A Message to Shareholders
Dear Shareholder:
At a time when successful investing appears as easy as buying the latest hot
stocks, some individual investors may consider "going it alone." Despite
convenient new methods of trading securities, we firmly believe in the
importance of seeking professional assistance, diversifying, developing a
long-term investment strategy and having the patience to stick with it.
By diversifying your investments into a variety of asset classes, you help
spread the risk in your portfolio. Diversification improves the chances that
some of your investments will perform well, even when others don't. By
maintaining a long-term perspective, you stay focused on the big picture. This
helps you to avoid falling prey to natural emotional reactions which can cause
you to become alternately overly aggressive or conservative, typically at
exactly the wrong time in the market cycle.
Another key element to developing a successful investment plan is the expertise
of an investment professional. We're certain you have witnessed the media hype
surrounding the market gyrations of the past several months. This frequently
comes in the form of conflicting advice which leaves investors confused and
concerned. We caution our shareholders to ignore media speculation and instead
focus on the sound advice of a known and trusted registered representative.
Of course, patience is a virtue when it comes to investing. Though recent equity
mutual fund performance may have trailed that of the most widely recognized
indices, we think patient shareholders will receive their rewards as investor
confidence--lost during the international financial crises of 1998 and the
corresponding market fluctuations--is regained.
On a final note, you may already have noticed this letter comes to you under
different signature. In March, Stephan Jones retired as President. Named as the
new President of Principal Management Corporation and Principal Mutual Funds was
Ralph Eucher. At the same time, Mike Beer was named Executive Vice President of
Principal Management Corporation.
Ralph joins Principal Mutual Funds after spending five years with the Investment
operations of the Principal Financial Group. Ralph has a broad range of prior
investment and business leadership experience. Mike has been with the company
since 1990, and continues in his role of Chief Operating Officer.
Our home office staff's dedication combined with the strength of our field
organization makes us confident that the top notch customer service and quality
investment products our shareholders now enjoy will carry on uninterrupted. We
look forward to the continued success of the Principal Mutual Funds and our
shareholders.
Sincerely,
/s/Ralph C. Eucher /s/Mike Beer
Ralph C. Eucher Mike Beer
President Executive Vice President &
Chief Operating Officer
Table of Contents
Page
Portfolio Managers' Comments............................................... 3
Domestic Growth-Oriented Funds Financial Statements and Highlights
Statements of Assets and Liabilities.................................... 12
Statements of Operations................................................ 14
Statements of Changes in Net Assets..................................... 16
Notes to Financial Statements........................................... 18
Schedules of Investments
Balanced Fund......................................................... 24
Blue Chip Fund........................................................ 27
Capital Value Fund.................................................... 28
Growth Fund........................................................... 29
MidCap Fund........................................................... 31
Real Estate Fund...................................................... 33
SmallCap Fund......................................................... 34
Utilities Fund........................................................ 36
Financial Highlights.................................................... 38
International Growth-Oriented Funds Financial Statements and Highlights
Statements of Assets and Liabilities.................................... 48
Statements of Operations................................................ 49
Statements of Changes in Net Assets..................................... 50
Notes to Financial Statements........................................... 52
Schedules of Investments
International Emerging Markets Fund................................... 60
International Fund.................................................... 62
International SmallCap Fund........................................... 64
Financial Highlights.................................................... 68
Income-Oriented Funds Financial Statements and Highlights
Statements of Assets and Liabilities.................................... 72
Statements of Operations................................................ 74
Statements of Changes in Net Assets..................................... 76
Notes to Financial Statements........................................... 78
Schedules of Investments
Bond Fund............................................................. 86
Government Securities Income Fund..................................... 89
High Yield Fund....................................................... 89
Limited Term Bond Fund................................................ 91
Tax-Exempt Bond Fund.................................................. 93
Financial Highlights.................................................... 98
Money Market Fund Financial Statements and Highlights
Statements of Assets and Liabilities.................................... 106
Statements of Operations................................................ 107
Statements of Changes in Net Assets..................................... 108
Notes to Financial Statements........................................... 110
Schedules of Investments
Cash Management Fund.................................................. 114
Financial Highlights.................................................... 118
Principal Mutual Funds..................................................... 120
Principal Funds Performance
<TABLE>
<CAPTION>
Average Annual Total Returns
As of March 31, 1999
<S> <C> <C> <C>
1 Year 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C>
with without with without with without
sales sales sales sales sales sales
A Shares of: charge charge charge charge charge charge
Balanced (1.37)% 3.50% 11.36% 12.44% 10.16% 10.69%
Blue Chip 3.32 8.41 19.72 20.88 14.26(a) 14.94(a)
Bond (0.21) 4.71 7.00 8.04 8.66 9.18
Capital Value (4.09) 0.64 18.45 19.60 13.49 14.04
Government Securities Income 1.10 6.09 6.73 7.77 8.41 8.93
Growth 3.25 8.34 18.76 19.90 17.39 17.96
High Yield (7.83) (3.29) 6.54 7.57 6.47 6.99
International (8.36) (3.84) 9.81 10.87 10.55 11.09
International Emerging Markets (23.16) (19.37) (17.63)(b) (15.09)(b)
International SmallCap (4.22) 0.50 9.04(b) 12.40(b)
Limited Term Bond 4.08 5.66 5.43(c) 5.95(c)
MidCap (17.97) (13.93) 13.09 14.19 14.44 15.00
Real Estate (22.73) (18.92) (18.90)(d) (15.70)(d)
SmallCap (23.25) (19.47) (11.02)(d) (7.51)(d)
Tax-Exempt Bond (0.05) 4.88 6.29 7.32 7.26 7.78
Utilities 1.20 6.19 14.15 15.25 11.17(e) 12.02(e)
</TABLE>
1 Year 5 Years
with without with without
B Shares of: CDSC* CDSC* CDSC* CDSC*
Balanced (1.18)% 2.73% 13.88%(f) 14.18%(f)
Blue Chip 3.62 7.62 21.79(f) 22.03(f)
Bond (0.01) 3.93 8.34(f) 8.69(f)
Capital Value (3.83) (0.10) 21.43(f) 21.68(f)
Government Securities Income 1.35 5.34 8.27(f) 8.63(f)
Growth 3.85 7.85 22.76(f) 23.00(f)
High Yield (7.58) (4.00) 7.19(f) 7.55(f)
International (8.11) (4.49) 12.44(f) 12.75(f)
International Emerging Markets (23.14) (19.93) (17.62)(b) (15.47)(b)
International SmallCap (4.06) (0.09) 9.55(b) 11.93(b)
Limited Term Bond 3.96 5.21 5.29(c) 5.51(c)
MidCap (17.70) (14.27) 16.42(f) 16.70(f)
Real Estate (22.47) (19.34) (18.69)(d) (16.08)(d)
SmallCap (23.38) (20.18) (11.12)(d) (8.16)(d)
Tax-Exempt Bond 0.24 4.24 8.44(f) 8.79(f)
Utilities 1.42 5.42 17.49(f) 17.76(f)
* Contingent Deferred Sales Charge
R Shares of: 1 Year 5 Years
Balanced 2.99% 11.87%(c)
Blue Chip 7.90 18.92(c)
Bond 4.06 6.57(c)
Capital Value (0.08) 18.34(c)
Government Securities Income 5.28 6.36(c)
Growth 7.67 18.85(c)
High Yield (4.09) 5.02(c)
International (4.60) 12.13(c)
International Emerging Markets (19.59) (15.25)(b)
International SmallCap 0.67 12.52(b)
Limited Term Bond 5.06 5.33(c)
MidCap (14.52) 9.09(c)
Real Estate (18.76) 15.59(d)
SmallCap (19.47) (7.51)(d)
Utilities 5.63 14.57(c)
(a)Partial period,
from effective date 3/1/91
(b) Partial period,
from effective date 8/29/97
(c)Partial period,
from effective date 2/29/96
(d) Partial period,
from effective date 12/31/97
(e) Partial period, from effective date 12/16/92
(f) Partial period, from effective date 12/9/94
Total return represents the overall perfor-mance 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% sales charge. Average annual total
returns for B shares are with and without maximum 4.0% contingent deferred
sales charge. Total 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.
MANAGER'S COMMENTS
Principal Management Corporation, the adviser to the Principal funds, is staffed
with investment professionals who manage each individual fund. Comments by these
individuals in the following paragraphs 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
Marty Schafer Judi Vogel
[ Photo ] [ Photo ]
For five of the past six months earnings momentum and large capitalization
growth stocks were the drivers of results in the financial markets. It was a
short list of very large cap, high P/E, "glamour growth" stocks (such as
Microsoft, MCI WorldCom, Cisco Systems, America On Line) that drove the gains in
major stock indices. Small companies and value stocks drastically underperformed
this select group. The tables turned in April, however, when a rotation out of
growth stocks and into smaller, more economically sensitive cyclical stocks
began in earnest. With the price of oil up 50% from its lows a few months
earlier, and foreign economies showing signs of stabilization, the specter of
global economic risk dissipated. In a very short time the consensus view shifted
from that of a muddle along economy to one of stronger than expected global
growth and concerns about commodity price inflation. Interest rates moved higher
in response to inflation fears, causing bond prices to decline. Investors began
taking note of the attractive prices of the heretofore beaten down value stocks,
stocks valued at a discount to the overall market, and shifted funds out of
large cap growth and into cheaper small cap and value stocks.
For most of the last six months, the Fund's returns suffered from lack of
exposure to the market leading mega-cap growth companies. Specifically, the Fund
did not hold enough technology and communications services stocks because the
Fund's managers felt their lofty valuations already fully reflected the most
optimistic of sales and earnings forecasts. The Fund's equity portfolio is
positioned primarily in mid- to large-cap value stocks, which have been
outperforming since the end of March. Returns of the fixed income portfolio have
hovered near breakeven, in line with bond market indices and other fixed income
funds. With interest rates up over 0.75% in the last six months, only the more
risky, high-yield instruments have mustered positive returns. The Fund continues
to be well diversified among corporate bonds, mortgage-backed securities, and
reasonably priced common stocks. It is designed to preserve shareholders'
capital while providing long term growth.
Principal Blue Chip Fund
Mark Williams The Dow Jones Industrial Average crossed into
[ Photo ] celebrated territory as it passed 10,000 for the
first time on March 29 and then shot past 11,000
a scant 24 trading days later. These historic
accomplishments were in part due to stronger than
expected earnings released in March and April
following some rather cautious utterances by the
Fed's Alan Greenspan and many economists earlier in
the year.
The Fund turned in a +15.21% return for the six months ended April 30 by
continuing to focus on high quality companies with rising earnings. It is
difficult or impossible to match the euphoria of the Dow during periods like the
one just past and maintain a defensive posture toward the growing downside
exposure that looms behind record highs. The Fund's managers believe they have
struck a good balance within the Fund to participate in the upside while being
mindful of the downside should the markets settle back in the coming months.
Principal Capital Value Fund
Catherine Zaharis The market has seen two distinctly different periods
[ Photo ] during the past six months. The beginning of this
period was a bounce off the October lows, and an
easing of the worries that surrounded the market
with the Russian crisis last year. In January, the
market quickly bounced back from the concerns in
South America. Growth stocks were continuing their strong march throughout this
period as the notion was that people will pay anything for a growth stock. In
the last two months that mentality has changed as investors have begun to
realize that cyclical companies have some sustainable earnings strength.
Cyclical stocks have been ignored for an extended duration and became so
inexpensive that the market could no longer ignore valuations. Since March, the
value sector, companies valued at a discount to the overall market, has strongly
outperformed growth stocks, helping the performance of the Principal Capital
Value Fund. However, the tide has not totally changed. There has been a
sustained period where growth stocks have done substantially better than value,
and the Fund's managers have just begun to retrace this trend. The market is
assuming all positives when determining what growth companies are worth. Any
disappointment causes a dramatic fall in the price and that is seen in the daily
volatility trends within the market. To the extent there are high expectations
for growth companies and low expectations for value companies, the Fund's
managers continue to find many opportunities within the value area.
The Fund's portfolio continues to have a solid focus on value investing and
companies added to this portfolio exhibit many of the traditional value
attributes. The Fund managers are looking for companies with valuations below
average but have specific opportunities that are unique for that firm.
Value Investing has been an underperforming style the past six months with the
primary reason being the size of companies in the portfolio. During more recent
periods, the larger the company, the better the stock price has performed. Since
the Fund's portfolio holds several companies that would be defined as mid cap in
size, these companies have not helped near term performance. The Fund managers
feel these are solid investments with strong future opportunities.
Principal Growth Fund
Mike Hamilton The five fundamental factors that have been the
[ Photo ] foundation of this bull market powered the market to
record highs again. The five factors are:moderate but
sustainable economic growth, low inflation, low
interest rates, financial liquidity and corporate
profit growth.
The Fund performed quite strongly over the past six months, with a total return
of over 20%. Highlights for the past six months include: Linear Technology +91%,
Citigroup +60%, Boston Scientific +56%, Cendant +56%, Marriott International
+56%, Amvescap +50%, MCI Worldcom +49%, Chase Manhattan +47%. A common theme
among these standouts is that although the market called these companies into
question last fall, the Fund managers stuck with them and were eventually
rewarded.
Despite several strong performing stocks, the Fund slightly trailed the strong
return of the S&P 500 Stock Index. This can be attributed to 1) Technology - not
owning AOL and not owning enough of Cisco, 2) Healthcare - the Fund's large
position here did not help because healthcare stocks lagged the overall market
due to less fear of an economic slow-down, 3) Consumer Staples - Ralston
Purina's Energizer Battery Division was weak and pulled the stock down 8%.
Going forward the Fund's managers continue to see good prospectus in the
healthcare and financial sectors. Healthcare companies are benefiting from
strong demand as the population ages and from spectacular new products that make
life better. In financials, managers see companies that are more prudently
managing their capital, taking advantage of deregulation and which can be
purchased at very reasonable valuations. Few opportunities are found in the
utility, energy and transportation sectors and thus the portfolio has little to
no exposure in these sectors. As always, the Fund's managers continue to pursue
companies that possess competitive advantages, have the potential for good
growth and can be purchased at a reasonable price.
Principal MidCap Fund
Mike Hamilton Stock market returns for the first six months of the
[ Photo ] Fund's 1999 fiscal year have continued their
divergence between the various market
capitalization ranges. Large caps stocks have
outdistanced their mid and smallcap counterparts by a
considerable margin as investors gravitate to
companies with assumed stable and visible earnings
streams.
The Principal MidCap Fund's performance relative to the S&P 500 Stock Index
lagged due to its emphasis on the smaller end of midcap companies. The
communication services and consumer staples sectors outperformed relative to the
S&P 500, while the technology, financial, healthcare and consumer cyclicals
sectors were the largest negative contributors to Fund performance relative to
the Index.
Over the course of the current economic cycle, the U.S. consumer has been
dominant. This is evidenced by the tremendous spending on durable goods. In
addition to the strong consumer, capital spending has continued on a strong
uptrend. Business continues to invest in capital to drive the productivity
increases necessary to compete on a global basis. Both profits and incomes have
been strong, giving both business and the consumer confidence to maintain the
high level of spending. Many analysts are raising earning estimates of the
companies they follow and the top down projections for the indexes are being
raised along with them, implying growth in corporate profits. If strong economic
growth continues, many of the mid cap and small cap companies will do well given
the economic sensitivity of their underlying businesses.
Looking ahead to the second half of fiscal year 1999, the same factors driving
the slow, sustainable growth in the U.S. economy appear to be very much in
place--low inflation, low interest rates, financial liquidity and high consumer
confidence. The Fund's managers continue to look for companies that possess
competitive advantages, have the potential for above average growth and can be
purchased at a reasonable price. The technology, financial, consumer cyclical
and healthcare economic sectors continue to be the top four highest weighted
economic sectors in the portfolio.
Principal Real Estate Fund
Kelly Rush Strong returns in April boosted the Fund's
[ Photo ] six-month performance into positive territory. Real
estate stocks provided negative returns from October
1998 through March 1999. A sharp reversal was
experienced in April where each class of shares
enjoyed a return between 9.6 and 9.8 percent.
Nearly all income-oriented and value stocks experienced weak performance from
October through March. Investors narrowly focused on stocks that were expected
to deliver a high level of earnings growth even in the face of a weakening
economy. This led to strong performance by large capitalization growth stocks
and internet-related stocks.
In April, signs of the economy's persistent strength led investors to reassess
the merits of cyclical and value stocks. Attractive relative valuations of these
stocks led to a powerful broad market rally. Value and income stocks were
sluggish in 1998 and real estate stocks were one of the worst within the group.
During the April rally, this relationship reversed as real estate stocks
outperformed other value and income stocks.
Prior to the recent rally, the Fund managers commented that real estate stocks
looked cheap. Now, following the rally, the question is "where are we headed
from here?" Valuations look reasonable today, suggesting price appreciation will
slow from April's torrid pace, but remain positive as earnings grow. Coupled
with the high level of current income real estate stocks offer, the Fund is
poised to provide a competitive level of total return in the months ahead.
However, short-term momentum is almost impossible to predict as both upward and
downward surprises may occur.
Principal SmallCap Fund
John McClain Mark Williams
[ Photo ] [ Photo ]
The economy that many thought would stall out late last year continued to fly
high through the six-month period ended April 30. At the same time, worries
about how long this expansion will continue, combined with market volatility,
resulted in continued investor interest in large-cap companies. The S&P 500
Stock Index finished the period at +22.32% while the S&P Small-Cap 600 Index
stood at +9.03%.
The Fund outperformed most small-cap indexes with a +19.22% return for the six
months ended April 30. Since its inception at the start of 1997, the Fund has
maintained 60% of its holdings in growth stocks and the remainder in value
stocks. During this time, the Fund has benefited as the growth segment
outperformed the value segment in a manner similar to the market as a whole.
Fund managers continue to believe the Fund will benefit from this allocation as
the trend toward superior growth performance continues and better opportunities
for stock selection are available in the growth sector.
Principal Utilities Fund
Catherine Zaharis The Utilities sector is one that has continued to see
[ Photo ] much change in the last six months. Several states
continue their progress to deregulation of the
electric industry. Although many are not finalized,
it is clear there are additional states that will
complete this legislation by year end. Also, for the
first time, a foreign utility company has offered to
merge with a domestic utility company. Certainly the
trend of global energy services will move forward as the globalization of
telecommunications is seen. The electric utility industry is also making inroads
at determining strategies to go from a regulated business to one where growth
into related businesses can become part of the focus. Telecommunication
continues to be possessed by two trends - unit growth and consolidation. Mergers
continue as each company tries to expose themselves to the platforms they
believe will be successful in the future. Usage also remains a positive force
with data, commercial, residential, internet and cellular all exhibiting growth.
The Principal Utilities Fund outperformed the index in this latest period as the
growth perspective certainly aided many of the portfolio holdings. The Fund
manager's process for selecting stocks has focused on those companies where it
is felt their strategy best fits their strengths. Managers are looking for those
companies who will either be long term winners or have set a change of strategy
that has not yet been realized by the market.
INTERNATIONAL GROWTH FUNDS
Principal International Emerging Markets
Kurt Spieler Emerging markets have rallied sharply with the MSCI
[ Photo ] Emerging Markets Free Index up 35% in U.S. dollars
over the last six months. Underlying economies show
signs of stabilization and favorable earnings growth
reinvigorates the markets. During this time period, the asset class outperformed
all regions except Japan. The key reasons behind the rally are: 1) a decline in
emerging bond yields which lowered the cost of capital and reduced equity market
volatility; 2) the beneficial fundamental impact of lower global interest rates
on Asian stocks and structural change in that region, including debt and bank
restructuring; 3) attractive valuation and moderate economic and earnings growth
in Latin America; and 4) continued favorable momentum in global liquidity flows
caused by sizable underexposure to emerging markets in non-dedicated portfolios.
Last fall, the Fund's portfolio was overweight Eastern Europe as those economies
began to prepare for European Union inclusion. As stocks approached full
valuation the Fund was transitioned out of this overweight position. The Fund's
portfolio was also underweight in Latin America as investors expected a
deterioration of macroeconomic fundamentals. As expected, Brazil devalued their
currency in February. Investors separated this devaluation from other emerging
economies, limiting the impact in Latin America and Asia. The Fund's weighting
in Latin America increased slightly as it appears cheap on a valuation basis,
which is offset by slower economic growth. Recently, the Fund's repositioned
exposure to Asia was increased as this region is showing signs of economic
recovery.
The Fund's performance lagged the benchmark in the first quarter of 1999. The
Fund's managers focused on quality and cheap valuations which led the Fund to
owning smaller export companies with strong balance sheets in Asia. The
underperformance is due to underweighting Asian companies and the Asian
companies the Fund does own are smaller companies. These small stocks were
underperformers over the last two quarters as large Asian companies led the
market returning 58% compared to 15% for the average Asian small company. Fund
managers continue to increase Asian weighting by purchasing companies with
attractive domestic growth stories. These include banks in Korea, Singapore,
Taiwan and India.
Principal International Fund
Scott Opsal The international markets recovered during the first
[ Photo ] half of the fiscal year as the global growth outlook
for the world economy improved and the risk of global
recession declined. The main contribution to this
turn-around was global monetary ease, which occurred
in the fourth quarter of 1998 and resulted in higher
equity prices. Commodity prices, other than oil,
remained at very low levels indicating that world
trade continues to be weak.
The Euro was introduced as Europe's official currency in January and has been
weak versus the U.S. dollar since its introduction. The combination of strong
economic data coming out of the United States with sluggish growth persisting in
Europe is the primary reason behind the currency weakness. Although the European
Monetary Union's local equity markets performed well (+22% in the first half of
the fiscal year), the change in currency value resulted in a lower return for
U.S. investors (+9.3%). The strongest market performance in the period was in
emerging markets, which had suffered from very poor performance in the prior
period when global risk seemed to be very high. Japan also performed well due to
restructuring at the corporate level and very strong Yen performance.
The Fund was positioned somewhat defensively during the first half of the fiscal
year, with large positions in food and household product companies. These stocks
performed well early in the period and began to underperform at the end of the
six months as the global growth outlook improved. Outperforming industries in
the portfolio throughout the period were business services and media. Corporate
merger and acquisition activity in Europe was strong during the performance
period and several stocks in the portfolio benefited from involvement in this
corporate activity. The Fund has approximately 9% in emerging markets which
helped performance as these regions recovered.
The Japanese equity market performed well, up 30% on a local currency basis,
however, the economy continued to languish. There has been a shift in investor
perceptions as bad economic and corporate news in Japan is being viewed less
negatively and the market appears to believe there is a way out of the current
crisis. The fundamental outlook remains weak, therefore, the Fund remains
underweighted in Japan.
Looking forward, in Europe the Fund managers believe de-regulation and increased
competition will sustain the current disinflationary trend. Economic growth
looks to remain below U.S. levels but may be helped by easy monetary conditions.
The current Euro weakness should benefit domestic producers and exporters.
The Fund remains underweight Japan because business conditions remain weak and
banks have not solved their bad loan problems. The Fund managers believe there
are select companies which may be fairly valued if restructuring on the
corporate level is successful and analysts are spending significant time
researching possible ideas.
The Fund's managers are maintaining the weighting in Latin America where GDP
revisions continue on the upside and recessions are not as bad as expected. The
Fund's weighting is being increased in Asia where signs of economic recovery and
corporate restructuring are emerging and positive GDP growth for 1999 is now
expected for most of the countries in the region.
Principal International SmallCap
Darren Sleister "And the last shall become the first" accurately
[ Photo ] describes the six month period ending April 30.
Although Asian economies have shown only slight
indications of possible growth, the end to the sudden
decline in economic activity was enough to send the
region's equity markets rocketing skyward. Even
the "black sheep" Japanese small cap market managed a near 60% increase in the
first quarter of 1999. Many of the region's gains were the result of falling
interest rates and increased capital flows. In case anyone doubts the power of
liquidity- driven market rallies, many Korean equities have increased by five to
tenfold since their lows in October. In short, the laggards became leaders and
vice versa. The broad-based rally in Japanese small cap companies confirms our
current stance that Japan is finally taking measures that will nurse the economy
back to health. The Fund's managers have picked up many undervalued companies in
Japan that will prosper even if the healing process takes longer than expected.
These stocks have impacted the portfolio with several up 50-100% since the
initial purchase. Many purchases in Japan are "category killers" in the retail
industry that benefit regardless of what happens in the macroeconomic
environment. It is highly probable the Fund's managers will increase the total
Asian exposure as the region is showing definite evidence of economic repair and
valuations are attractive enough to warrant further exposure.
The Fund remains heavily exposed to European markets but by definition is
decreasing exposure here. The Euro has weakened from its initial inception in
January, slightly biasing returns downward. There are signs of funds shifting
liquidity from Europe into Eastern Asia as the Asian economies once again show
signs of life. The Fund's managers favor cheap European growth stocks and focus
on high returns on capital as well as globally attractive business models.
Global valuation levels and liquidity flows lend themselves to volatile
conditions in the future. However, the Fund's managers are still convinced that
by choosing the best businesses with the highest rates of forward-looking
returns investors will be well rewarded over the long run in this asset class.
The resource countries of Canada and Australia have become large weightings, but
the Fund's holdings are generally in non-commodity companies in these countries.
In Europe some of the Fund's marginal purchases have been in specialty chemical
companies with attractive valuations and high probabilities of either
restructuring or takeovers to help realize their inherent value. The Fund
continues to be heavily exposed to telecoms, technology and service companies.
Important Notes for Growth-Oriented Funds
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. These are
unmanaged indexes into which direct investment is not possible.
Investments in Principal MidCap, Principal SmallCap and Principal International
SmallCap Funds involve more abrupt or erratic market movements and greater risk
than other larger company stock fund investments.
The International Growth Funds are subject to volatility caused by exchange
rates, foreign economies and foreign taxes.
