Corporate and Yankee debentures and secured notes from the
Industrial, Utility, Finance, and Yankee categories.
Lipper Balanced Fund Average: This average consists of funds whose primary
objective is to conserve principal by maintaining at all times a balanced
portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges
around 60%/40%. The one-year average currently contains 475 funds.
Lipper Emerging Markets Fund Average: This average consists of funds which
invest at least 65% of their total assets in emerging market equity securities,
where "emerging market" is defined by a country's GNP per capita or other
economic measures. The one-year average currently contains 188 funds.
Lipper European Region Fund Average: This average consists of funds that
concentrates investments in equity securities whose primary trading markets or
operations are concentrated inthe European region or a single country within
this region. The one-year average currently contains 151 funds.
Lipper International Small-Cap Fund Average: This average consists of funds
which invest at least 65% of their assets in equity securities of non-United
States companies with market capitalizations less than U.S. $1 billion at the
time of purchase. The one-year average currently contains 73 funds.
Lipper International Fund Average: This average consists of funds which invest
in securities primarily traded in markets outside of the United States. The
one-year average currently contains 666 funds.
Lipper Large-Cap Growth Fund Average: This average consists of funds which
invest at least 75% of their equity assets in companies with market
capitalizations (on a three-year weighted basis) of greater than 300% of the
dollar-weighted median market capitalization of the S&P Mid-Cap 400 Index. The
one-year average currently contains 496 funds.
Lipper Large-Cap Value Fund Average: This average consists of funds which invest
at least 75% of their equity assets in companies with market capitalizations of
greater than 300% of the dollar-weighted median market capitalization of the S&P
Mid-Cap 400 Index. The one-year average currently contains 362 funds.
Lipper Mid-Cap Core Fund Average: This average consists of funds that invest at
least 75% of their equity assets in companies with market capitalizations of
less than 300% of the dollar weighted median market capitalization of the S&P
Mid-Cap 400 Index. The one-year average currently contains 139 funds.
Lipper Mid-Cap Growth Fund Average: This average consists of funds which invest
at leaast 75% of their equity assets in companies with market capitalizations
(on a three-year weighted basis) of less than 300% of the dollar-weighted median
market capitalization of the S&P Mid-Cap 400 Index. The one-year average
currently contains 225 funds
Lipper Pacific Region Fund Average: This average consists of funds that
concentrates investments in equity securities with primary trading markets or
operations concentrated in the Western Pacific Basin region or a single country
within this region. The one-year average currently contains 60 funds
Lipper Real Estate Fund Average: This average consists of funds which invest 65%
of their equity portfolio in equity securities of domestic and foreign companies
engaged in the real estate industry. The one-year average currently contains 145
funds.
Lipper S&P 500 Index Average: This average consists of funds that are passively
managed, have limited expenses (advisor fee no higher than 0.50%), and are
designed to replicate the performance of the Standard & Poor's 500 Index on a
reinvested basis. The one-year average currently contains 126 funds
Lipper Small-Cap Core Fund Average: This average consists of funds which invest
at least 75% of their equity assets in companies with market capitalizations of
less than 250% of the dollar-weighted median market capitalization of the S&P
Small-Cap 600 Index. The one-year average currently contains 192 funds.
Lipper Utilities Fund Average: This average consists of funds which invest 65%
of their equity portfolio in utility shares. The one-year average currently
contains 95 funds.
Morgan Stanley Capital International EAFE (Europe, Australia and Far East)
Index: This average reflects an arithmetic, market value weighted average of
performance of more than 900 securities which are listed on the stock exchanges
of the following countries: Australia, Austria, Belgium, Denmark, Netherlands,
New Zealand, Norway, Singapore/Malaysia, Spain, Sweden, Switzerland, and the
United Kingdom.
Morgan Stanley Capital International EMF (Emerging Markets Free) Index: This
average is capitalization weighted and consists of stocks from 26 countries.
These countries include: Argentina, Brazil, Chile, China Free, Columbia, Czech
Republic, Greece, Hungary, India, Indonesia Free, Israel, Jordan, Korea at 50%,
Malaysia Free, Mexico Free, Pakistan, Peru, Philippines Free, Poland, Portugal,
South Africa, Sri Lanka, Taiwan at 50%, Thailand Free, Turkey and Venezuela.
Morgan Stanley Capital International Europe (15) Index: This average is
capitalization weighted and is designed to track the broader MSCI EMU Benchmark
containing stocks in ten EMU member countries.
Morgan Stanley Capital International Pacific Free Index: This average is
capitalization weighted representing all of the Morgan Stanley Capital
International developed markets in the Pacific. It comprises six of the
twenty-two countries that are included in the Morgan Stanley Capital
International World. This index is created by aggregating the six different
country indexes, all of which are created separately. This index is calculated
with gross dividends reinvested. The countries represented by this index are:
Australia, Hong Kong, Japan, Malaysia, New Zealand and Singapore. The "Free"
aspect indicates that this index includes only securities that are allowed to be
purchased by global investors.
Morgan Stanley REIT Index: This is a capitalization-weighted index of the most
actively traded real estate investment trusts, and is designed to be a measure
of real estate equity performance.
Morningstar Diversified Emerging Markets Category: Diversified emerging-markets
funds invest in developing nations. Most funds divide their assets among 20 or
more nations, although they tend to focus on the emerging markets of Asia and
Latin America rather than on those of the Middle East, Africa, or Europe.
Morningstar Diversified Pacific/Asia Stock Category: Diversified Pacific/Asia
stock funds have a wider investment range than other Asia-oriented funds. While
Japan funds focus exclusively on Japan and Pacific ex-Japan funds emphasize
Asia's developing nations, these funds can invest throughout the Pacific Rim,
including Australia and New Zealand.
Morningstar Domestic Hybrid Category: Domestic-hybrid funds divide their assets
among stocks. These funds tend to focus on conservative stocks and bonds.
Morningstar Europe Stock Category: Europe-stock funds invest in companies based
inEurope. Most of these funds emphasize the region's larger and more developed
markets. Currency fluctuations frequently affect investors' returns.
Morningstar Foreign Stock Category: Foreign-stock funds can invest in any
country outside the United States. Most of these funds divide their assets among
a dozen or more developed markets, including Japan, Britain, France, and
Germany. They tend to invest the rest in emerging markets such as Hong Kong,
Brazil, Mexico and Thailand.
Morningstar Large Blend Category: Large-cap blend funds focus on big companies
that are fairly representative of the overall stock market in both size and
price. They tend to invest across the spectrum of U.S. industries and owing to
their broad exposure, the funds' returns are often similar to the S&P 500 Index.
Morningstar Large Growth Category: Large-cap growth funds invest in big
companies that are projected to grow faster than the overall stock market. Most
of these funds focus on either companies in rapidly expanding industries with a
high percentage of sales coming from foreign markets.
Morningstar Large Value: Large-cap value funds focus on big companies that are
less expensive than the market as a whole. They often come from the utilities,
energy, financial, and cyclical sectors, and many pay dividends. They also
generally have more-stable stock prices.
Morningstar Mid-Cap Blend Category: The typical mid-cap blend fund invests in
stocks of various sizes and mixed characteristics, giving it a middle-of-the
road profile. Most shy away from high-priced growth stocks, but aren't so
price-conscious that they land in value territory.
Morningstar Mid-Cap Growth Category: Some mid-cap growth funds invest in stocks
of all sizes, but most focus directly on mid-size companies. Mid-cap growth
funds target firms that are projected to grow faster than the overall market,
therefore commanding relatively higher prices. Many of these stocks are found in
the volatile technology, health-care, and services sectors.
Morningstar Small Blend Category: Small-cap blend funds favor firms at the
smaller end of the market-capitalization range, and are flexible in the types of
small caps they buy. They own everything from fairly cheap, out-of-favor stocks
to somewhat expensive growth stocks. They thus provide exposure both to
traditional value sectors, such as financials and cyclicals, and to growth
sectors like technology and health care.
Morningstar Specialty - Real Estate Category: Specialty real-estate funds invest
primarily in real-estate investment trusts (REITs) of various types. The
performance of these funds is less connected to the overall market than most
other types of stock funds.
Morningstar Specialty - Utilities: Specialty-utilities funds invest in phone,
power, gas, and water companies. These types of companies have historically been
conservative investments that pay sturdy dividends. These funds tend to provide
relatively little capital appreciation, and more in the way of yield. These
funds are sensitive to interest rates and industry changes.
Russell 1000 Growth Index: This index measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth
values.
Russell MidCap Growth Index: This index measures the performance of those
Russell MidCap companies with higher price-to-book ratio and higher forecasted
growth values. The stocks are also members of the Russell 1000 Growth Index.
Standard & Poor's 500 Barra Value Index: This is a market
capitalization-weighted index of the stocks in the Standard & Poor's 500 Index
having the highest book to price ratios. The index consists of approximately
half of the S&P 500 on a market capitalization basis.
Standard & Poor's 500 Stock Index: This is an unmanaged index of 500 widely held
common stocks representing industrial, financial, utility and transportation
companies listed on the New York Stock Exchange, American Stock Exchange and the
Over-the-Counter market.
Standard & Poor's 600 Index: This is a market-value weighted index consisting of
600 domestic stocks chosen for market size, liquidity and industry group
representation.
Standard & Poor's MidCap 400 Index: This index includes approximately 10% of the
capitalization of U.S. equity securities. These are
comprised of stocks in the middle capitalization range. Any mid-sized stocks
already included in the S&P 500 are excluded from this
index.
Note: Mutual fund data from Lipper Analytical Services, Inc.
Income-Oriented Funds
Principal Bond Fund, Inc.
Scott Bennett
Investors are seeing the benefits of portfolio diversification with fixed income
products generally posting positive returns and equities negative so far in
calendar year 2000. Interest rates have moved lower following a 0.50% rate hike
by the Federal Reserve in May with investors now convinced that the Fed has
engineered a slowdown in the U.S. economy. While the economy has slowed (third
quarter annualized real GDP was 2.7% vs. 5.5% in the second quarter), we expect
the U.S. economy to continue to grow in 2001.
With the slowing economy, corporate profit growth has started to slow. Fixed
income investors have continued to favor those instruments with very high
liquidity and high credit ratings. Treasuries have benefited the most with
structured investments such as mortgage-backed and asset-backed securities,
which lack credit risk, outperforming corporate securities.
Corporate yield premiums to Treasuries currently average 1.80%, which is a
historically high premium and represents long-term value. Average yields are
also attractive at 7.5%. Premiums to Treasuries have increased with a slowing
economy but also because of increased volatility of prices within the investment
grade corporate market. Market reactions remain severe for those companies which
disappoint investors. These severe price declines have largely been confined to
BBB-corporates, which is the main credit rating class of the Principal Bond
Fund.
The Principal Bond Fund has not been immune from securities having large price
declines, which has hurt the performance versus the Lehman BAA benchmark. To
decrease the risk of this occurring, we continue to overweight those companies
and industry sectors unlikely to have negative surprises. Thus we increased the
exposure to industries such as energy, utilities and transportation while
decreasing exposures to basic industrials, capital goods and technology. In
addition to safe sector overweights, we remain focused on avoiding individual
corporate holdings which may disappoint investors.
Comparison of Change in Value of $10,000 Investment in the Bond Fund Class A,
Lipper Corporate Debt BBB Rated Fund Average, Morningstar Intermediate-Term Bond
Category and Lehman Brothers BAA Corporate Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 3.23% 4.71% 8.05%
B 2.45% 3.90% - 6.24%*
C 1.22% - - 0.61%**
R 2.85% - - 4.41%***
Lipper
Morningstar Corporate Debt
Lehman Brothers Intermediate-Term BBB Rated Bond Fund
BAA Corporate Index Bond Category Fund Average Class A
Thousands
10 10 10 9.523
"1991" 11.811 11.581 11.709 11.05
"1992" 13.175 12.718 12.974 12.315
"1993" 15.269 14.305 14.934 14.189
"1994" 14.591 13.663 14.132 13.336
"1995" 17.413 15.626 16.163 15.967
"1996" 18.602 16.449 17.058 16.724
"1997" 20.492 17.822 18.69 18.421
"1998" 21.769 19.194 19.748 19.85
"1999" 22.128 19.2 19.789 19.469
"2000" 23.104 20.3 20.719 20.098
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal Government Securities Income Fund, Inc.
Marty Schafer
Kelly Alexander
Mortgage backed securities (MBS) had a strong year for the 12 month period
ending October 31, 2000. MBS outperformed most other fixed income asset classes
as most others underperformed Treasuries due to the Treasury buy-back program.
Investors sought MBS for their lack of volatility as compared to security
specific corporate event risk.
The Principal Government Securities Income Fund outperformed the Lipper GNMA
Fund Average (7.09% vs. 6.79%) for the period. The
outperformance is attributable to security selection and timing of cashflows.
The quality and composition of the Fund is generally in line with its benchmark.
Fund managers continue to hold more discount MBS securities than the index but
maintain a duration neutral approach by holding some cash to offset the higher
coupons (premiums). Discount securities are securities priced below 100 (par).
When mortgage holders prepay discounts investors receive 100 (par) versus the
market price below par, producing positive returns. Fund managers believe the
homeowner's propensity to refinance and the mortgage banker's technology driven
inducement to refinance loans puts great risk on securities priced above par.
Comparison of Change in Value of $10,000 Investment in the Government Securities
Income Fund Class A, Lipper GNMA Fund Average, Morningstar Intermediate Gov't.
Bond Category and Lehman Brothers GNMA Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 7.09% 6.21% 7.74%
B 6.32% 5.44% - 7.28%*
C 5.41% - - 4.88%**
R 6.63% - - 5.61%***
Government
Morningstar Lipper Securities
Lehman Brothers Intermediate Government GNMA Income Fund
GNMA Index Bond Category Fund Average Class A
Thousands
10 10 10 9.522
"1991" 11.709 11.463 11.493 11.12
"1992" 12.738 12.469 12.448 12.064
"1993" 13.704 13.685 13.459 13.488
"1994" 13.493 13.062 13.044 12.644
"1995" 15.543 14.848 14.823 14.852
"1996" 16.654 15.559 15.646 15.752
"1997" 18.188 16.779 16.959 17.206
"1998" 19.492 18.163 18.107 18.476
"1999" 20.094 18.101 18.375 18.748
"2000" 21.675 19.274 19.623 20.077
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal High Yield Fund, Inc.
Mark Denkinger
The difficulties in the high yield market are clearly reflected in the
performance of the Principal High Yield Fund. The Principal High Yield Fund
posted a total return of -3.12% for the year, trailing the Lipper High Current
Yield Fund Average of -2.77%. The negative performance is a result of continued
weakness in market fundamentals, i.e., increased default rates and negative
mutual fund flows.
While predicting the direction of the high yield market has proven difficult, we
believe better times are ahead. Market volatility, which has been led by the
NASDAQ index, will likely remain high in the foreseeable future, but with yield
nearing record highs we believe the market is nearing the bottom. As liquidity
returns to the market, high yield securities are well positioned to post strong
returns.
Weak market technicals have led to wider yields and increased volatility during
the past year. The key to outperformance has been heavily tied to individual
credit selection. The financial markets, equity or fixed income, have little
tolerance for poor financial results and severely punish credits regardless of
quality. The high yield market continues to favor large, liquid issues with good
earnings visibility.
The Principal High Yield Fund has a current average quality of B+/BB-. We have
maintained a slightly higher quality portfolio, a prudent strategy given
difficult market conditions. But ratings alone can be misleading as many of the
credit problems have been occurring with BBB or even A-rated companies. We are
more concerned about investing in companies with strong management and good
earnings momentum, regardless of ratings. High yield continues to be a valuable
asset for building well-diversified portfolios, due to its low correlation with
other asset classes. As investors begin to realize the attractive yields
currently offered, performance will improve. And, if history repeats itself, it
could improve quickly and catch everyone by surprise.
Comparison of Change in Value of $10,000 Investment in the High Yield Fund Class
A, Lipper High Current Yield Fund Average, Morningstar High Yield Category and
Lehman Brothers High Yield Composite Bond Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A -3.12% 3.92% 8.22%
B -4.04% 2.95% - 4.52%*
C -6.64% -5.71%** - -5.71%**
R -3.78% 2.31%*** - 2.31%***
Morningstar Lipper High
Lehman Brothers High Yield Current Yield High Yield
High Yield Index Category Fund Average Fund Class A
Thousands
10 10 10 9.527
"1991" 14.867 13.574 13.634 11.969
"1992" 17.134 15.757 15.869 13.687
"1993" 20.201 18.847 19.054 15.283
"1994" 20.447 18.802 18.976 15.505
"1995" 23.653 21.231 21.481 17.324
"1996" 26.278 23.944 24.198 19.382
"1997" 29.883 27.478 27.697 21.772
"1998" 29.734 26.601 26.769 21.08
"1999" 31.024 28.298 28.538 21.672
"2000" 30.525 27.387 27.747 20.996
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
*** Since inception date 2/29/96
Principal Limited Term Bond Fund, Inc.
Marty Schafer
Dan Garrett
Principal Limited Term Bond Fund performed well over the past year. The fund is
targeted for investors looking to improve on lower-yielding money market funds
and similar investments.
Relative to the Lipper Short-Intermediate Debt Fund Average, the Fund has
outperformed due to sector and security specific decisions. The two main themes
are short maturity holdings and long maturity, high-quality securitized bonds.
The focus is on relative value across sectors based on our economic outlook.
Lower rated holdings are favored only on short maturities where the business
risk and cash flow outlooks are fairly clear. The securitized bonds provide more
income for longer maturities with less business and event risks than individual
corporation's debt securities.
The strategy is to stay fully invested, find the best value among various
short-term fixed income securities, maintain high credit quality standards and
manage duration within the target range.
Comparison of Change in Value of $10,000 Investment in the Limited Term Bond
Fund Class A, Lipper Short-Intermediate Investment Grade Debt Fund Average,
Morningstar Short-Term Bond Category and Lehman Brothers Intermediate
Government/Corporate Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year Since Inception
A 5.94% 5.28%*
B 5.69% 4.88%*
C 5.72% 4.90%**
R 5.38% 4.75%*
Lipper
Lehman Brothers Morningstar Short-Intermediate Limited Term
Government/Corporate Short-Term Investment Grade Bond Fund
Intermediate Index Bond Category Debt Fund Average Class A
Thousands
10 10 10 9.851
"1996" 10.368 10.343 10.357 10.208
"1997" 11.145 11.013 11.032 10.897
"1998" 12.161 11.726 11.801 11.614
"1999" 12.281 12.018 11.971 11.827
"2000" 13.157 12.733 12.652 12.53
Note: Past performance is not predictive of future performance.
The performance of Class B, Class C and Class R shares will vary
from the performance of Class A shares based on the differences
in loads and fees.
* Since inception date 2/29/96
** Since inception date 6/30/99
Principal Tax-Exempt Bond Fund, Inc.
Dan Garrett
Principal Tax-Exempt Bond Fund continued to provide competitive tax-exempt
income for shareholders over the past year. The strategy of a long-term
disciplined focus of value-priced investments within the industrial and utility
revenue bond sectors, with managed exposure to interest rate and prepayment
risk, has delivered consistent results.
Underperformance relative to the Lehman Municipal Bond Index was due to three
demand shifts. Cautious individual investors favored high quality bonds. Lesser
quality revenue bond sectors, especially healthcare and utilities, faced poor
demand from two big buyers, funds and insurers. Mutual funds were seeing high
redemptions and property & casualty insurers had weak operations with little to
no need for tax-free income.
Strong growth continues but slowing signals such as higher oil and natural gas
costs are being watched closely by our economic team. Our economic forecast
continues to show solid growth with no Fed action for the next several quarters.
We are watching for consumer and market sentiment shifts due to energy, a strong
dollar, and resulting earnings warnings. Overall, balanced growth and inflation
expectations are reflected in today's yield curve, so we continue to be duration
neutral versus the Lehman benchmark.
We remain fully invested in revenue bonds to provide positive relative return
compared to the broader municipal market and our peers. The additional yield
from revenue bonds will continue to be the main driver of performance over the
longer term.
Fund strategy continues to focus on solid credit quality evaluation to seek out
the best value among municipal securities that deliver competitive levels of
income free from federal tax.
Comparison of Change in Value of $10,000 Investment in the Tax-Exempt Bond Fund
Class A, Lipper General Municipal Debt Fund Average, Morningstar Muni National
Long Category and Lehman Brothers Municipal Bond Index
Average Annual Total Returns
as of October 31, 2000
Class 1 Year 5 Year 10 Year Since Inception
A 5.81% 4.89% 6.76%
B 5.69% 4.33% - 6.61%*
C 3.63% - - 0.70%**
Morningstar Lipper Tax-Exempt
Lehman Brothers Muni National General Municipal Bond Fund
Municipal Bond Index Long Category Debt Fund Average Class A
Thousands
10 10 10 9.526
"1991" 11.217 11.219 11.23 10.773
"1992" 12.158 12.046 12.06 11.609
"1993" 13.87 13.902 13.923 13.432
"1994" 13.265 13.072 13.107 12.437
"1995" 15.234 14.886 14.903 14.431
"1996" 16.102 15.662 15.665 15.308
"1997" 17.469 16.965 16.937 16.641
"1998" 18.87 18.186 18.143 17.766
"1999" 18.536 17.409 17.385 17.32
"2000" 20.113 18.591 18.665 18.326
Note: Past performance is not predictive of future performance.
The performance of Class B and Class C shares will vary from the
performance of Class A shares based on the differences in loads
and fees.
* Since inception date 12/9/94
** Since inception date 6/30/99
Principal Cash Management Fund, Inc.
Mike Johnson
Alice Robertson
On November 16, 1999, the Federal Reserve raised its targeted Federal Funds
rate** by .25 % to 5.50%, continuing a trend of raising rates in order to keep
inflation under control. Rates remained steady through the uncertainty of the
Y2K time frame and the Federal Reserve then returned to the task of adjusting
rates upward in order to continue to address the strengthening economy along
with concerns of rising inflation. The Fed proceeded to raise rates an
additional three times: .25% in February, .25% in March and .50% in June,
leaving the level at 6.50%. Following that softer economic data was released and
the Fed remained on hold though continuing to maintain a tightening bias. The
industry average maturity over the course of fiscal 2000 was in the 50-57 day
range, with downward fluctuations when the market was anticipating another Fed
rate hike. Principal Cash Management Fund strives to stay close to the industry
average. Management actively monitors industry averages in order to keep both
yields and average maturities in line. The Fund continues to invest from a list
of high quality investments that is actively monitored by our fixed income
analytical staff.
Investment in money market funds is neither insured not guaranteed by the U.S.
Government. While the funds strive to maintain a $1.00 per share net asset
value, it is possible to lose money by investing in them.
** The Federal Funds rate is the rate at which banks lend to each other on an
overnight basis.
Important Notes for Income-Oriented Funds:
* Duration is the dollar weighted, present value of cash flows, principal and
interest, expressed in time.
** The Fed Funds rate is the rate at which banks lend to each other on an
overnight basis.
The values of these indexes will vary according to the aggregate value of the
common equity of each of the securities included. The indexes represent asset
types which are subject to risk, including possible loss of principal. You
cannot invest directly in an index. An index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
While the underlying securities of Principal Government Securities Income Fund
are guaranteed by the U.S. Government as to the timely payment of principal and
interest, Fund shares are not.
Principal High Yield Fund is subject to the greater credit risks associated with
high yield bonds.
Principal Cash Management Fund shares are not guaranteed by the U.S. Government
or FDIC. While the Fund strives to maintain a $1.00 per share net sset value, it
is possible to lose money by investing in it.
Lehman Brothers Baa Corporate Index: An unmanaged index of all publicly issued,
fixed-rate, nonconvertible, dollar-denominated, SEC-registered corporate debt
rated Baa or BBB by Moody's or Standard & Poor's.
Lehman Brothers GNMA Index: An unmanaged index of 15- and 30-year fixed-rate
securities backed by mortgage pools of the Government National Mortgage
Association (GNMA) and Graduated Payment Mortgages (GPMs) with at least $100
million outstanding and one year or more to maturity.
Lehman Brothers High Yield Composite Bond Index: An unmanaged index of all
publicly issued fixed, dollar-denominated, SEC-registered corporate debt rated
Ba1 or lower with at least $100 million outstanding and one year or more to
maturity.
Lehman Brothers Intermediate Government/Corporate Index: An unmanaged index of
U. S. Government agency and Treasury securities and
investment-grade corporate debt securities with maturities of five to ten years.
Lehman Brothers Municipal Bond Index: An unmanaged index of investment-grade,
tax-exempt bonds which have been issued within the last five years and at least
one year or more to maturity. This index is classified into four main sectors:
General Obligation, Revenue, Insured and Prerefunded.
Lipper Corporate Debt BBB Rated Fund Average: This average consists of funds
which invest at least 65% of their assets in corporate and government debt
issues rated in the top four grades. The one-year average currently contains 142
funds.
Lipper General Municipal Debt Fund Average: This average consists of funds which
invest at least 65% of their assets in municipal debt issues in the top four
credit ratings. The one-year average currently contains 265 funds.
Lipper GNMA Fund Average: This average consists of funds which invest a least
65% of their assets in Government National Mortgage Association securities. The
one-year average currently contains 54 funds.
Lipper High Current Yield Fund Average: This average consists of funds which aim
at high (relative) current yield from fixed-income securities. No quality or
maturity restrictions. They tend to invest in lower grade debt issues. The
one-year average currently contains 357 funds.
Lipper Short-Intermediate Investment Grade Debt Fund Average: This average
consists of funds which invest at least 65% of their assets in investment-grade
debt issues rated in the top four grades with dollar-weighted average maturities
of one to five years. The one-year average currently contains 117 funds.
Morningstar High Yield Category: High-Yield bond funds concentrate on
lower-quality bonds. These funds generally offer higher yields than other types
of funds - but they are also more vulnerable to economic and credit risk.
Morningstar Intermediate Government Bond Category: Intermediate-term government
funds devote at least 90% of their bond holdings to government issues. These
funds have, on average, durations between 3.5 and six years.
Morningstar Intermediate-Term Bond Category: Intermediate-term bond funds have
average durations that are greater than 3.5 years and less than six years. Most
of the funds rotate among a variety of sectors in the bond market, based upon
which appear to offer better values.
Morningstar Muni National Long Category: Muni National Long-Term Bond funds
invest in municipal bonds. Such bonds are issued by various state and local
governments to fund public projects and are free from federal taxes. To lower
risk, these funds spread their assets across many states and sectors. They focus
on bonds with maturities of 10 years or more.
Morningstar Short-Term Bond Category: Short-term bond funds have durations that
stay between one and 3.5 years. These funds invest in a variety of bonds, from
the most creditworthy, such as Treasury bonds, to mortgages and corporates, and
on rare occasions, even more speculative high-yield and emerging markets debt.
Note: Mutual fund data from Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
October 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal Principal
Balanced Blue Chip Capital Value
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............ $131,404,702 $224,673,287 $486,868,101
Assets
Investment in securities -- at value (Notes 4 & 8) $140,013,891 $280,938,671 $528,698,677
Cash........................................ 10,000 10,198 10,001
Receivables:
Dividends and interest...................... 681,610 142,546 399,665
Investment securities sold.................. 351,565 -- --
Capital Shares sold......................... 25,173 121,333 74,183
Other assets................................... 3,806 560 24,449
Variation margin on futures contracts (Note 7). -- -- --
Total Assets 141,086,045 281,213,308 529,206,975
Liabilities
Accrued expenses............................... 143,038 183,534 266,051
Payables:
Investment securities purchased............. 337,299 -- --
Capital Shares reacquired................... 168,291 348,871 590,514
Total Liabilities 648,628 532,405 856,565
Net Assets Applicable to
Outstanding Shares ............................ $140,437,417 $280,680,903 $528,350,410
$
Net Assets Consist of:
Capital Stock.................................. $ 97,069 $ 116,239 $ 211,383
Additional paid-in capital..................... 129,530,049 220,546,403 461,918,860
Accumulated undistributed net investment
income ..................................... 158,918 -- 5,025,927
Accumulated undistributed net realized
gain on investment transactions............. 2,042,192 3,752,877 19,363,664
Net unrealized appreciation (depreciation)
of investments.............................. 8,609,189 56,265,384 41,830,576
Total Net Assets $140,437,417 $280,680,903 $528,350,410
Capital Stock (par value: $.01 a share):
Shares authorized.............................. 100,000,000 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets $94,763,092 $170,462,020 $452,251,624
Shares issued and outstanding..... 6,534,784 7,025,913 18,064,305
Net asset value per share.......... $14.50 $24.26 $25.04
Maximum offering price per share(a) ... $15.22 $25.47 $26.29
Class B: Net Assets........................... $20,680,466 $54,550,414 $39,016,898
Shares issued and outstanding..... 1,432,969 2,283,543 1,575,964
Net asset value per share(b)........... $14.43 $23.89 $24.76
Class C: Net Assets........................... $404,009 $1,355,488 $648,045
Shares issued and outstanding..... 28,244 56,320 26,491
Net asset value per share(b)........... $14.30 $24.07 $24.46
Class R: Net Assets........................... $24,589,850 $54,312,981 $36,433,843
Shares issued and outstanding..... 1,710,921 2,258,108 1,471,548
Net asset value per share.............. $14.37 $24.05 $24.76
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end sales
charge of 4.75% (1.50% with respect to Principal LargeCap Stock Index Fund,
Inc.) of the offering price or 4.99% of the net asset value (1.52% with
respect to Principal LargeCap Stock Index Fund, Inc.).
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
October 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal Principal
Growth LargeCap Stock MidCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Index Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............ $576,356,634 $27,684,773 $402,527,517
Assets
Investment in securities -- at value (Notes 4 & 8) $698,015,248 $27,484,021 $479,571,869
Cash........................................ 10,001 10,620 15,898
Receivables:
Dividends and interest...................... 247,893 15,546 255,318
Investment securities sold.................. -- 3,639,528 2,819,254
Capital Shares sold......................... 325,173 24,070 127,798
Other assets................................... 8,676 -- 2,156
Variation margin on futures contracts (Note 7). -- 21,750 --
Total Assets 698,606,991 31,195,535 482,792,293
Liabilities
Accrued expenses............................... 168,667 24,314 360,055
Payables:
Investment securities purchased............. -- 3,772,534 2,551,973
Capital Shares reacquired................... 555,991 2,485 637,889
Total Liabilities 724,658 3,799,333 3,549,917
Net Assets Applicable to
Outstanding Shares ............................ $697,882,333 $27,396,202 $ 479,242,376
Net Assets Consist of:
Capital Stock.................................. $ 98,269 $ 25,924 $ 92,704
Additional paid-in capital..................... 360,836,935 27,469,732 262,636,444
Accumulated undistributed net investment
income ..................................... -- 47,917 --
Accumulated undistributed net realized
gain on investment transactions............. 215,288,515 53,381 139,468,876
Net unrealized appreciation (depreciation)
of investments.............................. 121,658,614 (200,752) 77,044,352
Total Net Assets $697,882,333 $27,396,202 $479,242,376
Capital Stock (par value: $.01 a share):
Shares authorized.............................. 100,000,000 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets $525,175,390 $9,855,250 $364,639,441
Shares issued and outstanding..... 7,373,514 930,708 7,011,522
Net asset value per share.......... $71.22 $10.59 $52.01
Maximum offering price per share(a) ... $74.77 $10.75 $54.60
Class B: Net Assets........................... $110,000,870 $2,837,584 $80,720,782
Shares issued and outstanding..... 1,562,363 268,607 1,591,961
Net asset value per share(b)........... $70.41 $10.56 $50.71
Class C: Net Assets........................... $2,203,198 $1,304,558 $743,269
Shares issued and outstanding..... 31,396 123,474 14,624
Net asset value per share(b)........... $70.17 $10.57 $50.83
Class R: Net Assets........................... $60,502,875 $13,398,810 $33,138,884
Shares issued and outstanding..... 859,676 1,269,616 652,279
Net asset value per share.............. $70.38 $10.55 $50.80
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end sales
charge of 4.75% (1.50% with respect to Principal LargeCap Stock Index Fund,
Inc.)of the offering price or 4.99% of the net asset value (1.52% with
respect to Principal LargeCap Stock Index Fund, Inc.).
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
October 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
Principal Principal Principal
Partners Aggressive Partners LargeCap Partners MidCap
GROWTH FUNDS (DOMESTIC) Growth Fund, Inc. Growth Fund, Inc. Growth Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............ $74,090,056 $11,061,551 $17,630,470
Assets
Investment in securities -- at value (Notes 4 & 8) $78,753,463 $12,182,305 $18,960,877
Cash........................................... 2,536,149 969,688 930,204
Receivables:
Dividends and interest...................... 47,400 3,364 4,441
Investment securities sold.................. 812,117 576,557 264,356
Capital Shares sold......................... 172,354 8,279 119,322
Other assets................................... -- -- --
Total Assets 82,321,483 13,740,193 20,279,200
Liabilities
Accrued expenses............................... 32,080 19,292 15,415
Payables:
Investment securities purchased............. 1,067,848 1,027,180 625,157
Capital Shares reacquired................... 33,598 3,674 699
Total Liabilities 1,133,526 1,050,146 641,271
Net Assets Applicable to
Outstanding Shares ............................ $81,187,957 $12,690,047 $19,637,929
Net Assets Consist of:
Capital Stock.................................. $ 71,662 $ 15,652 $ 21,635
Additional paid-in capital..................... 79,878,551 13,414,743 19,663,940
Accumulated undistributed net investment
income ..................................... -- -- --
Accumulated undistributed net realized
gain (loss) on investment transactions...... (3,425,663) (1,861,102) (1,378,053)
Net unrealized appreciation (depreciation)
of investments.............................. 4,663,407 1,120,754 1,330,407
Total Net Assets $81,187,957 $12,690,047 $19,637,929
Capital Stock (par value: $.01 a share):
Shares authorized.............................. 100,000,000 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets $49,793,878 $7,125,809 $11,875,309
Shares issued and outstanding..... 4,385,194 877,372 1,305,805
Net asset value per share.......... $11.36 $8.12 $9.09
Maximum offering price per share(a) ... $11.93 $8.52 $9.54
Class B: Net Assets........................... $19,429,687 $2,795,896 $4,092,724
Shares issued and outstanding..... 1,722,585 345,833 452,503
Net asset value per share(b)........... $11.28 $8.08 $9.04
Class C: Net Assets........................... $2,468,316 $1,009,303 $1,288,233
Shares issued and outstanding..... 218,852 124,869 142,434
Net asset value per share(b)........... $11.28 $8.08 $9.04
Class R: Net Assets........................... $9,496,076 $1,759,039 $2,381,663
Shares issued and outstanding..... 839,541 217,141 262,792
Net asset value per share.............. $11.31 $8.10 $9.06
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end sales
charge of 4.75% of the offering price or 4.99% of the net asset value.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
</FN>
</TABLE>
<TABLE>
<CAPTION>
See accompanying notes.
October 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
Principal Principal Principal
Real Estate SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............ $17,362,702 $109,491,240 $113,720,583
Assets
Investment in securities -- at value (Notes 4 & 8) $19,072,810 $99,091,879 $134,626,226
Cash........................................... 10,750 530,732 10,002
Receivables:
Dividends and interest...................... 22,361 29,568 254,465
Investment securities sold.................. 314,050 1,105,815 --
Capital Shares sold......................... 15,060 27,472 83,363
Other assets................................... -- -- 438
Total Assets 19,435,031 100,785,466 134,974,494
Liabilities
Accrued expenses............................... 19,597 95,903 89,678
Payables:
Investment securities purchased............. 820,407 1,859,352 2,158,642
Capital Shares reacquired................... 39,822 190,045 290,833
Total Liabilities 879,826 2,145,300 2,539,153
Net Assets Applicable to
Outstanding Shares ............................ $18,555,205 $ 98,640,166 $132,435,341
Net Assets Consist of:
Capital Stock.................................. $ 20,573 $ 88,206 $ 72,002
Additional paid-in capital..................... 19,312,452 94,458,033 84,977,412
Accumulated undistributed net investment
income ..................................... 41,949 -- 131,630
Accumulated undistributed net realized
gain (loss) on investment transactions...... (2,529,877) 14,493,288 26,348,654
Net unrealized appreciation (depreciation)
of investments.............................. 1,710,108 (10,399,361) 20,905,643
Total Net Assets $18,555,205 $98,640,166 $132,435,341
Capital Stock (par value: $.01 a share):
Shares authorized.............................. 100,000,000 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets $9,439,334 $60,659,668 $101,352,370
Shares issued and outstanding..... 1,045,208 5,397,447 5,507,365
Net asset value per share.......... $9.03 $11.24 $18.40
Maximum offering price per share(a) ... $9.48 $11.80 $19.32
Class B: Net Assets........................... $4,488,562 $19,022,184 $19,624,005
Shares issued and outstanding..... 498,937 1,725,834 1,068,478
Net asset value per share(b)........... $9.00 $11.02 $18.37
Class C: Net Assets........................... $142,675 $1,078,590 $721,191
Shares issued and outstanding..... 15,777 96,952 39,681
Net asset value per share(b)........... $9.04 $11.12 $18.17
Class R: Net Assets........................... $4,484,634 $17,879,724 $10,737,775
Shares issued and outstanding..... 497,397 1,600,327 584,699
Net asset value per share.............. $9.02 $11.17 $18.36
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end sales
charge of 4.75% of the offering price or 4.99% of the net asset value.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS
Principal Principal Principal
Balanced Blue Chip Capital Value
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................... $1,305,541 $ 3,703,756 $ 11,973,693
Interest.................................... 3,948,962 290,080 1,037,753
Total Income 5,254,503 3,993,836 13,011,446
Expenses:
Management and investment advisory
fees (Note 3)............................ 855,652 1,643,618 2,983,060
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 615,892 1,329,451 1,401,242
Transfer and administrative services
(Notes 1 and 3)......................... 648,257 1,375,116 1,258,197
Registration fees (Note 1).................. 56,855 89,895 99,437
Custodian fees.............................. 10,705 3,099 4,458
Auditing and legal fees..................... 6,623 5,524 6,239
Directors' fees............................. 6,479 6,029 6,390
Other....................................... 52,608 55,394 66,271
Total Gross Expenses 2,253,071 4,508,126 5,825,294
Less: Management and investment
advisory fees waived (Note 3)........... -- 354,721 --
Total Net Expenses 2,253,071 4,153,405 5,825,294
Net Investment Income (Operating Loss) 3,001,432 (159,569) 7,186,152
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from:
Investment transactions .................... 2,042,192 4,182,278 19,363,663
Futures Contracts (Note 7).................. -- -- --
Change in unrealized appreciation/depreciation of:
Investments................................. (2,230,928) (12,486,042) (72,696,327)
Futures Contracts (Note 7).................. -- -- --
Net Realized and Unrealized
Gain (Loss) on Investments (188,736) (8,303,764) (53,332,664)
Net Increase (Decrease) in Net Assets
Resulting from Operations $2,812,696 $ (8,463,333) $(46,146,512)
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS
Principal Principal Principal
Growth LargeCap Stock MidCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Index Fund, Inc.(a) Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................... $ 3,383,150 $108,940 $ 2,267,651
Interest.................................... 480,593 46,518 1,492,486
Total Income 3,863,743 155,458 3,760,137
Expenses:
Management and investment advisory
fees (Note 3)............................ 3,650,139 35,262 2,570,995
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 2,677,815 38,414 1,500,195
Transfer and administrative services
(Notes 1 and 3)......................... 2,097,788 86,519 1,590,918
Registration fees (Note 1).................. 88,901 14,260 65,998
Custodian fees.............................. 8,920 32,000 13,832
Auditing and legal fees..................... 9,321 1,070 5,189
Directors' fees............................. 6,578 2,262 6,241
Other....................................... 99,854 320 147,098
Total Gross Expenses 8,639,316 210,107 5,900,466
Less: Management and investment
advisory fees waived (Note 3)........... -- 102,566 --
Total Net Expenses 8,639,316 107,541 5,900,466
Net Investment Income (Operating Loss) (4,775,573) 47,917 (2,140,329)
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from:
Investment transactions .................... 215,288,514 96,220 140,538,206
Futures Contracts (Note 7).................. -- (42,839) 1,898,876
Change in unrealized appreciation/depreciation of:
Investments................................. (130,937,522) (258,177) (25,718,564)
Futures Contracts (Note 7).................. -- 57,425 --
Net Realized and Unrealized
Gain (Loss) on Investments 84,350,992 (147,371) 116,718,518
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 79,575,419 $ (99,454) $114,578,189
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS (Continued)
Principal Principal Principal
Partners Aggressive Partners LargeCap Partners MidCap
GROWTH FUNDS (DOMESTIC) Growth Fund, Inc. Growth Fund, Inc.(a) Growth Fund, Inc.(a)
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................... $ 366,954 $ 9,824 $ 5,439
Interest.................................... 104,775 18,045 24,793
Total Income 471,729 27,869 30,232
Expenses:
Management and investment advisory
fees (Note 3)............................ 393,898 50,431 65,684
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 241,670 28,775 36,357
Transfer and administrative services
(Notes 1 and 3)......................... 445,480 62,073 83,149
Registration fees (Note 1).................. 23,242 6,110 998
Custodian fees.............................. 45,074 7,000 18,000
Auditing and legal fees..................... 1,360 1,470 1,470
Directors' fees............................. 6,081 2,262 2,262
Other....................................... 2,890 234 201
Total Gross Expenses 1,159,695 158,355 208,121
Less: Management and investment
advisory fees waived (Note 3)........... 195,854 44,330 54,171
Total Net Expenses 963,841 114,025 153,950
Net Investment Income (Operating Loss) (492,112) (86,156) (123,718)
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions (3,425,663) (1,861,102) (1,378,053)
Realized gain distributions from investment
companies................................... -- -- --
Change in unrealized appreciation/depreciation of
investments................................. 4,663,407 1,120,754 1,330,407
Net Realized and Unrealized
Gain (Loss) on Investments 1,237,744 (740,348) (47,646)
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 745,632 $ (826,504) $ (171,364)
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS (Continued)
Principal Principal Principal
Real Estate SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................... $ 904,168 $ 807,815 $ 3,215,796
Interest.................................... 34,690 332,934 288,251
Total Income 938,858 1,140,749 3,504,047
Expenses:
Management and investment advisory
fees (Note 3)............................ 136,629 844,608 731,817
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 71,665 456,105 473,039
Transfer and administrative services
(Notes 1 and 3)......................... 100,762 570,085 431,218
Registration fees (Note 1).................. 42,319 62,903 49,943
Custodian fees.............................. 4,357 11,608 5,126
Auditing and legal fees..................... 5,041 7,302 3,577
Directors' fees............................. 6,029 6,029 6,029
Other....................................... 6,111 23,600 31,476
Total Gross Expenses 372,913 1,982,240 1,732,225
Less: Management and investment
advisory fees waived (Note 3)........... 39,036 24,978 --
Total Net Expenses 333,877 1,957,262 1,732,225
Net Investment Income (Operating Loss) 604,981 (816,513) 1,771,822
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions (1,221,419) 15,309,801 26,348,653
Realized gain distributions from investment
companies................................... 67,805 -- --
Change in unrealized appreciation/depreciation of
investments................................. 3,432,208 (11,391,014) (14,012,281)
Net Realized and Unrealized
Gain (Loss) on Investments 2,278,594 3,918,787 12,336,372
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 2,883,575 $ 3,102,274 $14,108,194
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal Principal
Balanced Blue Chip Capital Value
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
2000 1999(b) 2000 1999(b) 2000 1999(b)
Operations
<S> <C> <C> <C> <C> <C> <C>
Net investment income (operating loss) $ 3,001,432 $ 3,909,315 $(159,569) $ 977,006 $7,186,152 $11,270,813
Net realized gain from investment transactions 2,042,192 6,771,675 4,182,278 3,421,073 19,363,663 57,024,202
Change in unrealized appreciation/
depreciation of investments................ (2,230,928) (4,100,582) (12,486,042) 31,100,972 (72,696,327)(49,482,847)
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,812,696 6,580,408 (8,463,333) 35,499,051 (46,146,512) 18,812,168
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... (2,336,930) (3,153,964) -- (874,272) (5,196,875) (9,877,196)
Class B ................................... (334,383) (454,611) -- (17,657) (280,373) (458,266)
Class C.................................... (6,398) (959) -- -- (1,767) --
Class R.................................... (425,518) (501,400) -- (49,100) (292,054) (391,502)
Dividends in excess of net investment income:
Class A ................................... -- -- (407,993) -- -- --
Class B ................................... -- -- (16,065) -- -- --
Class C ................................... -- -- -- -- -- --
Class R.................................... -- -- (43,640) -- -- --
From net realized gain on investments:
Class A ................................... (4,720,700) (3,108,449) (2,127,452) (24,683) (48,608,727)(35,544,917)
Class B ................................... (998,139) (579,595) (661,889) (8,209) (4,488,526) (2,882,612)
Class C ................................... (11,070) -- (6,750) -- (28,770) --
Class R.................................... (1,038,106) (605,230) (605,970) (6,612) (3,896,432) (2,464,152)
Total Dividends and Distributions (9,871,244) (8,404,208) (3,869,759) (980,533) (62,793,524)(51,618,645)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 13,411,911 23,834,020 47,360,460 62,427,545 35,241,240 71,171,390
Class B ................................... 4,477,328 8,208,037 16,431,891 23,559,014 8,845,130 18,742,374
Class C.................................... 649,864 248,890 1,242,820 326,943 620,241 217,569
Class R.................................... 8,549,875 9,709,321 22,893,990 22,787,946 10,909,778 17,677,992
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... 6,893,935 6,090,364 2,462,986 862,557 52,596,883 44,385,520
Class B ................................... 1,310,422 1,015,205 672,073 26,997 4,683,372 3,292,087
Class C.................................... 12,137 487 5,486 -- 22,209 --
Class R.................................... 1,460,894 1,105,036 648,862 97,845 4,184,928 2,860,407
Shares redeemed:
Class A ................................... (32,891,994) (20,782,453) (56,245,969)(28,208,067) (116,451,410)(78,893,780)
Class B ................................... (7,651,863) (4,290,594) (16,437,367) (7,490,289) (18,852,706)(11,104,390)
Class C ................................... (465,881) (500) (186,959) (500) (154,503) (525)
Class R ................................... (8,374,065) (5,978,278) (17,542,233)(11,035,085) (15,081,364)(12,307,726)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions (12,617,437) 19,159,535 1,306,040 63,354,906 (33,436,202) 56,040,918
Total Increase (Decrease) (19,675,985) 17,335,735 (11,027,052) 97,873,424 (142,376,238) 23,234,441
Net Assets
Beginning of period........................... 160,113,402 142,777,667 291,707,955 193,834,531 670,726,648 647,492,207
End of period (including undistributed
net investment income as set forth below).... $140,437,417 $160,113,402 $280,680,903 $291,707,955 $528,350,410 $670,726,648
Undistributed Net Investment Income........... $ 158,918 $ 260,715 $ -- $ 38,296 $ 5,025,927 $ 3,610,844
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
(b) Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal Principal
Growth LargeCap Stock MidCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Index Fund, Inc. Fund, Inc.
2000 1999(b) 2000(a) 2000 1999(b)
Operations
<S> <C> <C> <C> <C> <C>
Net investment income (operating loss) $(4,775,573) $1,229,342 $ 47,917 $(2,140,329) $(1,219,956)
Net realized gain from investment transactions 215,288,514 28,017,681 53,381 142,437,082 19,056,817
Change in unrealized appreciation/
depreciation of investments................ (130,937,522) 57,955,516 (200,752) (25,718,564) 6,184,268
Net Increase (Decrease) in Net Assets
Resulting from Operations 79,575,419 87,202,539 (99,454) 114,578,189 24,021,129
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... -- (2,147,442) -- -- --
Class B ................................... -- (31,614) -- -- --
Class C.................................... -- -- -- -- --
Class R.................................... -- -- -- -- --
Dividends in excess of net investment income:
Class A ................................... -- -- -- -- --
Class B ................................... -- -- -- -- --
Class C ................................... -- -- -- -- --
Class R.................................... -- -- -- -- --
From net realized gain on investments:
Class A ................................... (18,109,107) -- -- (14,934,238) --
Class B ................................... (3,570,951) -- -- (3,314,853) --
Class C ................................... (28,596) -- -- (11,626) --
Class R.................................... (1,789,897) -- -- (1,223,767) --
Total Dividends and Distributions (23,498,551) (2,179,056) -- (19,484,484) --
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 83,028,358 107,477,838 10,544,484 51,992,316 56,319,162
Class B ................................... 26,266,529 35,315,526 3,031,148 13,399,582 17,773,544
Class C.................................... 2,062,661 453,795 1,274,562 542,684 231,675
Class R.................................... 23,717,829 22,266,474 14,238,755 10,423,209 8,646,117
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... 17,638,563 2,075,575 -- 14,635,486 130
Class B ................................... 3,529,963 32,011 -- 3,279,707 378
Class C.................................... 25,061 -- -- 7,192 --
Class R.................................... 1,786,489 -- -- 1,221,314 --
Shares redeemed:
Class A ................................... (112,420,149) (80,471,364) (626,634) (89,298,627) (94,562,580)
Class B ................................... (23,871,410) (15,502,723) (217,521) (20,265,299) (21,056,757)
Class C ................................... (427,696) (1,820) (21,714) (97,146) --
Class R ................................... (16,408,863) (11,110,814) (727,424) (9,413,724) (8,490,660)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 4,927,335 60,534,498 27,495,656 (23,573,306) (41,138,991)
Total Increase (Decrease) 61,004,203 145,557,981 27,396,202 71,520,399 (17,117,862)
Net Assets
Beginning of period........................... 636,878,130 491,320,149 -- 407,721,977 424,839,839
End of period (including undistributed
net investment income as set forth below).... $697,882,333 $636,878,130 $27,396,202 $479,242,376 $407,721,977
Undistributed Net Investment Income........... $ -- $ -- $ 47,917 $ -- $ --
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
(b) Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Principal Principal Principal
Partners Aggressive Partners LargeCap Partners MidCap
GROWTH FUNDS (DOMESTIC) Growth Fund, Inc. Growth Fund, Inc. Growth Fund, Inc.
2000 2000(a) 2000(a)
Operations
<S> <C> <C> <C>
Net investment income (operating loss) $(492,112) $ (86,156) $(123,718)
Net realized gain (loss) from investment transactions (3,425,663) (1,861,102) (1,378,053)
Change in unrealized appreciation/depreciation of
investments................................ 4,663,407 1,120,754 1,330,407
Net Increase (Decrease) in Net Assets
Resulting from Operations 745,632 (826,504) (171,364)
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... -- -- --
Class B ................................... -- -- --
Class C.................................... -- -- --
Class R.................................... -- -- --
From net realized gain on investments:
Class A ................................... -- -- --
Class B ................................... -- -- --
Class C.................................... -- -- --
Class R.................................... -- -- --
Total Dividends and Distributions -- -- --
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 57,043,767 7,786,022 12,179,947
Class B ................................... 20,771,926 3,081,974 4,250,584
Class C.................................... 2,508,654 1,222,877 1,656,956
Class R.................................... 11,074,057 2,008,930 2,533,694
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... -- -- --
Class B ................................... -- -- --
Class C.................................... -- -- --
Class R.................................... -- -- --
Shares redeemed:
Class A ................................... (7,681,239) (438,586) (373,516)
Class B ................................... (1,492,486) (52,201) (95,881)
Class C ................................... (160,350) (26,515) (267,374)
Class R ................................... (1,622,004) (65,950) (75,117)
Net Increase in Net Assets from
Capital Share Transactions 80,442,325 13,516,551 19,809,293
Total Increase 81,187,957 12,690,047 19,637,929
Net Assets
Beginning of period........................... -- -- --
End of period (including undistributed net investment
income as set forth below)................. $81,187,957 $12,690,047 $19,637,929
Undistributed Net Investment Income........... $ -- $ -- $ --
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
(b) Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Principal Principal
Real Estate SmallCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
2000 1999(b) 2000 1999(b)
Operations
<S> <C> <C> <C> <C>
Net investment income (operating loss) $ 604,981 $ 442,943 $(816,513) $(611,523)
Net realized gain (loss) from investment transactions (1,153,614) (763,156) 15,309,801 9,424,406
Change in unrealized appreciation/depreciation of
investments................................ 3,432,208 (326,793) (11,391,014) 4,379,531
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,883,575 (647,006) 3,102,274 13,192,414
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... (318,742) (229,521) -- --
Class B ................................... (134,771) (99,626) -- --
Class C.................................... (3,670) (659) -- --
Class R.................................... (138,166) (111,209) -- --
From net realized gain on investments:
Class A ................................... -- -- (4,730,629) --
Class B ................................... -- -- (1,623,318) --
Class C.................................... -- -- (36,318) --
Class R.................................... -- -- (1,194,462) --
Total Dividends and Distributions (595,349) (441,015) (7,584,727) --
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 3,333,828 2,032,088 36,137,130 20,126,957
Class B ................................... 859,621 585,157 12,053,778 6,236,906
Class C.................................... 26,161 109,653 1,130,085 189,192
Class R.................................... 1,038,239 587,916 12,788,809 5,317,338
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... 311,112 224,609 4,187,819 --
Class B ................................... 133,276 99,447 1,237,750 --
Class C.................................... 2,897 4 25,066 --
Class R.................................... 138,149 111,264 816,080 --
Shares redeemed:
Class A ................................... (1,821,269) (761,086) (18,859,051) (5,249,038)
Class B ................................... (423,149) (171,784) (7,506,098) (1,561,009)
Class C ................................... (2,594) -- (142,667) (2,315)
Class R ................................... (338,600) (257,676) (4,867,536) (1,905,434)
Net Increase in Net Assets from
Capital Share Transactions 3,257,671 2,559,592 37,001,165 23,152,597
Total Increase 5,545,897 1,471,571 32,518,712 36,345,011
Net Assets
Beginning of period........................... 13,009,308 11,537,737 66,121,454 29,776,443
End of period (including undistributed net investment
income as set forth below)................. $18,555,205 $13,009,308 98,640,166 $66,121,454
Undistributed Net Investment Income........... $ 41,949 $ 37,747 $ -- $ --
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
(b) Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Principal
Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc.
2000 1999(b)
Operations
<S> <C> <C>
Net investment income (operating loss) $1,771,822 $2,088,421
Net realized gain (loss) from investment transactions 26,348,653 8,056,360
Change in unrealized appreciation/depreciation of
investments................................ (14,012,281) 4,964,248
Net Increase (Decrease) in Net Assets
Resulting from Operations 14,108,194 15,109,029
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... (1,578,995) (1,891,969)
Class B ................................... (164,103) (191,707)
Class C.................................... (2,807) (465)
Class R.................................... (92,364) (80,547)
From net realized gain on investments:
Class A ................................... (6,329,850) (1,242,661)
Class B ................................... (1,171,902) (171,044)
Class C.................................... (15,990) --
Class R.................................... (537,438) (61,770)
Total Dividends and Distributions (9,893,449) (3,640,163)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 13,247,033 22,591,597
Class B ................................... 5,088,585 8,701,893
Class C.................................... 498,099 224,590
Class R.................................... 4,591,179 5,229,592
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... 7,423,815 2,896,775
Class B ................................... 1,265,856 336,342
Class C.................................... 11,359 --
Class R.................................... 627,998 142,351
Shares redeemed:
Class A ................................... (22,263,778) (18,619,898)
Class B ................................... (5,634,089) (3,605,259)
Class C ................................... (57,275) --
Class R ................................... (3,023,745) (1,850,085)
Net Increase in Net Assets from
Capital Share Transactions 1,775,037 16,047,898
Total Increase 5,989,782 27,516,764
Net Assets
Beginning of period........................... 126,445,559 98,928,795
End of period (including undistributed
net investment income as set forth below).... $132,435,341 $126,445,559
Undistributed Net Investment Income........... $ 131,630 $ 198,077
<FN>
(a) Period from February 24, 2000 (date operations commenced) through October
31, 2000.
(b) Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</FN>
</TABLE>
October 31, 2000
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Balanced Fund, Inc. Principal LargeCap Stock Index Fund, Inc. Principal Partners MidCap Growth Fund, Inc.
Principal Blue Chip Fund, Inc. Principal MidCap Fund, Inc. Principal Real Estate Fund, Inc.
Principal Capital Value Fund, Inc. Principal Partners Aggressive Growth Fund, Inc. Principal SmallCap Fund, Inc.
Principal Growth Fund, Inc. Principal Partners LargeCap Growth Fund, Inc. Principal Utilities Fund, Inc.
</TABLE>
Note 1 -- Significant Accounting Policies
Principal Balanced Fund, Inc., Principal Blue Chip Fund, Inc., Principal Capital
Value Fund, Inc., Principal Growth Fund, Inc., Principal LargeCap Stock Index
Fund, Inc., Principal MidCap Fund, Inc., Principal Partners Aggressive Growth
Fund, Inc., Principal Partners LargeCap Growth Fund, Inc., Principal Partners
MidCap Growth Fund, Inc., Principal Real Estate Fund, Inc., Principal SmallCap
Fund, Inc. and Principal Utilities Fund, Inc. (the "Domestic Growth Funds") are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies and operate in the mutual fund industry.
On February 24, 2000, the initial purchase of 100,000 shares of each Class A, B,
C and R of the Principal LargeCap Stock Index Fund, Inc., Principal Partners
LargeCap Growth Fund, Inc., and Principal Partners MidCap Growth Fund, Inc. was
made by Principal Life Insurance Company. Effective March 1, 2000, these funds
began offering Class A, B and C shares to the public and Class R shares to
eligible purchasers.
