PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
ANNUAL REPORT
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Permanent Portfolio Family of Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Permanent Portfolio Family of Funds, Inc.
(comprising, respectively, the Permanent Portfolio, the Treasury Bill Portfolio,
the Versatile Bond Portfolio and the Aggressive Growth Portfolio), as of January
31, 1998, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the four-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. All periods indicated in the accompanying financial highlights ending
prior to February 1, 1994, were audited by other auditors whose report dated
March 18, 1994, expressed an unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
January 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Permanent Portfolio Family of Funds,
Inc. as of January 31, 1998, the results of their operations, the changes in
their net assets and their financial highlights for the periods indicated
herein, except as noted above, in conformity with generally accepted accounting
principles.
As discussed in Note 8 to the financial statements, the Securities and Exchange
Commission is involved in public administrative and cease-and-desist proceedings
against the Fund's investment adviser and two of the Fund's directors and
officers, for which no decision has been rendered.
KPMG PEAT MARWICK LLP
San Francisco, California
March 6, 1998, except as to Note 9, which is as of
March 10, 1998
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
January 31, 1998
ASSETS AND LIABILITIES
ASSETS
Investments at market value (Notes 1, 2, 4 & 5):
Investments other than securities:
Gold assets ..............................................................
Silver assets ............................................................
Swiss franc deposits .....................................................
Swiss franc bonds ...........................................................
Stocks of United States and foreign real estate and natural resource companies
Aggressive growth stock investments .........................................
Corporate bonds .............................................................
United States Treasury securities ...........................................
Total investments (identified cost $64,013,093; $92,985,819; $22,816,884
and $11,554,935, respectively)
Cash ..........................................................................
Accounts receivable for shares of the portfolio sold ..........................
Accrued interest, dividends and foreign taxes receivable ......................
Total assets
LIABILITIES
Bank overdraft ................................................................
Accounts payable for shares of the portfolio redeemed .........................
Accrued investment advisory fee ...............................................
Accrued directors' and officers' fees and expenses ............................
Accrued excise tax ............................................................
Total liabilities
Net assets applicable to outstanding shares
NET ASSETS
Capital stock - par value $.001 per share:
Authorized - 100,000,000; 100,000,000; 10,000,000 and 25,000,000 shares,
respectively
Outstanding - 3,725,465; 1,394,397; 398,686 and 354,839 shares,
respectively ..............................................................
Paid-in capital ...............................................................
Undistributed net investment income (loss) (Note 1) ...........................
Accumulated net realized gain (loss) on investments ...........................
Net unrealized appreciation of investments .....................................
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies ....................................................................
Net assets applicable to outstanding shares
Net asset value per share
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Permanent Portfolio Treasury Bill Portfolio Versatile Bond Portfolio Aggressive Growth Portfolio
------------------- ----------------------- ------------------------ ---------------------------
<S> <C> <C> <C> <C>
$ 14,089,384 $ - $ - $ -
3,707,561 - - -
944,541 - - -
------------ ------------ ------------- ------------
18,741,486 - - -
5,924,376 - - -
10,656,456 - - -
11,608,580 - - 19,980,711
403,422 - 22,914,727 -
23,020,216 92,997,650 - -
------------ ------------ ------------- ------------
70,354,536 92,997,650 22,914,727 19,980,711
122,527 - 64,006 -
157,650 108,668 6,647 5,895
648,578 1,387,367 417,182 4,089
------------ ------------ ------------- ------------
71,283,291 94,493,685 23,402,562 19,990,695
- 86,504 - 8,977
2,307 28,146 4,218 6,339
66,917 50,255 15,099 18,785
5,215 7,531 1,526 1,101
110,291 121,407 26,801 -
------------ ------------ ------------- ------------
184,730 293,843 47,644 35,202
------------ ------------ ------------- ------------
$ 71,098,561 $ 94,199,842 $ 23,354,918 $ 19,955,493
============ ============ ============= ============
$ 3,725 $ 1,394 $ 399 $ 355
55,745,373 93,826,392 21,674,835 11,694,159
------------ ------------ ------------- ------------
55,749,098 93,827,786 21,675,234 11,694,514
6,831,523 520,264 1,725,080 (70,175)
2,212,888 (160,039) (143,239) (94,622)
6,341,443 11,831 97,843 8,425,776
(36,391) - - -
------------ ------------ ------------- ------------
$ 71,098,561 $ 94,199,842 $ 23,354,918 $ 19,955,493
============ ============ ============= ============
$19.08 $67.56 $58.58 $56.24
====== ====== ====== ======
</TABLE>
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
STATEMENTS OF OPERATIONS
Year ended January 31, 1998
Investment income:
Interest ....................................................................
Dividends ...................................................................
Expenses (Notes 3, 6 & 8):
Investment advisory fee .....................................................
Directors' fees and expenses ................................................
Officers' salary expense ....................................................
Excise tax ..................................................................
Regulatory expense ..........................................................
Commitment fee ..............................................................
Total expenses
Less waiver of investment advisory fee ......................................
Net expenses
Net investment income (loss) before foreign income taxes deducted at source
Less foreign income taxes deducted at source, net of refundable taxes .........
Net investment income (loss)
Realized and unrealized gain on investments and foreign currency
(Notes 1, 2, 4 & 5):
Net realized gain (loss) on:
Investments in unaffiliated issuers .........................................
Investments other than securities ............................................
Change in unrealized appreciation (depreciation) of:
Investments .................................................................
Translation of assets and liabilities in foreign currencies .................
Net realized and unrealized gain on investments
and foreign currency
Net increase in net assets resulting
from operations
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Permanent Portfolio Treasury Bill Portfolio Versatile Bond Portfolio Aggressive Growth Portfolio
------------------- ---------------------- ------------------------ ---------------------------
<S> <C> <C> <C> <C>
$ 2,251,424 $ 5,150,212 $ 1,358,348 $ 17,287
516,418 - - 136,751
------------ ------------ ------------- ------------
2,767,842 5,150,212 1,358,348 154,038
800,234 1,116,994 256,817 202,493
49,719 68,462 14,785 13,268
61,485 88,804 17,999 12,980
110,291 121,407 26,801 -
325,585 293,026 - 32,558
2,500 - - -
------------ ------------ ------------- ------------
1,349,814 1,688,693 316,402 261,299
- 494,877 85,809 -
------------ ------------ ------------- ------------
1,349,814 1,193,816 230,593 261,299
------------ ------------ ------------- ------------
1,418,028 3,956,396 1,127,755 (107,261)
15,036 - - -
------------ ------------ ------------- ------------
1,402,992 3,956,396 1,127,755 (107,261)
------------ ------------ ------------- ------------
3,126,145 (7,073) (16,422) (92,993)
(902,108) - - -
------------ ------------ ------------- ------------
2,224,037 (7,073) (16,422) (92,993)
1,508,317 8,758 72,273 3,976,486
11,615 - - -
------------ ------------ ------------- ------------
3,743,969 1,685 55,851 3,883,493
------------ ------------ ------------- ------------
$ 5,146,961 $ 3,958,081 $ 1,183,606 $ 3,776,232
============ ============ ============= ============
</TABLE>
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Permanent Portfolio
-----------------------------------
Year ended Year ended
January 31, 1998 January 31, 1997
---------------- ----------------
<S> <C> <C>
Operations:
Net investment income (loss) .............................................. $ 1,402,992 $ 2,083,023
Net realized gain (loss) on investments ................................... 2,224,037 1,296,441
Net realized gain on foreign currency transactions ........................ - 10,793
Change in unrealized appreciation (depreciation) of investments ........... 1,508,317 (2,950,852)
Change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies ........................... 11,615 (56,724)
------------ ------------
Net increase in net assets resulting from operations 5,146,961 382,681