Dow Jones Industrial Index: This average is a price-weighted average of 30
actively traded blue chip stocks.
Morgan Stanley 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.
Standard & Poor's 500 Stock Index: 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 Small-Cap 600 Index: This is a market-value index consisting
of 600 domestic stocks chosen for market size, liquidity and industry group
representation.
Income-Oriented Funds
Principal Bond Fund
Scott Bennett During the last six months the Fund has experienced
[ Photo ] two very different operating environments in the
fixed income market. The emerging market financial
crisis reasserted itself in June and early October
but was eased in mid-October by Federal Reserve rate
cuts. These cuts helped to restore confidence and
liquidity to the markets, which continued to improve from month to month in 1999
with fairly normal market conditions present today. Specifically, as confidence
increased, investors returned to purchasing securities with more financial risk
than U.S. Treasuries and were rewarded with greater returns. This benefited the
Principal Bond Fund, which is primarily invested in BBB-rated corporate bonds,
the best performing part of the investment grade market in 1999.
The Fund's investment strategy during this time period was to be somewhat
conservative with investing new cash flows until the October Fed cuts when Fund
managers became confident the financial markets would improve. Since that time
Fund managers have concentrated on adding good companies with somewhat higher
risk, gradually increasing the overall risk profile of the Fund. This has been
the correct strategy so far in 1999. Given an expectation of a continued strong
U.S. economy and a bottoming world economy this strategy should continue to
prove correct.
Principal Government Securities Income Fund
Marty Schafer Many fixed income fund portfolio managers, in mid to
[ Photo ] late 1998 positioned their portfolios based on a
market perception of continued global risk and an
expectation of a slowing of the U.S. economy.
Portfolio durations were generally longer than their
normal performance benchmarks, and continued fewer
holdings of corporate, mortgage and asset backed securities. During February,
1999 the market perception changed dramatically as portfolio managers began to
realize that 1999 economic growth would be stronger than expected and the
Federal Reserve would not need to cut short-term interest rates to stimulate the
economy. Thus, the better performing portfolios in the last few months have been
those where portfolio managers had durations shorter than their normal
benchmarks, and where a significant number of corporate, mortgage and asset
backed securities were held.
By not changing interest rates in late 1998, the Federal Reserve signaled that
the U.S. economy was still very strong, and likely to experience continued
growth, low inflation and low employment. This Fund's performance was generally
disappointing relative to its benchmark target, however a shortening of duration
during the latter part of 1998 did help add some strength to the Fund's
position. The portfolio management concern early in 1999 was that the U.S.
economy would continue its growth position or even strengthen, which would be
favorable for many of the Fund's portfolio securities but would produce low
absolute returns relative to money market funds. The Fund's manager anticipates
interest rates being channeled into a fairly narrow range for the foreseeable
future, with a slight bias upwards for U.S. interest rates. For U.S. investors
the strong U.S. economic climate will act as an offset for what can be described
as a global economic weakness elsewhere in the world.
Principal High Yield Fund
Mark Denkinger The high market continued to perform well for the six
[ Photo ] months ended April 30. This comes on the heels of a
very difficult and volatile third quarter of 1998,
which experienced the collapse of Long Term Capital,
a well-publicized and highly leveraged hedge fund,
and Russia defaulting. Nevertheless, the high yield
market quickly recovered as the strength of the domestic economy and stock
market continued to remain strong. The Principal High Yield Fund outperformed
all other fixed income sectors. The Fund's performance has been impacted during
this period by the poor performance of several bonds that are having severe
financial difficulties. Default rates are still below historical averages but
have been gradually increasing.
The Principal High Yield Fund maintains a B+ average quality, comprised
primarily of BB and B bonds. This is a relatively conservative risk position
compared to other funds in the high yield market. At the end of April the
account was well diversified among 47 bonds of various sectors. The Fund's
managers are currently overweighting the media, telecom and service industries.
The high yield market is responding well to the strength of the U.S. economy.
Spreads, the amount of additional yield investors require relative to Treasuries
(risk-free) have tightened, new issues have been well received and investors are
pouring money into high yield mutual funds. With most fixed income products
offering inadequate yields in this low interest rate environment, investors have
been turning to the high yield market for its double-digit yields. Given what
looks to be a strong year for economic growth and a strong stock market, high
yield is well positioned to post strong returns in the coming quarters.
Principal Limited Term Bond Fund
Marty Schafer At the beginning of the current fiscal year of the
[ Photo ] Fund, many fixed income portfolio managers were
positioning their portfolios based on a view that
there would be a slowing of the U.S. economy and
continued risk in the global investment markets.
They were anticipating a likely cut in interest
rates and had positioned their portfolios accordingly. However, as things have
turned out, the best performing portfolios were those that were positioned for
the opposite to occur. Generally these were portfolios with shorter than average
durations and a large number of holdings in mortgage and asset backed securities
as well as intermediate term corporate securities.
Relative to its benchmark, the Fund's recent performance has been competitive
among peers but disappointing on absolute basis. In the near term the economic
outlook is that interest rates are expected in continue on a fairly narrow
range, with a slight upward bias for U.S. interest rates. The strong U.S.
economic climate continues to act as an offset for global economic weakness
elsewhere in the world.
Principal Tax-Exempt Bond Fund
Dan Garrett Principal Tax-Exempt Bond Fund continued to provide
[ Photo ] steady results for shareholders over the past six
months. 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 steady results.
Revenue bonds tend to provide higher income than the average municipal bond in
the broader Lehman Municipal Bond Index or the Lipper peer group with only a
slightly higher risk. As credit market fears have been reduced through prudent
moves by the U.S. Fed and other global banks, risk premiums have returned to
more reasonable levels and resulted in favorable performance relative to Lipper
peers. Municipal bond values were steadier than other bond sectors during this
turmoil supported by strong local and state budget surpluses and ongoing growth
in the domestic economy.
Looking forward, the U.S. economy shows signs of continued low inflation with
steady growth. The Fund remains fully invested in revenue bonds to provide
positive relative return compared to the broader municipal market and the Fund's
peers. 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.
Important Notes for Income-Oriented Funds
Greater credit risks are inherent in a fund which invests primarily in high
yield bonds.
* 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.
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.
Money Market Funds
Principal Cash Management Fund
Mike Johnson Steve Schneider
[ Photo ] [ Photo ]
On November 17, 1998, at the Federal Open Market Committee (FOMC) meeting, the
Federal Reserve cut its targeted Fed Funds rate** by .25% to 4.75%. This was the
third in a series of three rate cuts that took place between September and
November of 1998. These cuts were the first to come about since January of 1996
and were aimed at easing the effects of a global slowdown on the U.S. economy.
Since that latter cut, Fed sentiment appeared to be moving toward a more neutral
stance or possibly in the direction of a rate hike somewhere down the line. The
industry average maturity for the majority of the past six months was in the
60-65+ day area. Principal Cash Management Fund strives to stay at or near the
industry average. Fund 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 credit quality investments that is carefully monitored.
An investment in a money market fund is neither insured nor guaranteed by the
U.S. Government. While money market funds strive to maintain a $1.00 per share
net asset value, it is possible to lose money in this type of investment.
* The Fed Funds rate is the rate at which banks lend to each other on an
overnight basis.
April 30, 1999
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
<TABLE>
<CAPTION>
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............ $139,708,013 $195,710,448 $522,617,096
Assets
Investment in securities -- at value (Note 4).. $161,433,476 $258,190,801 $730,673,134
Cash........................................ 73,227 39,865 10,001
Receivables:
Dividends and interest...................... 763,447 147,571 1,046,294
Investment securities sold.................. -- -- 900,005
Capital Shares sold......................... 94,185 657,625 564,831
Prepaid Expenses............................... -- -- --
Other assets................................... 6,789 5,267 37,374
Total Assets 162,371,124 259,041,129 733,231,639
Liabilities
Accrued expenses............................... 73,267 39,266 316,414
Payables:
Investment securities purchased............. -- -- --
Capital Shares reacquired................... 79,685 164,294 964,874
Total Liabilities 152,952 203,560 1,281,288
Net Assets Applicable to
Outstanding Shares ............................ $162,218,172 $258,837,569 $731,950,351
Net Assets Consist of:
Capital Stock.................................. $ 102,793 $ 104,118 $ 227,028
Additional paid-in capital..................... 137,024,950 190,249,381 495,086,675
Accumulated undistributed net investment
income (operating loss)..................... 331,940 (49,995) 3,235,011
Accumulated undistributed net realized
gain (loss) on investment transactions...... 3,033,026 6,053,712 25,345,599
Net unrealized appreciation (depreciation)
of investments.............................. 21,725,463 62,480,353 208,056,038
Total Net Assets $162,218,172 $258,837,569 $731,950,351
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............................ $116,402,562 $166,447,009 $630,443,125
Shares issued and outstanding..... 7,362,351 6,681,066 19,535,952
Net asset value per share.......... $15.81 $24.91 $32.27
Maximum offering price per share(a) ... $16.60 $26.15 $33.88
Class B: Net Assets........................... $22,844,042 $47,864,103 $56,322,598
Shares issued and outstanding..... 1,451,167 1,936,281 1,754,379
Net asset value per share(b)........... $15.74 $24.72 $32.10
Class R: Net Assets........................... $22,971,568 $44,526,457 $45,184,628
Shares issued and outstanding..... 1,465,827 1,794,425 1,412,466
Net asset value per share.............. $15.67 $24.81 $31.99
<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>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal
Growth MidCap Real Estate
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............ $367,079,847 $329,476,686 $13,631,246
Assets
Investment in securities -- at value (Note 4).. $626,119,293 $454,546,632 $13,251,144
Cash........................................ 134,541 2,450,125 9,981
Receivables:
Dividends and interest...................... 383,890 400,291 16,762
Investment securities sold.................. -- 1,517,477 --
Capital Shares sold......................... 1,047,209 288,365 11,281
Prepaid Expenses............................... -- -- 10,692
Other assets................................... 19,360 11,438 --
Total Assets 627,704,293 459,214,328 13,299,860
Liabilities
Accrued expenses............................... 209,180 459,762 --
Payables:
Investment securities purchased............. -- 2,587,622 --
Capital Shares reacquired................... 748,887 880,577 193
Total Liabilities 958,067 3,927,961 193
Net Assets Applicable to
Outstanding Shares ............................ $626,746,226 $455,286,367 $13,299,667
Net Assets Consist of:
Capital Stock.................................. $ 94,298 $ 101,823 $ 15,412
Additional paid-in capital..................... 341,426,300 307,083,820 14,867,338
Accumulated undistributed net investment
income (operating loss)..................... 621,577 -- 27,003
Accumulated undistributed net realized
gain (loss) on investment transactions...... 25,564,605 23,030,778 (1,229,984)
Net unrealized appreciation (depreciation)
of investments.............................. 259,039,446 125,069,946 (380,102)
Total Net Assets $626,746,226 $455,286,367 $13,299,667
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............................ $494,746,625 $353,387,545 $6,697,293
Shares issued and outstanding..... 7,438,967 7,874,017 775,874
Net asset value per share.......... $66.51 $44.88 $8.63
Maximum offering price per share(a) ... $69.83 $47.12 $9.06
Class B: Net Assets........................... $89,660,777 $75,248,145 $3,417,404
Shares issued and outstanding..... 1,350,585 1,705,622 396,901
Net asset value per share(b)........... $66.39 $44.12 $8.61
Class R: Net Assets........................... $42,338,824 $26,650,677 $3,184,970
Shares issued and outstanding..... 640,199 602,700 368,426
Net asset value per share.............. $66.13 $44.22 $8.64
<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>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost............ $45,957,382 $82,371,905
Assets
Investment in securities -- at value (Note 4).. $47,916,012 $116,181,701
Cash........................................ 10,001 71,522
Receivables:
Dividends and interest...................... 16,089 347,822
Investment securities sold.................. -- 1,819,295
Capital Shares sold......................... 81,040 181,852
Prepaid Expenses............................... -- --
Other assets................................... 746 2,338
Total Assets 48,023,888 118,604,530
Liabilities
Accrued expenses............................... 9,668 83,479
Payables:
Investment securities purchased............. -- 1,847,351
Capital Shares reacquired................... 18,945 105,578
Total Liabilities 28,613 2,036,408
Net Assets Applicable to
Outstanding Shares ............................ $47,995,275 $116,568,122
Net Assets Consist of:
Capital Stock.................................. $ 47,825 $ 67,561
Additional paid-in capital..................... 45,508,746 77,428,273
Accumulated undistributed net investment
income (operating loss)..................... -- 282,214
Accumulated undistributed net realized
gain (loss) on investment transactions...... 480,074 4,980,278
Net unrealized appreciation (depreciation)
of investments.............................. 1,958,630 33,809,796
Total Net Assets $47,995,275 $116,568,122
Capital Stock (par value: $.01 a share):
Shares authorized.............................. 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................ $29,844,585 $95,188,520
Shares issued and outstanding..... 2,968,353 5,515,220
Net asset value per share.......... $10.05 $17.26
Maximum offering price per share(a) ... $10.56 $18.12
Class B: Net Assets........................... $10,527,963 $15,220,332
Shares issued and outstanding..... 1,056,195 883,072
Net asset value per share(b)........... $9.97 $17.24
Class R: Net Assets........................... $7,622,727 $6,159,270
Shares issued and outstanding..... 757,925 357,809
Net asset value per share.............. $10.06 $17.21
<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>
See accompanying notes.
</TABLE>
Six Months Ended April 30, 1999
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Principal
Balanced Blue Chip Capital Value
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Net Investment Income
Income:
Dividends................................... $ 835,910 $ 1,977,885 $ 7,918,699
Interest.................................... 2,186,249 182,822 401,869
Total Income 3,022,159 2,160,707 8,320,568
Expenses:
Management and investment advisory
fees (Note 3)............................ 444,522 524,246 1,280,423
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 308,404 517,945 812,703
Transfer and administrative services
(Notes 1 and 3)......................... 270,801 518,046 631,807
Registration fees (Note 1).................. 26,445 48,442 55,473
Custodian fees.............................. 2,537 1,643 1,682
Auditing and legal fees..................... 3,205 3,673 3,096
Directors' fees............................. 3,369 3,483 3,696
Other....................................... 2,997 3,701 14,789
Total Expenses 1,062,280 1,621,179 2,803,669
Net Investment Income (Operating Loss) 1,959,879 539,528 5,516,899
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions 3,034,155 6,072,126 25,333,085
Net realized gains from other investment companies -- -- --
Change in unrealized appreciation/
depreciation of investments................. 6,784,764 24,829,899 44,046,288
Net Realized and Unrealized
Gain on Investments 9,818,919 30,902,025 69,379,373
Net Increase in Net Assets
Resulting from Operations $11,778,798 $31,441,553 $74,896,272
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal
Growth MidCap Real Estate
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Net Investment Income
Income:
Dividends................................... $ 3,074,272 $ 1,939,882 $ 344,256
Interest.................................... 571,377 651,609 12,930
Total Income 3,645,649 2,591,491 357,186
Expenses:
Management and investment advisory
fees (Note 3)............................ 1,098,114 1,250,320 54,533
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 879,708 743,990 28,133
Transfer and administrative services
(Notes 1 and 3)......................... 682,642 886,796 39,450
Registration fees (Note 1).................. 43,282 47,763 8,847
Custodian fees.............................. 2,484 2,564 945
Auditing and legal fees..................... 5,314 4,182 1,889
Directors' fees............................. 3,733 3,696 2,386
Other....................................... 10,424 17,835 1,708
Total Expenses 2,725,701 2,957,146 137,891
Net Investment Income (Operating Loss) 919,948 (365,655) 219,295
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions 30,035,535 23,428,447 (628,976)
Net realized gains from other investment companies -- -- 12,099
Change in unrealized appreciation/
depreciation of investments................. 64,398,826 28,491,297 1,015,205
Net Realized and Unrealized
Gain on Investments 94,434,361 51,919,744 398,328
Net Increase in Net Assets
Resulting from Operations $95,354,309 $51,554,089 $ 617,623
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
<S> <C> <C>
Net Investment Income
Income:
Dividends................................... $ 117,847 $ 1,736,554
Interest.................................... 54,662 79,198
Total Income 172,509 1,815,752
Expenses:
Management and investment advisory
fees (Note 3)............................ 166,201 325,064
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 72,138 196,400
Transfer and administrative services
(Notes 1 and 3)......................... 135,673 160,615
Registration fees (Note 1).................. 13,751 15,850
Custodian fees.............................. 2,378 897
Auditing and legal fees..................... 1,930 2,456
Directors' fees............................. 2,385 3,483
Other....................................... 442 2,954
Total Expenses 394,898 707,719
Net Investment Income (Operating Loss) (222,389) 1,108,033
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions 1,706,875 4,979,007
Net realized gains from other investment companies -- --
Change in unrealized appreciation/
depreciation of investments................. 5,346,508 3,856,120
Net Realized and Unrealized
Gain on Investments 7,053,383 8,835,127
Net Increase in Net Assets
Resulting from Operations $ 6,830,994 $9,943,160
See accompanying notes.
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal
Balanced Blue Chip
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
Six Months Year Six Months Year
Ended Ended Ended Ended
April 30, October 31, April 30, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operations
Net investment income(operating loss)........... $ 1,959,879 $ 3,433,710 $ 539,528 $ 567,773
Net realized gain (loss)
from investment transactions 3,034,155 4,283,465 6,072,126 21,090
Change in unrealized appreciation/
depreciation of investments................ 6,784,764 4,621,248 24,829,899 23,303,399
Net Increase (Decrease) in Net Assets
Resulting from Operations 11,778,798 12,338,423 31,441,553 23,892,262
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... (1,633,893) (2,435,139) (545,735) (571,140)
Class B ................................... (231,157) (269,151) (17,656) (21,463)
Class R.................................... (254,656) (300,221) (43,333) (42,466)
From net realized gain on investments:
Class A ................................... (3,106,897) (5,882,074) (24,683) (8,442,806)
Class B ................................... (579,595) (842,073) (8,209) (1,993,541)
Class R.................................... (605,230) (725,965) (6,612) (1,692,630)
Tax return of capital distributions:
Class A ................................... -- -- -- --
Class B ................................... -- -- -- --
Class R.................................... -- -- -- --
Total Dividends and Distributions (6,411,428) (10,454,623) (646,228) (12,764,046)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 13,835,947 23,880,103 33,638,676 46,354,686
Class B ................................... 4,506,075 8,010,824 11,821,716 15,736,209
Class R.................................... 5,353,248 11,459,488 11,884,381 18,838,628
Shares issued in reinvestment
of dividends and distributions:
Class A.................................... 4,621,874 8,093,981 546,949 8,730,513
Class B ................................... 796,374 1,101,436 26,997 2,000,486
Class R.................................... 858,628 1,026,031 92,076 1,734,897
Shares redeemed:
Class A ................................... (10,349,237) (14,404,904) (14,439,751) (15,983,191)
Class B ................................... (2,132,199) (2,320,820) (3,757,066) (3,609,645)
Class R ................................... (3,417,575) (3,017,907) (5,606,265) (4,847,775)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 14,073,135 33,828,232 34,207,713 68,954,808
Total Increase 19,440,505 35,712,032 65,003,038 80,083,024
Net Assets
Beginning of period........................... 142,777,667 107,065,635 193,834,531 113,751,507
End of period [including
undistributed (overdistributed)
net investment income as set forth below].. $162,218,172 $142,777,667 $258,837,569 $193,834,531
Undistributed (Overdistributed)
Net Investment Income....................... $ 331,940 $ 500,739 $ (49,995) $ 607
<FN>
(a) Period from December 11, 1997 (date operations commenced) through October
31, 1998.
</FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
Capital Value Growth
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
Six Months Year Six Months Year
Ended Ended Ended Ended
April 30, October 31, April 30, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operations
Net investment income(operating loss)........... $ 5,516,899 $9,784,467 $ 919,948 $2,547,476
Net realized gain (loss)
from investment transactions 25,333,085 40,907,350 30,035,535 (4,470,515)
Change in unrealized appreciation/
depreciation of investments................ 44,046,288 33,306,303 64,398,826 58,299,881
Net Increase (Decrease) in Net Assets
Resulting from Operations 74,896,272 83,998,120 95,354,309 56,376,842
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... (4,942,284) (9,413,649) (1,249,572) (2,281,014)
Class B ................................... (212,784) (302,359) (31,615) (84,298)
Class R.................................... (193,815) (272,715) -- (5,786)
From net realized gain on investments:
Class A ................................... (35,538,046) (40,827,739) -- (9,421,497)
Class B ................................... (2,882,612) (2,381,772) (416) (1,280,548)
Class R.................................... (2,464,152) (1,697,455) -- (518,291)
Tax return of capital distributions:
Class A ................................... -- -- -- --
Class B ................................... -- -- -- --
Class R.................................... -- -- -- --
Total Dividends and Distributions (46,233,693) (54,895,689) (1,281,603) (13,591,434)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 44,150,854 73,344,881 63,819,185 80,738,775
Class B ................................... 11,476,186 17,966,775 19,262,545 23,436,918
Class R.................................... 10,011,201 22,090,590 11,852,588 16,186,162
Shares issued in reinvestment
of dividends and distributions:
Class A.................................... 39,586,582 49,153,586 1,208,675 11,393,839
Class B ................................... 3,051,663 2,633,936 32,010 1,340,964
Class R.................................... 2,662,827 2,028,417 -- 524,005
Shares redeemed:
Class A ................................... (42,968,727) (78,578,133) (41,359,267) (49,829,917)
Class B ................................... (5,267,472) (4,560,133) (7,331,707) (6,849,158)
Class R ................................... (6,907,549) (5,699,984) (6,130,658) (4,298,409)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 55,795,565 78,379,935 41,353,371 72,643,179
Total Increase 84,458,144 107,482,366 135,426,077 115,428,587
Net Assets
Beginning of period........................... 647,492,207 540,009,841 491,320,149 375,891,562
End of period [including
undistributed (overdistributed)
net investment income as set forth below].. $731,950,351 $647,492,207 $626,746,226 $491,320,149
Undistributed (Overdistributed)
Net Investment Income....................... $ 3,235,011 $3,066,439 $621,577 $ 982,816
<FN>
(a) Period from December 11, 1997 (date operations commenced) through October
31, 1998.
</FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
MidCap Real Estate
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
Six Months Year Six Months Period
Ended Ended Ended Ended
April 30, October 31, April 30, October 31,
1999 1998 1999 1998(a)
<S> <C> <C> <C> <C>
Operations
Net investment income(operating loss)........... $(365,655) $(1,167,967) $219,295 $292,169
Net realized gain (loss)
from investment transactions 23,428,447 (397,666) (616,877) (613,107)
Change in unrealized appreciation/
depreciation of investments................ 28,491,297 (47,859,461) 1,015,205 (1,395,307)
Net Increase (Decrease) in Net Assets
Resulting from Operations 51,554,089 (49,425,094) 617,623 (1,716,245)
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... -- -- (116,561) (118,861)
Class B ................................... -- -- (53,335) (70,429)
Class R.................................... -- -- (58,094) (67,181)
From net realized gain on investments:
Class A ................................... -- (8,489,268) -- --
Class B ................................... -- (1,505,719) -- --
Class R.................................... -- (456,798) -- --
Tax return of capital distributions:
Class A ................................... -- (3,831) -- --
Class B ................................... -- (351) -- --
Class R.................................... -- (114) -- --
Total Dividends and Distributions -- (10,456,081) (227,990) (256,471)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 33,838,911 84,673,707 1,270,930 6,657,527
Class B ................................... 11,128,533 26,339,797 279,869 3,740,670
Class R.................................... 5,289,291 14,593,610 305,378 3,419,415
Shares issued in reinvestment
of dividends and distributions:
Class A.................................... 122 8,301,363 114,128 117,899
Class B ................................... 378 1,491,031 53,310 72,055
Class R.................................... -- 456,912 58,149 69,699
Shares redeemed:
Class A ................................... (53,731,951) (60,048,924) (383,275) (394,690)
Class B ................................... (12,569,173) (9,249,916) (129,510) (118,103)
Class R ................................... (5,063,672) (5,504,466) (196,682) (54,019)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions (21,107,561) 61,053,114 1,372,297 13,510,453
Total Increase 30,446,528 1,171,939 1,761,930 11,537,737
Net Assets
Beginning of period........................... 424,839,839 423,667,900 11,537,737 --
End of period [including
undistributed (overdistributed)
net investment income as set forth below].. $455,286,367 $424,839,839 $13,299,667 $11,537,737
Undistributed (Overdistributed)
Net Investment Income....................... $ -- $-- $ 27,003 $ 35,698
<FN>
(a) Period from December 11, 1997 (date operations commenced) through October
31, 1998.
</FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc.