On October 28, 1999, the initial purchase of 100,000 shares of each Class A, B,
C and R of Principal Partners Aggressive Growth Fund, Inc. was made by Principal
Life Insurance Company. Effective November 1, 1999, Class A, B and C shares were
offered to the public and Class R shares were offered to eligible purchasers.
On June 30, 1999, the initial purchases of Class C shares of the Domestic Growth
Funds were made by Principal Life Insurance Company. Effective June 30, 1999,
the Domestic Growth Funds began offering Class C shares to the public.
Class A shares generally are sold with an initial sales charge based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") upon redemption. Class B shares are sold without an
initial sales charge, but are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class C shares are sold without an initial
sales charge, but are subject to a CDSC on certain redemptions made within the
first twelve months of purchase. Class R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear higher ongoing distribution fees than Class A shares. Class
B shares automatically convert into Class A shares, based on relative net asset
value (without a sales charge), seven years after purchase. Class C shares do
not convert into Class A shares. Class R shares automatically convert into Class
A shares, based on relative net asset value (without a sales charge), four years
after purchase. All classes of shares for each fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by each of the Domestic Growth
Funds' respective Board of Directors. In addition, the Board of Directors of
each fund declares separate dividends on each class of shares.
The Domestic Growth Funds allocate daily all income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses to each
class of shares based upon the relative proportion of the value of shares
outstanding of each class. Expenses specifically attributable to a particular
class are charged directly to such class. Class-specific expenses charged to
each class during the periods ended October 31, 2000, which are included in the
corresponding captions of the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services
Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Balanced Fund, Inc. $ 250,814 $198,910 $ 4,340 $161,828 $174,059 $ 59,086 $ 662 $57,761
Principal Blue Chip Fund, Inc. 443,902 505,501 10,263 369,785 304,417 128,529 2,160 95,597
Principal Capital Value Fund, Inc. 838,208 378,188 5,345 179,501 424,040 105,301 799 80,642
Principal Growth Fund, Inc. 1,292,653 991,004 17,505 376,653 525,318 199,850 2,500 99,892
Principal LargeCap Stock Index Fund, Inc. 6,083 6,749 4,019 21,563 1,665 527 229 484
Principal MidCap Fund, Inc. 839,402 485,649 4,941 170,203 565,725 167,597 754 79,444
Principal Partners Aggressive Growth Fund, Inc.82,137 109,157 19,037 31,339 49,515 19,534 1,280 6,749
Principal Partners LargeCap Growth Fund, Inc. 7,182 10,086 6,650 4,857 3,588 1,270 285 590
Principal Partners MidCap Growth Fund , Inc. 10,050 13,458 7,307 5,542 5,196 1,943 286 609
Principal Real Estate Fund, Inc. 19,010 29,628 1,132 21,895 10,276 3,990 -- 2,149
Principal SmallCap Fund, Inc. 153,729 177,482 8,005 116,889 80,775 34,830 1,156 14,792
Principal Utilities Fund, Inc. 241,081 164,948 4,317 62,693 114,797 36,347 1,003 17,814
</TABLE>
<TABLE>
<CAPTION>
Registration Fees
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Balanced Fund, Inc. $12,189 $ 6,818 $ 6,445 $ 7,106
Principal Blue Chip Fund, Inc. 21,196 12,191 6,725 13,567
Principal Capital Value Fund, Inc. 28,132 8,875 9,305 10,814
Principal Growth Fund, Inc. 23,766 12,633 7,255 5,819
Principal LargeCap Stock Index Fund, Inc. 5,400 3,600 450 1,800
Principal MidCap Fund, Inc. 17,122 9,005 6,855 7,226
Principal Partners Aggressive Growth Fund, Inc. 10,320 5,060 1,090 1,573
Principal Partners LargeCap Growth Fund, Inc. 3,200 1,600 100 800
Principal Partners MidCap Growth Fund, Inc. 242 242 42 157
Principal Real Estate Fund, Inc. 8,073 8,506 8,425 5,557
Principal SmallCap Fund, Inc. 15,148 10,537 10,551 4,981
Principal Utilities Fund, Inc. 10,105 7,255 6,999 5,556
</TABLE>
The Domestic Growth 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 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.
The Domestic Growth Funds record investment transactions generally one day after
the trade date, except for short-term investment transactions, which are
recorded generally on 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 Domestic Growth
Funds record dividend income on the ex-dividend date. Interest income is
recognized on an accrual basis.
The Domestic Growth Funds may, pursuant to an exemptive order issued by the
Securities and Exchange Commission, transfer uninvested funds into a joint
trading account. The order permits the Domestic Growth Funds' cash balances to
be deposited into a single joint account along with the cash of other registered
investment companies managed by Principal Management Corporation (the
"Manager"). These balances may be invested in one or more short-term
instruments.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Dividends and distributions to shareholders from net investment income and
net realized gain from investments are determined in accordance with federal tax
regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for net operating
losses and futures. Permanent book and tax basis differences are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes, but not for tax purposes, are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as tax return of capital distributions.
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.
The Financial Accounting Standards Board recently approved the AICPA Audit and
Accounting Guide for Investment Companies (the "Guide"). The Guide supercedes a
previous version of the AICPA Audit and Accounting Guide for Investment
Companies and Statement of Position 93-2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. The Guide is effective for fiscal years
beginning after December 15, 2000. Management of the Domestic Growth Funds does
not anticipate that the adoption of the Guide will have a significant effect on
the financial statements.
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 for
federal income tax reporting purposes approximates that used for financial
reporting purposes.
At October 31, 2000, the Domestic Growth Funds had approximate net capital loss
carryforwards as follows:
<TABLE>
<CAPTION>
Principal Principal Principal
Principal Partners Partners Partners
LargeCap Aggressive LargeCap MidCap Principal
Net Capital Loss Stock Index Growth Growth Growth Real Estate
Carryforwards Expire in: Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C> <C> <C>
2006 $ -- $ -- $ -- $ -- $ 576,000
2007 -- -- -- -- 800,000
2008 4,000 3,426,000 1,861,000 1,378,000 1,154,000
$4,000 $3,426,000 $1,861,000 $1,378,000 $2,530,000
</TABLE>
Note 3 -- Management Agreement and Transactions With Affiliates
The Domestic Growth Funds have agreed to pay investment advisory and management
fees to Principal Management Corporation (wholly owned by Princor Financial
Services Corporation, a subsidiary of Principal Financial Services, Inc.)
computed at an annual percentage rate of each fund's average daily net assets.
The annual rates used in this calculation for the Domestic Growth Funds are as
follows:
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
<S> <C> <C> <C> <C> <C>
Principal Balanced Fund, Inc. 0.60% 0.55% 0.50% 0.45% 0.40%
Principal Blue Chip Fund, Inc.* 0.50 0.45 0.40 0.35 0.30
Principal Capital Value Fund, Inc.* 0.50 0.45 0.40 0.35 0.30
Principal Growth Fund, Inc.* 0.50 0.45 0.40 0.35 0.30
Principal MidCap Fund, Inc. 0.65 0.60 0.55 0.50 0.45
Principal Real Estate Fund, Inc. 0.90 0.85 0.80 0.75 0.70
Principal SmallCap Fund, Inc. 0.85 0.80 0.75 0.70 0.65
Principal Utilities Fund, Inc. 0.60 0.55 0.50 0.45 0.40
<FN>
* At the meetings of the shareholders of the Principal Blue Chip Fund,
Inc. and Principal Capital Value Fund, Inc. held on November 2, 1999,
and the meeting of shareholders of the Principal Growth Fund, Inc.
held on November 9, 1999, the management fee schedules for each of
these funds were modified. The modifications were effective as of
January 1, 2000. The new management fee schedule for each of these
funds is as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$250 $250 $250 $250 $1,000
<S> <C> <C> <C> <C> <C>
0.60% 0.55% 0.50% 0.45% 0.40%
</TABLE>
A management fee schedule for Principal Partners Aggressive Growth Fund, Inc. is
summarized in the following schedule.
<TABLE>
<CAPTION>
Net Asset Value of Fund
(in millions)
First Next Next Next Over
$250 $250 $250 $250 $1,000
<S> <C> <C> <C> <C> <C>
Principal Partners Aggressive Growth Fund, Inc. 0.75% 0.70% 0.65% 0.60% 0.55%
</TABLE>
A management fee schedule for Principal LargeCap Stock Index Fund, Inc.,
Principal Partners LargeCap Growth Fund, Inc. and Principal Partners MidCap
Growth Fund, Inc. is summarized in the following schedule.
Overall Fee
Principal LargeCap Stock Index Fund, Inc. 0.35%
Principal Partners LargeCap Growth Fund, Inc. 0.90
Principal Partners MidCap Growth Fund, Inc. 0.90
The Domestic Growth Funds also reimburse the Manager for transfer and
administrative services, including the cost of accounting, data processing,
supplies and other services rendered.
The Manager voluntarily waives a portion of its fee for certain funds. The
waivers are in amounts that maintain total operating expenses within certain
limits. The limits are expressed as a percentage of average daily net assets
attributable to each class on an annualized basis during the reporting period.
The amounts waived and the operating expense limits, which were maintained at or
below that shown, are as follows:
<TABLE>
<CAPTION>
Expense
Periods Ended October 31, 2000 Limit
<S> <C> <C>
Principal Blue Chip Fund, Inc.
Class A $239,527 1.20%
Class B 61,214 1.95
Class C 8,450 1.95
Class R 45,530 1.70
Principal LargeCap Stock Index Fund, Inc.
Class A 42,768 0.80
Class B 18,946 1.15
Class C 11,367 1.15
Class R 29,485 1.30
Principal Partners Aggressive Growth Fund, Inc.
Class A 137,883 1.60
Class B 38,014 2.35
Class C 6,095 2.35
Class R 13,862 2.10
Principal Partners LargeCap Growth Fund, Inc.
Class A 20,936 1.80
Class B 9,395 2.55
Class C 6,629 2.55
Class R 7,370 2.30
Principal Partners MidCap Growth Fund, Inc.
Class A 29,482 1.80
Class B 11,005 2.55
Class C 6,928 2.55
Class R 6,756 2.30
Principal Real Estate Fund, Inc.
Class A 21,860 1.90
Class B 4,803 2.65
Class C 8,538 2.65
Class R 3,835 2.40
Principal SmallCap Fund, Inc.
Class A 2,978 1.80
Class B 365 2.55
Class C 10,509 2.55
Class R 11,126 2.30
</TABLE>
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00%, and Class C shares at 1.00% (.25%, 1.25% and .50% for
Principal LargeCap Stock Index Fund, Inc. share classes, respectively), of the
lesser of the current market value or the cost of shares being redeemed. Princor
Financial Services Corporation also retains sales charges on sales of Class A
shares based on declining rates which begin at 4.75% of the offering price
(1.50% for Principal LargeCap Stock Index Fund, Inc.). The aggregate amount of
these charges retained, by fund, for the periods ended October 31, 2000, were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal Balanced Fund, Inc. $ 323,886 $102,135 $4,482
Principal Blue Chip Fund, Inc. 955,870 286,781 955
Principal Capital Value Fund, Inc. 722,291 241,503 624
Principal Growth Fund, Inc. 1,672,043 367,586 1,228
Principal LargeCap Stock Index Fund, Inc. 31,391 1,232 76
Principal MidCap Fund, Inc. 1,014,499 305,672 695
Principal Partners Aggressive Growth Fund, Inc. 658,600 23,108 982
Principal Partners LargeCap Growth Fund, Inc. 99,714 753 145
Principal Partners MidCap Growth Fund, Inc. 172,696 1,001 58
Principal Real Estate Fund, Inc. 46,827 6,782 14
Principal SmallCap Fund, Inc. 550,401 49,821 657
Principal Utilities Fund, Inc. 283,345 76,225 420
</TABLE>
No brokerage commissions were paid by the Domestic Growth Funds to Princor
Financial Services Corporation during the period. Brokerage commissions were
paid to other affiliates by the following funds:
<TABLE>
<CAPTION>
Periods Ended Year Ended
October 31, 2000 October 31, 1999
<S> <C> <C>
Principal Balanced Fund, Inc. $ 9,686 $ 10,866
Principal Blue Chip Fund, Inc. 69,056 30,170
Principal Capital Value Fund, Inc. 219,353 109,485
Principal Growth Fund, Inc. 83,268 46,158
Principal MidCap Fund, Inc. 124,029 53,939
Principal Partners Aggressive Growth Fund, Inc. 21,165 N/A
Principal Partners LargeCap Growth Fund, Inc. 598 N/A
Principal Partners MidCap Growth Fund, Inc. 7,842 N/A
Principal Real Estate Fund, Inc. 5,114 10,580
Principal SmallCap Fund, Inc. 17,920 6,230
Principal Utilities Fund, Inc. 53,778 7,435
</TABLE>
The Domestic Growth Funds bear distribution and shareholder servicing fees with
respect to each class computed at an annual rate of the average daily net assets
attributable to each class of each fund. The annual rate will not exceed the
following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
All Domestic Growth Funds
(except Principal LargeCap Stock Index Fund, Inc.) 0.25% 1.00% 1.00% 0.75%
Principal LargeCap Stock Index Fund, Inc. 0.15% 0.50% 0.50% 0.65%
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class A, Class B and Class
R shares, fees that are unused by the principal underwriter at the end of the
fiscal year are returned to the respective Domestic Growth Funds which generated
the excess.
At October 31, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company and benefit plans sponsored on behalf of Principal Life
Insurance Company owned shares of the Domestic Growth Funds as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Balanced Fund, Inc. -- -- 5,460 --
Principal Blue Chip Fund, Inc. -- -- 3,922 --
Principal Capital Value Fund, Inc. 5,907,540 -- 3,144 --
Principal Growth Fund, Inc. -- -- 1,473 --
Principal LargeCap Stock Index Fund, Inc. 100,000 100,000 100,000 100,000
Principal MidCap Fund, Inc. -- -- 2,184 --
Principal Partners Aggressive Growth Fund, Inc. 18,167 100,000 100,000 100,000
Principal Partners LargeCap Growth Fund, Inc. 100,000 100,000 100,000 100,000
Principal Partners MidCap Growth Fund, Inc. 100,000 100,000 100,000 100,000
Principal Real Estate Fund, Inc. 431,205 327,938 11,827 330,829
Principal SmallCap Fund, Inc. -- -- 8,977 141,817
Principal Utilities Fund, Inc. -- -- 5,869 --
</TABLE>
Note 4 -- Investment Transactions
For the periods ended October 31, 2000, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Domestic Growth Funds were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Principal Balanced Fund, Inc. $ 76,783,226 $ 93,633,193
Principal Blue Chip Fund, Inc. 208,600,785 208,566,557
Principal Capital Value Fund, Inc. 593,432,146 671,846,882
Principal Growth Fund, Inc. 835,727,198 854,556,855
Principal LargeCap Stock Index Fund, Inc. 43,549,456 17,561,173
Principal MidCap Fund, Inc. 706,118,248 734,554,187
Principal Partners Aggressive Growth Fund, Inc. 111,213,752 33,723,940
Principal Partners LargeCap Growth Fund, Inc. 23,262,711 10,340,058
Principal Partners MidCap Growth Fund, Inc. 39,360,571 20,352,049
Principal Real Estate Fund, Inc. 14,360,318 11,638,706
Principal SmallCap Fund, Inc. 157,097,700 130,148,998
Principal Utilities Fund, Inc. 183,572,664 190,798,279
</TABLE>
At October 31, 2000, net unrealized appreciation (depreciation) of investments
by the Domestic Growth Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Gross Unrealized (Depreciation)
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Balanced Fund, Inc. $ 19,627,925 $(11,018,736) $ 8,609,189
Principal Blue Chip Fund, Inc. 75,947,539 (19,682,155) 56,265,384
Principal Capital Value Fund, Inc. 82,134,518 (40,303,942) 41,830,576
Principal Growth Fund, Inc. 156,135,130 (34,476,516) 121,658,614
Principal LargeCap Stock Index Fund, Inc. 2,400,487 (2,601,239) (200,752)
Principal MidCap Fund, Inc. 89,924,933 (12,880,581) 77,044,352
Principal Partners Aggressive Growth Fund, Inc. 10,913,885 (6,250,478) 4,663,407
Principal Partners LargeCap Growth Fund, Inc. 1,436,920 (316,166) 1,120,754
Principal Partners MidCap Growth Fund, Inc. 2,623,933 (1,293,526) 1,330,407
Principal Real Estate Fund, Inc. 2,101,263 (391,155) 1,710,108
Principal SmallCap Fund, Inc. 10,846,643 (21,246,004) (10,399,361)
Principal Utilities Fund, Inc. 25,890,301 (4,984,658) 20,905,643
</TABLE>
The Domestic Growth Funds' investments are with various issuers in various
industries. The Schedules of Investments contained herein summarize
concentrations of credit risk by issuer & industry.
Note 5 -- Capital Share Transactions
Transactions in Capital Shares by fund were as follows:
<TABLE>
<CAPTION>
Principal Principal Principal Principal
Balanced Blue Chip Capital Value Growth
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Year Ended October 31, 2000:
Shares sold:
<S> <C> <C> <C> <C>
Class A ......................................... 933,549 1,950,005 1,419,729 1,196,655
Class B ......................................... 312,927 682,982 362,220 381,774
Class C ......................................... 45,067 50,817 25,020 30,241
Class R ......................................... 599,255 943,206 437,931 343,886
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 476,562 97,814 2,028,094 270,572
Class B ........................................... 90,989 26,905 181,583 54,424
Class C ........................................ 841 218 860 386
Class R ......................................... 101,900 25,863 162,652 27,603
Shares redeemed:
Class A ......................................... (2,300,437) (2,318,481) (4,768,047) (1,614,195)
Class B............................................ (535,910) (686,142) (775,453) (345,017)
Class C ......................................... (33,684) (7,877) (6,565) (6,158)
Class R ......................................... (589,022) (727,939) (624,708) (236,402)
Net Increase (Decrease) (897,963) 37,371 (1,556,684) 103,769
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 1,543,354 2,598,298 2,320,532 1,698,273
Class B ......................................... 534,435 983,832 614,916 556,338
Class C ......................................... 16,020 13,182 7,194 6,956
Class R ......................................... 635,088 955,361 583,231 353,782
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 397,074 36,318 1,458,213 33,237
Class B ........................................... 66,344 1,213 108,859 536
Class C ......................................... 33 -- -- --
Class R ......................................... 72,639 4,124 94,789 --
Shares redeemed:
Class A ......................................... (1,348,209) (1,175,462) (2,583,273) (1,270,168)
Class B............................................ (279,766) (313,216) (364,952) (243,384)
Class C ......................................... (33) (20) (18) (29)
Class R ......................................... (391,795) (462,525) (405,657) (177,102)
Net Increase 1,245,184 2,641,105 1,833,834 958,439
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal Partners Principal Partners
LargeCap Stock MidCap Aggressive Growth LargeCap Growth
Index Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Periods Ended October 31, 2000:
Shares sold:
<S> <C> <C> <C> <C>
Class A ......................................... 990,122 1,073,339 5,040,166 929,976
Class B ......................................... 289,269 282,130 1,852,530 351,968
Class C ......................................... 125,533 11,186 232,969 127,993
Class R ......................................... 1,337,520 219,529 979,040 225,194
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 335,291 -- --
Class B ........................................... -- 76,736 -- --
Class C ......................................... -- 165 -- --
Class R ......................................... -- 28,509 -- --
Shares redeemed:
Class A ......................................... (59,414) (1,852,115) (654,972) (52,604)
Class B ......................................... (20,662) (429,261) (129,945) (6,135)
Class C ......................................... (2,059) (2,016) (14,117) (3,124)
Class R ......................................... (67,904) (197,202) (139,499) (8,053)
Net Increase(Decrease) 2,592,405 (453,709) 7,166,173 1,565,215
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... N/A 1,325,967 N/A N/A
Class B ......................................... N/A 424,898 N/A N/A
Class C ......................................... N/A 5,289 N/A N/A
Class R ......................................... N/A 206,999 N/A N/A
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... N/A 3 N/A N/A
Class B ........................................... N/A 9 N/A N/A
Class C ......................................... N/A -- N/A N/A
Class R ......................................... N/A -- N/A N/A
Shares redeemed:
Class A ......................................... N/A (2,215,756) N/A N/A
Class B ......................................... N/A (502,335) N/A N/A
Class C ......................................... N/A -- N/A N/A
Class R ......................................... N/A (202,547) N/A N/A
Net Decrease (957,473)
</TABLE>
Note 5 -- Capital Share Transactions (Continued)
Transactions in Capital Shares by fund were as follows:
<TABLE>
<CAPTION>
Principal
Partners Principal Principal Principal
MidCap Growth Real Estate SmallCap Utilities
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Periods Ended October 31, 2000:
Shares sold:
<S> <C> <C> <C> <C>
Class A ......................................... 1,345,526 389,421 2,833,636 784,317
Class B ......................................... 462,396 99,858 955,283 302,192
Class C ......................................... 170,233 2,947 89,757 29,733
Class R ......................................... 270,678 120,314 1,023,863 273,098
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 37,113 362,271 455,489
Class B ........................................... -- 15,991 108,575 78,081
Class C ......................................... -- 337 2,175 697
Class R ......................................... -- 16,544 70,779 38,718
Shares redeemed:
Class A ......................................... (39,721) (216,896) (1,467,562) (1,323,767)
Class B ......................................... (9,893) (51,691) (601,314) (336,884)
Class C ......................................... (27,799) (297) (11,725) (3,381)
Class R ......................................... (7,886) (40,811) (393,838) (180,704)
Net Increase 2,163,534 372,830 2,971,900 117,589
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... N/A 245,069 2,014,656 1,320,329
Class B ......................................... N/A 71,200 631,644 507,818
Class C ......................................... N/A 12,790 16,954 12,620
Class R ......................................... N/A 70,415 539,084 304,565
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... N/A 27,713 -- 171,345
Class B ........................................... N/A 12,295 -- 19,977
Class C ......................................... N/A -- -- 12
Class R ......................................... N/A 13,702 -- 8,437
Shares redeemed:
Class A ......................................... N/A (91,613) (531,725) (1,083,938)
Class B ............................................. N/A (20,911) (159,547) (210,456)
Class C ......................................... N/A -- (209) --
Class R ......................................... N/A (31,207) (194,374) (108,625)
Net Increase 309,453 2,316,483 942,084
</TABLE>
Note 6 -- Line of Credit
The Domestic Growth Funds participate with other funds and portfolios managed by
Principal Management Corporation in an unsecured joint line of credit with two
banks which allow the funds to borrow up to $75,000,000 collectively. 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 Fed Funds Rate plus .50%. Additionally, a
commitment fee is charged at the annual rate of .09% on the amount of the line
of credit. The commitment fee is allocated among the participating funds and
portfolios in proportion to their average net assets during each calendar
quarter. At October 31, 2000, the Domestic Growth Funds had no outstanding
borrowings under the line of credit.
Note 7 -- Futures Contracts
The Domestic Growth Funds may enter into futures contracts as a hedge against
changes in market conditions. Initial margin deposits are made by cash deposits
or segregation of specific securities as may be required by the exchange on
which the transaction was conducted. Pursuant to the contracts, a fund agrees to
receive from or pay to the broker, an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the fund as a variation margin receivable
or payable on futures contracts. During the period the futures contracts are
open, daily changes in the value of the contracts are recognized as unrealized
gains or losses. These unrealized gains or losses are included in the net
unrealized appreciation (depreciation) of investments on the Statement of Assets
and Liabilities. When the contracts are closed, the fund recognizes a realized
gain or loss equal to the difference between the proceeds from, or cost of, the
closing transaction and the fund's cost basis in the contract.
Note 8 -- Security Lending
The Domestic Growth Funds may lend portfolio securities to approved brokers to
earn additional income. Each applicable fund receives collateral against the
loaned securities and maintains collateral in an amount not less than 100% of
the market value of the loaned securities during the period of the loan. The
market value of loaned securities is determined at the close of business of the
funds and any additional required collateral is delivered to the funds on the
next business day. Although risk is mitigated by the collateral, the fund could
experience a delay in recovering its securities and possible loss of income or
value if the borrower fails to return them. At October 31, 2000, the value of
securities loaned and aggregate collateral received were as follows:
<TABLE>
<CAPTION>
Securities Loaned Collateral
<S> <C> <C>
Principal Blue Chip Fund, Inc. $ 4,226,150 $ 4,381,000
Principal MidCap Fund, Inc. 34,307,166 35,516,600
Principal SmallCap Fund, Inc. 2,356,972 2,452,286
</TABLE>
SCHEDULES OF INVESTMENTS
GROWTH FUNDS (DOMESTIC)
PRINCIPAL BALANCED FUND, INC.
Shares
Held Value
Common Stocks (63.93%)
Accounting, Auditing, &
Bookkeeping (1.36%)
Paychex, Inc. 33,650 $ 1,907,534
Advertising (0.57%)
TMP Worldwide, Inc. 10,591(a) 737,233
WPP Group PLC ADR 1,000 66,875
804,108
Air Transportation, Scheduled (0.07%)
Ryanair Holdings PLC ADR 2,400(a) 96,750
Aircraft & Parts (0.04%)
Rolls-Royce PLC ADR 4,200 54,965
Auto & Home Supply Stores (0.36%)
Autozone, Inc. 18,600(a) 498,712
Bakery Products (0.44%)
Sara Lee Corp. 28,500 614,531
Beverages (0.51%)
PepsiCo, Inc. 13,600 658,750
Seagram Co. Ltd. 990 56,554
715,304
Blast Furnace & Basic Steel
Products (0.03%)
Pohang Iron & Steel ADR 2,900 45,856
Cable & Other Pay TV Services (1.04%)
Comcast Corp. 35,300(a) 1,438,475
United Pan-Europe
Communications NV ADR 1,380(a) 25,185
1,463,660
Commercial Banks (3.83%)
UBS AG ADR 700(a) 98,000
ABN-AMRO Holdings NV ADR 7,576 177,562
Bank of America Corp. 8,400(a) 403,725
Chase Manhattan Corp. 10,350 470,925
Deutsche Bank 1,500 123,332
Dresdner Bank AG ADR 3,293 136,634
Fifth Third Bancorp 9,600 493,200
First Union Corp. 14,692 445,351
FleetBoston Financial Corp. 13,240 503,120
HSBC Holdings PLC 1,700 122,570
National Australia Bank Ltd. ADR 470 33,017
PNC Financial Corp. 8,500 568,437
Royal Bank of Canada 1,400 44,275
San Paolo IMI SPA ADR 5,600 180,600
State Street Corp. 5,900 735,966
The Bank of Tokyo-Mitsubishi Ltd. ADR 6,010 72,120
Wells Fargo & Co. 16,700 773,419
5,382,253
Commercial Printing (0.22%)
Creo Products, Inc. 1,900(a) $ 58,306
R.R. Donnelley & Sons Co. 11,700 251,550
309,856
Communications Equipment (4.58%)
ADC Telecommunications 25,300(a) 540,787
Alcatel ADR 2,890 180,264
Canon, Inc. ADR 2,700 109,519
Comverse Technology, Inc. 14,300(a) 1,598,025
Ericsson LM Telefon ADR 8,500 117,938
Koninklijke Philips Electronic 3,010 120,212
Lucent Technologies, Inc. 7,400 172,513
Matsushita Electric ADR 200 58,450
Motorola, Inc. 19,710 491,518
Nortel Networks Corp. 32,798 1,492,309
Siemens AG - Unsponsored ADR 700 89,003
Tellabs, Inc. 29,300(a) 1,463,169
6,433,707
Communications Services, NEC (0.02%)
Korea Telecom Corp. ADR 800 29,500
Computer & Data Processing
Services (4.34%)
3COM Corp. 5,400(a) 95,850
America Online, Inc. 7,300(a) 368,139
BMC Software, Inc. 9,700(a) 197,031
Computer Associates International 2,500 79,687
Compuware Corp. 12,100(a) 95,287
Electronic Data Systems Corp. 12,500 586,719
First Data Corp. 12,600 631,575
Microsoft Corp. 8,400(a) 578,550
Oracle Systems Corp. 9,400(a) 310,200
Sun Microsystems, Inc. 20,100(a) 2,228,587
Unisys Corp. 8,600(a) 109,650
Veritas Software 5,800(a) 817,891
6,099,166
Computer & Office Equipment (6.99%)
Automatic Data Processing, Inc. 14,200 927,436
Cabletron Systems, Inc. 14,400(a) 390,600
Cisco Systems, Inc. 56,200(a) 3,027,775
Compaq Computer Corp. 25,700 781,536
Dell Computer Corp. 9,000(a) 265,500
EMC Corp. 19,500(a) 1,736,718
Gateway, Inc. 10,900(a) 562,549
Hewlett-Packard Co. 14,200 659,411
Hitachi Ltd. ADR 900 100,350
International Business Machines Corp. 8,300 817,550
NEC Corp. ADR 734 74,409
Orbotech Ltd. ADR 732(a) 38,750
Palm, Inc. 8,009(a) 428,982
9,811,566
Consumer Products (0.66%)
Fortune Brands, Inc. 13,500 397,406
Hanson PLC ADR 2,100 55,125
Philip Morris Cos., Inc. 12,800 468,800
921,331
Crude Petroleum & Natural Gas (0.52%)
Texaco, Inc. 12,400 732,375
Department Stores (1.15%)
Kohl's Corp. 18,000(a) $ 975,375
Target Corp. 9,800 270,725
Wal-Mart Stores, Inc. 8,100 367,537
1,613,637
Dimension Stone (0.02%)
Potash Corp. of Saskatchewan 560 33,250
Drugs (6.34%)
Abbott Laboratories 18,600 982,312
American Home Products Corp. 14,000 889,000
Aventis ADR 2,490 179,436
Bristol-Myers Squibb Co. 22,800 1,389,375
Elan Corp. PLC ADR 1,890(a) 98,162
Glaxo Wellcome PLC ADR 2,500 145,469
Johnson & Johnson 10,600 976,525
Merck & Co., Inc. 9,300 836,419
Novartis 2,400 92,100
Pfizer, Inc. 51,000 2,202,563
Pharmacia Corp. 10,643 585,365
Schering-Plough Corp. 10,100 522,044
8,898,770
Electric Lighting & Wiring
Equipment (0.01%)
Furukawa Electric Co. 70 18,400
Electric Services (1.41%)
American Electric Power Co, Inc. 6,380 264,770
Dominion Resources, Inc. 8,900 530,106
Endesa SA ADR 3,200 53,400
Potomac Electric Power Co. 13,800 315,675
Reliant Energy, Inc. 16,600 685,788
Scottish Power PLC 2,500 75,469
Southern Energy, Inc. 2,083(a) 56,762
1,981,970
Electrical Industrial Apparatus (0.64%)
Emerson Electric Co. 12,200 895,938
Electronic Components &
Accessories (3.61%)
Intel Corp. 43,900 1,975,500
JDS Uniphase Corp. 5,800(a) 471,975
Linear Technology Corp. 9,400 606,888
Maxim Integrated Products, Inc. 17,400(a) 1,153,837
PMC Sierra, Inc. 1,900(a) 322,050
Texas Instruments 11,000 539,688
5,069,938
Fats & Oils (0.27%)
ADM Co. 34,730 382,030
Federal & Federally-Sponsored
Credit (0.92%)
Federal National Mortgage Association 16,700 1,285,900
Finance Services (0.06%)
Nomura Securities Co. Ltd. ADR 410 86,929
Fire, Marine & Casualty Insurance (2.17%)
American International Group, Inc. 21,500 $ 2,107,000
Hartford Financial Services Group, Inc. 4,800 357,300
Loews Corp. 2,700 245,531
St. Paul Cos. 6,600 338,250
3,048,081
Foreign Bank, Branches, &
Agencies (0.10%)
Fortis NV 4,550 138,844
Furniture & Home Furnishings
Store (1.16%)
Bed Bath & Beyond, Inc. 62,900(a) 1,623,606
Gas Production & Distribution (0.04%)
BG Group PLC 2,483 50,902
Gas Transportation (0.01%)
Lattice Group PLC 8,770 18,720
General Industrial Machinery (0.14%)
Pall Corp. 9,100 196,219
Grain Mill Products (0.35%)
Ralston-Ralston Purina Group 20,300 492,275
Groceries & Related Products (1.42%)
SYSCO Corp. 35,400 1,847,438
Unilever PLC ADR 5,000 139,375
1,986,813
Grocery Stores (0.31%)
Albertson's, Inc. 15,881 376,181
Koninklijke Ahold NV 2,230 65,228
441,409
Heavy Construction (0.03%)
Vivendi ADR 3,300 48,056
Highway & Street Construction (0.12%)
Halliburton Co. 4,700 174,194
Hospitals (0.22%)
Tenet Healthcare Corp. 7,800 306,638
Household Appliances (2.20%)
General Electric Co. 56,400 3,091,425
Industrial Inorganic Chemicals (0.27%)
Akzo ADR 1,350 61,256
Praxair, Inc. 8,600 320,350
381,606
Investment Offices (0.07%)
Amvescap PLC 900 102,038
Life Insurance (0.60%)
AXA ADR 2,620 174,066
ING Groep NV ADR 2,775 191,995
Lincoln National Corp. 9,800 474,075
840,136
Lumber & Other Building
Materials (0.73%)
Home Depot, Inc. 15,000 $ 645,000
Lowe's Companies, Inc. 8,400 383,775
1,028,775
Machinery, Equipment & Supplies (0.26%)
Grainger (W. W.), Inc. 11,400 364,088
Medical Instruments & Supplies (1.54%)
Fresenius Medical Care AG ADR 1,700 24,863
Guidant Corp. 27,000(a) 1,429,312
St. Jude Medical, Inc. 12,950(a) 712,250
2,166,425
Medical Services & Health
Insurance (0.16%)
Aon Corp. 5,500 227,906
Miscellaneous Chemical Products (0.47%)
Du Pont (E. I.) De Nemours 14,653 664,880
Miscellaneous Converted Paper
Products (0.45%)
Minnesota Mining & Mfg. Co. 6,600 637,725
Miscellaneous Food & Kindred
Products (0.11%)
Groupe Danone 3,610 101,802
Nestle SA ADR 560 58,006
159,808
Miscellaneous Furniture &
Fixtures (0.24%)
Newell Rubbermaid, Inc. 17,200 330,025
Miscellaneous Manufacturers (0.48%)
Tyco International Ltd. 11,900 674,581
Miscellaneous Non-Durable Goods (0.11%)
Diageo PLC ADR 4,170 156,896
Miscellaneous Shopping Goods (0.20%)
Staples, Inc. 19,500(a) 277,875
Motion Picture Production &
Services (0.16%)
Walt Disney Co. 6,200 222,038
Newspapers (0.09%)
United News & Media PLC ADR 2,400 56,400
News Corp. Ltd. ADR 1,600 68,800
125,200
Oil & Gas Field Services (0.49%)
TransOcean Sedco Forex, Inc. 5,500 291,500
Petroleum Geo-Services ADR 1,300(a) 17,794
Schlumberger Ltd. 4,900 373,013
682,307
Paper Mills (0.71%)
Fort James Corp. 15,362 $ 505,986
Kimberly Clark Corp. 7,400 488,400
994,386
Petroleum & Petroleum Products (0.05%)
E.on AG ADR 1,300 66,056
Petroleum Refining (1.39%)
BP Amoco PLC 11,678 594,848
Conoco, Inc., Class B 13,803 375,269
Exxon Mobil Corp. 9,000 802,688
Total Fina Elf ADR 2,500 179,063
1,951,868
Professional & Commercial
Equipment (0.04%)
Schering AG ADR 1,100(a) 61,531
Pulp Mills (0.15%)
Boise Cascade Corp. 7,100 203,681
Radio & Television Broadcasting (0.29%)
Carlton Communications PLC ADR 1,200 47,400
Fox Entertainment Group 15,200(a) 326,800
Grupo Televisa SA GDR 600(a) 32,475
406,675
Research & Testing Services (0.22%)
Qiagen NV ADR 2,800(a) 120,750
Moody's Corp. 7,100 186,819
307,569
Rubber & Plastics Footwear (0.45%)
Nike, Inc. 15,800 631,013
Sanitary Services (0.25%)
Waste Management, Inc. 17,642 352,840
Savings Institutions (2.06%)
Citigroup, Inc. 54,866 2,887,323
Search & Navigation Equipment (0.02%)
Marconi PLC 1,225 31,850
Security Brokers & Dealers (0.30%)
Bear Stearns Cos., Inc. 3,668 222,373
Morgan Stanley Dean Witter & Co. 2,500 200,781
423,154
Telegraph & Other Communications (0.04%)
Colt Telecom Group PLC 300(a) 39,188
Sonera Corp. ADR 600 13,425
52,613
Telephone Communication (3.22%)
AT&T Corp. 14,379 $ 333,413
AT&T Wireless Group 8,691(a) 216,732
Alltel Corp. 6,900 444,619
BellSouth Corp. 17,900 864,794
British Telecommunication PLC ADR 620 73,780
Cable & Wireless PLC ADR 1,800 77,513
Hellenic Telecom Organization SA ADR 1,800 15,750
Koninklijke KPN NV ADR 2,481 51,326
McLeodUSA, Inc. 16,500(a) 317,625
NTT Docomo, Inc. ADR 400 49,274
Nippon Telegraph & Telephone Corp. ADR 900 41,119
Nokia Corp. ADR, Class A 2,000 85,500
SBC Communications, Inc. 6,970 402,082
Sprint Corp. 8,300 211,650
Telefonica SA ADR 1,316(a) 76,246
Verizon Communications 13,908 804,056
Vodafone Group PLC ADR 3,850 163,866
Worldcom, Inc. 12,500(a) 296,875
4,526,220
Tires & Inner Tubes (0.03%)
Rhodia SA ADR 3,400 41,863
Total Common Stocks 89,786,069
Principal
Amount Value
Bonds (19.63%)
Beverages (0.72%)
Seagram Co., Ltd. Notes;
6.50%; 4/1/2003 $1,000,000 $ 1,006,207
Blast Furnace & Basic Steel
Products (0.74%)
Carpenter Technology Corp.
Medium-Term Notes;
6.99%; 4/20/2018 800,000 725,607
Quanex Corp. Convertible
Subordinated Debentures;
6.88%; 6/30/2007 350,000 312,813
1,038,420
Consumer Products (1.06%)
Philip Morris Cos., Inc. Notes;
7.25%; 9/15/2001 1,500,000 1,493,626
Commercial Banks (1.62%)
NationsBank Corp.
Subordinated Notes;
7.80%; 9/15/2016 2,300,000 2,282,410
Communications Equipment (0.90%)
Motorola, Inc. Debentures;
7.50%; 5/15/2025 1,291,000 1,262,335
Computer & Office Equipment (1.81%)
Seagate Technology, Inc.
Senior Notes; 7.13%; 3/1/2004 1,750,000 1,751,015
Senior Notes; 7.37%; 3/1/2007 813,000 798,727
2,549,742
Department Stores (1.20%)
Dillard's, Inc. Notes;
6.43%; 8/1/2004 $1,500,000 $ 1,140,585
7.38%; 6/1/2006 772,000 538,934
1,679,519
Farm & Garden Machinery (0.83%)
Deere & Co. Senior Debentures;
8.50%; 1/9/2022 1,100,000 1,160,246
Fire, Marine & Casualty Insurance (0.79%)
St. Paul Cos., Inc.
Medium-Term Notes, Series C;
6.38%; 12/15/2008 1,200,000 1,110,274
Funeral Service & Crematories (1.30%)
Service Corp. International Notes;
6.75%; 6/1/2001 1,961,000 1,823,730
General Industrial Machinery (1.06%)
Ingersoll-Rand Co. Medium-Term Notes;
6.46%; 11/19/2003 1,000,000 983,044
Timken Co. Medium-Term Notes;
7.30%; 8/13/2002 500,000 502,710
1,485,754
Medical Services & Health
Insurance (0.28%)
Aetna, Inc. Notes;
6.38%; 8/15/2003 400,000 393,685
Miscellaneous Investing (1.04%)
Kimco Realty Corp. Senior Notes;
6.50%; 10/1/2003 1,500,000 1,463,856
Paper & Paper Products (0.33%)
Boise Cascade Office Products Corp.
Notes; 7.05%; 5/15/2005 500,000 468,167
Personal Credit Institutions (0.72%)
Ford Motor Credit Co. Notes;
7.88%; 6/15/2010 1,000,000 1,008,405
Petroleum & Petroleum Products (1.06%)
Enron Corp. Notes;
6.75%; 9/1/2004 1,500,000 1,482,799
Railroads (0.85%)
Norfolk Southern Debentures;
9.00%; 3/1/2021 1,100,000 1,195,314
Security Brokers & Dealers (1.42%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
6.13%; 2/1/2001 1,000,000 997,783
7.25%; 4/15/2003 1,000,000 1,002,026
1,999,809
Surety Insurance (1.90%)
Allstate Corp. Debentures;
6.75%; 5/15/2018 2,000,000 1,777,392
MBIA, Inc. Debentures;
7.00%; 12/15/2025 1,000,000 889,242
2,666,634
Trucking & Courier Services,
Except Air (0.00%)
Builders Transport, Inc. Convertible
Subordinated Debentures;
6.50%; 5/1/2011 $306,000 $ 306
Total Bonds 27,571,238
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation (FHLMC)
Certificates (3.82%)
FHLMC 6.00% 1/1/2029 $ 911,870 $ 857,307
FHLMC 6.50 10/1/2027-1/1/2029 3,385,769 3,262,697
FHLMC 7.00 12/1/2027 1,265,941 1,244,119
Total FHLMC Certificates 5,364,123
Government National Mortgage Association (GNMA)
Certificates (3.49%)
GNMA I 6.00 1/15/2029 1,408,015 1,327,726
GNMA II 6.00 6/20/2026-9/20/2028 3,786,997 3,564,010
Total GNMA Certificates 4,891,736
Principal
Amount Value
Asset-Backed Securities (5.73%)
Mortgage Pass-Through Securities (5.73%)
DLJ Commercial Mortgage Corp.
Mortgage Pass-Through Cert.,
Class A-1B, Series 1998-CF1;
6.41%; 2/15/2008 $2,100,000 $ 2,018,738
Mortgage Pass-Through Cert.,
Class A-2, Series 1998-CF1;
6.59%; 2/15/2008 700,000 672,916
First Union Commercial Mortgage Trust
Commercial Mortgage Pass-Through
Cert., Series 1999-C1, Class B;
6.22%; 12/15/2008 1,435,000 1,345,308
GMAC Commercial Mortgage Securities,
Inc. Mortgage Pass-Through Cert.,
Series 1998-C2, Class C;
6.50%; 8/15/2008 2,000,000 1,898,680
J.P. Morgan Commercial Mortgage Fin.
Corp. Mortgage Pass-Through Cert.,
Series 97-C5, Class A-2;
7.06%; 9/15/2029 220,000 220,417
Mortgage Pass-Through Cert.,
Series 1999-C7, Class B;
6.66%; 10/15/2035 450,000 431,789
Morgan Stanley Capital I, Inc. Commercial
Mortgage, Series 1999-RM1, Class B;
6.81%; 12/15/2031 $1,500,000 $ 1,454,916
Total Asset-Backed Securities 8,042,764
Commercial Paper (3.10%)
Personal Credit Institutions (3.10%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 4,357,961 4,357,961
Total Portfolio Investments (99.70%) 140,013,891
Cash, receivables and other assets,
net of liabilities (0.30%) 423,526
Total Net Assets (100.00%) $140,437,417
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL BLUE CHIP FUND, INC.
Shares
Held Value
Common Stocks (98.72%)
Beverages (6.28%)
Anheuser-Busch Cos., Inc. 216,800 $ 9,918,600
PepsiCo, Inc . 159,200 7,711,250
17,629,850
Commercial Banks (3.36%)
FleetBoston Financial Corp. 99,200 3,769,600
J.P. Morgan & Co., Inc. 16,100 2,664,550
Wachovia Corp. 24,100 1,301,400
Wells Fargo & Co. 36,400 1,685,775
9,421,325
Communications Equipment (1.25%)
Motorola, Inc. 141,000 3,516,188
Computer & Data Processing
Services (5.62%)
Microsoft Corp. 88,100(a) 6,067,887
Oracle Systems Corp. 96,200(a) 3,174,600
Sun Microsystems, Inc. 59,000(a) 6,541,625
15,784,112
Computer & Office Equipment (14.16%)
Automatic Data Processing, Inc. 132,800 8,673,500
Cisco Systems, Inc. 186,900(a) 10,069,237
Dell Computer Corp. 174,500(a) 5,147,750
EMC Corp. 89,600(a) 7,980,000
Hewlett-Packard Co. 169,600 7,875,800
39,746,287
Department Stores (4.49%)
Target Corp. 162,500 4,489,063
Wal-Mart Stores, Inc. 178,900 8,117,587
12,606,650
Drugs (11.58%)
American Home Products Corp. 112,100 7,118,350
Bristol-Myers Squibb Co. 104,100 6,343,594
Johnson & Johnson 88,400 8,143,850
Merck & Co., Inc. 121,200 10,900,425
32,506,219
Eating & Drinking Places (2.11%)
McDonald's Corp. 191,500 5,936,500
Electrical Industrial Apparatus (1.98%)
Emerson Electric Co. 75,800 5,566,562
Electronic Components &
Accessories (4.18%)
Intel Corp. 149,800 6,741,000
Solectron Corp. 57,100(a) 2,512,400
Texas Instruments 50,700 2,487,469
11,740,869
Fire, Marine & Casualty Insurance (3.66%)
American International Group, Inc. 104,852 10,275,496
Gas Production & Distribution (3.24%)
Williams Cos., Inc. 217,200 9,081,675
Groceries & Related Products (3.05%)
SYSCO Corp. 163,800 8,548,313
Highway & Street Construction (0.87%)
Halliburton Co. 65,600 2,431,300
Household Appliances (3.77%)
General Electric Co. 193,000 $10,578,812
Life Insurance (1.58%)
Lincoln National Corp. 91,800 4,440,825
Medical Instruments & Supplies (1.84%)
Guidant Corp. 97,300(a) 5,150,819
Miscellaneous Chemical Products (1.18%)
Du Pont (E. I.) De Nemours 73,000 3,312,375
Miscellaneous Manufacturers (1.88%)
Tyco International Ltd. 93,000 5,271,938
Oil & Gas Field Services (0.89%)
TransOcean Sedco Forex, Inc. 47,300 2,506,900
Petroleum Refining (4.92%)
Exxon Mobil Corp. 98,219 8,759,907
Royal Dutch Petroleum Co. ADR 85,200 5,058,750
13,818,657
Primary Non-Ferrous Metal (0.50%)
Alcoa, Inc. 48,500 1,391,344
Savings Institutions (4.64%)
Citigroup, Inc. 181,800 9,567,225
Washington Mutual, Inc. 78,600 3,458,400
13,025,625
Security Brokers & Dealers (0.96%)
Morgan Stanley Dean Witter & Co. 33,500 2,690,469
Special Industry Machinery (2.03%)
Applied Materials, Inc. 107,000(a) 5,684,375
Telephone Communication (8.70%)
Alltel Corp. 71,200 4,587,950
AT&T Corp. 72,750 1,686,890
McLeodUSA, Inc. 79,500(a) 1,530,375
SBC Communications, Inc. 72,400 4,176,575
Sprint Corp. 172,600 4,401,301
Verizon Communications 77,958 4,506,946
Worldcom, Inc. 96,100(a) 2,282,375
XO Communications, Inc. 37,000(a) 1,248,172
24,420,584
Total Common Stocks 277,084,069
Principal
Amount Value
Commercial Paper (1.37%)
Personal Credit Institutions (1.37%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 $3,854,602 $ 3,854,602
Total Portfolio Investments (100.09%) 280,938,671
Liabilities, net of cash, receivables and
other assets (-0.09%) (257,768)
Total Net Assets (100.00%) $280,680,903
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL CAPITAL VALUE FUND, INC.
Shares
Held Value
Common Stocks (98.43%)
Aircraft & Parts (2.17%)
Honeywell International, Inc. 213,100 $11,467,444
Bakery Products (1.17%)
Sara Lee Corp. 286,600 6,179,813
Beverages (1.13%)
PepsiCo, Inc. 123,300 5,972,344
Cable & Other Pay TV Services (1.13%)
Cablevision Systems Corp., Class A 80,200(a) 5,974,900
Chemicals & Allied Products (1.15%)
Dow Chemical Co. 197,800 6,057,625
Commercial Banks (7.81%)
Bank of America Corp. 172,460 8,288,859
Chase Manhattan Corp. 236,200 10,747,100
Comerica, Inc. 110,790 6,682,022
FleetBoston Financial Corp. 189,680 7,207,840
PNC Financial Corp. 124,600 8,332,625
41,258,446
Communications Equipment (0.87%)
Motorola, Inc. 185,200 4,618,425
Computer & Data Processing (1.75%)
Electronic Data Systems Corp. 87,335 4,099,286
First Data Corp. 102,200 5,122,775
9,222,061
Computer & Office Equipment (2.74%)
Compaq Computer Corp. 242,800 7,383,548
Hewlett-Packard Co. 152,600 7,086,362
14,469,910
Consumer Products (2.32%)
Fortune Brands, Inc. 415,500 12,231,281
Crude Petroleum & Natural Gas (4.18%)
Burlington Resources, Inc. 225,200 8,107,200
Texaco, Inc. 237,070 14,001,947
22,109,147
Cutlery, Handtools & Hardware (1.26%)
Danaher Corp. 105,800 6,678,625
Department Stores (1.02%)
Target Corp. 194,600 5,375,825
Drugs (8.11%)
American Home Products Corp. 170,600 10,833,100
Bristol-Myers Squibb Co. 247,900 15,106,406
Merck & Co., Inc. 187,870 16,896,558
42,836,064
Eating & Drinking Places (1.45%)
McDonald's Corp. 247,900 7,684,900
Electric Services (6.99%)
AES Corp. 59,776(a)$ 3,377,344
Dominion Resources, Inc. 183,700 10,941,631
Duke Energy Corp. 175,500 15,169,781
Enron Corp. 90,500 7,426,656
36,915,412
Electrical Industrial Apparatus (2.95%)
Emerson Electric Co. 211,900 15,561,406
Electronic Components &
Accessories (1.13%)
Advanced Micro Devices, Inc. 102,800(a) 2,325,850
Analog Devices, Inc. 55,800(a) 3,627,000
5,952,850
Fire, Marine & Casualty
Insurance (3.89%)
American International Group, Inc. 106,050 10,392,900
Hartford Financial Services Group, Inc.136,400 10,153,275
20,546,175
Forest Products (0.75%)
Weyerhaeuser Co. 84,400 3,961,525
Groceries & Related Products (2.02%)
SYSCO Corp. 204,700 10,682,781
Highway & Street Construction (1.52%)
Halliburton Co. 217,200 8,049,975
Life Insurance (4.37%)
American General Corp. 168,500 13,564,250
Lincoln National Corp. 196,400 9,500,850
23,065,100
Measuring & Controlling Devices (0.66%)
KLA-Tencor Corp. 102,600(a) 3,469,162
Medical Instruments & Supplies (2.17%)
Guidant Corp. 216,100(a) 11,439,794
Miscellaneous Chemical Products (0.97%)
Du Pont (E. I.) De Nemours 113,500 5,150,062
Miscellaneous Converted Paper
Products (1.80%)
Minnesota Mining & Mfg. Co. 98,400 9,507,900
Miscellaneous Manufacturers (2.52%)
Tyco International Ltd. 235,100 13,327,231
Miscellaneous Shopping Goods
Stores (1.71%)
Staples, Inc. 634,300(a) 9,038,775
Paper Mills (2.28%)
Kimberly Clark Corp. 182,900 12,071,400
Petroleum Refining (6.29%)
Chevron Corp. 150,800 12,384,450
Coastal Corp. 77,200 5,823,775
Exxon Mobil Corp. 168,200 15,001,338
33,209,563
Primary Non-Ferrous Metals (0.67%)
Alcoa, Inc. 123,700 $ 3,548,644
Radio & Television Broadcasting (1.09%)
Fox Entertainment Group, Inc. 268,800(a) 5,779,200
Retail Stores, NEC (1.11%)
Costco Wholesale Corp. 160,000(a) 5,860,000
Savings Institutions (3.59%)
Citigroup, Inc. 207,246 10,906,321
Washington Mutual, Inc. 183,000 8,052,000
18,958,321
Search & Navigation Equipment (1.26%)
Raytheon Co. 208,000 6,656,000
Security Brokers & Dealers (1.20%)
Morgan Stanley Dean Witter & Co. 78,800 6,328,625
Special Industry Machinery (0.71%)
Applied Materials, Inc. 71,000(a) 3,771,875
Telephone Communication (8.52%)
Alltel Corp. 145,700 9,388,544
AT&T Corp. 291,550 6,760,316
SBC Communications, Inc. 131,400 7,580,137
Sprint Corp. 273,600 6,976,800
Verizon Communications 216,862 12,537,336
WorldCom, Inc. 75,300(a) 1,788,375
45,031,508
Total Common Stocks 520,020,094
Principal
Amount Value
Commercial Paper (1.64%)
Personal Credit Institutions (1.64%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 $8,678,583 $ 8,678,583
Total Portfolio Investments (100.07%) 528,698,677
Liabilities, net of cash, receivables
and other assets (-0.07%) (348,267)
Total Net Assets (100.00%) $528,350,410
(a) Non-income producing security - No dividend paid during the past twelve
months.
INCIPAL GROWTH FUND, INC.