Equalization on shares issued and redeemed: ................................. (497,147) (249,430)
Distributions to shareholders from:
Net investment income ..................................................... (1,233,055) (1,647,665)
Net realized gain on investments .......................................... (1,305,588) (352,938)
Capital stock transactions exclusive of amounts allocated to undistributed
net investment income (Note 7): ........................................... (4,004,133) (1,781,916)
------------ ------------
Net increase (decrease) in net assets (1,892,962) (3,649,268)
Net assets at beginning of year 72,991,523 76,640,791
------------ ------------
Net assets at end of year (including undistributed net investment income
(loss) of $6,831,523 and $7,322,418; $520,264 and $2,263,201; $1,725,080
and $1,556,933; $(70,175) and $122,708, respectively) $ 71,098,561 $ 72,991,523
============ ============
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Treasury Bill Portfolio Versatile Bond Portfolio Aggressive Growth Portfolio
- ------------------------------------ ----------------------------------- --------------------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
January 31, 1998 January 31, 1997 January 31, 1998 January 31, 1997 January 31, 1998 January 31, 1997
- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S><C> <C> <C> <C> <C> <C>
$ 3,956,396 $ 4,677,086 $ 1,127,755 $ 1,024,523 $ (107,261) $ 77,145
(7,073) (2,228) (16,422) 9,404 (92,993) 992,038
- - - - - -
8,758 (55,884) 72,273 (148,138) 3,976,486 1,106,794
- - - - - -
------------ ------------- ------------ ------------ ------------ ------------
3,958,081 4,618,974 1,183,606 885,789 3,776,232 2,175,977
(853,426) (1,052,143) 86,852 16,284 4,600 34,901
(3,465,235) (4,430,015) (588,840) (699,991) (65,240) (86,850)
- - - - (992,338) (17,370)
(10,781,113) (8,462,596) 1,328,359 1,005,692 1,814,900 2,244,098
------------ ------------- ------------ ------------ ------------ ------------
(11,141,693) (9,325,780) 2,009,977 1,207,774 4,538,154 4,350,756
105,341,535 114,667,315 21,344,941 20,137,167 15,417,339 11,066,583
------------ ------------- ------------ ------------ ------------ ------------
$ 94,199,842 $ 105,341,535 $ 23,354,918 $ 21,344,941 $ 19,955,493 $ 15,417,339
============ ============= ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE PERMANENT PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Quantity Market Value
- ----------------- ------------
<C> <S> <C>
GOLD ASSETS - 19.82% of Total Net Assets
11,997 Troy Oz. Gold bullion (a) ......................................................... $ 3,633,974
33,383 Coins One-ounce gold coins (a) .................................................. 10,403,812
4,297 Units United States Gold Trust (a)(b) ........................................... 51,598
------------
Total Gold Assets (Cost $17,869,069) $ 14,089,384
------------
SILVER ASSETS - 5.21% of Total Net Assets
351,133 Troy Oz. Silver bullion (a) ........................................................ $ 2,150,691
379 Bags Silver coins (a) .......................................................... 1,556,870
------------
Total Silver Assets (Cost $3,126,799) $ 3,707,561
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount SWISS FRANC ASSETS - 9.66% of Total Net Assets
- ----------------
<C> <S> <C>
CHF 1,399,244 Swiss francs in interest-bearing bank accounts ............................ $ 944,541
------------
CHF 3,700,000 5.250% Swiss Confederation bonds, 02-11-98 ................................ 2,499,136
CHF 4,000,000 4.000% Swiss Confederation bonds, 03-10-99 ................................ 2,778,993
CHF 820,000 7.000% Swiss Confederation bonds, 07-09-01 ................................ 646,247
------------
Total Swiss Confederation bonds 5,924,376
------------
Total Swiss Franc Assets (Cost $7,182,260) $ 6,868,917
------------
</TABLE>
<TABLE>
<CAPTION>
Number STOCKS OF UNITED STATES AND FOREIGN REAL ESTATE AND NATURAL
Of Shares RESOURCE COMPANIES - 14.99% of Total Net Assets
---------
<C> <S> <C>
NATURAL RESOURCES - 4.66% of Total Net Assets
14,300 Broken Hill Proprietary, Ltd. (c) ......................................... $ 279,744
12,000 Burlington Resources, Inc. ................................................ 513,000
17,200 Cyprus Amax Minerals Company ............................................. 270,900
26,600 Forest Oil Corporation (a) ................................................ 375,725
15,200 Inco, Ltd. ................................................................ 269,800
20,000 Pogo Producing Company .................................................... 567,500
29,000 Santa Fe Energy Resources, Inc. (a) ...................................... 304,500
4,439 Texaco, Inc. .............................................................. 231,105
10,000 Weyerhaeuser Company ..................................................... 498,125
------------
$ 3,310,399
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE PERMANENT PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Number
Of Shares Market Value
--------- ------------
<C> <S> <C>
REAL ESTATE - 10.33% of Total Net Assets
22,000 BRE Properties, Inc. Class A .............................................. $ 606,375
31,000 Burnham Pacific Properties, Inc. .......................................... 463,063
23,500 Federal Realty Investment Trust ........................................... 581,625
29,000 HRE Properties ............................................................ 547,375
47,000 IRT Property Company ...................................................... 552,250
25,000 MGI Properties ............................................................ 625,000
21,000 New Plan Realty Trust ..................................................... 530,250
20,100 Pennsylvania Real Estate Investment Trust ................................. 492,450
27,500 Security Capital Pacific Trust ............................................ 647,969
15,000 Texas Pacific Land Trust .................................................. 697,500
40,000 United Dominion Realty Trust, Inc. ........................................ 555,000
31,900 Washington Real Estate Investment Trust ................................... 534,325
37,300 Western Investment Real Estate Trust ...................................... 512,875
-----------
$ 7,346,057
-----------
Total Stocks of United States and Foreign Real Estate and Natural
Resource Companies (Cost $6,664,419) $10,656,456
-----------
AGGRESSIVE GROWTH STOCK INVESTMENTS - 16.33% of Total Net Assets
CHEMICALS - .45% of Total Net Assets
4,000 Air Products & Chemicals, Inc. ........................................... $ 320,250
-----------
$ 320,250
COMPUTER SOFTWARE - 1.55% of Total Net Assets
7,000 Autodesk, Inc. ............................................................ $ 270,375
1 Symantec Corporation warrant (a)(d) ....................................... 832,432
-----------
$ 1,102,807
CONSTRUCTION - .13% of Total Net Assets
2,500 Fluor Corporation ........................................................ $ 94,219
-----------
$ 94,219
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE PERMANENT PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Number
Of Shares Market Value
--------- ------------
<C> <S> <C>
DATA PROCESS1NG - .55% of Total Net Assets
5,000 Hewlett-Packard Company ................................................... $ 300,000
4,000 Seagate Technology, Inc. (a) .............................................. 92,750
----------
$ 392,750
ELECTRICAL AND ELECTRONICS - 1.19% of Total Net Assets
12,000 DSC Communications Corporation (a) ....................................... $ 240,000
4,000 Intel Corporation ........................................................ 324,000
10,000 National Semiconductor Corporation (a) .................................... 281,250
----------
$ 845,250
ENTERTAINMENT AND LEISURE - 1.75% of Total Net Assets
2,500 The Walt Disney Company .................................................. $ 266,406
3,000 Harcourt General, Inc. ................................................... 159,938
16,000 Harrah's Entertainment, Inc. (a) ......................................... 352,000
4,625 Promus Hotel Corporation (a) .............................................. 208,992
4,200 Tribune Company .......................................................... 255,150
----------
$1,242,486
FINANCIAL SERVICES - 3.29% of Total Net Assets
3,000 Bank of New York, Inc. warrants (a) ....................................... $ 477,000
7,193 Bank of Petaluma (a) ...................................................... 243,663
7,000 Bear Stearns Companies, Inc. ............................................. 292,688
6,600 Morgan Stanley, Dean Witter, Discover & Company .......................... 385,275
13,500 The Charles Schwab Corporation ........................................... 492,750
8,000 State Street Corporation ................................................. 448,000
----------
$2,339,376
MANUFACTURING - 3.21% of Total Net Assets
23,000 Collins Industries, Inc. warrants (a) .................................... $ 719
6,000 Harley-Davidson, Inc. ..................................................... 150,750
3,000 Harnischfeger Industries, Inc. ............................................ 105,000
7,000 Illinois Tool Works, Inc. ................................................ 389,813