Six Months Period Six Months Year
Ended Ended Ended Ended
April 30, October 31, April 30, October 31,
1999 1998(a) 1999 1998
<S> <C> <C> <C> <C>
Operations
Net investment income(operating loss)........... $(222,389) $(258,265) $1,108,033 $2,339,457
Net realized gain (loss)
from investment transactions 1,706,875 (1,226,801) 4,979,007 1,540,023
Change in unrealized appreciation/
depreciation of investments................ 5,346,508 (3,387,878) 3,856,120 19,641,699
Net Increase (Decrease) in Net Assets
Resulting from Operations 6,830,994 (4,872,944) 9,943,160 23,521,179
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... -- -- (977,307) (2,238,576)
Class B ................................... -- -- (93,136) (202,869)
Class R.................................... -- -- (35,695) (59,525)
From net realized gain on investments:
Class A ................................... -- -- (1,241,335) --
Class B ................................... -- -- (171,044) --
Class R.................................... -- -- (61,770) --
Tax return of capital distributions:
Class A ................................... -- (4,160) -- --
Class B ................................... -- (3,120) -- --
Class R.................................... -- (3,120) -- --
Total Dividends and Distributions -- (10,400) (2,580,287) (2,500,970)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 10,116,310 22,354,702 13,637,669 12,723,975
Class B ................................... 3,245,004 8,073,780 4,521,072 4,293,220
Class R.................................... 2,996,325 5,958,145 2,617,533 2,547,194
Shares issued in reinvestment
of dividends and distributions:
Class A.................................... -- 4,160 2,065,420 1,973,186
Class B ................................... -- 3,120 246,521 182,379
Class R.................................... -- 3,120 97,576 59,486
Shares redeemed:
Class A ................................... (2,970,328) (967,357) (10,191,706) (13,805,582)
Class B ................................... (842,630) (232,397) (1,829,584) (2,155,400)
Class R ................................... (1,156,843) (537,486) (888,047) (725,248)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 11,387,838 34,659,787 10,276,454 5,093,210
Total Increase 18,218,832 29,776,443 17,639,327 26,113,419
Net Assets
Beginning of period........................... 29,776,443 -- 98,928,795 72,815,376
End of period [including
undistributed (overdistributed)
net investment income as set forth below].. $47,995,275 $29,776,443 $116,568,122 $98,928,795
Undistributed (Overdistributed)
Net Investment Income....................... $ -- $ -- $282,214 $ 280,319
<FN>
(a) Period from December 11, 1997 (date operations commenced) through October
31, 1998.
</FN>
See accompanying notes.
</TABLE>
April 30, 1999
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Principal Balanced Fund, Inc.
Principal Blue Chip Fund, Inc.
Principal Capital Value Fund, Inc.
Principal Growth Fund, Inc.
Principal MidCap Fund, Inc.
Principal Real Estate Fund, Inc.
Principal SmallCap Fund, Inc.
Principal Utilities Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal Balanced Fund, Inc., Principal Blue Chip Fund, Inc., Principal Capital
Value Fund, Inc., Principal Growth Fund, Inc., Principal MidCap 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 diversified management
investment companies and operate in the mutual fund industry.
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 R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B 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 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 declare 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 period ended April 30, 1999, 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 R Class A Class B Class R Class A Class B Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Balanced Fund, Inc. $137,885 $ 92,474 $ 78,045 $ 58,355 $15,500 $14,119 $ 6,434 $ 4,215 $ 4,995
Principal Blue Chip Fund, Inc. 181,596 191,291 145,058 87,700 32,788 26,797 15,642 6,629 7,201
Principal Capital Value Fund, Inc. 479,610 188,081 145,012 172,307 33,299 29,334 18,162 8,200 6,710
Principal Growth Fund, Inc. 492,701 253,537 133,470 203,764 46,349 23,436 14,513 4,719 5,440
Principal MidCap Fund, Inc. 438,577 209,554 95,859 252,571 61,869 29,545 13,351 6,232 5,961
Principal Real Estate Fund, Inc. 5,943 16,459 5,731 2,065 750 268 1,882 2,399 1,698
Principal SmallCap Fund, Inc. 17,065 42,689 12,384 18,206 5,707 2,399 3,554 2,977 2,619
Principal Utilities Fund, Inc. 113,295 64,130 18,975 44,231 7,424 3,901 5,067 3,638 3,527
</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.
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. Reclassifications made for Principal MidCap Fund,
Inc. and Principal SmallCap Fund, Inc. for the year ended October 31, 1998
aggregated $1,172,263 and $268,657, respectively. Other reclassifications made
for the year ended October 31, 1998 were not material.
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.
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.
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 rate used in this calculation for the Domestic 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 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
</TABLE>
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.
For the year ended October 31, 1998, the Manager voluntarily waived a portion of
its fee for the Principal Utilities Fund, Inc. The amounts waived for the
Principal Utilities Fund, Inc. Class A shares, Class B shares and Class R shares
were $60,477, $9,557 and $12,481, respectively. The Manager ceased its waiver of
expenses October 31, 1998.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A and Class B share redemptions. The
charge is based on declining rates which for Class A shares begin at .75%, and
for Class B shares at 4.00%, 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 period ended April 30, 1999 were as follows:
Class A Class B
Principal Balanced Fund, Inc. $ 357,396 $ 40,994
Principal Blue Chip Fund, Inc. 650,671 71,296
Principal Capital Value Fund, Inc. 848,323 84,649
Principal Growth Fund, Inc. 1,206,935 115,928
Principal MidCap Fund, Inc. 770,613 165,849
Principal Real Estate Fund, Inc. 28,091 1,756
Principal SmallCap Fund, Inc. 227,304 7,367
Principal Utilities Fund, Inc. 248,655 28,232
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:
Period Ended Year Ended
April 30, 1999 October 31, 1998
Principal Balanced Fund, Inc. $ 2,965 $ 6,080
Principal Blue Chip Fund, Inc. 16,0152,315
Principal Capital Value Fund, Inc. 36,110 32,675
Principal Growth Fund, Inc. 29,288 18,750
Principal MidCap Fund, Inc. 7,465 7,716
Principal Real Estate Fund, Inc. 7,775 14,745
Principal SmallCap Fund, Inc. 1,695 1,050
Principal Utilities Fund, Inc. 4,255 3,235
The Domestic Growth Funds bear distribution and shareholder servicing fees with
respect to Class A shares computed at an annual rate of up to .25% of the
average daily net assets attributable to Class A shares of each fund. Each of
the Domestic Growth Funds adopted a distribution plan with respect to Class B
shares that provides for distribution and shareholder servicing fees computed at
an annual rate of up to 1.00% of the average daily net assets attributable to
Class B shares of each fund. Each of the Domestic Growth Funds adopted a
distribution plan with respect to Class R shares that provides for distribution
and shareholder servicing fees computed at an annual rate of up to .75% of the
average daily net assets attributable to Class R shares of each fund.
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, fees 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 April 30, 1999, 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:
Class A Class B Class R
Principal Balanced Fund, Inc. 5,467 116 2,774
Principal Blue Chip Fund, Inc. 64,478 99 71
Principal Capital Value Fund, Inc. 5,356,846 76 55
Principal Growth Fund, Inc. 37,577 37 27
Principal MidCap Fund, Inc. 46,739 45 32
Principal Real Estate Fund, Inc. 417,861 312,058 313,166
Principal SmallCap Fund, Inc. 400,425 300,319 300,319
Principal Utilities Fund, Inc. 5,874 126 94
Note 4 -- Investment Transactions
For the period ended April 30, 1999, 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:
Purchases Sales
Principal Balanced Fund, Inc. $ 30,555,952 $17,887,154
Principal Blue Chip Fund, Inc. 50,782,538 14,296,937
Principal Capital Value Fund, Inc. 105,976,771 70,624,928
Principal Growth Fund, Inc. 139,026,028 50,593,737
Principal MidCap Fund, Inc. 78,289,364 52,509,623
Principal Real Estate Fund, Inc. 5,122,888 3,304,984
Principal SmallCap Fund, Inc. 27,493,140 14,505,797
Principal Utilities Fund, Inc. 23,913,023 13,804,254
At April 30, 1999, 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. $ 25,386,436 $ (3,660,973) $ 21,725,463
Principal Blue Chip Fund, Inc. 70,310,037 (7,829,684) 62,480,353
Principal Capital Value Fund, Inc. 223,207,947 (15,151,909) 208,056,038
Principal Growth Fund, Inc. 269,430,967 (10,391,521) 259,039,446
Principal MidCap Fund, Inc. 160,395,154 (35,325,208) 125,069,946
Principal Real Estate Fund, Inc. 540,502 (920,604) (380,102)
Principal SmallCap Fund, Inc. 7,444,656 (5,486,026) 1,958,630
Principal Utilities Fund, Inc. 35,608,182 (1,798,386) 33,809,796
</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 and 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.
<S> <C> <C> <C> <C>
Period Ended April 30, 1999:
Shares sold:
Class A ......................................... 901,835 1,439,982 1,444,883 1,028,045
Class B ......................................... 294,888 508,260 376,602 309,632
Class R ......................................... 351,035 512,807 328,329 192,424
Shares issued in reinvestment of dividends
and distributions:
Class A ........................................... 301,537 23,622 1,307,207 20,161
Class B ........................................... 52,046 1,213 101,272 536
Class R ......................................... 56,470 3,893 88,532 --
Shares redeemed:
Class A ......................................... (673,912) (619,959) (1,405,195) (668,379)
Class B............................................ (139,717) (161,161) (172,286) (117,275)
Class R ......................................... (224,534) (242,293) (227,705) (100,134)
Net Increase 919,648 1,466,364 1,841,639 665,010
Year Ended October 31, 1998:
Shares sold:
Class A ......................................... 1,578,648 2,196,999 2,383,996 1,435,543
Class B ......................................... 531,549 749,555 582,574 414,689
Class R ......................................... 764,170 893,287 717,506 290,030
Shares issued in reinvestment of dividends and
distributions:
Class A ........................................... 551,343 445,659 1,687,027 219,136
Class B ........................................... 75,490 102,886 91,259 26,054
Class R ......................................... 70,471 89,024 70,217 10,249
Shares redeemed:
Class A ......................................... (952,391) (760,092) (2,537,205) (888,842)
Class B ......................................... (153,016) (171,471) (148,042) (121,844)
Class R ......................................... (202,139) (231,149) (186,811) (76,609)
Net Increase 2,264,125 3,314,698 2,660,521 1,308,406
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal Principal
MidCap Real Estate SmallCap Utilities
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C>
Period Ended April 30, 1999:
Shares sold:
Class A ......................................... 805,293 154,085 1,107,547 814,081
Class B ......................................... 268,747 33,815 358,237 270,266
Class R ......................................... 127,716 36,598 329,014 156,127
Shares issued in reinvestment of dividends and
distributions:
Class A ........................................... 3 14,240 -- 124,254
Class B ........................................... 9 6,641 -- 14,880
Class R ......................................... -- 7,229 -- 5,894
Shares redeemed:
Class A ......................................... (1,276,072) (46,852) (325,365) (606,705)
Class B ......................................... (302,918) (15,750) (93,235) (109,824)
Class R ......................................... (122,007) (23,841) (125,902) (53,422)
Net Increase(Decrease) (499,229) 166,165 1,250,296 615,551
Periods Ended October 31, 1998:
Shares sold:
Class A ......................................... 1,891,397 684,793 2,291,199 853,517
Class B ......................................... 593,857 377,186 817,321 286,360
Class R ......................................... 327,198 346,800 610,143 172,466
Shares issued in reinvestment of
dividends and distributions:
Class A ........................................... 188,881 13,045 425 130,341
Class B ........................................... 34,300 7,946 319 12,065
Class R ......................................... 10,456 7,688 319 3,932
Shares redeemed:
Class A ......................................... (1,383,727) (43,437) (105,453) (928,474)
Class B ......................................... (215,454) (12,937) (26,447) (144,160)
Class R ......................................... (127,550) (6,048) (55,649) (48,307)
Net Increase 1,319,358 1,375,036 3,532,177 337,740
</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 a
bank, which allows the funds to borrow up to $60,000,000, 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 .08% on the
average unused portion 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 quarter. At April 30, 1999, the Domestic Growth Funds had no
outstanding borrowings under the line of credit.
April 30, 1999
SCHEDULES OF INVESTMENTS
GROWTH FUNDS (DOMESTIC)
PRINCIPAL BALANCED FUND, INC.
Shares
Held Value
Common Stocks (57.69%)
Auto & Home Supply Stores (0.79%)
Autozone, Inc. 42,900(a) $1,287,000
Bakery Products (0.79%)
Sara Lee Corp. 57,400 1,277,150
Beverages (1.15%)
Pepsico, Inc. 50,700 1,872,731
Business Credit Institutions (0.21%)
Associates First Capital `A' 7,680 340,320
Chemicals & Allied Products (0.50%)
Dow Chemical Co. 6,200 813,363
Commercial Banks (5.18%)
Bank of America Corp. 22,000 1,584,000
BankBoston Corp. 19,200 940,800
Bankers Trust Corp. 10,000 900,625
Chase Manhattan Corp. 11,800 976,450
First Union Corp. 20,492 1,134,745
Fleet Financial Group, Inc. 8,800 378,950
PNC Financial Corp. 15,900 920,213
Wells Fargo Co. 36,200 1,563,387
8,399,170
Commercial Printing (0.50%)
R.R. Donnelley & Sons Co. 23,100 817,163
Communications Equipment (0.44%)
General Instrument Corp. 19,600(a) 715,400
Computer & Data Processing
Services (3.13%)
Adobe Systems, Inc. 26,100 1,654,087
Electronic Data Systems Corp. 29,800 1,601,750
First Data Corp. 42,800 1,816,325
5,072,162
Computer & Office Equipment (3.15%)
3COM Corp. 24,100(a) 629,612
Cabletron Systems, Inc. 41,800(a) 394,488
Compaq Computer Corp. 31,900 711,769
Hewlett-Packard Co. 18,600 1,467,075
International Business Machines Corp. 9,100 1,903,606
5,106,550
Consumer Products (2.44%)
Fortune Brands, Inc. 34,300 1,354,850
Philip Morris Cos., Inc. 27,700 971,231
RJR Nabisco Holdings Corp. 31,200 803,400
UST, Inc. 29,500 822,313
3,951,794
Crude Petroleum & Natural Gas (1.07%)
Texaco, Inc. 27,700 1,738,175
Department Stores (0.96%)
Dillard's, Inc., Class A 41,100 $ 1,137,956
Penney (J.C.) Co. 9,300 424,313
1,562,269
Drugs (5.30%)
Abbott Laboratories 18,900 915,469
American Home Products Corp. 27,300 1,665,300
Bristol-Myers Squibb Co. 18,600 1,182,262
Johnson & Johnson 21,200 2,067,000
Merck & Co., Inc. 26,200 1,840,550
Pharmacia & Upjohn, Inc. 16,500 924,000
8,594,581
Electric Services (1.94%)
Central & Southwest Corp. 36,100 895,731
Dominion Resources, Inc. 19,900 818,387
Potomac Electric Power Co. 23,400 684,450
Reliant Energy, Inc. 26,700 755,944
3,154,512
Electrical Industrial Apparatus (1.03%)
Emerson Electric Co. 25,800 1,664,100
Electronic Distribution Equipment (0.72%)
General Electric Co. 11,100 1,171,050
Fats & Oils (0.58%)
Archer Daniels Midland Co. 63,193 947,895
Federal & Federally-Sponsored
Credit (0.28%)
Federal National Mortgage Association 6,400 454,000
Fire, Marine & Casualty Insurance (2.50%)
Berkshire Hathaway, Inc., Class A 17(a) 1,298,800
Berkshire Hathaway, Inc., Class B 25(a) 61,750
Loews Corp. 12,800 936,800
Safeco Corp. 24,300 965,925
St. Paul Cos., Inc. 27,800 797,512
4,060,787
General Industrial Machinery (0.52%)
Pall Corp. 45,500 838,906
Grain Mill Products (0.85%)
Ralston-Ralston Purina Group 45,300 1,381,650
Groceries & Related Materials (0.58%)
Sysco Corp. 31,800 944,063
Grocery Stores (0.87%)
American Stores Co. 44,900 1,417,156
Industrial Inorganic Chemicals (0.94%)
Eastman Chemical Co. 9,050 503,972
Praxair, Inc. 19,700 1,019,475
1,523,447
Jewlery, Silverware & Plated Ware (0.11%)
Jostens, Inc. 8,400 180,075
Life Insurance (0.60%)
Lincoln National Corp. 10,100 970,231
Machinery, Equipment & Supplies (0.79%)
Grainger (W. W.), Inc. 25,600 $ 1,284,800
Management & Public Relations (0.51%)
Dun & Bradstreet Corp. 22,500 826,875
Meat Products (0.39%)
Tyson Foods, Inc. 30,450 629,934
Medical Instruments & Supplies (0.58%)
St. Jude Medical, Inc. 33,850(a) 943,569
Medical Services & Health
Insurance (1.57%)
Aon Corp. 11,400 780,900
Conseco, Inc. 30,400 959,500
Pacificare Health Systems, Inc. 10,100(a) 805,791
2,546,191
Miscellaneous Converted Paper
Products (1.05%)
Minnesota Mining & Mfg. Co. 19,100 1,699,900
Miscellaneous Food & Kindred
Products (0.37%)
Universal Foods Corp. 28,600 600,600
Miscellaneous Furniture & Fixtures (0.54%)
Newell Rubbermaid, Inc. 18,400 872,850
Miscellaneous Shopping Goods (0.33%)
Toys `R' Us, Inc. 24,900(a) 541,575
Miscellaneous Transportation (0.50%)
FMC Corp. 12,400(a) 806,000
Motor Vehicles & Equipment (0.58%)
Ford Motor Co. 14,654 936,940
Oil & Gas Field Services (0.39%)
Diamond Offshore Drilling 18,900 624,881
Paper Mills (1.62%)
Fort James Corp. 28,162 1,070,156
Kimberly Clark Corp. 25,400 1,557,337
2,627,493
Petroleum Refining (2.86%)
Amerada Hess Corp. 17,500 997,500
Atlantic Richfield Co. 19,600 1,645,175
British Petroleum Amoco PLC 7,945 899,275
Exxon Corp. 13,200 1,096,425
4,638,375
Plastic Materials & Synthetics (0.99%)
Du Pont (E.I.) De Nemour 22,800 1,610,250
Pulp Mills (0.18%)
Boise Cascade Corp. 7,400 297,850
Rubber & Plastics Footwear (0.57%)
Nike, Inc. 14,900 926,594
Sanitary Services (2.17%)
Browning-Ferris Industries, Inc. 47,100 $ 1,878,112
Waste Management, Inc. 28,942 1,635,223
3,513,335
Savings Institutions (1.30%)
Citigroup, Inc. 28,100 2,114,525
Security Brokers & Dealers (0.23%)
Bear Stearns Cos., Inc. 7,875 367,172
Telephone Communication (2.68%)
AT&T Corp. 30,850 1,557,925
GTE Corp. 18,600 1,245,038
Motorola, Inc. 19,200 1,538,400
4,341,363
Variety Stores (0.36%)
Wal-Mart Stores, Inc. 12,800 588,800
Total Common Stocks 93,595,572
Preferred Stock (0.72%)
Telephone Communications (0.72%)
Sprint - 8.25% Conv. Pfd. 13,500 1,161,000
Principal
Amount Value
Bonds (24.31%)
Beverages (0.62%)
Seagram Co., Ltd. Notes;
6.50%; 4/1/2003 $1,000,000 $ 1,003,491
Blast Furnace & Basic
Steel Products (0.69%)
Carpenter Technology Corp.
Medium-Term Notes;
6.99%; 4/20/2018 800,000 768,963
Quanex Corp. Convertible
Subordinated Debentures;
6.88%; 6/30/2007 350,000 350,000
1,118,963
Business Credit Institutions (1.25%)
CIT Group Holdings
Senior Medium-Term Notes;
6.38%; 10/1/2002 1,000,000 1,013,635
Heller Financial, Inc. Notes;
6.44%; 10/6/2002 1,000,000 1,012,375
2,026,010
Commercial Banks (1.68%)
J.P. Morgan & Co., Inc.
Subordinated Notes;
6.70%; 11/1/2007 1,300,000 1,316,886
NationsBank Corp.
Subordinated Notes;
7.80%; 9/15/2016 1,300,000 1,412,052
2,728,938
Communications Equipment (0.85%)
Motorola, Inc. Debentures;
7.50%; 5/15/2025 1,291,000 1,375,793
Computer & Office Equipment (0.45%)
Seagate Technology, Inc.
Senior Notes;
7.37%; 3/1/2007 $ 750,000 $ 733,559
Consumer Products (1.20%)
Philip Morris Cos., Inc. Notes;
7.25%; 9/15/2001 1,500,000 1,540,806
6.15%; 3/15/2010 400,000 401,224
1,942,030
Department Stores (0.70%)
Dillard's, Inc. Notes;
7.38%; 6/1/2006 600,000 614,504
Fred Meyer, Inc. Senior Notes;
7.38%; 3/1/2005 500,000 518,416
1,132,920
Farm & Garden Machinery (0.79%)
Deere & Co. Senior Debentures;
8.50%; 1/9/2022 1,100,000 1,288,819
Fire, Marine & Casualty Insurance (0.73%)
St. Paul Cos., Inc.
Medium-Term Notes, Series C;
6.38%; 12/15/2008 1,200,000 1,178,251
Forest Products (0.61%)
Weyerhaeuser Co.
Debentures;
6.95%; 10/1/2027 1,000,000 987,183
General Government , NEC (1.03%)
Province of Quebec, Canada
Debentures;
7.50%; 7/15/2002 500,000 523,320
7.00%; 1/30/2007 1,100,000 1,149,379
1,672,699
General Industrial Machinery (0.94%)
Ingersoll-Rand
Medium-Term Notes;
6.46%; 11/19/2003 1,000,000 1,012,110
Timken Co. Medium-Term Notes;
7.30%; 8/13/2002 500,000 519,936
1,532,046
Miscellaneous Investing (1.55%)
Federal Realty Investment Trust Notes;
8.88%; 1/15/2000 1,000,000 1,020,645
Kimco Realty Corp. Senior Notes;
6.50%; 10/1/2003 1,500,000 1,490,439
2,511,084
Mortgage Bankers & Brokers (0.62%)
Countrywide Funding Corp.
Medium-Term Notes;
6.54%; 4/14/2000 1,000,000 1,006,511
Motor Vehicles & Equipment (1.60%)
Chrysler Corp. Debentures;
7.45%; 3/1/2027 $1,400,000 $ 1,509,098
General Motors Corp. Debentures;
7.70%; 4/15/2016 1,000,000 1,084,511
2,593,609
Paper & Paper Products (0.30%)
Boise Cascade Office Products Corp.
Notes; 7.05%; 5/15/2005 500,000 489,009
Paper Mills (0.62%)
International Paper Co. Notes;
6.88%; 7/10/2000 1,000,000 1,012,345
Personal Credit Institutions (1.41%)
Associates Corp. of North America
Senior Notes; 6.45%; 10/15/2001 1,200,000 1,219,811
Ford Motor Credit Co. Notes;
7.75%; 3/15/2005 1,000,000 1,063,882
2,283,693
Petroleum & Petroleum Products (0.63%)
Enron Corp. Notes;
6.75%; 9/1/2004 1,000,000 1,023,349
Plumbing & Heating, Except
Electric (0.62%)
Masco Corp. Notes;
6.13%; 9/15/2003 1,000,000 1,002,270
Railroads (1.45%)
Norfolk Southern Debentures;
9.00%; 3/1/2021 1,100,000 1,335,797
Union Pacific Corp. Notes;
7.00%; 6/15/2000 1,000,000 1,014,950
2,350,747
Security Brokers & Dealers (2.12%)
Bear Stearns Cos., Inc. Senior Notes;
6.13%; 2/1/2003 250,000 248,955
Lehman Brothers, Inc. Senior
Subordinated Notes; 6.13%; 2/1/20011,000,000 1,000,091
Morgan Stanley Group, Inc.
Debentures; 8.88%; 10/15/2001 1,000,000 1,071,140
Salomon Smith Barney Holdings, Inc.
Notes; 7.98%; 3/1/2000 1,100,000 1,122,080
3,442,266
Surety Insurance (1.85%)
Allstate Corp. Debentures;
6.75%; 5/15/2018 2,000,000 1,994,460
MBIA, Inc. Debentures;
7.00%; 12/15/2025 1,000,000 998,782
2,993,242
Trucking & Courier Services,
Except Air (0.00%)
Builders Transport, Inc. Convertible
Subordinated Debentures;
6.50%; 5/1/2011 306,000(b) 765
Total Bonds 39,429,591
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation (FHLMC)
Certificates (3.88%)
FHLMC 6.50% 10/1/2027-1/1/2029 $3,778,021 $3,760,547
FHLMC 7.00 12/1/2027 1,540,182 1,563,450
FHLMC 6.00 1/1/2029 994,177 965,335
Total FHLMC Certificates 6,289,332
Government National Mortgage Association (GNMA)
Certificates (2.56%)
GNMA II 6.00 6/20/2026-9/20/2028 4,293,248 4,145,637
Principal
Amount Value
Asset-Backed Securities (6.54%)
Mortgage Pass-Through Securities (5.92%)
Chase Commercial Mortgage Securities
Corp. Mortgage Pass-Through Cert.,
Series 1998-1, Class B;
6.56%; 5/18/2008 $2,200,000 $ 2,192,322
DLJ Commercial Mortgage Corp.
Mortgage Pass-Through Cert.,
Class A-1B, Series 1998-CF1;
6.41%; 2/18/2008 2,100,000 2,086,392
First Union Commercial Mortgage Trust
Commercial Mortgage Pass-Through
Cert., Series 1999-C1, Class B;
6.22%; 12/15/2008 1,435,000 1,394,217
GMAC Commercial Mortgage Securities,
Inc. Mortgage Pass-Through Cert.,
Series 1998-C2, Class C;
6.50%; 8/15/2008 2,000,000 1,965,540
J.P. Morgan Commercial Mortgage Fin.
Corp. Mortgage Pass-Through Cert.,
Series 1999-C7, Class B;
6.66%; 10/15/2035 450,000 449,446
Morgan Stanley Capital I Inc. Commercial
Mortgage, Series 1999-RM1, Class B;
6.81%; 11/15/2008 1,500,000 1,513,125
9,601,042
Personal Credit Institutions (0.62%)
Chase Manhattan Credit Card Master Trust
Asset-Backed Certificates, Series 97-2,
Class A; 6.30%; 4/15/2003 1,000,000 1,011,460
Total Asset-Backed Securities 10,612,502
Commercial Paper (3.82%)
Personal Credit Institutions (3.82%)
Investment in Joint Trade Account,
Associates Corp.;4.92%; 5/3/1999 $6,199,841 $ 6,199,841
Total Portfolio Investments (99.52%) 161,433,476
Cash, receivables and other assets,
net of liabilities (0.48%) 784,696
Total Net Assets (100.00%) $162,218,172
(a) Non-income producing security - No dividend paid during the period.