Shares
Held Value
Common Stocks (99.32%)
Accounting, Auditing &
Bookkeeping (4.87%)
Paychex, Inc. 599,400 $33,978,487
Advertising (1.87%)
TMP Worldwide, Inc. 187,772(a) 13,070,691
Cable & Other Pay TV Services (3.11%)
Comcast Corp. 532,900(a) 21,715,675
Commercial Banks (3.76%)
Fifth Third Bancorp. 168,150 8,638,706
State Street Corp. 141,100 17,600,814
26,239,520
Communications Equipment (10.56%)
ADC Telecommunications, Inc. 449,700(a) 9,612,338
Comverse Technology, Inc. 202,100(a) 22,584,675
Nortel Networks Corp. 569,800 25,925,900
Tellabs, Inc. 312,000(a) 15,580,500
73,703,413
Computer & Data Processing
Services (8.64%)
America Online, Inc. 129,500(a) 6,530,685
Sun Microsystems, Inc. 354,100(a) 39,260,838
Veritas Software Corp. 102,800(a) 14,496,406
60,287,929
Computer & Office Equipment (14.93%)
Automatic Data Processing, Inc. 249,500 16,295,469
Cisco Systems, Inc. 869,300(a) 46,833,536
EMC Corp. 348,300(a) 31,020,469
Gateway, Inc. 195,200(a) 10,074,272
104,223,746
Department Stores (2.47%)
Kohl's Corp. 318,400(a) 17,253,300
Drugs (7.34%)
Bristol-Myers Squibb Co. 200,800 12,236,250
Johnson & Johnson 43,000 3,961,375
Pfizer, Inc. 811,200 35,033,700
51,231,325
Electronic Components &
Accessories (10.82%)
Intel Corp. 457,200 20,574,000
JDS Uniphase Corp. 102,800(a) 8,365,350
Linear Technology Corp. 165,300 10,672,181
Maxim Integrated Products, Inc. 311,900(a) 20,682,869
PMC Sierra, Inc. 33,500(a) 5,678,250
Texas Instruments 193,600 9,498,500
75,471,150
Federal & Federally Sponsored
Credit (2.11%)
Federal National Mortgage Association 191,200 14,722,400
Fire, Marine & Casualty
Insurance (4.05%)
American International Group, Inc. 288,050 $28,228,900
Furniture & Home Furnishings
Stores (4.12%)
Bed Bath & Beyond, Inc. 1,114,800(a) 28,775,775
Groceries & Related Products (3.25%)
SYSCO Corp. 434,600 22,680,688
Household Appliances (4.45%)
General Electric Co. 565,900 31,018,394
Lumber & Other Building
Materials (1.65%)
Home Depot, Inc. 267,900 11,519,700
Medical Instruments & Supplies (3.65%)
Guidant Corp. 481,300(a) 25,478,819
Miscellaneous Shopping Goods
Stores (0.69%)
Staples, Inc. 335,700(a) 4,783,725
Savings Institutions (4.76%)
Citigroup, Inc. 631,733 33,244,949
Telephone Communication (2.22%)
BellSouth Corp. 320,300 15,474,494
Total Common Stocks 693,103,080
Principal
Amount Value
Commercial Paper (0.70%)
Personal Credit Institutions (0.70%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 $4,912,168 $ 4,912,168
Total Portfolio Investments (100.02%) 698,015,248
Liabilities, net of cash, receivables
and other assets (-0.02%) (132,915)
Total Net Assets (100.00%) $697,882,333
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Shares
Held Value
Common Stocks (94.71%)
Accounting, Auditing &
Bookkeeping (0.16%)
Paychex, Inc. 769 $ 43,593
Advertising (0.22%)
Interpublic Group of Cos., Inc. 635 27,265
Omnicom Group, Inc. 366 33,763
61,028
Air Transportation, Scheduled (0.31%)
AMR Corp. 309(a) 10,120
Delta Air Lines, Inc. 253 11,954
FedEx Corp. 588(a) 27,554
Southwest Airlines Co. 1,030 29,355
US Airways Group, Inc. 138(a) 5,209
84,192
Aircraft & Parts (1.32%)
B.F. Goodrich Co. 210 8,597
Boeing Co. 1,852 125,589
General Dynamics Corp. 410 29,341
Honeywell International, Inc. 1,653 88,952
Northrop Grumman Corp. 148 12,432
Rockwell International Corp. 383 15,057
Textron, Inc. 295 14,879
United Technologies Corp. 967 67,509
362,356
Auto & Home Supply Stores (0.03%)
Autozone, Inc. 263(a) 7,052
Automotive Rentals, No Drivers (0.01%)
Ryder Systems, Inc. 123 2,429
Bakery Products (0.14%)
Sara Lee Corp. 1,795 38,705
Beer, Wine & Distilled Beverages (0.03%)
Brown-Forman Corp. 141 8,583
Beverages (2.23%)
Adolph Coors Co., Class B 77 4,904
Anheuser-Busch Cos., Inc. 1,870 85,552
Coca-Cola Co. 5,112 308,637
Coca-Cola Enterprises 863 15,858
PepsiCo, Inc. 2,979 144,295
Seagram Co. Ltd. 900 51,412
610,658
Blankbooks & Bookbinding (0.01%)
Deluxe Corp. 149 3,362
Blast Furnace & Basic Steel
Products (0.05%)
Allegheny Technologies, Inc. 168 3,402
Bethlehem Steel Corp. 273(a) 785
Nucor Corp. 168 5,828
USX-U.S. Steel Group 183 2,917
Worthington Industries, Inc. 176 1,683
14,615
Books (0.14%)
Harcourt General, Inc. 151 $ 8,464
McGraw-Hill Cos., Inc. 401 25,739
Meredith Corp. 105 3,334
37,537
Broadwoven Fabric Mills, Cotton (0.00%)
Springs Industries, Inc. 38 895
Business Credit Institutions (0.15%)
C.I.T. Group, Inc. 541 9,434
Providian Financial Corp. 294 30,576
40,010
Cable & Other Pay TV
Services (0.28%)
Comcast Corp. 1,867(a) 76,080
Chemicals & Allied Products (0.18%)
Dow Chemical Co. 1,399 42,844
Sigma-Aldrich Corp. 166 5,934
48,778
Combination Utility Services (0.26%)
Cinergy Corp. 327 10,014
Constellation Energy Group, Inc. 308 12,840
Entergy Corp. 459 17,585
Keyspan Corp. 277 9,747
PG&E Corp. 796 21,442
71,628
Commercial Banks (5.09%)
AmSouth Bancorp. 777 10,829
Bank of America Corp. 3,390 162,932
Bank of New York Co., Inc. 1,523 87,668
Bank One Corp. 2,385 87,052
BB&T Corp. 825 26,297
Chase Manhattan Corp. 2,701 122,895
Comerica, Inc. 322 19,421
Fifth Third Bancorp. 960 49,320
First Union Corp. 2,032 61,595
Firstar Corp. 1,978 38,942
FleetBoston Financial Corp. 1,863 70,794
Huntington Bancshares, Inc. 518 7,446
J.P. Morgan & Co., Inc. 327 54,118
KeyCorp 888 21,922
MBNA Corp. 1,758 66,035
Mellon Financial Corp. 1,007 48,588
National City Corp. 1,254 26,804
Northern Trust Corp. 458 39,102
Old Kent Financial Corp. 282 7,808
PNC Financial Corp. 596 39,857
Regions Financial Corp. 452 10,650
Southtrust Corp. 347 11,234
State Street Corp. 333 41,538
Summit Bancorp. 359 13,462
Suntrust Banks, Inc. 615 30,020
Synovus Financial Corp. 587 12,657
Union Planters Corp. 279 9,434
US Bancorp. 1,540 37,249
Wachovia Corp. 419 22,626
Wells Fargo & Co. 3,398 157,370
1,395,665
Commercial Printing (0.02%)
R. R. Donnelley & Sons Co. 251 5,396
Communications Equipment (3.17%)
ADC Telecommunications, Inc. 1,593(a) $ 34,050
Andrew Corp. 168(a) 4,420
Comverse Technology, Inc. 321(a) 35,872
Lucent Technologies, Inc. 6,893 160,693
Motorola, Inc. 4,501 112,244
Network Appliance, Inc. 645(a) 76,755
Nortel Networks Corp. 6,166 280,553
Qualcom, Inc. 1,537(a) 100,073
Scientific-Atlanta, Inc. 328 22,448
Tellabs, Inc. 847(a) 42,297
869,405
Communications Services, NEC (0.25%)
Avaya, Inc. 575(a) 7,727
Nextel Communications, Inc. 1,572(a) 60,424
68,151
Computer & Data Processing
Services (8.43%)
Adobe Systems, Inc. 494 37,575
America Online, Inc. 4,766(a) 240,349
Autodesk, Inc. 119 2,625
BMC Software, Inc. 509(a) 10,339
Citrix Systems, Inc. 383(a) 8,474
Computer Associates International, Inc. 1,220 38,887
Computer Sciences Corp. 347(a) 21,861
Compuware Corp. 753(a) 5,930
Electronic Data Systems Corp. 962 45,154
First Data Corp. 837 41,955
IMS Health, Inc. 613 14,482
Mercury Interactive Corp. 164(a) 18,204
Microsoft Corp. 10,863(a) 748,189
Novell, Inc. 671(a) 6,039
Oracle Systems Corp. 11,621(a) 383,493
Parametric Technology Corp. 562(a) 6,920
Peoplesoft, Inc. 576(a) 25,137
Sapient Corp. 245(a) 8,713
Siebel Systems, Inc. 860(a) 90,246
Sun Microsystems, Inc. 3,274(a) 363,005
Unisys Corp. 646(a) 8,236
Veritas Software Corp. 830(a) 117,043
Yahoo!, Inc. 1,134(a) 66,481
2,309,337
Computer & Office Equipment (8.34%)
Apple Computer, Inc. 671(a) 13,126
Automatic Data Processing, Inc. 1,294 84,514
Cabletron Systems, Inc. 380(a) 10,307
Ceridian Corp. 300(a) 7,500
Cisco Systems, Inc. 14,648(a) 789,161
Compaq Computer Corp. 3,509 106,709
Dell Computer Corp. 5,340(a) 157,530
EMC Corp. 4,500(a) 400,781
Gateway, Inc. 665(a) 34,321
Hewlett-Packard Co. 4,116 191,137
International Business Machines Corp. 3,635 358,047
Lexmark International Group, Inc. 263(a) $ 10,783
NCR Corp. 198(a) 8,539
Palm, Inc. 1,167(a) 62,507
Pitney Bowes, Inc. 527 15,645
Seagate Technology, Inc. 472(a) 32,981
2,283,589
Construction & Related Machinery (0.18%)
Baker Hughes, Inc. 683 23,478
Caterpillar, Inc. 713 24,999
48,477
Consumer Products (0.76%)
Fortune Brands, Inc. 324 9,538
Nabisco Group Holdings Corp. 673 19,433
Philip Morris Cos., Inc. 4,649 170,270
UST, Inc. 334 8,434
207,675
Credit Reporting & Collection (0.04%)
Equifax, Inc. 292 10,074
Crude Petroleum & Natural Gas (0.69%)
Anadarko Petroleum Co. 501 32,089
Apache Corp. 252 13,939
Burlington Resources, Inc. 445 16,020
Devon Energy Corp. 263 13,255
Kerr-McGee Corp. 195 12,736
Occidental Petroleum Corp. 762 15,145
Texaco, Inc. 1,137 67,154
USX-Marathon Group, Inc. 645 17,536
187,874
Crushed & Broken Stone (0.03%)
Vulcan Materials Co. 208 8,736
Cutlery, Handtools & Hardware (0.48%)
Danaher Corp. 293 18,496
Gillette Co. 2,174 75,818
Illinois Tool Works, Inc. 623 34,615
Snap-On, Inc. 121 3,093
132,022
Department Stores (2.07%)
Dillard's, Inc., Class A 192 2,016
Federated Department Stores, Inc. 430(a) 14,002
J.C. Penney Co., Inc. 541 6,323
Kohl's Corp. 680(a) 36,847
May Department Stores Co. 614 16,118
Sears, Roebuck & Co. 707 21,019
Target Corp. 1,878 51,880
Wal-Mart Stores, Inc. 9,220 418,357
566,562
Drug Stores & Proprietary Stores (0.51%)
CVS Corp. 807 42,721
Longs Drug Stores Corp. 78 1,706
Walgreen Co. 2,085 95,128
139,555
Drugs (9.37%)
Abbott Laboratories 3,199 168,947
ALZA Corp. 238(a) 19,263
American Home Products Corp. 2,691 170,879
Amgen, Inc. 2,122(a) 122,943
Biogen, Inc. 306(a) 18,417
Bristol-Myers Squibb Co. 4,057 247,223
Johnson & Johnson 2,871 264,491
King Pharmaceuticals, Inc. 341(a) $ 15,281
Lilly (Eli) & Co. 2,332 208,423
Medimmune, Inc. 433(a) 28,307
Merck & Co., Inc. 4,748 427,023
Pfizer, Inc. 13,032 562,830
Pharmacia Corp. 2,678 147,290
Schering-Plough Corp. 3,023 156,251
Watson Pharmaceuticals, Inc. 210(a) 13,138
2,570,706
Drugs, Proprietaries & Sundries (0.26%)
Cardinal Health, Inc. 574 54,387
McKesson HBOC, Inc. 587 16,473
70,860
Eating & Drinking Places (0.38%)
Darden Restaurants, Inc. 252 5,670
McDonald's Corp. 2,726 84,506
Tricon Global Restaurants, Inc. 301(a) 9,030
Wendy's International, Inc. 234 5,089
104,295
Electric Lighting & Wiring
Equipment (0.04%)
Cooper Industries, Inc. 192 7,344
National Service Industries, Inc. 84 1,717
Thomas & Betts Corp. 120 1,815
10,876
Electric Services (2.28%)
AES Corp. 942(a) 53,223
Ameren Corp. 283 11,249
American Electric Power Co., Inc. 665 27,597
CMS Energy Corp. 250 6,750
Consolidated Edison, Inc. 438 15,412
CP&L Energy, Inc. 329 13,263
Dominion Resources, Inc. 491 29,245
DTE Energy Co. 294 10,621
Duke Energy Corp. 759 65,606
Edison International 672 16,044
Enron Corp. 1,526 125,227
Exelon Corp. 668 40,133
FirstEnergy Corp. 472 12,213
Florida Progress Corp. 203 10,797
FPL Group, Inc. 367 24,222
GPU, Inc. 250 8,266
Niagara Mohawk Holdings, Inc. 331(a) 5,296
Pinnacle West Capital Corp. 175 7,602
PPL Corp. 299 12,315
Public Service Enterprise Group, Inc. 443 18,384
Reliant Energy, Inc. 607 25,077
Sempra Energy 422 8,730
Southern Co. 1,339 39,333
Texas Utilities Holdings Co. 544 20,162
Xcel Energy, Inc. 700 17,894
624,661
Electrical Industrial Apparatus (0.26%)
American Power Conversion 401(a) 5,188
Emerson Electric Co. 881 64,698
69,886
Electronic Components &
Accessories (5.48%)
Adaptec, Inc. 204(a) $ 3,226
Advanced Micro Devices, Inc. 644(a) 14,571
Altera Corp. 824(a) 33,732
Analog Devices, Inc. 733(a) 47,645
Broadcom Corp., Class A 458(a) 101,848
Conexant Systems, Inc. 470(a) 12,367
Intel Corp. 13,859 623,655
JDS Uniphase Corp. 1,932(a) 157,217
Linear Technology Corp. 642 41,449
LSI Logic Corp. 640(a) 21,040
Maxim Integrated Products, Inc. 583(a) 38,660
Micron Technology, Inc. 1,165(a) 40,484
Molex, Inc. 405 21,870
National Semiconductor Corp. 366(a) 9,516
Novellus Systems, Inc. 270(a) 11,053
Power-One, Inc. 152(a) 10,782
Sanmina Corp. 313(a) 35,780
Solectron Corp. 1,241(a) 54,604
Texas Instruments, Inc. 3,567 175,006
Xilinx, Inc. 679(a) 49,185
1,503,690
Engines & Turbines (0.02%)
Briggs & Stratton Corp. 45 1,606
Cummins Engine Co., Inc. 86 2,924
4,530
Fabricated Rubber Products, NEC (0.01%)
Cooper Tire & Rubber Co. 149 1,630
Family Clothing Stores (0.24%)
Gap, Inc. 1,754 45,275
Nordstrom, Inc. 268 4,405
TJX Cos., Inc. 603 16,432
66,112
Farm & Garden Machinery (0.07%)
Deere & Co. 484 17,817
Fats & Oils (0.05%)
ADM Co. 1,306 14,365
Federal & Federally Sponsored
Credit (0.90%)
Federal National Mortgage Association 2,078 160,006
Freddie Mac 1,435 86,100
246,106
Finance Services (0.04%)
Cincinnati Financial Corp. 332 12,201
Fire, Marine & Casualty
Insurance (2.61%)
Aetna, Inc. 292 16,881
Allstate Corp. 1,515 60,979
American International Group, Inc. 4,777 468,146
Chubb Corp. 361 30,482
Cigna Corp. 326 39,756
Hartford Financial Services Group, Inc. 463 34,465
Loews Corp. 203 18,460
Progressive Corp. 151 14,836
Safeco Corp. 263 6,361
St. Paul Cos., Inc. 461 23,626
713,992
Forest Products (0.08%)
Weyerhaeuser Co. 455 $ 21,357
Furniture & Home Furnishing
Stores (0.05%)
Bed Bath & Beyond, Inc. 583(a) 15,049
Gas Production & Distribution (0.44%)
Columbia Energy Group 164 11,798
Dynegy, Inc. 639 29,594
Eastern Enterprises 55 3,541
El Paso Energy Corp. 479 30,027
Nicor, Inc. 95 3,355
Oneok Inc. 60 2,377
Peoples Energy Corp. 72 2,475
Williams Cos., Inc. 913 38,175
121,342
General Industrial Machinery (0.14%)
Dover Corp. 419 17,781
Ingersoll-Rand Co. 333 12,571
Pall Corp. 255 5,498
Timken Co. 125 1,758
37,608
Glass & Glassware, Pressed or
Blown (0.52%)
Corning, Inc. 1,821 139,306
Owens-Illinois, Inc. 301(a) 1,787
141,093
Gold & Silver Ores (0.09%)
Barrick Gold Corp. 817 10,927
Homestake Mining Co. 543 2,240
Newmont Mining Corp. 347 4,706
Placer Dome, Inc. 675 5,484
23,357
Grain Mill Products (0.30%)
General Mills, Inc. 589 24,591
Kellogg Co. 837 21,239
Quaker Oats Co. 273 22,267
Ralston-Ralston Purina Group 633 15,350
83,447
Greeting Cards (0.01%)
American Greetings Corp. 133 2,419
Groceries & Related Products (0.57%)
Safeway, Inc. 1,026(a) 56,109
SUPERVALU, Inc. 273 4,197
SYSCO Corp. 687 35,853
Unilever NV 1,180 59,959
156,118
Grocery Stores (0.24%)
Albertsons, Inc. 873 20,679
Kroger Co. 1,705(a) 38,469
Winn-Dixie Stores, Inc. 290 5,582
64,730
Health & Allied Services, NEC (0.03%)
HealthSouth Corp. 796(a) $ 9,552
Heavy Construction, Except Highway (0.00%)
McDermott International, Inc. 124 1,201
Highway & Street Construction (0.12%)
Halliburton Co. 920 34,098
Hospitals (0.28%)
Columbia/HCA Healthcare Corp. 1,152 46,008
Humana, Inc. 342(a) 4,147
Tenet Healthcare Corp. 651 25,592
75,747
Hotels & Motels (0.10%)
Hilton Hotels Corp. 760 7,220
Marriot International, Inc., Class A 495 20,048
27,268
Household Appliances (4.13%)
General Electric Co. 20,445(b) 1,120,643
Maytag Corp. 161 4,609
Whirlpool Corp. 148 6,438
1,131,690
Household Furniture (0.02%)
Leggett & Platt, Inc. 405 6,632
Industrial Inorganic Chemicals (0.19%)
Air Products & Chemicals, Inc. 472 17,611
Eastman Chemical Co. 158 6,774
Great Lakes Chemical Corp. 108 3,605
Praxair, Inc. 327 12,181
Union Carbide Corp. 279 11,997
W.R. Grace & Co. 118(a) 450
52,618
Industrial Machinery, NEC (0.03%)
Parker-Hannifin Corp. 231 9,558
Industrial Organic Chemicals (0.01%)
International Flavors & Fragrances, Inc. 205 3,434
Insurance Agents, Brokers &
Services (0.27%)
Marsh & McLennan Cos., Inc. 560 73,220
Jewelry, Silverware & Plated Ware (0.05%)
Tiffany & Co. 300 12,806
Knitting Mills (0.00%)
Russell Corp. 67 1,072
Life Insurance (0.28%)
American General Corp. 521 41,941
Jefferson-Pilot Corp. 213 14,644
Lincoln National Corp. 393 19,011
75,596
Lumber & Construction Materials (0.01%)
Crane Co. 125 3,273
Lumber & Other Building
Materials (0.88%)
Home Depot, Inc. 4,781 $ 205,583
Lowe's Cos., Inc. 789 36,047
241,630
Machinery, Equipment & Supplies (0.02%)
Grainger (W. W.), Inc. 194 6,196
Management & Public Relations (0.06%)
Fluor Corp. 156 5,460
Perkinelmer, Inc. 102 12,189
17,649
Measuring & Controlling Devices (0.67%)
Agilent Technologies, Inc. 935(a) 43,302
Allergan, Inc. 272 22,865
Eaton Corp. 150 10,209
Johnson Controls, Inc. 177 10,554
KLA-Tencor Corp. 384(a) 12,984
Millipore Corp. 96 5,040
PE Corp.-PE Biosystems Group 430 50,310
Tektronix, Inc. 99 7,054
Teradyne, Inc. 358(a) 11,188
Thermo Electron Corp. 358(a) 10,382
183,888
Medical Instruments & Supplies (1.01%)
Bard (C.R.), Inc. 105 4,397
Baxter International, Inc. 603 49,559
Becton, Dickinson & Co. 522 17,487
Biomet, Inc. 366 13,245
Boston Scientific Corp. 838(a) 13,356
Guidant Corp. 633(a) 33,509
Medtronic, Inc. 2,473 134,315
St. Jude Medical, Inc. 174(a) 9,570
275,438
Medical Services & Health
Insurance (0.51%)
AFLAC, Inc. 548 40,038
Aon Corp. 527 21,838
Conseco, Inc. 672 4,662
Torchmark Corp. 263 8,761
United Healthcare Corp. 332 36,312
UnumProvident Corp. 496 14,012
Wellpoint Health Networks, Inc. 129(a) 15,085
140,708
Men's & Boys' Furnishings (0.02%)
V.F. Corp. 236 6,446
Metal Cans & Shipping Containers (0.02%)
Ball Corp. 60 2,108
Crown Cork & Seal Co., Inc. 260 2,372
4,480
Metal Mining Services (0.01%)
Freeport-McMoRan Copper &
Gold, Inc., Class B 315(a) 2,500
Metalworking Machinery (0.04%)
Black & Decker Corp. 172 6,471
Stanley Works 177 4,713
11,184
Millwork, Plywood & Strucural
Members (0.03%)
Georgia-Pacific Group 352 $ 9,460
Miscellaneous Amusement, Recreation
Services (0.03%)
Harrahs Entertainment, Inc. 241(a) 6,899
Miscellaneous Business Services (0.12%)
Cendant Corp. 1,499(a) 17,988
Convergys Corp. 318(a) 13,853
31,841
Miscellaneous Chemical Products (0.36%)
Du Pont (E. I.) De Nemours 2,153 97,692
Miscellaneous Converted Paper
Products (0.35%)
Avery Dennison Corp. 230 11,615
Bemis Company, Inc. 110 2,846
Minnesota Mining & Mfg. Co. 816 78,846
Pactiv Corp. 350(a) 3,675
96,982
Miscellaneous Food & Kindred
Products (0.16%)
Campbell Soup Co. 869 25,418
Starbucks Corp. 386(a) 17,249
42,667
Miscellaneous Furniture & Fixtures (0.04%)
Newell Rubbermaid, Inc. 550 10,553
Miscellaneous General Merchandise
Stores (0.01%)
Consolidated Stores Corp. 230(a) 2,731
Miscellaneous Manufacturers (0.72%)
Armstrong Holdings, Inc. 71 204
Tyco International Ltd. 3,478 197,159
197,363
Miscellaneous Personal Services (0.02%)
H&R Block, Inc. 189 6,745
Miscellaneous Plastics Products, NEC (0.04%)
Sealed Air Corp. 172(a) 8,278
Tupperware Corp. 119 2,038
10,316
Miscellaneous Shopping Goods Stores (0.09%)
Office Depot, Inc. 631(a) 5,245
Staples, Inc. 938(a) 13,366
Toys `R' Us, Inc. 422(a) 7,253
25,864
Miscellaneous Transportation
Equipment (0.02%)
FMC Corp. 63(a) 4,788
Mortgage Bankers & Brokers (0.03%)
Countrywide Credit Industries, Inc. 235 8,798
Motion Picture Production &
Services (1.97%)
Time Warner, Inc. 2,731 $ 207,310
Viacom, Inc., Class B 3,130(a) 178,019
Walt Disney Co. 4,303 154,101
539,430
Motor Vehicles & Equipment (0.78%)
Dana Corp. 307 6,812
Delphi Automotive Systems Corp. 1,155 18,119
Ford Motor Co. 3,907 102,070
General Motors Corp. 940 58,398
ITT Industries, Inc. 182 5,926
Navistar International Corp. 122(a) 4,034
PACCAR, Inc. 157 6,604
TRW, Inc. 256 10,752
212,715
Motor Vehicles, Parts & Supplies (0.05%)
Genuine Parts Co. 361 7,694
Visteon Corp. 271 4,793
12,487
Motorcycles, Bicycles & Parts (0.11%)
Harley Davidson, Inc. 624 30,069
Newspapers (0.31%)
Dow Jones & Co., Inc. 181 10,656
Gannett Co. 544 31,552
Knight-Ridder, Inc. 156 7,839
New York Times Co., Class A 345 12,679
Tribune Co. 636 23,572
86,298
Nursing & Personal Care Facilities (0.01%)
Manor Care, Inc. 210(a) 3,504
Oil & Gas Field Services (0.48%)
Nabors Industries, Inc. 301(a) 15,321
Rowan Cos., Inc. 195(a) 4,912
Schlumberger Ltd. 1,176 89,523
Transocean Sedco Forex, Inc. 435 23,055
132,811
Operative Builders (0.03%)
Centex Corp. 121 4,477
Pulte Corp. 83 2,765
7,242
Opthalmic Goods (0.02%)
Bausch & Lomb, Inc. 110 4,242
Ordnance & Accessories, NEC (0.12%)
Lockheed Martin Corp. 881 31,584
Paints & Allied Products (0.03%)
Sherwin-Williams Co. 335 7,265
Paper Mills (0.38%)
Fort James Corp. 423 $ 13,933
Kimberly Clark Corp. 1,111 73,326
Potlatch Corp. 59 1,976
Westvaco Corp. 208 5,928
Willamette Industries, Inc. 224 8,134
103,297
Paperboard Containers & Boxes (0.02%)
Temple-Inland, Inc. 105 4,699
Passenger Transportation
Arrangement (0.03%)
Sabre Group Holdings, Inc. 266 8,894
Personal Credit Institutions (1.14%)
American Express Co. 2,749 164,940
Associates First Capital Corp. 1,503 55,799
Capital One Financial Corp. 405 25,566
Household International Corp. 975 49,055
USA Education, Inc. 321 17,936
313,296
Petroleum Refining (4.34%)
Amerada Hess Corp. 185 11,470
Ashland, Inc. 144 4,716
Chevron Corp. 1,347 110,622
Coastal Corp. 443 33,419
Conoco, Inc., Class B 1,286 34,963
Exxon Mobil Corp. 7,191 641,347
Phillips Petroleum Co. 525 32,419
Royal Dutch Petroleum Co. ADR 4,426 262,795
Sunoco, Inc. 179 5,359
Tosco Corp. 299 8,559
Unocal Corp. 501 17,097
1,162,766
Photographic Equipment &
Supplies (0.15%)
Eastman Kodak Co. 635 28,496
Polaroid Corp. 93 936
Xerox Corp. 1,376 11,610
41,042
Plastic Materials & Synthetics (0.12%)
Hercules, Inc. 222 4,065
PPG Industries, Inc. 359 16,020
Rohm & Haas Co. 446 13,408
33,493
Plumbing & Heating, Except
Electric (0.06%)
Masco Corp. 944 17,641
Preserved Fruits & Vegetables (0.20%)
Conagra Foods, Inc. 1,100 23,513
Heinz (H.J.) Co. 717 30,069
53,582
Primary Non-Ferrous Metals (0.34%)
Alcan Aluminium Ltd. 691 21,810
Alcoa, Inc. 1,788 51,293
Engelhard Corp. 263 5,490
Inco Ltd. 375(a) 5,789
Phelps Dodge Corp. 162 7,573
91,955
Pulp Mills (0.17%)
Boise Cascade Corp. 118 $ 3,385
International Paper Co. 998 36,552
Mead Corp. 211 6,106
46,043
Radio & Television Broadcasting (0.27%)
Clear Channel Communications, Inc. 1,209(a) 72,616
Radio, Television & Computer
Stores (0.18%)
Best Buy, Inc. 426(a) 21,380
Circuit City Stores - Circuit City Group 424 5,618
RadioShack Corp. 383 22,836
49,834
Railroads (0.25%)
Burlington Northern Sante Fe Corp. 835 22,180
CSX Corp. 452 11,441
Norfolk Southern Corp. 791 11,173
Union Pacific Corp. 511 23,953
68,747
Research & Testing Services (0.04%)
Moody's Corp. 334 8,788
Quintiles Transnational Corp. 239(a) 3,331
12,119
Residential Building Construction (0.01%)
Kaufman & Broad Home Corp. 99 2,945
Retail Stores, NEC (0.12%)
Costco Wholesale Corp. 922(a) 33,768
Rubber & Plastics Footwear (0.09%)
Nike, Inc. 556 22,205
Reebok International Ltd. 117(a) 2,523
24,728
Sanitary Services (0.11%)
Allied Waste Industries, Inc. 406(a) 3,756
Waste Management, Inc. 1,284 25,680
29,436
Savings Institutions (2.07%)
Charter One Financial, Inc. 433 9,932
Citigroup, Inc. 9,286 488,677
Golden West Financial Corp. 326 18,276
Washington Mutual, Inc. 1,112 48,928
565,813
Sawmills & Planning Mills (0.01%)
Louisiana Pacific Corp. 215 1,827
Search & Navigation Equipment (0.09%)
Raytheon Co., Class B 701 23,965
Security & Commodity Services (0.20%)
Franklin Resources, Inc. 503 21,549
Price (T. Rowe) Associates, Inc. 250 11,703
Stilwell Financial, Inc. 464 20,793
54,045
Security Brokers & Dealers (1.72%)
Bear Stearns Cos., Inc. 222 13,459
Charles Schwab Corp. 2,850 100,106
Lehman Brothers Holdings, Inc. 501 32,315
Merrill Lynch & Co., Inc. 1,658 116,060
Morgan Stanley Dean Witter & Co. 2,323 186,566
Paine Webber Group, Inc. 305 21,731
470,237
Ship & Boat Building & Repairing (0.01%)
Brunswick Corp. 181 $ 3,518
Soap, Cleaners & Toilet Goods (1.18%)
Alberto-Culver Co., Class B 115 3,860
Avon Products, Inc. 490 23,765
Clorox Co. 485 21,643
Colgate-Palmolive Co. 1,186 69,689
Ecolab, Inc. 264 10,345
Procter & Gamble Co. 2,699 192,810
322,112
Special Industry Machinery (0.32%)
Applied Materials, Inc. 1,674(a) 88,931
Sugar & Confectionery Products (0.12%)
Hershey Foods Corp. 282 15,316
Wrigley (Wm.) Jr. Co. 235 18,609
33,925
Surety Insurance (0.11%)
MBIA, Inc. 203 14,756
MGIC Investment Corp. 220 14,988
29,744
Telephone Communication (5.90%)
Alltel Corp. 651 41,949
AT&T Corp. 7,752 179,749
BellSouth Corp. 3,868 186,873
Centurytel, Inc. 290 11,165
Global Crossing Ltd. 1,817(a) 42,927
Qwest Communications International, Inc.3,428(a) 166,687
SBC Communications, Inc. 6,996 403,583
Sprint Corp. 1,826 46,563
Sprint PCS Group 1,917(a) 73,086
Verizon Communications 5,610 324,328
WorldCom Inc. 5,930(a) 140,837
1,617,747
Tires & Inner Tubes (0.02%)
Goodyear Tire & Rubber Co. 322 5,957
Toys & Sporting Goods (0.06%)
Hasbro, Inc. 356 3,827
Mattel, Inc 880 11,385
15,212
Variety Stores (0.06%)
Dollar General Corp. 679 10,524
Kmart Corp. 991(a) 5,884
16,408
Water Transportation of Passengers (0.11%)
Carnival Corp. 1,217 30,197
Women's & Misses' Outerwear (0.02%)
Liz Claiborne, Inc. 110 4,675
Women's Clothing Stores (0.08%)
Limited, Inc. 891 22,498
Total Common Stocks 25,948,208
Principal
Amount Value
Commercial Paper (5.61%)
Federal & Federally Sponsored Credit (5.61%)
Investment in Joint Trading Account,
Federal Home Loan Bank System;
6.45%; 11/1/2000 $1,535,813 $1,535,813
Total Portfolio Investments (100.32%) 27,484,021
Liabilities, net of cash, receivables
and other assets (-0.32%) (87,819)
Total Net Assets (100.00%) $27,396,202
Contract Opening Current Unrealized
Type Commitment Market Value Market Value Gain(Loss)
Futures Contracts
4 S&P 500 Buy $1,137,575 $1,080,150 $(57,425)
December 2000
Futures
(a) Non-income producing security - No dividend paid during the past
twelve months.
(b) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $164,430.
PRINCIPAL MIDCAP FUND, INC.
Shares
Held Value
Common Stocks (96.84%)
Accounting, Auditing, &
Bookkeeping (0.74%)
Paychex, Inc. 62,571 $ 3,546,994
Air Transportation, Scheduled (1.37%)
Southwest Airlines Co. 230,300 6,563,550
Cable & Other Pay TV Services (1.10%)
Charter Communciations, Inc., Class A 270,000(a) 5,265,000
Combination Utility Services (1.10%)
Entergy Corp. 137,000 5,248,813
Commercial Banks (4.71%)
Associated Bancorp. 58,888 1,416,992
Marshall & Ilsley Corp. 88,000 3,987,500
North Fork Bancorp., Inc. 337,487 6,813,019
State Street Corp. 83,000 10,353,420
22,570,931
Communications Equipment (2.92%)
Comverse Technology, Inc. 125,200(a) 13,991,100
Computer & Data Processing
Services (10.65%)
Brocade Communications Systems, Inc. 11,645(a) 2,647,782
Cadence Design Systems, Inc. 121,200(a) 3,113,325
DST Systems, Inc. 35,868(a) 2,210,365
Fiserv, Inc. 80,917(a) 4,243,085
IMS Health, Inc. 448,400 10,593,450
Intuit, Inc. 205,000(a) 12,594,688
Rational Software Corp. 45,232(a) 2,699,785
Sungard Data Systems, Inc. 145,900(a) 7,459,138
Symantec Corp. 142,000(a) 5,546,875
51,108,493
Computer & Office Equipment (1.38%)
Ceridian Corp. 264,000(a) 6,600,000
Crude Petroleum & Natural Gas (2.52%)
Devon Energy Corp. 135,000 6,804,000
Newfield Exploration Co. 140,000(a) 5,285,000
12,089,000
Cutlery, Handtools & Hardware (0.92%)
Danaher Corp. 70,000 4,418,750
Drugs (4.47%)
Biochem Pharma, Inc. 132,000(a) 3,267,000
Biogen, Inc. 84,000(a) 5,055,750
Forest Laboratories, Inc. 34,900(a) 4,624,250
Genzyme Corp. 119,200(a) 8,463,200
21,410,200
Electric Services (7.68%)
Calpine Corp. 74,300(a) $5,865,056
DQE, Inc. 80,000 2,795,000
Duke Energy Corp. 118,000 10,199,625
Exelon Corp. 79,000 4,749,875
GPU, Inc. 163,000 5,389,188
Ipalco Enterprises, Inc. 109,000 2,445,687
Niagara Mohawk Holdings, Inc. 334,000(a) 5,344,000
36,788,431
Electronic Components &
Accessories (3.84%)
Integrated Device Technology, Inc. 27,000(a) 1,520,438
Novellus Systems, Inc. 99,600(a) 4,077,375
QLogic Corp. 37,700(a) 3,647,475
Vitesse Semiconductor Corp. 131,000(a) 9,161,812
18,407,100
Fabricated Rubber Product, NEC (0.72%)
Weatherford International, Inc. 94,300(a) 3,441,950
Gas Production & Distribution (0.98%)
Dynegy, Inc. 47,000 2,176,688
MCN Energy Group, Inc. 102,000 2,511,750
4,688,438
Grain Mill Products (0.99%)
Quaker Oats Co. 58,000 4,730,625
Groceries & Related Products (1.55%)
Sysco Corp. 142,000 7,410,625
Hospitals (0.80%)
Universal Health
Services, Inc., Class B 45,800(a) 3,841,475
Hotels & Motels (2.37%)
Marriot International, Inc., Class A 280,100 11,344,050
Laundry, Cleaning, & Garment
Services (0.83%)
Cintas Corp. 86,000 3,988,250
Machinery, Equipment & Supplies (0.54%)
National Oilwell, Inc. 88,000(a) 2,574,000
Measuring & Controlling Devices (3.05%)
Millipore Corp. 86,400 4,536,000
Roper Industries, Inc. 165,300 5,785,500
Waters Corp. 59,000(a) 4,281,187
14,602,687
Medical Instruments & Supplies (3.68%)
Biomet, Inc. 134,000 4,849,125
Guidant Corp. 191,000(a) 10,111,063
Stryker Corp. 57,000 2,686,125
17,646,313
Medical Services & Health
Insurance (1.08%)
AFLAC, Inc. 71,000 5,187,437
Miscellaneous Business Services (2.21%)
Cendant Corp. 615,000(a) 7,380,000
Concord EFS, Inc. 78,000(a) 3,222,375
10,602,375
Miscellaneous Investing (4.19%)
AMB Property Corp. 125,000 $ 2,937,500
Boston Properties, Inc. 72,000 2,916,000
Equity Office Properties Trust 160,000 4,820,000
Equity Residential Properties Trust 104,000 4,894,500
Prologis Trust 216,000 4,536,000
20,104,000
Miscellaneous Personal Services (1.13%)
H&R Block, Inc. 152,000 5,424,500
Motor Vehicles & Equipment (0.62%)
SPX Corp. 24,000(a) 2,967,000
Oil & Gas Field Services (1.31%)
BJ Services Co. 63,000(a) 3,303,562
R&B Falcon Corp. 119,000(a) 2,975,000
6,278,562
Petroleum Refining (2.08%)
Coastal Corp. 132,000 9,957,750
Professional & Commercial
Equipment (0.92%)
Sybron International Corp. 178,000(a) 4,405,500
Publicly Traded Investment Fund (4.77%)
iShares S&P Midcap 400 Index Fund 68,000 7,072,000
S&P Mid-Cap 400 Depository Receipts 165,830 15,774,579
22,846,579
Radio & Television Broadcasting (2.19%)
Univision Communication, Inc. 134,000(a) 5,125,500
USA Networks, Inc. 265,000(a) 5,366,250
10,491,750
Savings Institutions (5.06%)
Charter One Financial, Inc. 193,250 4,432,672
TCF Financial Corp. 317,400 12,834,862
Washington Mutual, Inc. 159,000 6,996,000
24,263,534
Security & Commodity Services (0.97%)
Franklin Resources, Inc. 108,000 4,626,720
Security Brokers & Dealers (0.71%)
Lehman Brothers Holdings, Inc. 52,400 3,379,800
Surety Insurance (1.43%)
Ambac Financial Group, Inc. 44,000 3,511,750
MGIC Investment Corp. 49,000 3,338,125
6,849,875
Telephone Communication (8.55%)
Alltel Corp. 153,000 9,858,937
Broadwing, Inc. 166,900(a) 4,714,925
Centurytel, Inc. 196,047 7,547,810
McLeodUSA, Inc. 232,826(a) 4,481,900
Telephone and Data Systems, Inc. 86,000 9,073,000
Western Wireless Corp. 113,000(a) 5,367,500
41,044,072
Variety Stores (0.71%)
Family Dollar Stores, Inc. 174,500 $ 3,391,844
Total Common Stocks 464,098,073
Principal
Amount Value
Commercial Paper (3.23%)
Personal Credit Institutions (3.23%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 $15,473,796 $15,473,796
Total Portfolio Investments (100.07%) 479,571,869
Liabilities, net of cash, receivables and
other assets (-0.07%) (329,493)
Total Net Assets (100.00%) $479,242,376
(a) Non-income producing security - No dividend paid during the
past twelve months.
PRINCIPAL PARTNERS AGGRESSIVE GROWTH
FUND, INC.
Shares
Held Value
Common Stocks (96.61%)
Advertising (0.55%)
Omnicom Group, Inc. 4,800 $ 442,800
Aircraft & Parts (6.04%)
General Dynamics Corp. 19,400 1,388,313
Textron, Inc. 9,900 499,331
United Technologies Corp. 43,200 3,015,900
4,903,544
Beverages (2.37%)
Anheuser-Busch Cos., Inc. 19,800 905,850
PepsiCo, Inc. 21,000 1,017,188
1,923,038
Cable & Other Pay TV Services (0.95%)
Comcast Corp. 19,000(a) 774,250
Commercial Banks (2.87%)
Bank of New York Co., Inc. 29,300 1,686,581
FleetBoston Financial Corp. 17,000 646,000
2,332,581
Communications Equipment (4.28%)
Ciena Corp. 5,500(a) 578,188
Efficient Networks, Inc. 11,900(a) 499,242
Juniper Networks, Inc. 3,200(a) 624,000
McData Corp. 2,000(a) 166,719
Nortel Networks Corp. 20,200 919,100
SBA Communications Corp. 2,000(a) 100,250
Scientific-Atlanta, Inc. 8,600 588,563
3,476,062
Communications Services, NEC (1.17%)
Avaya Inc. 1(a) 9
Crown Castle International Corp. 22,200(a) 672,938
Spectrasite Holdings, Inc. 13,900(a) 274,525
947,472
Computer & Data Processing
Services (6.59%)
Brocade Communications Systems, Inc. 1,000(a) 227,375
Inktomi Corp. 2,400(a) 152,250
Microsoft Corp. 32,100(a) 2,210,888
Oracle Systems Corp. 34,900(a) 1,151,700
Sun Microsystems, Inc. 13,100(a) 1,452,463
Verisign, Inc. 1,200(a) 158,400
5,353,076
Computer & Office Equipment (8.93%)
Cisco Systems, Inc. 64,600(a) 3,480,323
Compaq Computer Corp. 13,900 422,699
EMC Corp. 13,500(a) 1,202,344
Extreme Networks, Inc. 900(a) 74,644
Hewlett-Packard Co. 12,000 557,250
International Business Machines Corp. 10,300 1,014,550
Seagate Technology, Inc. 7,100(a) 496,113
7,247,923
Consumer Products (0.57%)
Philip Morris Cos., Inc. 12,700 465,138
Department Stores (0.89%)
Wal-Mart Stores, Inc. 15,900 $ 721,463
Drugs (13.25%)
Abbott Laboratories 7,100 374,969
American Home Products Corp. 21,400 1,358,900
Amgen, Inc. 5,150(a) 298,378
Bristol-Myers Squibb Co. 16,000 975,000
Crucell NV ADR 1,100(a) 14,161
Genentech, Inc. 4,000(a) 330,000
Invitrogen Corp. 1,600(a) 121,700
Johnson & Johnson 5,500 506,688
Lilly (Eli) & Co. 3,600 321,750
Merck & Co., Inc. 12,800 1,151,200
Millenium Pharmaceuticals, Inc. 1,600(a) 116,100
Pfizer, Inc. 93,100 4,020,755
Pharmacia Corp. 18,468 1,015,740
Tularik, Inc. 4,800(a) 152,400
10,757,741
Electrical Industrial Apparatus (0.01%)
Hydrogenics Corp. 800(a) 9,650
Electronic Components &
Accessories (10.07%)
Analog Devices, Inc. 4,800(a) 312,000
Broadcom Corp., Class A 2,400(a) 533,700
Infineon Technologies AG ADR 4,000(a) 171,500
Intel Corp. 55,100 2,479,498
Intersil Holding Corp. 6,700(a) 321,181
JDS Uniphase Corp. 7,700(a) 626,588
Maxim Integrated Products, Inc. 16,200(a) 1,074,263
PMC Sierra, Inc. 2,000 339,000
QLogic Corp. 4,800(a) 464,400
Sanmina Corp. 4,000(a) 457,250
Texas Instruments, Inc. 19,900 976,344
Transwitch Corp. 4,400(a) 254,100
Tycom, Ltd. 5,100(a) 170,850
8,180,674
Federal & Federally Sponsored
Credit (1.26%)
Freddie Mac 17,000 1,020,000
Fire, Marine & Casualty
Insurance (1.38%)
American International Group, Inc. 11,450 1,122,100
Glass & Glassware, Pressed or
Blown (0.86%)
Corning, Inc. 9,100 696,150
Grain Mill Products (0.41%)
Quaker Oats Co. 4,100 334,406
Groceries & Related Products (0.83%)
Safeway, Inc. 12,300(a) 672,656
Hospitals (0.47%)
HCA - The Healthcare Corp. 9,500 379,406
Household Appliances (5.17%)
General Electric Co. 76,500 4,193,156
Household Audio & Video
Equipment (0.22%)
Gemstar-TV Guide International, Inc. 2,555(a) $ 175,177
Jewelry, Silverware & Plated Ware (0.25%)
Tiffany & Co. 4,800 204,900
Lumber & Other Building
Materials (1.69%)
Home Depot, Inc. 32,000 1,376,000
Measuring & Controlling Devices (0.52%)
PE Corp. - PE Biosystems Group 3,600 421,200
Medical Instruments & Supplies (0.47%)
Medtronic, Inc. 7,100 385,619
Miscellaneous Business Services (0.28%)
StorageNetworks, Inc. 3,600(a) 228,375
Miscellaneous Manufacturers (7.08%)
Tyco International Ltd. 101,400 5,748,113
Miscellaneous Shopping Goods
Stores (0.23%)
Dollar Tree Stores, Inc. 4,700(a) 183,888
Motion Picture Production &
Services (3.87%)
AT&T Corp.-Liberty Media
Group, Class A 69,700(a) 1,254,600
Time Warner, Inc. 17,100 1,298,061
Viacom Inc., Class B 10,303(a) 585,983
3,138,644
Motor Vehicles & Equipment (0.86%)
General Motors Corp., Class H 21,500 696,600
Personal Credit Institutions (1.09%)
American Express Co. 14,800 888,000
Radio & Television Broadcasting (2.57%)
American Tower Corp., Class A 34,100(a) 1,395,969
Clear Channel Communications 11,558(a) 694,202
2,090,171
Research & Testing Services (0.02%)
Ciphergen Biosystems, Inc. 600(a) 18,600
Savings Institutions (2.12%)
Citigroup, Inc. 32,766 1,724,311
Soap, Cleaners & Toilet Goods (0.70%)
Procter & Gamble Co. 7,900 564,356
Special Industry Machinery (1.22%)
Applied Materials, Inc. 16,600(a) $ 881,875
ASM Lithography Holdings NV 3,800(a) 105,688
987,563
Telephone Communication (3.66%)
AT&T Corp. 17,129 397,179
Global Crossing Ltd. 7,475(a) 176,597
Nokia Corp. ADR, Class A 4,000 171,000
Verizon Communications 29,242 1,690,553
Worldcom, Inc. 22,600(a) 536,750
2,972,079
Women's Clothing Stores (0.84%)
Limited, Inc. 27,000 681,750
Total Common Stocks 78,438,632
Preferred Stock (0.39%)
Newspapers (0.39%)
The News Corp. Ltd. ADR 8,700 314,831
Total Portfolio Investments (97.00%) 78,753,463
Cash, receivables and other assets,
net of liabilities (3.00%) 2,434,494
Total Net Assets (100.00%) $81,187,957
(a) Non-income producing security - No dividend paid during the
past twelve months.
PRINCIPAL PARTNERS LARGECAP GROWTH
FUND, INC.
Shares
Held Value
Common Stocks (96.00%)
Accounting, Auditing &
Bookkeeping (2.28%)
Paychex, Inc. 5,100 $ 289,106
Communications Equipment (9.83%)
Ciena Corp. 2,500(a) 262,813
Juniper Networks, Inc. 2,590(a) 505,050
Network Appliance, Inc. 4,030(a) 479,570
1,247,433
Computer & Data Processing
Services (25.13%)
Brocade Communications Systems, Inc. 3,620(a) 823,097
Check Point Software Technologies Ltd. 3,030(a) 479,876
i2 Technologies, Inc. 2,330(a) 396,100
Mercury Interactive Corp. 3,500(a) 388,500
Siebel Systems, Inc. 5,490(a) 576,107
Sun Microsystems, Inc. 4,740(a) 525,548
3,189,228
Computer & Office Equipment (12.49%)
Automatic Data Processing, Inc. 8,100 529,031
Cisco Systems, Inc. 5,910(a) 318,401
EMC Corp. 8,280(a) 737,437
1,584,869
Department Stores (3.03%)
Kohl's Corp. 7,090(a) 384,189
Drug Stores & Proprietary Stores (2.09%)
Walgreen Co. 5,800 264,625
Drugs, Proprietaries & Sundries (4.41%)
Cardinal Health, Inc. 5,900 559,025
Electric Services (8.20%)
AES Corp. 9,380(a) 529,970
Enron Corp. 6,230 511,249
1,041,219
Electronic Components &
Accessories (8.55%)
Applied Micro Circuits Corp. 1,700(a) 129,838
Broadcom Corp., Class A 1,420(a) 315,773
PMC-Sierra, Inc. 720(a) 122,040
Sanmina Corp. 4,530(a) 517,836
1,085,487
Fire, Marine & Casualty
Insurance (2.01%)
American International Group, Inc. 2,600 254,800
Glass & Glassware, Pressed or
Blown (2.03%)
Corning, Inc. 3,370 257,805
Household Appliances (2.01%)
General Electric Co. 4,660 255,426
Medical Services & Health
Insurance (5.08%)
UnitedHealth Group, Inc. 5,890 $ 644,219
Oil & Gas Field Services (2.77%)
Schlumberger Ltd. 4,620 351,698
Savings Institutions (6.09%)
Citigroup, Inc. 10,010 526,776
Washington Mutual, Inc. 5,600 246,400
773,176
Total Portfolio Investments (96.00%) 12,182,305
Cash, receivables, and other assets
net of liabilities (4.00%) 507,742
Total Net Assets (100.00%) $12,690,047
(a) Non-income producing security - No dividend paid during the
past twelve months.
PRINCIPAL PARTNERS MIDCAP GROWTH FUND, INC.
Shares
Held Value
Common Stocks (96.55%)
Advertising (2.01%)
Getty Images, Inc. 4,980(a) $ 158,115
TMP Worldwide, Inc. 3,410(a) 237,368
395,483
Business Credit Institutions (1.05%)
Providian Financial Corp. 1,990 206,960
Cable & Other Pay TV Services (0.70%)
Charter Communciations, Inc., Class A 7,090(a) 138,255
Combination Utility Services (0.34%)
TNPC, Inc. 4,030(a) 66,999
Commercial Banks (0.43%)
Zions Bancorp. 1,460 83,859
Communications Equipment (5.12%)
Inrange Technologies Corp. 3,590(a) 131,484
McData Corp. 1,890(a) 157,549
Natural Microsytems Corp. 2,860(a) 129,236
Phone.com, Inc. 1,330(a) 123,108
Polycom, Inc. 4,010(a) 260,650
Powerwave Technologies, Inc. 4,240(a) 204,050
1,006,077
Computer & Data Processing
Services (20.58%)
Aether Systems, Inc. 1,960(a) 158,025
Agile Software Corp. 2,020(a) 152,258
Ariba, Inc. 3,660(a) 462,533
Art Technology Group, Inc. 2,250(a) 141,188
Brocade Communications Systems, Inc. 2,160(a) 491,130
Clarent Corp. 3,770(a) 117,106
Commerce One, Inc. 4,410(a) 283,067
Fiserv, Inc. 1,700(a) 89,144
IMS Health, Inc. 4,370 103,241
Interwoven, Inc. 1,730(a) 174,297
Intuit, Inc. 4,710(a) 289,371
Mercury Interactive Corp. 2,220(a) 246,420
Micromuse, Inc. 1,930(a) 327,497
Nuance Communications, Inc. 1,660(a) 143,175
Portal Software, Inc. 4,180(a) 147,084
Quest Software, Inc. 1,480(a) 64,657
Rational Software Corp. 3,840(a) 229,200
Software.com, Inc. 850(a) 126,650
Sungard Data Systems, Inc. 4,330(a) 221,371
VerticalNet, Inc. 2,620(a) 73,073
4,040,487
Computer & Office Equipment (6.78%)
Avici Systems, Inc. 2,270(a) $ 98,461
Emulex Corp. 1,330(a) 195,344
Extreme Networks, Inc. 3,590(a) 297,746
Palm, Inc. 11,870(a) 635,787
Sandisk Corp. 1,930(a) 103,707
1,331,045
Construction & Related Machinery (0.23%)
Cooper Cameron Corp. 810(a) 44,145
Crude Petroleum & Natural Gas (1.56%)
Apache Corp. 3,920 216,825
Kerr-McGee Corp. 1,360 88,825
305,650
Drugs (6.61%)
Alpharma, Inc., Class A 2,010 78,013
Biovail Corp. 4,260(a) 179,186
Forest Laboratories, Inc. 970(a) 128,525
IDEC Pharmaceuticals 1,180(a) 231,427
King Pharmaceuticals, Inc. 5,040(a) 225,855
Millenium Pharmaceuticals, Inc. 3,640(a) 264,128
Watson Pharmaceuticals, Inc. 3,050(a) 190,816
1,297,950
Electric Services (1.61%)
Calpine Corp. 2,330(a) 183,924
Southern Energy, Inc. 4,880(a) 132,980
316,904
Electronic Components &
Accessories (13.77%)
Applied Micro Circuits Corp. 8,080(a) 617,110
Avanex Corp. 1,890(a) 191,953
Celestica, Inc. 1,750(a) 125,781
Finisar Corp. 3,050(a) 87,878
Globespan, Inc. 2,870(a) 220,811
Integrated Circuit Systems, Inc. 4,420(a) 60,222
Intersil Holding Corp. 2,860(a) 137,101
Jabil Circuit, Inc. 2,520(a) 143,797
Oplink Communications, Inc. 1,830(a) 44,606
Power-One, Inc. 1,430(a) 101,441
Sanmina Corp. 2,760(a) 315,502
Transwitch Corp. 3,960(a) 228,690
Triquint Semiconductor, Inc. 3,160(a) 121,068
Vitesse Semiconductor Corp. 4,400(a) 307,725
2,703,685
Family Clothing Stores (0.62%)
American Eagle Outfitters, Inc. 3,550(a) 122,253
Furniture & Home Furnishishings
Store (0.74%)
Bed Bath & Beyond, Inc. 5,640(a) 145,582
Gas Production & Distribution (0.47%)
Dynegy, Inc. 1,990 92,162
Grain Mill Products (0.55%)
Ralston-Ralston Purina Group 4,410 106,943
Groceries & Related Products (0.65%)
Suiza Foods Corp. 2,770(a) 128,286
Health & Allied Services, NEC (0.48%)
HealthSouth Corp. 7,920(a) $ 95,040
Hospitals (1.26%)
Tenet Healthcare Corp. 6,300 247,669
Hotels & Motels (0.49%)
MGM Mirage, Inc. 2,800 96,775
Insurance Agents, Brokers &
Services (0.43%)
Express Scripts, Inc. 1,250(a) 83,984
Jewelry, Silverware & Plated Ware (0.49%)
Tiffany & Co. 2,270 96,901
Management & Public Relations (0.81%)
Perkinelmer, Inc. 1,330 158,935
Measuring & Controlling Devices (7.01%)
Allergan, Inc. 2,120 178,212
EXFO Electro-Optical Engineering Inc. 2,040(a) 77,775
Newport Corp. 2,230 254,673
PE Corp. - PE Biosystems Group 3,560 416,520
Tektronix, Inc. 1,980 141,075
Waters Corp. 4,250(a) 308,391
1,376,646
Medical & Dental Laboratoratories (0.44%)
Quest Diagnostics, Inc. 890(a) 85,662
Medical Instruments & Supplies (2.44%)
Minimed, Inc. 3,140(a) 229,024
St. Jude Medical, Inc. 4,530(a) 249,150
478,174
Medical Services & Health
Insurance (1.07%)
UnitedHealth Group, Inc. 1,920 210,000
Miscellaneous Business Services (1.26%)
Concord EFS, Inc. 5,980(a) 247,049
Miscellaneous Food & Kindred
Products (1.00%)
Starbucks Corp. 4,410(a) 197,072
Miscellaneous Shopping Goods
Stores (1.10%)
Dollar Tree Stores, Inc. 5,530(a) 216,361
Motor Vehicles & Equipment (0.65%)
SPX Corp. 1,030(a) 127,334
Motorcycles, Bicycles & Parts (0.77%)
Harley Davidson, Inc. 3,140 151,309
Oil & Gas Field Services (0.81%)
Nabors Industries, Inc. 3,110(a) 158,299
Personal Credit Institutions (0.75%)
Capital One Financial Corp. 2,320 146,450
Personnel Supply Services (1.00%)
Robert Half International, Inc. 6,470(a) 197,335
Professional & Commercial
Equipment (0.72%)
Sybron International Corp. 5,690(a) $ 140,827
Radio, Television & Computer
Stores (0.95%)
RadioShack Corp. 3,130 186,626
Research & Testing Services (0.62%)
Celgene Corp. 1,880(a) 121,025
Security & Commodity Services (0.72%)
Federated Investors, Inc. 4,850 141,256
Soap, Cleaners & Toilet Goods (0.80%)
Ecolab, Inc. 4,010 157,142
Surety Insurance (0.25%)
XL Capital Ltd., Class A 630 48,431
Telephone Communication (4.92%)
McLeodUSA, Inc. 8,620(a) 165,935
Redback Networks, Inc. 2,500(a) 266,094
Research In Motion 2,290(a) 229,000
Wireless Facilities, Inc. 3,260(a) 163,000
XO Communications, Inc. 4,230(a) 142,696
966,725
Vocational Schools (0.51%)
Apollo Group, Inc. 2,580(a) 100,943
Water Transportation Services (0.45%)
Tidewater, Inc. 1,930 89,142
Women's Clothing Stores (0.53%)
Limited, Inc. 4,160 105,040
Total Common Stocks 18,960,877
Cash, receivables and other assets,
net of liabilities (3.45%) 677,052
Total Net Assets (100.00%) $19,637,929
(a) Non-income producing security - No dividend paid during the
past twelve months.
Common Stocks (93.69%)
Apartment REITs (24.51%)
Apartment Investment & Management Co. 17,000 $ 776,687
Archstone Communities Trust 28,500 671,531
Avalonbay Communities, Inc. 14,887 683,872
BRE Properties, Inc. 16,800 531,300
Charles E. Smith Residential Realty 11,800 519,200
Equity Residential Properties Trust 18,000 847,125
Essex Property Trust, Inc. 9,950 517,400
4,547,115
Diversified REITs (4.51%)
Cousins Properties, Inc. 18,000 468,000
Vornado Realty Trust 10,600 369,012
837,012
Factory Outlet REITs (0.30%)
Chelsea GCA Realty, Inc. 1,700 54,825
Hotel REITs (5.06%)
Hospitality Properties Trust 10,700 230,719
Lasalle Hotel Properties 16,200 232,875
Meristar Hospitality Corp. 17,300 330,863
Starwood Hotels & Resorts
Worldwide, Inc. 4,900 145,162
939,619
Mall REITs (6.56%)
CBL & Associates 14,400 333,000
General Growth Properties, Inc. 15,300 451,350
Simon Property Group, Inc. 19,400 432,862
1,217,212
Manufactured Housing REITs (0.43%)
Chateau Properties 2,836 79,762
Mortgage, Mixed Use & Miscellaneous
REITs (0.45%)
Eastgroup Properties, Inc. 4,105 83,639
Office & Industrial REITs (43.40%)
AMB Property Corp. 26,300 618,050
Arden Realty Group, Inc. 17,300 415,200
Bedford Property Investors 10,900 214,594
Boston Properties, Inc. 12,300 498,150
Carramerica Realty Corp. 9,400 277,888
Centerpoint Properties Corp. 9,600 426,600
Duke-Weeks Realty Corp. 26,700 632,456
Equity Office Properties Trust 41,976 1,264,527
First Industrial Realty Trust, Inc. 4,700 145,113
Kilroy Realty Corp. 14,300 372,694
Liberty Property Trust 14,500 383,344
Mission West Properties, Inc. 18,500 248,594
Prologis Trust 36,650 769,650
Reckson Associates Realty Corp. 10,600 239,825
Reckson Associates Realty Corp., Class B12,018 277,165
SL Green Realty Corp. 11,500 308,344
Spieker Properties, Inc. 17,350 960,756
8,052,950
Self Storage REITs (0.93%)
Public Storage, Inc. 7,700 $ 173,250
Shopping Center REITs (7.54%)
First Washington Realty Trust, Inc. 7,500 189,375
JDN Realty Corp. 15,300 167,344
Kimco Realty Corp. 15,300 615,825
Pan Pacific Retail Properties, Inc. 13,900 284,081
Weingarten Realty Investors 3,410 143,007
1,399,632
Total Common Stocks 17,385,016
Principal
Amount Value
Commercial Paper (9.10%)
Business Credit Institutions (4.61%)
Ford Motor Credit Co.; 6.45%; 11/1/2000$450,000 $ 449,918
Household Finance Corp.;
6.50%; 11/3/2000 405,000 404,854
854,772
Personal Credit Institutions (4.49%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 833,022 833,022
Total Commercial Paper 1,687,794
Total Portfolio Investments (102.79%) 19,072,810
Liabilities, net of cash, receivables and
other assets (-2.79%) (517,605)
Total Net Assets (100.00%) $18,555,205
(a) Non-income producing security - No dividend paid during the past
twelve months.