9,000 Mattel, Inc. ............................................................. 364,500
2,000 NACCO Industries, Inc. Class A ........................................... 200,875
8,000 NACCO Industries, Inc. Class B ........................................... 803,500
6,000 Parker-Hannifin Corporation .............................................. 262,125
----------
$2,277,282
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE PERMANENT PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Number
Of Shares Market Value
--------- ------------
<C> <S> <C>
OIL AND OILFIELD SERVICES - .85% of Total Net Assets
20,000 Parker Drilling Company (a) ............................................... $ 232,500
48,200 Wainoco Oil Corporation (a) ............................................... 373,550
-----------
$ 606,050
PHARMACEUTICALS - .91% of Total Net Assets
5,000 Abbott Laboratories ....................................................... $ 354,063
2,400 Biogen, Inc. (a) .......................................................... 98,700
7,000 Genzyme Corporation (General Division) (a) ................................ 186,813
1,245 Genzyme Corporation Tissue Repair (a) ..................................... 8,871
-----------
$ 648,447
RETAIL - .73% of Total Net Assets
12,000 Costco Companies, Inc. (a) ................................................ $ 520,500
-----------
$ 520,500
TRANSPORTATION - .97% of Total Net Assets
8,000 ASA Holdings, Inc. ........................................................ $ 276,000
13,800 Kansas City Southern Industries, Inc. ..................................... 413,138
-----------
$ 689,138
MISCELLANEOUS - .75% of Total Net Assets
3,600 Lockheed Martin Corporation ............................................... $ 374,625
2,800 Temple-Inland, Inc. ....................................................... 155,400
-----------
$ 530,025
-----------
Total Aggressive Growth Stock Investments (Cost $3,519,025) $11,608,580
-----------
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE PERMANENT PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Principal Amount Market Value
---------------- ------------
<C> <S> <C>
DOLLAR ASSETS - 32.94% of Total Net Assets
CORPORATE BONDS - .56% of Total Net Assets
$ 100,000 8.750% Dillard Department Stores, Inc., 06-15-98 .......................... $ 101,153
100,000 8.300% Hertz Corporation, 02-02-98 ........................................ 100,070
100,000 9.000% Philip Morris Companies, Inc., 05-15-98 ............................ 100,992
100,000 9.375% Virginia Electric & Power Company, 06-01-98 ........................ 101,207
------------
$ 403,422
UNITED STATES TREASURY SECURITIES - 32.38% of Total Net Assets
41,000,000 United States Treasury bond strips (Principal only) 5.990%, 05-15-18(e) ... $ 12,377,900
800,000 United States Treasury bonds 6.250%, 08-15-23 ............................ 838,616
2,000,000 United States Treasury notes 5.875%, 01-31-99 ............................ 2,012,020
3,000,000 United States Treasury notes 7.750%, 01-31-00 ............................ 3,135,510
1,500,000 United States Treasury notes 5.625%, 01-31-01 ............................ 1,496,025
625,000 United States Treasury bills 4.380%, 02-05-98 (e) ........................ 624,625
2,600,000 United States Treasury bills 5.370%, 07-23-98 (e)(g) ...................... 2,535,520
------------
$ 23,020,216
------------
Total Dollar Assets (Cost $25,651,521) $ 23,423,638
------------
Total Portfolio - 98.95% of total net assets (identified cost $64,013,093)(f) $ 70,354,536
Other assets, less liabilities (1.05% of total net assets) 744,025
------------
Net assets applicable to outstanding shares $ 71,098,561
============
<FN>
Note:(a) Non-income producing.
(b) Affiliated investment trust.
(c) Sponsored ADR.
(d) Market value determined by the Board of Directors.
(e) Interest rate represents yield to maturity.
(f) Aggregate cost for Federal income tax purposes was $56,604,551.
(g) Collateral supporting line of credit(see Note 6).
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE TREASURY BILL PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Principal Amount Market Value
---------------- ------------
<C> <S> <C>
UNITED STATES TREASURY SECURITIES - 98.72% of Total Net Assets
$ 21,000,000 United States Treasury notes 5.125%, 02-28-98 ............................. $ 20,997,060
20,000,000 United States Treasury notes 5.125%, 03-31-98 ............................. 19,999,000
25,000,000 United States Treasury notes 5.125%, 04-30-98 ............................. 24,997,000
27,000,000 United States Treasury notes 5.375%, 05-31-98 ............................. 27,004,590
-------------
Total Portfolio - 98.72% of total net assets (identified cost $92,985,819)(a) $ 92,997,650
Other assets, less liabilities (1.28% of total net assets) 1,202,192
-------------
Net assets applicable to outstanding shares $ 94,199,842
=============
<FN>
Note:(a) Aggregate cost for Federal income tax purposes.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE VERSATILE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Principal Amount Market Value
---------------- ------------
<C> <S> <C>
CORPORATE BONDS - 98.12% of Total Net Assets
BEVERAGES - 13.20% of Total Net Assets
$ 1,000,000 8.750% Anheuser-Busch Companies, Inc., 12-01-99 .......................... $ 1,052,100
1,000,000 7.875% Coca Cola Company, 09-15-98 ....................................... 1,015,350
1,000,000 7.625% PepsiCo, Inc., 11-01-98 ............................................ 1,015,520
------------
$ 3,082,970
ELECTRIC UTILITIES - 12.13% of Total Net Assets
900,000 5.000% Gulf Power Company, 07-01-98 ...................................... $ 898,659
1,000,000 7.500% Southern California Edison Company, 04-15-99 ....................... 1,022,020
900,000 9.375% Virginia Electric & Power Company, 06-01-98 ........................ 910,863
------------
$ 2,831,542
ELECTRICAL AND ELECTRONICS - 8.69% of Total Net Assets
1,000,000 7.875% General Electric Company, 09-15-98 ................................. $ 1,014,670
1,000,000 6.750% Texas Instruments, Inc., 07-15-99 .................................. 1,015,000
------------
$ 2,029,670
FINANCIAL SERVICES - 13.00% of Total Net Assets
1,000,000 8.500% American General Finance Corporation, 06-15-99 ..................... $ 1,035,290
1,000,000 5.250% Associates Corporation of North America, 09-01-98 ................. 998,630
1,000,000 5.750% International Lease Finance Company, 01-15-99 ...................... 1,001,240
------------
$ 3,035,160
INSURANCE - 8.81% of Total Net Assets
1,000,000 9.000% SunAmerica, Inc., 01-15-99 ........................................ $ 1,031,250
1,000,000 7.750% Travelers Group, Inc., 06-15-99 .................................... 1,026,920
------------
$ 2,058,170
MANUFACTURING - 4.32% OF Total Net Assets
1,000,000 6.375% Eaton Corporation, 04-01-99 ........................................ $ 1,007,630
------------
$ 1,007,630
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE VERSATILE BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Principal Amount Market Value
---------------- ------------
<C> <S> <C>
NATURAL GAS UTILITIES - 4.29% of Total Net Assets
$ 1,000,000 5.875% Consolidated Natural Gas Company, 10-01-98 ........................ $ 1,002,420
------------
$ 1,002,420
OIL AND OILFIELD SERVICES - 8.71% of Total Net Assets
1,000,000 7.625% Baker Hughes, Inc., 02-15-99 ....................................... $ 1,021,490
1,000,000 6.950% Shell Oil Company, 12-15-98 ....................................... 1,012,550
------------
$ 2,034,040
PHARMACEUTICALS - 4.28% of Total Net Assets
1,000,000 8.625% McKesson Corporation, 02-01-98 ..................................... $ 1,000,470
------------
$ 1,000,470
RETAIL - 8.18% of Total Net Assets
900,000 8.750% Dillard Department Stores, Inc., 06-15-98 ......................... $ 910,377
1,000,000 5.500% Wal-Mart Stores, Inc., 03-01-98 ................................... 1,000,550
------------
$ 1,910,927
TELECOMMUNICATIONS - 8.62% of Total Net Assets
1,000,000 6.125% GTE Northwest, 02-15-99 ............................................ $ 1,004,480
1,000,000 6.150% New England Telephone & Telegraph Company, 09-01-99 ............... 1,008,320
------------
$ 2,012,800
TOBACCO - 3.89% of Total Net Assets
900,000 9.000% Philip Morris Companies, Inc., 05-15-98 ........................... $ 908,928
------------
$ 908,928
------------
Total Portfolio - 98.12% of total net assets (identified cost $22,816,884)(a) $ 22,914,727
Other assets, less liabilities (1.88% of total net assets) 440,191
------------
Net assets applicable to outstanding shares $ 23,354,918
============
<FN>
Note: (a) Aggregate cost for Federal income tax purposes.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE AGGRESSIVE GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Number
Of Shares Market Value
--------- ------------
<C> <S> <C>
AGGRESSIVE GROWTH STOCK INVESTMENTS - 100.13% of Total Net Assets
CHEMICALS - 4.01% of Total Net Assets
6,000 Air Products & Chemicals, Inc. ............................................ $ 480,375
17,800 Wellman, Inc. ............................................................. 319,288
----------
$ 799,663
COMPUTER SOFTWARE - 5.38% of Total Net Assets
14,800 Autodesk, Inc. ............................................................ $ 571,650
9,450 Computer Associates International, Inc. ................................... 502,622
----------