(b) Non-income producing - Security in default.
PRINCIPAL BLUE CHIP FUND, INC.
Shares
Held Value
Common Stocks (97.97%)
Bakery Products (2.51%)
Sara Lee Corp. 291,700 $ 6,490,325
Beverages (5.44%)
Anheuser-Busch Cos., Inc. 97,000 7,093,125
PepsiCo, Inc. 189,000 6,981,188
14,074,313
Commercial Banks (5.80%)
Bank One Corp. 124,619 7,352,521
J.P. Morgan & Co., Inc. 56,800 7,653,800
15,006,321
Computer & Office Equipment (6.14%)
Automatic Data Processing, Inc. 176,400 7,849,800
Hewlett-Packard Co. 102,100 8,053,137
15,902,937
Drugs (10.74%)
American Home Products Corp. 111,600 6,807,600
Johnson & Johnson 75,000 7,312,500
Merck & Co., Inc. 95,600 6,715,900
Pharmacia & Upjohn, Inc. 124,200 6,955,200
27,791,200
Eating & Drinking Places (2.62%)
McDonald's Corp. 159,800 6,771,525
Electrical Industrial Apparatus (2.99%)
Emerson Electric Co. 120,100 7,746,450
Electronic Distribution Equipment (2.77%)
General Electric Co. 68,000 7,174,000
Fire, Marine & Casualty Insurance (5.50%)
American International Group, Inc. 60,475 7,102,033
Chubb Corp. 120,300 7,127,775
14,229,808
General Industrial Machinery (1.81%)
Pall Corp. 254,200 4,686,813
Grain Mill Products (2.86%)
Kellogg Co. 199,900 $ 7,396,300
Groceries & Related Products (2.99%)
Sysco Corp. 260,700 7,739,531
Medical Instruments & Supplies (2.84%)
Becton, Dickinson & Co. 198,000 7,363,125
Metal Cans & Shipping Containers (3.00%)
Crown Cork & Seal Co., Inc. 238,600 7,754,500
Miscellaneous Converted Paper
Products (3.43%)
Minnesota Mining & Mfg. Co. 99,900 8,891,100
Miscellaneous Food & Kindred
Products (2.94%)
Bestfoods 151,800 7,618,462
Miscellaneous Shopping Goods
Stores (1.59%)
Toys `R' Us, Inc. 188,700(a) 4,104,225
Petroleum Refining (9.14%)
Exxon Corp. 94,300 7,832,794
Mobil Corp. 75,200 7,877,200
Royal Dutch Petroleum Co. ADR 135,300 7,940,419
23,650,413
Preserved Fruits & Vegetables (2.70%)
Heinz (H.J.) Co. 149,600 6,984,450
Sanitary Services (3.63%)
Browning-Ferris Industries, Inc. 235,400 9,386,575
Sugar & Confectionery Products (2.77%)
Wrigley (Wm.) Jr. Co. 80,800 7,165,950
Telephone Communication (8.41%)
AT&T Corp. 135,750 6,855,375
GTE Corp. 110,800 7,416,675
Motorola, Inc. 93,700 7,507,712
21,779,762
Variety Stores (2.47%)
Wal-Mart Stores, Inc. 139,200 6,403,200
Women's Clothing Stores (2.88%)
The Limited, Inc. 170,500 7,459,375
Total Common Stocks 253,570,660
Principal
Amount Value
Commercial Paper (1.78%)
Personal Credit Institutions (1.78%)
Investment In Joint Trade Account;
Associates Corp.; 4.92%; 05/03/1999 $4,620,141 $ 4,620,141
Total Portfolio Investments (99.75%) 258,190,801
Cash, receivables and other assets,
net of liabilities (0.25%) 646,768
Total Net Assets (100.00%) $258,837,569
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL CAPITAL VALUE FUND, INC.
Shares
Held Value
Common Stocks (98.76%)
Beverages (4.99%)
Anheuser-Busch Cos., Inc. 285,000 $20,840,625
PepsiCo, Inc. 424,100 15,665,194
36,505,819
Commercial Banks (18.45%)
Bank of America Corp. 243,000 17,496,000
Bank One Corp. 324,764 19,161,076
Chase Manhattan Corp. 200,000 16,550,000
Comerica, Inc. 270,000 17,566,875
First Union Corp. 331,160 18,337,985
Keycorp 459,000 14,200,313
Summit Bancorp. 364,500 15,445,687
Union Planters Corp. 380,800 16,303,000
135,060,936
Communications Equipment (2.17%)
Harris Corp. 459,100 15,867,644
Computer & Office Equipment (1.93%)
Hewlett-Packard Co. 82,000 6,467,750
International Business Machines Corp. 36,600 7,656,263
14,124,013
Crude Petroleum & Natural Gas (2.68%)
Texaco, Inc. 312,700 19,621,925
Department Stores (2.50%)
Sears, Roebuck & Co. 397,300 18,275,800
Drug Stores & Proprietary Stores (0.08%)
Rite Aid Corp. 25,000 582,812
Drugs (7.17%)
Abbott Laboratories 372,800 18,057,500
American Home Products Corp. 286,600 17,482,600
Pharmacia & Upjohn, Inc. 303,000 16,968,000
52,508,100
Electric Services (3.26%)
Dominion Resources, Inc. 98,200 $ 4,038,475
FPL Group, Inc. 85,100 4,797,513
Reliant Energy, Inc. 530,000 15,005,625
23,841,613
Electrical Industrial Apparatus (1.07%)
Emerson Electric Co. 121,394 7,829,913
Electronic Distribution Equipment (1.17%)
General Electric Co. 81,000 8,545,500
General Industrial Machinery (0.00%)
Tyco International Ltd. 6 487
Grain Mill Products (2.27%)
Kellogg Co. 448,500 16,594,500
Greeting Cards (2.03%)
American Greetings Corp. 568,500 14,887,594
Groceries & Related Products (1.71%)
Sysco Corp. 421,000 12,498,437
Grocery Stores (1.21%)
American Stores Co. 280,000 8,837,500
Life Insurance (2.21%)
American General Corp. 218,600 16,176,400
Machinery, Equipment & Supplies (2.83%)
Grainger (W. W.), Inc. 412,800 20,717,400
Management & Public Relations (1.36%)
Dun & Bradstreet Corp. 270,600 9,944,550
Medical Services & Health
Insurance (1.05%)
Aon Corp. 111,900 7,665,150
Metal Cans & Shipping Containers (5.04%)
Ball Corp. 311,100 17,091,056
Crown Cork & Seal Co., Inc. 609,800 19,818,500
36,909,556
Miscellaneous Converted Paper
Products (5.66%)
Avery Dennison Corp. 367,000 25,047,750
Minnesota Mining & Mfg. Co. 183,700 16,349,300
41,397,050
Miscellaneous Food & Kindred
Products (0.28%)
Universal Foods Corp. 96,600 2,028,600
Miscellaneous Furniture & Fixtures (2.67%)
Newell Rubbermaid, Inc. 412,700 19,577,456
Paper Mills (2.86%)
Kimberly Clark Corp. 341,200 20,919,825
Petroleum Refining (7.13%)
Atlantic Richfield Co. 273,200 22,931,725
Chevron Corp. 201,400 20,089,650
Exxon Corp. 110,100 9,145,181
52,166,556
Plumbing & Heating, Except
Electrical (2.58%)
Masco Corp. 643,000 $18,888,125
Rental of Railroad Cars (2.25%)
GATX Corp. 480,000 16,500,000
Sanitary Services (2.61%)
Browning-Ferris Industries, Inc. 480,000 19,140,000
Telephone Communications (7.54%)
AT&T Corp. 368,250 18,596,625
SBC Communications, Inc. 350,280 19,615,680
U.S. West, Inc. 325,000 17,001,563
55,213,868
Total Common Stocks 722,827,129
Principal
Amount Value
Commercial Paper (1.07%)
Personal Credit Institutions (1.07%)
Investment in Joint Trade Account,
Associates Corp.; 4.92%; 5/3/99 $7,846,005 $ 7,846,005
Total Portfolio Investments (99.83%) 730,673,134
Cash, receivables and other assets,
net of liabilities (0.17%) 1,277,217
Total Net Assets (100.00%) $731,950,351
PRINCIPAL GROWTH FUND, INC.
Shares
Held Value
Common Stocks (98.87%)
Advertising (0.94%)
Interpublic Group of Cos., Inc. 75,900 $ 5,886,994
Beverages (2.55%)
Coca-Cola Co. 60,000 4,080,000
PepsiCo, Inc. 322,500 11,912,344
15,992,344
Carpets & Rugs (0.58%)
Shaw Industries, Inc. 200,000(a) 3,625,000
Cash Grains (1.20%)
Pioneer Hi-Bred International, Inc. 202,000 7,549,750
Commercial Banks (10.64%)
Bank One Corp. 213,500 12,596,500
Chase Manhattan Corp. 165,500 13,695,125
Firstar Corp. 189,000 5,681,813
FirstMerit Corp. 100,000 2,781,250
Mellon Bank Corp. 150,000 11,146,875
National City Corp. 72,000 5,166,000
US Bancorp 305,000 11,304,062
Wells Fargo Co. 100,000 4,318,750
66,690,375
Communications Equipment (2.75%)
General Instrument Corp. 175,000(a) $6,387,500
Lucent Technologies, Inc. 180,000 10,822,500
17,210,000
Computer & Data Processing
Services (3.12%)
GTECH Holdings Corp. 139,300(a) 3,630,506
Microsoft Corp. 176,000(a) 14,311,000
Network Associates, Inc. 123,000(a) 1,629,750
19,571,256
Computer & Office Equipment (7.21%)
Automatic Data Processing, Inc. 210,000 9,345,000
Ceridian Corp. 350,600(a) 12,840,725
Cisco Systems, Inc. 45,000(a) 5,132,813
Compaq Computer Corp. 67,567 1,507,589
Hewlett-Packard Co. 79,100 6,239,012
International Business Machines Corp. 32,000 6,694,000
Pitney Bowes, Inc. 49,400 3,454,912
45,214,051
Consumer Products (0.85%)
Philip Morris Cos., Inc. 152,200 5,336,513
Drug Stores & Proprietary Stores (1.78%)
CVS Corp. 234,000 11,144,250
Drugs (13.44%)
American Home Products Corp. 217,000 13,237,000
Bristol-Myers Squibb Co. 118,000 7,500,375
Forest Laboratories, Inc. 132,600(a) 5,900,700
Genzyme Corp. - General Division 100,756(a) 3,803,539
Johnson & Johnson 141,000 13,747,500
Lilly (Eli) & Co. 100,000 7,362,500
Merck & Co., Inc. 159,600 11,211,900
Pharmacia & Upjohn, Inc. 220,000 12,320,000
SmithKline Beecham PLC ADR 139,500 9,163,406
84,246,920
Electronic Components &
Accessories (4.21%)
Intel Corp. 264,000 16,153,500
Linear Technology Corp. 180,000 10,237,500
26,391,000
Electronic Distribution Equipment (1.77%)
General Electric Co. 105,000 11,077,500
Engineering & Architectural
Services (1.12%)
Paychex, Inc. 137,000 6,995,562
Federal & Federally Sponsored
Credit (2.25%)
Federal Home Loan Mtg. 124,700 7,824,925
Federal National Mortgage Association 88,600 6,285,063
14,109,988
Fire, Marine & Casualty Insurance (0.90%)
American International Group, Inc. 48,000 5,637,000
General Industrial Machinery (3.87%)
Ingersoll-Rand Co. 105,000 $ 7,264,688
Tyco International Ltd. 209,400 17,013,750
24,278,438
Grain Mill Products (1.66%)
Ralston-Ralston Purina Group 342,000 10,431,000
Groceries & Related Products (1.24%)
Sysco Corp. 262,800 7,801,875
Grocery Stores (0.09%)
Casey's General Stores, Inc. 42,104 557,878
Hospitals (1.43%)
Humana, Inc. 105,000(a) 1,430,625
Universal Health
Services, Inc., Class B 145,400(a) 7,533,537
8,964,162
Hotels & Motels (2.57%)
Marriott International, Inc., Class A 384,700 16,109,313
Investment Offices (1.22%)
AMVESCAP PLC Sponsored ADR 140,000 7,638,750
Lumber & Other Building
Materials (2.30%)
Home Depot, Inc. 240,000 14,385,000
Medical Instruments & Supplies (2.95%)
Becton, Dickinson & Co. 153,000 5,689,687
Boston Scientific Corp. 300,000(a) 12,768,750
18,458,437
Medical Services & Health
Insurance (2.27%)
Aon Corp. 60,000 4,110,000
Foundation Health
Systems, Inc., Class A 147,500(a) 2,037,343
PacifiCare Health
Systems, Inc., Class B 28,540(a) 2,276,957
Torchmark Corp. 71,700 2,451,244
United Healthcare Corp. 60,000 3,367,500
14,243,044
Miscellaneous Converted Paper
Products (0.45%)
Minnesota Mining & Mfg. Co. 31,400 2,794,600
Miscellaneous Fabricated Metal
Products (0.77%)
Parker-Hannifin Corp. 103,350 4,850,991
Miscellaneous Food & Kindred
Products (0.40%)
Bestfoods 50,000 2,509,375
Miscellaneous Investing (1.34%)
Cendant Corp. 465,500(a) 8,379,000
Motor Vehicles & Equipment (0.74%)
Dana Corp. 98,000 4,618,250
Oil & Gas Field Services (1.06%)
Schlumberger Ltd. 104,000 6,643,000
Petroleum Refining (1.90%)
Atlantic Richfield Co. 40,000 $ 3,357,500
Exxon Corp. 102,600 8,522,212
11,879,712
Plumbing & Heating, Except
Electric (0.75%)
Masco Corp. 160,000 4,700,000
Refrigeration & Service Machinery (0.39%)
Tecumseh Products Co. 40,000 2,445,000
Sanitary Services (1.00%)
Browning-Ferris Industries, Inc. 80,000 3,190,000
Waste Management, Inc. 53,945 3,047,893
6,237,893
Savings Institutions (2.62%)
Citigroup, Inc. 218,450 16,438,362
Soap, Cleaners & Toilet Goods (3.09%)
Colgate-Palmolive Co. 80,000 8,195,000
Ecolab, Inc. 266,400 11,172,150
19,367,150
Sugar & Confectionery Products (0.78%)
Wrigley (Wm.) Jr. Co. 55,000 4,877,813
Telephone Communication (6.64%)
Ameritech Corp. 80,000 5,475,000
AT&T Corp. 155,595 7,857,548
GTE Corp. 84,000 5,622,750
MCI WorldCom, Inc. 214,829(a) 17,656,258
Motorola, Inc. 62,700 5,023,837
41,635,393
Variety Stores (1.24%)
Wal-Mart Stores, Inc. 168,600 7,755,600
Women's & Children's
Undergarments (0.79%)
Warnaco Group, Inc. 185,200 4,942,525
Total Common Stocks 619,621,064
Principal
Amount Value
Bond (0.38%)
Electrical Industrial Apparatus (0.38%)
Liebert Co., Convertible Subordinated
Debentures; 8.00%; 11/15/2010 $ 500,000 $ 2,405,000
Commercial Paper (0.65%)
Business Credit Institutions (0.58%)
American Express Credit Corp.;
4.68%; 5/3/1999 3,610,301 3,615,000
Personal Credit Institutions (0.07%)
Investment In Joint Trade Account,
Associates Corp.; 4.92%; 5/3/1999 478,229 478,229
Total Commercial Paper 4,093,229
Total Portfolio Investments (99.90%) 626,119,293
Cash, receivables and other assets,
net of liabilities (0.10%) $ 626,933
Total Net Assets (100.00%) $626,746,226
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL MIDCAP FUND, INC.
Shares
Held Value
Common Stocks (99.68%)
Blast Furnace & Basic Steel (1.03%)
Carpenter Technology Corp. 150,000 $ 4,696,875
Business Credit Institution (1.32%)
C.I.T. Group, Inc., Class A 185,000 6,012,500
Carpets & Rugs (0.79%)
Shaw Industries, Inc. 198,700 3,601,437
Chemicals & Allied Products (0.29%)
Sigma-Aldrich Corp. 40,400 1,313,000
Commercial Banks (10.34%)
Associated Banc-corp. 167,535 6,094,086
First Federal Capital Corp. 328,796 4,685,343
FirstMerit Corp. 81,800 2,275,062
Independent Bank Corp. Michigan 104,265 1,746,439
Mercantile Bancorp, Inc. 179,829 10,250,253
Merchants Bancorp, Inc. 116,200 2,963,100
North Fork Bancorp, Inc. 362,187 8,149,207
Peoples Heritage Financial Group, Inc.224,800 4,355,500
Princeton National Bancorp, Inc. 150,000 2,325,000
Summit Bancorp 99,650 4,222,669
47,066,659
Commercial Printing (0.12%)
Merrill Corp. 35,400 526,575
Computer & Data Processing
Services (5.71%)
American Management Systems, Inc. 101,000(a) 3,471,875
Cadence Design Systems, Inc. 230,100(a) 3,120,731
Cerner Corp. 245,500(a) 4,173,500
ICG Communications, Inc. 129,000(a) 2,846,062
Microsoft Corp. 26,800(a) 2,179,175
Network Associates, Inc. 123,100(a) 1,631,075
Synopsys, Inc. 181,100(a) 8,534,338
25,956,756
Computer & Office Equipment (2.58%)
3COM Corp. 150,000(a) 3,918,750
EMC Corp. 71,700(a) 7,810,819
11,729,569
Construction & Related Machinery (0.64%)
Cooper Cameron Corp. 75,000(a) 2,896,875
Crude Petroleum & Natural Gas (2.39%)
Devon Energy Corp. 165,000 5,486,250
Newfield Exploration Co. 200,000(a) 5,375,000
10,861,250
Dairy Products (0.20%)
Dreyer's Grand Ice Cream, Inc. 65,400 $ 891,075
Department Stores (1.44%)
Saks, Inc. 232,060(a) 6,570,199
Drugs (4.93%)
Centocor, Inc. 140,700(a) 6,243,562
Dura Pharmaceuticals, Inc. 282,000(a) 3,384,000
Genzyme Corp. - General Division 83,000(a) 3,133,250
Pharmacia & Upjohn, Inc. 75,700 4,239,200
Watson Pharmaceuticals 134,000(a) 5,427,000
22,427,012
Drugs, Proprietaries, & Sundries (0.79%)
McKesson HBOC, Inc. 102,120 3,574,200
Electronic Components &
Accessories (5.89%)
Intel Corp. 37,200 2,276,175
Jabil Circuit, Inc. 199,000(a) 9,265,938
Linear Technology Corp. 110,600 6,290,375
Solectron Corp. 64,800(a) 3,142,800
Celestica, Inc. 149,800(a) 5,860,925
26,836,213
Engineering & Architectural
Services (1.32%)
Paychex, Inc. 117,743 6,012,252
Fabricated Rubber Products, NEC (2.34%)
Weatherford International 314,800(a) 10,663,850
Fire, Marine & Casualty Insurance (0.80%)
Berkley W.R. Corp. 132,750 3,650,625
General Industrial Machinery (4.25%)
Kaydon Corp. 181,600 6,129,000
Pentair, Inc. 137,500 6,462,500
Roper Industries, Inc. 237,500 6,768,750
19,360,250
Grocery Stores (0.82%)
Casey's General Stores, Inc. 282,800 3,747,100
Holding Offices (0.49%)
ISB Financial Corp. 109,100 2,236,550
Hospitals (2.39%)
Humana, Inc. 249,300(a) 3,396,712
Universal Health
Services, Inc., Class B 144,800(a) 7,502,450
10,899,162
Hotels & Motels (3.50%)
Four Seasons Hotel, Inc. 201,200 8,400,100
Marriott International, Inc., Class A 179,800 7,529,125
15,929,225
Household Appliances (2.12%)
Maytag Corp. 141,300 9,661,387
Industrial Inorganic Chemicals (0.49%)
ICN Pharmaceuticals, Inc. 67,821 $ 2,242,332
Industrial Machinery, NEC (1.90%)
Coltec Industries 401,000(a) 8,671,625
Insurance Agents, Brokers &
Services (1.79%)
Equifax, Inc. 226,600 8,143,438
Investment Offices (1.60%)
AMVESCAP PLC Sponsored ADR 133,820 7,301,554
Iron & Steel Foundries (1.06%)
Precision Castparts Corp. 112,800 4,822,200
Laundry, Cleaning, & Garment
Services (2.03%)
G&K Services, Inc. 84,600 3,955,050
Stewart Enterprises Inc., Class A 266,700 5,300,663
9,255,713
Measuring & Controlling Devices (1.05%)
Isco, Inc. 1 2
Millipore Corp. 156,400 4,799,525
4,799,527
Meat Products (0.95%)
Michael Foods, Inc. 188,500 4,311,938
Medical Instruments & Supplies (2.52%)
Boston Scientific Corp. 164,000(a) 6,980,250
Steris Corp. 252,600(a) 4,483,650
11,463,900
Medical Services & Health
Insurance (5.85%)
Alternative Living Services 234,200(a) 5,210,950
Foundation Health
Systems, Inc., Class A 422,540(a) 5,836,334
Orthofix International NV 156,200(a) 2,343,000
Pacificare Health
Systems, Inc., Class B 51,391 4,100,038
Torchmark Corp. 127,300 4,352,069
United Healthcare Corp. 85,000 4,770,625
26,613,016
Miscellaneous Chemical Products (1.16%)
Cytec Industries 72,600(a) 2,064,562
Fuller H.B. Co. 47,500 3,235,938
5,300,500
Miscellaneous Investing (0.51%)
Cendant Corp. 129,938(a) 2,338,884
Miscellaneous Furniture & Fixtures (1.18%)
Newell Rubbermaid, Inc. 112,884 5,354,935
Office Furniture (0.48%)
Chromcraft Revington, Inc. 142,800(a) 2,186,625
Oil & Gas Field Services (1.09%)
Diamond Offshore Drilling 150,000 4,959,375
Operative Builders (1.25%)
D. R. Horton, Inc. 294,500 5,687,531
Paints & Allied Products (0.62%)
RPM, Inc. 200,500 $ 2,819,531
Plumbing, Heating &
Air Conditioning (1.34%)
Apogee Enterprises, Inc. 498,200 6,102,950
Public Building & Related Furniture (0.87%)
BE Aerospace, Inc. 231,700(a) 3,953,381
Refrigeration & Service Machinery (0.34%)
Tecumseh Products Co. 25,200 1,540,350
Sanitary Services (3.04%)
Browning-Ferris Industries, Inc. 113,200 4,513,850
Republic Services, Inc., Class A 453,300(a) 9,320,981
13,834,831
Savings Institutions (5.47%)
Greenpoint Financial Corp. 227,900 7,976,500
Sterling Financial Corp. 124,133(a) 1,830,962
TCF Financial Corp. 364,900 10,582,100
WSFS Financial Corp. 290,000 4,531,250
24,920,812
Security Brokers & Dealers (1.34%)
Jefferies Group, Inc. 106,400 2,433,900
Investment Tech Group 106,400 3,684,100
6,118,000
Telephone Communication (4.33%)
Hyperion Telecomm, Inc., Class A 300,000(a) 3,750,000
McLeodUSA, Inc. 193,900(a) 10,870,519
Winstar Communications, Inc. 105,000(a) 5,105,625
19,726,144
Trucking & Courier Services, Except
Air (0.50%)
J.B. Hunt Transport Services, Inc. 109,900 2,287,294
Women's & Children's
Undergarments (0.43%)
Warnaco Group, Inc. 73,612 1,964,520
Total Common Stocks 453,841,502
Principal
Amount Value
Commercial Paper (0.16%)
Personal Credit Institutions (0.16%)
Investment In Joint Trade Account,
Associates Corp.; 4.92%: 5/3/1999 $705,130 $ 705,130
Total Portfolio Investments (99.84%) 454,546,632
Cash, receivables and other assets,
net of liabilities (0.16%) 739,735
Total Net Assets (100.00%) $455,286,367
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL REAL ESTATE FUND, INC.