PRINCIPAL SMALLCAP FUND, INC.
Shares
Held Value
Common Stocks (94.84%)
Advertising (0.91%)
R.H. Donnelley Corp. 39,700(a) $ 898,213
Air Transportation, Scheduled (1.60%)
Airtran Holdings, Inc. 160,019(a) 710,084
Frontier Airlines, Inc. 12,191(a) 286,488
Skywest, Inc. 11,551 583,326
1,579,898
Apparel, Piece Goods, & Notions (0.29%)
Men's Wearhouse, Inc. 9,736(a) 284,778
Beverages (0.68%)
Constellation Brands, Inc. 13,700(a) 667,875
Blast Furnace & Basic Steel
Products (1.68%)
Allegheny Technologies, Inc. 32,400 656,100
Quanex Corp. 31,200 618,150
Texas Industries, Inc. 16,500 384,656
1,658,906
Books (0.89%)
Banta Corp. 37,900 874,069
Business Credit Institutions (0.58%)
ePlus, Inc. 39,000(a) 569,766
Commercial Banks (4.76%)
BancWest Corp. 31,300 639,694
Centura Banks, Inc. 17,700 680,344
Colonial Bancgroup, Inc. 55,500 489,094
Community First Bankshare, Inc. 29,600 458,800
Cullen Frost Bankers 25,900 862,794
First Midwest Bancorp, Inc. 30,700 769,419
Mercantile Bancshares Corp. 7,800 293,475
Provident Bankshares Corp. 12,433 235,450
United Bankshares, Inc. 13,500 263,250
4,692,320
Communications Equipment (4.80%)
Aspect Communications, Inc. 40,659(a) 670,238
Efficient Networks, Inc. 16,648(a) 698,436
Harmonic, Inc. 14,068(a) 203,986
Inet Technologies, Inc. 35,361(a) 1,449,801
Metricom, Inc. 21,231(a) 376,850
Natural Microsytems Corp. 17,323(a) 782,783
Turnstone Systems, Inc. 26,170(a) 556,112
4,738,206
Communications Services, NEC (0.80%)
ITC Deltacom, Inc. 97,359(a) 787,999
Computer & Data Processing
Services (10.76%)
AVT Corp. 3,139(a) $ 19,717
BindView Development Corp. 105,889(a) 827,258
Ciber, Inc. 32,389(a) 253,039
Clarent Corp. 17,465(a) 542,507
F5 Networks, Inc. 16,929(a) 524,799
Information Resource Engineering, Inc. 33,000 1,386,000
Interactive Intelligence, Inc. 26,182(a) 955,643
Internet Pictures Corp. 116,195(a) 248,730
Matrixone, Inc. 23,600(a) 700,625
Metro Information Services, Inc. 9,821(a) 61,381
Netpliance, Inc. 141,425(a) 256,333
Netsolve, Inc. 80,646(a) 604,845
Netzee, Inc. 94,841(a) 269,704
Organic, Inc. 67,000(a) 217,750
Quintus Corp. 118,900(a) 888,034
Razorfish, Inc. 67,879(a) 305,456
RealNetworks, Inc. 30,834(a) 635,470
SPSS, Inc. 35,400(a) 796,500
SonicWall, Inc. 41,067(a) 613,438
The 3Do Co. 165,000(a) 505,313
10,612,542
Computer & Office Equipment (0.68%)
Paradyne Networks, Inc. 31,934(a) 127,736
Xircom, Inc. 38,175(a) 539,222
666,958
Crude Petroleum & Natural (1.11%)
Cross Timbers Oil Co. 26,200 492,888
Noble Affiliates, Inc. 16,300 598,006
1,090,894
Department Stores (1.09%)
BJ's Wholesale Club, Inc. 20,100(a) 662,044
Saks, Inc. 40,885(a) 416,516
1,078,560
Drugs (3.33%)
Aviron 5,242(a) 342,696
Matritech, Inc. 118,755(a) 645,730
Sangstat Medical Corp. 48,973(a) 489,730
SuperGen, Inc. 53,807(a) 692,765
Texas Biotechnology Corp. 36,964(a) 545,219
Titan Pharmaceuticals, Inc. 13,418(a) 564,629
3,280,769
Drugs, Proprietaries & Sundries (0.51%)
Amerisource Health Corp., Class A 11,600(a) 503,875
Eating & Drinking Places (2.54%)
Brinker International, Inc. 18,100(a) 710,425
CEC Entertainment, Inc. 14,400(a) 459,000
Papa John's International, Inc. 19,497(a) 489,862
Rare Hospitality International, Inc. 36,300(a) 843,975
2,503,262
Electric Services (2.18%)
Cleco Corp. 22,500 1,070,156
Idacorp, Inc. 22,000 1,084,875
2,155,031
Electronic Components &
Accessories (7.95%)
Advanced Energy Industries 19,453(a) $335,564
APW Ltd. 36,946(a) 1,706,443
ASM International NV 18,478(a) 296,803
Concord Communications, Inc. 29,318(a) 227,214
Cree, Inc. 6,570(a) 652,073
Galileo Technology ADR 77,000(a) 2,088,625
Mattson Technology, Inc. 49,794(a) 585,079
Pemstar, Inc. 29,843(a) 436,454
Photronics, Inc. 30,833(a) 695,670
PLX Technology, Inc. 22,072(a) 529,728
Varian Semiconductor Equipment
Associates, Inc. 12,651(a) 290,973
7,844,626
Engines & Turbines (0.68%)
Briggs & Stratton Corp. 18,700 667,356
Fabricated Rubber Products, NEC (0.61%)
Grant Prideco, Inc. 32,600(a) 605,138
Family Clothing Stores (0.73%)
Pacific Sunwear of California, Inc. 24,352(a) 499,216
Ross Stores, Inc. 16,551 218,266
717,482
Footwear, Except Rubber (0.18%)
Maxwell Shoe Company, Inc. 15,525(a) 172,716
Gas Production & Distribution (1.70%)
Peoples Energy Corp. 24,800 852,500
Piedmont Natural Gas Co. 27,100 826,550
1,679,050
General Industrial Machinery (2.94%)
Applied Science & Technology 76,300(a) 1,096,812
Electroglas, Inc. 32,760(a) 460,688
Pentair, Inc. 44,989 1,341,235
2,898,735
Horticultural Specialties (0.20%)
Hines Horticulture, Inc. 48,612(a) 200,524
Hospitals (0.71%)
Universal Health
Services, Inc., Class B 8,400(a) 704,550
Household Appliances (0.63%)
Maytag Corp. 21,662 620,075
Household Audio & Video
Equipment (0.77%)
Harman International Industries, Inc. 15,800 758,400
Iron Ores (0.61%)
Stillwater Mining Co. 20,600(a) 597,400
Life Insurance (0.65%)
MONY Group, Inc. 15,700 645,663
Measuring & Controlling Devices (1.93%)
Integrated Measurement Systems, Inc. 37,157(a) $ 538,776
LTX Corp. 35,700(a) 499,800
Roper Industries, Inc. 24,729 865,515
1,904,091
Meat Products (1.54%)
Michael Foods, Inc. 33,100 891,631
Smithfield Foods, Inc. 21,800(a) 625,388
1,517,019
Medical Instruments & Supplies (2.88%)
ADAC Laboratories 27,200(a) 353,600
Dentsply International, Inc. 17,200 596,625
Focal, Inc. 93,627(a) 198,957
Intuitive Surgical, Inc. 69,868(a) 951,951
Novoste Corp. 29,400(a) 742,350
2,843,483
Medical Services & Health
Insurance (0.52%)
Foundation Health Systems, Inc. 25,312(a) 510,986
Men's & Boy's Clothing Stores (0.40%)
Hot Topic, Inc. 11,400(a) 390,450
Men's & Boys' Furnishings (0.84%)
Quiksilver, Inc. 14,007(a) 267,884
Tommy Hilfiger Corp. 48,554(a) 564,440
832,324
Miscellaneous Converted Paper
Products (0.54%)
Pactiv Corp. 51,100(a) 536,550
Miscellaneous Electrical Equipment &
Supplies (0.36%)
Rayovac Corp. 23,770(a) 350,608
Miscellaneous Investing (5.22%)
Centerpoint Properties Corp. 19,300 857,644
Charles E. Smith Residential
Realty, Inc. 15,600 686,400
Chelsea GCA Realty, Inc. 7,300 235,425
Cousins Properties, Inc. 23,700 616,200
Essex Property Trust, Inc. 5,100 265,200
First Industrial Realty Trust, Inc. 19,100 589,712
Gables Residential Trust 9,300 237,150
Home Properties of NY, Inc. 18,600 505,688
Kilroy Realty Corp. 24,800 646,350
Reckson Associates Realty Corp. 22,700 513,587
5,153,356
Miscellaneous Manufacturers (0.42%)
Zomax, Inc. 68,260(a) 413,826
Miscellaneous Plastics Products,
NEC (1.08%)
Entegris Inc. 119,052(a) 1,064,027
Miscellaneous Shopping Goods
Stores (0.65%)
Zale Corp. 18,935(a) 641,423
Miscellaneous Textile Goods (0.77%)
Belden, Inc. 29,100 $ 754,781
Motor Vehicles & Equipment (0.62%)
Modine Mfg. Co. 23,200 611,900
Non-Store Retailers (0.28%)
Barnesandnoble.com, Inc. 70,757(a) 276,395
Oil & Gas Field Services (2.14%)
Helmerich & Payne, Inc. 21,300 669,619
Marine Drilling Co., Inc. 23,600(a) 563,450
Pride International, Inc. 34,700(a) 878,344
2,111,413
Operative Builders (0.51%)
Pulte Corp. 15,183 505,784
Paper & Paper Products (0.58%)
United Stationers, Inc. 19,100(a) 574,194
Paperboard Mills (0.65%)
Packaging Corp. of America 43,900(a) 644,781
Personnel Supply Services (0.55%)
Spherion Corp. 45,900(a) 545,063
Professional & Commercial
Equipment (0.86%)
Sybron International Corp. 34,200(a) 846,450
Radio & Television Broadcasting (2.19%)
Emmis Communications Corp. 43,068(a) 1,152,069
Price Communications Corp. 46,684(a) 1,009,541
2,161,610
Retail Stores, NEC (0.89%)
Brookstone, Inc. 25,388(a) 334,804
The Children's Place Retail Stores, Inc.20,993(a) 544,506
879,310
Rubber & Plastics Footwear (0.30%)
Vans, Inc. 23,177(a) 299,852
Savings Institutions (1.15%)
Astoria Financial Corp. 19,200 720,000
Washington Federal, Inc. 18,375 409,992
1,129,992
Search & Navigation Equipment (0.36%)
Orbital Sciences Corp. 44,900(a) 356,394
Shoe Stores (0.65%)
Footstar, Inc. 17,900(a) 642,162
Special Industry Machinery (3.67%)
Axcelis Technologies, Inc. 30,916(a) 332,347
Brooks Automation, Inc. 10,804(a) 286,306
Cymer, Inc. 29,293(a) 732,325
Metron Technology NV 84,600(a) 824,850
PRI Automation, Inc. 36,878(a) 834,365
Varian Medical Systems, Inc. 12,500(a) 610,938
3,621,131
Telephone Communication (2.47%)
Intermedia Communications, Inc. 32,394(a) $ 716,717
RCN Corp. 35,208(a) 624,942
Teligent, Inc. 76,501(a) 580,929
Winstar Communications, Inc. 26,281(a) 512,480
2,435,068
Trucking & Courier Services, Except
Air (0.76%)
Werner Enterprises, Inc. 53,400 747,600
Watches, Clocks, Watchcases, &
Parts (0.69%)
Fossil, Inc. 51,936(a) 678,414
Women's Clothing Stores (0.82%)
AnnTaylor Stores Corp. 11,092(a) 332,760
Too, Inc. 20,783(a) 476,710
809,470
Total Common Stocks 93,545,543
Principal
Amount Value
Commercial Paper (5.62%)
Personal Credit Institutions (5.62%)
Investment in Joint Trading Account,
Associates First Capital Corp.;
6.65%; 11/1/2000 $4,971,336 $4,971,336
Ford Motor Credit Co.;
6.45%; 11/1/2000 575,000 575,000
Total Commercial Paper 5,546,336
Total Portfolio Investments (100.46%) 99,091,879
Liabilities, net of cash, receivables and
other assets (-0.46%) (451,713)
Total Net Assets (100.00%) $98,640,166
(a) Non-income producing security - No dividend paid during the past
twelve months.
PRINCIPAL UTILITIES FUND, INC.
Shares
Held Value
Common Stocks (88.95%)
Combination Utility Services (13.44%)
Citizens Communication Co. 117,091(a) $1,697,819
Constellation Energy Group, Inc. 102,500 4,272,969
Entergy Corp. 66,675 2,554,486
Montana Power Co. 106,600 3,011,450
NiSource, Inc. 84,400 2,104,725
Utilicorp United, Inc. 156,500 4,157,031
17,798,480
Electric Services (46.22%)
Allegheny Energy 83,700 3,426,469
Calpine Corp. 21,600(a) 1,705,050
Dominion Resources, Inc. 72,000 4,288,500
Duke Energy Corp. 58,100 5,022,019
Enron Corp. 61,560 5,051,767
Exelon Corp. 101,300 6,090,663
FPL Group, Inc. 62,500 4,125,000
GPU, Inc. 100,700 3,329,394
Kansas City Power & Light 98,700 2,374,969
Niagara Mohawk Holdings, Inc. 204,800(a) 3,276,800
NStar 44,300 1,713,856
Pinnacle West Capital Corp. 92,100 4,000,594
PPL Corp. 62,500 2,574,219
Reliant Energy, Inc. 91,400 3,775,963
Scottish Power PLC ADR 67,508 2,037,898
Southern Co. 109,400 3,213,625
Southern Energy, Inc. 40,002(a) 1,090,054
TXU Corp. 111,200 4,121,350
61,218,190
Electrical Industrial Apparatus (0.49%)
Ballard Power Systems, Inc. 6,000(a) 645,000
Electronic Components &
Accessories (0.78%)
Tycom Ltd. 30,963(a) 1,037,260
Gas Production & Distribution (8.49%)
Columbia Energy Group 36,800 2,647,300
Dynegy, Inc. 95,900 4,441,369
MCN Energy Group, Inc. 81,086 1,996,743
New Jersey Resources Corp. 33,900 1,353,881
Peoples Energy Corp. 23,300 800,938
11,240,231
Petroleum Refining (3.47%)
Coastal Corp. 61,000 4,601,687
Radio & Television Broadcasting (1.22%)
Time Warner Telecom, Class A 27,200(a) 1,621,800
Telegraph & Other Communications (0.61%)
Level 3 Communications, Inc. 16,900(a) 805,919
Telephone Communication (14.23%)
Alltel Corp. 51,000 $ 3,286,312
AT&T Wireless Group 20,000(a) 498,750
BellSouth Corp. 27,700 1,338,256
McLeodUSA, Inc. 150,740(a) 2,901,745
RCN Corp. 69,100(a) 1,226,525
SBC Communications, Inc. 62,600 3,611,237
Telephone and Data Systems 10,475 1,105,113
Verizon Communications 57,064 3,299,012
XO Communications, Inc. 46,600(a) 1,572,022
18,838,972
Total Common Stocks 117,807,539
Preferred Stocks (7.12%)
Electrical Services (5.99%)
AES Trust III 49,800 4,432,200
Calpine Capital Trust III 64,000(a) 3,504,000
7,936,200
Telephone Communications (1.13%)
Mediaone Group ATI Pies 16,100 1,497,300
Total Preferred Stocks 9,433,500
Principal
Amount Value
Bond (1.54%)
Motion Picture Production &
Services (1.54%)
Liberty Media Group Convertible Bond;
4.00%; 11/15/2029 $2,000,000 $ 2,037,500
Commercial Paper (4.04%)
Personal Credit Institutions (4.04%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 5,347,687 5,347,687
Total Portfolio Investments (101.65%) 134,626,226
Liabilities, net of cash, receivables and
other assets (-1.65%) (2,190,885)
Total Net Assets (100.00%) $132,435,341
(a) Non-income producing security - No dividend paid during the past twelve
months.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class A shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.13 $15.28 $15.11 $14.61 $13.74
Income from Investment Operations:
Net Investment Income............................... .32 .40 .42 .35 .38
Net Realized and Unrealized Gain
on Investments.................................... .02 .34 1.15 1.81 1.59
Total from Investment Operations .34 .74 1.57 2.16 1.97
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.33) (.44) (.37) (.36) (.43)
Distributions from Capital Gains.................... (.64) (.45) (1.03) (1.30) (.67)
Total Dividends and Distributions (.97) (.89) (1.40) (1.66) (1.10)
Net Asset Value, End of Period......................... $14.50 $15.13 $15.28 $15.11 $14.61
Total Return(b) ....................................... 2.40% 4.85% 11.00% 15.88% 15.10%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $94,763 $112,329 $104,414 $85,436 $70,820
Ratio of Expenses to Average Net Assets............. 1.32% 1.28% 1.28% 1.33% 1.28%
Ratio of Net Investment Income to
Average Net Assets................................ 2.26% 2.67% 2.86% 2.42% 2.82%
Portfolio Turnover Rate............................. 54.4% 24.2% 57.0% 27.6% 32.6%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class B shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.06 $15.22 $15.05 $14.56 $13.71
Income from Investment Operations:
Net Investment Income............................... .21 .29 .31 .25 .29
Net Realized and Unrealized Gain
on Investments.................................... .02 .32 1.14 1.79 1.55
Total from Investment Operations .23 .61 1.45 2.04 1.84
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.22) (.32) (.25) (.25) (.32)
Distributions from Capital Gains.................... (.64) (.45) (1.03) (1.30) (.67)
Total Dividends and Distributions (.86) (.77) (1.28) (1.55) (.99)
Net Asset Value, End of Period......................... $14.43 $15.06 $15.22 $15.05 $14.56
Total Return(b) ....................................... 1.61% 4.02% 10.18% 14.96% 14.10%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $20,680 $23,570 $18,930 $11,885 $5,964
Ratio of Expenses to Average Net Assets............. 2.12% 2.02% 2.04% 2.14% 2.13%
Ratio of Net Investment Income to
Average Net Assets................................ 1.46% 1.93% 2.08% 1.58% 1.93%
Portfolio Turnover Rate............................. 54.4% 24.2% 57.0% 27.6% 32.6%
</TABLE>
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class C shares 2000 1999(e)
----------------------------------------------------------------- ----
Net Asset Value, Beginning of Period................... $15.13 $15.94
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.03) .07
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .03 (.81)
Total from Investment Operations .00 (.74)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.19) (.07)
Distributions from Capital Gains.................... (.64) --
Total Dividends (.83) (.07)
Net Asset Value, End of Period......................... $14.30 $15.13
Total Return(b) ....................................... .03% (4.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $404 $242
Ratio of Expenses to Average Net Assets............. 3.52% 2.11%(d)
-
Ratio of Net Investment Income to
Average Net Assets................................ .03% 1.78%(d)
Portfolio Turnover Rate............................. 54.4% 24.2%(d)
-
<TABLE>
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class R shares 2000 1999 1998 1997 1996(f)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $14.99 $15.15 $14.98 $14.52 $13.81
Income from Investment Operations:
Net Investment Income............................... .24 .32 .33 .29 .24
Net Realized and Unrealized Gain
on Investments.................................... .03 .32 1.15 1.76 .73
Total from Investment Operations .27 .64 1.48 2.05 .97
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.25) (.35) (.28) (.30) (.26)
Distributions from Capital Gains.................... (.64) (.45) (1.03) (1.29) --
Total Dividends and Distributions (.89) (.80) (1.31) (1.59) (.26)
Net Asset Value, End of Period......................... $14.37 $14.99 $15.15 $14.98 $14.52
Total Return........................................... 1.92% 4.21% 10.43% 15.16% 7.52%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $24,590 $23,972 $19,434 $9,745 $875
Ratio of Expenses to Average Net Assets............. 1.83% 1.84% 1.88% 1.99% 1.49%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.73% 2.11% 2.22% 1.66% 2.26%(d)
Portfolio Turnover Rate............................. 54.4% 24.2% 57.0% 27.6% 32.6%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class A shares 2000 1999 1998 1997 1996
---------------------------------------------------------------------- ---- ------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $25.25 $21.71 $20.22 $17.10 $15.03
Income from Investment Operations:
Net Investment Income(g) ......................... .04 .15 .12 .21 .23
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.69) 3.53 3.57 3.58 2.45
Total from Investment Operations (.65) 3.68 3.69 3.79 2.68
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.14) (.12) (.21) (.26)
Dvidends in Excess of Net Investment
Income(j) ........................................ (.05) -- -- -- --
Distributions from Capital Gains.................... (.29) -- (2.08) (.46) (.35)
Total Dividends and Distributions (.34) (.14) (2.20) (.67) (.61)
Net Asset Value, End of Period......................... $24.26 $25.25 $21.71 $20.22 $17.10
Total Return(b) ....................................... (2.60)% 17.00% 19.48% 22.57% 18.20%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $170,462 $184,217 $126,740 $79,985 $44,389
Ratio of Expenses to Average Net Assets(g) ....... 1.19% 1.26% 1.31% 1.30% 1.33%
Ratio of Net Investment Income to
Average Net Assets................................ .19% .63% .57% 1.10% 1.41%
Portfolio Turnover Rate............................. 73.6% 16.4% .5% 55.4% 13.3%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class B shares 2000 1999 1998 1997 1996
---------------------------------------------------------------------- ---- ------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $25.00 $21.55 $20.14 $17.03 $14.99
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ..(.14) (.02) (.02) .07 .11
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.67) 3.48 3.53 3.54 2.41
Total from Investment Operations (.81) 3.46 3.51 3.61 2.52
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.01) (.02) (.04) (.13)
Dividends in Excess of Net Investment
Income(j) ........................................ (.01) -- -- -- --
Distributions from Capital Gains.................... (.29) -- (2.08) (.46) (.35)
Total Dividends and Distributions (.30) (.01) (2.10) (.50) (.48)
Net Asset Value, End of Period......................... $23.89 $25.00 $21.55 $20.14 $17.03
Total Return(b) ....................................... (3.30)% 16.09% 18.59% 21.59% 17.18%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $54,550 $56,493 $34,223 $18,265 $6,527
Ratio of Expenses to Average Net Assets(g) ....... 1.94% 2.04% 2.02% 2.06% 2.19%
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.56)% (.15)% (.14)% .32% 49%
Portfolio Turnover Rate............................. 73.6% 16.4% .5% 55.4% 13.3%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $25.17 $25.50
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.09) (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.72) (.30)
Total from Investment Operations (.81) (.33)
Less Distributions from Capital Gains.................. (.29) --
Net Asset Value, End of Period......................... $24.07 $25.17
Total Return(b) ....................................... (3.27)% (1.29)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,355 $331
-
Ratio of Expenses to Average Net Assets(g) ....... 1.93% 2.27%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets............................... (.66)% (.72)%(d)
Portfolio Turnover Rate............................. 73.6% 16.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class R shares 2000 1999 1998 1997 1996(f)
---------------------------------------------------------------------- ------------------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $25.12 $21.63 $20.16 $17.08 $16.21
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.07) .03 .02 .13 .12
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.69) 3.49 3.57 3.53 .90
Total from Investment Operations (.76) 3.52 3.59 3.66 1.02
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.03) (.04) (.12) (.15)
Dividends in Excess of Net Investment
Income(j) ....................................... (.02) -- -- -- --
Distributions from Capital Gains.................... (.29) -- (2.08) (.46) --
Total Dividends and Distributions (.31) (.03) (2.12) (.58) (.15)
Net Asset Value, End of Period......................... $24.05 $25.12 $21.63 $20.16 $17.08
Total Return........................................... (3.07)% 16.31% 19.01% 21.82% 7.02%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $54,313 $50,667 $32,871 $15,502 $1,575
Ratio of Expenses to Average Net Assets(g) ....... 1.69% 1.81% 1.85% 1.89% 1.48%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................ (.32)% .08% .02% .45% .68%(d)
Portfolio Turnover Rate............................. 73.6% 16.4% .5% 55.4% 13.3%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class A shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $29.58 $31.07 $29.69 $27.72 $23.69
Income from Investment Operations:
Net Investment Income............................... .34 .52 .50 .50 .45
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.10) .45 3.88 5.80 5.48
Total from Investment Operations (1.76) .97 4.38 6.30 5.93
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.25) (.51) (.53) (.48) (.43)
Distributions from Capital Gains.................... (2.53) (1.95) (2.47) (3.85) (1.47)
Total Dividends and Distributions (2.78) (2.46) (3.00) (4.33) (1.90)
Net Asset Value, End of Period......................... $25.04 $29.58 $31.07 $29.69 $27.72
Total Return(b) ....................................... (6.20)% 3.00% 15.59% 25.36% 26.41%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $452,251 $573,485 $565,052 $494,444 $435,617
Ratio of Expenses to Average Net Assets............. .94% .75% .74% .70% .69%
Ratio of Net Investment Income to
Average Net Assets................................ 1.38% 1.73% 1.67% 1.85% 1.82%
Portfolio Turnover Rate................................ 107.8% 44.5% 23.2% 30.8% 50.2%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class B shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $29.41 $30.90 $29.51 $27.58 $23.61
Income from Investment Operations:
Net Investment Income............................... .11 .29 .26 .23 .21
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.09) .44 3.86 5.77 5.45
Total from Investment Operations (1.98) .73 4.12 6.00 5.66
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.14) (.27) (.26) (.22) (.22)
Distributions from Capital Gains.................... (2.53) (1.95) (2.47) (3.85) (1.47)
Total Dividends and Distributions (2.67) (2.22) (2.73) (4.07) (1.69)
Net Asset Value, End of Period......................... $24.76 $29.41 $30.90 $29.51 $27.58
Total Return(b) ....................................... (7.03)% 2.24% 14.71% 24.13% 25.19%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $39,017 $53,169 $44,765 $27,240 $9,832
Ratio of Expenses to Average Net Assets............. 1.82% 1.52% 1.52% 1.65% 1.70%
Ratio of Net Investment Income to
Average Net Assets................................ .51% .96% .88% .84% .80%
Portfolio Turnover Rate................................ 107.8% 44.5% 23.2% 30.8% 50.2%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $29.45 $31.81
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.25) .01
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.10) (2.37)
Total from Investment Operations (2.35) (2.36)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.11) --
Distributions from Capital Gains.................... (2.53) --
Total Dividends and Distributions (2.64) (2.23)
Net Asset Value, End of Period......................... $24.46 $29.45
Total Return(b) ....................................... (8.43)% (7.42)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $648 $211
Ratio of Expenses to Average Net Assets............. 3.56% 2.07%(d)
Ratio of Net Investment Income to
Average Net Assets (Operating Loss)............... (1.39)% .23%(d)
Portfolio Turnover Rate............................. 107.8% 44.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class R shares 2000 1999 1998 1997 1996(f)
---------------------------------------------------------------------- ------------------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $29.33 $30.80 $29.44 $27.57 $24.73
Income from Investment Operations:
Net Investment Income............................... .22 .32 .28 .30 .19
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.09) .44 3.84 5.74 2.81
Total from Investment Operations (1.87) .76 4.12 6.04 3.00
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.28) (.29) (.32) (.16)
Distributions from Capital Gains.................... (2.53) (1.95) (2.47) (3.85) --
Total Dividends and Distributions (2.70) (2.23) (2.76) (4.17) (.16)
Net Asset Value, End of Period......................... $24.76 $29.33 $30.80 $29.44 $27.57
Total Return........................................... (6.66)% 2.35% 14.77% 24.36% 12.74%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $36,434 $43,862 $37,675 $18,326 $1,752
Ratio of Expenses to Average Net Assets............. 1.37% 1.43% 1.50% 1.50% 1.16%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .95% 1.05% .88% .93% 1.18%(d)
Portfolio Turnover Rate............................. 107.8% 44.5% 23.2% 30.8% 50.2%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class A shares 2000 1999 1998 1997 1996
------------------------------------------------------------------- ---- ----------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $65.57 $56.09 $50.43 $39.54 $37.22
Income from Investment Operations:
Net Investment Income (Operating Loss) ............. (.37) .21 .35 .31 .35
Net Realized and Unrealized Gain
on Investments.................................... 8.43 9.56 7.14 11.26 3.50
Total from Investment Operations 8.06 9.77 7.49 11.57 3.85
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.30) (.34) (.31) (.35)
Distributions from Capital Gains.................... (2.41) -- (1.49) (.37) (1.18)
Total Dividends and Distributions (2.41) (.30) (1.83) (.68) (1.53)
Net Asset Value, End of Period......................... $71.22 $65.57 $56.09 $50.43 $39.54
Total Return(b) ....................................... 12.64% 17.46% 15.17% 29.55% 10.60%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $525,175 $493,117 $395,954 $317,386 $228,361
Ratio of Expenses to Average Net Assets............. 1.08% .89% .95% 1.03% 1.08%
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets............................... (.52)% .33% .66% .68% .95%
Portfolio Turnover Rate............................. 121.5% 32.4% 21.9% 16.5% 1.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class B shares 2000 1999 1998 1997 1996
------------------------------------------------------------------- -------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $65.33 $55.98 $50.36 $39.43 $37.10
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.89) (.17) .06 .09 .08
Net Realized and Unrealized Gain
on Investments.................................... 8.38 9.55 7.14 11.23 3.48
Total from Investment Operations 7.49 9.38 7.20 11.32 3.56
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.03) (.09) (.02) (.05)
Distributions from Capital Gains.................... (2.41) -- (1.49) (.37) (1.18)
Total Dividends and Distributions (2.41) (.03) (1.58) (.39) (1.23)
Net Asset Value, End of Period......................... $70.41 $65.33 $55.98 $50.36 $39.43
Total Return(b) ....................................... 11.79% 16.75% 14.58% 28.92% 9.80%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $110,001 $96,116 $64,809 $42,241 $24,019
Ratio of Expenses to Average Net Assets............. 1.85% 1.50% 1.46% 1.48% 1.79%
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.30)% (.28)% .15% .23% .22%
Portfolio Turnover Rate............................. 121.5% 32.4% 21.9% 16.5% 1.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $65.34 $67.89
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.94) (.07)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 8.18 (2.48)
Total from Investment Operations 7.24 (2.55)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- --
Distributions from Capital Gains.................... (2.41) --
Total Dividends and Distributions (2.41) --
Net Asset Value, End of Period......................... $70.17 $65.34
Total Return(b) ....................................... 11.38% (3.75)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,203 $452
Ratio of Expenses to Average Net Assets............. 2.30% 1.85%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.78)% (.58)%(d)
Portfolio Turnover Rate............................. 121.5% 32.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class R shares 2000 1999 1998 1997 1996(f)
---------------------------------------------------------------------- ------------------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $65.13 $55.77 $50.16 $39.40 $39.27
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.66) (.13) .02 .06 .10
Net Realized and Unrealized Gain
on Investments.................................... 8.32 9.49 7.09 11.16 .13
Total from Investment Operations 7.66 9.36 7.11 11.22 .23
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- (.01) (.09) (.10)
Distributions from Capital Gains.................... (2.41) -- (1.49) (.37) --
Total Dividends and Distributions (2.41) -- (1.50) (.46) (.10)
Net Asset Value, End of Period......................... $70.38 $65.13 $55.77 $50.16 $39.40
Total Return........................................... 12.09% 16.78% 14.46% 28.72% 1.12%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $60,503 $47,193 $30,557 $16,265 $2,014
Ratio of Expenses to Average Net Assets............. 1.58% 1.46% 1.59% 1.69% 1.42%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.03)% (.24)% .01% .00% .14%(d)
Portfolio Turnover Rate............................. 121.5% 32.4% 21.9% 16.5% 1.8%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class A shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(g) ........................... .03
Net Realized and Unrealized Gain
on Investments.................................... .56
Total from Investment Operations .59
Net Asset Value, End of Period......................... $10.59
Total Return(b) ....................................... 4.96%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $9,855
Ratio of Expenses to Average Net Assets(g) ....... .79%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .76%(d)
Portfolio Turnover Rate............................. 189.7%(d)
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class B shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(g) ......................... .02
Net Realized and Unrealized Gain
on Investments.................................... .54
Total from Investment Operations .56
Net Asset Value, End of Period......................... $10.56
Total Return(b) ....................................... 4.66%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,838
Ratio of Expenses to Average Net Assets(g) ....... 1.14%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .45%(d)
Portfolio Turnover Rate............................. 189.7%(d)
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class C shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(g) ......................... .03
Net Realized and Unrealized Gain
on Investments.................................... .54
Total from Investment Operations .57
Net Asset Value, End of Period......................... $10.57
Total Return(b) ....................................... 4.76%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,304
Ratio of Expenses to Average Net Assets(g) ....... 1.14%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .49%(d)
Portfolio Turnover Rate............................. 189.7%(d)
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class R shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(g) ......................... .01
Net Realized and Unrealized Gain
on Investments.................................... .54
Total from Investment Operations .55
Net Asset Value, End of Period......................... $10.55
Total Return........................................... 4.56%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $13,399
Ratio of Expenses to Average Net Assets(g) ....... 1.29%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .19%(d)
Portfolio Turnover Rate............................. 189.7%(d)
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class A shares 2000 1999 1998 1997 1996
------------------------------------------------------------------- ---- ----------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $42.12 $39.90 $45.33 $35.75 $31.45
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.16) (.06) (.07) .07 .14
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 12.08 2.28 (4.26) 10.80 5.05
Total from Investment Operations 11.92 2.22 (4.33) 10.87 5.19
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- -- (.11) (.14)
Distributions from Capital Gains.................... (2.03) -- (1.10) (1.18) (.75)
Total Dividends and Distributions (2.03) -- (1.10) (1.29) (.89)
Net Asset Value, End of Period......................... $52.01 $42.12 $39.90 $45.33 $35.75
Total Return(b) ....................................... 29.21% 5.56% (9.78)% 31.26% 16.89%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $364,639 $313,984 $332,942 $346,666 $229,465
Ratio of Expenses to Average Net Assets............. 1.17% 1.22% 1.22% 1.26% 1.32%
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.36)% (.17)% (.14)% .20% .46%
Portfolio Turnover Rate................................ 161.8% 59.9% 25.1% 9.5% 12.3%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class B shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $41.29 $39.29 $44.88 $35.48 $31.31
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.42) (.28) (.23) (.05) (.04)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 11.87 2.28 (4.26) 10.64 4.97
Total from Investment Operations 11.45 2.00 (4.49) 10.59 4.93
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- -- (.01) (.01)
Distributions from Capital Gains.................... (2.03) -- (1.10) (1.18) (.75)
Total Dividends and Distributions (2.03) -- (1.10) (1.19) (.76)
Net Asset Value, End of Period......................... $50.71 $41.29 $39.29 $44.88 $35.48
Total Return(b) ....................................... 28.63% 5.09% (10.24)% 30.64% 16.07%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $80,721 $68,639 $68,358 $59,554 $28,480
Ratio of Expenses to Average Net Assets............. 1.62% 1.67% 1.73% 1.69% 2.01%
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.80)% (.62)% (.66)% (.24)% (.24)%
Portfolio Turnover Rate............................. 161.8% 59.9% 25.1% 9.5% 12.3%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $41.96 $45.79
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.87) (.11)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 11.77 (3.72)
Total from Investment Operations 10.90 (3.83)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- --
Distributions from Capital Gains.................... (2.03) --
Total Dividends and Distributions (2.03) --
Net Asset Value, End of Period......................... $50.83 $41.96
Total Return(b) ....................................... 26.75% (8.36)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $743 $222
Ratio of Expenses to Average Net Assets............. 3.29% 2.25%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (2.45)% (1.14)%(d)
Portfolio Turnover Rate............................. 161.8% 59.9%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class R shares 2000 1999 1998 1997 1996(f)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $41.36 $39.43 $45.10 $35.67 $33.77
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.31) (.34) (.28) (.12) .04
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 11.78 2.27 (4.29) 10.74 1.88
Total from Investment Operations 11.47 1.93 (4.57) 10.62 1.92
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- -- (.01) (.02)
Distributions from Capital Gains.................... (2.03) -- (1.10) (1.18) --
Total Dividends and Distributions (2.03) -- (1.10) (1.19) (.02)
Net Asset Value, End of Period......................... $50.80 $41.36 $39.43 $45.10 $35.67
Total Return........................................... 28.63% 4.89% (10.37)% 30.56% 6.20%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $33,139 $24,877 $23,540 $17,448 $2,016
Ratio of Expenses to Average Net Assets............. 1.62% 1.85% 1.89% 1.87% 1.53%(d)
Ratio of Net Investment Income (Operating Loss) to..
Average Net Assets................................ (.80)% (.80)% (.82)% (.45)% .29%(d)
Portfolio Turnover Rate............................. 161.8% 59.9% 25.1% 9.5% 12.3%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class A shares 2000
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.05)
Net Realized and Unrealized Gain
on Investments.................................... 1.41
Total from Investment Operations 1.36
Net Asset Value, End of Period......................... $11.36
Total Return(b) ....................................... 13.60%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $49,794
Ratio of Expenses to Average Net Assets(g) ....... 1.57%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.68)%(d)
Portfolio Turnover Rate............................. 62.0%(d)
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class B shares 2000
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.10)
Net Realized and Unrealized Gain
on Investments.................................... 1.38
Total from Investment Operations 1.28
Net Asset Value, End of Period......................... $11.28
Total Return(b) ....................................... 12.80%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $19,430
Ratio of Expenses to Average Net Assets(g) ....... 2.31%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.41)%(d)
Portfolio Turnover Rate............................. 62.0%(d)
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class C shares 2000
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.12)
Net Realized and Unrealized Gain
on Investments.................................... 1.40
Total from Investment Operations 1.28
Net Asset Value, End of Period......................... $11.28
Total Return(b) ....................................... 12.80%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,468
Ratio of Expenses to Average Net Assets(g) ....... 2.31%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.38)%(d)
Portfolio Turnover Rate............................. 62.0%(d)
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class R shares 2000
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.07)
Net Realized and Unrealized Gain
on Investments.................................... 1.38
Total from Investment Operations 1.31
Net Asset Value, End of Period......................... $11.31
Total Return........................................... 13.10%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $9,496
Ratio of Expenses to Average Net Assets(g) ....... 2.06%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.16)%(d)
Portfolio Turnover Rate............................. 62.0%(d)
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class A shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.04)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.84)
Total from Investment Operations (1.88)
Net Asset Value, End of Period......................... $8.12
Total Return(b) ....................................... (20.55)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $7,126
Ratio of Expenses to Average Net Assets(g) ...... 1.73%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.24)%(d)
Portfolio Turnover Rate............................. 181.8%(d)
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class B shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.06)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.86)
Total from Investment Operations (1.92)
Net Asset Value, End of Period......................... $8.08
Total Return(b) ....................................... (20.94)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,796
Ratio of Expenses to Average Net Assets(g) ...... 2.40%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.91)%(d)
Portfolio Turnover Rate............................. 181.8%(d)
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class C shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.10)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.82)
Total from Investment Operations (1.92)
Net Asset Value, End of Period......................... $8.08
Total Return(b) ....................................... (20.94)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,009
Ratio of Expenses to Average Net Assets(g) ...... 2.46%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.95)%(d)
Portfolio Turnover Rate............................. 181.8%(d)
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class R shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.06)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.84)
Total from Investment Operations (1.90)
Net Asset Value, End of Period......................... $8.10
Total Return........................................... (20.74)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,759
Ratio of Expenses to Average Net Assets(g) ...... 2.11%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.60)%(d)
Portfolio Turnover Rate............................. 181.8%(d)
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class A shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.04)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.87)
Total from Investment Operations (.91)
Net Asset Value, End of Period......................... $9.09
Total Return(b) ....................................... (12.68)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $11,875
Ratio of Expenses to Average Net Assets(g) ..1.79% (d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.40)%(d)
Portfolio Turnover Rate............................. 265.5%(d)
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class B shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.07)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.89)
Total from Investment Operations (.96)
Net Asset Value, End of Period......................... $9.04
Total Return(b) ....................................... (13.16)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,093
Ratio of Expenses to Average Net Assets(g) ...... 2.54%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (2.18)%(d)
Portfolio Turnover Rate............................. 265.5%(d)
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class C shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.11)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.85)
Total from Investment Operations (.96)
Net Asset Value, End of Period......................... $9.04
Total Return(b) ....................................... (13.16)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,288
Ratio of Expenses to Average Net Assets(g) ...... 2.54%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (2.10)%(d)
Portfolio Turnover Rate............................. 265.5%(d)
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class R shares 2000(h)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.07)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.87)
Total from Investment Operations (.94)
Net Asset Value, End of Period......................... $9.06
Total Return........................................... (12.97)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,382
Ratio of Expenses to Average Net Assets(g) ...... 2.29%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.88)%(d)
Portfolio Turnover Rate............................. 265.5%(d)
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL REAL ESTATE FUND, INC.
Class A shares 2000 1999 1998(i)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $7.73 $8.39 $10.15
Income from Investment Operations:
Net Investment Income(g) ......................... .35 .31 .20
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.30 (.67) (1.76)
Total from Investment Operations 1.65 (.36) (1.56)
Less Dividends from Net Investment Income.............. (.35) (.30) (.20)
Total Dividends (.35) (.30) (.20)
Net Asset Value, End of Period......................... $9.03 $7.73 $8.39
Total Return(b) ....................................... 21.86% (4.38)% (15.45)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $9,439 $6,459 $5,490
Ratio of Expenses to Average Net Assets(g) ...... 1.88% 2.19% 2.25%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 4.28% 3.77% 2.89%(d)
Portfolio Turnover Rate............................. 79.8% 55.1% 60.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class B shares 2000 1999 1998(i)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $7.71 $8.38 $10.15
Income from Investment Operations:
Net Investment Income(g) ......................... .30 .24 .20
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.29 (.66) (1.78)
Total from Investment Operations 1.59 (.42) (1.58)
Less Dividends from Net Investment Income.............. (.30) (.25) (.19)
Total Dividends (.30) (.25) (.19)
Net Asset Value, End of Period......................... $9.00 $7.71 $8.38
Total Return(b) ....................................... 21.00% (5.10)% (15.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,488 $3,351 $3,120
Ratio of Expenses to Average Net Assets(g) ...... 2.62% 2.98% 2.47%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 3.53% 2.98% 2.67%(d)
Portfolio Turnover Rate............................. 79.8% 55.1% 60.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $7.72 $8.66
Income from Investment Operations:
Net Investment Income(g) ......................... .30 .06
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.30 (.94)
Total from Investment Operations 1.60 (.88)
Less Dividends from Net Investment Income.............. (.28) (.06)
Total Dividends (.28) (.06)
Net Asset Value, End of Period......................... $9.04 $7.72
Total Return(b) ....................................... 21.01% (10.21)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $143 $99
Ratio of Expenses to Average Net Assets(g) ...... 2.62% 3.13%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 3.55% 2.00%(d)
Portfolio Turnover Rate............................. 79.8% 55.1%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class R shares 2000 1999 1998(i)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $7.72 $8.40 $10.15
Income from Investment Operations:
Net Investment Income(g) ......................... .31 .28 .23
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.31 (.66) (1.78)
Total from Investment Operations 1.62 (.38) (1.55)
Less Dividends from Net Investment Income.............. (.32) (.30) (.20)
Total Dividends (.32) (.30) (.20)
Net Asset Value, End of Period......................... $9.02 $7.72 $8.40
Total Return........................................... 21.40% (4.70)% (15.37)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,485 $3,100 $2,928
Ratio of Expenses to Average Net Assets(g) ...... 2.38% 2.53% 1.99%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 3.79% 3.43% 3.07%(d)
Portfolio Turnover Rate............................. 79.8% 55.1% 60.4%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL SMALLCAP FUND, INC.
Class A shares 2000 1999 1998(i)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $11.34 $8.43 $9.92
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.11) (.11) (.08)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.27 3.02 (1.41)
Total from Investment Operations 1.16 2.91 (1.49)
Less Distributions from Capital Gains.................. (1.26) -- --
Net Asset Value, End of Period......................... $11.24 $11.34 $8.43
Total Return(b) ....................................... 9.89% 34.52% (15.95)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $60,660 $41,598 $18,438
Ratio of Expenses to Average Net Assets(g) ...... 1.75% 1.92% 2.58%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.61)% (1.04)% (1.65)%(d)
Portfolio Turnover Rate............................. 138.4% 100.7% 20.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class B shares 2000 1999 1998(i)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $11.21 $8.41 $9.91
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.10) (.11) (.11)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.17 2.91 (1.39)
Total from Investment Operations 1.07 2.80 (1.50)
Less Distributions from Capital Gains.................. (1.26) -- --
Net Asset Value, End of Period......................... $11.02 $11.21 $ 8.41
Total Return(b) ....................................... 9.14% 33.29% (16.15)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $19,022 $14,158 $6,550
Ratio of Expenses to Average Net Assets(g) ...... 2.41% 2.63% 2.80%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.27)% (1.75)% (1.85)%(d)
Portfolio Turnover Rate............................. 138.4% 100.7% 20.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $11.31 $11.14
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.12) (.05)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.19 .22
Total from Investment Operations 1.07 .17
Less Distributions from Capital Gains.................. (1.26) --
Net Asset Value, End of Period......................... $11.12 $11.31
Total Return(b) ....................................... 9.04% 1.53%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,078 $189
Ratio of Expenses to Average Net Assets(g) ...... 2.53% 2.60%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.40)% (1.79)%(d)
Portfolio Turnover Rate............................. 138.4% 100.7%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class R shares 2000 1999 1998(i)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $11.31 $8.45 $9.91
Income from Investment Operations:
Net Investment Income (Operating Loss)(g) ....... (.03) (.10) (.07)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.15 2.96 (1.39)
Total from Investment Operations 1.12 2.86 (1.46)
Less Distributions from Capital Gains.................. (1.26) -- --
Net Asset Value, End of Period......................... $11.17 $11.31 $8.45
Total Return........................................... 9.53% 33.85% (15.75)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $17,880 $10,177 $4,688
Ratio of Expenses to Average Net Assets(g) ...... 2.12% 2.31% 2.07%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.98)% (1.43)% (1.12)%(d)
Portfolio Turnover Rate............................. 138.4% 100.7% 20.5%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class A shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $17.86 $16.11 $12.55 $11.40 $10.94
Income from Investment Operations:
Net Investment Income(g) ......................... .27 .33 .41 .48 .44
Net Realized and Unrealized Gain
on Investments.................................... 1.68 2.00 3.59 1.12 .45
Total from Investment Operations 1.95 2.33 4.00 1.60 .89
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.27) (.34) (.44) (.45) (.43)
Distributions from Capital Gains.................... (1.14) (.24) -- -- --
Total Dividends and Distributions (1.41) (.58) (.44) (.45) (.43)
Net Asset Value, End of Period......................... $18.40 $17.86 $16.11 $12.55 $11.40
Total Return(b) ....................................... 12.09% 14.74% 32.10% 14.26% 8.13%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $101,352 $99,857 $83,533 $64,366 $66,322
Ratio of Expenses to Average Net Assets(g) ....... 1.23% 1.20% 1.15% 1.15% 1.17%
Ratio of Net Investment Income to
Average Net Assets................................ 1.59% 1.94% 2.73% 3.90% 3.85%
Portfolio Turnover Rate............................. 150.8% 23.5% 11.9% 22.5% 34.2%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class B shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------- ------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $17.83 $16.09 $12.53 $11.38 $10.93
Income from Investment Operations:
Net Investment Income(g) ......................... .14 .22 .30 .38 .36
Net Realized and Unrealized Gain
on Investments.................................... 1.69 1.98 3.59 1.13 .43
Total from Investment Operations 1.83 2.20 3.89 1.51 .79
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.15) (.22) (.33) (.36) (.34)
Distributions from Capital Gains.................... (1.14) (.24) -- -- --
Total Dividends and Distributions (1.29) (.46) (.33) (.36) (.34)
Net Asset Value, End of Period......................... $18.37 $17.83 $16.09 $12.53 $11.38
Total Return(b) ....................................... 11.30% 13.85% 31.23% 13.41% 7.23%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $19,624 $18,282 $11,391 $6,937 $5,579
Ratio of Expenses to Average Net Assets(g) ....... 2.00% 1.95% 1.90% 1.90% 1.93%
Ratio of Net Investment Income to
Average Net Assets................................ .82% 1.19% 2.04% 3.14% 3.07%
Portfolio Turnover Rate................................ 150.8% 23.5% 11.9% 22.5% 34.2%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class C shares 2000 1999(e)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $17.84 $17.97
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.06) .05
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.64 (.14)
Total from Investment Operations 1.58 (.09)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.11) (.04)
Distributions from Capital Gains.................... (1.14) --
Total Dividends and Distributions (1.25) (.04)
Net Asset Value, End of Period......................... $18.17 $17.84
Total Return(b) ....................................... 9.78% (.47)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $721 $226
Ratio of Expenses to Average Net Assets............. 3.69% 2.05%(d)
Ratio of Net Investment Income to
Average Net Assets (Operating Loss)............... (.88)% 1.08%(d)
Portfolio Turnover Rate............................. 150.8% 23.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class R shares 2000 1999 1998 1997 1996(f)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $17.82 $16.07 $12.49 $11.33 $11.75
Income from Investment Operations:
Net Investment Income(g) ......................... .17 .21 .33 .39 .28
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.68 2.00 3.58 1.14 (.41)
Total from Investment Operations 1.85 2.21 3.91 1.53 (.13)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.22) (.33) (.37) (.29)
Distributions from Capital Gains.................... (1.14) (.24) -- -- --
Total Dividends and Distributions (1.31) (.46) (.33) (.37) (.29)
Net Asset Value, End of Period......................... $18.36 $17.82 $16.07 $12.49 $11.33
Total Return........................................... 11.43% 13.97% 31.47% 13.72% (.31)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $10,738 $8,081 $4,005 $1,512 $311
Ratio of Expenses to Average Net Assets(g) ....... 1.80% 1.87% 1.65% 1.65% 1.47%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.01% 1.27% 2.21% 3.35% 3.77%(d)
Portfolio Turnover Rate............................. 150.8% 23.5% 11.9% 22.5% 34.2%(d)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Notes to Financial Highlights
(a) Effective January 1, 1998, the following changes were made to the names of
the Domestic Growth Funds:
Former Fund Name New Fund Name
----------------------------------------------------------------
Princor Balanced Fund, Inc. Principal Balanced Fund, Inc.
Princor Blue Chip Fund, Inc. Principal Blue Chip Fund, Inc.
Princor Capital Accumulation Fund, Inc. Principal Capital Value Fund, Inc.
Princor Growth Fund, Inc. Principal Growth Fund, Inc.
Princor Emerging Growth Fund, Inc. Principal MidCap Fund, Inc.
Princor Utilities Fund, Inc. Principal Utilities Fund, Inc.
(b) Total return is calculated without the front-end sales charge or contingent
deferred sales charge.
(c) Total return amounts have not been annualized.
(d) Computed on an annualized basis.
(e) Period from June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(f) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996. Certain of the Domestic
Growth Funds' Class R shares recognized net investment income for the
period from the initial purchase of Class R shares on February 27, 1996
through February 28, 1996 as follows, none of which was distributed to the
sole shareholder, Principal Management Corporation. Additionally, the
Domestic Growth Funds incurred unrealized gains (losses) on investments
during the initial interim period as follows. This represents Class R share
activities of each fund prior to the initial offering of Class R shares:
Per Share Per Share Net Net Investment Unrealized Income Gain (Loss)
Principal Balanced Fund, Inc. $-- $(.03)
Principal Blue Chip Fund, Inc. .01 (.02)
Principal Capital Value Fund, Inc. .01 (.11)
Principal Growth Fund, Inc. .01 .10
Principal MidCap Fund, Inc -- .19
<TABLE>
<CAPTION>
(g) Without the Manager's voluntary waiver of a portion of certain of its
expenses (see Note 3 to the financial statements) for the periods
indicated, the following funds would have had per share net investment
income and the ratios of expenses to average net assets as shown:
Periods Per Share Ratio of Expenses
Ended Net Investment to Average Net Amount
Fund October 31, Income Assets Waived
Principal Blue Chip Fund, Inc.
<S> <C> <C> <C> <C>
Class A 2000 $ .01 1.33% $ 239,527
Class B 2000 (.16) 2.05 61,214
Class C 2000 (.24) 2.75 8,450
Class R 2000 (.09) 1.77 45,530
Principal LargeCap Stock Index Fund, Inc.
Class A 2000 $(.01) 1.82%(d) $ 41,967
Class B 2000 (.05) 2.44(d) 18,223
Class C 2000 (.06) 2.51(d) 10,811
Class R 2000 (.02) 2.04(d) 28,818
Principal Partners Aggressive
Growth Fund, Inc.
Class A 2000 $(.08) 1.99% $ 137,876
Class B 2000 (.13) 2.61 38,014
Class C 2000 (.15) 2.63 6,095
Class R 2000 (.09) 2.33 13,862
Principal Partners LargeCap Growth
Fund, Inc.
Class A 2000 $(.06) 2.44%(d) $ 20,357
Class B 2000 (.09) 3.17(d) 9,043
Class C 2000 (.15) 3.43(d) 6,281
Class R 2000 (.10) 2.92(d) 6,992
Principal Partners MidCap Growth
Fund, Inc.
Class A 2000 $(.06) 2.50%(d) $ 28,903
Class B 2000 (.10) 3.22(d) 10,644
Class C 2000 (.16) 3.46(d) 6,580
Class R 2000 (.10) 2.94(d) 6,375
Principal Real Estate Fund, Inc.
Class A 2000 $ -- 2.17% $ 21,860
Class B 2000 .01 2.75 4,803
Class C 2000 (.52) 10.14 8,538
Class R 2000 .02 2.48 3,835
Principal SmallCap Fund, Inc.
Class A 2000 $ (.11) 1.76% $ 2,978
Class B 2000 (.10) 2.41 365
Class C 2000 (.23) 3.84 10,509
Class R 2000 (.03) 2.19 11,126
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Notes to Financial Highlights (Continued)
<TABLE>
<CAPTION>
Year Ended
October 31, Per Share Ratio of Expenses
Except Net Investment to Average Net Amount
Fund as Noted Income Assets Waived
Principal Utilities Fund, Inc.
<S> <C> <C> <C> <C>
Class A 1998 $.39 1.23% $ 60,477
1997 .46 1.25% 65,940
1996 .43 1.25% 54,932
Class B 1998 .29 2.00%(d) 9,557
1997 .37 1.95% 3,753
1996 .34 2.06% 6,690
Class R 1998 .28 2.10% 12,481
1997 .31 2.67% 9,355
1996(f) .28 1.47%(d) --
<FN>
The Manager ceased its waiver of expenses for the Principal
Utilities Fund, Inc. as of October 31, 1998.
</FN>
</TABLE>
(h) Period from March 1, 2000, date Class A, Class B and Class C shares first
offered to the public and Class R shares first offered to eligible
purchasers, through October 31, 2000.
(i) Period from December 31, 1997, date Class A and Class B shares first
offered to the public and Class R shares first offered to eligible
purchasers, through October 31, 1998. With respect to Principal Real Estate
Fund, Inc. Class A, Class B and Class R shares, net investment income
aggregating $.03 per share for the period from the initial purchase of
shares on December 11, 1997 through December 30, 1997 was recognized, of
which $.01 per share was distributed to its sole shareholder, Principal
Life Insurance Company, during the period. With respect to Principal
SmallCap Fund, Inc. Class A, Class B and Class R shares, net investment
income aggregating $.02 per share from the initial purchase of shares on
December 11, 1997 through December 30, 1997 was recognized. Principal
SmallCap Fund, Inc. Class A, Class B and Class R did distribute $.01 per
share a taxable return of capital to the sole shareholder Principal Life
Insurance Company, during the period. Principal Real Estate Fund, Inc. and
Principal SmallCap Fund, Inc. Class A, Class B and Class R shares incurred
unrealized gains (losses) on investments during the initial interim period
as follows. This represents Class A, Class B and Class R share activities
of each fund prior to the initial public offering of each class of shares.
Per Share Unrealized
Gain (Loss)
Class Class Class
A B R
Principal Real Estate Fund, Inc. $ .13 $ .13 $ .13
Principal SmallCap Fund, Inc. (.09) (.09) (.09)
(j) Dividends and distributions which exceed investment income and net realized
gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions
in excess of net realized gains on investments. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as tax return of capital distribution.