$1,074,272
CONSTRUCTION - 4.97% of Total Net Assets
5,900 Fluor Corporation ......................................................... $ 222,356
13,000 Johns Manville Corporation ............................................... 149,500
25,400 Ryland Group, Inc. ........................................................ 619,125
----------
$ 990,981
DATA PROCESSING - 3.81% of Total Net Assets
9,800 Hewlett-Packard Company ................................................... $ 588,000
7,400 Seagate Technology, Inc. (a) .............................................. 171,588
----------
$ 759,588
ELECTRICAL AND ELECTRONICS - 6.56% of Total Net Assets
22,200 DSC Communications Corporation (a) ........................................ $ 444,000
5,400 Intel Corporation ........................................................ 437,400
15,200 National Semiconductor Corporation (a) .................................... 427,500
----------
$1,308,900
ENTERTAINMENT AND LEISURE - 10.55% of Total Net Assets
5,300 The Walt Disney Company ................................................... $ 564,781
9,000 Harcourt General, Inc. .................................................... 479,813
3,700 Promus Hotel Corporation (a) .............................................. 167,194
9,600 Tribune Company .......................................................... 583,200
7,500 Viacom, Inc. Class A (a) .................................................. 309,375
----------
$2,104,363
FINANCIAL SERVICES - 15.56% of Total Net Assets
2,600 Bank of New York, Inc. warrants (a) ...................................... $ 413,400
16,182 Bear Stearns Companies, Inc. .............................................. 676,610
9,240 Morgan Stanley, Dean Witter, Discover & Company ........................... 539,385
22,950 The Charles Schwab Corporation ............................................ 837,675
11,400 State Street Corporation .................................................. 638,400
----------
$3,105,470
MANUFACTURING - 12.96% of Total Net Assets
8,400 Dana Corporation ......................................................... $ 421,050
10,000 Harley-Davidson, Inc. ..................................................... 251,250
9,000 Harnischfeger Industries, Inc. ............................................ 315,000
8,600 Illinois Tool Works, Inc. ................................................. 478,913
12,583 Mattel, Inc. .............................................................. 509,612
13,950 Parker-Hannifin Corporation ............................................... 609,441
----------
$2,585,266
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE AGGRESSIVE GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
January 31, 1998
<CAPTION>
Number
Of Shares Market Value
--------- ------------
<C> <S> <C>
OIL AND OILFIELD SERVICES - 6.57% of Total Net Assets
42,700 Parker Drilling Company (a) ............................................... $ 496,388
105,200 Wainoco Oil Corporation (a) ............................................... 815,300
-----------
$ 1,311,688
PHARMACEUTICALS - 7.67% of Total Net Assets
6,400 Amgen, Inc. (a) .......................................................... $ 320,000
11,000 Biogen, Inc. (a) .......................................................... 452,375
19,500 Chiron Corporation (a) .................................................... 349,781
15,000 Genzyme Corporation (General Division) (a) ................................ 400,313
1,170 Genzyme Corporation Tissue Repair (a) .................................... 8,330
-----------
$ 1,530,799
RETAIL - 5.05% of Total Net Assets
15,200 Costco Companies, Inc. (a) ................................................ $ 659,300
13,000 Toys "R" Us, Inc. (a) ..................................................... 348,563
-----------
$ 1,007,863
TRANSPORTATION - 10.13% of Total Net Assets
16,000 ASA Holdings, Inc. ........................................................ $ 552,000
25,800 Kansas City Southern Industries, Inc. ..................................... 772,388
20,100 M.S. Carriers, Inc. (a) ................................................... 444,713
37,500 Mesa Air Group, Inc. (a) ................................................. 253,125
-----------
$ 2,022,226
MISCELLANEOUS - 6.91% of Total Net Assets
13,000 Browning-Ferris Industries, Inc. .......................................... $ 449,313
5,500 Lockheed Martin Corporation .............................................. 572,344
6,450 Temple-Inland, Inc. ....................................................... 357,975
-----------
$ 1,379,632
-----------
Total Portfolio - 100.13% of total net assets (identified cost $11,554,935)(b) $19,980,711
Liabilities, less other assets (.13% of total net assets) (25,218)
-----------
Net assets applicable to outstanding shares $19,955,493
===========
<FN>
Note:(a) Non-income producing.
(b) Aggregate cost for Federal income tax purposes.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Permanent Portfolio Family of Funds, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a no-load,
open-end, series, investment management company. The Fund commenced
operations as the Permanent Portfolio, the Treasury Bill Portfolio, the
Versatile Bond Portfolio and the Aggressive Growth Portfolio on January 8,
1982, May 26, 1987, September 27, 1991 and January 2, 1990, respectively.
Investment operations in the Permanent Portfolio, the Treasury Bill
Portfolio, the Versatile Bond Portfolio and the Aggressive Growth Portfolio
commenced on December 1, 1982, September 21, 1987, November 12, 1991 and
May 16, 1990, respectively.
The following significant accounting policies are consistently followed by
the Fund in the preparation of its financial statements, and such policies
are in conformity with generally accepted accounting principles for
registered investment companies. The preparation of such financial
statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses earned and incurred,
respectively, during the reporting period. Actual results could differ from
those estimates.
Valuation of investments
Investments are valued at market. Securities for which market quotations
are readily available are valued at the latest sale price. Unlisted
securities or securities for which the most active market is
over-the-counter are valued at the mean between the closing bid and asked
prices. Swiss francs are valued at the closing spot price on the
International Monetary Market. Swiss Confederation bonds are valued at the
closing price in Zurich, Switzerland, converted into U.S. dollars at 4 p.m.
(Eastern Time). Investments in gold and silver are valued based on the
closing spot prices on the New York Commodity Exchange. Short-term
securities are valued at market daily. Investments for which there is no
active market are valued at fair value as determined by the Board of
Directors. At January 31, 1998, one such investment in the Permanent
Portfolio (1.17% of total net assets) was so valued.
Investment transactions and investment income
Investment transactions are accounted for on the date of purchase, sale or
maturity. Interest income is accrued daily and includes amortization of any
premium and discount for financial and tax reporting purposes. Dividend
income is recorded on the ex-dividend date. Realized gains and losses from
securities transactions and unrealized appreciation or depreciation of
investments are recorded on an identified cost basis for financial and tax
reporting purposes.
For the year ended January 31, 1998, investment income was earned as
follows:
<TABLE>
<CAPTION>
Permanent Treasury Bill Versatile Bond Aggressive Growth
Portfolio Portfolio Portfolio Portfolio
------------ ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Interest on:
Corporate bonds .................... $ 41,328 $ - $ 1,273,136 $ -
Swiss franc assets ................. 257,132 - - -
United States Treasury securities .. 1,939,807 5,084,800 48,375 611
Other investments .................. 13,157 65,412 36,837 16,676
Dividends ............................ 516,418 - - 136,751
------------ ------------ ------------ -----------
Total $ 2,767,842 $ 5,150,212 $ 1,358,348 $ 154,038
============ ============ ============ ===========
</TABLE>
Continued on following page.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
Translation of foreign currencies
Amounts denominated in or expected to settle in foreign currencies are
translated into U.S. dollars on the following basis: (i) market value of
investment securities and other assets and liabilities are translated at
the closing rate of exchange at January 31, 1998; and (ii) purchases and
sales of investment securities, income and expenses are translated at the
rate of exchange prevailing on the respective dates of such transactions.
The Fund separately reports the portions of the results of operations
attributable to the effect of changes in foreign exchange rates on the
value of investments. Reported net realized gains or losses on foreign
currency transactions arise from sales of foreign currencies; foreign
currency gains or losses realized between the trade and settlement dates on
securities transactions; and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's
books verses the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign currency gains or losses arise from changes in
the exchange rate applicable to cash, receivables and liabilities
denominated in foreign currencies at January 31, 1998.