Shares
Held Value
Common Stocks (99.10%)
Apartment REITs (26.56%)
Apartment Investment & Management Co. 13,000 $ 520,812
Archstone Communities Trust 17,400 394,763
Avalonbay Communities, Inc. 9,987 349,545
Berkshire Realty Company, Inc. 31,300 359,950
Charles E. Smith
Residential Realty, Inc. 2,000 65,000
Equity Residential Properties Trust 14,500 670,625
Gables Residential Trust 16,800 400,050
Irvine Apartment Communities, Inc. 18,300 613,050
Walden Residential Properties, Inc. 8,300 158,738
3,532,533
Factory Outlet REITs (1.74%)
Chelsea GCA Realty, Inc. 7,000 230,562
Hotel REITs (8.49%)
Crestline Capital Corp. 2,430(a) 37,361
Felcor Lodging Trust, Inc. 7,600 181,925
Host Marriott Corp. 26,414 351,636
Meristar Hospitality Corp. 14,700 338,100
Sunstone Hotel Investors, Inc. 24,000 220,500
1,129,522
Mall REITs (12.68%)
CBL & Associates Properties, Inc. 16,300 400,369
General Growth Properties, Inc. 10,900 401,256
Simon Property Group, Inc. 13,000 372,938
The Macerich Co. 20,000 511,250
1,685,813
Manufactured Housing REITs (5.31%)
Manufactured Home Communities, Inc. 17,400 440,438
Sun Communities, Inc. 7,600 266,000
706,438
Mortgage, Mixed Use & Miscellaneous
REITs (3.40%)
Bradley Real Estate, Inc. 22,700 452,581
Net Lease REITs (2.25%)
Trinet Corporate Realty Trust, Inc. 10,900 299,069
Office & Industrial REITs (29.62%)
Arden Realty Group, Inc. 13,200 330,000
Boston Properties, Inc. 5,500 199,719
Cabot Industrial Trust 24,600 501,225
Centerpoint Properties Corp. 2,100 75,469
Equity Office Properties Trust 19,200 529,200
Great Lakes REIT, Inc. 3,900 60,206
Highwoods Properties, Inc. 11,000 283,250
Kilroy Realty Corp. 10,900 256,831
Mack-Cali Realty Corp. 6,700 207,281
Prologis Trust 28,950 607,950
Spieker Properties, Inc. 9,950 390,538
Tower Realty Trust, Inc. 24,300 498,150
3,939,819
Self Storage REITs (2.63%)
Storage USA, Inc. 10,900 350,162
Shopping Center REITs (6.42%)
AMB Property Corp. 3,000 $ 66,000
Developers Diversified Realty Corp. 20,200 319,412
Federal Realty Investment Trust 16,000 382,000
Pan Pacific Retail Properties, Inc. 4,800 86,400
853,812
Total Common Stocks 13,180,311
Principal
Amount Value
Commercial Paper (0.53%)
Personal Credit Institutions (0.53%)
Investment In Joint Trade Account,
Associates Corp.; 4.92%; 05/03/99 $70,833 $ 70,833
Total Portfolio Investments (99.63%) 13,251,144
Cash and receivables, net of liabilities (0.37%) 48,523
Total Net Assets (100.00%) $13,299,667
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL SMALLCAP FUND, INC.
Shares
Held Value
Common Stocks (98.73%)
Blast Furnace & Basic Steel
Products (1.11%)
Carpenter Technology Corp. 17,000 $ 532,312
Commercial Banks (1.62%)
Cullen Frost Bankers 9,500 512,406
Valley National Bancorp 9,200 265,075
777,481
Commercial Printing (1.52%)
Bowne & Co., Inc. 30,000 562,500
World Color Press, Inc. 6,450(a) 164,878
727,378
Communications Equipment (4.23%)
DSP Communications, Inc. 41,700(a) 1,136,325
Sawtek, Inc. 9,100(a) 320,775
Spectrian Corp. 14,100(a) 193,875
Tekelec 42,000(a) 379,313
2,030,288
Computer & Data Processing
Services (7.11%)
Advanced Communications System, Inc. 45,950(a) $ 574,375
Ciber, Inc. 22,000(a) 415,250
Cotelligent, Inc. 21,000(a) 245,437
Gtech Holdings Corp. 8,250(a) 215,016
Hypercom Corp. 64,500(a) 419,250
ICG Communications, Inc. 25,100(a) 553,769
SPSS, Inc. 9,200(a) 158,700
Structural Dynamics Research Corp. 10,000(a) 194,375
Synopsys, Inc. 6,200(a) 292,175
Unigraphics Solutions, Inc. 23,000(a) 342,125
3,410,472
Computer & Office Equipment (4.68%)
Box Hill Systems Corp. 110,000(a) 666,875
Fore Systems, Inc. 32,000(a) 1,080,000
Neomagic Corp. 25,000(a) 292,187
Smart Modular Technologies, Inc. 15,650(a) 209,319
2,248,381
Construction & Related Machinery (0.79%)
JLG Industries, Inc. 23,500 377,469
Crude Petroleum & Natural Gas (1.21%)
Nuevo Energy Co. 36,500(a) 579,437
Drugs (5.63%)
Chirex, Inc. 16,100(a) 418,600
Dura Pharmaceuticals, Inc. 16,500(a) 198,000
Geltex Pharmaceuticals, Inc. 25,000(a) 428,125
Inhale Therapeutic Systems, Inc. 11,950(a) 343,563
Liposome Co., Inc. 60,000(a) 750,000
Matritech, Inc. 360,900(a) 563,906
2,702,194
Drugs, Proprietaries & Sundries (0.96%)
Bindley Western Industries, Inc. 14,900 460,037
Eating & Drinking Places (2.01%)
CEC Entertainment, Inc. 9,800(a) 367,500
Morton's Restaurant Group, Inc. 35,000(a) 595,000
962,500
Electric Services (1.02%)
TNP Enterprises, Inc. 15,700 490,625
Electronic Components &
Accessories (2.93%)
DII Group, Inc. 35,050(a) 1,086,550
Microchip Technology, Inc. 9,100(a) 318,500
1,405,050
Fabricated Structural Metal
Products (0.99%)
Aavid Thermal Technologies, Inc. 25,000(a) 476,562
Family Clothing Stores (1.87%)
Pacific Sunwear of California, Inc. 13,000(a) 482,219
Ross Stores, Inc. 9,000 413,437
895,656
Fire, Marine & Casualty Insurance (1.00%)
Horace Mann Educators 21,100 480,025
Footwear, Except Rubber (1.17%)
Wolverine World Wide, Inc. 46,900 $ 562,800
Gas Production & Distribution (0.85%)
Piedmont Natural Gas Co. 12,800 408,000
General Industrial Machinery (2.22%)
Kaydon Corp. 15,100 509,625
Regal-Beloit Corp. 25,600 553,600
1,063,225
Grain Mill Products (0.98%)
Ralcorp Holdings, Inc. 25,500(a) 468,562
Greeting Cards (1.04%)
American Greetings Corp. 19,100(a) 500,181
Groceries & Related Products (0.98%)
Universal Corp. 18,400 468,050
Horticultural Specialties (0.92%)
Hines Horticulture, Inc. 52,000(a) 442,000
Hospitals (1.12%)
Universal Health
Services, Inc., Class B 10,400(a) 538,850
Hotels & Motels (0.92%)
Four Seasons Hotel, Inc. 8,000 334,000
Lodgian, Inc. 17,950(a) 108,822
442,822
Industrial Machinery, NEC (0.93%)
Industrial Distribution Group, Inc. 78,750(a) 447,891
Industrial Organic Chemicals (1.74%)
CFC International, Inc. 81,450(a) 834,862
Iron & Steel Foundries (1.07%)
Precision Castparts Corp. 12,000 513,000
Jewlery, Silverware & Plated Ware (0.93%)
Jostens, Inc. 20,900 448,044
Life Insurance (1.04%)
Mony Group, Inc. 18,900 500,850
Measuring & Controlling Devices (0.58%)
Integrated Measurement Systems, Inc. 24,300(a) 279,450
Meat Products (1.08%)
Michael Foods, Inc. 22,700 519,262
Medical Instruments & Supplies (1.77%)
ADAC Laboratories 32,700(a) 237,075
Focal, Inc. 26,850(a) 231,581
Hologic, Inc. 56,000(a) 381,500
850,156
Medical Service & Health
Insurance (0.84%)
Patient Info Systems 162,000(a) $ 405,000
Men's & Boys' Clothing Stores (1.09%)
Hot Topic, Inc. 31,600(a) 525,350
Men's & Boys' Furnishings (2.41%)
Nautica Enterprises, Inc. 31,350(a) 425,184
Tommy Hilfiger Corp. 10,500 733,688
1,158,872
Metal Forgings & Stampings (1.19%)
Varlen Corp. 20,350 569,800
Metalworking Machinery (1.01%)
Riviera Tool Co. 99,000(a) 482,625
Miscellaneous Apparel & Accessory
Stores (2.09%)
Pier 1 Imports, Inc. 28,000 206,500
The Buckle, Inc. 34,100(a) 797,088
1,003,588
Miscellaneous Chemical Products (1.12%)
H.B. Fuller Co. 7,900 538,188
Miscellaneous Converted Paper
Products (1.14%)
Shorewood Packaging Corp. 27,675(a) 546,581
Miscellaneous Electrical Equipment &
Supplies (1.46%)
Motorcar Parts & Accessories 58,550(a) 702,600
Miscellaneous Equipment Rental &
Leasing (0.19%)
T & W Financial Corp. 11,000(a) 90,063
Miscellaneous Fabricated Metal
Products (1.02%)
Watts Industries, Inc. 31,800 488,925
Miscellaneous Manufacturers (1.06%)
Russ Berrie & Co. 18,700 507,238
Miscellaneous Shopping Goods
Stores (0.64%)
Party City Corp. 84,400(a)(b) 305,950
Miscellaneous Textile Goods (1.09%)
Kellwood Co. 20,400 525,300
Motor Vehicles & Equipment (0.99%)
United Auto Group, Inc. 48,500(a) 472,875
Motor Vehicles, Parts & Supplies (0.92%)
Keystone Automotive Industries, Inc. 29,400(a) 441,000
Office Furniture (0.96%)
Kimball International, Inc., Class B 28,800 460,800
Oil & Gas Field Services (2.08%)
Marine Drilling Co., Inc. 20,250(a) $ 348,047
Pride International, Inc. 55,600(a) 649,825
997,872
Personal Credit Institutions (0.01%)
Firstplus Financial Group, Inc. 6,450(a) 5,241
Personnel Supply Services (0.32%)
Remedytemp, Inc. 13,000(a) 151,937
Petroleum Refining (1.51%)
IRI International Corp. 52,000(a) 289,250
Valero Energy Corp. 19,500 435,094
724,344
Photographic Equipment &
Supplies (0.40%)
Imax Corp. 10,100(a) 191,269
Public Building & Related
Furniture (0.37%)
BE Aerospace, Inc. 10,400(a) 177,450
Rubber & Plastics Footwear (0.38%)
Vans, Inc. 22,200(a) 183,150
Savings Institutions (3.87%)
Commercial Federal Corp. 19,400 470,450
Community First Bankshares, Inc. 24,200 494,588
MAF Bancorp, Inc. 19,400 431,650
Reliance Bancorp, Inc. 16,100 458,850
1,855,538
Search & Navigation Equipment (1.02%)
Anaren Microwave, Inc. 24,000(a) 489,000
Soap, Cleaners & Toilet Goods (1.68%)
Carter-Wallace, Inc. 25,600 449,600
Digene Corp. 30,550(a) 358,963
808,563
Special Industry Machinery (0.20%)
GSI Lumonics, Inc. 22,562(a) 95,888
Sugar & Confectionary Products (0.58%)
Sherwood Brands, Inc., Class A 112,000(a) 280,000
Surety Insurance (1.59%)
CMAC Investment Corp. 6,600 302,775
Enhance Financial Services Group, Inc. 22,300 461,331
764,106
Telephone Communication (4.84%)
Audiovox Corp., Class A 73,700(a) 469,838
Intermedia Communications, Inc. 19,000(a) 611,563
McLeodUSA, Inc. 11,000(a) 616,687
Winstar Communications, Inc. 12,900(a) 627,262
2,325,350
Trucking & Courier Services, Except
Air (1.21%)
Werner Enterprises, Inc. 30,100 $ 579,425
Women's Clothing Stores (1.43%)
Wet Seal, Inc., Class A 16,900(a) 688,675
Total Common Stocks 47,386,435
Principal
Amount Value
Commercial Paper (1.10%)
Personal Credit Institutions (1.10%)
Investment In Joint Trading Account
Associates Corp.; 4.92%; 5/3/99 $529,577 $ 529,577
Total Portfolio Investments (99.83%) 47,916,012
Cash, receivables and other assets,
net of liabilities (0.17%) 79,263
Total Net Assets (100.00%) $47,995,275
(a) Non-income producing security - No dividend paid during the period.
(b) On May 10, 1999 Party City Corp.'s stock price per share decreased
significantly due to the delayed filing of the fiscal year 1998 financial
statements.
PRINCIPAL UTILITIES FUND, INC.
Shares
Held Value
Common Stocks (98.07%)
Combination Utility Services (15.77%)
Baltimore Gas & Electric Co. 82,500 $ 2,320,313
Citizens Utilities 364,191 3,664,672
Montana Power Co. 28,200 2,102,662
Nisource, Inc. 122,600 3,402,150
PacifiCorp. 107,600 1,795,575
Scana Corp. 85,600 2,011,600
Utilicorp United, Inc. 126,000 3,079,125
18,376,097
Electric Services (42.77%)
Allegheny Energy 86,000 2,929,375
Avista Corp. 111,500 1,672,500
Carolina Power & Light Co. 60,300 2,430,844
CMS Energy Corp 42,200 1,856,800
Dominion Resources, Inc. 55,800 2,294,775
DQE, Inc. 64,600 2,660,713
Duke Energy Corp. 42,700 2,391,200
Edison International 122,800 3,008,600
Enron Corp. 51,180 3,851,295
Firstenergy Corp. 77,500 2,300,781
FPL Group, Inc. 49,600 2,796,200
GPU, Inc. 84,800 3,233,000
Ipalco Enterprises, Inc. 40,200 927,113
MidAmerican Energy Holdings Co. 27,400 881,937
Peco Energy Co. 48,800 2,314,950
Pinnacle West Capital Corp. 82,700 3,209,794
Reliant Energy, Inc. 94,900 2,686,856
Southern Co. 132,400 3,583,075
Teco Energy, Inc. 122,900 2,619,306
Texas Utilities Holdings 55,600 2,210,100
49,859,214
Gas Production & Distribution (1.97%)
New Jersey Resources Corp. 38,700 1,427,063
Peoples Energy Corp. 23,300 870,837
2,297,900
Telephone Communication (37.56%)
Ameritech Corp. 85,300 5,837,719
AT&T Corp. 82,050 4,143,525
Bell Atlantic Corp. 90,700 5,226,588
BellSouth Corp. 119,000 5,325,250
GTE Corp. 67,400 4,511,587
MCI Worldcom, Inc. 60,824(a) 4,998,973
RCN Corp. 56,800(a) 2,761,900
Sprint Corp. 52,100 5,343,506
Sprint PCS Group 26,700(a) 1,131,412
US West, Inc. 86,000 4,498,875
43,779,335
Total Common Stocks 114,312,546
Principal
Amount Value
Commercial Paper (1.60%)
Personal Credit Institutions (1.60%)
Investment In Joint Trade Account,
Associates Corp.; 4.92%; 5/3/1999 $1,869,155 $ 1,869,155
Total Portfolio Investments (99.67%) 116,181,701
Cash, receivables and other assets,
net of liabilities (0.33%) 386,421
Total Net Assets (100.00%) $116,568,122
(a) Non-income producing security - No dividend paid during the period.
FINANCIAL HIGHLIGHTS
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.28 $15.11 $14.61 $13.74 $12.43
Income from Investment Operations:
Net Investment Income............................... .21 .42 .35 .38 .41
Net Realized and Unrealized Gain (Loss) on Investments 1.00 1.15 1.81 1.59 1.31
Total from Investment Operations 1.21 1.57 2.16 1.97 1.72
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.23) (.37) (.36) (.43) (.36)
Distributions from Capital Gains.................... (.45) (1.03) (1.30) (.67) (.05)
Total Dividends and Distributions (.68) (1.40) (1.66) (1.10) (.41)
Net Asset Value, End of Period......................... $15.81 $15.28 $15.11 $14.61 $13.74
Total Return(b)........................................ 8.12%(c) 11.00% 15.88% 15.10% 14.18%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $116,402 $104,414 $85,436 $70,820 $57,125
Ratio of Expenses to Average Net Assets............. 1.22%(d) 1.28% 1.33% 1.28% 1.37%
Ratio of Net Investment Income to Average Net Assets 2.74%(d) 2.86% 2.42% 2.82% 3.21%
Portfolio Turnover Rate............................. 27.9%(d) 57.0% 27.6% 32.6% 35.8%
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(e)
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.22 $15.05 $14.56 $13.71 $11.80
Income from Investment Operations:
Net Investment Income............................... .15 .31 .25 .29 .31
Net Realized and Unrealized Gain (Loss) on Investments .99 1.14 1.79 1.55 1.90
Total from Investment Operations 1.14 1.45 2.04 1.84 2.21
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.25) (.25) (.32) (.30)
Distributions from Capital Gains.................... (.45) (1.03) (1.30) (.67) --
Total Dividends and Distributions (.62) (1.28) (1.55) (.99) (.30)
Net Asset Value, End of Period......................... $15.74 $15.22 $15.05 $14.56 $13.71
Total Return(b)........................................ 7.68%(c) 10.18% 14.96% 14.10% 18.72%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $22,844 $18,930 $11,885 $5,964 $1,263
Ratio of Expenses to Average Net Assets............. 1.93%(d) 2.04% 2.14% 2.13% 1.91%(d)
Ratio of Net Investment Income to Average Net Assets 2.03%(d) 2.08% 1.58% 1.93% 2.53%(d)
Portfolio Turnover Rate............................. 27.9%(d) 57.0% 27.6% 32.6% 35.8%(d)
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(f)
- ------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.15 $14.98 $14.52 $13.81
Income from Investment Operations:
Net Investment Income............................... .17 .33 .29 .24
Net Realized and Unrealized Gain (Loss) on Investments .99 1.15 1.76 .73
Total from Investment Operations 1.16 1.48 2.05 .97
Less Dividends and Distributions:......................
Dividends from Net Investment Income................ (.18) (.28) (.30) (.26)
Distributions from Capital Gains.................... (.46) (1.03) (1.29) --
Total Dividends and Distributions (.64) (1.31) (1.59) (.26)
Net Asset Value, End of Period......................... $15.67 $15.15 $14.98 $14.52
Total Return(b)........................................ 7.80%(c) 10.43% 15.16% 7.52%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $22,972 $19,434 $9,745 $875
Ratio of Expenses to Average Net Assets............. 1.76%(d) 1.88% 1.99% 1.49%(d)
Ratio of Net Investment Income to Average Net Assets 2.20%(d) 2.22% 1.66% 2.26%(d)
Portfolio Turnover Rate............................. 27.9%(d) 57.0% 27.6% 32.6%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $21.71 $20.22 $17.10 $15.03 $12.45
Income from Investment Operations:
Net Investment Income............................... .08 .12 .21 .23 .24
Net Realized and Unrealized Gain (Loss) on Investments 3.21 3.57 3.58 2.45 2.55
Total from Investment Operations 3.29 3.69 3.79 2.68 2.79
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.08) (.12) (.21) (.26) (.21)
Distributions from Capital Gains.................... (.01) (2.08) (.46) (.35) --
Total Dividends and Distributions (.09) (2.20) (.67) (.61) (.21)
Net Asset Value, End of Period......................... $24.91 $21.71 $20.22 $17.10 $15.03
Total Return(b)........................................ 15.20%(c) 19.48% 22.57% 18.20% 22.65%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $166,447 $126,740 $79,985 $44,389 $35,212
Ratio of Expenses to Average Net Assets............. 1.21%(d) 1.31% 1.30% 1.33% 1.38%
Ratio of Net Investment Income to Average Net Assets .71%(d) .57% 1.10% 1.41% 1.83%
Portfolio Turnover Rate............................. 13.2%(d) .5% 55.4% 13.3% 26.1%
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(e)
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $21.55 $20.14 $17.03 $14.99 $11.89
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .01 (.02) .07 .11 .15
Net Realized and Unrealized Gain (Loss) on Investments 3.18 3.53 3.54 2.41 3.10
Total from Investment Operations 3.19 3.51 3.61 2.52 3.25
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.01) (.02) (.04) (.13) (.15)
Distributions from Capital Gains.................... (.01) (2.08) (.46) (.35) --
Total Dividends and Distributions (.02) (2.10) (.50) (.48) (.15)
Net Asset Value, End of Period......................... $24.72 $21.55 $20.14 $17.03 $14.99
Total Return(b)........................................ 14.79%(c) 18.59% 21.59% 17.18% 26.20%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $47,864 $34,223 $18,265 $6,527 $1,732
Ratio of Expenses to Average Net Assets............. 1.96%(d) 2.02% 2.06% 2.19% 1.90%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.04)%(d) (.14)% .32% .49% .97%(d)
Portfolio Turnover Rate............................. 13.2%(d) .5% 55.4% 13.3% 26.1%(d)
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(f)
- ------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $21.63 $20.16 $17.08 $16.21
Income from Investment Operations:
Net Investment Income............................... .03 .02 .13 .12
Net Realized and Unrealized Gain (Loss) on Investments 3.18 3.57 3.53 .90
Total from Investment Operations 3.21 3.59 3.66 1.02
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.02) (.04) (.12) (.15)
Distributions from Capital Gains.................... (.01) (2.08) (.46) --
Total Dividends and Distributions (.03) (2.12) (.58) (.15)
Net Asset Value, End of Period......................... $24.81 $21.63 $20.16 $17.08
Total Return(b)........................................ 14.86%(c) 19.01% 21.82% 7.02%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $44,527 $32,871 $15,502 $1,575
Ratio of Expenses to Average Net Assets............. 1.75%(d) 1.85% 1.89% 1.48%(d)
Ratio of Net Investment Income to Average Net Assets .17%(d) .02% .45% .68%(d)
Portfolio Turnover Rate............................. 13.2%(d) .5% 55.4% 13.3%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $31.07 $29.69 $27.72 $23.69 $20.83
Income from Investment Operations:
Net Investment Income............................... .25 .50 .50 .45 .45
Net Realized and Unrealized Gain (Loss) on Investments 3.16 3.88 5.80 5.48 3.15
Total from Investment Operations 3.41 4.38 6.30 5.93 3.60
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.26) (.53) (.48) (.43) (.39)
Distributions from Capital Gains.................... (1.95) (2.47) (3.85) (1.47) (.35)
Total Dividends and Distributions (2.21) (3.00) (4.33) (1.90) (.74)
Net Asset Value, End of Period......................... $32.27 $31.07 $29.69 $27.72 $23.69
Total Return(b)........................................ 11.48%(c) 15.59% 25.36% 26.41% 17.94%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $630,443 $565,052 $494,444 $435,617 $339,656
Ratio of Expenses to Average Net Assets............. .72%(d) .74% .70% .69% .75%
Ratio of Net Investment Income to Average Net Assets 1.69%(d) 1.67% 1.85% 1.82% 2.08%
Portfolio Turnover Rate............................. 21.2%(d) 23.2% 30.8% 50.2% 46.0%
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(e)
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $30.90 $29.51 $27.58 $23.61 $19.12
Income from Investment Operations:
Net Investment Income............................... .15 .26 .23 .21 .33
Net Realized and Unrealized Gain (Loss) on Investments 3.14 3.86 5.77 5.45 4.46
Total from Investment Operations 3.29 4.12 6.00 5.66 4.79
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.14) (.26) (.22) (.22) (.30)
Distributions from Capital Gains.................... (1.95) (2.47) (3.85) (1.47) --
Total Dividends and Distributions (2.09) (2.73) (4.07) (1.69) (.30)
Net Asset Value, End of Period......................... $32.10 $30.90 $29.51 $27.58 $23.61
Total Return(b)........................................ 11.11%(c) 14.71% 24.13% 25.19% 25.06%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $56,323 $44,765 $27,240 $9,832 $2,248
Ratio of Expenses to Average Net Assets............. 1.42%(d) 1.52% 1.65% 1.70% 1.50%(d)
Ratio of Net Investment Income to Average Net Assets .99%(d) .88% .84% .80% 1.07%(d)
Portfolio Turnover Rate............................. 21.2%(d) 23.2% 30.8% 50.2% 46.0%(d)
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(f)
- ------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $30.80 $29.44 $27.57 $24.73
Income from Investment Operations:
Net Investment Income............................... .16 .28 .30 .19
Net Realized and Unrealized Gain (Loss) on Investments 3.13 3.84 5.74 2.81
Total from Investment Operations 3.29 4.12 6.04 3.00
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.15) (.29) (.32) (.16)
Distributions from Capital Gains.................... (1.95) (2.47) (3.85) --
Total Dividends and Distributions (2.10) (2.76) (4.17) (.16)
Net Asset Value, End of Period......................... $31.99 $30.80 $29.44 $27.57
Total Return(b)........................................ 11.15%(c) 14.77% 24.36% 12.74%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $45,185 $37,675 $18,326 $1,752
Ratio of Expenses to Average Net Assets............. 1.37%(d) 1.50% 1.50% 1.16%(d)
Ratio of Net Investment Income to Average Net Assets 1.04%(d) .88% .93% 1.18%(d)
Portfolio Turnover Rate............................. 21.2%(d) 23.2% 30.8% 50.2%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $56.09 $50.43 $39.54 $37.22 $31.14
Income from Investment Operations:
Net Investment Income............................... .13 .35 .31 .35 .35
Net Realized and Unrealized Gain (Loss) on Investments 10.47 7.14 11.26 3.50 6.67
Total from Investment Operations 10.60 7.49 11.57 3.85 7.02
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.18) (.34) (.31) (.35) (.31)
Distributions from Capital Gains.................... -- (1.49) (.37) (1.18) (.63)
Total Dividends and Distributions (.18) (1.83) (.68) (1.53) (.94)
Net Asset Value, End of Period......................... $66.51 $56.09 $50.43 $39.54 $37.22
Total Return(b)........................................ 18.92%(c) 15.17% 29.55% 10.60% 23.29%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $494,746 $395,954 $317,386 $228,361 $174,328
Ratio of Expenses to Average Net Assets............. .86%(d) .95% 1.03% 1.08% 1.16%
Ratio of Net Investment Income to Average Net Assets .43%(d) .66% .68% .95% 1.12%
Portfolio Turnover Rate............................. 18.7%(d) 21.9% 16.5% 1.8% 12.2%
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(e)
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $55.98 $50.36 $39.43 $37.10 $28.33
Income from Investment Operations:
Net Investment Income............................... (.02) .06 .09 .08 .21
Net Realized and Unrealized Gain (Loss) on Investments 10.46 7.14 11.23 3.48 8.76
Total from Investment Operations 10.44 7.20 11.32 3.56 8.97
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.03) (.09) (.02) (.05) (.20)
Distributions from Capital Gains.................... -- (1.49) (.37) (1.18) --
Total Dividends and Distributions (.03) (1.58) (.39) (1.23) (.20)
Net Asset Value, End of Period......................... $66.39 $55.98 $50.36 $39.43 $37.10
Total Return(b)........................................ 18.65%(c) 14.58% 28.92% 9.80% 31.48%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $89,661 $64,809 $42,241 $24,019 $8,279
Ratio of Expenses to Average Net Assets............. 1.33%(d) 1.46% 1.48% 1.79% 1.80%(d)
Ratio of Net Investment Income to Average Net Assets (.04)%(d) .15% .23% .22% .31%(d)
Portfolio Turnover Rate............................. 18.7%(d) 21.9% 16.5% 1.8% 12.2%(d)
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(f)
- ------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $55.77 $50.16 $39.40 $39.27
Income from Investment Operations:
Net Investment Income............................... (.04) .02 .06 .10
Net Realized and Unrealized Gain (Loss) on Investments 10.40 7.09 11.16 .13
Total from Investment Operations 10.36 7.11 11.22 .23
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.01) (.09) (.10)
Distributions from Capital Gains.................... -- (1.49) (.37) --
Total Dividends and Distributions -- (1.50) (.46) (.10)
Net Asset Value, End of Period......................... $66.13 $55.77 $50.16 $39.40
Total Return(b)........................................ 18.58%(c) 14.46% 28.72% 1.12%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $42,339 $30,557 $16,265 $2,014
Ratio of Expenses to Average Net Assets............. 1.43%(d) 1.59% 1.69% 1.42%(d)
Ratio of Net Investment Income to Average Net Assets (.14)%(d) .01% .00% .14%(d)
Portfolio Turnover Rate............................. 18.7%(d) 21.9% 16.5% 1.8%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $39.90 $45.33 $35.75 $31.45 $25.08
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .02 (.07) .07 .14 .12
Net Realized and Unrealized Gain (Loss) on Investments 4.96 (4.26) 10.80 5.05 6.45
Total from Investment Operations 4.98 (4.33) 10.87 5.19 6.57
Less Dividends and Distributions:
Dividends from Net Investment Income -- -- (.11) (.14) (.06)
Distributions from Capital Gains.................... -- (1.10) (1.18) (.75) (.14)
Total Dividends and Distributions -- (1.10) (1.29) (.89) (.20)
Net Asset Value, End of Period......................... $44.88 $39.90 $45.33 $35.75 $31.45
Total Return(b)........................................ 12.48%(c) (9.78)% 31.26% 16.89% 26.89%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $353,387 $332,942 $346,666 $229,465 $150,611