<TABLE>
<CAPTION>
October 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES
Principal
Principal International
European Equity Emerging Markets
Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost................................ $6,210,088 $30,226,784
Assets
Investment in securities -- at value (Note 4)..................... $5,663,430 $28,146,817
Cash.............................................................. 221,799 839,194
Receivables:
Dividends and interest......................................... 7,497 7,303
Investment securities sold..................................... 45,155 248,035
Capital Shares sold............................................ 16,219 --
Net foreign currency contracts (Note 8)........................ 6,361 --
Other assets...................................................... -- --
Total Assets 5,960,461 29,241,349
Liabilities
Accrued expenses.................................................. 37,047 63,940
Payables:
Investment securities purchased................................ 64,396 196,244
Capital Shares reacquired...................................... -- 16,459
Total Liabilities 101,443 276,643
Net Assets Applicable to Outstanding Shares ...................... $5,859,018 $28,964,706
Net Assets Consist of:
Capital Stock..................................................... $ 6,758 $ 33,257
Additional paid-in capital........................................ 6,660,687 30,841,236
Accumulated undistributed net investment income (loss)............ 40,403 (22,000)
Accumulated net realized gain (loss) on investment transactions .. (309,725) 194,492
Net unrealized appreciation (depreciation) of investments......... (546,658) (2,079,967)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies................... 7,553 (2,312)
Total Net Assets $5,859,018 $28,964,706
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 125,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $2,241,538 $17,889,758
Shares issued and outstanding............................ 258,018 2,044,974
Net asset value per share................................ $8.69 $8.75
Maximum offering price per share(a) ................... $9.12 $9.19
Class B: Net Assets .............................................. $1,288,354
Shares issued and outstanding............................ 148,733 720,802
Net asset value per share(b)............................. $8.66
Class C: Net Assets............................................... $1,121,278 $258,171
Shares issued and outstanding............................ 129,605 29,746
Net asset value per share(b)............................. $8.65
Class R: Net Assets............................................... $1,207,848 $4,618,672
Shares issued and outstanding............................ 139,433 530,193
Net asset value per share................................ $8.66 $8.71
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF ASSETS AND LIABILITIES
Principal International
International SmallCap
Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost................................ $382,829,597 $51,513,678
Assets
Investment in securities -- at value (Note 4)..................... $401,265,252 $56,233,560
Cash.............................................................. 3,680,276 841,796
Receivables:
Dividends and interest......................................... 1,084,706 63,024
Investment securities sold..................................... 1,685,313 2,249,728
Capital Shares sold............................................ 143,410 86,002
Net foreign currency contracts (Note 8)........................ -- --
Other assets...................................................... 1,905 --
Total Assets 407,860,862 59,474,110
Liabilities
Accrued expenses.................................................. 239,243 89,554
Payables:
Investment securities purchased................................ 4,013,344 852,749
Capital Shares reacquired...................................... 340,785 28,040
Total Liabilities 4,593,372 970,343
Net Assets Applicable to Outstanding Shares ...................... $403,267,490 $58,503,767
Net Assets Consist of:
Capital Stock..................................................... $ 456,383 $ 34,537
Additional paid-in capital........................................ 350,205,738 44,593,629
Accumulated undistributed net investment income (loss)............ 1,461,000 --
Accumulated net realized gain (loss) on investment transactions .. 32,851,749 9,196,021
Net unrealized appreciation (depreciation) of investments......... 18,435,655 4,719,882
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies................... (143,035) (40,302)
Total Net Assets $403,267,490 $58,503,767
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $325,369,172 $36,321,791
Shares issued and outstanding............................ 36,771,392 2,136,180
Net asset value per share................................ $8.85 $17.00
Maximum offering price per share(a) ................... $9.29 $17.85
Class B: Net Assets .............................................. $6,198,105 $48,691,822
Shares issued and outstanding............................ 5,544,004 749,994
Net asset value per share(b)............................. $8.60 $8.78
Class C: Net Assets............................................... $1,093,006 $691,322
Shares issued and outstanding............................ 124,732 41,637
Net asset value per share(b)............................. $8.68 $8.76
Class R: Net Assets............................................... $28,113,490 $8,951,979
Shares issued and outstanding............................ 3,198,136 525,904
Net asset value per share................................ $8.79 $17.02
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF ASSETS AND LIABILITIES
Principal
Pacific Basin
Fund, Inc.
<S> <C>
Investment in securities -- at cost................................ $6,170,410
Assets
Investment in securities -- at value (Note 4)..................... $5,279,544
Cash.............................................................. 158,491
Receivables:
Dividends and interest......................................... 6,942
Investment securities sold..................................... --
Capital Shares sold............................................ 30,047
Net foreign currency contracts (Note 8)........................ 7,540
Other assets...................................................... --
Total Assets 5,482,564
Liabilities
Accrued expenses.................................................. 20,906
Payables:
Investment securities purchased................................ 26,534
Capital Shares reacquired...................................... --
Total Liabilities 47,440
Net Assets Applicable to Outstanding Shares ...................... $5,435,124
Net Assets Consist of:
Capital Stock..................................................... $ 6,314
Additional paid-in capital........................................ 6,244,739
Accumulated undistributed net investment income (loss)............ (5,404)
Accumulated net realized gain (loss) on investment transactions .. 73,156
Net unrealized appreciation (depreciation) of investments......... (890,866)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies................... 7,185
Total Net Assets $5,435,124
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $1,859,912
Shares issued and outstanding............................ 215,928
Net asset value per share................................ $8.61
Maximum offering price per share(a) ................... $9.04
Class B: Net Assets .............................................. $1,347,269
Shares issued and outstanding............................ 156,488
Net asset value per share(b)............................. $8.61
Class C: Net Assets............................................... $1,098,814
Shares issued and outstanding............................ 127,791
Net asset value per share(b)............................. $8.60
Class R: Net Assets............................................... $1,129,129
Shares issued and outstanding............................ 131,198
Net asset value per share................................ $8.61
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end sales
charge of 4.75% of the offering price or 4.99% of the net asset value.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS
Principal
Principal International
European Equity Emerging Markets
Fund, Inc.(a) Fund, Inc.
Net Investment Income
Income:
<S> <C> <C>
Dividends....................................................... $ 35,728 $ 442,286
Withholding tax on foreign dividends............................ (3,032) (47,788)
Interest........................................................ 9,651 85,552
Total Income 42,347 480,050
Expenses:
Management and investment advisory fees (Note 3)................ 25,312 415,666
Distribution and shareholder servicing fees (Notes 1 and 3)..... 17,805 135,115
Transfer and administrative services (Notes 1 and 3)............ 33,232 214,860
Registration fees (Note 1)...................................... 1,749 51,651
Custodian fees ................................................. 24,361 95,000
Auditing and legal fees ........................................ 1,385 4,903
Directors' fees ................................................ 2,700 6,029
Other .......................................................... 30 7,830
Total Gross Expenses 106,574 931,054
Less: Management and investment
advisory fees waived (Note 3)................................ 25,416 32,052
Total Net Expenses 81,158 899,002
Net Investment Income (Operating Loss) (38,811) (418,952)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currencies
Net realized gain (loss) from:
Investment transactions......................................... (309,725) 2,247,800
Foreign currency transactions (Note 7).......................... 79,214 (60,554)
Change in unrealized appreciation/depreciation of:
Investments ................................................ (546,658) (3,180,420)
Translation of assets and liabilities in foreign currencies..... 7,553 4,757
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies (769,616) (986,105)
Net Increase (Decrease) in Net Assets
Resulting from Operations $(808,427) $ (1,405,057)
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF OPERATIONS
Principal
Principal International
International SmallCap
Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C>
Dividends....................................................... $ 13,044,531 $ 446,597
Withholding tax on foreign dividends............................ (713,746) (57,732)
Interest........................................................ 1,176,735 292,188
Total Income 13,507,520 681,053
Expenses:
Management and investment advisory fees (Note 3)................ 3,582,992 774,570
Distribution and shareholder servicing fees (Notes 1 and 3)..... 1,213,928 279,331
Transfer and administrative services (Notes 1 and 3)............ 1,100,481 426,364
Registration fees (Note 1)...................................... 59,850 76,136
Custodian fees ................................................. 160,000 140,034
Auditing and legal fees ........................................ 5,379 4,733
Directors' fees ................................................ 6,138 5,745
Other .......................................................... 54,118 10,030
Total Gross Expenses 6,182,886 1,716,943
Less: Management and investment
advisory fees waived (Note 3)................................ -- --
Total Net Expenses 6,182,886 1,716,943
Net Investment Income (Operating Loss) 7,324,634 (1,035,890)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currencies
Net realized gain (loss) from:
Investment transactions......................................... 32,909,143 10,330,998
Foreign currency transactions (Note 7).......................... (147,712) (147,602)
Change in unrealized appreciation/depreciation of:
Investments ................................................ (26,150,485) (2,853,045)
Translation of assets and liabilities in foreign currencies..... (144,986) 8,195
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies 6,465,960 7,338,546
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 13,790,594 $ 6,302,656
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF OPERATIONS
Principal
Pacific Basin
Fund, Inc.(a)
Net Investment Income
Income:
<S> <C>
Dividends....................................................... $ 14,478
Withholding tax on foreign dividends............................ --
Interest........................................................ 9,836
Total Income 24,314
Expenses:
Management and investment advisory fees (Note 3)................ 30,215
Distribution and shareholder servicing fees (Notes 1 and 3)..... 17,879
Transfer and administrative services (Notes 1 and 3)............ 26,455
Registration fees (Note 1)...................................... 3,216
Custodian fees ................................................. 10,283
Auditing and legal fees ........................................ 1,560
Directors' fees ................................................ 2,750
Other .......................................................... 60
Total Gross Expenses 92,418
Less: Management and investment
advisory fees waived (Note 3)................................ 29,047
Total Net Expenses 63,371
Net Investment Income (Operating Loss) (39,057)
Net Realized and Unrealized Gain (Loss) on Investments and
Foreign Currencies
Net realized gain (loss) from:
Investment transactions......................................... 135,034
Foreign currency transactions (Note 7).......................... (28,225)
Change in unrealized appreciation/depreciation of:
Investments ................................................ (546,658)
Translation of assets and liabilities in foreign currencies..... 7,185
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies (776,872)
Net Increase (Decrease) in Net Assets
Resulting from Operations $(815,929)
(a)Period from April 26, 2000 (date operations commenced)
through October 31, 2000.
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal
Principal International
European Equity Emerging Markets
Fund, Inc. Fund, Inc.
2000(a) 2000 1999(b)
Operations
<S> <C> <C> <C>
Net investment income (operating loss)........................... $ (38,811) $ (418,952) $ (89,427)
Net realized gain (loss) from investment transactions and
foreign currency transactions................................. (230,511) 2,187,246 (498,427)
Change in unrealized appreciation/depreciation of investments.... (539,105) (3,173,351) 4,849,065
Net Increase (Decrease) in Net Assets
Resulting from Operations (808,427) (1,405,057) 4,261,247
Dividends and Distributions to Shareholders From net investment income:
Class A....................................................... -- -- --
Class B....................................................... -- -- --
Class C....................................................... -- -- --
Class R....................................................... -- -- --
Dividends in excess of net investment income:
Class A....................................................... -- (25,056) --
Class B....................................................... -- -- --
Class C....................................................... -- -- --
Class R....................................................... -- (7,869) --
From net realized gain on investments:
Class A....................................................... -- -- --
Class B....................................................... -- -- --
Class C....................................................... -- -- --
Class R....................................................... -- -- --
Total Dividends and Distributions -- (32,925) --
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 2,576,227 12,493,426 5,344,227
Class B....................................................... 1,472,073 2,502,588 1,240,621
Class C....................................................... 1,292,283 204,604 111,837
Class R....................................................... 1,384,288 1,920,715 1,141,426
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... -- 24,482 --
Class B....................................................... -- -- --
Class C....................................................... -- -- --
Class R....................................................... -- 7,869 --
Shares redeemed:
Class A....................................................... (55,170) (7,064,384) (1,703,746)
Class B....................................................... (167) (1,102,892) (508,592)
Class C....................................................... -- (16,061) --
Class R....................................................... (2,089) (734,133) (510,451)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 6,667,445 8,236,214 5,115,322
Total Increase (Decrease) 5,859,018 6,798,232 9,376,569
Net Assets
Beginning of period.............................................. -- 22,166,474 12,789,905
End of period [including undistributed net investment income (loss)
as set forth below]........................................... $5,859,018 $28,964,706 $22,166,474
Undistributed Net Investment Income (Loss)....................... $ 40,403 $(22,000) --
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Principal
Principal International
International SmallCap
Fund, Inc. Fund, Inc.
2000 1999(b) 2000 1999(b)
Operations
<S> <C> <C> <C> <C>
Net investment income (operating loss)........................... $7,324,634 $ 4,872,374 $(1,035,890) $ (359,166)
Net realized gain (loss) from investment transactions and
foreign currency transactions................................. 32,761,431 49,666,886 10,183,396 4,501,772
Change in unrealized appreciation/depreciation of investments.... (26,295,471) 3,344,196 (2,844,850) 8,794,601
Net Increase (Decrease) in Net Assets
Resulting from Operations 13,790,594 57,883,456 6,302,656 12,937,205
Dividends and Distributions to Shareholders From net investment income:
Class A....................................................... (8,902,215) (3,969,273) -- --
Class B....................................................... (913,278) (251,681) -- --
Class C....................................................... (6,309) -- -- --
Class R....................................................... (428,383) (86,216) -- --
Dividends in excess of net investment income:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class C....................................................... -- -- -- --
Class R....................................................... -- -- -- --
From net realized gain on investments:
Class A....................................................... (44,156,072) (15,033,379) (2,370,795) (93,728)
Class B....................................................... (6,362,398) (2,095,376) (1,102,237) (51,691)
Class C....................................................... (44,801) -- (20,957) --
Class R....................................................... (2,947,199) (904,521) (598,971) (25,931)
Total Dividends and Distributions (63,760,655) (22,340,446) (4,092,960) (171,350)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 82,369,195 86,190,514 32,385,361 9,483,933
Class B....................................................... 11,002,678 11,341,699 8,689,777 2,071,973
Class C....................................................... 1,163,693 185,888 711,579 124,696
Class R....................................................... 13,035,534 6,962,176 5,601,145 1,131,774
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 52,348,535 18,683,449 1,752,908 93,541
Class B....................................................... 7,193,604 2,317,119 639,532 51,577
Class C....................................................... 36,063 -- 9,365 --
Class R....................................................... 3,376,384 994,480 143,898 26,009
Shares redeemed:
Class A....................................................... (107,022,647) (99,069,597) (22,527,521) (5,023,440)
Class B....................................................... (11,806,895) (11,138,167) (8,599,573) (1,332,071)
Class C....................................................... (154,495) -- (113,431) (3,360)
Class R....................................................... (7,186,741) (5,300,263) (3,266,043) (190,655)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 44,354,908 (11,167,298) 15,426,997 6,433,977
Total Increase (Decrease) (5,615,153) (46,710,308) 17,636,693 19,199,832
Net Assets
Beginning of period.............................................. 408,882,643 362,172,335 40,867,074 21,667,242
End of period [including undistributed net investment income (loss)
as set forth below]........................................... $403,267,490 $408,882,643 $58,503,767 $40,867,074
Undistributed Net Investment Income (Loss)....................... $1,461,000 $4,476,869 $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Principal
Pacific Basin
Fund, Inc.
2000(a)
Operations
<S> <C>
Net investment income (operating loss)........................... $(39,057)
Net realized gain (loss) from investment transactions and
foreign currency transactions................................. 106,809
Change in unrealized appreciation/depreciation of investments.... (883,681)
Net Increase (Decrease) in Net Assets
Resulting from Operations (815,929)
Dividends and Distributions to Shareholders From net investment income:
Class A....................................................... --
Class B....................................................... --
Class C....................................................... --
Class R....................................................... --
Dividends in excess of net investment income:
Class A....................................................... --
Class B....................................................... --
Class C....................................................... --
Class R....................................................... --
From net realized gain on investments:
Class A....................................................... --
Class B....................................................... --
Class C....................................................... --
Class R....................................................... --
Total Dividends and Distributions --
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 2,170,059
Class B....................................................... 1,555,913
Class C....................................................... 1,276,132
Class R....................................................... 1,312,197
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... --
Class B....................................................... --
Class C....................................................... --
Class R....................................................... --
Shares redeemed:
Class A....................................................... (52,875)
Class B....................................................... (5,558)
Class C....................................................... --
Class R....................................................... (4,815)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 6,251,053
Total Increase (Decrease) 5,435,124
Net Assets
Beginning of period.............................................. --
End of period [including undistributed net investment income (loss)
as set forth below]........................................... $5,435,124
Undistributed Net Investment Income (Loss)....................... $(5,404)
(a)Period from April 26, 2000 (date operations commenced) through
October 31, 2000.
(b)Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</TABLE>
October 31, 2000
NOTES TO FINANCIAL STATEMENTS
Principal European Equity Fund, Inc.
Principal International SmallCap Fund, Inc.
Principal International Emerging Markets Fund, Inc.
Principal Pacific Basin Fund, Inc.
Principal International Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal European Equity Fund, Inc., Principal International Emerging Markets
Fund, Inc., Principal International Fund, Inc., Principal International
SmallCap Fund, Inc. and Principal Pacific Basin Fund, Inc. (the "International
Growth 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.
On April 25, 2000, the initial purchase of 100,000 shares of each Class A, B, C
and R of the Principal European Equity Fund, Inc. and Principal Pacific Basin
Fund, Inc. was made by Principal Life Insurance Company. Effective May 1, 2000,
Principal European Equity Fund, Inc. and Principal Pacific Basin Fund,
Inc. began offering Class A, B, and C shares to the public and Class R shares
to eligible purchasers.
On June 30, 1999, the initial purchases of Class C shares of the International
Growth Funds were made by Principal Life Insurance Company. Effective June 30,
1999, the International Growth Funds began offering Class C shares to the
public.
Class A shares generally are sold with an initial sales charge based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") upon redemption. Class B shares are sold without an
initial sales charge, but are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class C shares are sold without an initial
sales charge, but are subject to a CDSC on certain redemptions made within the
first twelve months of purchase. Class R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear higher ongoing distribution fees than Class A shares. Class
B shares automatically convert into Class A shares, based on relative net asset
value (without a sales charge), seven years after purchase. Class C shares do
not convert into Class A shares. Class R shares automatically convert into Class
A shares, based on relative net asset value (without a sales charge), four years
after purchase. All classes of shares for each fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by each of the International
Growth Funds' respective Board of Directors. In addition, the Board of Directors
of each fund declares separate dividends on each class of shares.
The International Growth Funds allocate daily all income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses to each
class of shares based upon the relative proportion of the value of shares
outstanding of each class. Expenses specifically attributable to a particular
class are charged directly to such class. Class-specific expenses charged to
each class during the periods ended October 31, 2000, which are included in the
corresponding captions of the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services
Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal European Equity Fund, Inc. $ 2,310 $ 5,857 $6,142 $ 3,496 $ 1,431 $ 1,043 $ 569 $ 795
Principal International
Emerging Markets Fund, Inc. 51,445 59,440 2,327 21,903 42,677 15,496 559 4,778
Principal International Fund, Inc. 664,059 368,970 8,230 172,669 347,079 99,297 1,162 59,812
Principal International
SmallCap Fund, Inc. 96,606 135,870 5,929 40,926 102,296 33,554 1,205 14,981
Principal Pacific Basin Fund, Inc. 2,065 6,153 6,222 3,439 704 457 353 354
</TABLE>
Registration Fees
Class A Class B Class C Class R
Principal European Equity Fund, Inc. $ 365 $ 361 $ 241 $ 327
Principal International
Emerging Markets Fund, Inc. 7,977 6,793 11,000 7,238
Principal International Fund, Inc. 15,772 10,182 8,146 7,116
Principal International
SmallCap Fund, Inc. 15,166 16,300 10,206 10,402
Principal Pacific Basin Fund, Inc. 504 491 491 457
The International Growth 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, preferred stocks and
foreign securities, the investments are valued by using 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.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange. The values of
such securities used in computing net asset value per share are usually
determined as of such times. Occasionally, events which affect the values of
such securities and foreign currency exchange rates may occur between the times
at which they are generally determined and the close of the New York Stock
Exchange and would therefore not be reflected in the computation of each fund's
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities are valued at their fair value
as determined in good faith by Principal Management Corporation (the "Manager")
under procedures established and regularly reviewed by each fund's Board of
Directors. To the extent each fund invests in foreign securities listed on
foreign exchanges which trade on days on which the fund does not determine its
net asset value, for example Saturdays and other customary national U.S.
holidays, each fund's net asset value could be significantly affected on days
when shareholders do not have access to the International Growth Funds.
Certain securities issued by companies in emerging market countries may have
more than one quoted valuation at any given point in time, sometimes referred to
as a "local" price and a "premium" price. The premium price is often a
negotiated price which may not consistently represent a price at which a
specific transaction can be effected. It is the policy of the International
Growth Funds to value such securities at prices at which it is expected those
shares may be sold, and the Manager or any sub-advisor is authorized to make
such determinations subject to such oversight by each fund's Board of Directors
as may occasionally be necessary.
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 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 International Growth Funds record investment transactions generally one day
after the trade date, except for short-term investment transactions, which are
recorded generally on 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 International Growth
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.
Note 1 -- Significant Accounting Policies (Continued)
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between trade and settlement dates
on security transactions, and the difference between the amount of dividends and
foreign withholding taxes recorded on the books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized appreciation
(depreciation) on translation of assets and liabilities in foreign currencies
arise from changes in the exchange rate relating to assets and liabilities,
other than investments in securities, purchased and held in non-U.S. denominated
currencies.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Dividends and distributions to shareholders from net investment income and
net realized gain from investments and foreign currency transactions are
determined in accordance with federal tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions, net operating losses and
sales of Passive Foreign Investment Companies. Permanent book and tax basis
differences are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes, but not for tax purposes, are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as tax return of capital distributions.
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.
The Financial Accounting Standards Board recently approved the AICPA Audit and
Accounting Guide for Investment Companies (the "Guide"). The Guide supercedes a
previous version of the AICPA Audit and Accounting Guide for Investment
Companies and Statement of Position 93-2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distribution by Investment Companies. The Guide is effective for fiscal years
beginning after December 15, 2000. Management of the International Growth Funds
does not anticipate that the adoption of the Guide will have a significant
effect on the financial statements.
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 for
federal income tax reporting purposes approximates that used for financial
reporting purposes.
At October 31, 2000, the Principal European Equity Fund, Inc. had a net capital
loss carryforward of approximately $310,000 which expires in 2008.
Note 3 -- Management Agreement and Transactions With Affiliates
The International Growth Funds have agreed to pay investment advisory and
management fees to Principal Management Corporation (wholly owned by Princor
Financial Services Corporation, a subsidiary of Principal Financial Services,
Inc.) computed at an annual percentage rate of each fund's average daily net
assets. The annual rate used in this calculation for the International Growth
Funds is as follows:
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
<S> <C> <C> <C> <C> <C>
Principal International Emerging Markets Fund, Inc. 1.25% 1.20% 1.15% 1.10% 1.05%
Principal International Fund, Inc.* 0.75 0.70 0.65 0.60 0.55
Principal International SmallCap Fund, Inc. 1.20 1.15 1.10 1.05 1.00
</TABLE>
* At the meeting of the shareholders of the Principal International Fund,
Inc. held on November 2, 1999, the management fee schedule for this Fund
was modified. The modification was effective as of January 1, 2000. The new
management fee schedule for Principal International Fund, Inc. along with
Principal European Equity Fund, Inc. and Principal Pacific Basin Fund Inc.
is as follows:
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$250 $250 $250 $250 $1,000
<S> <C> <C> <C> <C> <C>
Principal European Equity Fund, Inc. 0.90% 0.85% 0.80% 0.75% 0.70%
Principal International Fund, Inc. 0.85 0.80 0.75 0.70 0.65
Principal Pacific Basin Fund, Inc. 1.10 1.05 1.00 0.95 0.90
</TABLE>
The International Growth Funds also reimburse the Manager for transfer and
administrative services, including the cost of accounting, data processing,
supplies and other services rendered. The Manager voluntarily waives a portion
of its fee for certain of the International Growth Funds. The waivers are in
amounts that maintain total operating expenses within certain limits. The limits
are expressed as a percentage of average daily net assets attributable to each
class on an annualized basis during the reporting period. The amounts waived and
the operating expense limits, which were maintained at or below that shown, are
as follows:
<TABLE>
<CAPTION>
Periods Ended Expense
October 31, 2000 Limit
Principal European Equity Fund, Inc.
<S> <C> <C>
Class A $ 8,650 2.50%
Class B 7,135 3.25
Class C 5,242 3.25
Class R 4,389 3.00
Principal International Emerging Markets Fund, Inc.
Class A 20,727 2.50%
Class B -- 3.25
Class C 11,325 3.25
Class R -- 3.00
Principal Pacific Basin Fund, Inc.
Class A 6,576 2.50
Class B 9,372 3.25
Class C 7,380 3.25
Class R 5,719 3.00
</TABLE>
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00%, and Class C shares at 1.00% of the lesser of the
current market value or the cost of shares being redeemed. Princor Financial
Services Corporation also retains sales charges on sales of Class A shares based
on declining rates which begin at 4.75% of the offering price. The aggregate
amount of these charges retained, by fund, for the periods ended October 31,
2000, were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal European Equity Fund, Inc. $ 18,178 $ 2 $--
Principal International Emerging Markets Fund, Inc. 158,387 17,624 135
Principal International Fund, Inc. 693,361 174,643 645
Principal International SmallCap Fund, Inc. 358,302 34,460 610
Principal Pacific Basin Fund, Inc. 13,897 217 --
</TABLE>
No brokerage commissions were paid by the International Growth Funds to Princor
Financial Services Corporation during the periods. Brokerage commissions were
paid to other affiliates by the following funds:
<TABLE>
<CAPTION>
Periods Ended Year Ended
October 31, 2000 October 31, 1999
<S> <C> <C>
Principal European Equity Fund, Inc. $ 12,283 $ --
Principal International Emerging Markets Fund, Inc. 21,495 13,818
Principal International Fund, Inc. 391,958 232,934
Principal International SmallCap Fund, Inc. 55,180 45,132
Principal Pacific Basin Fund, Inc. 4,011 --
</TABLE>
The International Growth Funds bear distribution and shareholder servicing fees
with respect to each class computed at an annual rate of the average daily net
assets attributable to each class of each fund. The annual rate will not exceed
the following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
All International Growth Funds .25% 1.00% 1.00% .75%
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class A, Class B and Class
R shares, fees that are unused by the principal underwriter at the end of the
fiscal year are returned to the respective International Growth Funds which
generated the excess.
At October 31, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company and benefit plans sponsored on behalf of Principal Life
Insurance Company owned shares of the International Growth Funds as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal European Equity Fund, Inc. 125,000 125,000 125,000 125,000
Principal International Emerging Markets Fund, Inc. 389,365 300,000 11,186 300,501
Principal International Fund, Inc. 11,134,915 -- 10,406 --
Principal International SmallCap Fund, Inc. -- -- 7,710 271,369
Principal Pacific Basin Fund, Inc. 125,000 125,000 125,000 125,000
</TABLE>
Note 4 -- Investment Transactions
For the periods ended October 31, 2000, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the International Growth Funds
were as follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Principal European Equity Fund, Inc. $ 9,105,225 $ 2,581,269
Principal International Emerging Markets Fund, Inc. 41,572,208 34,694,074
Principal International Fund, Inc. 395,310,439 435,916,175
Principal International SmallCap Fund, Inc. 192,656,833 190,342,591
Principal Pacific Basin Fund, Inc. 7,365,325 1,329,949
</TABLE>
At October 31, 2000, net unrealized appreciation (depreciation) of investments
by the International Growth Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Gross Unrealized (Depreciation)
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal European Equity Fund, Inc. $ 154,453 $ (701,111) $ (546,658)
Principal International Emerging Markets Fund, Inc. 2,879,487 (4,959,454) (2,079,967)
Principal International Fund, Inc. 46,679,019 (28,243,364) 18,435,655
Principal International SmallCap Fund, Inc. 6,794,449 (2,074,567) 4,719,882
Principal Pacific Basin Fund, Inc. 148,471 (1,039,337) (890,866)
</TABLE>
At October 31, 2000, the International Growth Funds held the following
securities which were purchased in private placement transactions and may
require registration, or an exemption therefrom, in order to effect their sale
in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of October 31, Percentage of
Security Description Acquisition Cost 2000 Net Assets
<S> <C> <C> <C> <C>
Principal International Agora SA GDR 2/23/99 $ 50,166 $ 98,787 .34%
Emerging Markets Fund, Inc. 8/16/99 12,650 20,123 .07
Al-Ahram Beverages Co. ADR 8/21/97 28,050 28,160 .10
11/6/98 4,404 3,840 .01
12/14/98 36,400 35,840 .12
3/19/99 54,485 43,520 .15
4/1/99 43,335 34,560 .12
6/8/99 29,000 25,600 .09
8/19/99 30,250 25,600 .09
8/20/99 15,550 12,800 .04
10/25/99 20,300 17,920 .06
1/3/00 16,000 10,240 .04
1/17/00 22,780 12,800 .04
2/16/00 36,450 23,040 .08
6/6/00 18,350 12,800 .04
8/22/00 18,315 14,080 .05
Ceske Radiokomunikace GDR 6/12/98 33,477 76,446 .26
6/16/99 37,125 37,290 .13
1/17/00 26,580 22,374 .08
3/8/00 20,350 14,916 .05
3/23/00 74,480 52,207 .18
Note 4 -- Investment Transactions (Continued)
Principal International Hindalco Industries Ltd. GDR 5/6/99 $ 66,884 $ 57,998 .20%
Emerging Markets Fund, Inc. 5/19/99 32,750 30,525 .11
(Continued) 6/3/99 52,870 51,893 .18
2/15/00 37,500 22,894 .08
3/31/00 104,811 88,523 .30
6/6/00 21,360 18,315 .06
State Bank of India GDR 5/5/99 89,225 58,129 .20
5/6/99 5,825 3,502 .01
2/2/00 28,000 14,007 .05
3/2/00 19,350 8,404 .03
3/31/00 96,515 67,934 .23
5/25/00 28,875 24,512 .08
Videsh Sanchar Nigam Ltd. GDR 1/13/98 5,675 3,687 .01
6/5/98 19,800 13,275 .05
7/30/98 10,875 7,375 .03
9/28/98 16,687 11,063 .04
2/11/99 54,575 43,512 .15
5/20/99 35,850 22,126 .08
1/17/00 28,080 8,850 .03
2/2/00 28,875 7,375 .03
3/1/00 74,575 14,013 .05
3/28/00 41,207 9,587 .03
4/18/00 54,990 19,175 .07
$1,229,617 4.24%
Principal Pacific
Basin Fund, Inc. Samsung Electronics GDR 5/30/00 $ 46,350 $18,792 .35%
Reliance Industries Ltd. GDR 10/23/00 34,715 34,307 .63
$53,099 .98%
</TABLE>
The International Growth Funds' investments are with various issuers in various
industries. The Schedules of Investments contained herein summarize
concentrations of credit risk by issuer and industry.
Note 5 -- Capital Share Transactions
Transactions in Capital Shares by fund were as follows:
<TABLE>
<CAPTION>
Principal Principal International Principal
European Equity Emerging Markets International
Fund, Inc. Fund, Inc. Fund, Inc.
Periods Ended October 31, 2000:
Shares sold:
<S> <C> <C> <C>
Class A ......................................... 264,106 1,141,632 8,446,419
Class B ......................................... 148,752 231,172 1,128,898
Class C ......................................... 129,605 18,685 118,641
Class R ......................................... 139,667 177,121 1,350,621
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 2,282 5,592,768
Class B .......................................... -- -- 774,031
Class C ......................................... -- -- 3,869
Class R ......................................... -- 734 363,246
Shares redeemed:
Class A ......................................... (6,088) (663,904) (10,962,606)
Class B ......................................... (19) (107,073) (1,209,501)
Class C ......................................... -- (1,552) (16,843)
Class R ......................................... (234) (69,533) (746,783)
Net Increase 675,789 729,564 4,842,760
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... N/A 667,274 9,027,584
Class B ......................................... N/A 160,328 1,200,081
Class C ......................................... N/A 12,613 19,065
Class R ......................................... N/A 157,952 734,641
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... N/A -- 2,098,559
...............................................Class B N/A --
262,628
Class C ......................................... N/A -- --
Class R ......................................... N/A -- 112,716
Shares redeemed:
Class A ......................................... N/A (219,971) (10,325,463)
Class B ......................................... N/A (65,736) (1,172,425)
Class C ......................................... N/A -- --
Class R ......................................... N/A (73,370) (558,617)
Net Increase 639,090 1,398,769
</TABLE>
Note 5 -- Capital Share Transactions (Continued)
<TABLE>
<CAPTION>
Principal International Principal
SmallCap Pacific Basin
Fund, Inc. Fund, Inc.
Periods Ended October 31, 2000:
Shares sold:
<S> <C> <C>
Class A ......................................... 1,630,160 221,755
Class B ......................................... 445,407 157,123
Class C ......................................... 37,577 127,791
Class R ......................................... 281,773 131,719
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 107,474 --
Class B .......................................... 39,637 --
Class C ......................................... 576 --
Class R ......................................... 8,796 --
Shares redeemed:
Class A ......................................... (1,142,271) (5,827)
Class B ......................................... (454,925) (635)
Class C ......................................... (5,735) --
Class R ......................................... (167,537) (521)
Net Increase 780,932 631,405
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 767,113 N/A
Class B ......................................... 167,457 N/A
Class C ......................................... 9,453 N/A
Class R ......................................... 84,990 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 9,098 N/A
Class B .............................................. 5,060 N/A
Class C ......................................... -- N/A
Class R ......................................... 2,530 N/A
Shares redeemed:
Class A ......................................... (412,770) N/A
Class B ......................................... (113,345) N/A
Class C ......................................... (234) N/A
Class R ......................................... (16,099) N/A
Net Increase 503,253
</TABLE>
Note 6 -- Line of Credit
The International Growth Funds participate with other funds and portfolios
managed by Principal Management Corporation in an unsecured joint line of credit
with two banks which allow the funds to borrow up to $75,000,000 collectively.
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 Fed Funds Rate plus .50%.
Additionally, a commitment fee is charged at the annual rate of .09% on the
amount of the line of credit. The commitment fee is allocated among the
participating funds and portfolios in proportion to their average net assets
during each calendar quarter. At October 31, 2000, the International Growth
Funds had no outstanding borrowings under the line of credit.
Note 7 -- Foreign Currency Contracts
At October 31, 2000, the International Growth Funds owned forward contracts to
both purchase and sell foreign currencies at specified future dates at fixed
exchange rates. Forward foreign currency contracts are valued at the forward
rate, and are marked-to-market daily. The change in market value is recorded by
each fund as an unrealized gain or loss. When the contract is closed, each fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
<TABLE>
<CAPTION>
Value At Net Unrealized
Foreign Currency Contracts In Exchange October 31, Appreciation
Purchase Contracts to Deliver For 2000 (Depreciation)
<S> <C> <C> <C> <C>
Principal European Equity Fund, Inc.Euro 228,712 $193,048 $194,042 $ 994
Principal Pacific Basin Fund, Inc. Hong Kong Dollar 389,525 50,000 49,995 (5)
Indian Rupee 607,640 13,000 12,947 (53)
Japanese Yen 76,005,523 715,311 701,992 (13,319)
South Korean Won 30,605,500 27,000 26,866 (134)
</TABLE>
<TABLE>
<CAPTION>
Value At Net Unrealized
Foreign Currency Contracts In Exchange October 31, Appreciation
Sale Contracts to Deliver For 2000 (Depreciation)
<S> <C> <C> <C> <C>
Principal European Equity Fund, Inc. Euro 236,471 $206,065 $200,698 $ 5,367
Principal Pacific Basin Fund, Inc. Australian Dollar 20,000 10,451 10,363 88
Hong Kong Dollar 2,107,263 270,441 270,557 (116)
Indian Rupee 2,186,930 46,608 46,597 11
Japanese Yen 104,130,523 979,038 960,404 18,635
South Korean Won 116,190,730 103,855 101,989 1,866
Taiwan Dollar 975,415 31,000 30,433 567
</TABLE>
The use of forward foreign currency contracts does not eliminate the
fluctuations in underlying prices of each fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, each fund could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts.
PRINCIPAL EUROPEAN EQUITY FUND, INC.
Shares
Held Value
Common Stocks (96.66%)
Advertising (1.96%)
Aegis Group PLC 50,367 $ 114,827
Aircraft & Parts (1.63%)
British Aerospace 16,695 95,274
Commercial Banks (10.75%)
Barclays PLC 5,737(a) 164,130
Bbva (Bilb-Viz-Arg) 10,033 133,512
Credit Suisse Group 477 89,400
Deutsche Bank AG 374 30,274
Julius Baer Holdings Ltd. 17 84,145
Nordic Baltic Holding AB FDR 9,940 74,984
Nordic Baltic Holding AB 7,093 53,093
629,538
Communications Equipment (2.33%)
Telefonaktiebolaget Lm Ericsson,
Class B Shares 10,306 136,800
Communications Services, Nec (0.55%)
Koninklijke Kpn NV 1,584 32,044
Computer & Data Processing Services (3.92%)
Aldata Solution 2,339(a) 16,455
Autonomy Corp. PLC 188(a) 9,555
Cell Network AB 765 1,756
GFT Technology AG 338(a) 15,614
Intershop Communications AG 405(a) 17,576
KPNQwest NV 1,280(a) 30,975
Sap AG (Systeme, Anwendungen, Produkte
In Der Datenverarbeitung) 522 102,427
Telelogic AB 3,037(a) 20,005
Trader.com NV 1,855(a) 15,629
229,992
Crude Petroleum & Natural Gas (3.23%)
Total Fina Elf SA 1,325 189,350
Dairy Products (2.36%)
Danone 633 88,420
Unilever PLC 7,363(a) 49,931
138,351
Drugs (6.36%)
Aventis SA 2,241 161,455
Pharmacia Corp. 3,939 211,109
372,564
Drugs, Proprietaries & Sundries (4.77%)
Glaxo Wellcome PLC 9,717 279,521
Eating & Drinking Places (3.05%)
Granada Compass PLC 20,602(a) 178,447
Electric Services (2.32%)
Union Electric Fenosa SA 7,361 135,952
Electronic Components &
Accessories (0.95%)
ADVA AG NPV 304(a) $ 21,541
Alcatel Optronics 570(a) 33,868
55,409
Electronic Distribution Equipment (3.06%)
Koninklijke (Royal) Philips Electronics NV 4,567 179,266
Fire, Marine & Casualty Insurance (1.46%)
CGNU PLC 6,245(a) 83,882
Zurich Financial Services AG 4 1,935
85,817
Foreign Banks, Branches &
Agencies (2.39%)
Unicredito Italiano SPA 27,566 140,190
Forest Products (0.24%)
Stora Enso OYJ 1,379 14,107
Holding Offices (2.08%)
Fortis Nl 3,985 121,597
Life Insurance (7.40%)
Allianz AG 420 141,222
AXA 1,216 160,786
ING Groep NV 1,632 111,935
Skandia Forsakrings AB 1,168 19,759
433,702
Miscellaneous Apparel &
Accessories (1.34%)
Gucci Group 806 78,564
Miscellaneous Food Stores (2.28%)
Tesco PLC 34,984(a) 133,605
Miscellaneous Non-Durable Goods (1.75%)
Diageo PLC 10,862 102,759
Miscellaneous Wood Products (0.31%)
Enso OY 1,764 18,092
Motion Picture Production &
Services (0.59%)
Granada Media PLC 6,000(a) 34,850
Motor Vehicles & Equipment (2.47%)
Psa Peugeot Citroen SA 522 96,011
Valeo SA 1,115 48,482
144,493
Newspapers (1.25%)
Pearson PLC 2,723 73,308
Oil & Gas Field Services (4.88%)
Repsol YPF SA 404(a) 6,410
Royal Dutch Petroleum Co. 2,090 123,809
Shell Transport & Trading Co. 19,346 155,912
286,131
Personnel Supply Services (2.03%)
Adecco SA 172 118,902
Radio & Television Broadcasting (1.15%)
Comptel PLC 1,753 $ 24,219
Societe Television Francise 1 788 42,947
67,166
Research & Testing Services (0.58%)
Oxford Glycosciences PLC 921(a) 33,702
Sanitary Services (0.65%)
Suez Lyonnaise Des Eaux SA 251 38,252
Search & Navigation Equipment (0.46%)
Marconi PLC 2,141(a) 27,048
Soap, Cleaners & Toilet Goods (1.03%)
Beiersdorf AG 605 60,459
Telephone Communication (15.08%)
Deutsche Telekom AG 2,099 78,370
Elisa Communications OYJ 513 14,218
Energis PLC 4,105 34,990
Nokia OYJ 4,727 194,280
T.I.M. SPA 9,322 79,171
Telefonica SA 4,720(a) 89,895
Vodafone Group PLC 94,245 392,427
883,351
Total Portfolio Investments (96.66%) 5,663,430
Cash, receivables and other assets,
net of liabilities (3.34%) 195,588
Total Net Assets (100.00%) $5,859,018
(a) Non-income producing security - No dividend paid during the twelve months.
Principal European Equity Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Finland $ 281,371 4.97%
France 875,200 15.45
Germany 467,483 8.25
Italy 219,361 3.87
Netherlands 678,190 11.98
Spain 365,769 6.46
Sweden 306,397 5.41
Switzerland 294,382 5.20
United Kingdom 1,964,168 34.68
United States 211,109 3.73
Total $5,663,430 100.00%
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Shares
Held Value
Common Stocks (90.45%)
Advertising (0.80%)
Cheil Communications, Inc. 3,630 $ 232,958
Aircraft & Parts (1.05%)
Embraer Aircraft Corp. ADR 10,490(a) 303,554
Beer, Wine & Distilled Beverages (1.71%)
Hite Brewery Co. Ltd. 9,341 417,984
South African Breweries Ltd. 12,762 76,486
494,470
Beverages (4.27%)
Al-Ahram Beverages Co. ADR 23,500(a)(b) 300,800
Beijing Enterprises Holdings 150,000 136,554
Fomento Economico Mexicano SA ADR 12,240 467,415
Grupo Modelo SA de C.V. 124,200 330,933
1,235,702
Blast Furnace & Basic
Steel Products (1.14%)
Pohang Iron & Steel Co. Ltd. ADR 14,100 222,956
Tubos De Acero De Mexico SA ADR 7,100 107,991
330,947
Business Credit Institutions (0.60%)
Cosco Pacific Ltd. 230,000 172,520
Cable & Other Pay TV Services (0.70%)
Ceske Radiokomunikace GDR 5,450(a)(b) 203,233
Cement, Hydraulic (0.65%)
Uniao De Bancos Brasileiros GDR 7,500 189,375
Combination Utility Services (0.70%)
Tenaga Nasional Berhad 63,000 203,948
Commercial Banks (9.12%)
Alpha Bank SA 9,200 339,315
Bank Hapoalim Ltd. 56,880 143,923
Bank Sinopac 524,618(a) 218,044
BOE Ltd. 143,200(a) 72,940
Commercial Bank of Greece 3,900 174,156
Grupo Financiero Banamex 293,400(a) 455,573
H&CB GDR 16,390 394,080
Malayan Banking Berhad 35,000(a) 140,018
OTP Bank Rt. 3,500 162,144
Overseas Union Bank Ltd. 42,442 205,501
Shinhan Bank 16,000 160,352
State Bank of India GDR 25,200(b) 176,488
2,642,534
Communications Equipment (2.11%)
Comverse Technology, Inc. 2,890(a) 322,957
Netas Northern Electric
Telekomunikasyon AS 2,254,000 287,192
610,149
Communications Services, NEC (0.83%)
Korea Telecom Corp. ADR 6,500 $ 239,688
Computer & Data Processing
Services (5.12%)
Breezecom Ltd. 3,528(a) 65,488
Check Point Software Technologies Ltd. 4,800(a) 760,200
Datatec Ltd. 30,800(a) 193,964
Infosys Technologies Ltd. 2,600 398,002
Silverline Technologies Ltd. - ADR 4,300(a) 63,963
1,481,617
Computer & Office Equipment (2.65%)
Asustek Computer, Inc. 28,280 140,697
Compal Electronics, Inc. 92,385 140,743
M-Systems Flash Disk Pioneer Ltd. 11,537(a) 286,983
Orbotech Ltd. ADR 3,750(a) 198,516
766,939
Concrete, Gypsum & Plaster
Products (0.62%)
Cemex SA CPO 42,554 178,749
Consumer Products (0.93%)
British American Tobacco
Australasia Ltd. 29,600 270,720
Crude Petroleum & Natural Gas (0.98%)
Lukoil Holding - ADR 5,300(a) 283,020
Deep Sea Domestic Transportation of
Freight (0.37%)
China Shipping Development `H' CNY1 694,000(a) 105,892
Department Stores (0.86%)
Wal-Mart De Mexico SA De CV 103,500(a) 249,281
Drugs (0.82%)
Ranbaxy Laboratories Ltd. GDR 2,100 36,487
Teva Pharmaceutical ADR 3,400 201,025
237,512
Electric Lighting and Wiring
Equipment (0.25%)
LG Cable & Machinery 5,300 71,288
Electric Services (3.94%)
Companhia Paranaense De Enersis ADR 50,000 453,125
Korean Electric Power ADR 35,700 435,094
Rao Unified Energy Systems ADR 20,000(a) 253,000
1,141,219
Electronic Components &
Accessories (6.97%)
Ambit Microsystems Corp. 30,656 142,097
Ase Test Ltd. 13,500(a) 208,406
Hon Hai Precision Industry Co., Ltd. 25,000 130,558
Procomp Informatics Co., Ltd. 860(a) 3,083
Samsung Electronics 4,050 507,363
Taiwan Semiconductor
Manufacturing Co., Ltd. 204,640(a) 619,719
United Microelectronics Corp. 188,800(a) 332,548
Winbond Electronics Corp. 78,000(a) 75,443
2,019,217
Electronic Distribution Equipment (0.26%)
Reltek Semiconductor Corp. 20,000 74,472
Family Clothing Stores (0.54%)
Giordano International Ltd. 266,000 $ 156,037
Fire, Marine & Casualty Insurance (1.48%)
Aksigorta AS 21,690,000 428,837
Foreign Banks, Branches &
Agencies (1.10%)
Yapi Ve Kredi Bankasi AS 36,931,360(a) 319,114
Furniture & Home
Furnishing Stores (1.21%)
Grupo Elecktra SA CPO 203,000 209,995
Profurn Ltd. 288,100(a) 141,029
351,024
Gasoline Service Stations (1.95%)
Petroleo Brasileiro ADR 8,400(a) 244,125
President Chain Store Corp. 112,456 319,705
563,830
Glass & Glassware, Pressed or
Blown (0.69%)
Hankuk Electric Glass Co., Ltd. 3,180 201,283
Holding Offices (0.55%)
The India Fund, Inc. ADR 14,800(a) 158,175
Hotels & Motels (0.33%)
Resorts World Berhad 55,000 96,263
Medical & Dental Laboratories (1.23%)
Ranbaxy Laboratories Ltd. 25,000(a) 356,572
Metal Mining Services (0.63%)
Compahia Vale Do Rio Doce 7,897 182,072
Miscellaneous Electrical Equipment &
Supplies (0.31%)
Camtek Ltd. 11,222(a) 89,776
Miscellaneous Investing (1.21%)
Banco Latino Americano De
Exportaciones (Bladex) ADR 8,246 206,665
Johnnic Holdings Ltd. 12,700 144,499
351,164
Miscellaneous Metal Ores (0.95%)
Anglo Amer Platnum 7,090 276,527
Miscellaneous Textile Goods (0.94%)
Esprit Holdings Ltd. 316,000(a) 271,467
Newspapers (0.71%)
Agora SA GDR 6,500(a)(b) 118,910
New Straits Times Press Berhad 58,000(a) 87,011
205,921
Oil & Gas Field Services (1.99%)
Gulf Indonesia Resources Ltd. ADR 19,300(a) 209,889
Surgutneftegaz ADR 28,440 365,454
575,343
Paper & Paper Products (0.70%)
Aracruz Celulose SA ADR 13,600 204,000
Paper Mills (0.82%)
Sappi Ltd. 23,500(a) $ 161,050
Sappi Ltd. ADR 11,100 77,700
238,750
Petroleum Refining (1.77%)
Sasol Ltd. 66,900(a) 512,472
Primary Non-Ferrous Metals (0.93%)
Hindalco Industries Ltd. GDR 17,700(b) 270,148
Producers, Orchestras &
Entertainers (1.51%)
Corporacion Interamericana De
Entretenimiento SA, Class B 98,040(a) 437,431
Radio & Television Broadcasting (1.19%)
Grupo Televisa SA GDR 6,384(a) 345,534
Real Estate Agents & Managers (1.38%)
Amoy Properties 87,000(a) 79,202
Cheung Kong 29,000(a) 320,710
399,912
Real Estate Operators & Lessors (0.85%)
Hong Kong Land Holdings Ltd. 111,000 205,350
SM Prime Holdings, Inc. 511,800 40,025
245,375
Retail Stores, NEC (1.00%)
Cia Brasileira De Distribuicao Acucar GDR8,120 289,275
Security & Commodity Exchanges (0.67%)
Hong Kong Exchanges & Clearing Ltd. 112,000 195,305
Telegraph & Other
Communications (0.24%)
Advanced Info Service Public Co. Ltd. 8,600(a) 70,781
Telephone Communication (14.08%)
Carso Global Telecom, Class A1 35,600(a) 79,791
China Mobile Ltd. 88,500(a) 570,210
China Unicom - ADR 13,300(a) 272,650
Compania Anonima Telefonos De
Venezuela ADR 10,700 203,300
Cosmote Mobile Communication 10,000(a) 75,112
Digi Com Berhad 44,000(a) 66,009
Embratel Participacoes SA 15,824,900 201,500
Embratel Participacoes SA ADR 14,300 231,481
Global Tele-systems Ltd. 6,000 135,533
Hellenic Telecom Organization SA ADR 30,000 262,500
Hellenic Telecommunication 15,611 272,106
Matav Tavkozlesi Rt. ADR 6,230 146,405
Partner Communications Co. Ltd. ADR 22,150(a) 132,900
SK Telecom Co. Ltd. ADR 5,298 132,781
Telefonos De Mexico SA ADR 17,100 922,333
Tele Norte Leste
Participacoes SA (Telemar) 12,900,000 212,250
Videsh Sanchar Nigamn Ltd. GDR 21,700(a)(b) 160,038
4,076,899
Variety Stores (0.74%)
Hutchison Whampoa Ltd. 17,200 $ 213,371
Vocational Schools (1.30%)
NIIT Ltd. 11,170 375,633
Total Common Stocks 26,197,295
Preferred Stocks (4.12%)
Beverages (0.50%)
Quilmes Industrial Quines SA ADR 17,600 145,200
Commercial Banks (1.03%)
Banco Itau SA 3,828,000 297,870
Gasoline Service Stations (0.61%)
Petroleo Brasileiro SA 6,700 177,681
Telephone Communication (1.98%)
Tele Celular Sul Participacoes SA ADR 5,700 143,569
Tele Norte Leste Participacoes ADR 19,444 430,202
573,771
Total Preferred Stocks 1,194,522
Principal
Amount Value
Commercial Paper (2.61%)
Business Credit Institutions (2.61%)
General Electric Capital Corp.;
6.65%; 11/01/2000 $755,000 $755,000
Total Commercial Paper 755,000
Total Portfolio Investments (97.18%) 28,146,817
Cash, receivables and other assets,
net of liabilities (2.82%) 817,889
Total Net Assets (100.00%) $28,964,706
(a) Non-income producing security - No dividend paid during the
past twelve months.
(b) Restricted security - See Note 4 to the financial statements.
Principal International Emerging Markets Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Argentina $ 145,200 0.52%
Brazil 3,270,804 11.62
China 378,542 1.34
Czech Republic 203,233 0.72
Egypt 300,800 1.07
Greece 1,123,189 3.99
Hong Kong 2,320,726 8.25
Hungary 308,549 1.10
India 2,131,039 7.57
Indonesia 209,889 0.75
Israel 1,849,297 6.57
Korea, Republic of 3,015,827 10.71
Malaysia 863,969 3.07
Mexico 3,785,026 13.45
Panama 206,665 0.73
Philippines 40,025 0.14
Poland 118,910 0.42
Russia 901,474 3.20
Singapore 205,501 0.73
South Africa 1,656,677 5.89
Taiwan, Province of China 2,405,515 8.55
Thailand 70,781 0.25
Turkey 1,035,143 3.68
United States 1,396,746 4.96
Venezuela 203,300 0.72
Total $28,146,817 100.00%
PRINCIPAL INTERNATIONAL FUND, INC.
Shares
Held Value
Common Stocks (92.53%)
Advertising (1.30%)
WPP Group PLC 389,005(a) $5,233,565
Aircraft & Parts (0.64%)
Rolls-Royce PLC 987,830(a) 2,585,559
Cable & Other Pay TV Services (0.94%)
United Pan-Europe Communications NV 216,539(a) 3,790,069
Combination Utility Services (3.07%)
Alcatel Alsthom 167,150 10,186,529
Vivendi Environnement 58,529(a) 2,182,804
12,369,333
Commercial Banks (9.22%)
Bank of Ireland 235,555 1,786,925
BNP Paribas 71,156 6,127,682
Deutsche Bank AG 54,000 4,371,073
Dresdner Bank AG 142,420 5,752,079
Nordic Baltic Holding AB 1,008,310 7,547,460
Royal Bank of Canada Montreal, Quebec 85,100 2,691,352
San Paolo-Imi SPA 324,400 5,251,764
Sanwa Bank Ltd. 410,000 3,642,275
37,170,610
Communications Equipment (3.41%)
Canon, Inc. 48,000 1,903,471
Ericsson Lm, Class B 342,370 4,544,571
Nortel Networks Corp. 30,350 1,373,190
Nortel Networks Corp. 41,573 1,891,572
Siemens AG 25,131 3,195,155
Sony Corp. 10,800 862,497
13,770,456
Communications Services, NEC (0.56%)
Koninklijke KPN NV 64,657 1,308,153
Korea Telecom Corp. ADR 25,800 951,375
2,259,528
Computer & Data Processing
Services (1.08%)
Cap Gemini SA 10,250 1,633,325
Misys PLC 261,198(a) 2,723,274
4,356,599
Computer & Office Equipment (1.98%)
NEC Corp. 165,000 3,143,145
Orbotech Ltd. ADR 48,631(a) 2,574,404
Toshiba Corp. 316,000(a) 2,257,350
7,974,899
Concrete, Gypsum & Plaster
Products (1.55%)
Lafarge SA 84,800 6,253,254
Consumer Products (0.50%)
Swedish Match Co. 589,565 2,018,233
Crude Petroleum & Natural Gas (2.68%)
Total Fina Elf 75,571 10,799,501
Dairy Products (1.97%)
Koninklijke Numico NV 77,277 $ 3,609,049
Unilever NV 42,200(a) 2,113,931
Unilever PLC 329,070(a) 2,231,527
7,954,507
Department Stores (1.24%)
Metro AG 124,700 5,020,547
Drugs (7.14%)
Aventis SA 143,541 10,341,555
Novartis AG 5,521 8,373,223
Rhodia, Inc. SA 165,100 2,062,697
Schering AG 84,000(a) 4,663,495
Takeda Chemical Industries 51,000 3,358,275
28,799,245
Drugs, Proprietaries & Sundries (2.18%)
Glaxo Wellcome PLC 305,540 8,789,205
Electric Services (0.49%)
Scottish and Southern Energy PLC 119,225(a) 992,017
Scottish Power PLC 130,301(a) 979,163
1,971,180
Electrical Goods (0.81%)
Matsushita Electrical
Industrial Co., Inc. 112,000(a) 3,251,580
Electronic Components &
Accessories (0.19%)
Samsung Electronics 6,160 771,692
Electronic Distribution Equipment (1.91%)
Koninklijke Philips Electronics NV 196,124 7,698,329
Family Clothing Stores (0.56%)
Fast Retailing Co. Ltd. 9,200(a) 2,262,295
Fire, Marine & Casualty Insurance (7.60%)
Muenchener Rueckversicherungs
Gesellschaft AG 37,200 11,524,478
Ras SPA 335,900 4,404,446
Royal & Sun Alliance
Insurance Group PLC 663,600 4,724,121
Zurich Financial Services AG 20,697 10,014,204
30,667,249
Foreign Bank & Branches &
Agencies (1.44%)
Ubs AG 41,937 5,807,464
Gas Production & Distribution (1.37%)
BG Group PLC 535,883 2,157,439
Lattice Group PLC 535,883(a) 1,143,890
OMV AG 32,610 2,210,113
5,511,442
Groceries & Related Products (0.71%)
Koninklijke Ahold NV 98,237 2,850,184
Heavy Construction, Except
Highway (1.17%)
Vivendi SA 65,900 4,731,074
Holding Offices (0.77%)
Fortis NV 102,064 3,114,340
Industrial Inorganic Chemicals (0.99%)
Akzo Nobel NV 87,957(a) 3,999,734
Investment Offices (1.83%)
Amvescap PLC 328,410(a) $7,391,713
Life Insurance (5.44%)
AXA 72,078 9,530,557
ING Groep NV 180,666 12,391,482
21,922,039
Miscellaneous Business Services (1.24%)
Brisa-Auto Estradas De Portugal SA 650,000 5,019,063
Miscellaneous Food Stores (0.16%)
Tesco PLC 169,000 645,416
Miscellaneous Investing (1.66%)
Investor AB, Class B 506,600 6,673,976
Miscellaneous Non-Durable Goods (2.22%)
Diageo PLC 946,639 8,955,624
Newspapers (2.36%)
News Corp. Ltd. ADR 124,824 5,367,432
United News & Media PLC 329,923 4,144,057
9,511,489
Non-Ferrous Rolling & Drawing (0.33%)
Furukawa Electric Co. Ltd. 50,000(a) 1,314,223
Oil & Gas Field Services (0.27%)
Petroleum Geo-Services ASA 78,584(a) 1,081,565
Paperboard Containers & Boxes (1.17%)
Ubuhrmann NV 172,260 4,701,444
Petroleum & Petroleum Products (0.95%)
E.on AG 75,900 3,834,237
Petroleum Refining (2.47%)
BP Amoco PLC 1,174,159 9,965,715
Radio & Television Broadcasting (0.57%)
Carlton Communications PLC 283,578(a) 2,283,343
Railroads (0.38%)
East Japan Railway Co. 266(a) 1,527,448
Sanitary Services (0.99%)
Usuez Lyonnaise Des Eaux SA 26,200 3,992,840
Search & Navigation Equipment (0.88%)
Marconi PLC 280,726(a) 3,546,492
Security Brokers & Dealers (1.40%)
Inikko Securities Co. Ltd. 356,000 3,071,270
Onomura Securities Co. Ltd. 122,000 2,586,592
5,657,862
Soap, Cleaners & Toilet Goods (1.10%)
Reckitt Benckiser PLC 336,662(a) 4,436,472
Sugar & Confectionary Products (1.47%)
Nestle 2,861(a) 5,926,986
Telephone Communication (8.17%)
British Telecommunications PLC ADR 276,400 3,242,996
Cable & Wireless PLC 201,600(a) 2,863,033
Colt Telecom Group PLC 79,538(a) 2,532,855
Hellenic Telecom Organization SA ADR 104,300 $ 912,625
NTT Docomo, Inc. 356 3,237,549
NTT Docomo, Inc. 106 2,611,411
Nokia Corp. ADR, Class A 92,500 3,954,375
Telefonica, SA 151,300(a) 2,881,595
Vodafone Airtouch PLC 2,571,717 10,708,377
32,944,816
Total Common Stocks 373,114,436
Principal
Amount Value
Commercial Paper (6.98%)
Business Credit Institutions (4.12%)
General Electric Capital Corp.;
6.65%; 11/1/2000 $16,605,000 $16,605,000
Commercial Banks (2.86%)
Citicorp;
6.52%; 11/3/2000 11,550,000 11,545,816
Total Commercial Paper 28,150,816
Total Portfolio Investments (99.51%) 401,265,252
Cash, receivables and other assets,
net of liabilities (0.49%) 2,002,238
Total Net Assets (100.00%) $403,267,490
(a) Non-income producing security - No dividend paid
during the past twelve months.