Federal income taxes
Each of the Fund's Portfolios will continue to be treated as a separate
regulated investment company and each Portfolio intends to qualify under
Subchapter M of the United States Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, no provision has been made for United States
income taxes, as each Portfolio intends to declare necessary dividend
distributions from investment company taxable income and net realized
capital gains, if any, to its shareholders prior to October 15, 1998,
pursuant to the requirements of the Code.
At January 31, 1998, capital loss carryforwards available to offset future
realized gains, if any, are as follows: $151,117 in the Treasury Bill
Portfolio, of which $1,752, $98,561, $41,743, $5,429 and $3,632 expire on
January 31, 2001, January 31, 2002, January 31, 2003, January 31, 2004 and
January 31, 2005, respectively; $143,239 in the Versatile Bond Portfolio,
of which $89,841, $34,492 and $18,906 expire on January 31, 2003, January
31, 2004 and January 31, 2006, respectively; and $92,993 in the Aggressive
Growth Portfolio, all of which expires on January 31, 2006. There were no
capital loss carryforwards in the Permanent Portfolio.
Pursuant to the Code, 16.55% and 100.00% of the distributions made from
investment company taxable income in 1997 by the Permanent Portfolio and
Aggressive Growth Portfolio, respectively, qualify for the corporate
dividends received deduction.
Distributions
Distributions to shareholders from net investment income and realized gain
on investments, if any, are recorded on the ex-dividend date. The amount of
such distributions are determined in accordance with the Code which may
differ from generally accepted accounting principles. These differences
result primarily from different treatment of net investment income and
realized gains on certain investment securities held by the Fund's
Portfolios. During the year ended January 31, 1998, the Fund reclassified
from undistributed net investment income to paid-in capital, certain book
and tax basis differences relating to shareholder distributions, totaling
$174,478, $1,380,672, $457,620 and $24,982 for the Permanent Portfolio, the
Treasury Bill Portfolio, the Versatile Bond Portfolio and the Aggressive
Growth Portfolio, respectively. Additionally in the Permanent Portfolio,
$10,793 was reclassified from accumulated net realized gain on foreign
currency transactions to undistributed net investment income due to these
differences.
Continued on following page.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
Equalization
The Fund follows the accounting practice of equalization, by which a
portion of the proceeds from sales and a portion of the costs of
redemptions of shares of capital stock are allocated to undistributed net
investment income. The effect of this practice is to prevent the
calculation of net investment income per share from being affected by sales
or redemptions of shares in each Portfolio, and for periods of net
issuances of shares, allows undistributed net investment income to exceed
distributable investment company taxable income.
2. INVESTMENTS IN AFFILIATED ISSUERS
The Permanent Portfolio held 4,297 units of United States Gold Trust, an
affiliated investment trust, resulting in net unrealized depreciation of
$14,348 at January 31, 1998. The Permanent Portfolio received no income
from this investment during the year then ended.
3. INVESTMENT ADVISORY CONTRACT
In accordance with the terms of an Investment Advisory Contract (the
"Contract"), World Money Managers ("WMM"), the Fund's investment adviser,
receives a comprehensive advisory fee monthly, computed at the following
annual rate: (i) for each Portfolio, 1/4 of 1% of the first $200 million of
the Portfolio's average daily net assets; plus (ii) for the Fund as a
whole: 7/8 of 1% of the first $200 million of the Fund's average daily net
assets; 13/16 of 1% of the next $200 million of the Fund's average daily
net assets; 3/4 of 1% of the next $200 million of the Fund's average daily
net assets; and 11/16 of 1% of the Fund's average daily net assets in
excess of $600 million, such fee for the Fund as a whole to be allocated
among the Portfolios in proportion to their net assets.
All fees and expenses payable by the Fund pursuant to the Contract and
attributable only to one Portfolio are borne entirely by that Portfolio;
all other such fees and expenses are allocated among the Fund's Portfolios
in proportion to their net assets. Except for the comprehensive advisory
fee, the fees and expenses of the Fund's directors, the salary expense of
the Fund's officers, excise taxes and extraordinary expenses as defined by
the Contract, WMM pays or reimburses the Fund for substantially all of the
Fund's ordinary operating expenses out of its comprehensive advisory fee.
During the year ended January 31, 1998, WMM voluntarily agreed to waive
portions of the advisory fee allocable to the Treasury Bill Portfolio and
to the Versatile Bond Portfolio to the extent that either Portfolio's total
advisory fee otherwise would exceed an annual rate of 5/8 of 1%, in the
case of the Treasury Bill Portfolio, or 3/4 of 1%, in the case of the
Versatile Bond Portfolio, of the respective Portfolio's average daily net
assets. WMM may continue voluntarily to waive such fees, although it is not
required to do so, and reserves the right to revoke, reduce or change the
waiver prospectively upon five days written notice to the Fund.
WMM is a limited partnership of which one of the general partners is the
President and a director of the Fund and the other general partner is a
corporation wholly owned by the same individual.
Continued on following page.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
4. PURCHASES AND SALES OF SECURITIES
The following is a summary of purchases and sales of securities other than
short-term securities for the year ended January 31, 1998:
<TABLE>
<CAPTION>
Permanent Treasury Bill Versatile Bond Aggressive Growth
Portfolio Portfolio Portfolio Portfolio
--------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Purchases................................ $ 3,497,955 None $ 12,224,360 $ 1,630,210
Sales.................................... 7,012,403 None 12,192,210 377,082
</TABLE>
5. NET UNREALIZED APPRECIATION OF INVESTMENTS
<TABLE>
The following is a summary of net unrealized appreciation of investments at
January 31, 1998 for federal income tax purposes:
<CAPTION>
Permanent Treasury Bill Versatile Bond Aggressive Growth
Portfolio Portfolio Portfolio Portfolio
--------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation of
investments with excess of value over tax
cost:
Investments in securities of
unaffiliated issuers .................... $ 17,814,541 $ 14,138 $ 102,292 $ 8,826,038
Investments other than securities ....... 580,762 - - -
--------------- -------------- -------------- ---------------
18,395,303 14,138 102,292 8,826,038
Aggregate gross unrealized depreciation
of investments with excess of tax cost
over value:
Investments in securities of unaffiliated
issuers ................................. (775,806) (2,307) (4,449) (400,262)
Investments other than securities........ (3,869,512) - - -
--------------- -------------- -------------- ---------------
(4,645,318) (2,307) (4,449) (400,262)
--------------- -------------- -------------- ---------------
Net unrealized appreciation
of investments $ 13,749,985 $ 11,831 $ 97,843 $ 8,425,776
=============== ============== ============== ===============
</TABLE>
6. LINE OF CREDIT
On March 3, 1990, the Fund entered into a line of credit agreement with a
foreign bank whereby the Permanent Portfolio may borrow up to $2,000,000
for a period not to exceed twenty-one days, for the purpose of making
settlement for purchases of investments in the event that banks in the
United States are not able to operate according to their normal procedures.
The agreement is in effect through April 30, 1998.
Interest is charged at a base rate of 1% per annum above the offered rate
for deposits of United States Dollars on the London Interbank Market
(LIBOR) for terms substantially similar to any drawdown. The Permanent
Portfolio is obligated to pay a commitment fee of 1/2% per year on the
entire commitment amount.
The line is collateralized by United States Treasury bills having a face
value of not less than 125% of the outstanding principal balance and a
maturity date of not more than one year. The agreement contains certain
covenants, including but not limited to, the Permanent Portfolio
maintaining a specified net asset value of at least $60 million. During the
year ended January 31, 1998, there were no amounts outstanding under this
agreement.