Ratio of Expenses to Average Net Assets............. 1.24%(d) 1.22% 1.26% 1.32% 1.47%
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.07)%(d) (.14)% .20% .46% .47%
Portfolio Turnover Rate............................. 25.0%(d) 25.1% 9.5% 12.3% 13.5%
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(e)
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $39.29 $44.88 $35.48 $31.31 $23.15
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .26 (.23) (.05) (.04) --
Net Realized and Unrealized Gain (Loss) on Investments 4.67 (4.26) 10.64 4.97 8.18
Total from Investment Operations 4.93 (4.49) 10.59 4.93 8.18
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- (.01) (.01) (.02)
Distributions from Capital Gains.................... -- (1.10) (1.18) (.75) --
Total Dividends and Distributions -- (1.10) (1.19) (.76) (.02)
Net Asset Value, End of Period......................... $44.22 $39.29 $44.88 $35.48 $31.31
Total Return(b)........................................ 12.29%(c) (10.24)% 30.64% 16.07% 35.65%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $75,248 $68,358 $59,554 $28,480 $8,997
Ratio of Expenses to Average Net Assets............. 1.59%(d) 1.73% 1.69% 2.01% 2.04%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.42)%(d) (.66)% (.24)% (.24)% (.17)%(d)
Portfolio Turnover Rate............................. 25.0%(d) 25.1% 9.5% 12.3% 13.5%(d)
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(f)
- ------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $39.43 $45.10 $35.67 $33.77
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .24 (.28) (.12) .04
Net Realized and Unrealized Gain (Loss) on Investments 4.55 (4.29) 10.74 1.88
Total from Investment Operations 4.79 (4.57) 10.62 1.92
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- (.01) (.02)
Distributions from Capital Gains.................... -- (1.10) (1.18) --
Total Dividends and Distributions -- (1.10) (1.19) (.02)
Net Asset Value, End of Period......................... $44.22 $39.43 $45.10 $35.67
Total Return(b)........................................ 12.10%(c) (10.37)% 30.56% 6.20%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $26,651 $23,540 $17,448 $2,016
Ratio of Expenses to Average Net Assets............. 1.86%(d) 1.89% 1.87% 1.53%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.69)%(d) (.82)% (.45)% .29%(d)
Portfolio Turnover Rate............................. 25.0%(d) 25.1% 9.5% 12.3%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class A shares 1999* 1998(g)
- ------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.39 $10.15
Income from Investment Operations:
Net Investment Income............................... .16 .20
Net Realized and Unrealized Gain (Loss) on Investments .24 (1.76)
Total from Investment Operations .40 (1.56)
Less Dividends:
Dividends from Net Investment Income (.16) (.20)
Total Dividends (.16) (.20)
Net Asset Value, End of Period......................... $8.63 $8.39
Total Return(b)........................................ 4.95%(c) (15.45)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $6,697 $5,490
Ratio of Expenses to Average Net Assets............. 2.00%(d) 2.25%(d)
Ratio of Net Investment Income to Average Net Assets 3.89%(d) 2.89%(d)
Portfolio Turnover Rate............................. 59.6%(d) 60.4%(d)
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class B shares 1999* 1998(g)
- ------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.38 $10.15
Net Investment Income............................... .12 .20
Net Realized and Unrealized Gain (Loss) on Investments .25 (1.78)
Total from Investment Operations .37 (1.58)
Less Dividends:
Dividends from Net Investment Income................ (.14) (.19)
Total Dividends (.14) (.19)
Net Asset Value, End of Period......................... $8.61 $ 8.38
Total Return(b)........................................ 4.54%(c) (15.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $3,418 $3,120
Ratio of Expenses to Average Net Assets............. 2.89%(d) 2.47% (d)
Ratio of Net Investment Income to Average Net Assets 3.00%(d) 2.67%(d)
Portfolio Turnover Rate............................. 59.6%(d) 60.4%(d)
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class R shares 1999* 1998(g)
- ------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.40 $10.15
Income from Investment Operations:
Net Investment Income............................... .15 .23
Net Realized and Unrealized Gain (Loss) on Investments .25 (1.78)
Total from Investment Operations .40 (1.55)
Less Dividends:
Dividends from Net Investment Income................ (.16) (.20)
Total Dividends (.16) (.20)
Net Asset Value, End of Period......................... $8.64 $ 8.40
Total Return(b)........................................ 4.90%(c) (15.37)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $3,185 $2,928
Ratio of Expenses to Average Net Assets............. 2.17%(d) 1.99%(d)
Ratio of Net Investment Income to Average Net Assets 3.72%(d) 3.07%(d)
Portfolio Turnover Rate............................. 59.6%(d) 60.4%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class A shares 1999* 1998(g)
- ------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.43 $9.92
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.02) (.08)
Net Realized and Unrealized Gain (Loss) on Investments 1.64 (1.41)
Total from Investment Operations 1.62 (1.49)
Net Asset Value, End of Period......................... $10.05 $8.43
Total Return(b)........................................ 19.22%(c) (15.95)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $29,845 $18,438
Ratio of Expenses to Average Net Assets............. 1.79%(d) 2.58%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.91)%(d) (1.65)%(d)
Portfolio Turnover Rate............................. 78.2%(d) 20.5%(d)
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class B shares 1999* 1998(g)
- ------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.41 $9.91
Net Investment Income (Operating Loss).............. (.05) (.11)
Net Realized and Unrealized Gain (Loss) on Investments 1.61 (1.39)
Total from Investment Operations 1.56 (1.50)
Net Asset Value, End of Period......................... 9.97 $ 8.41
Total Return(b)........................................ 18.55%(c) (16.15)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $10,528 $6,550
Ratio of Expenses to Average Net Assets............. 2.66%(d) 2.80% (d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.78)%(d) (1.85)%(d)
Portfolio Turnover Rate............................. 78.2%(d) 20.5%(d)
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class R shares 1999* 1998(g)
- ------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.45 $9.91
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.03) (.07)
Net Realized and Unrealized Gain (Loss) on Investments 1.64 (1.39)
Total from Investment Operations 1.61 (1.46)
Net Asset Value, End of Period......................... $10.06 $ 8.45
Total Return(b)........................................ 19.05%(c) (15.75)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $7,623 $4,688
Ratio of Expenses to Average Net Assets............. 2.01%(d) 2.07%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.13)%(d) (1.12)%(d)
Portfolio Turnover Rate............................. 78.2%(d) 20.5%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $16.11 $12.55 $11.40 $10.94 $9.25
Income from Investment Operations:
Net Investment Income(h)............................ .18 .41 .48 .44 .48
Net Realized and Unrealized Gain (Loss) on Investments 1.39 3.59 1.12 .45 1.70
Total from Investment Operations 1.57 4.00 1.60 .89 2.18
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.18) (.44) (.45) (.43) (.49)
Distributions from Capital Gains.................... (.24) -- -- -- --
Total Dividends and Distributions (.42) (.44) (.45) (.43) (.49)
Net Asset Value, End of Period......................... $17.26 $16.11 $12.55 $11.40 $10.94
Total Return(b)........................................ 9.85%(c) 32.10% 14.26% 8.13% 24.36%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $95,189 $83,533 $64,366 $66,322 $65,873
Ratio of Expenses to Average Net Assets(h).......... 1.17%(d) 1.15% 1.15% 1.17% 1.04%
Ratio of Net Investment Income to Average Net Assets 2.16%(d) 2.73% 3.90% 3.85% 4.95%
Portfolio Turnover Rate............................. 26.2%(d) 11.9% 22.5% 34.2% 13.0%
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(e)
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $16.09 $12.53 $11.38 $10.93 $9.20
Income from Investment Operations:
Net Investment Income(h)............................ .12 .30 .38 .36 .40
Net Realized and Unrealized Gain (Loss) on Investments 1.38 3.59 1.13 .43 1.77
Total from Investment Operations 1.50 3.89 1.51 .79 2.17
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.11) (.33) (.36) (.34) (.44)
Distributions from Capital Gains.................... (.24) -- -- -- --
Total Dividends and Distributions (.35) (.33) (.36) (.34) (.44)
Net Asset Value, End of Period......................... $17.24 $16.09 $12.53 $11.38 $10.93
Total Return(b)........................................ 9.45%(c) 31.23% 13.41% 7.23% 24.18%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $15,220 $11,391 $6,937 $5,579 $3,952
Ratio of Expenses to Average Net Assets(h).......... 1.93%(d) 1.90% 1.90% 1.93% 1.72%(d)
Ratio of Net Investment Income to Average Net Assets 1.40%(d) 2.04% 3.14% 3.07% 3.84%(d)
Portfolio Turnover Rate............................. 26.2%(d) 11.9% 22.5% 34.2% 13.0%(d)
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(f)
- ------------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $16.07 $12.49 $11.33 $11.75
Income from Investment Operations:
Net Investment Income(h)............................ .12 .33 .39 .28
Net Realized and Unrealized Gain (Loss) on Investments 1.38 3.58 1.14 (.41)
Total from Investment Operations 1.50 3.91 1.53 (.13)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.12) (.33) (.37) (.29)
Distributions from Capital Gains.................... (.24) -- -- --
Total Dividends and Distributions (.36) (.33) (.37) (.29)
Net Asset Value, End of Period......................... $17.21 $16.07 $12.49 $11.33
Total Return(b)........................................ 9.41%(c) 31.47% 13.72% (.31)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $6,159 $4,005 $1,512 $311
Ratio of Expenses to Average Net Assets(h).......... 1.84%(d) 1.65% 1.65% 1.47%(d)
Ratio of Net Investment Income to Average Net Assets 1.49%(d) 2.21% 3.35% 3.77%(d)
Portfolio Turnover Rate............................. 26.2%(d) 11.9% 22.5% 34.2%(d)
* Six Months Ended April 30, 1999.
See accompanying notes.
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
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 December 9, 1994, date Class B shares first offered to the
public, through October 31, 1995. The Domestic Growth Funds' Class B shares
recognized net investment income as follows for the period from the initial
purchase of Class B shares on December 5, 1994 through December 8, 1994,
none of which was distributed to the sole shareholder, Principal Management
Corporation. The Domestic Growth Funds' Class B shares incurred unrealized
losses on investments during the initial interim period as follows. This
represents Class B share activities of each fund prior to the initial
public offering of Class B shares:
Net Investment
Income
Principal Balanced Fund, Inc. $-- $(.19)
Principal Blue Chip Fund, Inc. -- (.15)
Principal Capital Value Fund, Inc. -- (.46)
Principal Growth Fund, Inc. -- (.86)
Principal MidCap Fund, Inc. -- (.77)
Principal Utilities Fund, Inc. .01 (.01)
(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
Net Investment
Income
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
(g) 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 distributed $.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)
(h) 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, Principal Utilities Fund, Inc. would have had per share net
investment income and the ratios of expenses to average net assets as
shown:
Year Ended
October 31, Per Share Ratio of Expenses
Except Net Investment to Average Net Amount
as Noted Income Assets Waived
Class A 1998 $.39 1.23% $ 60,477
1997 .46 1.25% 65,940
1996 .43 1.25% 54,932
1995 .46 1.30% 151,145
Class B 1998 .29 2.00%(d) 9,557
1997 .37 1.95% 3,753
1996 .34 2.06% 6,690
1995(e) .40 1.81%(d) 1,338
Class R 1998 .28 2.10%(d) 12,481
1997 .31 2.67% 9,355
1996(f) .28 1.47%(d) --
The Manager ceased its waiver of expenses October 31, 1998.
April 30, 1999
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
<TABLE>
<CAPTION>
Principal Principal
International Principal International
Emerging Markets International SmallCap
GROWTH FUNDS (INTERNATIONAL) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost........ $17,128,928 $337,246,551 $25,898,003
Assets
Investment in securities -- at value (Note 4) $17,344,326 $403,279,197 $29,085,843
Cash....................................79,538 13,364 11,581
Receivables:
Dividends and interest.................. 62,264 1,765,733 54,645
Investment securities sold.............. 285,361 7,745,363 712,990
Capital Shares sold..................... 51,999 248,082 80,205
Other assets............................... -- 9,174 --
Total Assets 17,823,488 413,060,913 29,945,264
Liabilities
Accrued expenses........................... 49,326 481,617 49,924
Payables:
Investment securities purchased......... 573,051 3,360,968 288,295
Capital Shares reacquired............... 10,161 443,838 13,947
Indebtedness (Note 6) ..................... -- -- 55,000
Total Liabilities 632,538 4,286,423 407,166
Net Assets Applicable to Outstanding Shares $17,190,950 $408,774,490 $29,538,098
Net Assets Consist of:
Capital Stock.............................. $ 21,598 $ 415,600
$ 23,786
Additional paid-in capital................. 19,307,225 313,487,803 24,945,069
Accumulated undistributed net
investment income ...................... -- 1,855,132 --
Accumulated undistributed net realized
gain (loss) from investment and
foreign currency transactions........... (2,346,505) 26,979,148 1,382,745
Net unrealized appreciation
of investments.......................... 215,398 66,032,646 3,187,840
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in
foreign currencies...................... (6,766) 4,161 (1,342)
Total Net Assets $17,190,950 $408,774,490 $29,538,098
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....................... $9,799,763 $339,889,315 $16,805,423
Shares issued and outstanding. 1,227,807 34,533,746 1,350,891
Net asset value per share...... $7.98 $9.84 $12.44
Maximum offering price per share(a) $8.38 $10.33 $13.06
Class B: Net Assets....................... $4,290,554 $47,800,869 $8,376,251
Shares issued and outstanding. 542,105 4,875,754 678,126
Net asset value per share(b)... $7.91 $9.80 $12.35
Class R: Net Assets....................... $3,100,633 $21,084,306 $4,356,424
Shares issued and outstanding. 389,901 2,150,466 349,567
Net asset value per share.... $7.95 $9.80 $12.46
<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>
See accompanying notes.
</TABLE>
Six Months Ended April 30, 1999
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal
International Principal International
Emerging Markets International SmallCap
GROWTH FUNDS (INTERNATIONAL) Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Net Investment Income
Income:
Dividends............................. $ 204,904 $ 5,018,928 $ 177,138
Withholding tax on foreign dividends... (9,445) (575,919) (20,543)
Interest............................... 17,783 383,270 31,111
Total Income 213,242 4,826,279 187,706
Expenses:
Management and investment advisory
fees (Note 3)....................... 89,891 1,314,211 154,420
Distribution and shareholder servicing
fees (Notes 1 and 3)................ 25,613 559,100 50,488
Transfer and administrative services
(Notes 1 and 3)..................... 61,363 597,511 73,656
Registration fees (Note 1)............. 19,008 49,565 20,123
Custodian fees ........................ 16,249 60,566 8,272
Auditing and legal fees ............... 4,813 5,121 4,627
Directors' fees ....................... 3,553 3,522 3,567
Other ................................. 325 8,471 974
Total Net Expenses 220,815 2,598,067 316,127
Net Investment Income (Operating Loss) (7,573) 2,228,212 (128,421)
Net Realized and Unrealized
Gain (Loss) on Investments and Foreign
Currencies Net realized gain (loss) from:
Investment transactions................ (910,240) 23,278,847 1,382,302
Foreign currency transactions.......... (29,185) (146,496) (6,828)
Change in unrealized appreciation/depreciation of:
Investments............................ 3,953,973 24,709,633 4,458,924
Translation of assets and liabilities in
foreign currencies.................. 12,652 83,279 (2,254)
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 3,027,200 47,925,263 5,832,144
Net Increase in Net Assets
Resulting from Operations $3,019,627 $50,153,475 $5,703,723
See accompanying notes.
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal
International Principal International
Emerging Markets International SmallCap
GROWTH FUNDS (INTERNATIONAL) Fund, Inc. Fund, Inc. Fund, Inc.
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
April 30, October 31, April 30, October 31, April 30, October 31,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income (operating loss).... $ (7,573) $ (62,006) $ 2,228,212 $ 4,898,628 $ (128,421) $ (174,037)
Net realized gain (loss) from investment and
foreign currency transactions.......... (939,425) (1,360,310) 23,132,351 21,565,859 1,375,474 362,866
Change in unrealized appreciation/
depreciation of investments and translation
of assets and liabilities in foreign
currencies 3,966,625 (1,771,953) 24,792,912 (21,851,314) 4,456,670 (1,228,241)
Net Increase (Decrease) in Net
Assets Resulting from Operations 3,019,627 (3,194,269) 50,153,475 4,613,173 5,703,723 (1,039,412)
Dividends and Distributions to Shareholders
From net investment income:
Class A................................ -- -- (3,969,770) (3,230,657) -- --
Class B ............................... -- -- (251,686) (135,323) -- --
Class R ............................... -- -- (86,216) (60,535) -- --
From net realized gain on investments and
foreign currency transactions:
Class A ............................... -- -- (15,023,448) (6,125,804) (93,634) --
Class B ............................... -- -- (2,095,415) (754,887) (51,661) --
Class R................................ -- -- (904,520) (272,111) (25,931) --
Total Dividends and Distributions -- -- (22,331,055) (10,579,317) (171,226) --
Capital Share Transactions (Note 5)
Shares sold:
Class A................................ 1,563,625 4,862,019 45,375,305 61,935,765 5,192,445 8,737,574
Class B ............................... 481,942 1,321,774 6,651,580 14,284,105 968,427 3,023,591
Class R................................ 575,383 609,470 3,758,483 9,941,189 319,836 532,826
Shares issued in reinvestment of dividends
and distributions:
Class A................................ -- -- 18,682,846 9,196,905 93,472 --
Class B ............................... -- -- 2,317,115 870,916 51,577 --
Class R................................ -- -- 994,480 332,448 26,009 --
Shares redeemed:
Class A ............................... (809,033) (797,000) (49,910,302) (44,920,651) (3,362,670) (2,487,754)
Class B ............................... (209,350) (339,033) (6,205,471) (6,478,598) (806,897) (895,810)
Class R ............................... (221,149) (338,015) (2,884,301) (3,796,800) (143,840) (192,387)
Net Increase in Net Assets from
Capital Share Transactions 1,381,418 5,319,215 18,779,735 41,365,279 2,338,359 8,718,040
Total Increase 4,401,045 2,124,946 46,602,155 35,399,135 7,870,856 7,678,628
Net Assets
Beginning of period....................... 12,789,905 10,664,959 362,172,335 326,773,200 21,667,242 13,988,614
End of period (including undistributed net
investment income as set forth below). $17,190,950 $12,789,905 $408,774,490 $362,172,335 $29,538,098 $21,667,242
Undistributed Net Investment Income....... $ -- $ -- $ 1,855,132 $4,262,374 $ -- $ --
See accompanying notes.
</TABLE>
April 30, 1999
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Principal International Emerging Markets Fund, Inc.
Principal International Fund, Inc.
Principal International SmallCap Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal International Emerging Markets Fund, Inc., Principal International
Fund, Inc. and Principal International SmallCap 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.
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 R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares and Class R shares
bear a higher ongoing distribution fee 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 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 declare 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 period ended April 30, 1999, 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 R Class A Class B Class R Class A Class B Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Principal International Emerging Markets Fund, Inc.$ 2,286 $ 19,589 $ 3,738 $ 7,172 $ 1,877 $ 322 $ 4,948 $4,555 $4,812
Principal International Fund, Inc. 316,113 169,135 73,852 172,662 41,648 22,721 10,691 7,160 5,913
Principal International SmallCap Fund, Inc . 11,044 37,567 1,877 7,946 3,297 285 4,510 4,380 3,493
</TABLE>
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 International Growth Funds are informed of the
ex-dividend date. Interest income is recognized on an accrual basis.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between 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 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.
The International 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 International 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.
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 and foreign currency transactions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. 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.
Reclassifications made for Principal International Emerging Markets Fund, Inc.
and Principal International SmallCap Fund, Inc. for the year ended October 31,
1998 aggregated $75,696 and $181,352 respectively. Other reclassifications made
for the year ended October 31, 1998 were not material.
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.
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.
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>
Net Asset Value of Funds
(in millions)
<CAPTION>
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>
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.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A and Class B share redemptions. The
charge is based on declining rates which for Class A shares begin at .75%, and
for Class B shares at 4.00%, 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 period ended April 30, 1999 were as follows:
Class A Class B
Principal International Emerging Markets Fund, Inc. $ 37,212 $ 3,744
Principal International Fund, Inc. 471,671 106,603
Principal International SmallCap Fund, Inc. 61,002 12,406
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:
Period Ended Year Ended
April 30,1999 October 31,1998
Principal International Emerging Markets Fund, Inc. $ 6,679 $ 4,730
Principal International Fund, Inc. 115,637 138,499
Principal International SmallCap Fund, Inc. 21,340 6,610
The International Growth Funds bear distribution and shareholder servicing fees
with respect to Class A shares computed at an annual rate of up to .25% of the
average daily net assets attributable to Class A shares of each fund. Each of
the International Growth Funds adopted a distribution plan with respect to Class
B shares that provides for distribution and shareholder servicing fees computed
at an annual rate of up to 1.00% of the average daily net assets attributable to
Class B shares of each fund. Each of the International Growth Funds adopted a
distribution plan with respect to Class R shares that provides for distribution
and shareholder servicing fees computed at an annual rate of up to .75% of the
average daily net assets attributable to Class R shares of each fund.
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, fees unused by the principal
underwriter at the end of the fiscal year are returned to the respective
International Growth Fund which generated the excess.
At April 30, 1999, 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 R
<S> <C> <C> <C>
Principal International Emerging Markets Fund, Inc 400,000 300,000 300,000
Principal International Fund, Inc. 9,669,940 176 152
Principal International SmallCap Fund, Inc. 403,035 302,288 302,272
</TABLE>
Note 4 -- Investment Transactions
For the period ended April 30, 1999, 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:
Purchases Sales
Principal International Emerging Markets Fund, Inc. $ 8,756,709 $ 6,301,944
Principal International Fund, Inc. 105,038,713 105,433,998
Principal International SmallCap Fund, Inc. 25,125,398 19,758,546
At April 30, 1999, net unrealized appreciation of investments by the
International Growth Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Appreciation
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal International Emerging Markets Fund, Inc. $ 2,495,167 $ (2,279,769) $ 215,398
Principal International Fund, Inc. 87,810,175 (21,777,529) 66,032,646
Principal International SmallCap Fund, Inc. 4,880,884 (1,693,044) 3,187,840
</TABLE>
The International Growth Funds held the following securities which were
purchased in a private placement transaction and may require registration in
order to effect the sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of April 30, Percentage of
Security Description Acquisition Cost 1999 Net Assets
<S> <C> <C> <C> <C> <C>
Principal International Agora SA GDR 2/23/99 $98,474 $121,900 .71%
Emerging Markets Fund, Inc.