Principal International Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Australia $ 5,367,432 1.34%
Austria 2,210,113 0.55
Canada 4,064,542 1.01
Finland 3,954,375 0.98
France 67,841,818 16.91
Germany 38,361,065 9.56
Greece 912,625 0.23
Israel 2,574,404 0.64
Italy 9,656,209 2.40
Japan 35,029,380 8.73
Korea, Republic of 1,723,067 0.43
Netherlands 45,576,716 11.36
Norway 1,081,565 0.27
Portugal 5,019,063 1.25
Spain 2,881,595 0.72
Sweden 20,784,239 5.18
Switzerland 30,121,877 7.51
United Kingdom 94,062,779 23.44
United States 30,042,388 7.49
Total $ 401,265,252 100.00%
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Shares
Held Value
Common Stocks (84.61%)
Advertising (0.94%)
Mosaic Group, Inc. 73,114(a) $ 550,544
Agricultural Chemicals (1.44%)
Zeltia SA 46,800(a) 845,318
Air Transportation, Scheduled (1.24%)
Ryanair Holdings PLC ADR 12,070(a) 486,572
West Jet Airlines Ltd. 14,550 236,270
722,842
Cogeneration - Small Power Producer (0.65%)
Energiekontor AG 700(a) 64,138
Umweltkontor Rennewable Energy AG 5,210(a) 315,744
379,882
Commercial Banks (0.77%)
HKCB Bank Holding Co., Ltd. 1,794,000 448,552
Commercial Printing (1.53%)
Creo Products, Inc. 29,175(a) 895,308
Communications Equipment (3.47%)
Elcoteq Network Corp., Class A 32,950 1,122,722
Eltek ASA 12,050 452,190
Highwave
Optical Technology 2,970(a) 452,875
2,027,787
Communications Services, Nec (1.94%)
Eyretel PLC 395,300(a) 1,136,551
Computer & Data Processing
Services (13.77%)
AIT Group PLC 11,605 286,478
Articon Integralis AG 7,300(a) 499,948
Biodata Information Technology AG 1,190(a) 258,213
C.REL 70,000 97,847
Certicom Corp. 8,580 283,709
Computershare Ltd. 141,262(a) 611,193
Computershare Warrants 39,080 21,870
Data Advantage Ltd. 204,500 572,207
Diagonal PLC 93,245 358,813
GrenkeLeasing AG 15,600(a) 409,899
I-data International A/S 3,080(a) 329,722
LPKF Laser & Electronics 3,880 144,702
MaxxCom, Inc. 89,000 611,890
Morse Holdings PLC 119,800(a) 1,008,978
Orchestream Holdings Ltd. 79,400(a) 643,645
Oridion Systems Ltd. 14,670(a) 642,904
Tele Atlas BV 25,500(a) 512,247
Telindus Group NV 4,500(a) 38
Thiel Logistik AG 5,113(a) 767,079
8,061,382
Computer & Office Equipment (2.47%)
M-Systems Flash Disk Pioneer Ltd. 21,595(a) 537,176
Venture Mfg. Ltd. 94,000 910,282
1,447,458
Construction & Related Machinery (2.05%)
Palfinger AG 14,200 $ 421,859
Pinguely-Haulotte 36,011 778,334
1,200,193
Credit Reporting & Collection (0.69%)
Baycorp Holdings Ltd. 86,000 402,731
Crushed & Broken Stone (0.54%)
Brandrill Limited NPV 290,787 317,924
Deep Sea Foreign Transportation of
Freight (1.01%)
Frontline Ltd. 35,900(a) 590,601
Drugs (3.33%)
CSL Ltd. 20,670 367,561
FH Faulding & Co., Ltd. 119,600 632,118
Genmab A/S 23,600(a) 620,859
Hisamitsu Pharmaceutical Co., Ltd. 17,000 323,839
Perbio Science 580(a) 5875
1,950,252
Electric Services (1.75%)
Energy Developments Ltd. 49,579 318,556
Vestas Wind Systems AS 13,000 703,244
1,021,800
Electrical Industrial Apparatus (2.78%)
Egide S.A. 570(a) 309,204
Kontron Embedded Computer AG 4,060(a) 435,319
Leica Goesystems AG 3,110(a) 882,105
1,626,628
Electrical Work (1.25%)
Bracknell Corp. 107,570 732,518
Electronic Components &
Accessories (5.86%)
Arc International PLC 55,260(a) 270,821
Chloride Group PLC 257,100 765,337
C-MAC Industries, Inc. 16,800 946,023
ELMOS Semiconductor AG 1,330 43,965
JIT Holdings Ltd. 208,000 492,898
Micronic Laser Systems AB 14,500(a) 431,251
Parthus Technologies PLC 68,000(a) 233,033
SOITEC 11,010(a) 249,166
3,432,494
Electronic Distribution Equipment (0.58%)
Austria Technologie & Systemtechnik AG 12,000 340,735
Engineering & Architectural Services (0.49%)
Fugro NV 4,85 285,970
Engines & Turbines (1.06%)
Grupo Auxiliar Metalurgico, S.A. 3,700(a) 68,148
NEG Micon 10,600(a) 549,271
617,419
Fabricated Rubber Products, NEC (0.28%)
Nok Corp. 17,000 162,231
Family Clothing Stores (0.30%)
Giordano International Ltd. 298,000 174,809
Glass & Glassware, Pressed or
Blown (0.07%)
Hankuk Electric Glass Co., Ltd. 680 43,042
Grain Mill Products (0.65%)
Nutreco Holding NV 8,780 $ 378,050
Health & Allied Services, NEC (0.82%)
Lion Bioscience AG 2,650(a) 206,420
Medisys PLC 128,528(a) 275,288
481,708
Heavy Construction, Except
Highway (0.35%)
Groupo Dragados 21,000 203,805
Industrial Machinery, NEC (0.34%)
CKD Corp. 27,000 197,326
Investment Offices (0.73%)
C.I. Fund Management Inc. 20,400 425,435
Life Insurance (1.29%)
Industrial Alliance Life Insurance Co. 34,200 755,777
Management & Public Relations (0.79%)
D. Logistics AG 6,570(a) 462,205
Medical & Dental Laboratories (2.53%)
Card Guard Scientific Survival, Ltd. 12,830(a) 772,404
Unilabs AG 1,060 709,188
1,481,592
Medical Instruments & Supplies (3.14%)
Cochlear Ltd. 38,700 543,434
Medical Imaging Australasia Ltd. 93,200 72,439
Resmed, Inc. 193,390(a) 519,076
Tecan Group AG 660 708,420
1,843,369
Miscellaneous Amusement, Recreation
Service (0.15%)
Aristocrat Leisure Ltd. 28,044 87,624
Miscellaneous Apparel &
Accessories (0.52%)
Billabong International Ltd. 141,3000(a) 302,384
Miscellaneous Business Services (0.19%)
GFK AG 2,930 111,880
Miscellaneous Electrical Equipment &
Supplies (1.32%)
Camtek Ltd. 28,641(a) 229,128
Kaba Holding AG, Class B 324 436,966
Miyachi Technos Corp. 1,800 106,328
772,422
Miscellaneous Equipment Rental &
Leasing (0.94%)
Ashtead Group PLC 190,400 326,247
LVL Medical SA 3,969 222,032
548,279
Miscellaneous Investing (0.80%)
BTG PLC 18,500(a) 468,439
Miscellaneous Plastics
Products, NEC (0.21%)
EIMO OYJ 20,370 121,723
Miscellaneous Primary Metal
Products (0.00%)
YBM Magnex International, Inc. 28,300 $ 185
Miscellaneous Shopping Goods
Stores (0.88%)
Electronics Boutique PLC 570,688 513,792
Motion Picture Production &
Services (1.46%)
Expand 2,237 161,167
Hit Entertainment PLC 102,400 691,434
852,601
Motor Vehicles & Equipment (1.47%)
Torotrak PLC 135,300(a) 858,571
Non-Ferrous Rolling & Drawing (0.59%)
Mitsubishi Cable Industries, Ltd. 38,000 123,198
Volex Group PLC 7,100 222,179
345,377
Nonresidential Building
Construction (0.92%)
JGC Corp. 26,000 162,158
Vinci 7,512 377,255
539,413
Office Furniture (1.11%)
Corporate Express Australia 144,546 647,871
Offices & Clinics Of Medical
Doctors (0.62%)
Quality Healthcare Asia Ltd. 591,500(a) 136,516
Rhon-Klinikum AG 2,488 135,281
Rhon-Klinikum AG-Vorzugsakt 1,690 91,820
363,617
Oil & Gas Field Services (2.42%)
Bouygues Offshore SA 5,870 288,574
Cie Generale De Geophysique 3,740(a) 229,827
Coflexip SA 3,900 451,220
TGS Nopec Geophysical Co. ASA 35,050(a) 444,712
1,414,333
Periodicals (0.80%)
Informa Group PLC 42,700 466,586
Personnel Supply Services (1.82%)
Creyf's NV 13,600 351,008
Proffice AB, Class B 11,800 388,634
Unique International NV 16,051 326,516
1,066,158
Photographic Equipment &
Supplies (0.20%)
Gretag Imaging Holding 660 118,559
Plumbing & Heating,
Except Electric (0.05%)
Aalberts Industries NV 1,154 26,899
Real Estate Agents & Managers (1.31%)
Regus PLC 168,600(a) 763,852
Refrigeration & Service Machinery (0.77%)
Jenoptik AG 10,100 279,937
Wedeco AB Water Technology 4,600(a) 171,164
451,101
Research & Testing Services (1.37%)
Cambridge Antibody Technology Group 12,881(a) $ 799,618
Security Brokers & Dealers (1.23%)
Kempen & Co. NV 4,100 251,949
O.S.K. Holdings Berhad 666 317
Van Der Moolen Holdings NV 5,780 466,642
718,908
Ship & Boat Building and
Repairing (0.01%)
Ferretti S.P.A. 2,200(a) 8,160
Special Industry Machinery (0.78%)
Muehlbauer Holding AG & Co. 1,700 150,288
Sez Holding AG 525 305,116
455,404
Textile Finishing, Except Wool (0.68%)
Technotrans AG 3,079 399,293
Trucking & Courier Services, Except
Air (1.09%)
Mayne Nickless Ltd. 239,345 634,981
Total Common Stocks 49,502,268
Principal
Amount Value
Commercial Paper (11.51%)
Business Credit Institutions (6.28%)
American Express Credit Corp.
6.53%; 11/06/2000 $ 730,000 $ 729,338
General Electric Capital Corp.
6.65%; 11/01/2000 2,940,000 2,940,000
3,669,338
Commercial Banks (2.62%)
Citicorp
6.52%; 11/03/2000 1,535,000 1,534,444
Personal Credit Institutions (2.61%)
Ford Motor Credit Co.
6.51%; 11/10/2000 1,530,000 1,527,510
Total Commercial Paper 6,731,292
Total Portfolio Investments (96.12%) 56,233,560
Cash, receivables and other assets,
net of liabilities (3.88%) 2,270,207
Total Net Assets (100.00%) $58,503,767
(a) Non-income producing security - No dividend paid
during the past twelve months.
Principal International SmallCap Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Australia $5,130,162 9.12%
Austria 762,594 1.36
Belgium 351,046 0.62
Canada 5,437,659 9.67
Denmark 2,203,096 3.92
Finland 1,244,445 2.20
France 3,519,654 6.26
Germany 4,947,295 8.80
Hong Kong 759,877 1.35
Ireland 719,605 1.28
Israel 1,644,436 2.92
Italy 8,160 0.01
Japan 1,075,080 1.91
Korea, Republic of 43,042 0.08
Malaysia 317 0.00
Netherlands 2,248,273 4.00
New Zealand 402,731 0.72
Norway 1,585,350 2.82
Singapore 1,403,180 2.50
Spain 1,117,271 1.99
Sweden 825,760 1.47
Switzerland 3,160,354 5.62
United Kingdom 9,856,629 17.53
United States 7,787,544 13.85
Total $56,233,560 100.00%
PRINCIPAL PACIFIC BASIN FUND, INC.
Shares
Held Value
Common Stocks (97.14%)
Air Transportation, Scheduled (0.15%)
Qantas Airways Ltd. 4,025 $ 8,092
Cash Grains (1.21%)
Amritus Corp. 3,000 65,940
Commercial Banks (9.63%)
Bank of East Asia Ltd. 22,000(a) 49,788
Commonwealth Bank of Australia 1,293 19,238
DBS Group Holdings Ltd. 4,000 47,166
H&CB GDR 980 23,765
Mizuho Holdings, Inc. 24(a) 184,412
The Sakura Bank Ltd. 16,000(a) 116,494
The Suruga Bank Ltd. 6,000(a) 82,315
523,178
Communications Equipment (3.23%)
Sony Corp. 2,200 175,694
Computer & Data Processing
Services (0.51%)
Crosswave Communications, Inc. 3,000 27,750
Computer & Office Equipment (4.79%)
Fujitsu Ltd. 7,000 124,627
Toshiba Corp. 19,000(a) 135,727
260,354
Concrete, Gypsum & Plaster
Products (0.55%)
Sumitomo Osaka Cement Co. Ltd. 7,000(a) 29,810
Consumer Products (0.43%)
British American Tobacco Australasia Ltd.3,493 23,301
Deep Sea Foreign Transportation of
Freight (0.37%)
Neptune Orient Lines Ltd. 24,000(a) 20,370
Drugs (1.66%)
Yamanouchi Pharmaceutical Co. Ltd. 2,000(a) 90,484
Electric Services (1.20%)
Energy Developments Ltd. 1,932 12,414
Huaneng Power International, Inc. 136,000(a) 52,750
65,164
Electrical Industrial Apparatus (3.18%)
Omron Corp. 5,000(a) 123,180
Yaskawa Electric Corp. 5,000(a) 49,913
173,093
Electronic Components &
Accessories (6.27%)
Hosiden Corp. 2,000(a) $ 63,742
New Japan Radio Co. Ltd. 5,000(a) 49,363
Rohm Co. Ltd. 500(a) 125,973
Samsung Electronics GDR 300(b) 18,792
Taiwan Semiconductor Mfg. Co. Ltd. ADR 1,300 29,494
United Microelectronics Corp. ADR 4,700 53,462
340,826
Engineering & Architectural
Services (2.55%)
Meitec Corp. 3,300(a) 138,419
Engines & Turbines (0.38%)
Moritex Corp. 420 20,386
Family Clothing Stores (0.52%)
Giordano International Ltd. 48,000 28,157
General Industrial Machinery (0.54%)
Nippon Thompson Co. Ltd. 3,000 29,536
Machinery, Equipment & Supplies (2.26%)
Sumitomo Corp. 14,000(a) 123,088
Measuring & Controlling Devices (1.71%)
Keyence Corp. 300(a) 93,140
Medical Instruments & Supplies (0.59%)
Cochlear Ltd. 843 11,838
Resmed, Inc. 7,590(a) 20,372
32,210
Men's & Boys' Suits & Coats (1.23%)
Onward Kashiyama Co. Ltd. 9,000(a) 66,764
Miscellaneous Durable Goods (0.51%)
Li & Fung Ltd. 15,000(a) 27,888
Miscellaneous Electrical Equipment &
Supplies (2.72%)
Sumitomo Electric Industries Ltd. 8,000(a) 147,633
Miscellaneous Equipment Rental &
Leasing (3.28%)
Orix Corp. 1,700(a) 178,267
Miscellaneous General
Merchandise Stores (1.37%)
Japan Airport Terminal Co. Ltd. 10,000 74,641
Miscellaneous Investing (0.50%)
Harvey Norman Holdings Ltd. 9,120(a) 20,084
Revesco Ltd. 13,651(a) 7,073
27,157
Miscellaneous Metal Ores (0.67%)
Rio Tinto Ltd. 2,645 36,295
Miscellaneous Non-Durable Goods (2.20%)
Kao Corp. 4,000(a) 119,791
Miscellaneous Shopping Goods
Stores (1.26%)
Toys `R' Us - Japan Ltd. 500(a) 68,230
Miscellaneous Textile Goods (0.63%)
Reliance Industries Ltd. GDR 2,650(b) $ 34,307
Motor Vehicles & Equipment (5.46%)
Fuji Heavy Industries Ltd. 18,000(a) 125,286
Nissan Motor Co. Ltd. 25,000(a) 171,490
296,776
Newspapers (1.55%)
Publishing & Broadcasting Ltd. 6,066(a) 41,396
Singapore Press Holdings Ltd. 3,000(a) 42,894
84,290
Professional &
Commercial Equipment (3.36%)
Canon Sales Co., Inc. 8,000 114,956
Nihon Unisys Ltd. 5,000(a) 67,772
182,728
Radio & Television Broadcasting (6.35%)
Nippon Television Network Corp. 190(a) 107,015
Sky Perfect Communications, Inc. 23(a) 42,339
Tokyo Broadcasting System, Inc. 5,000(a) 195,532
344,886
Radio, Television & Computer Stores (1.78%)
Yamada Denki Co. Ltd. 1,100 96,712
Real Estate Agents & Managers (1.63%)
Cheung Kong Holdings Ltd. 8,000(a) 88,472
Refrigeration & Service Machinery (1.80%)
Kurita Water Industries Ltd. 6,000(a) 97,536
Residential Building Construction (0.82%)
National House Industrial Co. Ltd. 7,000(a) 44,491
Schools & Educational Services, NEC (0.61%)
Benesse Corp. 600(a) 32,970
Security Brokers & Dealers (2.37%)
Nikko Securities Co. Ltd. 10,000 86,272
Nomura Securities Co. Ltd. 2,000 42,403
128,675
Soap, Cleaners & Toilet Goods (0.19%)
Kose Corp. 300(a) 10,413
Subdividers & Developers (0.52%)
Westfield Holdings Ltd. 4,391 28,327
Telephone Communication (10.12%)
China Mobile Ltd. 7,000(a) 45,101
China Unicom Ltd. 23,000(a) 46,153
Hutchison Telecommunications Ltd. 9,997(a) 14,556
Nippon Telephone & Telegraph Corp. 29(a) 263,733
NTT Docomo, Inc. 6 147,816
Sk Telecom Co. Ltd. ADR 1,300 32,581
549,940
Tires & Inner Tubes (0.73%)
Bridgestone Corp. 4,000 39,637
Toys & Sporting Goods (2.68%)
Nintendo Co. Ltd. 600(a) 99,185
Shimano, Inc. 2,300 46,236
145,421
Variety Stores (1.07%)
Hutchison Whampoa Ltd. 4,700 $ 58,305
Total Portfolio Investments (97.14%) 5,279,544
Cash, receivables and other assets,
net of liabilities (2.86%) 155,580
Total Net Assets (100.00%) $5,435,124
(a) Non-income producing security - No dividend paid during the
past twelve months.
(b) Restricted security - See Note 4 to the financial statements.
Principal Pacific Basin Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Australia $ 222,614 4.22%
China 98,903 1.87
Hong Kong 297,711 5.64
India 34,307 0.65
Japan 4,337,113 82.15
Korea, Republic of 75,138 1.42
Singapore 110,430 2.09
Taiwan, Province of China 82,956 1.57
United States 20,372 0.39
Total $5,279,544 100.00%
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL EUROPEAN EQUITY FUND, INC.
Class A shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.04)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.27)
Total from Investment Operations (1.31)
Net Asset Value, End of Period......................... $ 8.69
Total Return(c) ....................................... (13.10)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,242
Ratio of Expenses to Average Net Assets(b) ......... 2.49%(e)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets (1.09)%(e)
Portfolio Turnover Rate............................. 48.6%(e)
PRINCIPAL EUROPEAN EQUITY FUND, INC.
Class B shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b)........... (.06)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.28)
Total from Investment Operations (1.34)
Net Asset Value, End of Period......................... $ 8.66
Total Return(c) ....................................... (13.40)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,288
Ratio of Expenses to Average Net Assets(b) ......... 2.97%(e)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets (1.40)%(e)
Portfolio Turnover Rate............................. 48.6%(e)
PRINCIPAL EUROPEAN EQUITY FUND, INC.
Class C shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b)........... (.07)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.28)
Total from Investment Operations (1.35)
Net Asset Value, End of Period......................... $ 8.65
Total Return(c) ....................................... (13.50)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,121
Ratio of Expenses to Average Net Assets(b) ......... 3.22%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.61)%(e)
Portfolio Turnover Rate............................. 48.6%(e)
PRINCIPAL EUROPEAN EQUITY FUND, INC.
Class R shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.06)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.28)
Total from Investment Operations (1.34)
Net Asset Value, End of Period......................... $ 8.66
Total Return.......................................... (13.40)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,208
Ratio of Expenses to Average Net Assets(b) ......... 2.99%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.40)%(e)
Portfolio Turnover Rate............................. 48.6%(e)
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class A shares 2000 1999 1998 1997(f)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $8.56 $6.54 $8.29 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.10) (.03) (.02) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ .31 2.05 (1.73) (1.21)
Total from Investment Operations .21 2.02 (1.75) (1.22)
Dividends in Excess of Net Investment Income(j)........ (.02) -- -- --
Net Asset Value, End of Period......................... $8.75 $8.56 $6.54 $8.29
Total Return(c) ....................................... 2.36% 30.89% (21.11)% (10.18)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $17,890 $13,401 $7,312 $5,039
Ratio of Expenses to Average Net Assets(b) ......... 2.49% 2.75% 3.31% 2.03%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.05)% (.35)% (.36)% (.32)%(e)
Portfolio Turnover Rate............................. 112.9% 95.8% 45.2% 21.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class B shares 2000 1999 1998 1997(f)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $8.47 $6.52 $8.28 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.16) (.07) (.05) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ .29 2.02 (1.71) (1.22)
Total from Investment Operations .13 1.95 (1.76) (1.23)
Net Asset Value, End of Period......................... $8.60 $8.47 $6.52 $8.28
Total Return(c) ....................................... 1.53% 29.91% (21.26)% (10.29)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $6,198 $5,051 $3,275 $3,116
Ratio of Expenses to Average Net Assets............. 3.22% 3.57% 3.59% 2.16%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.78)% (1.12)% (.69)% (.46)%(e)
Portfolio Turnover Rate............................. 112.9% 95.8% 45.2% 21.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class C shares 2000 1999(g)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.54 $8.94
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.10) (.06)
Net Realized and Unrealized
Gain (Loss) on Investments........................ .24 (.34)
Total from Investment Operations .14 (.40)
Net Asset Value, End of Period......................... $8.68 $8.54
Total Return(c) ....................................... 1.64% (4.47)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $258 $108
Ratio of Expenses to Average Net Assets(b) ......... 3.24% 3.52%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.78)% (2.24)%(e)
Portfolio Turnover Rate............................. 112.9% 95.8%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class R shares 2000 1999 1998 1997(f)
-------------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $8.55 $6.53 $8.28 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.11) -- (.04) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ .29 2.02 (1.71) (1.22)
Total from Investment Operations .18 2.02 (1.75) (1.23)
Dividends in Excess of Net Investment Income(j)........ (.02) -- -- --
Net Asset Value, End of Period......................... $8.71 $8.55 $6.53 $8.28
Total Return........................................... 2.04% 30.93% (21.14)% (10.29)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,619 $3,606 $2,202 $2,510
Ratio of Expenses to Average Net Assets............. 2.74% 2.67% 3.47% 2.20%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.31)% (.22)% (.60)% (.51)%(e)
Portfolio Turnover Rate............................. 112.9% 95.8% 45.2% 21.4%(e)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(h)
----------------------------------
Class A shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------- ----------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $10.04 $ 9.20 $9.33 $8.14 $7.28
Income from Investment Operations:
Net Investment Income............................... .16 .13 .13 .09 .10
Net Realized and Unrealized
Gain on Investments............................... .20 1.28 .04 1.52 1.17
Total from Investment Operations .36 1.41 .17 1.61 1.27
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.23) (.11) (.10) (.11) (.08)
Distributions from Capital Gains.................... (1.32) (.46) (.20) (.31) (.33)
Total Dividends and Distributions (1.55) (.57) (.30) (.42) (.41)
Net Asset Value, End of Period......................... $ 8.85 $10.04 $9.20 $9.33 $8.14
Total Return(c) ....................................... 3.04% 16.18% 1.93% 20.46% 18.36%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $325,369 $338,144 $302,757 $281,158 $172,276
Ratio of Expenses to Average Net Assets............. 1.27% 1.22% 1.25% 1.39% 1.45%
Ratio of Net Investment Income to
Average Net Assets................................ 1.76% 1.35% 1.45% 1.25% 1.43%
Portfolio Turnover Rate............................. 92.7% 58.7% 38.7% 26.6% 23.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(h)
----------------------------------
Class B shares 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------- ----------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.96 $9.14 $9.26 $8.07 $7.24
Income from Investment Operations:
Net Investment Income............................... .11 .06 .07 .03 .03
Net Realized and Unrealized
Gain on Investments............................... .20 1.27 .04 1.51 1.15
Total from Investment Operations .31 1.33 .11 1.54 1.18
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.05) (.03) (.04) (.02)
---
Distributions from Capital Gains.................... (1.32) (.46) (.20) (.31) (.33)
-
Total Dividends and Distributions (1.49) (.51) (.23) (.35) (.35)
Net Asset Value, End of Period......................... $8.78 $9.96 $9.14 $9.26 $8.07
Total Return(c) ....................................... 2.43% 15.27% 1.27% 19.62% 17.16%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $48,692 $48,319 $41,676 $33,842 $15,745
Ratio of Expenses to Average Net Assets............. 1.88% 1.90% 1.91% 2.17% 2.28%
Ratio of Net Investment Income to
Average Net Assets................................ 1.13% .67% .77% .42% .64%
Portfolio Turnover Rate................................ 92.7% 58.7% 38.7% 26.6% 23.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(h)
----------------------------------
Class C shares 2000 1999(g)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $9.99 $9.61
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .03 (.02)
Net Realized and Unrealized
Gain on Investments............................... .18 .40
Total from Investment Operations .21 .38
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.12) --
---
Distributions from Capital Gains.................... (1.32) --
Total Dividends and Distributions (1.44) --
Net Asset Value, End of Period......................... $8.76 $9.99
Total Return(c) ....................................... 1.40% 3.95%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,093 $191
Ratio of Expenses to Average Net Assets............. 3.10% 2.38%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.89)% (.95)%(e)
Portfolio Turnover Rate............................. 92.7% 58.7%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(h)
----------------------------------
Class R shares 2000 1999 1998 1997 1996(i)
------------------------------------------------------------------- ----------- ----------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.96 $9.13 $9.27 $8.12 $7.48
Income from Investment Operations:
Net Investment Income............................... .11 .06 .06 .07 .01
Net Realized and Unrealized
Gain on Investments............................... .20 1.27 .04 1.47 .63
Total from Investment Operations .31 1.33 .10 1.54 .64
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.04) (.04) (.08) --
Distributions from Capital Gains.................... (1.32) (.46) (.20) (.31) --
Total Dividends and Distributions (1.49) (.50) (.24) (.39) --
Net Asset Value, End of Period......................... $8.79 $9.96 $9.13 $9.27 $8.12
Total Return........................................... 2.54% 15.27% 1.13% 19.65% 9.29%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $28,113 $22,229 $17,739 $11,773 $1,057
Ratio of Expenses to Average Net Assets............. 1.86% 1.93% 2.01% 2.10% 1.59%(e)
Ratio of Net Investment Income to
Average Net Assets................................ 1.02% .64% .67% .44% .78%(e)
Portfolio Turnover Rate............................. 92.7% 58.7% 38.7% 26.6% 23.8%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class A shares 2000 1999 1998 1997(f)
------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.32 $9.99 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.32) (.12) (.07) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 3.51 5.53 .10 (.07)
Total from Investment Operations 3.19 5.41 .03 (.08)
Less Distributions from Capital Gains.................. (1.51) (.08) -- --
Total Distributions (1.51) (.08) -- --
Net Asset Value, End of Period......................... $17.00 $15.32 $9.99 $ 9.96
Total Return(c) ....................................... 21.21% 54.52% .30% .50%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $36,322 $23,612 $11,765 $6,210
Ratio of Expenses to Average Net Assets............. 2.46% 2.21% 2.66% 1.99%(e)
Ratio of Net Investment Income (Operating Loss) to .
Average Net Assets................................ (1.41)% (1.02)% (.81)% (.40)%(e)
Portfolio Turnover Rate............................. 329.8% 191.5% 99.8% 10.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class B shares 2000 1999 1998 1997(f)
-------------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.18 $9.97 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.41) (.20) (.10) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 3.46 5.49 .11 (.07)
Total from Investment Operations 3.05 5.29 .01 (.08)
Less Distributions from Capital Gains.................. (1.51) (.08) -- --
Total Distributions (1.51) (.08) -- --
Net Asset Value, End of Period......................... $16.72 $15.18 $9.97 $ 9.96
Total Return(c) ....................................... 20.43% 53.42% .10% .50%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $12,539 $10,926 $6,585 $4,774
Ratio of Expenses to Average Net Assets............. 3.04% 2.87% 2.90% 2.07%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.99)% (1.68)% (1.05)% (.47)%(e)
Portfolio Turnover Rate............................. 329.8% 191.5% 99.8% 10.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class C shares 2000 1999(g)
------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $15.28 $12.97
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.45) (.11)
Net Realized and Unrealized
Gain on Investments............................... 3.28 2.42
Total from Investment Operations 2.83 2.31
Less Distributions from Capital Gains.................. (1.51) --
Total Distributions (1.51) --
Net Asset Value, End of Period......................... $16.60 $15.28
Total Return(c) ....................................... 18.71% 17.81%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $691 $141
Ratio of Expenses to Average Net Assets............. 4.89% 2.96%(e)
Ratio of Net Investment Income (Operating Loss) to .
Average Net Assets................................ (3.78)% (2.31)%(e)
Portfolio Turnover Rate............................. 329.8% 191.5%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class R shares 2000 1999 1998 1997(f)
-------------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.36 $10.01 $ 9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss)................ (.24) (.10) (.07) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 3.41 5.53 .12 (.07)
Total from Investment Operations 3.17 5.43 .05 (.08)
Less Distributions from Capital Gains.................. (1.51) (.08) -- --
Total Distributions (1.51) (.08) -- --
Net Asset Value, End of Period......................... $17.02 $15.36 $10.01 $ 9.96
Total Return........................................... 21.01% 54.61% .50% .50%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $8,952 $6,188 $3,317 $3,004
Ratio of Expenses to Average Net Assets............. 2.64% 2.12% 2.51% 2.15%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.58)% (.93)% (.68)% (.54)%(e)
Portfolio Turnover Rate............................. 329.8% 191.5% 99.8% 10.4%(e)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PACIFIC BASIN FUND, INC.
Class A shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.04)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.35)
Total from Investment Operations (1.39)
Net Asset Value, End of Period......................... $ 8.61
Total Return(c) ....................................... (13.90)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,860
Ratio of Expenses to Average Net Assets(b) ......... 2.10%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.21)%(e)
Portfolio Turnover Rate............................. 51.4%(e)
PRINCIPAL PACIFIC BASIN FUND, INC.
Class B shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.06)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.33)
Total from Investment Operations (1.39)
Net Asset Value, End of Period......................... $ 8.61
Total Return(c) ....................................... (13.90)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,347
Ratio of Expenses to Average Net Assets(b) ......... 2.21%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.31)%(e)
Portfolio Turnover Rate............................. 51.4%(e)
PRINCIPAL PACIFIC BASIN FUND, INC.
Class C shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.08)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.32)
Total from Investment Operations (1.40)
Net Asset Value, End of Period......................... $ 8.60
Total Return(c) ....................................... (14.00)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,099
Ratio of Expenses to Average Net Assets(b) ......... 2.55%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.64)%(e)
Portfolio Turnover Rate............................. 51.4%(e)
PRINCIPAL PACIFIC BASIN FUND, INC.
Class R shares 2000(a)
-------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.07)
Net Realized and Unrealized
Gain (Loss) on Investments........................ (1.32)
Total from Investment Operations (1.39)
Net Asset Value, End of Period......................... $ 8.61
Total Return........................................... (13.90)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,129
Ratio of Expenses to Average Net Assets(b) ......... 2.35%(e)
Ratio of Net Investment Income (Operating Loss) to
to Average Net Assets............................. (1.45)%(e)
Portfolio Turnover Rate............................. 51.4%(e)
Notes to Financial Highlights
(a) Period from May 1, 2000, date Class A, Class B and Class C shares first
offered to the public and Class R shares first offered to eligible
purchasers, through October 31, 2000.
(b)Without the Managers voluntary waiver of a portion of certain expenses (see
Note 3 to the financial statements) for the periods indicated, the following
funds would have had per share net investment income and the ratios of expenses
to average net assets as shown:
<TABLE>
<CAPTION>
Periods Per Share Ratio of Expenses
Ended Net Investment to Average Amount
Fund October 31, Income Net Assets Waived
Principal European Equity Fund, Inc.
<S> <C> <C> <C> <C>
Class A 2000 (.07) 3.42%(e) $8,462
Class B 2000 (.11) 4.06%(e) 6,858
Class C 2000 (.11) 4.06%(e) 5,023
Class R 2000 (.11) 3.67%(e 4,211
Principal International Emerging
Markets Fund, Inc.
Class A 2000 (.11) 2.59% 20,727
Class C 2000 (.48) 8.09% 11,325
Principal Pacific Basin Fund, Inc.
Class A 2000 (.07) 2.88%(e) 6,397
Class B 2000 (.11) 3.57%(e) 9,089
Class C 2000 (.13) 3.72%(e) 7,156
Class R 2000 (.11) 3.27%(e) 5,545
</TABLE>
(c)Total return is calculated without the front-end sales charge or contingent
deferred sales charge.
(d)Total return amounts have not been annualized.
(e)Computed on an annualized basis.
October 31, 2000
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost............................... $167,224,454 $254,596,966
Assets
Investment in securities -- at value (Note 4)..................... $161,215,601 $253,283,512
Cash.............................................................. 10,001 12,701
Receivables:
Interest....................................................... 3,033,883 1,377,862
Investment securities sold..................................... 1,862,888 --
Capital Shares sold............................................ 60,950 69,794
Other assets...................................................... 3,449 16,798
Total Assets 166,186,772 254,760,667
Liabilities
Accrued expenses.................................................. 135,186 143,017
Payables:
Investment securities purchased................................ 1,934,320 --
Capital Shares reacquired...................................... 142,898 102,591
Total Liabilities 2,212,404 245,608
Net Assets Applicable to Outstanding Shares .................... $163,974,368 $254,515,059
Net Assets Consist of:
Capital Stock..................................................... $ 159,980 $ 227,849
Additional paid-in capital........................................ 177,458,073 258,420,166
Accumulated undistributed net investment income................... 121,816 136,199
Accumulated net realized gain (loss) on investment transactions .. (7,756,648) (2,955,701)
Net unrealized (depreciation) of investments...................... (6,008,853) (1,313,454)
Total Net Assets $163,974,368 $254,515,059
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 125,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $124,629,615 $213,113,550
Shares issued and outstanding............................ 12,160,086 19,062,685
Net asset value per share................................ $10.25 $11.18
Maximum offering price per share(a) ................... $10.76 $11.74
Class B: Net Assets .............................................. $22,577,435 $27,395,237
Shares issued and outstanding............................ 2,205,270 2,461,989
Net asset value per share(b)............................. $10.24 $11.13
Class C: Net Assets............................................... $695,917 $1,030,087
Shares issued and outstanding............................ 68,603 92,793
Net asset value per share(b)............................. $10.14 $11.10
Class R: Net Assets............................................... $16,071,401 $12,976,185
Shares issued and outstanding............................ 1,564,044 1,167,396
Net asset value per share................................ $10.28 $11.12
(a)Maximum offering price is equal to net asset value plus a front-end
sales charge of 4.75% (1.50% with respect to Principal Limited Term Bond
Fund, Inc.) of the offering price or 4.99% of the net asset value (1.52%
with respect to Principal Limited Term Bond Fund, Inc.)
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
October 31, 2000
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal
High Yield Limited Term Bond
INCOME FUNDS Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost............................... $32,858,608 $34,434,560
Assets
Investment in securities -- at value (Note 4)..................... $ 30,077,218 $33,500,210
Cash.............................................................. 10,000 10,001
Receivables:
Interest....................................................... 800,952 464,419
Investment securities sold..................................... -- 7,177
Capital Shares sold............................................ 20,860 38
Other assets...................................................... 1,993 --
Total Assets 30,911,023 33,981,845
Liabilities
Accrued expenses.................................................. 47,866 36,589
Payables:
Investment securities purchased................................ -- --
Capital Shares reacquired...................................... 19,573 13,141
Total Liabilities 67,439 49,730
Net Assets Applicable to Outstanding Shares .................... $30,843,584 $33,932,115
Net Assets Consist of:
Capital Stock..................................................... $48,654 $ 35,645
Additional paid-in capital........................................ 42,789,211 35,122,993
Accumulated undistributed net investment income................... 11,204 46,577
Accumulated net realized gain (loss) on investment transactions .. (9,224,095) (338,750)
Net unrealized (depreciation) of investments...................... (2,781,390) (934,350)
Total Net Assets $30,843,584 $33,932,115
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $ 22,868,793 $25,183,023
Shares issued and outstanding............................ 3,597,334 2,649,842
Net asset value per share................................ $6.36 $9.50
Maximum offering price per share(a) ................... $6.68 $9.64
Class B: Net Assets .............................................. $5,586,050 $3,290,931
Shares issued and outstanding............................ 884,656 342,679
Net asset value per share(b)............................. $6.31 $9.60
Class C: Net Assets............................................... $249,728 $523,676
Shares issued and outstanding............................ 40,343 54,691
Net asset value per share(b)............................. $6.19 $9.58
Class R: Net Assets............................................... $2,139,013 $4,934,485
Shares issued and outstanding............................ 343,086 517,327
Net asset value per share................................ $6.23 $9.54
(a)Maximum offering price is equal to net asset value plus a front-end
sales charge of 4.75% (1.50% with respect to Principal Limited Term Bond
Fund, Inc.) of the offering price or 4.99% of the net asset value (1.52%
with respect to Principal Limited Term Bond Fund, Inc.)
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
<S> <C>
Investment in securities -- at cost............................... $ 174,432,580
Assets
Investment in securities -- at value (Note 4)..................... $ 171,870,203
Cash.............................................................. 29,601
Receivables:
Interest....................................................... 3,339,510
Investment securities sold..................................... --
Capital Shares sold............................................ 11,070
Other assets...................................................... 7,345
Total Assets 175,257,729
Liabilities
Accrued expenses.................................................. 72,375
Payables:
Investment securities purchased................................ --
Capital Shares reacquired...................................... 69,322
Total Liabilities 141,697
Net Assets Applicable to Outstanding Shares .................... $175,116,032
Net Assets Consist of:
Capital Stock..................................................... $ 150,281
Additional paid-in capital........................................ 176,627,121
Accumulated undistributed net investment income................... 167,139
Accumulated net realized gain (loss) on investment transactions .. 733,868
Net unrealized (depreciation) of investments...................... (2,562,377)
Total Net Assets $175,116,032
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $163,846,509
Shares issued and outstanding............................ 14,064,612
Net asset value per share................................ $11.65
Maximum offering price per share(a) ................... $12.23
Class B: Net Assets .............................................. $10,743,722
Shares issued and outstanding............................ 917,856
Net asset value per share(b)............................. $11.71
Class C: Net Assets............................................... $525,801
Shares issued and outstanding............................ 45,653
Net asset value per share(b)............................. $11.52
Class R: Net Assets............................................... N/A
Shares issued and outstanding............................ N/A
Net asset value per share................................ N/A
(a)Maximum offering price is equal to net asset value plus a front-end
sales charge of 4.75% (1.50% with respect to Principal Limited Term Bond
Fund, Inc.) of the offering price or 4.99% of the net asset value (1.52%
with respect to Principal Limited Term Bond Fund, Inc.)
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
Net Investment Income
<S> <C> <C>
Interest income.................................................... $ 14,025,530 $ 18,587,671
Expenses:
Management and investment advisory fees (Note 3)................ 835,909 1,198,832
Distribution and shareholder servicing fees (Notes 1 and 3)..... 659,048 948,090
Transfer and administrative services (Notes 1 and 3)............ 506,782 477,902
Registration fees (Note 1)...................................... 65,519 60,260
Custodian fees ................................................. 3,033 14,341
Auditing and legal fees ........................................ 4,423 4,957
Directors' fees ................................................ 6,029 6,029
Other .......................................................... 44,240 47,846
Total Gross Expenses 2,124,983 2,758,257
Less: Management and investment
advisory fees waived (Note 3)................................ -- --
Total Net Expenses 2,124,983 2,758,257
Net Investment Income 11,900,547 15,829,414
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. (7,046,649) (941,540)
Change in unrealized appreciation/depreciation
of investments ................................................. 107,694 2,341,152
Net Realized and Unrealized
Gain (Loss) on Investments (6,938,955) 1,399,612
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 4,961,592 $ 17,229,026
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS
Principal Principal
High Yield Limited Term Bond
INCOME FUNDS Fund, Inc. Fund, Inc.
Net Investment Income
<S> <C> <C>
Interest income.................................................... $ 3,621,790 $2,318,819
Expenses:
Management and investment advisory fees (Note 3)................ 213,800 161,804
Distribution and shareholder servicing fees (Notes 1 and 3)..... 140,001 82,720
Transfer and administrative services (Notes 1 and 3)............ 173,407 129,485
Registration fees (Note 1)...................................... 37,872 49,742
Custodian fees ................................................. 2,855 2,756
Auditing and legal fees ........................................ 2,646 3,040
Directors' fees ................................................ 6,479 6,479
Other .......................................................... 14,282 10,464
Total Gross Expenses 591,342 446,490
Less: Management and investment
advisory fees waived (Note 3)................................ -- 89,274
Total Net Expenses 591,342 357,216
Net Investment Income 3,030,448 1,961,603
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. (5,797,722) (263,572)
Change in unrealized appreciation/depreciation
of investments ................................................. 1,594,152 162,678
Net Realized and Unrealized
Gain (Loss) on Investments (4,203,570) (100,894)
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (1,173,122) $1,860,709
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31, 2000, Except as Noted
STATEMENTS OF OPERATIONS
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
Net Investment Income
<S> <C>
Interest income.................................................... $10,996,099
Expenses:
Management and investment advisory fees (Note 3)................ 866,854
Distribution and shareholder servicing fees (Notes 1 and 3)..... 549,504
Transfer and administrative services (Notes 1 and 3)............ 169,961
Registration fees (Note 1)...................................... 43,506
Custodian fees ................................................. 2,631
Auditing and legal fees ........................................ 7,010
Directors' fees ................................................ 6,029
Other .......................................................... 26,825
Total Gross Expenses 1,672,320
Less: Management and investment
advisory fees waived (Note 3)................................ --
Total Net Expenses 1,672,320
Net Investment Income 9,323,779
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. 733,867
Change in unrealized appreciation/depreciation
of investments ................................................. (18,645)
Net Realized and Unrealized
Gain (Loss) on Investments 715,222
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 10,039,001
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, 2000, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
2000 1999(a) 2000 1999(a)
Operations
<S> <C> <C> <C> <C>
Net investment income............................................ $ 11,900,547 $ 11,662,268 $ 15,829,414 $ 16,851,924
Net realized gain (loss) from investment transactions ........... (7,046,649) (702,288) (941,540) (5,979)
Change in unrealized appreciation/depreciation of investments.... 107,694 (15,114,798) 2,341,152 (13,254,133)
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,961,592 (4,154,818) 17,229,026 3,591,812
Dividends and Distributions to Shareholders From net
investment income:
Class A....................................................... (9,469,298) (9,256,285) (13,531,449) (14,951,275)
Class B....................................................... (1,500,213) (1,358,259) (1,490,738) (1,539,850)
Class C....................................................... (36,871) (3,357) (42,906) (3,699)
Class R....................................................... (1,040,754) (817,338) (684,240) (554,941)
Dividends in excess of net investment income:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class C....................................................... -- -- -- --
Class R....................................................... -- -- -- --
From net realized gain on investments:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class C....................................................... -- --
Class R....................................................... -- -- -- --
Excess distribution of net realized gain on investments:
Class A....................................................... -- (424,531) -- --
Class B....................................................... -- (65,282) -- --
Class R....................................................... -- (35,649) -- --
Total Dividends and Distributions (12,047,136) (11,960,701) (15,749,333) (17,049,765)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 22,490,421 36,049,940 31,748,900 58,626,094
Class B....................................................... 4,523,000 9,965,885 5,809,580 13,731,533
Class C....................................................... 529,718 274,582 1,100,594 330,725
Class R....................................................... 5,860,418 9,183,266 5,125,911 6,980,668
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 7,605,749 7,799,345 11,134,408 12,386,671
Class B....................................................... 1,317,646 1,265,823 1,253,339 1,326,664
Class C....................................................... 26,629 1,182 34,479 2,056
Class R....................................................... 1,028,904 839,555 674,386 547,169
Shares redeemed:
Class A....................................................... (45,950,005) (33,235,273) (68,830,220) (73,060,063)
Class B....................................................... (7,746,551) (6,105,138) (9,534,258) (8,292,187)
Class C....................................................... (104,887) (500) (440,296) (801)
Class R....................................................... (6,313,771) (4,873,171) (4,474,386) (3,669,023)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (16,732,729) 21,165,496 (26,397,563) 8,909,506
Total Increase (Decrease) (23,818,273) 17,010,678 (24,917,870) (4,548,447)
Net Assets
Beginning of year............................................... 187,792,641 182,742,664 279,432,929 283,981,376
End of year [including undistributed (overdistributed) net investment
income as set forth below].................................... $163,974,368 $187,792,641 $254,515,059 $279,432,929
Undistributed (Overdistributed) Net Investment Income............ $ 121,816 $ 260,694 $ 136,199 $56,118
(a).Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</TABLE>
Years Ended October 31, 2000, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Principal Principal
High Yield Limited Term Bond
INCOME FUNDS Fund, Inc. Fund, Inc.
2000 1999(a) 2000 1999(a)
Operations
<S> <C> <C> <C> <C>
Net investment income............................................ $ 3,030,448 $ 3,487,499 $ 1,961,603 $ 1,827,383
Net realized gain (loss) from investment transactions ........... (5,797,722) (2,214,342) (263,572) (29,150)
Change in unrealized appreciation/depreciation of investments.... 1,594,152 (65,536) 162,678 (1,258,231)
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,173,122) 1,207,621 1,860,709 540,002
Dividends and Distributions to Shareholders From net
investment income:
Class A....................................................... (2,206,619) (2,667,853) (1,538,355) (1,558,512)
Class B....................................................... (509,401) (614,039) (161,789) (125,037)
Class C....................................................... (191,624) (3,242) (23,735) (3,686)
Class R....................................................... (19,584) (202,365) (211,828) (142,252)
Dividends in excess of net investment income:
Class A....................................................... (255,057) (53,519) -- --
Class B....................................................... (58,880) (7,154) -- --
Class C....................................................... (22,149) (304) -- --
Class R....................................................... (2,264) (10,362) -- --
From net realized gain on investments:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class C....................................................... -- --
Class R....................................................... -- -- -- --
Excess distribution of net realized gain on investments:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class R....................................................... -- -- -- --
Total Dividends and Distributions (3,265,578) (3,558,838) (1,935,707) (1,829,487)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 4,091,165 6,088,348 10,648,016 13,486,229
Class B....................................................... 1,420,552 2,023,608 1,371,677 1,668,358
Class C....................................................... 103,204 186,235 249,713 349,050
Class R....................................................... 613,315 659,720 2,719,468 2,160,595
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 1,523,115 1,703,574 1,187,915 1,182,882
Class B....................................................... 453,644 486,899 145,678 110,918
Class C....................................................... 7,913 271 18,195 2,209
Class R....................................................... 208,499 212,231 208,312 139,519
Shares redeemed:
Class A....................................................... (9,538,903) (9,434,994) (13,657,051) (14,127,084)
Class B....................................................... (2,930,792) (3,144,289) (926,534) (692,401)
Class C....................................................... (2,037) -- (96,741) --
Class R....................................................... (979,436) (853,143) (1,280,018) (943,012)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (5,029,761) (2,071,540) 588,630 3,337,263
Total Increase (Decrease) (9,468,461) (4,422,757) 513,632 2,047,778
Net Assets
Beginning of year............................................... 40,312,045 44,734,802 33,418,483 31,370,705
End of year [including undistributed (overdistributed) net investment
income as set forth below].................................... $30,843,584 $40,312,045 $33,932,115 $ 33,418,483
Undistributed (Overdistributed) Net Investment Income............ $ 11,204 (103,220) $ 46,577 $ 20,312
(a).Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Years Ended October 31, 2000, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
2000 1999(a)
Operations
<S> <C> <C>
Net investment income............................................ $ 9,323,779 $10,118,426
Net realized gain (loss) from investment transactions ........... 733,867 1,798,045
Change in unrealized appreciation/depreciation of investments.... (18,645) (17,135,691)
Net Increase (Decrease) in Net Assets
Resulting from Operations 10,039,001 (5,219,220)
Dividends and Distributions to Shareholders From net investment income:
Class A....................................................... (8,784,934) (9,572,216)
Class B....................................................... (459,946) (498,767)
Class C....................................................... (16,156) (1,542)
Class R....................................................... N/A N/A
Dividends in excess of net investment income:
Class A....................................................... -- --
Class B....................................................... -- --
Class C....................................................... -- --
Class R....................................................... N/A N/A
From net realized gain on investments:
Class A....................................................... (1,691,376) (81,082)
Class B....................................................... (102,928) (4,523)
Class C....................................................... (1,231) --
Class R....................................................... N/A N/A
Excess distribution of net realized gain on investments:
Class A....................................................... -- --
Class B....................................................... -- --
Class R....................................................... N/A N/A
Total Dividends and Distributions (11,056,571) (10,158,130)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 12,004,332 27,588,420
Class B....................................................... 945,244 2,296,619
Class C....................................................... 400,007 140,820
Class R....................................................... N/A N/A
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 7,477,309 6,665,020
Class B....................................................... 453,891 383,870
Class C....................................................... 12,885 292
Class R....................................................... N/A N/A
Shares redeemed:
Class A....................................................... (41,604,425) (37,634,782)
Class B....................................................... (2,117,567) (1,756,824)
Class C....................................................... (28,064) --
Class R....................................................... N/A N/A
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (22,456,388) (2,316,565)
Total Increase (Decrease) (23,473,958) (17,693,915)
Net Assets
Beginning of year............................................... 198,589,990 216,283,905
End of year [including undistributed (overdistributed) net investment
income as set forth below].................................... $175,116,032 $198,589,990
Undistributed (Overdistributed) Net Investment Income............ $ 167,139 $129,803
(a).Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Principal Bond Fund, Inc.
Principal Limited Term Bond Fund, Inc.
Principal Government Securities Income Fund, Inc.
Principal Tax-Exempt Bond Fund, Inc.
Principal High Yield Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal Bond Fund, Inc., Principal Government Securities Income Fund, Inc.,
Principal High Yield Fund, Inc., Principal Limited Term Bond Fund, Inc. and
Principal Tax-Exempt Bond Fund, Inc. (the "Income 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.
On June 30, 1999, the initial purchases of Class C shares of the Income Funds
were made by Principal Life Insurance Company. Effective June 30, 1999, the
Income Funds began offering Class C shares to the public.
Class A shares generally are sold with an initial sales charge based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") upon redemption. Class B shares are sold without an
initial sales charge, but are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class C shares are sold without an initial
sales charge, but are subject to a CDSC on certain redemptions made within the
first twelve months of purchase. Class R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear higher ongoing distribution fees than Class A shares. Class
B shares automatically convert into Class A shares, based on relative net asset
value (without a sales charge), seven years after purchase. Class C shares do
not convert into Class A shares. Class R shares automatically convert into Class
A shares, based on relative net asset value (without a sales charge) four years
after purchase. All classes of shares for each fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by each of the Income Funds'
respective Board of Directors. In addition, the Board of Directors of each fund
declares separate dividends on each class of shares.
The Income Funds allocate daily all income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses to each class of shares
based upon the relative proportion of the value of shares outstanding of each
class. Expenses specifically attributable to a particular class are charged
directly to such class. Class-specific expenses charged to each class during the
year ended October 31, 2000, which are included in the corresponding captions of
the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services
Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. $349,364 $216,803 $5,897 $86,984 $149,089 $53,587 $482 $29,757
Principal Government Securities
Income Fund, Inc. 595,671 271,934 8,005 72,480 187,173 42,824 535 19,932
Principal High Yield Fund, Inc. 65,933 59,590 2,544 11,934 41,819 16,822 8 6,239
Principal Limited Term Bond Fund, Inc. 37,549 14,201 2,208 28,762 22,433 7,529 56 5,743
Principal Tax-Exempt Bond Fund, Inc. 470,741 74,935 3,828 N/A 54,586 4,465 27 N/A
</TABLE>
Registration Fees
Class A Class B Class C Class R
Principal Bond Fund, Inc. $15,759 $9,712 $8,141 $12,025
Principal Government Securities
Income Fund, Inc. 15,460 9,897 8,105 8,085
Principal High Yield Fund, Inc. 8,712 5,969 8,055 6,375
Principal Limited Term Bond Fund, Inc. 8,835 8,035 6,345 5,885
Principal Tax-Exempt Bond Fund, Inc. 17,586 8,255 6,055 N/A
The Income 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 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.
The Income Funds record investment transactions generally one day after the
trade date, except for short-term investment transactions, which are recorded
generally on 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. Interest income is
recognized on an accrual basis.
The Income Funds may, pursuant to an exemptive order issued by the Securities
and Exchange Commission, transfer uninvested funds into a joint trading account.
The order permits the Income Funds' cash balances to be deposited into a single
joint account along with the cash of other registered investment companies
managed by Principal Management Corporation (the "Manager"). These balances may
be invested in one or more short-term instruments.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Dividends and distributions to shareholders from net investment income and
net realized gain from investments are determined in accordance with federal tax
regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities, net operating losses, expiring capital loss carry forwards and
certain defaulted securities. Permanent book and tax basis differences are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes, but not for tax purposes, are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as tax return of capital distributions.
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.
The Financial Accounting Standards Board recently approved the AICPA Audit and
Accounting Guide for Investment Companies (the "Guide"). The Guide supercedes a
previous version of the AICPA Audit and Accounting Guide for Investment
Companies and Statement of Position 93-2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. The Guide is effective for fiscal years
beginning after December 15, 2000. Management of the Income Funds has not yet
determined the impact of the Guide.
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 for
federal income tax reporting purposes approximates that used for financial
reporting purposes.