Continued on following page.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
7. CAPITAL STOCK TRANSACTIONS
<TABLE>
Transactions in shares of each Portfolio's capital stock exclusive of
amounts allocated to undistributed net investment income were as follows
for the years ended January 31, 1998 and 1997:
<CAPTION>
Permanent Portfolio
---------------------------------------------------------------------------------
1998 1997
---------------------------------------- -------------------------------------
Shares Dollars Shares Dollars
---------------- -------------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Shares sold...................... 267,705 $ 4,309,828 437,736 $ 7,182,111
Distributions reinvested......... 124,147 2,324,036 99,400 1,837,906
--------- ------------ ---------- ------------
391,852 6,633,864 537,136 9,020,017
Shares redeemed.................. (632,375) (10,637,997) (647,681) (10,801,933)
--------- ------------ ---------- ------------
Net decrease (240,523) $ (4,004,133) (110,545) $ (1,781,916)
========= ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Treasury Bill Portfolio
---------------------------------------------------------------------------------
1998 1997
---------------------------------------- -------------------------------------
Shares Dollars Shares Dollars
---------------- -------------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Shares sold...................... 667,488 $ 43,964,269 763,237 $ 49,387,677
Distributions reinvested......... 48,405 3,251,352 61,755 4,149,954
--------- ------------ ---------- ------------
715,893 47,215,621 824,992 53,537,631
Shares redeemed.................. (880,865) (57,996,734) (955,791) (62,000,227)
--------- ------------ ---------- ------------
Net decrease (164,972) $(10,781,113) (130,799) $ (8,462,596)
========= ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Versatile Bond Portfolio
---------------------------------------------------------------------------------
1998 1997
---------------------------------------- --------------------------------------
Shares Dollars Shares Dollars
---------------- -------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Shares sold...................... 410,273 $ 21,564,778 337,677 $ 17,383,088
Distributions reinvested......... 9,512 553,476 11,742 670,356
--------- ------------ ---------- ------------
419,785 22,118,254 349,419 18,053,444
Shares redeemed.................. (393,973) (20,789,895) (330,784) (17,047,752)
--------- ------------ ---------- ------------
Net increase 25,812 $ 1,328,359 18,635 $ 1,005,692
========= ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Aggressive Growth Portfolio
---------------------------------------------------------------------------------
1998 1997
---------------------------------------- -------------------------------------
Shares Dollars Shares Dollars
---------------- -------------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Shares sold...................... 195,149 $ 10,447,677 159,742 $ 6,989,548
Distributions reinvested......... 18,011 1,021,204 2,099 98,304
--------- ------------ ---------- ------------
213,160 11,468,881 161,841 7,087,852
Shares redeemed.................. (181,840) (9,653,981) (110,561) (4,843,754)
--------- ------------ ---------- ------------
Net increase 31,320 $ 1,814,900 51,280 $ 2,244,098
========= ============ ========== ============
</TABLE>
Continued on following page.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
8. REGULATORY MATTERS
Following a routine examination of the Fund in 1991, the Securities and
Exchange Commission (the "Commission") instituted public administrative and
cease-and-desist proceedings on January 13, 1997, to determine the truth of
allegations by the Commission's Division of Enforcement (the "Division")
that WMM and two of the Fund's directors and officers (the "Respondents")
violated certain provisions of federal securities laws in fiscal years 1990
through 1992. The allegations include the following: that WMM, Terry Coxon
and Alan Sergy violated Section 206 of the Investment Advisers Act of 1940,
as amended, through conduct that included improper self-dealing at the
expense of the Fund; that WMM received excessive reimbursements under the
Fund's Marketing and Distribution Plan (the "Marketing Plan") during the
fiscal year ended January 31, 1991; that during fiscal years 1990 through
1992, the Fund's Board of Directors did not meet at the end of each quarter
to review the expenses incurred under the Marketing Plan and that the
reports thereon contained insufficient detail; and in April 1990, the
Permanent Portfolio acquired a "call option" prohibited by the Fund's
fundamental investment policies and managed the investment for the
advantage of a client of an officer of the Fund. No charges have been made
against the Fund. The Respondents have denied all of the allegations of the
Division and are contesting the proceedings. From May 5, 1997 through May
15, 1997, an administrative hearing on these charges was held before Chief
Administrative Law Judge Brenda P. Murray in San Francisco, California.
Thereafter, the Division and Respondents submitted post-hearing briefs and
the matter is currently under submission for decision. Pursuant to Maryland
law and the Fund's Bylaws, the Fund has agreed to continue to pay directly
on behalf of the Respondents, or to reimburse them, for certain expenses
incurred by them in connection with the proceedings, including expenses
paid by WMM to persons who are directors and officers of the Fund for
litigation support services. The Fund's management does not believe the
Fund will incur substantial additional expenses relating to this matter.
The Fund so paid or reimbursed the following expenses during the years
ended January 31, 1992 through 1998:
Permanent Treasury Bill Versatile Bond Aggressive Growth
Portfolio Portfolio Portfolio Portfolio
------------- ------------- -------------- -----------------
1992 .... $ - $ - $ - $ -
1993 .... 62,331 63,961 - -
1994 .... - - - -
1995 .... 78,010 71,156 6,213 1,777
1996 .... 26,100 22,233 1,646 848
1997 .... 53,511 43,469 3,046 2,640
1998 .... 325,585 293,026 - 32,558
---------- ---------- ---------- ----------
$ 545,537 $ 493,845 $ 10,905 $ 37,823
========== ========== ========== ==========
9. SUBSEQUENT EVENTS
On March 9, 1998, the Fund's Board of Directors adopted the Permanent
Portfolio Family of Funds, Inc. Long Term Disability Plan (the "Plan"). The
Plan provides for payment by the Fund to any qualified officer of the Fund
who is totally disabled (a "Participant"), as defined by the Plan, a
disability benefit equal to 50% of the Participant's salary as of the time
the disability is determined, subject to cost-of-living adjustments, for a
period not to exceed five years. The Plan is renewable annually and may be
terminated by the Fund's Board of Directors at any time prior to each
annual renewal. On March 10, 1998, the Fund accrued an estimated liability
of $107,808 under the Plan.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE PERMANENT PORTFOLIO
<TABLE>
Financial highlights for the Permanent Portfolio
For each share of capital stock outstanding throughout each fiscal year:
<CAPTION>
Year ended Year ended Year ended Year ended
January 31, 1998 January 31, 1997 January 31, 1996 January 31, 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.40 $ 18.80 $ 16.51 $ 17.55
--------- --------- --------- ---------
Income or loss from investment operations:
Net investment income ................ .37 .52 .50 .64
Net realized and unrealized gains
or losses on investments and
foreign currencies ................ 1.01 (.41) 2.17 (1.46)
--------- --------- --------- ---------
Total income or loss from
investment operations 1.38 .11 2.67 (.82)
Less distributions from:
Net investment income ................ (.34) (.42) (.38) (.22)
Net realized gain on investments ..... (.36) (.09) - -
--------- --------- --------- ---------
Total distributions (.70) (.51) (.38) (.22)
--------- --------- --------- ---------
Net asset value, end of year $ 19.08 $ 18.40 $ 18.80 $ 16.51
========= ========= ========= =========
Total return (1) ......................... 7.57% .57% 16.20% (4.65)%
Ratios / supplemental data:
Net assets, end of year (in thousands)... $ 71,099 $ 72,992 $ 76,641 $ 71,610
========= ========= ========= =========
Ratio of expenses to average net assets.. 1.91% 1.49% 1.35% 1.32%
Ratio of net investment income
to average net assets ................ 1.96% 2.78% 2.85% 2.63%
Portfolio turnover rate ................. 7.66% 12.29% 9.96% 31.24%
Average brokerage commission
rate paid (2) ........................ $ .0207 $ .0587 $ - $ -
<FN>
(l) Assumes reinvestment of all dividends and distributions, and deduction of
all fees and expenses except the $35 one-time account start-up fee and the
$1.50 monthly account maintenance fee.