Al-Ahram Beverages Co. GDR 8/21/97 56,100 70,125 .41
4/14/98 12,050 12,750 .07
9/28/98 19,350 19,125 .11
11/6/98 44,037 47,812 .28
12/14/98 36,400 44,625 .26
3/19/99 54,485 54,188 .32
4/1/99 57,780 57,375 .33
Bank Handlowy w Warszawie GDR 8/14/97 50,200 47,400 .28
2/23/98 31,100 23,700 .14
4/2/98 16,625 11,850 .07
4/21/98 16,100 11,850 .07
3/29/99 60,000 59,250 .34
Banque Libanaise Pour Le Commerce
SAL ADR 8/14/97 59,930 31,785 .18
2/19/98 7,440 4,890 .03
2/25/99 22,875 18,338 .11
Ceske Radiokomunikace GDR 6/12/98 62,871 141,488 .82
Estonian Telecom GDR 2/11/99 62,730 71,825 .42
Principal International Industrial Credit & Investment Corp. 8/14/97 137,750 46,740 .26%
Emerging Markets Fund, Inc. of India ADR 10/7/97 31,400 12,300 .07
(Continued) 10/20/97 33,400 12,300 .07
11/10/97 15,000 6,150 .04
12/4/97 10,750 6,150 .04
12/17/97 18,675 11,070 .06
1/13/98 13,975 7,995 .05
6/5/98 13,000 6,150 .04
7/14/98 14,365 7,995 .05
8/28/98 20,988 14,145 .08
Mol Magyar Olaj-es Gazipari Rt. ADR 3/20/98 150,000 111,474 .65
4/14/98 16,250 11,147 .06
5/20/98 13,800 11,147 .06
8/4/98 11,950 8,918 .06
9/2/98 18,113 20,065 .12
9/23/98 20,570 24,525 .14
2/25/99 27,335 24,525 .14
Paints & Chemical Industries 9/26/97 25,720 16,511 .10
Co. SAE GDR 10/20/97 11,700 7,179 .04
10/30/97 19,750 14,357 .08
12/4/97 12,155 9,332 .05
1/23/98 3,450 2,871 .02
4/14/98 14,788 9,332 .05
7/20/98 21,390 16,512 .10
9/1/98 17,040 17,229 .10
Pepsi-Gemex SA GDR 7/7/98 37,462 31,500 .18
7/9/98 27,796 23,100 .13
7/14/98 34,223 28,350 .17
7/20/98 31,165 24,150 .14
8/25/98 11,985 12,600 .07
12/8/98 29,920 44,100 .26
Pick Szeged Rt. GDR 7/7/98 26,510 13,966 .08
7/8/98 27,280 13,966 .08
7/14/98 12,950 6,348 .04
9/2/98 20,400 19,045 .11
9/23/98 14,490 19,045 .11
10/22/98 14,200 12,696 .07
10/27/98 20,410 16,505 .10
Reliance Industries Ltd. GDR 8/14/97 72,000 36,186 .21
10/24/97 22,125 12,063 .07
12/12/97 21,750 18,093 .11
1/2/98 17,535 12,665 .07
1/13/98 12,750 10,253 .06
4/6/98 13,800 9,046 .05
7/14/98 13,050 10,856 .06
12/17/98 20,720 24,124 .14
12/22/98 29,150 31,964 .19
Principal International Shinhan Bank GDR 4/9/99 37,593 45,363 .26%
Emerging Markets Fund, Inc. 4/19/99 59,265 64,462 .38
(Continued) 4/22/99 46,475 52,525 .31
Videsh Sanchar Nigam Ltd. GDR 8/14/97 129,440 95,800 .56
11/18/97 28,250 23,950 .14
12/2/97 14,250 11,975 .07
12/12/97 10,720 9,580 .06
1/2/98 15,235 13,173 .08
1/13/98 13,620 14,370 .08
3/5/98 10,440 9,580 .06
4/30/98 21,038 20,358 .12
6/5/98 19,800 21,555 .12
7/14/98 11,750 11,975 .07
7/30/98 10,875 11,975 .07
9/28/98 16,688 17,962 .10
2/11/99 54,575 70,652 .41
2,212,271 12.87
Principal International Neopost SA 2/23/99 26,430 28,912 .10
SmallCap Fund, Inc. 3/24/99 111,325 122,875 .41
3/31/99 67,925 75,893 .26
227,680 .77
</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 International Principal Principal International
Emerging Markets International SmallCap
Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Period Ended April 30, 1999:
Shares sold:
Class A ......................................... 225,635 4,894,572 456,355
Class B ......................................... 70,192 720,036 86,478
Class R ......................................... 91,450 406,857 28,177
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 2,098,492 9,091
Class B ........................................... -- 262,627 5,060
Class R ......................................... -- 112,716 2,530
Shares redeemed:
Class A ......................................... (115,489) (5,353,449) (291,931)
Class B ......................................... (30,198) (667,201) (74,115)
Class R ......................................... (38,838) (311,419) (12,591)
Net Increase 202,752 2,163,231 209,054
Year Ended October 31, 1998:
Shares sold:
Class A ......................................... 620,056 6,434,705 770,054
Class B ......................................... 169,453 1,480,411 260,731
Class R ......................................... 87,602 1,035,347 47,319
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 1,012,117 --
Class B ........................................... -- 95,849 --
Class R ......................................... -- 36,589 --
Shares redeemed:
Class A ......................................... (110,092) (4,688,589) (216,075)
Class B ......................................... (43,618) (672,121) (79,482)
Class R ......................................... (53,356) (400,191) (17,457)
Net Increase 670,045 4,334,117 765,090
</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 a bank, which allows the funds to borrow up to $60,000,000, 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 .08% on the
average unused portion 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 quarter. At April 30, 1999, the Principal International
SmallCap Fund, Inc. had an outstanding borrowing of $55,000 at an annual rate of
5.50%. No other International Growth Fund had outstanding borrowings at April
30, 1999 under the line of credit.
GROWTH FUNDS (INTERNATIONAL)
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
<TABLE>
<CAPTION>
Shares
Held Value
Common Stocks (89.92%)
<S> <C> <C>
Agricultural Chemicals (0.45%)
Sociedad Quimica Minera De Chile SA
ADR, Class A 115 $ 3,795
Sociedad Quimica Minera De Chile SA
ADR, Class B 2,000 73,750
77,545
Bakery Products (0.92%)
Nong Shim Co. Ltd. 2,800 157,851
Beer, Wine & Distilled Beverages (1.47%)
Hite Brewery Co. Ltd. 2,400(b) 56,543
South African Breweries Ltd. 23,862 196,624
253,167
Beverages (6.77%)
Al-Ahram Beverages Co. GDR 9,600(a)(b) 306,000
Embotelladora Andina SA ADR, Series A 9,800 177,012
Fomento Economico Mexicano SA ADR 10,050 365,569
PanAmerican Beverages, Inc. ADR 6,800 150,875
Pepsi-Gemex SA GDR 15,600(a) 163,800
1,163,256
Blast Furnace & Basic Steel Products (2.38%)
Pohang Iron & Steel ADR 6,600 169,950
Tubos De Acero De Mexico SA ADR 21,700 240,056
410,006
Cable & Other Pay TV Services (1.39%)
@Entertainment, Inc. ADR 10,800(b) 97,200
Ceske Radiokomunikace GDR 3,850(a)(b) 141,488
238,688
Cement, Hydraulic (1.82%)
Apasco SA 24,000 142,342
Uniao De Bancos Brasileiros SA GDR 6,900 171,206
313,548
Central Reserve Depositories (0.87%)
Dao Heng Bank Group Ltd. 37,000 150,377
Commercial Banks (9.85%)
ABSA Group Ltd. 53,000 277,835
Banco Rio De La Plata SA ADR 12,900 166,894
Bank Handlowy w Warazawie GDR 13,000(a) 154,050
Bank Sinopac 300,000(b) 211,016
Banque Libanaise Pour Le Commerce
SAL ADR 4,500(a) 55,013
BOE Ltd. 180,000 176,923
Overseas Union Bank Ltd. 65,000 333,924
Shinhan Bank 14,000 154,317
Shinhan Bank GDR 6,800(a)(b) 162,350
1,692,322
Communications Equipment (1.88%)
ECI Telecommunications Ltd. ADR 6,500 239,688
Gilat Satellite Networks Ltd. 1,600(b) 83,200
322,888
Computer & Data Processing
Services (0.52%)
Tecnomatix Technologies Ltd. ADR 6,000(b)$ 89,250
Computer & Office Equipment (3.33%)
Compal Electronics, Inc. 59,000(b) 203,890
Orbotech Ltd. ADR 5,000(b) 240,000
Sindo Ricoh Co. 3,100 127,812
571,702
Construction & Related Machinery (1.50%)
Barlow Ltd. 43,058 257,459
Consumer Products (1.97%)
Rothmans Industries Ltd. 37,000 194,450
Souza Cruz SA 12,100 80,887
Tabak AS 300 62,474
337,811
Crude Petroleum & Natural Gas (1.23%)
Mol Magyar Olaj-es Gazipari Rt. ADR 9,500(a) 211,801
Department Stores (1.00%)
Shinsegae Department Store Co. 5,000 172,492
Eating & Drinking Places (0.98%)
Cafe De Coral Holdings Ltd. 513,000 168,783
Electric Services (1.15%)
Korean Electric Power ADR 12,000 198,000
Electrical Industrial Apparatus (0.60%)
Guangdong Kelon Electric Holdings Co. Ltd.115,000 103,864
Electronic Components &
Accessories (2.73%)
Elec & Eltek International ADR 40,500 153,900
Flextech Holdings Ltd. 126,000 102,675
Varitronix International Ltd. 124,000 212,786
469,361
Electronic Distribution Equipment (1.07%)
Techtronic Industries Co. 964,000 184,081
Engines & Turbines (0.43%)
First Tractor Co. Ltd. 372,000 74,395
Family Clothing Stores (0.24%)
Giordano International Ltd. 88,000 40,875
Federal & Federally Sponsored
Credit (0.76%)
Industrial Credit & Investment
Corp. of India ADR 21,300(a) 130,995
Finance Services (0.52%)
Grupo Financiero Banorte SA, Series B 69,000(b) 89,613
Fire, Marine & Casualty Insurance (1.86%)
Aksigorta AS 4,914,000 320,013
Foreign Banks, Branches & Agencies (2.11%)
Bank Leumi Le-Israel 59,000 101,079
Credicorp Ltd. ADR 11,050 111,881
Yapi Ve Kredi Bankasi AS 6,260,000 150,278
363,238
Furniture & Home Furnishing
Stores (0.96%)
Grupo Elektra SA CPO 230,000 $ 164,290
Glass & Glassware, Pressed or Blown (1.45%)
Vitro SA ADR 40,000 250,000
Grocery Stores (0.85%)
Blue Square Chain Investments &
Property Ltd. 9,900(b) 146,977
Holding Offices (1.92%)
The India Fund, Inc. ADR 39,400(b) 329,975
Household Appliances (0.36%)
Halla Climate Control Co. 1,900 61,950
Measuring & Controlling Devices (2.56%)
IDT Holdings Singapore Ltd. ADR 195,000 216,450
Moulin International Holding Ltd. 1,910,000 224,257
440,707
Meat Products (0.59%)
Pick Szeged Rt. GDR 16,000(a) 101,571
Medical Instruments & Supplies (0.84%)
Medison Co. Ltd. 12,900 144,363
Miscellaneous Electrical Equipment &
Supplies (0.66%)
G.P. Batteries International Ltd. 67,500 112,799
Miscellaneous Food & Kindred
Products (0.48%)
Thai Union Frozen Products Public Co. Ltd.28,000 82,988
Miscellaneous Investing (1.45%)
Banco Latino Americano
De Exportaciones ADR 7,800 248,625
Miscellaneous Non-Durable Goods(1.71%)
Desc SA, Series B 230,000 294,229
Miscellaneous Textile Goods (2.08%)
Esprit Holdings Ltd. 324,000 192,297
Reliance Industries Ltd. GDR 27,400(a) 165,250
357,547
Newspapers (1.10%)
Agora SA GDR 10,600(a)(b) 121,900
Investec-Consultadoria Internacional SA 2,000 66,418
188,318
Oil & Gas Field Services (0.73%)
Gulf Indonesia Resources Ltd. ADR 12,200(b) 125,813
Paints & Allied Products (0.54%)
Paints&Chemical Industries Co.SAE GDR 13,000(a) 93,323
Paper & Paper Products (0.99%)
Aracruz Celulose SA ADR 8,500 170,000
Paperboard Containers & Boxes (0.56%)
Hung Hing Print Group 228,000 95,607
Petroleum Refining (4.14%)
Sasol Ltd. 40,100 $ 282,471
YPF Sociedad Anonima ADR 10,200 428,400
710,871
Radio & Television Broadcasting (1.43%)
Grupo Televisa SA GDR 6,000(b) 246,000
Search & Navigation Equipment (0.99%)
Elbit Systems Ltd. ADR 11,800 170,363
Security & Commodity Exchanges (0.80%)
OTK Holdings Ltd. ADR 206,000 136,673
Security Brokers & Dealers (1.31%)
G.K. Goh Holdings Ltd. 90,000 62,710
Kay Hian Holdings Ltd. 170,000 104,399
Peregrine Investment Holdings Ltd. 62,000(b)(c) 0
Vickers Ballas Holdings Ltd. 80,000 58,105
225,214
Subdividers & Developers (1.33%)
Allgreen Properties Ltd. 375,000(b) 228,078
Telephone Communication (10.29%)
Compania Anonima Telefonos De
Venezuela ADR 7,000 192,500
Compania De Telecomunicacion
De Chile ADR 2,100 55,519
Hellenic Telecom Organization SA ADR 18,500(b) 220,844
Hellenic Telecommunication 7,011 163,078
Korea Telecom Corp. 4,000 175,016
Matav Tavkozlesi Rt. ADR 9,500 267,187
Philippine Long Distance Telephone
Co. ADR 4,300 138,675
Tele Norte Leste Participacoes SA 3,800,000 36,649
Telefonica De Argentina SA ADR 5,000 186,875
Videsh Sanchar Nigam Ltd. GDR 27,800(a) 332,905
1,769,248
Variety Stores (0.00%)
Edgars Stores Ltd. 1 2
Total Common Stocks 15,458,912
Preferred Stocks (10.97%)
Beverages (1.75%)
Quilmes Industrial SA ADR 27,500 300,781
Blast Furnace & Basic Steel
Products (0.29%)
Gerdau SA 3,200,000 49,187
Cement, Hydraulic (1.49%)
Titan Cement Co. SA 3,600 255,779
Central Reserve Depositories (0.43%)
Banco Ganadero SA ADR 7,700 73,150
Commercial Banks (0.51%)
Banco Estado De Sao Paulo SA 2,000,000 88,007
Electric Services (0.99%)
Centrais Electricas De Santa Catarina SA367,000 170,341
Industrial Inorganic Chemicals (0.28%)
Fertilizantes Fosfatados SA
Fosfertil NPV 13,800,000 48,247
Telephone Communication (5.23%)
Estonian Telecom GDR 3,400(a)(b) 71,825
Tele Celular Sul Participacoes SA ADR 5,200 103,025
Tele Centro Sul Participacoes SA ADR 4,360 231,625
Tele Norte Leste Participacoes ADR 10,600 179,537
Telec De Sao Paulo SA 1,940,000 240,897
Telecommunicacoes Brasileiras SA ADR 800 63
Telecommunicacoes Brasileiras SA ADR 800 72,950
899,922
Total Preferred Stocks 1,885,414
Total Portfolio Investments (100.89%) 17,344,326
Liabilities, net of cash and receivables (-0.89%) (153,376)
Total Net Assets (100.00%) $17,190,950
<FN>
(a) Restricted security - See Note 4 to the financial statements.
(b) Non-income producing security - No dividend paid during the period.
(c) Peregrine Investment Holdings Ltd. has filed a plan of liquidation.
</FN>
</TABLE>
Principal International Emerging Markets Fund, Inc.
Investments by Country
Total Percentage of
Country Value Total Value
Argentina $1,082,950 6.24%
Brazil 1,642,622 9.47
Chile 310,076 1.79
China 178,260 1.03
Colombia 73,150 0.42
Czech Republic 203,961 1.18
Egypt 399,323 2.30
Estonia 71,825 0.41
Greece 639,701 3.69
Hong Kong 1,269,063 7.32
Hungary 580,559 3.35
India 959,125 5.53
Indonesia 125,813 0.73
Israel $1,070,556 6.17%
Korea, Republic Of 1,580,644 9.11
Lebanon 55,013 0.32
Mexico 2,106,774 12.15
Panama 248,625 1.43
Peru 111,881 0.64
Philippines 138,675 0.80
Poland 373,150 2.15
Portugal 66,418 0.38
Singapore 1,567,491 9.04
South Africa 1,327,987 7.66
Taiwan, Province Of China 414,905 2.39
Thailand 82,988 0.48
Turkey 470,291 2.71
Venezuela 192,500 1.11
Total $17,344,326 100.00%
PRINCIPAL INTERNATIONAL FUND, INC.
<TABLE>
<CAPTION>
Shares
Held Value
Common Stocks (94.12%)
<S> <C> <C>
Advertising (1.22%)
WPP Group PLC 563,000 $ 4,990,211
Blast Furnace & Basic Steel
Products (0.36%)
Tubos De Acero De Mexico SA ADR 132,000 1,460,250
Central Reserve Depositories (0.98%)
Union Bank Of Norway 209,660 4,012,098
Commercial Banks (13.13%)
Australia&New Zealand Banking Group 910,000 7,219,207
Bank of Ireland 430,030 8,609,892
Merita PLC, Class A 1,187,670 7,099,231
National Australia Bank Ltd. 326,437 6,364,971
Nordbanken Holding AB 220,000 1,386,316
Royal Bank of Canada
Montreal, Quebec 128,800 6,288,289
San Paolo-IMI SPA 431,585 6,483,683
Shinhan Bank 183,000 2,017,143
Svenska Handelsbanken AB Free 172,750 5,884,457
Svenska Handelsbanken, Class A 62,000 2,329,391
53,682,580
Communications Equipment (1.84%)
ECI Telecommunications Ltd. ADR 204,000 7,522,500
Communications Services, NEC (1.05%)
Koninklijke KPN NV 102,780 4,295,095
Computer & Office Equipment (1.45%)
Orbotech Ltd. ADR 123,200(a) 5,913,600
Concrete, Gypsum & Plaster
Products (1.50%)
Lafarge SA 63,000 6,131,906
Consumer Products (4.90%)
Imasco Ltd. 413,457 $ 9,113,449
Societe Nationale D'Exploitation
Industrielle Des Tabacs et Allumettes 89,000 5,367,005
Swedish Match Co. 1,688,000 5,559,246
20,039,700
Copper Ores (1.35%)
Trelleborg AB, Class B 552,000 5,529,332
Crude Petroleum & Natural Gas (1.56%)
Elf Aquitaine SA 41,000 6,376,293
Drugs (4.22%)
AstraZeneca Group PLC 167,225 6,541,235
Novartis AG 4,423 6,487,271
Takeda Chemical Industries 97,000 4,217,697
17,246,203
Electrical Goods (1.32%)
Smiths Industries PLC 344,000 5,405,818
Electronic Components &
Accessories (0.85%)
Elec & Eltek International ADR 757,400 2,878,120
Varitronix International Ltd. 340,000 583,446
3,461,566
Electronic Distribution Equipment (2.98%)
Philips Electronics 141,100 12,166,109
Engines & Turbines (0.67%)
RHI AG 89,000 2,720,224
Farm & Garden Machinery (0.82%)
New Holland NV 231,000 3,349,500
Finance Services (1.26%)
Takefuji Corp. 62,000 5,142,368
Foreign Banks, Branches &
Agencies (3.03%)
Bank Austria AG 68,000 4,223,651
UBS AG 24,000 8,165,775
12,389,426
Gas Production & Distribution (1.03%)
OMV AG 43,600 4,220,605
Industrial Inorganic Chemicals (1.52%)
Kemira OY 332,000 2,160,132
Rhone-Poulenc SA 85,000 4,046,677
6,206,809
Investment Offices (1.74%)
AMVESCAP PLC 671,400 7,107,719
Life Insurance (1.05%)
QBE Insurance Group Ltd. 959,797 4,300,114
Meat Products (4.89%)
Danisco AS 146,000 6,843,784
Orkla ASA, Class A 111,000 1,867,514
Orkla ASA, Class B 349,600 5,140,988
Unilever NV 89,600 6,142,570
19,994,856
Miscellaneous Chemical Products (1.48%)
Hoechst AG 132,000 $ 6,046,846
Miscellaneous Converted Paper
Products (1.34%)
Bunzl PLC 1,285,000 5,493,142
Miscellaneous Food & Kindred
Products (2.57%)
Greencore Group PLC 991,000 3,853,399
Tomkins PLC 1,576,000 6,660,988
10,514,387
Miscellaneous Non-Durable Goods (3.88%)
Desc SA , Series B 3,140,000 4,016,868
Diageo PLC 716,179 8,314,000
Lagardere SCA 89,000 3,529,041
15,859,909
Miscellaneous Textile Goods (1.03%)
Esprit Holdings Ltd. 7,082,000 4,203,238
Miscellaneous Transportation
Equipment (1.08%)
Autoliv, Inc. 52,000 1,811,485
Autoliv, Inc. ADR 75,000 2,587,500
4,398,985
Motor Vehicles & Equipment (1.57%)
Daimlerchrysler AG 65,700 6,432,931
Newspapers (3.57%)
Publishing & Broadcasting Ltd. 710,000 4,779,448
United News & Media PLC 798,000 9,790,638
14,570,086
Paperboard Containers & Boxes (1.11%)
Buhrmann NV 246,200 4,519,128
Pens, Pencils, Office & Art Supplies (1.07%)
Societe BIC SA 78,000 4,381,837
Personnel Supply Services (1.70%)
Vedior NV 308,265 6,946,578
Petroleum Refining (3.70%)
Sasol Ltd. 424,000 2,986,727
YPF Sociedad Anonima ADR 289,000 12,138,000
15,124,727
Pulp Mills (1.99%)
Lassila & Tikanoja Ltd. OY 164,000 3,903,853
UPM-Kymmene OY 139,980 4,242,850
8,146,703
Radio & Television Broadcasting (0.80%)
Mirror Group PLC 891,000 3,256,542
Security Brokers & Dealers (0.00%)
Peregrine Investment Holdings Ltd. 2,289,000(a)(b) 0
Soap, Cleaners & Toilet Goods (1.38%)
Reckitt & Colman PLC 472,797 5,656,095
Special Industry Machinery (1.85%)
Cookson Group 2,673,200 7,553,735
Telephone Communication (8.24%)
Hellenic Telecom Organization SA ADR 586,000(a) 6,995,375
Nokia Corp.,Class A ADR 100,000 7,418,750
Telecom Corp. of New Zealand Ltd. 1,644,000 8,555,347
Telecom Italia-DI 1,990,200 10,717,206
33,686,678
Trucking & Courier Services,
Except Air (1.04%)
Securicor PLC 451,000 4,258,903
Total Common Stocks 384,715,332
Preferred Stock (0.80%)
Commercial Banks (0.80%)
National Australia Bank ECU 96,000 3,270,000
Principal
Amount Value
Commercial Paper (3.74%)
Business Credit Institutions (2.29%)
American Express Credit Corp.;
4.72%; 5/3/1999 $8,715,000 $ 8,715,000
General Electric Capital Corp.;
4.85%; 5/7/1999 644,653 644,653
9,359,653
Personal Credit Institutions (1.45%)
Household Finance Corp.;
4.78%; 5/4/1999 5,934,212 5,934,212
Total Commercial Paper 15,293,865
Total Portfolio Investments (98.66%) 403,279,197
Cash, receivables and other assets,
net of liabilities (1.34%) 5,495,293
Total Net Assets (100.00%) $408,774,490
<FN>
(a)Non-income producing security - No dividend paid during the period.
(b)Peregrine Investment Holdings Ltd. has filed a plan of liquidation.
</FN>
</TABLE>
Principal International Fund, Inc.