At October 31, 2000, the Income Funds had approximate net capital loss
carryforwards as follows:
<TABLE>
<CAPTION>
Principal Principal
Principal Government Principal Limited
Bond Securities Income High Yield Term Bond
Net Capital Loss Carryforwards Expire In: Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C> <C>
2001 $ -- $ -- $ 409,000 $ --
2002 -- 157,000 323,000 --
2003 -- 1,075,000 106,000 --
2004 -- -- -- 4,000
2005 -- 776,000 -- 31,000
2006 -- -- -- 9,000
2007 702,000 6,000 2,271,000 32,000
2008 7,054,000 942,000 6,115,000 263,000
$7,756,000 $2,956,000 $9,224,000 $339,000
</TABLE>
Note 3 -- Management Agreement and Transactions With Affiliates
The Income Funds have agreed to pay investment advisory and management fees to
Principal Management Corporation (wholly owned by Princor Financial Services
Corporation, a subsidiary of Principal Financial Services, Inc.) computed at an
annual percentage rate of each fund's average daily net assets. The annual rates
used in this calculation for the Income Funds are as follows:
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
<S> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. 0.50% 0.45% 0.40% 0.35% 0.30%
Principal Government Securities Income Fund, Inc. 0.50 0.45 0.40 0.35 0.30
Principal High Yield Fund, Inc. 0.60 0.55 0.50 0.45 0.40
Principal Limited Term Bond Fund, Inc. 0.50 0.45 0.40 0.35 0.30
Principal Tax-Exempt Bond Fund, Inc. 0.50 0.45 0.40 0.35 0.30
</TABLE>
The Income Funds also reimburse the Manager for transfer and administrative
services, including the cost of accounting, data processing, supplies and other
services rendered.
The Manager voluntarily waives a portion of its fee for the Principal Limited
Term Bond Fund, Inc. The waivers are in amounts that maintain total operating
expenses within certain limits. The limits are expressed as a percentage of
average daily net assets attributable to each class on an annualized basis
during the reporting period. The amount waived and the operating expense limit,
which was maintained at or below that shown, are as follows:
<TABLE>
<CAPTION>
Year Ended Periods Ended Expense
October 31, 2000 October 31, 1999 Limit
Principal Limited Term Bond Fund, Inc.
<S> <C> <C> <C>
Class A $51,056 $40,285 1.00%
Class B 17,484 14,004 1.35
Class C 6,761 488 1.35
Class R 13,973 11,951 1.60
</TABLE>
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00% and Class C shares at 1.00% (.25%, 1.25% and .50% for
Principal Limited Term Bond Fund, Inc. share classes, respectively), of the
lesser of the current market value or the cost of shares being redeemed. Princor
Financial Services Corporation also retains sales charges on sales of Class A
shares based on declining rates which begin at 4.75% of the offering price
(1.50% for Principal Limited Term Bond Fund, Inc.). The aggregate amount of
these charges retained, by fund, for the year ended October 31, 2000, were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal Bond Fund, Inc. $321,609 $109,387 $475
Principal Government Securities Income Fund, Inc. 394,831 120,701 409
Principal High Yield Fund, Inc. 77,205 33,359 8
Principal Limited Term Bond Fund, Inc. 47,629 4,831 215
Principal Tax-Exempt Bond Fund, Inc. 229,981 38,274 121
</TABLE>
No brokerage commissions were paid by the Income Funds to affiliated broker
dealers during the period.
The Income Funds bear distribution and shareholder servicing fees with respect
to each class computed at an annual rate of the average daily net assets
attributable to each class of each fund. The annual rate will not exceed the
following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Bond Fund, Inc. .25% 1.00% 1.00% .75%
Principal Government Securities Income Fund, Inc. .25% 1.00% 1.00% .75%
Principal High Yield Fund, Inc. .25% 1.00% 1.00% .75%
Principal Limited Term Bond Fund, Inc. .15% .50% .50% .75%
Principal Tax-Exempt Bond Fund, Inc. .25% 1.00% 1.00% N/A
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class A, Class B and Class
R shares, fees that are unused by the principal underwriter at the end of the
fiscal year are returned to the respective Income Funds which generated the
excess.
At October 31, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company and benefit plans sponsored on behalf of Principal Life
Insurance Company owned shares of the Income Funds as follows:
<TABLE>
<CAPTION>
Class A Class C
<S> <C> <C>
Principal Bond Fund, Inc. 93,529 8,681
Principal Government Securities Income Fund, Inc. -- 8,598
Principal High Yield Fund, Inc. 382,965 13,369
Principal Limited Term Bond Fund, Inc. 562,154 10,373
Principal Tax-Exempt Bond Fund, Inc. -- 7,974
</TABLE>
Note 4 -- Investment Transactions
For the year ended October 31, 2000, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Income Funds were as follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Principal Bond Fund, Inc. $89,674,722 $108,932,361
Principal High Yield Fund, Inc. 50,692,258 56,045,747
Principal Limited Term Bond Fund, Inc. 9,879,898 5,935,139
Principal Tax-Exempt Bond Fund, Inc. 13,631,120 30,971,416
</TABLE>
At October 31, 2000, net unrealized appreciation (depreciation) of investments
by the Income Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Depreciation
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Bond Fund, Inc. $ 944,337 $(6,953,190) $(6,008,853)
Principal Government Securities Income Fund, Inc. 2,434,231 (3,747,685) (1,313,454)
Principal High Yield Fund, Inc. 258,778 (3,040,168) (2,781,390)
Principal Limited Term Bond Fund, Inc. 42,472 (976,822) (934,350)
Principal Tax-Exempt Bond Fund, Inc. 3,851,580 (6,413,957) (2,562,377)
</TABLE>
The Income Funds 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 October 31, 2000, there were no TBA purchase
or sell commitments outstanding.
Note 4 -- Investment Transactions (Continued)
At October 31, 2000, the Income Funds held the following securities, which may
require registration under the Securities Act of 1933, or an exemption
therefrom, in order to effect their sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of October 31, Percentage of
Security Description Acquisition Cost 2000 Net Assets
<S> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. Calpine Corp. Senior Notes 8/8/0 $3,011,640 $ 2,962,761 1.81%
Orix Credit Alliance
Short Term Notes 2/26/99 5,000,000 5,003,110 3.05
Osprey Trust/Osprey I, Inc.
Senior Secured Notes 9/16/99 4,500,000 4,547,488 2.77
Royal KPN NV Senior Notes 9/27/00 749,520 745,178 .45
Southern Energy, Inc.
Senior Notes 7/21/99 2,998,890 2,871,594 1.75
Triton Energy Senior Notes 9/27/00 1,000,000 1,001,250 .61
9/29/00 500,000 500,625 .31
Vodafone Airtouch PLC
Unsubordinated Notes 2/7/00 993,810 1,018,390 .62
-
Woodside Petroleum Notes 10/6/00 938,410 932,715 .57
$19,583,111 11.94%
Principal High Yield Fund, Inc. CE Casecnan Water & Energy
Co., Inc.
Senior Notes 1/21/00 $727,500 $ 667,500 2.17%
5/11/00 229,375 222,500 .72
Calpine Corp. Senior Notes 8/7/00 1,498,080 1,481,381 4.80
EchoStar Broadband Corp.
Senior Notes 9/15/00 750,000 751,875 2.44
International Game Technology
Senior Notes 7/14/00 720,937 731,250 2.37
Orion Power Holdings, Inc.
Senior Notes 7/13/00 1,057,500 1,060,000 3.44
7/13/00 528,750 530,000 1.72
Station Casinos, Inc.
Senior Subordinated Notes 6/29/00 697,242 701,750 2.28
Tenet Healthcare Corp.
Senior Notes 9/22/00 785,625 785,625 2.55
Triton Energy Senior Notes 9/27/00 500,000 500,625 1.62
9/29/00 250,000 250,312 .81
Williams Communication Group, Inc.
Senior Notes 8/3/00 251,684 223,125 .72
8/3/00 250,382 223,125 .72
Winstar Communications, Inc.
Senior Notes 3/27/00 250,000 176,250 .57
6/15/00 476,250 352,500 1.14
York Power Funding Ltd.
Senior Secured Bonds 7/31/98 900,000 882,000 2.86
$9,539,818 30.93%
Principal Tax-Exempt Bond Fund, Inc. Eddyville, Iowa IDR Ref. Bonds,
Cargill, Inc. Project 1/11/95 $859,910 $998,750 .58%
</TABLE>
The Income Funds' investments are with various issuers in various industries.
The Schedules of Investments contained herein summarize concentration of credit
risk by issuer and industry.
Note 5 -- Capital Share Transactions
<TABLE>
<CAPTION>
Transactions in Capital Shares by fund were as follows:
Principal Principal Principal
Bond Government Securities High Yield
Fund, Inc. Income Fund, Inc. Fund, Inc.
Year Ended October 31, 2000:
Shares sold:
<S> <C> <C> <C>
Class A ......................................... 2,164,948 2,897,222 598,747
Class B ......................................... 435,960 530,819 207,705
Class C............................................ 50,750 100,079 14,342
Class R............................................ 563,511 469,003 91,352
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 737,102 1,015,046 223,372
Class B ......................................... 127,773 114,747 66,965
Class C............................................ 2,596 3,145 1,122
Class R............................................ 99,543 61,795 31,188
Shares redeemed:
Class A ......................................... (4,438,298) (6,280,390) (1,392,164)
Class B ......................................... (748,197) (874,941) (431,195)
Class C............................................ (10,207) (40,355) (287)
Class R............................................ (607,587) (409,880) (146,115)
Net (Decrease) (1,622,106) (2,413,710) (734,968)
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 3,199,473 5,139,925 797,412
Class B ......................................... 887,883 1,209,279 267,743
Class C............................................ 25,400 29,810 25,128
Class R............................................ 818,782 617,460 88,610
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 700,226 1,093,369 225,486
Class B ......................................... 113,809 117,555 64,795
Class C............................................ 111 186 38
Class R............................................ 75,486 48,733 28,583
Shares redeemed:
Class A ......................................... (2,982,198) (6,419,532) (1,240,512)
Class B ......................................... (552,055) (735,814) (415,445)
Class C............................................ (47) (72) --
Class R............................................ (437,588) (326,089) (114,513)
Net Increase (Decrease) 1,849,282 774,810 (272,675)
</TABLE>
Note 5 -- Capital Share Transactions (Continued)
<TABLE>
<CAPTION>
Principal Principal
Limited Term Bond Tax-Exempt Bond
Fund, Inc. Fund, Inc.
Year Ended October 31, 2000:
Shares sold:
<S> <C> <C>
Class A ......................................... 1,130,938 1,044,466
Class B ......................................... 144,311 81,567
Class C............................................ 26,264 35,300
Class R............................................ 287,597 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 126,215 649,469
Class B ......................................... 15,334 39,324
Class C ......................................... 1,921 1,126
Class R............................................ 22,066 N/A
Shares redeemed:
Class A ......................................... (1,448,917) (3,624,026)
Class B ......................................... (97,659) (183,857)
Class C............................................ (10,153) (2,443)
Class R............................................ (135,567) N/A
Net Increase (Decrease) 62,350 (1,959,074)
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 1,377,645 2,233,237
Class B ......................................... 169,744 185,513
Class C............................................ 36,427 11,645
Class R............................................ 221,185 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 121,669 542,861
Class B ......................................... 11,365 31,252
Class C ......................................... 232 25
Class R............................................ 14,381 N/A
Shares redeemed:
Class A ......................................... (1,439,398) (3,056,609)
Class B ......................................... (71,330) (142,639)
Class C ......................................... -- --
Class R............................................ (97,249) N/A
Net Increase (Decrease) 344,671 (194,715)
</TABLE>
Note 6 -- Line of Credit
The Income Funds participate with other funds and portfolios managed by
Principal Management Corporation in an unsecured joint line of credit with two
banks which allow the funds to borrow up to $75,000,000 collectively. 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 Fed Funds Rate plus .50%. Additionally, a
commitment fee is charged at the annual rate of .09% on the amount of the line
of credit. The commitment fee is allocated among the participating funds and
portfolios in proportion to their average net assets during each calendar
quarter. At October 31, 2000, the Income Funds had no outstanding borrowings
under the line of credit.
SCHEDULES OF INVESTMENTS
PRINCIPAL BOND FUND, INC.
Principal
Amount Value
Bonds (90.12%)
Air Transportation, Scheduled (4.90%)
Continental Airlines, Inc. Pass-Through Cert.,
Series 1999-2, Class A-1;
7.26%; 9/15/2021 $2,862,581 $ 2,772,839
Federal Express Corp. 1994
Pass-Through Cert., Series A310-A3;
8.40%; 3/23/2010 1,500,000 1,497,780
Federal Express Corp. Pass-Through
Cert.; 7.58%; 7/2/2019 1,000,000 942,210
Northwest Airlines Corp. Pass-Through
Cert.; 7.58%; 3/1/2019 1,974,152 1,926,239
Northwest Airlines Pass-Through Cert.,
Series 1999-1, Class 1A;
6.81%; 2/1/2020 968,458 887,001
8,026,069
Cable & Other Pay TV Services (3.35%)
Cox Communications, Inc. Notes;
7.75%; 8/15/2006 3,500,000 3,538,703
CSC Holdings, Inc. Debentures;
8.13%; 8/15/2009 2,000,000 1,946,654
5,485,357
Cash Grains (1.52%)
Aktiebolaget SKF Senior Notes;
7.63%; 7/15/2003 2,500,000 2,495,433
Combination Utility Services (0.31%)
PG Energy, Inc. First Mortgage
Bonds; 8.38%; 12/1/2002 500,000 511,988
Commercial Banks (2.76%)
Bank One Corp. Subordinated Notes;
7.88%; 8/1/2010 2,500,000 2,518,938
FleetBoston Financial Corp.
Notes; 7.25%; 9/15/2005 2,000,000 2,008,072
4,527,010
Computer & Data Processing
Services (3.52%)
Comdisco, Inc.
Medium-Term Notes;
6.65%; 11/13/2001 2,000,000 1,810,536
Notes; 6.00%; 1/30/2002 3,100,000 2,387,000
UNISYS Corp. Senior Notes;
11.75%; 10/15/2004 1,500,000 1,571,250
5,768,786
Computer & Office Equipment (1.80%)
Seagate Technology, Inc. Senior Notes;
7.37%; 3/1/2007 3,000,000 2,947,332
Credit Reporting & Collection (3.05%)
Orix Credit Alliance Short-Term Notes;
7.00%; 3/15/2001 5,000,000(a) 5,003,110
Crude Petroleum & Natural Gas (4.48%)
Louis Dreyfus Natural Gas Corp.
Senior Notes; 6.88%; 12/1/2007 $2,000,000 $ 1,873,758
Occidental Petroleum Corp.
Medium-Term Notes;
9.73%; 6/15/2001 500,000 506,042
Triton Energy Senior Notes;
8.88%; 10/1/2007 1,500,000(a) 1,501,875
Union Pacific Resources
Debentures; 7.95% 4/15/2029 2,500,000 2,526,367
Woodside Petroleum Notes;
6.60%; 4/15/2008 1,000,000(a) 932,715
7,340,757
Electric Services (15.54%)
AES Ironwood LLC Senior Secured
Bonds; 8.88%; 11/30/2025 4,000,000 4,029,040
Calpine Corp. Senior Notes;
8.63%; 8/15/2010 3,000,000(a) 2,962,761
CE Generation LLC Senior Secured
Notes; 7.42%; 12/15/2018 1,974,000 1,849,520
Central Vermont Public Services
Second Mortgage Bonds;
8.13%; 8/1/2004 3,000,000 2,943,876
Dominion Resources, Inc. Notes;
7.82%; 9/15/2014 2,500,000 2,554,683
East Coast Power, LLC Senior Secured
Notes; 7.54%; 6/30/2017 3,000,000 2,700,090
Osprey Trust/Osprey I, Inc. Senior
Secured Notes; 8.31%; 1/15/2003 4,500,000(a) 4,547,488
Southern Energy, Inc. Senior Notes;
7.90%; 7/15/2009 3,000,000(a) 2,871,594
Toledo Edison Co. Debentures;
8.70%; 9/1/2002 1,000,000 1,016,108
25,475,160
Fabricated Rubber Products, NEC (0.96%)
M. A. Hanna Co. Senior Notes;
9.38%; 9/15/2003 1,500,000 1,566,038
Farm & Garden Machinery (0.53%)
Case Corp. Notes; 7.25%; 1/15/2016 1,000,000 866,320
Finance Services (2.12%)
Associates Corp. of N.A.
Senior Notes; 7.75%; 2/15/2005 1,500,000 1,538,719
Senior Notes; 5.75%; 11/1/2003 2,000,000 1,940,018
3,478,737
Foreign Banks, Branches &
Agencies (0.90%)
BSCH Issuance Ltd. Bond;
7.63%; 9/14/2010 1,500,000 1,480,698
Funeral Service & Crematories (0.84%)
Service Corp. International Notes;
6.00%; 12/15/2005 2,500,000 1,375,000
General Government, NEC (2.43%)
Mexican U.S. Bonds;
8.63%; 3/12/2008 $1,500,000 $ 1,456,500
Republic of Korea Unsubordinated
Notes; 8.88%; 4/15/2008 1,000,000 1,044,000
Quebec Province Debentures;
7.50%; 7/15/2023 1,500,000 1,489,089
3,989,589
Gold & Silver Ores (0.71%)
Placer Dome, Inc. Notes;
7.13%; 6/15/2007 1,250,000 1,172,401
Heavy Construction, Except
Highway (1.01%)
Mastec, Inc. Senior Subordinated Notes;
7.75%; 2/1/2008 1,750,000 1,662,500
Hospitals (0.62%)
Health Care Corp. Notes;
8.75%; 9/1/2010 1,000,000 1,008,989
Hotel & Motels (1.79%)
Marriott International, Inc. Notes;
6.63%; 11/15/2003 3,000,000 2,929,725
Machinery, Equipment &
Supplies (0.15%)
AAR Corp. Notes; 7.25%; 10/15/2003 250,000 248,840
Medical Service & Health
Insurance (1.97%)
Conseco, Inc. Notes; 8.75%; 2/9/2004 5,000,000 3,225,000
Miscellaneous Amusement, Recreation
Service (1.54%)
Park Place Entertainment Corp. Senior
Subordinated Notes; 9.38%; 2/15/2007 2,500,000 2,518,750
Miscellaneous Investing (2.75%)
BRE Properties, Inc. Notes;
7.20%; 6/15/2007 2,000,000 1,859,816
First Industrial LP Medium-Term
Notes; 7.00%; 12/1/2006 1,500,000 1,423,861
Weingarten Realty Investors
Medium-Term Notes;
7.29%; 5/23/2005 1,250,000 1,228,246
4,511,923
Miscellaneous Metal Ores (0.41%)
Cyprus Minerals Co. Notes;
10.13%; 4/1/2002 650,000 671,645
Mortgage Bankers & Brokers (1.16%)
Chase Commercial Mortgage Securities
Corp., Class C Notes;
6.60%; 12/19/2007 2,000,000 1,906,051
Motor Vehicles, Parts & Supplies (0.36%)
Visteon Corporation Senior Notes;
8.25%; 8/1/2010 $ 600,000 $ 593,745
Motor Vehicles & Equipment (1.22%)
Ford Motor Co. Debentures;
7.50%; 8/1/2026 1,000,000 926,583
8.90%; 1/15/2032 1,000,000 1,065,140
1,991,723
Natural Gas Liquids (1.86%)
Duke Energy Field Services, LLC
Notes; 7.88%; 8/16/2010 1,100,000 1,120,522
Enron Corp. Bonds;
7.38%; 5/15/2019 2,000,000 1,933,654
3,054,176
Newspapers (1.78%)
United News & Media PLC Notes;
7.75%; 7/1/2009 3,000,000 2,921,403
Operative Builders (1.28%)
Pulte Corp.
Senior Notes; 8.38%; 8/15/2004 500,000 491,054
Notes; 7.63%; 10/15/2017 2,000,000 1,611,898
2,102,952
Ordnance & Accessories, NEC (0.63%)
Lockheed Martin Corp. Notes;
7.95%; 12/1/2005 1,000,000 1,027,549
Paper & Paper Products (1.71%)
Boise Cascade Office Products Corp.
Notes; 7.05%; 5/15/2005 3,000,000 2,808,999
Paper Mills (1.52%)
Abitibi-Consolidated, Inc. Bonds;
8.55%; 8/1/2010 1,500,000 1,488,851
Chesapeake Corp. Notes;
9.88%; 5/1/2003 1,000,000 1,011,402
2,500,253
Paperboard Mills (0.96%)
Federal Paper Board Co., Inc.
Debentures; 8.88%; 7/1/2012 1,500,000 1,580,616
Personal Credit Institutions (1.84%)
Ford Motor Credit Co. Notes;
7.88%; 6/15/2010 3,000,000 3,025,215
Petroleum Refining (2.14%)
Ashland Oil, Inc. Medium-Term Notes;
7.71%; 5/11/2007 500,000 492,888
7.72%; 7/15/2013 1,000,000 958,051
7.73%; 7/15/2013 750,000 719,125
Mapco, Inc. Medium-Term Notes;
8.48%; 8/5/2013 1,000,000 1,038,528
Sun Co., Inc. Notes; 7.13%; 3/15/2004 300,000 299,097
3,507,689
Public Building & Related
Furniture (0.57%)
Lear Corp. Senior Notes;
7.96%; 5/15/2005 $1,000,000 $ 931,063
Railroads (2.88%)
Norfolk Southern Corporation
Bonds; 7.80%; 5/15/2027 2,500,000 2,428,890
Union Pacific Corp. Debentures;
7.00%; 2/1/2016 2,500,000 2,295,548
4,724,438
Real Estate Operators & Lessors (0.73%)
First Industrial, L.P. Notes;
7.60%; 5/15/2007 1,250,000 1,203,174
Security Brokers & Dealers (2.12%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.38%; 1/15/2007 3,545,000 3,475,348
Ship & Boat Building &
Repairing (0.55%)
Brunswick Corp. Debentures;
7.38%; 9/1/2023 1,000,000 902,884
Telephone Communication (6.17%)
GTE Corp. Debentures;
6.94%; 4/15/2028 1,500,000 1,368,007
Global Crossing Holdings Ltd. Senior
Notes; 9.13%; 11/15/2006 1,000,000 953,750
Qwest Capital Funding, Inc.
Company Guarantee;
7.90%; 8/15/2010 1,400,000 1,421,263
6.88%; 7/15/2028 2,000,000 1,760,384
Royal KPN NV Senior Notes;
7.50%; 10/1/2005 750,000(a) 745,178
Sprint Capital Corp.
Global Bonds; 6.88%; 11/15/2028 1,000,000 823,215
Notes; 6.90%; 5/1/2019 1,000,000 850,976
Telefonica Europe, B.V.
Company Guarantee;
7.75%; 9/15/2010 1,175,000 1,180,406
Vodafone Airtouch PLC
Unsubordinated Notes;
7.75%; 2/15/2010 1,000,000(a) 1,018,390
10,121,569
Variety Stores (0.68%)
Dayton-Hudson Corp. Debentures;
9.25%; 8/15/2011 1,000,000 1,113,309
Total Bonds 147,779,313
Asset-Backed Securities (4.81%)
Mortgage Bankers & Brokers (1.88%)
Chase Commercial Mortgage Securities
Corp. Mortgage-Backed Security,
Class A2; 7.63%; 7/15/2032 $3,000,000 $ 3,088,632
Security Brokers & Dealers (2.93%)
Merrill Lynch Mortgage Investors, Inc.
Collateralized Mortgage-Backed
Security, Series 95-C3, Class C;
7.35%*; 12/26/2025 3,000,000 2,990,028
JP Morgan Commercial Mortgage Finance
Corp. Commercial Mortgage
Pass-Through Cert. 2000-C9, Class A2;
7.77%; 10/15/2032 1,750,000 1,813,494
Total Asset-Backed Securities 7,892,154
Commercial Paper (1.24%)
Personal Credit Institutions (1.24%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 2,029,133 2,029,133
U.S. Government Bonds (2.15%)
Treasury Bonds (1.83%)
U.S. Government Treasury Bond;
5.75%; 8/15/2010 3,000,000 2,997,189
Treasury Notes (0.32%)
U.S. Government Treasury Bond;
6.13%; 8/15/2029 500,000 517,812
Total Portfolio Investments (98.32%) 161,215,601
Cash, receivables and other assets,
net of liabilities (1.68%) 2,758,767
Total Net Assets (100.00%) $163,974,368
(a) Restricted security - See Note 4 to the financial statements.
* Variable rate (monthly)
PRINCIPAL GOVERNMENT SECURITIES INCOME
FUND, INC.
Description of Issue Principal
Type Rate Maturity Amount Value
Government National Mortgage Association (GNMA)
Certificates (94.63%)
GNMA I 5.50% 12/15/2013-3/15/2014 $3,961,739 $ 3,754,267
GNMA I 6.00 10/15/2023-4/15/2024 11,531,959 10,959,032
GNMA I 6.50 7/15/2008-1/15/2029 68,436,019 66,379,138
GNMA I 7.00 10/15/2022-4/15/2029 66,800,714 66,060,839
GNMA I 7.25 9/15/2025-10/15/2025 2,229,769 2,218,643
GNMA I 7.50 4/15/2017-10/15/2027 25,094,904 25,281,633
GNMA I 8.00 8/15/2016-7/15/2030 14,041,261 14,318,752
GNMA II 5.50 7/20/2014 909,474 856,666
GNMA II 6.00 1/20/2024-8/20/2028 43,606,125 41,114,495
GNMA II 6.50 3/20/2024-3/20/2027 10,256,530 9,906,406
Total GNMA Certificates 240,849,871
Principal
Amount Value
Federal Agency Short-Term Obligation (4.89%)
Investment in Joint Trading Account,
Federal Home Loan Mortgage Corp.;
6.45%; 11/1/2000 $12,433,641 $12,433,641
Total Portfolio Investments (99.52%) 253,283,512
Cash, receivables and other assets,
net of liabilities (0.48%) 1,231,547
Total Net Assets (100.00%) $254,515,059
Principal
Amount Value
Principal High Yield Fund, Inc.
Bonds (92.86%)
Advertising (1.63%)
Lamar Media Corp.
Senior Subordinated Notes;
9.63%; 12/1/2006 $ 500,000 $ 503,750
Air Transportation, Scheduled (2.50%)
Atlas Air, Inc. Senior Notes;
10.75%; 8/1/2005 750,000 772,500
Cable & Other Pay TV Services (2.80%)
Charter Communications Holdings, LLC
Senior Discount Notes;
11.75%; 1/15/2010 1,500,000 862,500
Communications Equipment (2.34%)
Microcell Telecommunications, Inc.
Senior Discount Notes;
0.00%; 6/1/2006 750,000(a) 721,875
Communications Services, NEC (3.73%)
Level 3 Communications, Inc.
Senior Discount Notes;
0.00%; 3/15/2010 1,650,000(a) 812,625
Nextel Communications Senior Notes;
9.38%; 11/15/2009 350,000 337,750
1,150,375
Computer & Data Processing
Services (5.59%)
Globix, Inc. Senior Notes;
12.50%; 2/1/2010 750,000 412,500
PSINet, Inc. Senior Notes;
10.50%; 12/1/2006 1,100,000 525,250
UNISYS Corp. Senior Notes;
11.75%; 10/15/2004 750,000 785,625
1,723,375
Computer & Office Equipment (2.37%)
International Game Technology Senior
Notes; 8.38%; 5/15/2009 750,000(b) 731,250
Crude Petroleum & Natural Gas (4.88%)
Chesapeake Energy Corp. Senior
Notes, Series A; 9.63%; 5/1/2005 750,000 752,813
Triton Energy Senior Notes;
8.88%; 10/1/2007 750,000(b) 750,937
1,503,750
Electric Services (9.47%)
AES Corp. Senior Notes;
9.38%; 9/15/2010 550,000 558,250
Calpine Corp. Senior Notes;
8.63%; 8/15/2010 1,500,000(b) 1,481,381
York Power Funding Ltd.
Senior Secured
Bonds; 12.00%; 10/30/2007 900,000(b) 882,000
2,921,631
Electronic Components &
Accessories (2.44%)
EchoStar Broadband Corp.
Senior Notes;
10.37%; 10/1/2007 $ 750,000(b) $ 751,875
Finance Services (5.16%)
Orion Power Holdings, Inc.
Senior Notes; 12.00%; 5/1/2010 1,500,000(b) 1,590,000
Funeral Service & Crematories (3.80%)
Service Corp. International Notes;
6.75%; 6/1/2001 750,000 697,500
7.38%; 4/15/2004 750,000 476,250
1,173,750
Grocery Stores (2.10%)
Marsh Supermarkets, Inc. Senior
Subordinated Notes;
8.88%; 8/1/2007 700,000 647,500
Heavy Construction, Except
Highway (2.31%)
Mastec, Inc. Senior Subordinated
Notes; 7.75%; 2/1/2008 750,000 712,500
Hospitals (4.78%)
IASIS Healthcare Corp. Notes;
13.00%; 10/15/2009 750,000 690,000
Tenet Healthcare Corp. Senior Notes;
9.25%; 9/1/2010 750,000(b) 785,625
1,475,625
Hotels & Motels (2.10%)
John Q. Hammons Hotels, Inc.
First Mortgage Notes;
8.88%; 2/15/2004 700,000 647,500
Miscellaneous Amusement, Recreation
Service (2.28%)
Station Casinos, Inc. Senior
Subordinated Notes;
9.88%; 7/1/2010 700,000(b) 701,750
Oil & Gas Field Services (2.38%)
Parker Drilling Co. Senior Notes;
9.75%; 11/15/2006 750,000 735,000
Personal Credit Institutions (0.39%)
MacSaver Financial Services, Inc.
Notes; 7.60%; 8/1/2007 800,000(c) 120,000
Radio & Television Broadcasting (2.65%)
Antenna TV S.A. Senior Notes;
9.00%; 8/1/2007 900,000 819,000
Residential Building Construction (2.29%)
D. R. Horton, Inc. Notes;
9.75%; 9/15/2010 750,000 705,938
Sanitary Services (0.97%)
Allied Waste NA Corporate
Subordinated Bonds;
10.00%; 8/1/2009 350,000 299,250
Sawmills & Planning Mills (2.83%)
Doman Industries Ltd. Senior Notes;
12.00%; 7/1/2004 $ 900,000 $ 873,000
Telegraph & Other
Communications (2.29%)
Orius Capital Corp. Senior
Subordinated
Notes; 12.75%; 1/1/2010 750,000 705,000
Telephone Communication (15.89%)
Clearnet Communications, Inc.
Senior Discount Notes;
00.00%; 12/15/2005 750,000(a) 795,000
Covad Communications Group, Inc.
Senior Notes; 12.00%; 2/15/2010 1,500,000 731,250
Intermedia Communications, Inc.
Senior Notes; 8.60%; 6/1/2008 1,150,000 1,083,875
NEXTLINK Communications, Inc.
Senior Notes; 10.75%; 6/1/2009 1,500,000 1,316,250
Williams Communication Group, Inc.
Senior Notes; 11.70%; 8/1/2008 500,000(b) 446,250
Winstar Communications, Inc. Senior
Notes; 12.75%; 4/15/2010 750,000(b) 528,750
4,901,375
Water Supply (2.89%)
CE Casecnan Water & Energy Co., Inc.
Senior Notes; 11.45%; 11/15/2005 1,000,000(b) 890,000
Total Bonds 28,640,069
Shares
Held Value
Common Stocks (0.00%)
Communications Equipment (0.00%)
FWT, Inc. 14,933(d) $ --
Computer & Data Processing (0.00%)
DecisionOne Corp. - Common 3,500(d) --
DecisionOne Corp. - Warrants
Class A 2,054(d) --
Class B 3,540(d) --
Class C 2,100(d) --
Total Common Stocks --
Preferred Stocks (0.26%)
Communications Equipment (0.24%)
FWT, Inc. 149,333(d) 74,666
Fuel Dealers (0.02%)
Star Gas Partners LP 308 5,140
Total Preferred Stocks 79,806
Commercial Paper (4.40%)
Personal Credit Institutions (4.40%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 $1,357,343 $1,357,343
Total Portfolio Investments (97.52%) 30,077,218
Cash, receivables and other assets,
net of liabilities (2.48%) 766,366
Total Net Assets (100.00%) $30,843,584
(a) Non-income producing security - Zero-step coupon bond.
(b) Restricted security - See Note 4 to the financial statements.
(c) Non-income producing security - Security in default.
(d) Non-income producing security - No dividend paid during
the past twelve months.
PRINCIPAL LIMITED TERM BOND FUND, INC.
Principal
Amount Value
Bonds (47.77%)
Automotive Rentals, No Drivers (2.95%)
Rollins Truck Leasing Corp.
Collateral
Trust USA Corporate Bond;
8.25%; 5/1/2002 $1,000,000 $1,002,063
Department Stores (6.77%)
Dillards, Inc. Notes;
6.43%; 8/1/2004 490,000 372,591
J.C. Penney Co., Inc. Notes;
9.05%; 3/1/2001 1,505,000 1,473,666
Sears Roebuck Acceptance Corp.
Medium-Term Notes, Series II;
6.69%; 8/13/2001 450,000 449,816
2,296,073
Federal & Federally Sponsored
Credit (0.38%)
Federal Home Loan Mortgage
Corp. Debentures;
6.57%; 2/27/2007 130,000 129,938
Financial Services (1.11%)
Pemex Finance, Ltd. Global Notes;
6.13%; 11/15/2003 384,800 377,154
General Industrial Machinery (2.96%)
Timken Co. Medium-Term Notes;
7.30%; 8/13/2002 1,000,000 1,005,421
Medical Service & Health
Insurance (4.35%)
Aetna, Inc. Notes;
6.38%; 8/15/2003 1,500,000 1,476,319
Mortgage Bankers & Brokers (4.44%)
Countrywide Funding Corp.
Medium-Term Notes;
6.05%; 3/1/2001 860,000 858,207
Subordinated Notes;
8.25%; 7/15/2002 640,000 648,966
1,507,173
Motor Vehicles & Equipment (1.50%)
General Motors Corp. Medium-Term
Notes; 9.20%; 7/2/2001 500,000 507,904
Paper Mills (2.94%)
International Paper Co. Notes;
7.00%; 6/1/2001 1,000,000 997,360
Paperboard Mills (4.45%)
Temple-Inland, Inc. Notes;
9.00%; 5/1/2001 1,500,000 1,509,799
Personal Credit Institutions (4.05%)
Ford Motor Credit Co. Notes;
7.50%; 1/15/2003 $1,367,000 $1,372,903
Security Brokers & Dealers (8.94%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.25%; 4/15/2003 1,500,000 1,503,039
Morgan Stanley Dean Witter & Co.
Notes; 7.75%; 6/15/2005 1,500,000 1,531,090
3,034,129
Telephone Communication (2.93%)
Worldcom, Inc. Senior Notes;
6.13%; 8/15/2001 1,000,000 993,847
Total Bonds 16,210,083
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation (FHLMC)
Certificates (8.20%)
FHLMC 6.50% 4/1/2009-4/1/2015 $ 770,684 $ 756,721
FHLMC 7.00 12/1/2022-3/1/2028 791,256 778,985
FHLMC 7.25 12/1/2007 258,559 257,829
FHLMC 7.50 12/1/2029 476,280 476,322
FHLMC 8.00 12/1/2011-10/1/2022 330,143 333,724
FHLMC 8.25 1/1/2012 12,969 13,009
FHLMC 9.00 9/1/2009 157,808 164,045
Total FHLMC Certificates 2,780,635
Federal National Mortgage Association (FNMA)
Certificates (8.79%)
FNMA 6.00 7/1/2028 931,559 875,448
FNMA 7.50 10/1/2029 1,457,696 1,456,420
FNMA 8.00 10/1/2006-5/1/2027 239,507 241,881
FNMA 8.50 5/1/2022 268,452 275,637
FNMA 9.00 2/1/2025 129,510 134,563
Total FNMA Certificates 2,983,949
Government National Mortgage Association (GNMA)
Certificates (6.73%)
GNMA I 6.50 6/15/2028-9/15/2028 1,758,661 1,699,244
GNMA I 9.00 7/15/2017 24,135 25,275
GNMA II 6.00 7/20/2028 438,934 412,613
GNMA II 8.00 1/20/2016 143,449 146,137
Total GNMA Certificates 2,283,269
Asset-Backed Securities (24.23%)
Business Credit Institutions (2.57%)
Union Acceptance Securitization Corp.
Won Tr. Series 2000-B, Class A2;
7.28%; 6/9/2003 $ 871,111 $ 872,914
Mortgage Pass-Through
Securities (21.65%)
DLJ Commercial Mortgage Corp.
Class A1A,
Series 1998-CF1; 6.14%; 10/15/2006 565,900 552,748
Series 1999-CG1; 6.08%; 7/10/2008 1,363,126 1,319,850
GMAC Commercial Mortgage Securities,
Inc., Series 1998-C2 CL C;
6.50%; 8/15/2008 1,000,000 949,340
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97-C5,
Class A-2; 7.06%; 9/15/2029 1,445,000 1,447,739
LB Commercial Conduit Mortgage Trust,
Series 1999-C1 CL A1;
6.41%; 8/15/2007 1,246,086 1,222,304
Lehman Large Loan, Class A1,
Series 1997-LLI; 6.79%; 6/12/2004 1,413,884 1,414,770
Prudential Securities Secured Financing
Corp., Series 1998-C1,
Class A1A1; 6.11%; 11/15/2002 94,204 93,366
Salomon Brothers Mortgage SEC VII,
Series 1996-C1, Class A2;
6.78%; 1/20/2028 248,360 247,388
Union Acceptance Corp. 1996-B Auto
Trust, Class A; 6.45%; 7/8/2003 100,677 100,423
Total Asset-Backed Securities 8,220,842
Commercial Paper (3.01%)
Personal Credit Institutions (3.01%)
Investment in Joint Trading Account,
Associates Corp. of North America;
6.65%; 11/1/2000 1,021,431 1,021,431
Total Portfolio Investments (98.73%) 33,500,210
Cash, receivables and other assets,
net of liabilities (1.27%) 431,905
Total Net Assets (100.00%) $33,932,115
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
Principal
Amount Value
Long-Term Tax-Exempt Bonds (97.46%)
Alabama (0.51%)
Phenix County, Alabama IDB
Environmental Improvement Rev.
Bonds, Mead Coated Board, Inc.,
Series B; 5.25%; 4/1/2028 $1,000,000 $ 887,500
Arkansas (2.72%)
City of Blytheville, Arkansas
Solid Waste
Recycling & Sewer Treatment Rev.
Bonds, Nucor Corp. Project,
Series 1992; 6.90%; 12/1/2021 4,610,000 4,771,350
California (1.82%)
California Pollution Control Funding
Authority Pollution Control
Rev. Ref.
Bonds for San Diego Gas &
Electric,
Series A; 5.90%; 6/1/2014 1,000,000 1,087,500
City of Upland, California
San Antonio Comm. Hospital
Cert. of Participation;
5.25%; 1/1/2004 2,080,000 2,093,000
3,180,500
Colorado (2.99%)
City & County of Denver, Colorado
Airport System Rev. Bonds,
Series 1991D; 7.75%; 11/15/2013 3,185,000 3,774,225
Colorado Health Fac. Authority Rev.
Bonds for Sisters of Charity
Healthcare Systems, Series 1994;
5.25%; 5/15/2014 1,500,000 1,458,750
5,232,975
Florida (0.58%)
Nassau County, Florida Pollution
Control Ref. Bonds for ITT
Rayonier, Inc. Project;
6.10%; 6/1/2005 1,000,000 1,015,000
Georgia (2.76%)
Effingham County, Georgia Dev.
Authority Waste Disposal Rev. for
Fort James Project; 5.63%;
7/1/201 83,000,000 2,778,750
Fulco, Georgia Hospital
Authority Rev.
Anticipation Cert. for
St. Joseph's
Hospital of Atlanta, Inc.;
5.50%; 10/1/2014 2,000,000 2,055,000
4,833,750
Illinois (17.27%)
Chicago, Illinois Midway Airport Rev.
Bonds, Series A, MBIA Insured;
5.50%; 1/1/2011 1,500,000 1,550,625
5.50%; 1/1/2013 500,000 510,625
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
American Airlines, Inc. Project A;
7.88%; 11/1/2025 $3,010,000 $3,106,260
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
Lufthansa German Airlines Project;
7.13%; 5/1/2018 1,000,000 1,029,860
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
United Airlines Project, Series A;
5.35%; 9/1/2016 5,000,000 4,306,250
City of Chicago, Illinois Adj. Rate Gas
Supply Rev. Bonds,
Peoples Gas Light & Coke Project,
Series 1985A;
6.88%; 3/1/2015 2,800,000 2,929,500
Illinois Dev. Finance Authority
Solid Waste Disposal Waste
Management, Inc; 5.05%; 1/1/2010 3,750,000 3,234,375
Illinois Health Fac. Authority Advocate
Health Care Network, Series B;
5.25%; 8/15/2018 2,910,000 2,622,637
Illinois Health Fac. Authority Ref. Rev.
Bonds for OSF Healthcare System;
5.75%; 11/15/2007 1,000,000 998,750
Illinois Health Fac. Authority Rev. Bonds,
Northwestern Memorial Hospital,
Series 1994A;
5.60%; 8/15/2006 500,000 511,875
5.75%; 8/15/2008 615,000 628,069
5.80%; 8/15/2009 840,000 854,700
6.10%; 8/15/2014 1,000,000 1,015,000
Illinois Health Fac. Authority Rev.
Bonds for Sarah Bush Lincoln
Health Center;
Series 1992; 7.25%; 5/15/2002 2,950,000 3,127,000
Series 1996B; 6.00%; 2/15/2011 1,000,000 993,750
Series 1996B; 5.50%; 2/15/2016 1,000,000 921,250
Illinois Health Fac. Authority Rev.
Bonds for South Suburban Hospital,
Series 1992;
7.00%; 2/15/2009 305,000 339,694
7.00%; 2/15/2018 720,000 837,900
Illinois Health Fac. Authority Rev. Ref.
Bonds for Advocate Healthcare,
Series A; 6.75%; 4/15/2012 680,000 714,000
30,232,120
Indiana (6.22%)
Indiana Health Fac. Financing Authority
Hospital Rev. Bonds, Clarian Health
Partners, Inc.; 5.50%; 2/15/2009 2,520,000 2,532,600
Indiana Health Fac. Financing
Authority Hospital Rev. Ref. Bonds,
Schneck Memorial Hospital,
Series 1998;
4.70%; 2/15/2006 500,000 467,500
5.13%; 2/15/2017 500,000 406,250
Indianapolis, Indiana Airport Authority
Special Fac. Rev. Bonds, Federal
Express Corp.; 7.10%; 1/15/2017 $2,000,000 $ 2,102,500
Lawrenceburg, Indiana Pollution
Control Rev. Ref. Bonds, Indiana
Michigan Power Co. Project,
Series D; 7.00%; 4/1/2015 1,000,000 1,035,000
Series E; 5.90%; 11/1/2019 3,220,000 3,163,650
Warrick County, Indiana
Environmental Improvement Rev.
Bonds, Southern Indiana Gas &
Electric, Series 1993B;
6.00%; 5/1/2023 1,190,000 1,192,975
10,900,475
Iowa (3.45%)
City of Muscatine, Iowa Electric Rev.
Ref. Bonds, Series 1986;
6.00%; 1/1/2006 150,000 150,230
5.00%; 1/1/2007 1,575,000 1,574,811
Eddyville, Iowa IDR Ref. Bonds,
Cargill, Inc. Project;
5.63%; 12/1/2013 1,000,000(a) 998,750
Iowa Finance Authority Hospital Fac.
Ref. Rev. Bonds for Jennie
Edmundson Memorial Hospital;
7.40%; 11/1/2006 550,000 576,417
Iowa Finance Authority Hospital Fac.
Ref. Rev. Bonds, Iowa Health Systems,
Series A, MBIA Insured;
5.13%; 1/1/2028 3,000,000 2,730,000
6,030,208
Kentucky (1.03%)
City of Ashland, Kentucky Sewage
and Solid Waste Rev. Bonds for
Ashland Oil, Inc. Project,
Series 1995; 7.13%; 2/1/2022 750,000 786,562
City of Ashland, Kentucky Solid
Waste Rev. Bonds for Ashland
Oil, Inc. Project, Series 1991;
7.20%; 10/1/2020 1,000,000 1,025,000
1,811,562
Louisiana (1.15%)
St. Charles Parish, Louisiana Pollution
Control Rev. Bonds for Louisiana
Power & Light Co. Project;
7.50%; 6/1/2021 1,950,000 2,007,857
Michigan (3.11%)
Detroit, Michigan LOC Dev. Financing
Authority Ref. Bonds for Chrysler
Corp., Senior Series A;
5.20%; 5/1/2010 1,700,000 1,689,375
Michigan State Hospital Financing
Authority Hospital Rev. Bonds for
Detroit Medical Center, Obligated-A;
5.25%; 8/15/2028 1,500,000 1,012,500
Michigan State Hospital Financing
Authority Hospital Rev. Bonds for
Detroit Medical Center, Series 1993B;
5.75%; 8/15/2013 600,000 495,000
5.50%; 8/15/2023 2,000,000 1,447,500
Michigan State Hospital Financing
Authority Rev. Ref. Bonds,
Daughters of Charity National Health
System; 5.50%; 11/1/2005 $ 790,000 $ 807,775
5,452,150
Minnesota (0.84%)
City of Bass Brook, Minnesota Pollution
Control Rev. Ref. Bonds for
Minnesota Power & Light Project;
6.00%; 7/1/2022 1,500,000 1,473,750
Mississippi (1.82%)
Grenada County, Mississippi Rev. Ref.
Bonds, Georgia Pacific Corp. Project;
5.45%; 9/1/2014 500,000 468,750
Mississippi Dev. Bank Special
Obligation Park Place Entertainment,
Rev. Bonds; 6.25%; 12/1/2017 2,825,000 2,726,125
3,194,875
Missouri (1.06%)
Cape Girardeau County Mo.
Industrial Dev. Authority
Waste Disposal Rev.;
5.30%; 5/15/2028 2,000,000 1,850,000
Nebraska (0.57%)
Dawson County, Nebraska Sanitary &
Improvement General Obligation
Ref. Bonds; 5.55%; 2/1/2017 1,000,000 1,002,500
New Mexico (1.27%)
City of Lordsburg, New Mexico
Pollution Control Rev. Bonds
for Phelps Dodge Corp. Project;
6.50%; 4/1/2013 2,150,000 2,219,875
New York (3.49%)
Dutchess County, New York Industrial
Dev. Agency Bonds, IBM Corp.
Project; 5.45%; 12/1/2029 6,000,000 6,112,500
North Carolina (1.70%)
Martin County, North Carolina
Industrial Fac. & Pollution Control
Finance Authority Solid Waste
Rev. Bonds, Weyerhaeuser;
5.65%; 12/1/2023 1,000,000 928,750
6.80%; 5/1/2024 2,000,000 2,045,000
2,973,750
North Dakota (1.14%)
Mercer County, North Dakota
Pollution Control Rev. Bonds,
Ottertail Power Co. Project,
Series 1991; 6.90%; 2/1/2019 1,950,000 1,999,276
Ohio (5.12%)
Akron Bath Copley, Ohio JT TWP
Hospital District Rev. Hospital
Facilities, Summa Health
Systems, Series A;
5.38%; 11/15/2018 $5,760,000 $ 4,773,600
5.38%; 11/15/2024 1,000,000 798,750
Lorain County, Ohio Hospital Ref.
Bonds, Humility Mary Health
Care, Series A; 5.90%; 12/15/2008 3,270,000 3,400,800
8,973,150
Oklahoma (1.40%)
Tulsa Industrial Authority Rev. Bonds,
St. John Medical Center Project,
Series 1994;
6.25%; 2/15/2014 1,280,000 1,377,600
6.25%; 2/15/2017 1,000,000 1,076,250
2,453,850
Rhode Island (1.74%)
Rhode Island State Industrial Fac.
Corp. Marine Term Rev. Bonds,
Mobil Oil Refining;
6.00%; 11/1/2014 2,900,000 3,041,375
South Carolina (5.33%)
Darlington County, South Carolina
Pollution Control Rev. Bonds for
Carolina Power & Light;
6.60%; 11/1/2010 1,000,000 1,053,750
Greenville Hospital System,
South Carolina Hospital Fac.
Rev. Ref. Bonds; 6.00%; 5/1/2020 230,000 233,737
Series C; 5.50%; 5/1/2016 2,500,000 2,406,250
Oconee County, South Carolina
Pollution Control Rev. Ref. Bonds,
Duke Energy Corp. Project, Series
1993; 5.80%; 4/1/2014 2,000,000 2,015,000
York County, South Carolina Exempt
Fac. Industrial Rev. Bonds for
Hoechst Celanese Project,
Series 1994; 5.70%; 1/1/2024 2,000,000 1,795,000
York County, South Carolina Pollution
Control Rev. Bonds, Bowater, Inc.
Project; 7.63%; 3/1/2006 1,700,000 1,833,875
9,337,612
South Dakota (0.59%)
Pennington County, South Dakota
Pollution Control Rev. Ref. Bonds
for Black Hills Power & Light Co.
Project; 6.70%; 6/1/2010 1,000,000 1,038,750
Tennessee (1.70%)
County of Louden, Tennessee Industrial
Dev. Solid Waste; 6.20%; 2/1/2023 2,950,000 2,983,187
Texas (12.31%)
Brazos River Authority, Texas Rev.
Industrial Bonds Project-A Houston
Industries, Inc.; 5.13%; 5/1/2019 $2,000,000 $ 1,882,500
Cass County, Texas Industrial
Dev. Corp. Pollution Control
Rev. Bonds for International
Paper Co., Series B;
5.35%; 4/1/2012 3,750,000 3,646,875
Guadalupe-Blanco River Authority,
Texas Industrial Dev. Corp.
Pollution Control Rev.,
EI Dupont de Nemours,
1982 Series A; 6.35%; 7/1/2022 2,500,000 2,603,125
Gulf Coast Waste Disposal Authority
Texas Waste Disposal Rev., Valero
Energy Corp. Project;
5.70%; 4/1/2032 2,000,000 1,740,000
IDC Port of Corpus Christi Rev. Ref.
Bonds, Port Fac. Rev. Bonds,
Valero Energy Corp.;
.13%; 4/1/2009 1,000,000 921,250
IDC Port of Corpus Christi Rev. Ref.
Bonds, Valero Refining & Marketing
Co. Project; 5.40%; 4/1/2018 2,000,000 1,770,000
Milam County, Texas Industrial Dev.
Corp. Pollution Control Rev. Ref.
Bonds, Alcoa Project;
5.65%; 12/1/2012 2,000,000 2,020,000
Red River Authority, Texas Pollution
Control Rev. Bonds, Hoechst
Celanese Corp. Project;
5.20%; 5/1/2007 2,825,000 2,754,375
San Antonio Texas Electric & Gas,
Series A; 4.50%; 2/1/2021 3,715,000 3,157,750
Tarrant County, Texas Health Fac.
Dev. Corp., Harris Methodist Health
System Rev. Bonds;
5.90%; 9/1/2006 1,000,000 1,065,000
21,560,875
Virginia (1.28%)
Bedford County, Virginia Industrial Dev.