(2) Average brokerage commission rate paid information was not required for
years beginning before September 1, 1995.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended Year ended
January 31, 1994 January 31, 1993 January 31, 1992 January 31, 1991 January 31, 1990 January 31, 1989
- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S><C> <C> <C> <C> <C> <C>
$ 15.36 $ 15.21 $ 15.10 $ 15.57 $ 15.00 $ 14.71
--------- --------- --------- --------- --------- ---------
.44 .49 .51 .64 .57 .46
1.99 (.05) .51 (.63) - (.15)
--------- --------- --------- --------- --------- ---------
2.43 .44 1.02 .01 .57 .31
(.24) (.29) (.91) (.48) - -
- - - - - (.02)
--------- --------- --------- --------- --------- ---------
(.24) (.29) (.91) (.48) - (.02)
--------- --------- --------- --------- --------- ---------
$ 17.55 $ 15.36 $ 15.21 $ 15.10 $ 15.57 $ 15.00
========= ========= ========= ========= ========= =========
15.86% 2.93% 7.01% .15% 3.80% 2.11%
$ 79,043 $ 65,937 $ 72,312 $ 80,542 $ 93,663 $ 97,475
========= ========= ========= ========= ========= =========
1.21% 1.25% 1.27% 1.36% 1.17% 1.17%
2.66% 3.20% 3.29% 4.22% 3.80% 3.00%
49.51% 70.77% 8.01% 31.58% 61.44% 23.87%
$ - $ - $ - $ - $ - $ -
</TABLE>
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE TREASURY BILL PORTFOLIO
<TABLE>
Financial highlights for the Treasury Bill Portfolio
For each share of capital stock outstanding throughout each fiscal year:
<CAPTION>
Year ended Year ended Year ended Year ended
January 31, 1998 January 31, 1997 January 31, 1996 January 31, 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 67.55 $ 67.84 $ 66.40 $ 64.81
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (1) .................... 2.69 2.84 3.22 2.65
Net realized and unrealized gains
or losses on investments (2) ................. .06 .01 .06 (.39)
---------- ---------- ---------- ----------
Total income from investment operations 2.75 2.85 3.28 2.26
Less distributions from:
Net investment income ........................ (2.74) (3.14) (1.84) (.67)
---------- ---------- ---------- ----------
Total distributions (2.74) (3.14) (1.84) (.67)
---------- ---------- ---------- ----------
Net asset value, end of year $ 67.56 $ 67.55 $ 67.84 $ 66.40
========== ========== ========== ==========
Total return (3) ................................... 4.09% 4.23% 4.95% 3.49%
Ratios / supplemental data:
Net assets, end of year (in thousands) .......... $ 94,200 $ 105,342 $ 114,667 $ 121,666
========== ========== ========== ==========
Ratio of expenses to average net assets (1) ..... 1.20% .90% .82% .82%
Ratio of net investment income
to average net assets ......................... 3.98% 4.19% 4.79% 3.57%
<FN>
(l) Due to the waiver of advisory fees and, effective January 1, 1991
through January 31, 1994, distribution expenses, the ratio of expenses to
average net assets was reduced by .50% for the year ended January 31, 1998
and .50%, .50%, .50%, .49%, .47%, .48%, .47%, .62% and .62% for the years
ended January 31, 1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and 1989,
respectively. Without this waiver, the net investment income per share
would have been $2.19 for the year ended January 31, 1998 and $2.37, $2.78,
$2.12, $1.04, $1.28, $2.85, $3.85, $3.96 and $3.00 for the years then
ended.
(2) Per share net realized and unrealized gains or losses on investments may
not correspond with the change in aggregate unrealized gains and losses in
the Portfolio's securities because of the timing of sales and repurchases
of the Portfolio's shares in relation to fluctuating market values for the
Portfolio.
(3) Assumes reinvestment of all dividends and distributions, and deduction of
all fees and expenses except the $35 one-time account start-up fee and the
$1.50 monthly account maintenance fee.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended Year ended
January 31, 1994 January 31, 1993 January 31, 1992 January 31, 1991 January 31, 1990 January 31, 1989
---------------- ---------------- ---------------- ---------------- ---------------- ----------------
<S><C> <C> <C> <C> <C> <C>
$ 64.45 $ 64.99 $ 63.11 $ 59.35 $ 54.91 $ 51.54
---------- ---------- ---------- ---------- ---------- ----------
1.53 1.68 3.26 4.20 4.36 3.38
(.09) .19 (.08) (.01) .08 .02
---------- ---------- ---------- ---------- ---------- ----------
1.44 1.87 3.18 4.19 4.44 3.40
(1.08) (2.41) (1.30) (.43) - (.03)
---------- ---------- ---------- ---------- ---------- ----------
(1.08) (2.41) (1.30) (.43) - (.03)
---------- ---------- ---------- ---------- ---------- ----------
$ 64.81 $ 64.45 $ 64.99 $ 63.11 $ 59.35 $ 54.91
========== ========== ========== ========== ========== ==========
2.24% 2.89% 5.05% 7.06% 8.09% 6.60%
$ 133,970 $ 179,888 $ 320,382 $ 207,889 $ 61,056 $ 31,370
========== ========== ========== ========== ========== ==========
.72% .73% .73% .83% .54% .54%
2.46% 2.97% 4.87% 6.74% 7.87% 6.70%
</TABLE>
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE VERSATILE BOND PORTFOLIO
<TABLE>
Financial highlights for the Versatile Bond Portfolio
For each share of capital stock outstanding throughout each fiscal period:
<CAPTION>
Year ended Year ended Year ended
January 31, 1998 January 31, 1997 January 31, 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 57.24 $ 56.85 $ 54.90
--------- --------- ---------
Income from investment operations:
Net investment income (2) ............... 2.87 2.94 2.91
Net realized and unrealized gains
or losses on investments (3) .......... .17 (.34) 1.05
--------- --------- ---------
Total income from investment operations 3.04 2.60 3.96
Less distributions from:
Net investment income ................... (1.70) (2.21) (2.01)
Net realized gain on investments ........ - - -
--------- --------- ---------
Total distributions (1.70) (2.21) (2.01)
--------- --------- ---------
Net asset value, end of period $ 58.58 $ 57.24 $ 56.85
========= ========= =========
Total return (4) ............................ 5.33% 4.58% 7.24%
Ratios / supplemental data:
Net assets, end of period (in thousands).... $ 23,355 $ 21,345 $ 20,137
========= ========= =========
Ratio of expenses to average net assets (2). 1.01% .97% .89%
Ratio of net investment income
to average net assets ................... 4.95% 5.16% 5.21%
Portfolio turnover rate ................... 55.53% 102.29% 51.64%
<FN>
* Computed on an annualized basis.
(l) The Versatile Bond Portfolio commenced investment operations
November 12, 1991.
(2) Due to the waiver of advisory fees and through January 31, 1994,
distribution expenses, the ratio of expenses to average net assets was
reduced by .38% for the year ended January 31, 1998 and .38%, .37%, .36%,
.39%, .41% and .43% for the years ended January 31, 1997, 1996, 1995, 1994,
1993 and the period ended January 31, 1992, respectively. Without this
waiver, the net investment income per share would have been $2.59 for the
year ended January 31, 1998 and $2.66, $2.65, $1.84, $1.57, $1.77 and $2.13
for the years and the period then ended.
(3) Per share net realized and unrealized gains or losses on investments may
not correspond with the change in aggregate unrealized gains and losses in
the Portfolio's securities because of the timing of sales and repurchases
of the Portfolio's shares in relation to fluctuating market values for the
Portfolio.
(4) Assumes reinvestment of all dividends and distributions, and deduction of
all fees and expenses except the $35 one-time account start-up fee and the
$1.50 monthly account maintenance fee.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Year ended Year ended Year ended Period ended
January 31, 1995 January 31, 1994 January 31, 1993 January 31, 1992(1)
- ---------------- ---------------- ---------------- ------------------
<S><C> <C> <C> <C>
$ 54.76 $ 53.63 $ 50.58 $ 50.00
--------- --------- --------- ---------
2.12 1.87 2.06 2.51
(.63) (.04) 1.00 (1.93)
--------- --------- --------- ---------
1.49 1.83 3.06 .58
(1.33) (.70) (.01) -
(.02) - - -
--------- --------- --------- ---------
(1.35) (.70) (.01) -
--------- --------- --------- ---------
$ 54.90 $ 54.76 $ 53.63 $ 50.58
========= ========= ========= =========
2.74% 3.42% 6.05% 3.33%*
$ 22,229 $ 35,682 $ 23,217 $ 596
========= ========= ========= =========
.86% .89% .89% 1.07%*
3.84% 3.46% 3.86% 4.00%*
74.62% 75.05% 224.95% 600.99%*
</TABLE>
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
THE AGGRESSIVE GROWTH PORTFOLIO
<TABLE>
Financial highlights for the Aggressive Growth Portfolio
For each share of capital stock outstanding throughout each fiscal period:
<CAPTION>
Year ended Year ended Year ended
January 31, 1998 January 31, 1997 January 31, 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 47.66 $ 40.65 $ 31.61
---------- ---------- ----------
Income or loss from investment operations:
Net investment income (loss) ............................ (.31) .26 (.02)
Net realized and unrealized gains
or losses on investments .............................. 11.97 7.05 10.68
---------- ---------- ----------
Total income or loss from investment operations 11.66 7.31 10.66
Less distributions from:
Net investment income ................................... (.19) (.25) (.11)
Net realized gain on investments ........................ (2.89) (.05) (1.51)
---------- ---------- ----------
Total distributions (3.08) (.30) (1.62)
---------- ---------- ----------
Net asset value, end of period $ 56.24 $ 47.66 $ 40.65
========== ========== ==========
Total return (2) ............................................. 24.41% 18.00% 33.78%
Ratios / supplemental data:
Net assets, end of period (in thousands) .................... $ 19,955 $ 15,417 $ 11,067
========== ========== ==========
Ratio of expenses to average net assets ...................... 1.46% 1.33% 1.19%
Ratio of net investment income (loss) to average net assets... (.60)% .59% (.06)%
Portfolio turnover rate ...................................... 2.15% 21.32% 18.94%
Average brokerage commission rate paid (3) ................... $ .0041 $ .0588 $ -
<FN>
* Computed on an annualized basis.
(l) The Aggressive Growth Portfolio commenced investment operations May 16,
1990.
(2) Assumes reinvestment of all dividends and distributions, and deduction of
all fees and expenses except the $35 one-time account start-up fee and the
$1.50 monthly account maintenance fee.
(3) Average brokerage commission rate paid information was not required for
years beginning before September 1, 1995.
</FN>
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Period ended
January 31, 1995 January 31, 1994 January 31, 1993 January 31, 1992 January 31, 1991(1)
---------------- ---------------- ---------------- ---------------- ------------------
<S><C> <C> <C> <C> <C>
$ 32.56 $ 26.63 $ 22.77 $ 18.35 $ 20.00
--------- --------- --------- --------- ---------
(.01) .01 .02 .06 .13
(.89) 6.41 4.44 4.38 (1.78)
--------- --------- --------- --------- ---------
(.90) 6.42 4.46 4.44 (1.65)
(.03) (.02) (.13) (.02) -
(.02) (.47) (.47) - -
--------- --------- --------- --------- ---------
(.05) (.49) (.60) (.02) -
--------- --------- --------- --------- ---------
$ 31.61 $ 32.56 $ 26.63 $ 22.77 $ 18.35
========= ========= ========= ========= =========
(2.75)% 24.25% 19.77% 24.21% (8.25)%*
$ 6,758 $ 7,201 $ 3,596 $ 2,577 $ 1,151
========= ========= ========= ========= =========
1.23% 1.20% 1.12% 1.18% 1.07%*
(.04)% .02% .12% .23% .64%*
26.29% 29.83% 25.62% 53.18% 36.88%*
$ - $ - $ - $ - $ -
</TABLE>
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
Permanent Portfolio (PP)
(Graph ommitted, see description on page 35)
Versatile Bond Portfolio (VBP)
(Graph ommitted, see description on page 35)
Aggressive Growth Portfolio (AGP)
(Graph ommitted, see description on page 35)
See following page for explanation of graphs.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
The graphs on the preceding page compare the initial account value and
subsequent account values at the end of each of the most recently completed
ten fiscal years of the Permanent Portfolio and each of the most recently
completed fiscal years since the commencement of investment operations for
the Aggressive Growth Portfolio and the Versatile Bond Portfolio, assuming
a $10,000 investment in the Portfolio at the beginning of the first fiscal
year and reinvestment of all dividends and distributions, to a $10,000
investment over the same periods in the following broad-based securities
market indexes: for the Permanent Portfolio, 3-month Treasury bills from
the weekly releases of Selected Interest Rates from the Federal Reserve;
for the Versatile Bond Portfolio, 180-day rates on certificates of deposit
from the Dow Jones News Retrieval Service; and for the Aggressive Growth
Portfolio, the Dow Jones Industrial Average, which is an average of the
stock prices of 30 large companies and represents an unmanaged portfolio.
The tables below show each Portfolio's average annual total returns for the
periods indicated, assuming reinvestment of all dividends and distributions
and deduction of all fees and expenses except the $35 one-time account
start-up fee. Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
Permanent Portfolio(1) Versatile Bond Portfolio(2) Aggressive Growth Portfolio(3)
---------------------- --------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
1 year ended 1/31/98 7.51% 1 year ended 1/31/98 5.27% 1 year ended 1/31/98 24.34%
5 years ended 1/31/98 6.72% 5 years ended 1/31/98 4.59% 5 years ended 1/31/98 18.79%
10 years ended 1/31/98 4.87% 6 years, 127 days ended 1/31/98 4.73% 8 years, 29 days ended 1/31/98 15.57%
15 years ended 1/31/98 4.78%
15 years, 62 days ended 1/31/98 5.05%
- ---------------------
</TABLE>
(1) The Permanent Portfolio commenced operations on December 1, 1982.
(2) The Versatile Bond Portfolio commenced operations on September 27, 1991.
(3) The Aggressive Growth Portfolio commenced operations on January 2, 1990.
(4) The Treasury Bill Portfolio is not included in the data above because it is
a money market portfolio. Yield on the Treasury Bill Portfolio for the seven
days ended and January 31, 1998, assuming reinvestment of all dividends and
distributions and deduction of all fees and expenses except the $35 one-time
account start-up fee, was 4.63%, and effective yield was 4.74%.
<PAGE>
PERMANENT PORTFOLIO FAMILY OF FUNDS, INC.
Management's Discussion and Analysis
Permanent Portfolio
The Permanent Portfolio's investment objective is to preserve and increase
the purchasing power of its shares over the long term. The Portfolio
invests fixed target percentages of its net assets in gold, silver, Swiss
franc assets, stocks of real estate and natural resource companies,
aggressive growth stocks, and dollar assets such as United States Treasury
securities. The strong performance of the U.S. stock, bond and silver
markets throughout 1997 were partially offset by the weak performance in
the gold market, as well as the relative performance of the Swiss franc.
Accordingly, the Portfolio achieved a total return of 7.57% for the year
ended January 31, 1998, as compared to an inflation rate of 1.57% during
the year then ended.
Treasury Bill Portfolio
The Treasury Bill Portfolio's investment objective is to achieve high
current income, consistent with safety and liquidity of principal. It
invests in short-term United States Treasury securities. The Portfolio
achieved a total return of 4.09% and maintained an average maturity of
between 60 and 90 days throughout the year ended January 31, 1998. This
return was consistent with other money market funds that invest primarily
in short-term United States Treasury securities.
Versatile Bond Portfolio
The Versatile Bond Portfolio's investment objective is to achieve high
current income while limiting risk to principal. It invests in a
diversified portfolio of short-term corporate bonds rated "A" or higher by
Standard & Poor's. The Portfolio achieved a total return of 5.33% while
maintaining an average maturity of between 300 and 500 days throughout the
year ended January 31, 1998. This return was consistent with other mutual
funds that invest primarily in corporate bonds of similar safety, liquidity
and maturity.
Aggressive Growth Portfolio
The Aggressive Growth Portfolio's investment objective is to achieve high
long-term appreciation. It is fully invested at all times in a diversified
portfolio of domestic stocks and stock warrants selected for high profit
potential. The Portfolio achieved a total return of 24.41% for the year
ended January 31, 1998, as compared to 18.06% for the Dow Jones Industrial
Average and 27.91% for the Standard and Poor's 500 Stock Index for the year
then ended.
<PAGE>
This page intentionally left blank.
<PAGE>
INVESTMENT ADVISER The
World Money Managers PERMANENT
Terry Coxon, General Partner PORTFOLIO
625 Second Street Family of Funds
Petaluma, California 94952
CONSULTANTS TO THE FUND
Harry Browne
Douglas Casey
TRANSFER AGENT
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208
(for overnight delivery services,
73 Tremont Street
Boston, Massachusetts 02108)
1-800-341-8900
In Mass. 1-617-557-8000
CUSTODIAN
State Street Bank and Trust Company
Boston, Massachusetts 02105
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Three Embarcadero Center
San Francisco, California 94111
INVESTOR'S INFORMATION OFFICE
P.O. BOX 5847 ANNUAL REPORT
Austin, Texas 78763 January 31, 1998
1-800-531-5142 Nationwide
Local 1-512-453-7558