Nekoosa Packing Corp., Georgia
Pacific; 5.60%; 12/1/2025 2,500,000 2,240,625
Washington (2.56%)
City of Seattle, Washington Municipal
Light & Power Rev. Bonds;
1993; 5.10%; 11/1/2005 1,950,000 1,993,875
5.00%; 7/1/2018 1,225,000 1,143,844
1998; 4.88%; 6/1/2021 1,500,000 1,338,750
4,476,469
West Virginia (6.67%)
Braxton County, West Virginia Solid
Waste Disposal Rev. Weyerhaeuser
Co.; 5.40%; 5/1/2025 2,000,000 1,797,500
Marshall County, West Virginia
Pollution Control Rev. Bonds
for Ohio Power Co. Project,
Series C; 6.85%; 6/1/2022 1,200,000 1,242,000
Series D; 5.90%; 4/1/2022 4,500,000 4,545,000
Pleasants County, West Virgina
Pollution Control Rev. Bonds
for Potomac Edison Co.;
6.15%; 5/1/2015 $2,000,000 $ 2,057,500
Putnam County, West Virginia
Pollution Control Rev. Bonds for
Appalachian Power Co. Project,
Series C; 6.60%; 7/1/2019 2,000,000 2,035,000
11,677,000
Wisconsin (3.26%)
Kaukauna, Wisconsin Pollution
Control Rev. Ref. Bonds for
International Paper Co. Project,
Series A; 5.40%; 5/1/2004 3,610,000 3,641,587
Wisconsin Health & Educational
Fac. Authority Rev. Bonds for
Franciscan Skemp Medical
Center, Inc., Series 1995;
5.88%; 11/15/2010 1,000,000 1,023,750
6.13%; 11/15/2015 1,000,000 1,040,000
5,705,337
Total Long-Term Tax-Exempt Bonds 170,670,203
Shares
Held Value
Other (0.69%)
Municipal Fund for Temporary
Investment - Munifund Provident
Institutional Funds 1,200,000 $ 1,200,000
Total Portfolio Investments (98.15%) 171,870,203
Cash, receivables and other assets,
net of liabilities (1.85%) 3,245,829
Total Net Assets (100.00%) $175,116,032
(a) Restricted security - See Note 4 to the financial statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class A shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.66 $11.59 $11.44 $11.17 $11.42
Income from Investment Operations:
Net Investment Income(b) ........................... .72 .70 .71 .75 .76
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.40) (.91) .16 .33 (.25)
Total from Investment Operations .32 (.21) .87 1.08 .51
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.73) (.69) (.72) (.81) (.76)
Excess Distributions from Capital Gains(h) ......... -- (.03) -- -- --
Total Dividends and Distributions (.73) (.72) (.72) (.81) (.76)
Net Asset Value, End of Period........................... $10.25 $10.66 $11.59 $11.44 $11.17
Total Return(c) ......................................... 3.23% (1.92)% 7.76% 10.15% 4.74%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $124,630 $145,975 $148,081 $126,427 $113,437
Ratio of Expenses to Average Net Assets(b) ........ 1.06% 1.04% .95% .95% .95%
Ratio of Net Investment Income to
Average Net Assets.................................. 6.96% 6.25% 6.19% 6.70% 6.85%
Portfolio Turnover Rate............................... 60.7% 48.9% 15.2% 12.8% 3.4%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class B shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.65 $11.58 $11.42 $11.15 $11.41
Income from Investment Operations:
Net Investment Income(b) ........................... .64 .61 .63 .67 .67
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.39) (.91) .16 .31 (.25)
Total from Investment Operations .25 (.30) .79 .98 .42
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.66) (.60) (.63) (.71) (.68)
Excess Distributions from Capital Gains(h) ......... -- (.03) -- -- --
Total Dividends and Distributions (.66) (.63) (.63) (.71) (.68)
Net Asset Value, End of Period........................... $10.24 $10.65 $11.58 $11.42 $11.15
Total Return(c) ........................................ 2.45% (2.68)% 7.04% 9.20% 3.91%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $22,577 $25,451 $22,466 $13,403 $7,976
Ratio of Expenses to Average Net Assets(b) ........ 1.85% 1.79% 1.67% 1.70% 1.69%
Ratio of Net Investment Income to
Average Net Assets.................................. 6.16% 5.50% 5.45% 5.92% 6.14%
Portfolio Turnover Rate............................... 60.7% 48.9% 15.2% 12.8% 3.4%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class C shares 2000 1999(f)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $10.66 $10.90
Income from Investment Operations:
Net Investment Income................................. .52 .20
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.40) (.24)
Total from Investment Operations .12 (.04)
Less Dividends from Net Investment Income................ (.64) (.20)
Net Asset Value, End of Period........................... $10.14 $10.66
Total Return(c) ........................................ 1.22% (.40)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $696 $271
Ratio of Expenses to Average Net Assets............... 3.13% 1.84%(e)
Ratio of Net Investment Income to
Average Net Assets ............................... 4.89% 5.81%(e)
Portfolio Turnover Rate ............................. 60.7% 48.9%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class R shares 2000 1999 1998 1997 1996(g)
----------------------------------------------------------------------------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $10.67 $11.59 $11.43 $11.16 $11.27
Income from Investment Operations:
Net Investment Income(b) ........................... .68 .63 .63 .71 .51
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.39) (.90) .16 .30 (.13)
Total from Investment Operations .29 (.27) .79 1.01 .38
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.68) (.62) (.63) (.74) (.49)
Excess Distributions from Capital Gains(h) ......... -- (.03) -- -- --
Total Dividends and Distributions (.68) (.65) (.63) (.74) (.49)
Net Asset Value, End of Period........................... $10.28 $10.67 $11.59 $11.43 $11.16
Total Return............................................. 2.85% (2.45)% 7.05% 9.49% 3.75%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $16,071 $16,096 $12,196 $5,976 $525
Ratio of Expenses to Average Net Assets(b) ........ 1.48% 1.61% 1.45% 1.45% 1.28%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 6.54% 5.68% 5.66% 6.11% 6.51%(e)
Portfolio Turnover Rate............................... 60.7% 48.9% 15.2% 12.8% 3.4%(e)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class A shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.10 $11.63 $11.51 $11.26 $11.31
Income from Investment Operations:
Net Investment Income................................. .68 .69 .70 .70 .70
Net Realized and Unrealized Gain (Loss)
on Investments...................................... .07 (.52) .12 .29 (.05)
Total from Investment Operations .75 .17 .82 .99 .65
Less Dividends from Net Investment Income................ (.67) (.70) (.70) (.74) (.70)
Net Asset Value, End of Period........................... $11.18 $11.10 $11.63 $11.51 $11.26
Total Return(c) ........................................ 7.09% 1.47% 7.38% 9.23% 6.06%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $213,114 $237,811 $251,455 $249,832 $259,029
Ratio of Expenses to Average Net Assets............... .94% .89% .86% .84% .81%
Ratio of Net Investment Income to
Average Net Assets.................................. 6.14% 6.04% 6.07% 6.19% 6.31%
Portfolio Turnover Rate............................... 6.9% 19.4% 17.1% 10.8% 25.9%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class B shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.05 $11.60 $11.50 $11.23 $11.29
Income from Investment Operations:
Net Investment Income................................. .58 .61 .62 .64 .61
Net Realized and Unrealized Gain (Loss)
on Investments...................................... .09 (.54) .12 .29 (.05)
Total from Investment Operations .67 .07 .74 .93 .56
Less Dividends from Net Investment Income................ (.59) (.62) (.64) (.66) (.62)
Net Asset Value, End of Period........................... $11.13 $11.05 $11.60 $11.50 $11.23
Total Return(c) ........................................ 6.32% .65% 6.60% 8.65% 5.17%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $27,395 $29,751 $24,370 $15,431 $11,586
Ratio of Expenses to Average Net Assets............... 1.75% 1.63% 1.57% 1.39% 1.60%
Ratio of Net Investment Income to
Average Net Assets.................................. 5.33% 5.30% 5.43% 5.63% 5.53%
Portfolio Turnover Rate............................... 6.9% 19.4% 17.1% 10.8% 25.9%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class C shares 2000 1999(f)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $11.10 $11.17
Income from Investment Operations:
Net Investment Income................................. .50 .19
Net Realized and Unrealized Gain (Loss)
on Investments...................................... .08 (.07)
Total from Investment Operations .58 .12
Less Dividends from Net Investment Income................ (.58) (.19)
Net Asset Value, End of Period........................... $11.10 $11.10
Total Return(c) ........................................ 5.41% 1.11%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $1,030 $332
Ratio of Expenses to Average Net Assets.................. 2.64% 1.73%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 4.42% 5.29%(e)
Portfolio Turnover Rate............................... 6.9% 19.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class R shares 2000 1999 1998 1997 1996(g)
----------------------------------------------------------------------------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.03 $11.55 $11.42 $11.21 $11.27
Income from Investment Operations:
Net Investment Income................................. .62 .61 .61 .64 .47
Net Realized and Unrealized Gain (Loss)
on Investments...................................... .08 (.52) .13 .24 (.08)
Total from Investment Operations .70 .09 .74 .88 .39
Less Dividends from Net Investment Income................ (.61) (.61) (.61) (.67) (.45)
Net Asset Value, End of Period........................... $11.12 $11.03 $11.55 $11.42 $11.21
Total Return............................................. 6.63% .78% 6.66% 8.19% 3.76%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $12,976 $11,539 $8,156 $4,152 $481
Ratio of Expenses to Average Net Assets............... 1.40% 1.53% 1.64% 1.79% 1.18%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.67% 5.40% 5.39% 5.21% 5.84%(e)
Portfolio Turnover Rate............................... 6.9% 19.4% 17.1% 10.8% 25.9%(e)
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as oted):
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class A shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.21 $7.63 $8.52 $8.27 $8.06
Income from Investment Operations:
Net Investment Income................................. .60 .63 .64 .67 .68
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.81) (.41) (.88) .31 .23
Total from Investment Operations (.21) .22 (.24) .98 .91
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.57) (.63) (.64) (.73) (.70)
Dividends in Excess of Net Investment Income(h) (.07) (.01) (.01) -- --
Total Dividends and Distributions (.64) (.64) (.65) (.73) (.70)
Net Asset Value, End of Period........................... $6.36 $7.21 $7.63 $8.52 $8.27
Total Return(c) ........................................ (3.12)% 2.81% (3.18)% 12.33% 11.88%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $22,869 $30,065 $33,474 $38,239 $28,432
Ratio of Expenses to Average Net Assets............... 1.44% 1.31% 1.40% 1.22% 1.26%
Ratio of Net Investment Income to
Average Net Assets.................................. 8.71% 8.23% 7.71% 7.99% 8.49%
Portfolio Turnover Rate............................... 152.6% 86.1% 65.9% 39.2% 18.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class B shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.17 $7.59 $8.47 $8.22 $8.05
Income from Investment Operations:
Net Investment Income................................. .53 .57 .57 .62 .60
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.80) (.41) (.87) .28 .20
Total from Investment Operations (.27) .16 (.30) .90 .80
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.52) (.57) (.57) (.65) (.63)
Dividends in Excess of Net Investment Income(h) (.07) (.01) (.01) -- --
Total Dividends and Distributions (.59) (.58) (.58) (.65) (.63)
Net Asset Value, End of Period........................... $6.31 $7.17 $7.59 $8.47 $8.22
Total Return(c) ........................................ (4.04)% 2.02% (3.93)% 11.31% 10.46%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $5,586 $7,467 $8,527 $6,558 $2,113
Ratio of Expenses to Average Net Assets............... 2.25% 1.99% 2.34% 2.13% 2.38%
Ratio of Net Investment Income to
Average Net Assets.................................. 7.89% 7.55% 6.78% 7.03% 7.39%
Portfolio Turnover Rate............................... 152.6% 86.1% 65.9% 39.2% 18.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class C shares 2000 1999(f)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $7.22 $7.48
Income from Investment Operations:
Net Investment Income................................. .35 .18
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.80) (.25)
Total from Investment Operations (.45) (.07)
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.52) (.18)
Dividends in Excess of Net Investment Income(h) (.06) (.01)
Total Dividends and Distributions (.58) (.19)
Net Asset Value, End of Period........................... $6.19 $7.22
Total Return(c) ........................................ (6.64)% (.99)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $250 $182
Ratio of Expenses to Average Net Assets............... 5.16% 2.01%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 4.97% 7.15%(e)
Portfolio Turnover Rate............................... 152.6% 86.1%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class R shares 2000 1999 1998 1997 1996(g)
----------------------------------------------------------------------------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.08 $7.51 $8.40 $8.20 $8.21
Income from Investment Operations:
Net Investment Income................................. .54 .56 .57 .62 .46
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.79) (.40) (.87) .26 (.03)
Total from Investment Operations (.25) .16 (.30) .88 .43
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.53) (.56) (.58) (.68) (.44)
Dividends in Excess of Net Investment Income(h) (.07) (.03) (.01) -- --
Total Dividends and Distributions (.60) (.59) (.59) (.68) (.44)
Net Asset Value, End of Period........................... $6.23 $7.08 $7.51 $8.40 $8.20
Total Return............................................. (3.78)% 2.01% (3.97)% 11.14% 5.60%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $2,139 $2,598 $2,734 $1,961 $124
Ratio of Expenses to Average Net Assets............... 2.02% 2.09% 2.28% 2.42% 1.59%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 8.14% 7.43% 6.84% 6.70% 7.84%(e)
Portfolio Turnover Rate............................... 152.6% 86.1% 65.9% 39.2% 18.8%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class A shares 2000 1999 1998 1997 1996(i)
----------------------------------------------------------------------------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.54 $9.93 $9.88 $9.89 $9.90
Income from Investment Operations:
Net Investment Income(b) ........................... .59 .57 .57 .61 .38
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.05) (.39) .06 .03 (.04)
Total from Investment Operations .54 .18 .63 .64 .34
Less Dividends from Net Investment Income................ (.58) (.57) (.58) (.65) (.35)
Net Asset Value, End of Period........................... $9.50 $9.54 $9.93 $9.88 $9.89
Total Return(c) ........................................ 5.94% 1.83% 6.57% 6.75% 3.62%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $25,183 $27,096 $27,632 $20,567 $17,249
Ratio of Expenses to Average Net Assets(b) ........ .99% 1.00% .82% .90% .89%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 6.16% 5.76% 5.86% 6.20% 6.01%(e)
Portfolio Turnover Rate............................... 31.5% 20.9% 23.8% 17.4% 16.5%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class B shares 2000 1999 1998 1997 1996(i)
----------------------------------------------------------------------------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.60 $9.98 $9.90 $9.89 $9.90
Income from Investment Operations:
Net Investment Income(b) ........................... .55 .52 .54 .56 .36
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.02) (.39) .06 .04 (.05)
Total from Investment Operations .53 .13 .60 .60 .31
Less Dividends from Net Investment Income................ (.53) (.51) (.54) (.59) (.32)
Net Asset Value, End of Period........................... $9.60 $9.60 $9.98 $9.90 $9.89
Total Return(c) ........................................ 5.69% 1.29% 6.24% 6.31% 3.32%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $3,291 $2,696 $1,705 $625 $112
Ratio of Expenses to Average Net Assets(b) ........ 1.34% 1.35% 1.22% 1.24% 1.15%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.81% 5.41% 5.44% 5.84% 5.75%(e)
Portfolio Turnover Rate............................... 31.5% 20.9% 23.8% 17.4% 16.5%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class C shares 2000 1999(f)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $9.56 $9.64
Income from Investment Operations:
Net Investment Income(b) ........................... .55 .16
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.02) (.08)
Total from Investment Operations .53 .08
Less Dividends from Net Investment Income................ (.51) (.16)
Net Asset Value, End of Period........................... $9.58 $9.56
Total Return(c) ........................................ 5.72% .84(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $524 $350
Ratio of Expenses to Average Net Assets(b) ........ 1.34% 1.34%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.81% 5.52%(e)
Portfolio Turnover Rate............................... 31.5% 20.9%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class R shares 2000 1999 1998 1997 1996(g)
----------------------------------------------------------------------------------------------------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.55 $9.93 $9.85 $9.88 $9.90
Income from Investment Operations:
Net Investment Income(b) ........................... .52 .50 .52 .54 .36
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.03) (.39) .07 .03 (.06)
Total from Investment Operations .50 .11 .59 .57 .30
Less Dividends from Net Investment Income................ (.51) (.49) (.51) (.60) (.32)
Net Asset Value, End of Period........................... $9.54 $9.55 $9.93 $9.85 $9.88
Total Return............................................. 5.38% 1.13% 6.12% 6.01% 3.24%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $4,934 $3,276 $2,034 $606 $83
Ratio of Expenses to Average Net Assets(b) ........ 1.59% 1.41% 1.44% 1.48% 1.40%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.58% 5.35% 5.21% 5.60% 5.64%(e)
Portfolio Turnover Rate............................... 31.5% 20.9% 23.8% 17.4% 16.5%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
------------------------------------
Class A shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.69 $12.59 $12.38 $12.04 $11.98
Income from Investment Operations:
Net Investment Income................................. .59 .60 .60 .63 .64
Net Realized and Unrealized Gain (Loss)
on Investments...................................... .06 (.90) .22 .39 .07
Total from Investment Operations .65 (.30) .82 1.02 .71
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.58) (.59) (.61) (.68) (.65)
---
Distributions from Capital Gains...................... (.11) (.01) -- -- --
Total Dividends and Distributions (.69) (.60) (.61) (.68) (.65)
Net Asset Value, End of Period........................... $11.65 $11.69 $12.59 $12.38 $12.04
Total Return(c) ........................................ 5.81% (2.51)% 6.76% 8.71% 6.08%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $163,846 $186,973 $204,865 $193,007 $187,180
Ratio of Expenses to Average Net Assets............... .88% .80% .83% .79% .78%
Ratio of Net Investment Income to
Average Net Assets.................................. 5.12% 4.84% 4.83% 5.14% 5.34%
Portfolio Turnover Rate............................... 7.6% 15.6% 6.6% 8.9% 9.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
------------------------------------
Class B shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.70 $12.59 $12.39 $12.02 $11.96
Income from Investment Operations:
Net Investment Income................................. .57 .53 .53 .55 .55
Net Realized and Unrealized Gain (Loss)
on Investments...................................... .07 (.89) .20 .40 .06
Total from Investment Operations .64 (.36) .73 .95 .61
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.52) (.52) (.53) (.58) (.55)
---
Distributions from Capital Gains...................... (.11) (.01) -- -- --
Total Dividends and Distributions (.63) (.53) (.53) (.58) (.55)
Net Asset Value, End of Period........................... $11.71 $11.70 $12.59 $12.39 $12.02
Total Return(c) ........................................ 5.69% (3.01)% 6.01% 8.08% 5.23%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $10,744 $11,480 $11,419 $7,783 $5,794
Ratio of Expenses to Average Net Assets............... 1.37% 1.32% 1.43% 1.45% 1.52%
Ratio of Net Investment Income to
Average Net Assets.................................. 4.60% 4.32% 4.22% 4.46% 4.59%
Portfolio Turnover Rate............................... 7.6% 15.6% 6.6% 8.9% 9.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
------------------------------------
Class C shares 2000 1999(f)
--------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $11.69 $12.16
Income from Investment Operations:
Net Investment Income................................. .36 .16
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.05) (.47)
Total from Investment Operations .41 (.31)
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.47) (.16)
Distributions from Capital Gains...................... (.11) --
Total Dividends and Distributions (.58) (.16)
Net Asset Value, End of Period........................... $11.52 $11.69
Total Return(c) ........................................ 3.63% (2.59)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $526 $136
Ratio of Expenses to Average Net Assets............... 3.14% 1.78%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 2.83% 3.96%(e)
Portfolio Turnover Rate............................... 7.6% 15.6%(e)
</TABLE>
<TABLE>
<CAPTION>
January 1, 1998, the following changes were made to the names of the Income
Funds:
Former Fund Name New Fund Name
----------------- -------------
<S> <C>
Princor Bond Fund, Inc. Principal Bond Fund, Inc.
Princor Government Securites Income Fund, Inc. Principal Government Securities Income Fund, Inc.
Princor High Yield Fund, Inc. Principal High Yield Fund, Inc.
Princor Limited Term Bond Fund, Inc. Principal Limited Term Bond Fund, Inc.
Princor Tax-Exempt Bond Fund, Inc. Principal Tax-Exempt Bond Fund, Inc.
</TABLE>
(b) Without the Manager's voluntary waiver of a portion of certain of its
expenses (see Note 3 to the financial statements) for the periods
indicated, the following funds would have had per share net investment
income and the ratios of expenses to average net assets as shown:
<TABLE>
<CAPTION>
Year Ended
October 31, Per Share Ratio of Expenses
Except Net Investment to Average Net Amount
as Noted Income Assets Waived
Principal Bond Fund, Inc.:*
<S> <C> <C> <C> <C>
Class A 1998 $.70 1.04% $121,092
1997 .74 .98 41,256
1996 .76 .97 22,536
Class B 1998 .62 1.81 26,130
1997 .66 1.79 8,982
1996 .67 1.79 5,874
Class R 1998 .61 1.72 25,144
1997 .69 1.78 10,427
1996(g) .51 1.28(e) 3
Principal Limited Term Bond Fund, Inc.:
Class A 2000 .57 1.20 51,056
1999 .55 1.14 40,285
1998 .55 1.13 76,952
1997 .59 1.15 46,271
1996(i) .37 1.16(e) 22,716
Class B 2000 .50 1.93 17,484
1999 .47 1.92 14,004
1998 .47 2.36 11,537
1997 .46 3.82 6,528
1996(i) .34 1.94(e) 259
Class C 2000 .42 2.87 6,761
1999(f) .15 2.05(e) 488
Class R 2000 .49 1.94 13,973
1999 .46 2.02 11,951
1998 .46 2.22 11,781
1997 .43 2.95 6,831
1996(g) .35 1.79(e) 60
* The Manager ceased its waiver of expenses for Principal Bond Fund, Inc. on October 31, 1998.
</TABLE>
(c) Total return is calculated without the front-end sales charge or contingent
deferred sales charge.
(d) Total return amounts have not been annualized.
(e) Computed on an annualized basis.
(f) Period from June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(g) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996. The Income Funds' Class R
shares recognized no net investment income for the period from the initial
purchase by Principal Management Corporation of Class R shares on February
27, 1996 through February 28, 1996. Certain of the Income Funds' Class R
shares incurred unrealized losses on investments during the initial interim
period as follows. This represents Class R share activities of each fund
prior to the initial offering of Class R shares:
Per Share
Unrealized (Loss)
Principal Bond Fund, Inc. $(.03)
Principal Government Securities Income Fund, Inc. (.03)
Principal Limited Term Bond Fund, Inc. (.02)
(h) Dividends and distributions which exceed investment income and net realized
gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions
in excess of net realized gains on investments. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as tax return of capital distributions.
(i) Period from February 29, 1996, date shares first offered to the public,
through October 31, 1996. With respect to Class A shares, net investment
income, aggregating $.02 per share for the period from the initial purchase
of shares on February 13, 1996 through February 28, 1996, was recognized,
none of which was distributed to its sole shareholder, Principal Life
Insurance Company during the period. Additionally, Class A shares incurred
unrealized losses on investments of $.12 per share during the initial
interim period. With respect to Class B shares, no net investment income
was recognized for the period from initial purchase of shares on February
27, 1996 through February 28, 1996. Additionally, Class B shares incurred
unrealized losses on investments of $.02 per share during the initial
interim period. This represents Class A share and Class B share activities
of the fund prior to the initial public offering of both classes of shares.
October 31, 2000
STATEMENT OF ASSETS AND LIABILITIES
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
Assets
Investment in securities -- at value
(approximates cost) (Note 1)........... $410,085,109
Cash.............................1,716,090
Receivables:
Interest .............................. 649,020
Capital Shares sold.................... 2,743,057
Other assets.............................. 22,918
Total Assets 415,216,194
Liabilities
Accrued expenses.......................... 170,808
Payables for investment securities purchased 2,233,657
Total Liabilities 2,404,465
Net Assets Applicable to
Outstanding Shares ....................... $412,811,729
Net Assets Consist of:
Capital Stock............................. $ 4,128,117
Additional paid-in capital................ 408,683,612
Total Net Assets $412,811,729
Capital Stock (par value: $.01 a share):
Shares authorized......................... 2,000,000,000
Net Asset Value Per Share:
Class A: Net Assets....................... $390,154,199
Shares issued and outstanding.... 390,154,199
Net asset value per share........ $1.000
Class B: Net Assets....................... $5,318,112
Shares issued and outstanding.... 5,318,112
Net asset value per share(a)..... $1.000
Class C: Net Assets....................... $558,208
Shares issued and outstanding.... 558,208
Net asset value per share(a)..... $1.000
Class R: Net Assets....................... $16,781,210
Shares issued and outstanding.... 16,781,210
Net asset value per share........ $1.000
(a)Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
Year Ended October 31, 2000, Except as Noted
STATEMENT OF OPERATIONS
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
Net Investment Income
Interest income......................... $24,445,525
Expenses:
Management and investment
advisory fees (Note 3)............ 1,665,123
Distribution and shareholder
servicing fees (Notes 1 and 3).... 101,487
Transfer and administrative
services (Notes 1 and 3).......... 876,798
Registration fees (Note 1)........... 81,508
Custodian fees....................... 17,709
Auditing and legal fees.............. 7,120
Directors' fees...................... 5,911
Other................................ 96,213
Total Expenses 2,851,869
Net Investment Income $21,593,656
See accompanying notes.
<TABLE>
<CAPTION>
Years Ended October 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
2000 1999(a)
Operations
<S> <C> <C>
Net investment income .................. $ 21,593,656 $ 15,507,659
Dividends to Shareholders from Net
Investment Income:
Class A.............................. (20,460,940) (14,771,870)
Class B.............................. (281,623) (179,184)
Class C.............................. (8,675) (1,121)
Class R .................... (842,418) (555,484)
Total Dividends (21,593,656) (15,507,659)
Capital Share Transactions (Note 4)
Shares sold:
Class A.............................. 850,515,823 717,610,854
Class B.............................. 7,681,294 10,129,211
Class C.............................. 941,251 131,662
Class R ..................... 17,794,014 20,194,531
Class A shares issued in connection with the
acquisition of Principal Tax-Exempt
Cash Management Fund, Inc. (Note 6).. N/A 19,506,825
Shares issued in reinvestment of dividends:
Class A.............................. 19,480,720 14,313,193
Class B.............................. 264,526 170,825
Class C.............................. 5,028 222
Class R ...................... 814,253 536,604
Shares redeemed:
Class A.............................. (832,517,131) (693,673,532)
Class B.............................. (8,957,837) (7,572,270)
Class C.............................. (519,955) --
Class R ............................. (17,398,115) (15,573,852)
Net Increase in Net Assets
from Capital Share Transactions 38,103,871 65,774,273
Total Increase 38,103,871 65,774,273
Net Assets
Beginning of year....................... 374,707,858 308,933,585
End of year............................. $ 412,811,729 $ 374,707,858
(a).Class C share information is provided for the period from June 30, 1999
(inception date of class) through October 31, 1999.
See accompanying notes.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Principal Cash Management Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal Cash Management Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as an open-end diversified
management investment company and operates in the mutual fund industry.
On June 30, 1999, the initial purchase of Class C shares of the Fund was made by
Principal Life Insurance Company. Effective June 30, 1999, the Fund began
offering Class C shares to the public.
Shares of the Fund are sold at net asset value; no sales charge applies to
purchases of the Fund. Certain purchases of Class A shares of the Fund may be
subject to a contingent deferred sales charge ("CDSC") if redeemed within
eighteen months of purchase. Class B shares are subject to a declining CDSC on
certain redemptions made within six years of purchase. Class C shares are
subject to a CDSC on certain redemptions made within twelve months of purchase.
Class R shares are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear higher ongoing distribution fees than Class A shares. Class
B shares automatically convert into Class A shares, based on relative net asset
value (without a sales charge), seven years after purchase. Class C shares do
not convert into Class A shares. Class R shares automatically convert into Class
A shares, based on relative net asset value (without a sales charge), four years
after purchase. All classes of shares in the Fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by the Fund's Board of
Directors. In addition, the Board of Directors declares separate dividends on
each class of shares.
The Fund allocates daily all income, expenses (other than class-specific
expenses), and realized gains or losses to each class of shares based upon the
relative proportion of the number of settled shares outstanding of each class.
Expenses specifically attributable to a particular class are charged directly to
such class. Principal Cash Management Fund, Inc. class-specific expenses charged
to each class during the year ended October 31, 2000, which are included in the
corresponding captions of the Statement of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services Registration Fees
Class A Class B Class C Class R Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N/A $26,385 $2,682 $72,420 $348,562 $7,612 $27 $11,518 $37,331 $8,907 $4,425 $8,253
</TABLE>
The Fund values its securities at amortized cost, which approximates market.
Under the amortized cost method, a security is valued by applying a constant
yield to maturity of the difference between the principal amount due at maturity
and the cost of the security to the Fund.
The Fund records investment transactions generally on the trade date. The
identified cost basis has been used in determining the net realized gain or loss
from investment transactions. Interest income is recognized on an accrual basis.
The Fund may, pursuant to an exemptive order issued by the Securities and
Exchange Commission, transfer uninvested funds into a joint trading account. The
order permits the Fund's cash balance to be deposited into a single joint
account along with the cash of other registered investment companies managed by
Principal Management Corporation (the "Manager"). These balances may be invested
in one or more short-term instruments.
The Fund declares all net investment income and any realized gains and losses
from investment transactions as dividends daily to shareholders of record as of
that day. Dividends to shareholders from net investment income and net realized
gain from investments are determined in accordance with federal tax regulations,
which may differ from generally accepted accounting principles.
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.
The Financial Accounting Standards Board recently approved the AICPA Audit and
Accounting Guide for Investment Companies (the "Guide"). The Guide supercedes a
previous version of the AICPA Audit and Accounting Guide for Investment
Companies and Statement of Position 93-2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. The Guide is effective for fiscal years
beginning after December 15, 2000. Management of the Fund does not anticipate
that the adoption of the Guide will have a significant effect on the financial
statements.
The Fund's investments are with various issuers in various industries. The
Schedule of Investments contained herein summarizes concentration of credit risk
by issuer and industry.
Note 2 -- Federal Income Taxes
No provision for federal income taxes is considered necessary because the 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 for
federal income tax reporting purposes approximates that used for financial
reporting purposes.
Note 3 -- Management Agreement and Transactions With Affiliates
The Fund has agreed to pay investment advisory and management fees to Principal
Management Corporation (wholly owned by Princor Financial Services Corporation,
a subsidiary of Principal Financial Services, Inc.) computed at an annual
percentage rate of the Fund's average daily net assets. The annual rate used in
this calculation for the Fund is as follows:
Net Asset Value of Fund
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
0.50% 0.45% 0.40% 0.35% 0.30%
The Fund also reimburses the Manager for transfer and administrative services,
including the cost of accounting, data processing, supplies and other services
rendered.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00%, and Class C shares at 1.00% of the lesser of the
current market value or the cost of shares being redeemed. The aggregate amount
of these charges retained by Princor Financial Services Corporation for the year
ended October 31, 2000, was as follows:
Class A Class B Class C
$19,276 $68,149 $58
No brokerage commissions were paid by the Fund to affiliated broker dealers
during the period.
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
The Fund bears distribution and shareholder servicing fees with respect to each
class computed at an annual rate of the average daily net assets attributable to
each class of the Fund. The annual rate will not exceed the following limits:
Class A Class B Class C Class R
Distribution and Shareholder
Servicing fees N/A 1.00% 1.00% .75%
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class B and Class R shares,
fees that are unused by the principal underwriter at the end of the fiscal year
are returned to the Fund.
At October 31, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company, benefit plans sponsored on behalf of Principal Life
Insurance Company and several joint ventures (in each of which a subsidiary of
Principal Life Insurance Company is a participant) owned Class A and Class C
shares of the Fund of 55,745,442 and 100,114, respectively.
Note 4 -- Capital Share Transactions
<TABLE>
<CAPTION>
Transactions in Capital Shares were as follows:
Year Ended Year Ended
October 31, 2000 October 31, 1999
Shares sold:
<S> <C> <C>
Class A ................................................ 850,515,823 717,610,854
Class B ............................................... 7,681,294 10,129,211
Class C ............................................... 941,251 131,662
Class R ................................................ 17,794,014 20,194,531
Class A Shares issued in connection with the acquisition of
Principal Tax-Exempt Cash Management Fund, Inc. (Note 6) N/A 19,506,825
Shares issued in reinvestment of dividends:
Class A ............................................... 19,480,720 14,313,193
Class B ............................................... 264,526 170,825
Class C ............................................... 5,028 222
Class R ................................................ 814,253 536,604
Shares redeemed:
Class A ............................................... (832,517,131) (693,673,532)
Class B ............................................... (8,957,837) (7,572,270)
Class C ............................................... (519,955) --
Class R ................................................ (17,398,115) (15,573,852
Net Increase 38,103,871 65,774,273
</TABLE>
Note 5 -- Line of Credit
The Fund participates with other funds and portfolios managed by Principal
Management Corporation in an unsecured joint line of credit with two banks which
allow the funds to borrow up to $75,000,000 collectively. 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 Fed Funds Rate plus .50%. Additionally, a commitment fee is
charged at the annual rate of .09% on the amount of the line of credit. The
commitment fee is allocated among the participating funds and portfolios in
proportion to their average net assets during each calendar quarter. At October
31, 2000, the Fund had no outstanding borrowings under the line of credit.
Note 6-- Acquisition of Principal Tax-Exempt Cash Management Fund, Inc.
On April 8, 1999, Principal Cash Management Fund, Inc. acquired all the assets
and assumed all the liabilities of Principal Tax-Exempt Cash Management Fund,
Inc. pursuant to a plan of acquisition approved by shareholders of Principal
Tax-Exempt Cash Management Fund, Inc. on April 7, 1999. The acquisition was
accomplished by a tax-free exchange of 19,506,825 Class A shares of Principal
Cash Management Fund, Inc. (valued at $19,506,825) for the 19,506,825 shares of
Principal Tax-Exempt Cash Management Fund, Inc. outstanding on April 8, 1999.
The aggregate net assets of Principal Cash Management Fund, Inc. and Principal
Tax-Exempt Cash Management Fund, Inc. immediately before the acquisition were
approximately $355,081,000 and $19,507,000, respectively.
SCHEDULE OF INVESTMENTS
PRINCIPAL CASH MANAGEMENT FUND, INC.
Principal
Amount Value
Commercial Paper (92.65%)
Asset-Backed Securities (20.37%)
CXC, Inc.;
6.49%; 11/3/2000 $3,000,000 $ 2,998,918
6.49%; 11/3/2000 2,500,000 2,499,099
6.50%; 11/16/2000 3,000,000 2,991,875
6.50%; 11/20/2000 1,250,000 1,245,712
6.49%; 12/5/2000 2,500,000 2,484,676
6.48%; 12/7/2000 2,065,000 2,051,619
6.48%; 12/14/2000 2,000,000 1,984,520
6.49%; 12/15/2000 2,000,000 1,984,136
6.55%; 1/22/2001 2,500,000 2,462,701
Corporate Asset Funding Co.;
6.50%; 11/8/2000 1,460,000 1,458,155
6.50%; 11/28/2000 2,500,000 2,487,812
6.49%; 11/29/2000 3,000,000 2,984,857
6.49%; 12/6/2000 3,000,000 2,981,071
6.48%; 12/7/2000 2,000,000 1,987,040
6.48%; 12/8/2000 2,000,000 1,986,680
6.55%; 1/16/2001 3,000,000 2,958,517
6.50%; 2/7/2001 2,000,000 1,964,611
Corporate Receivables Corp.;
6.50%; 11/7/2000 1,500,000 1,498,377
6.56%; 11/9/2000 1,000,000 998,542
6.49%; 11/15/2000 3,000,000 2,992,428
6.48%; 12/4/2000 2,000,000 1,988,120
6.49%; 12/4/2000 3,000,000 2,982,152
6.52%; 1/24/2000 3,600,000 3,545,232
6.50%; 2/5/2001 2,500,000 2,456,667
Quincy Capital Corp.;
6.50%; 11/6/2000 2,725,000 2,722,540
6.50%; 12/5/2000 1,015,000 1,008,769
6.51%; 12/6/2000 1,115,000 1,107,943
6.57%; 1/12/2001 2,500,000 2,467,150
Receivables Capital Corp.;
6.49%; 9/11/2000 2,500,000 2,493,690
6.54%; 11/1/2000 500,000 500,000
6.50%; 11/3/2000 2,000,000 1,999,278
6.63%; 11/10/2000 2,500,000 2,495,856
6.49%; 11/15/2000 2,250,000 2,244,321
6.49%; 12/6/2000 2,000,000 1,987,381
6.58%; 1/10/2001 1,844,000 1,820,407
6.54%; 1/24/2001 1,500,000 1,477,145
Sheffield Receivables Corp.;
6.49%; 12/20/2000 2,500,000 2,477,916
Windmill Funding Corp.;
6.49%; 12/5/2000 1,350,000 1,341,725
6.60%; 1/3/2001 2,000,000 1,976,900
84,094,538
Business Credit Institutions (5.54%)
American Express Credit Corp.;
6.30%; 7/20/2001 $2,000,000 $ 1,908,650
CIT Group Holdings, Inc.;
6.49%; 11/2/2000 2,650,000 2,649,522
Deere (John) BV;
6.50%; 11/2/2000 2,500,000 2,499,549
6.49%; 12/12/2000 2,500,000 2,481,522
6.53%; 1/23/2001 3,000,000 2,954,834
Deere (John) Credit Ltd.;
6.55%; 1/9/2001 2,000,000 1,974,892
Deere (John) Credit Group PLC;
6.50%; 11/6/2000 1,500,000 1,498,646
General Electric Capital Corp.;
6.06%; 11/13/2000 900,000 898,182
6.54%; 11/2/2000 670,000 669,878
6.56%; 11/3/2000 1,100,000 1,099,599
6.50%; 11/7/2000 2,300,000 2,297,508
6.64%; 3/23/2001 2,000,000 1,947,618
22,880,400
Chemicals & Allied Products (1.57%)
Sinochem American CP, Inc.;
6.52%; 11/1/2000 2,000,000 2,000,000
6.50%; 11/14/2000 2,500,000 2,494,132
6.49%; 12/4/2000 2,000,000 1,988,102
6,482,234
Combination Utility Services (0.36%)
South Carolina Fuel Co. Notes;
6.49%; 11/28/2000 1,500,000 1,492,699
Commercial Banks (4.78%)
Bank One Corp.;
6.50%; 12/13/2000 1,125,000 1,116,469
6.50%; 12/20/2000 2,000,000 1,982,306
6.40%; 12/20/2000 1,000,000 991,153
6.65%; 7/17/2001 2,000,000 2,000,000
Bank One, NA Notes;
7.45%; 5/31/2000 1,500,000 1,500,000
7.43%; 5/25/2001 2,250,000 2,250,000
6.92%; 8/17/2001 2,000,000 2,000,000
Bank of America Corp. Notes;
6.39%; 5/11/2001 3,000,000 2,898,292
Citicorp;
6.50%; 1/2/2000 2,500,000 2,499,549
Wells Fargo & Co.;
6.50%; 2/1/2001 2,500,000 2,458,472
19,696,241
Crude Petroleum & Natural Gas (1.98%)
Chevron U.K. Investment PLC;
6.47%; 12/5/2000 1,750,000 1,739,307
6.48%; 12/6/2000 2,000,000 1,987,400
6.53%; 1/8/2001 1,500,000 1,481,498
6.55%; 1/18/2001 3,000,000 2,957,425
8,165,630
Crushed & Broken Stone (0.72%)
Vulcan Materials Co.;
6.49%; 11/28/2000 3,000,000 2,985,398
Cutlery, Handtools &
Hardware (3.92%)
Snap-On, Inc.;
6.47%; 11/30/2000 $2,500,000 $ 2,486,970
6.49%; 12/12/2000 2,000,000 1,985,240
Stanley Works;
6.48%; 11/27/2000 5,000,000 4,976,600
6.46%; 12/19/2000 2,500,000 2,478,467
6.47%; 12/28/2000 2,545,000 2,518,929
6.47%; 12/28/2000 1,765,000 1,746,919
16,193,125
Electric Services (4.10%)
Alliant Energy Corp.;
6.49%; 12/8/2000 2,000,000 1,986,659
Florida Power Corp.;
6.52%; 12/14/2000 1,600,000 1,587,540
6.47%; 12/14/2000 3,000,000 2,976,816
Kansas City Power & Light;
6.48%; 12/19/2000 2,955,000 2,929,469
6.48%; 12/21/2000 1,445,000 1,431,995
Southern California Edison;
6.48%; 11/8/2000 2,035,000 2,032,436
6.48%; 12/5/2000 2,000,000 1,987,760
6.56%; 1/10/2001 2,000,000 1,974,527
16,907,202
Farm & Garden Machinery (1.67%)
Caterpillar Financial Services Corp.;
6.12%; 11/14/2000 963,000 960,872
6.44%; 4/5/2001 2,250,000 2,187,612
Deere & Co.;
6.49%; 11/7/2000 2,250,000 2,247,566
6.47%; 12/13/2000 1,500,000 1,488,677
6,884,727
Federally & Federally Sponsored
Credit (1.68%)
Private Export Funding Corp.;
6.60%; 12/12/2000 1,500,000 1,488,725
6.61%; 12/7/2000 3,500,000 3,476,865
6.46%; 3/29/2001 2,000,000 1,946,884
6,912,474
Fire, Marine & Casualty
Insurance (0.60%)
Allstate Corp.; 6.48%; 12/8/2000 2,500,000 2,483,350
Gas Production & Distribution (0.60%)
Indiana Gas Co., Inc.;
6.50%; 12/11/2000 2,500,000 2,481,944
Investment Offices (0.55%)
Morgan Stanley Group, Inc.;
6.48%; 12/18/2000 2,300,000 2,280,542
Life Insurance (1.08%)
American General Corp.;
6.48%; 11/30/2000 2,000,000 1,989,560
6.46%; 12/22/2000 1,760,000 1,743,893
6.85%; 2/15/2001 750,000 734,873
4,468,326
Meat Products (0.62%)
Heinz HJ Co.;
6.49%; 11/29/2000 $2,575,000 $ 2,562,002
Miscellaneous Chemical
Products (1.09%)
Equitable Resources, Inc.;
6.48%; 12/12/2000 2,545,000 2,526,218
6.48%; 12/22/2000 2,000,000 1,981,640
4,507,858
Miscellaneous Electrical Equipment &
Supplies (1.87%)
Motorola, Inc.;
6.46%; 12/26/2000 2,000,000 1,980,261
6.47%; 12/27/2000 2,500,000 2,474,839
6.47%; 12/27/2000 1,400,000 1,385,910
6.44%; 3/1/2001 1,900,000 1,859,213
7,700,223
Miscellaneous Investing (3.68%)
Delaware Funding Corp.;
6.50%; 11/6/2000 1,760,000 1,758,411
6.49%; 11/13/2000 3,000,000 2,993,510
6.50%; 11/17/2000 3,000,000 2,991,333
6.49%; 11/22/2000 3,000,000 2,988,642
6.48%; 12/15/2000 2,000,000 1,984,160
6.48%; 12/22/2000 2,500,000 2,477,050
15,193,106
Mortgage Bankers & Brokers (0.48%)
Countrywide Home Loan, Inc.;
6.53%; 11/9/2000 2,000,000 1,997,098
Motor Vehicles & Equipment (3.84%)
Daimler Chrysler North
American HDTC;
6.52%; 11/1/2000 2,000,000 2,000,000
6.50%; 11/27/2000 1,700,000 1,692,019
6.50%; 11/27/2000 2,700,000 2,687,325
6.53%; 11/29/2000 1,400,000 1,392,890
6.46%; 11/30/2000 3,150,000 3,133,608
6.51%; 2/6/2001 1,500,000 1,473,689
Paccar Financial Corp.;
6.49%; 12/1/2000 2,0000,000 1,989,183
6.48%; 12/29/2000 1,500,000 1,484,340
15,853,054
Newspapers (1.37%)
Gannett Co.;
6.49%; 11/10/2000 3,000,000 2,995,132
6.48%; 11/21/2000 1,900,000 1,893,160
6.49%; 11/22/2000 770,000 767,085
5,655,377
Personal Credit Institutions (6.74%)
American General Finance Corp.;
6.67%; 12/4/2000 $ 750,000 $ 745,414
Associates First Capital Corp.;
6.50%; 11/9/2000 3,000,000 2,995,667
6.49%; 11/10/2000 1,900,000 1,896,917
Associates First Capital BV;
6.49%; 12/13/2000 1,000,000 992,428
6.47%; 12/1/2000 3,000,000 2,983,825
Commoloco, Inc.;
6.13%; 11/6/2000 1,000,000 999,149
6.70%; 11/13/2000 475,000 473,939
6.76%; 11/16/2000 800,000 797,747
6.47%; 11/17/2000 700,000 697,987
6.23%; 11/17/2000 500,000 498,616
6.29%; 11/17/2000 1,000,000 997,204
6.56%; 11/21/2000 1,000,000 996,356
6.58%; 1/10/2001 1,000,000 987,206
6.60%; 1/19/2001 2,700,000 2,660,895
6.58%; 1/24/2001 1,000,000 984,647
6.61%; 1/29/2001 1,000,000 983,659
6.53%; 2/12/2001 1,250,000 1,226,646
6.47%; 3/5/2001 1,600,000 1,564,343
General Motors Acceptance Corp.;
6.53%; 1/14/2001 3,000,000 2,958,099
6.52%; 1/30/2001 1,420,000 1,396,854
27,837,598
Petroleum Refining (2.79%)
Equilon Enterprises LLC;
6.49%; 11/21/2000 1,065,000 1,061,160
6.49%; 11/22/2000 2,500,000 2,490,535
6.48%; 11/27/2000 3,000,000 2,985,960
Motiva Enterprises LLC;
6.46%; 12/19/2000 3,000,000 2,974,160
6.47%; 12/26/2000 2,000,000 1,980,231
11,492,046
Security Brokers & Dealers (8.01%)
Bear Stearns Cos., Inc.;
6.48%; 12/18/2000 2,500,000 2,478,850
6.54%; 1/11/2001 3,000,000 2,961,305
6.54%; 1/26/2001 3,000,000 2,953,130
Bemis Co., Inc.;
6.48%; 11/8/2000 2,000,000 1,997,480
Merrill Lynch & Co., Inc.;
6.48%; 12/15/2000 2,500,000 2,480,200
6.55%; 1/12/2001 2,500,000 2,467,250
Salomon Smith Barney Holdings, Inc.;
6.49%; 11/14/2000 2,500,000 2,494,141
6.48%; 11/16/2000 1,400,000 1,396,220
6.48%; 11/20/2000 1,790,000 1,783,878
6.50%; 11/20/2000 2,000,000 1,993,139
6.50%; 11/22/2000 1,000,000 996,208
6.48%; 12/11/2000 $2,500,000 $ 2,482,000
6.47%; 12/14/2000 2,000,000 1,984,544
6.48%; 12/1/2000 2,500,000 2,486,500
6.47%; 12/8/2000 2,115,000 2,100,936
33,055,781
Telephone Communication (10.36%)
AT&T Corp.;
6.49%; 11/29/2000 1,920,000 1,910,308
6.52%; 1/9/2001 1,545,000 1,525,693
Notes;
7.27%; 6/14/2001 1,500,000 1,500,000
7.09%; 7/13/2001 1,000,000 1,000,000
British Telecommunications PLC;
6.53%; 11/6/2000 1,225,000 1,223,889
6.52%; 11/7/2000 1,200,000 1,198,696
6.55%; 11/8/2000 560,000 559,287
6.53%; 11/9/2000 1,510,000 1,507,809
6.55%; 11/13/2000 3,000,000 2,993,450
6.52%; 11/16/2000 2,915,000 2,907,081
6.54%; 11/17/2000 3,675,000 3,664,318
6.50%; 11/20/2000 1,560,000 1,554,648
6.52%; 11/21/2000 3,000,000 2,989,133
Verizon Global Funding;
6.51%; 11/1/2000 1,400,000 1,400,000
6.47%; 12/11/2000 1,875,000 1,861,521
6.50%; 12/11/2000 975,000 967,959
6.47%; 12/13/2000 3,000,000 2,977,355
6.49%; 11/14/2000 2,000,000 1,995,313
6.50%; 11/20/2000 1,835,000 1,828,705
6.47%; 12/18/2000 930,000 922,144
6.46%; 12/20/2000 2,500,000 2,478,018
Verizon Network Funding;
6.51%; 11/28/2000 1,810,000 1,801,163
6.50%; 11/1/2000 2,000,000 2,000,000
42,766,490
Variety Stores (2.28%)
Target Corp.;
6.48%; 12/15/2000 1,760,000 1,746,061
6.47%; 12/21/2000 2,000,000 1,982,028
6.47%; 12/21/2000 1,735,000 1,719,409
6.48%; 12/21/2000 2,015,000 1,996,865
6.47%; 12/29/2000 2,000,000 1,979,152
9,423,515
Total Commercial Paper 382,452,978
Bonds (6.69%)
Business Credit Institutions (1.62%)
CIT Group Holdings, Inc. Notes;
5.63%; 2/2/2001 350,000 348,988
5.80%; 2/26/2001 1,100,000 1,096,647
6.00%; 5/8/2001 1,000,000 993,795
Deere (John) Capital Corp. Notes;
7.14%; 6/20/2001 1,200,000 1,199,711
General Electric Capital Corp. Notes;
8.38%; 3/1/2001 505,000 507,389
5.92%; 4/3/2001 450,000 448,280
International Lease Finance Corp.
Notes;
5.88%; 1/15/2001 $ 500,000 $ 498,784
8.88%; 4/15/2001 1,600,000 1,612,231
6,705,825
Commercial Banks (0.27%)
Bank of America Corp.
Notes; 5.75%; 3/15/2001 1,125,000 1,119,853
Construction & Related
Machinery (0.30%)
Caterpillar Financial Services Corp.
Notes; 5.47%; 9/12/2001 1,250,000 1,237,579
Department Stores (0.54%)
Wal Mart Stores, Inc. Notes;
5.96%; 6/1/2001 2,250,000 2,232,436
Personal Credit Institutions (3.11%)
Associates Corp. of North America
Notes;
5.85%; 1/15/2001 200,000 199,656
6.75%; 7/15/2001 2,000,000 1,996,540
Ford Motor Credit Co. Notes;
6.25%; 11/8/2000 1,550,000 1,549,937
5.75%; 1/25/2001 750,000 748,004
7.00%; 9/25/2001 2,700,000 2,706,348
5.13%; 10/15/2001 700,000 689,998
General Motors Acceptance Corp.
Notes;
5.80%; 2/23/2001 820,000 817,655
5.95%; 4/20/2001 1,600,000 1,594,066
5.63%; 2/15/2001 1,000,000 996,850
7.13%; 5/1/2001 1,205,000 1,206,549
Household Finance Corp. Notes;
6.45%; 3/15/2001 319,000 318,326
12,823,929
Security Brokers & Dealers (0.85%)
Merrill Lynch & Co.
Notes; 6.00%; 1/15/2001 1,700,000 1,696,658
Morgan Stanley Dean Witter & Co.
Medium-Term Notes; 5.25%; 2/8/2001 445,000 443,194
Notes;
5.75%; 5/8/2000 835,000 831,797
9.38%; 6/15/2001 535,000 540,860
3,512,509
Total Bonds 27,632,131
Total Portfolio Investments (99.34%) 410,085,109
Cash, receivables and other assets,
net of liabilities (0.66%) 2,726,620
Total Net Assets (100.00%) $412,811,729
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class A shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b) ............................ .056 .045 .051 .050 .049
Total from Investment Operations .056 .045 .051 .050 .049
Less Dividends From Net Investment Income.............. (.056) (.045) (.051) (.050) (.049)
Total Dividends (.056) (.045) (.051) (.050) (.049)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000
Total Return(c) ........................................ 5.71% 4.56% 5.10% 4.96% 5.00%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $390,154 $352,675 $294,918 $836,072 $694,962
Ratio of Expenses to Average Net Assets(b) .......... .70% .69% .56%(f) .63% .66%
Ratio of Net Investment Income to
Average Net Assets................................. 5.54% 4.45% 5.12% 4.98% 4.88%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class B shares 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------- ------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b) ............................ .049 .039 .042 .041 .041
Total from Investment Operations .049 .039 .042 .041 .041
Less Dividends from Net Investment Income.............. (.049) (.039) (.042) (.041) (.041)
Total Dividends (.049) (.039) (.042) (.041) (.041)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000
Total Return(c) ........................................ 5.01% 4.00% 4.25% 4.05% 4.13%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $5,318 $6,330 $3,602 $992 $520
Ratio of Expenses to Average Net Assets(b) .......... 1.33% 1.19% 1.41%(f) 1.47% 1.50%
Ratio of Net Investment Income to
Average Net Assets................................. 4.87% 4.00% 4.23% 4.08% 4.08%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class C shares 2000 1999(g)
--------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000
Income from Investment Operations:
Net Investment Income .............................. .032 .010
Total from Investment Operations .032 .010
Less Dividends from Net Investment Income.............. (.032) (.010)
Total Dividends (.032) (.010)
Net Asset Value, End of Period.......................... $1.000 $1.000
Total Return(c) ........................................ 3.12% 1.01%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $558 $132
Ratio of Expenses to Average Net Assets ........ 3.18% 2.26%(e)
Ratio of Net Investment Income to
Average Net Assets................................. 3.21% 3.01%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class R shares 2000 1999 1998 1997 1996(h)
---------------------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b) ............................ .051 .040 .046 .044 .030
Total from Investment Operations .051 .040 .046 .044 .030
Less Dividends from Net Investment Income.............. (.051) (.040) (.046) (.044) (.030)
Total Dividends (.051) (.040) (.046) (.044) (.030)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000
Total Return............................................ 5.23% 4.04% 4.56% 4.16% 2.97%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $16,781 $15,571 $10,414 $4,296 $1,639
Ratio of Expenses to Average Net Assets(b) .......... 1.15% 1.15% 1.05%(f) 1.26% .99%(e)
Ratio of Net Investment Income to
Average Net Assets................................. 5.09% 3.99% 4.62% 4.40% 4.41%(e)
</TABLE>
Notes to Financial Highlights
(a) Effective January 1, 1998, the following change was made to the name of the
Money Market Fund:
Former Fund Name New Fund Name
Princor Cash Management Fund, Inc. Principal Cash Management Fund, Inc.
(b) Without the Manager's voluntary waiver of a portion of certain of its
expenses (see Note 3 to the financial statements) for the periods
indicated, the Fund would have had per share net investment income and the
ratios of expenses to average net assets as shown:
Year Ended Ratio of
October 31, Per Share Expenses
Except Net Investment to Average Amount
as Noted Income Net Assets Waived
Class A 1998 $.051 .56% $ --
1997 .050 .63 --
1996 .049 .67 7,102
Class B 1998 .041 1.49 1,343
1997 .036 2.14 5,492
1996 .029 3.94 6,140
Class R 1998 .046 1.05 --
1997 .043 1.34 2,441
1996(h) .030 .99(e) --
The Manager ceased its waiver of expenses for Principal Cash
Management Fund, Inc. on March 1, 1998.
(c) Total return is calculated without the front-end sales charge or contingent
deferred sales charge.
(d) Total return amounts have not been annualized.
(e) Computed on an annualized basis.
(f) Management fee waivers apply to November 1, 1997 through February 28, 1998.
(g) Period from June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(h) Period from February 29, 1996, date Class R shares first offered to eligible
purchasers, through October 31, 1996.
The Boards of Directors and Shareholders
Principal Balanced Fund, Inc.
Principal Blue Chip Fund, Inc.
Principal Capital Value Fund, Inc.
Principal Growth Fund, Inc.
Principal LargeCap Stock Index Fund, Inc.
Principal MidCap Fund, Inc.
Principal Partners Aggressive Growth Fund, Inc.
Principal Partners LargeCap Growth Fund, Inc.
Principal Partners MidCap Growth Fund, Inc.
Principal Real Estate Fund, Inc.
Principal SmallCap Fund, Inc.
Principal Utilities Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Principal Domestic Growth Funds
(comprising, respectively, Principal Balanced Fund, Inc., Principal Blue Chip
Fund, Inc., Principal Capital Value Fund, Inc., Principal Growth Fund, Inc.,
Principal LargeCap Stock Index Fund, Inc., Principal MidCap Fund, Inc.,
Principal Partners Aggressive Growth Fund, Inc., Principal Partners LargeCap
Growth Fund, Inc., Principal Partners MidCap Growth Fund, Inc., Principal Real
Estate Fund, Inc., Principal SmallCap Fund, Inc. and Principal Utilities Fund,
Inc.), The Principal International Growth Funds (comprising, respectively,
Principal European Equity Fund, Inc., Principal International Emerging Markets
Fund, Inc., Principal International Fund, Inc., Principal International SmallCap
Fund, Inc. and Principal Pacific Basin Fund, Inc.), The Principal Income Funds
(comprising, respectively, Principal Bond Fund, Inc., Principal Government
Securities Income Fund, Inc., Principal High Yield Fund, Inc., Principal Limited
Term Bond Fund, Inc. and Principal Tax-Exempt Bond Fund, Inc.) and The Principal
Money Market Fund (Principal Cash Management Fund, Inc.) as of October 31, 2000,
and the related statements of operations, statements of changes in net assets
and 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.
Principal European Equity Fund, Inc.
Principal International Emerging Markets Fund, Inc.
Principal International Fund, Inc.
Principal International SmallCap Fund, Inc.
Principal Pacific Basin Fund, Inc.
Principal Bond Fund, Inc.
Principal Government Securities Income Fund, Inc.
Principal High Yield Fund, Inc.
Principal Limited Term Bond Fund, Inc.
Principal Tax-Exempt Bond Fund, Inc.
Principal Cash Management Fund, Inc.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2000, by correspondence with
the custodians and brokers. As to securities relating to uncompleted
transactions, we performed other audit procedures. 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 each
of the respective funds constituting The Principal Domestic Growth Funds, The
Principal International Growth Funds, The Principal Income Funds and The
Principal Money Market Fund at October 31, 2000, and the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Des Moines, Iowa
November 22, 2000
FEDERAL INCOME TAX INFORMATION
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions shown below. Shareholders
should consult a tax advisor on how to report these distributions for state and
local purposes.
For corporate shareholders, the percentage of investment income (dividend income
and short-term gains, if any) deduction for the year ended October 31, 2000 that
qualifies for the dividends received is as follows:
Deductible
Percentage
Principal Balanced Fund, Inc. 41%
Principal Capital Value Fund, Inc. 100%
Principal LargeCap Stock Index Fund, Inc. 100%
Principal MidCap Fund, Inc. 5%
Principal SmallCap Fund, Inc. 7%
Principal Utilities Fund, Inc. 100%
For federal income tax purposes, the Funds designate long term capital gain
dividends for all share classes for the year ended October 31, 2000 as follows:
Per Share
Long Term
Capital Gain
Distributions
Principal Balanced Fund, Inc. $0.5007
Principal Blue Chip Fund, Inc. 0.2859
Principal Capital Value Fund, Inc. 2.5293
Principal Growth Fund, Inc. 2.4130
Principal International Fund, Inc. 1.1444
Principal International SmallCap Fund, Inc. 0.4504
Principal MidCap Fund, Inc. 2.0252
Principal Tax-Exempt Bond Fund, Inc. 0.1050
Principal Utilities Fund, Inc. 1.1167
Tax-Exempt Dividends
Dividends from the Principal Tax-Exempt Bond Fund, Inc. were exempt from federal
income taxation for non-corporate shareholders. Foreign Taxes Paid Principal
International Fund makes an election under the Internal Revenue Code Section 853
to pass through foreign taxes paid by the fund to its shareholders. The total
amount of foreign taxes passed through to shareholders for the year ended
October 31, 2000 totals $0.0157 per share for Principal International Fund, Inc.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the information
supplied with the 1099 form you receive from the fund's transfer agent.
PRINCIPAL MUTUAL FUNDS
The Principal Mutual Funds provide a choice of investment objectives through
Domestic Growth Funds, International Growth Funds, Income Funds and a Money
Market Fund. More complete information about any of the Funds, including charges
and expenses, is provided in the Funds' prospectus. A free copy is available
from Princor Financial Services Corporation, The Principal Financial Group, Des
Moines, Iowa 50392-0200 (telephone 1-800-247-4123). Please read it carefully
before you invest or send money.
Investment Objective
DOMESTIC GROWTH FUNDS
Principal Balanced Fund To seek the generation of a
total return consisting of current income
and capital appreciation while assuming
reasonable risks in furtherance of this
objective.
Principal Blue Chip Fund To seek growth of capital and
growth of income by investing primarily in
common stocks of well capitalized,
established companies.
Principal Capital Value Fund To seek long-term capital appreciation and a
secondary objective of growth of investment
income.
Principal Growth Fund To seek growth of capital with realization
of current income incidental to the
objective of growth of capital.
Principal LargeCap Stock To seek long-term growth of
Index Fund capital by investing in widely held common
stocks representing industrial, financial,
utilities and transportation companies.
Principal MidCap Fund To seek capital appreciation by investing
primarily in securities of emerging and
other growth-oriented companies.
Principal Partners Aggressive To seek long-term capital appreciation
Growth Fund from a portfolio of primarily equity
securities.
Principal Partners LargeCap To seek long-term growth of capital by
Growth Fund investing primarily in common stocks of
larger capitalization domestic companies.
Principal Partners MidCap To seek long-term growth of capital by
Growth Fund investing primarily in medium capitalization
U.S. companies with strong earnings growth
potential.
Principal Real Estate Fund To seek the generation of
total return by investing primarily in
equity securities of companies principally
engaged in the real estate industry.
Principal SmallCap Fund To seek long-term growth of
capital by investing primarily in equity
securities of companies with comparatively
smaller market capitalizations.
Principal Utilities Fund To seek current income and
long-term growth of income and capital by
investing primarily in equity and fixed
income securities of companies in the public
utilities industry.
PRINCIPAL MUTUAL FUNDS (Continued)
INTERNATIONAL GROWTH FUNDS
Principal European To seek growth of capital by investing
Equity Fund primarily in equity securities of companies
domiciled or having their core business
in Europe.
Principal International To seek long-term growth of capital by
Emerging Markets Fund investing primarily in equity securities
of issuers in emerging market countries.
Principal International Fund To seek long-term growth
of capital by investing in a portfolio of
equity securities of companies domiciled in
any of the nations of the world.
Principal International To seek long-term growth of capital by
SmallCap Fund investing primarily in equity securities of
non-United States companies with
comparatively smaller market
capitalizations.
Principal Pacific Basin Fund To seek growth of capital by investing
primarily in equity securities of issuers
located in the Pacific Basin region,
including Japan.
INCOME FUNDS
Principal Bond Fund To seek as high a level of income as is
consistent with preservation of capital
and prudent investment risk.
Principal Government To seek a high level of current income,
Securities Income Fund liquidity and safety of principal.
Principal High Yield Fund To seek high current income.
Capital growth is a secondary objective when
consistent with seeking high current income.
Principal Limited Term To seek a high level of current income
Bond Fund consistent with a relatively high level of
principal stability by investing in a
portfolio of securities with a dollar
weighted average maturity of five
years or less.
Principal Tax-Exempt To seek as high a level of current income
Bond Fund exempt from federal taxation as is
consistent with preservation of capital.
MONEY MARKET FUND
Principal Cash To seek as high a level of current income
Management Fund available from short-term securities as is
considered consistent with preservation of
principal and maintenance of liquidity by
investing in a portfolio of money market
instruments.