Investments by Country
Total Percentage of
Country Value Total Value
Argentina $ 12,138,000 3.01%
Australia 25,933,740 6.43
Austria 11,164,480 2.77
Canada 15,401,738 3.82
Denmark 6,843,784 1.70
Finland 24,824,817 6.16
France 29,832,758 7.40
Germany 12,479,777 3.10
Greece 6,995,375 1.73
Hong Kong 4,786,685 1.19
Israel 13,436,100 3.33
Italy 17,200,890 4.27
Japan 9,360,065 2.32
Korea, Republic of 2,017,143 0.50
Mexico 5,477,118 1.36
Netherlands 37,418,981 9.28
New Zealand 8,555,347 2.12
Norway 11,020,600 2.73
Singapore 2,878,120 0.71
South Africa 2,986,727 0.74
Sweden 31,628,961 7.84
Switzerland 14,653,046 3.63
United Kingdom 80,951,081 20.07
United States 15,293,864 3.79
Total $403,279,197 100.00%
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
<TABLE>
<CAPTION>
Shares
Held Value
Common Stocks (96.93%)
<S> <C> <C>
Advertising (1.30%)
United Group Ltd. 199,000 $ 382,477
Air Transportation, Scheduled (1.59%)
Ryanair Holdings PLC ADR 10,500(a) 469,875
Airports, Flying Fields & Services (2.99%)
Auckland International Airport Ltd 271,500 470,960
Virgin Express Holdings ADR 41,600(a) 413,400
884,360
Bakery Products (1.37%)
Kamps AG 11,700 405,382
Beverages (1.47%)
Doosan Corp. 11,500(a) 435,436
Central Reserve Depositories (0.81%)
Union Bank of Norway 12,420 237,672
Commercial Banks (1.00%)
Banco Pastor SA 5,600 $ 295,516
Communications Equipment (1.62%)
Gilat Satellite Networks Ltd. 3,600(a) 187,200
Indra Sistemas SA 14,000 134,784
Teleste OYJ 18,000(a) 157,106
479,090
Communications Services, NEC (3.20%)
RSL Communications Ltd., Class A 28,900(a) 946,475
Computer & Data Processing
Services (7.10%)
CI Technologies Group Ltd. 68,300 237,648
Computacenter PLC 61,000 444,428
Computershare Ltd. 47,000 485,933
Ecsoft Group PLC ADR 15,200(a) 264,100
Equant ADR 3,900(a) 348,075
Ixos Software AG 950(a) 201,012
Telinfo NV 900 114,735
2,095,931
Computer & Office Equipment (2.52%)
Orbotech Ltd. ADR 8,200(a) 393,600
Venture Manufacturing Ltd. 64,000 351,462
745,062
Drug Stores & Proprietary Stores (1.61%)
Tsuruha Co., Ltd. 7,000 475,615
Drugs (1.07%)
Biovail Corp. International 2,900(a) 103,550
Skyepharma PLC 202,000(a) 213,032
316,582
Eating & Drinking Places (0.95%)
Do & Co Restaurants & Catering AG 4,600(a) 279,829
Electric Services (3.14%)
Energy Developments Ltd. 72,000 188,488
Independent Energy Holdings ADR 36,400(a) 389,025
Vestas Wind Systems 5,100(a) 348,786
926,299
Electrical Work (2.22%)
Telesystem International Wireless, Inc. 33,300(a) 656,256
Electronic Components &
Accessories (4.12%)
Celestica, Inc. 25,900(a) 1,013,338
Elec & Eltek International ADR 53,900 204,820
1,218,158
Electronic Distribution Equipment (3.51%)
C/TAC NV 4,000 59,457
JOT Automation Group OYJ 21,200 699,774
Techtronic Industries Co. 1,447,000 276,312
1,035,543
Fabricated Rubber Products, Nec (0.58%)
Tenma Corp. 11,000 171,412
Family Clothing Stores (1.05%)
Fast Retailing Co. Ltd. 6,000 308,643
Freight Transportation
Arrangement (0.66%)
C Two-Network Co. Ltd. 2,200 $ 193,530
Grocery Stores (0.90%)
Superdiplo SA 12,300(a) 266,113
Holding Offices (0.81%)
Lang Corp. Ltd. 73,000(a) 239,971
Hose, Belting, Gaskets & Packing (0.54%)
Phoenix AG 9,400 160,111
Household Appliance Stores (0.31%)
Kojima Co. Ltd. 3,500 90,900
Hunting, Trapping, Game
Propagation (1.13%)
Rapala Normark Corp. 44,400(a) 333,510
Industrial Inorganic Chemicals (1.24%)
Kemira OY 56,300 366,312
Life Insurance (0.41%)
Scor SA 2,400 119,845
Measuring & Controlling Devices (0.29%)
Sensonor ASA 35,900(a) 84,375
Medical & Dental Laboratories (1.18%)
Qiagen NV 4,800(a) 347,856
Medical Instruments & Supplies (1.25%)
Cochlear Ltd. 47,900 369,841
Metalworking Machinery (1.78%)
Mikron Holding AG 2,200 526,716
Miscellaneous Amusement, Recreation
Services (0.99%)
Aristocrat Leisure Ltd. 45,600 292,546
Miscellaneous Durable Goods (0.84%)
Edel Music AG 700(a) 248,090
Miscellaneous Electrical Equipment &
Supplies (1.74%)
Kaba Holding AG, Class B 980 514,959
Miscellaneous General Merchandise
Stores (1.29%)
Japan Airport Terminal 36,000 380,023
Miscellaneous Manufacturers (1.02%)
Austria Haustechnik AG 8,300 302,506
Miscellaneous Non-Durable Goods (1.41%)
Austria Tabakwerke AG 6,800 417,257
Miscellaneous Plastics Products,
NEC (1.43%)
Airspray NV 15,600(a) 420,854
Miscellaneous Primary Metal
Products (0.00%)
YBM Magnex International, Inc. 28,300(a) 194
Motorcycles, Bicycles & Parts (0.89%)
Ducati Motor Holding SPA 89,200(a) 264,235
New & Used Car Dealers (0.94%)
Athlon Groep NV 10,000 277,184
Newspapers (1.24%)
Newsquest PLC 52,100 366,583
Non-Classifiable Establishments (1.00%)
Bure Investment Aktiebolaget AB 48,400 296,358
Non-Residential Building
Construction (0.78%)
Algeco 3,000 229,946
Non-Store Retailers (0.76%)
Simree Co. Ltd. 24,000(a) 225,199
Personnel Supply Services (1.41%)
Unique International NV 15,600 416,728
Pulp Mills (0.68%)
Miquel Y Costas 7,300 200,414
Radio & Television Broadcasting (2.68%)
Modern Times Group Mtg AB, Class B 38,500(a) 791,900
Radio, Television & Computer
Stores (3.32%)
Distefora Holding AG 800(a) 85,126
Yamada Denki 24,000 894,762
979,888
Real Estate Agents & Managers (1.45%)
First Capital Corp. Ltd. 321,800 427,547
Sanitary Services (0.88%)
De Sammensluttede Vognmand AS 3,200 259,424
Security Brokers & Dealers (1.84%)
Kempen & Co. NV 9,612 544,045
Special Industry Machinery (2.64%)
Aixtron 2,300 552,358
Neopost SA 12,600(a)(b) 227,680
780,038
Subdividers & Developers (1.26%)
MCL Land Ltd. 310,000 373,428
Telephone Communication (11.39%)
Aapt Ltd. 213,600(a) 764,450
Esat Telecom Group PLC ADR 19,100(a) 933,512
Global Telesystems Group, Inc. ADR 6,887(a) 455,403
Helsingin Puhelin OYJ, Series E 6,600 278,602
Metronet Communications ADR, Class B 16,800(a) 932,400
3,364,367
Trusts (1.33%)
NHP PLC 131,040 392,437
Total Common Stocks 28,630,843
Principal
Amount Value
Commercial Paper (1.54%)
Business Credit Institutions (1.54%)
General Electric Capital Corp.,
4.94%; 5/3/1999 455,000 $ 455,000
Total Portfolio Investments (98.47%) 29,085,843
Cash and receivables,
net of liabilities (1.53%) 452,255
Total Net Assets (100.00%) $29,538,098
<FN>
(a) Non-income producing security - No dividend paid during the period. (b)
Restricted security - See Note 4 to the financial statements.
</FN>
</TABLE>
Principal International SmallCap Fund, Inc.
Investments by Country
Total Percentage of
Country Value Total Value
Australia $ 2,961,353 10.18%
Austria 999,593 3.44
Belgium 528,135 1.81
Canada 2,705,737 9.30
Czech Repulic 455,403 1.57
Denmark 608,210 2.09
Finland 1,835,303 6.31
France 577,472 1.99
Germany 1,566,953 5.39
Hong Kong 276,312 0.95
Ireland 1,403,388 4.82
Israel 580,800 2.00
Italy 264,235 0.91
Japan 2,740,083 9.42
Korea, Republic Of 435,436 1.50
Netherlands 2,414,199 8.30
New Zealand 470,960 1.62
Norway 322,047 1.11
Singapore 1,357,258 4.67
Spain 896,826 3.08
Sweden 1,088,258 3.74
Switzerland 1,126,801 3.87
United Kingdom 3,016,081 10.37
United States 455,000 1.56
Total $29,085,843 100.00%
FINANCIAL HIGHLIGHTS
(unaudited)
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 1999* 1998 1997(a)
- ------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $6.54 $8.29 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. -- (.02) (.01)
Net Realized and Unrealized Gain (Loss) on Investments 1.44 (1.73) (1.21)
Total from Investment Operations 1.44 (1.75) (1.22)
Net Asset Value, End of Period......................... $7.98 $6.54 $8.29
Total Return(b)........................................ 22.02%(c) (21.11)% (10.18)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $9,800 $7,312 $5,039
Ratio of Expenses to Average Net Assets............. 2.73%(d) 3.31% 2.03%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ .23%(d) (.36)% (.32)%(d)
Portfolio Turnover Rate............................. 91.2%(d) 45.2% 21.4%(d)
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class B shares 1999* 1998 1997(a)
- ------------------------------------------------------------------- ---- ----
Net Asset Value, Beginning of Period................... $6.52 $8.28 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.03) (.05) (.01)
Net Realized and Unrealized Gain (Loss) on Investments 1.42 (1.71) (1.22)
Total from Investment Operations 1.39 (1.76) (1.23)
Net Asset Value, End of Period......................... $7.91 $6.52 $8.28
Total Return(b)........................................ 21.32%(c) (21.26)% (10.29)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,290 $3,275 $3,116
Ratio of Expenses to Average Net Assets............. 3.83%(d) 3.59% 2.16%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.87)%(d) (.69)% (.46)%(d)
Portfolio Turnover Rate............................. 91.2%(d) 45.2% 21.4%(d)
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class R shares 1999* 1998 1997(a)
- ------------------------------------------------------------------- ---- ----
Net Asset Value, Beginning of Period................... $6.53 $8.28 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. -- (.04) (.01)
Net Realized and Unrealized Gain (Loss) on Investments 1.42 (1.71) (1.22)
Total from Investment Operations 1.42 (1.75) (1.23)
Net Asset Value, End of Period......................... $7.95 $6.53 $8.28
Total Return(b)........................................ 21.75%(c) (21.14)% (10.29)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $3,101 $2,202 $2,510
Ratio of Expenses to Average Net Assets............. 3.06%(d) 3.47% 2.20%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.10)%(d) (.60)% (.51)%(d)
Portfolio Turnover Rate............................. 91.2%(d) 45.2% 21.4%(d)
* Six months ended April 30, 1999
See accompanying notes.
</TABLE>
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(e)
Class A shares 1999* 1998 1997 1996 1995
- ------------------------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.20 $9.33 $8.14 $7.28 $7.44
Income from Investment Operations:
Net Investment Income............................... .05 .13 .09 .10 .08
Net Realized and Unrealized Gain (Loss) on Investments 1.16 .04 1.52 1.17 (.02)
Total from Investment Operations 1.21 .17 1.61 1.27 .06
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.11) (.10) (.11) (.08) (.03)
Distributions from Capital Gains.................... (.46) (.20) (.31) (.33) (.19)
Total Dividends and Distributions (.57) (.30) (.42) (.41) (.22)
Net Asset Value, End of Period......................... $9.84 $9.20 $9.33 $8.14 $7.28
Total Return(b)........................................ 13.87%(c) 1.93% 20.46% 18.36% 1.03%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $339,889 $302,757 $281,158 $172,276 $126,554
Ratio of Expenses to Average Net Assets............. 1.23%(d) 1.25% 1.39% 1.45% 1.63%
Ratio of Net Investment Income to Average Net Assets 1.26%(d) 1.45% 1.25% 1.43% 1.10%
Portfolio Turnover Rate............................. 56.4%(d) 38.7% 26.6% 23.8% 35.4%
PRINCIPAL INTERNATIONAL FUND, INC.(e)
Class B shares 1999* 1998 1997 1996 1995(f)
- ------------------------------------------------------------------- ---- ---- ---- ----
Net Asset Value, Beginning of Period................... $9.14 $9.26 $8.07 $7.24 $6.71
Income from Investment Operations:
Net Investment Income............................... .03 .07 .03 .03 .05
Net Realized and Unrealized Gain (Loss) on Investments 1.14 .04 1.51 1.15 .51
Total from Investment Operations 1.17 .11 1.54 1.18 .56
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.05) (.03) (.04) (.02) (.03)
Distributions from Capital Gains.................... (.46) (.20) (.31) (.33) --
Total Dividends and Distributions (.51) (.23) (.35) (.35) (.03)
Net Asset Value, End of Period......................... $9.80 $9.14 $9.26 $8.07 $7.24
Total Return(b)........................................ 13.42%(c) 1.27% 19.62% 17.16% 9.77%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $47,801 $41,676 $33,842 $15,745 $3,908
Ratio of Expenses to Average Net Assets............. 1.88%(d) 1.91% 2.17% 2.28% 2.19%(d)
Ratio of Net Investment Income to Average Net Assets .61%(d) .77% .42% .64% .58%(d)
Portfolio Turnover Rate............................. 56.4%(d) 38.7% 26.6% 23.8% 35.4%(d)
PRINCIPAL INTERNATIONAL FUND, INC.(e)
Class R shares 1999* 1998 1997 1996(g)
- ------------------------------------------------------------------- ---- ---- ----
Net Asset Value, Beginning of Period................... $9.13 $9.27 $8.12 $7.48
Income from Investment Operations:
Net Investment Income............................... .03 .06 .07 .01
Net Realized and Unrealized Gain (Loss) on Investments 1.14 .04 1.47 .63
Total from Investment Operations 1.17 .10 1.54 .64
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.04) (.04) (.08) --
Distributions from Capital Gains.................... (.46) (.20) (.31) --
Total Dividends and Distributions (.50) (.24) (.39) --
Net Asset Value, End of Period......................... $9.80 $9.13 $9.27 $8.12
Total Return(b)........................................ 13.42%(c) 1.13% 19.65% 9.29%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $21,084 $17,739 $11,773 $1,057
Ratio of Expenses to Average Net Assets............. 1.95%(d) 2.01% 2.10% 1.59%(d)
Ratio of Net Investment Income to Average Net Assets .54%(d) .67% .44% .78%(d)
Portfolio Turnover Rate............................. 56.4%(d) 38.7% 26.6% 23.8%(d)
* Six months ended April 30, 1999
See accompanying notes.
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class A shares 1999* 1998 1997(a)
- ------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.99 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .03 (.07) (.01)
Net Realized and Unrealized Gain (Loss) on Investments 2.50 .10 (.07)
Total from Investment Operations 2.53 .03 (.08)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- --
Distributions from Capital Gains.................... (.08) -- --
Total Dividends and Distributions (.08) -- --
Net Asset Value, End of Period......................... $12.44 $9.99 $9.96
Total Return(b)........................................ 25.47%(c) .30% .50%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $16,805 $11,765 $6,210
Ratio of Expenses to Average Net Assets............. 2.19%(d) 2.66% 1.99%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.79)%(d) (.81)% (.40)%(d)
Portfolio Turnover Rate............................. 163.7%(d) 99.8% 10.4%(d)
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class B shares 1999* 1998 1997(a)
- ------------------------------------------------------------------- ---- ----
Net Asset Value, Beginning of Period................... $9.97 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.19) (.10) (.01)
Net Realized and Unrealized Gain (Loss) on Investments 2.65 .11 (.07)
Total from Investment Operations 2.46 .01 (.08)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- --
Distributions from Capital Gains.................... (.08) -- --
Total Dividends and Distributions (.08) -- --
Net Asset Value, End of Period......................... $12.35 $9.97 $9.96
Total Return(b)........................................ 24.82%(c) .10% .50%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $8,376 $6,585 $4,774
Ratio of Expenses to Average Net Assets............. 3.09%(d) 2.90% 2.07%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.69)%(d) (1.05)% (.47)%(d)
Portfolio Turnover Rate............................. 163.7%(d) 99.8% 10.4%(d)
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class R shares 1999* 1998 1997(a)
- ------------------------------------------------------------------- ---- ----
Net Asset Value, Beginning of Period................... $10.01 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.11) (.07) (.01)
Net Realized and Unrealized Gain (Loss) on Investments 2.64 .12 (.07)
Total from Investment Operations 2.53 .05 (.08)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- --
Distributions from Capital Gains.................... (.08) -- --
Total Dividends and Distributions (.08) -- --
Net Asset Value, End of Period......................... $12.46 $10.01 $9.96
Total Return(b)........................................ 25.42%(c) .50% .50%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,357 $3,317 $3,004
Ratio of Expenses to Average Net Assets............. 2.17%(d) 2.51% 2.15%(d)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.77)%(d) (.68)% (.54)%(d)
Portfolio Turnover Rate............................. 163.7%(d) 99.8% 10.4%(d)
* Six months ended April 30, 1999
See accompanying notes.
</TABLE>
Notes to Financial Highlights
(a) Period from August 29, 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, 1997. Principal International Emerging Markets Fund,
Inc. and Principal International SmallCap Fund, Inc. classes of shares
recognized net investment income as follows for the period from the initial
purchase of shares on August 14, 1997, through August 28, 1997, none of
which was distributed to the sole shareholder, Principal Life Insurance
Company. Principal International Emerging Markets Fund, Inc. and Principal
International SmallCap Fund, Inc. incurred unrealized gains (losses) on
investments during the initial interim period as follows. This represents
Class A, Class B and Class R share activities prior to the initial public
offering of all classes of shares of each fund.
Per Share Per Share
Net Investment Unrealized
Income Gain (Loss)
Principal International Emerging Markets Fund, Inc.:
Class A $.01 $(.50)
Class B .01 (.50)
Class R .01 (.50)
Principal International SmallCap Fund, Inc.:
Class A .01 .03
Class B .01 .03
Class R .01 .03
(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) Effective January 1, 1998, Princor World Fund, Inc. changed its name to
Principal International Fund, Inc.
(f) Period from December 9, 1994, date Class B shares first offered to the
public, through October 31, 1995. Principal International Fund, Inc. Class
B shares recognized no net investment income for the period from the
initial purchase by Principal Management Corporation of Class B shares on
December 5, 1994, through December 8, 1994. Additionally, Class B shares
incurred unrealized losses on investments of $.07 per share during the
initial interim period. This represents Class B share activities of the
fund prior to the initial public offering of Class B shares.
(g) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996. Principal International
Fund, Inc. 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.
Additionally, Class R shares incurred unrealized gains on investments of
$.02 per share during the initial interim period. This represents Class R
share activities of the fund prior to the intial offering of Class R
shares.
April 30, 1999
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost............................... $190,023,265 $287,755,570
Assets
Investment in securities -- at value (Note 4)..................... $193,817,755 $293,683,525
Cash ............................................................ 376,800 12,847
Receivables:
Interest....................................................... 3,122,709 1,668,376
Investment securities sold..................................... 1,082,310 --
Capital Shares sold............................................ 273,017 1,242,549
Prepaid Expenses.................................................. -- --
Other assets...................................................... 6,966 21,983
Total Assets 198,679,557 296,629,280
Liabilities
Accrued expenses.................................................. 126,096 171,282
Payables:
Investment securities purchased................................ 1,747,778 6,105,000
Capital Shares reacquired...................................... 272,179 108,052
Total Liabilities 2,146,053 6,384,334
Net Assets Applicable to Outstanding Shares .................... $196,533,504 $290,244,946
Net Assets Consist of:
Capital Stock..................................................... $ 174,451 $253,002
Additional paid-in capital........................................ 192,273,992 285,967,980
Accumulated undistributed net investment income................... 133,133 124,327
Accumulated net realized gain (loss) on investment transactions .. 157,438 (2,028,318)
Net unrealized appreciation (depreciation) of investments......... 3,794,490 5,927,955
Total Net Assets $196,533,504 $290,244,946
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $155,110,765 $250,496,261
Shares issued and outstanding............................ 13,768,217 21,822,375
Net asset value per share................................ $11.27 $11.48
Maximum offering price per share(a) ................... $11.83 $12.05
Class B: Net Assets .............................................. $26,209,831 $29,190,305
Shares issued and outstanding............................ 2,328,113 2,551,709
Net asset value per share(b)............................. $11.26 $11.44
Class R: Net Assets............................................... $15,212,908 $10,558,380
Shares issued and outstanding............................ 1,348,766 926,074
Net asset value per share................................ $11.28 $11.40
<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 Limited Term Bond Fund,
Inc.) of the offering price or 4.99% of the net asset value (1.52% of net
asset value 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.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal
High Yield Limited Term Bond Tax-Exempt Bond
INCOME FUNDS Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............................... $46,132,681 $31,586,531 $ 197,091,294
Assets
Investment in securities -- at value (Note 4)..................... $43,161,231 $31,316,322 $ 207,906,407
Cash ............................................................ 134,667 55,000 230,220
Receivables:
Interest....................................................... 919,787 306,966 3,830,644
Investment securities sold..................................... -- 32,258 --
Capital Shares sold............................................ 29,955 35,824 37,802
Prepaid Expenses.................................................. -- 6,417 --
Other assets...................................................... 2,814 236 11,196
Total Assets 44,248,454 31,753,023 212,016,269
Liabilities
Accrued expenses.................................................. 68,126 -- 126,566
Payables:
Investment securities purchased................................ -- -- --
Capital Shares reacquired...................................... 65,338 8,621 137,804
Total Liabilities 133,464 8,621 264,370
Net Assets Applicable to Outstanding Shares .................... $44,114,990 $31,744,402 211,751,899
Net Assets Consist of:
Capital Stock..................................................... $57,547 $ 32,374 $ 169,847
Additional paid-in capital........................................ 49,939,535 31,990,442 198,885,801
Accumulated undistributed net investment income................... 97,313 32,064 129,669
Accumulated net realized gain (loss) on investment transactions .. (3,007,955) (40,269) 1,751,469
Net unrealized appreciation (depreciation) of investments......... (2,971,450) (270,209) 10,815,113
Total Net Assets $44,114,990 $31,744,402 $ 211,751,899
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............................................... $32,933,785 $26,187,862 $199,616,702
Shares issued and outstanding............................ 4,287,104 2,671,914 16,011,877
Net asset value per share................................ $7.68 $9.80 $12.47
Maximum offering price per share(a) ................... $8.06 $9.95 $13.09
Class B: Net Assets .............................................. $8,441,628 $2,534,704 $12,135,197
Shares issued and outstanding............................ 1,104,932 257,160 972,793
Net asset value per share(b)............................. $7.64 $9.86 $12.47
Class R: Net Assets............................................... $2,739,577 $3,021,836 N/A
Shares issued and outstanding............................ 362,698 308,309 N/A
Net asset value per share................................ $7.55 $9.80 N/A
<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 Limited Term Bond Fund,
Inc.) of the offering price or 4.99% of the net asset value (1.52% of net
asset value 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.
</FN>
</TABLE>
Six Months Ended April 30, 1999
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
<S> <C> <C>
Net Investment Income
Interest income.................................................... $6,807,039 $9,816,975
Expenses:
Management and investment advisory fees (Note 3)................ 457,367 649,749
Distribution and shareholder servicing fees (Notes 1 and 3)..... 372,147 409,326
Transfer and administrative services (Notes 1 and 3)............ 241,191 250,224
Registration fees (Note 1)...................................... 26,195 21,696
Custodian fees ................................................. 1,501 6,610
Auditing and legal fees ........................................ 4,499 3,698
Directors' fees ................................................ 3,474 3,474
Other .......................................................... 5,554 6,713
Total Gross Expenses 1,111,918 1,351,490
Less: Management and investment
advisory fees waived......................................... -- --
Total Net Expenses 1,111,918 1,351,490
Net Investment Income 5,695,121 8,465,485
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. 157,610 (20,136)
Change in unrealized appreciation/depreciation
of investments ................................................. (5,203,761) (3,671,572)
Net Realized and Unrealized
Gain (Loss) on Investments (5,046,151) (3,691,708)
Net Increase in Net Assets
Resulting from Operations $ 648,970 $4,773,777
<FN>
See accompanying notes.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal
High Yield Limited Term Bond Tax-Exempt Bond
INCOME FUNDS Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Net Investment Income
Interest income.................................................... $2,262,916 $1,070,005 $5,998,141
Expenses:
Management and investment advisory fees (Note 3)................ 133,805 79,883 492,997
Distribution and shareholder servicing fees (Notes 1 and 3)..... 74,699 35,195 266,987
Transfer and administrative services (Notes 1 and 3)............ 101,283 48,571 93,067
Registration fees (Note 1)...................................... 24,625 21,984 22,958
Custodian fees ................................................. 1,368 1,186 1,334
Auditing and legal fees ........................................ 3,185 2,376 3,423
Directors' fees ................................................ 3,364 3,364 3,470
Other .......................................................... 2,419 1,206 5,771
Total Gross Expenses 344,748 193,765 890,007
Less: Management and investment
advisory fees waived......................................... -- 23,087 --
Total Net Expenses 344,748 170,678 890,007
Net Investment Income 1,918,168 899,327 5,108,134
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. (1,180,010) 3,293 1,751,791
Change in unrealized appreciation/depreciation
of investments ................................................. 1,338,556 (431,412) (3,776,846)
Net Realized and Unrealized
Gain (Loss) on Investments 158,556 (428,119) (2,025,055)
Net Increase in Net Assets
Resulting from Operations $2,076,714 $ 471,208 $3,083,079
<FN>
See accompanying notes.
</FN>
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
Six Months Year Six Months Year
Ended Ended Ended Ended
April 30, October 31, April 30, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operations
Net investment income............................................ $ 5,695,121 $ 9,903,008 $ 8,465,485 $ 16,370,086
Net realized gain (loss) from investment transactions ........... 157,610 598,317 (20,136) 242,270
Change in unrealized appreciation/depreciation
of investments................................................ (5,203,761) 1,323,899 (3,671,572) 2,717,566
Net Increase (Decrease) in Net Assets
Resulting from Operations 648,970 11,825,224 4,773,777 19,329,922
Dividends and Distributions to Shareholders
From net investment income:
Class A....................................................... (4,578,653) (8,430,036) (7,591,692) (15,088,625)
Class B....................................................... (646,100) (977,376) (753,541) (1,071,553)
Class R....................................................... (371,072) (530,322) (249,884) (334,428)
Excess distribution of net investment income:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class R....................................................... -- -- -- --
From net realized gain on investments:
Class A....................................................... (424,531) -- -- --
Class B....................................................... (65,282) -- -- --
Class R....................................................... (35,649) -- -- --
Total Dividends and Distributions (6,121,287) (9,937,734) (8,595,117) (16,494,606)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 23,405,833 41,289,926 37,340,679 39,967,883
Class B....................................................... 6,241,699 10,554,095 7,864,712 10,634,274
Class R....................................................... 5,263,483 8,716,511 3,976,997 4,770,310
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 4,017,975 6,299,889 6,287,764 12,166,316
Class B....................................................... 635,023 833,944 647,689 882,934
Class R....................................................... 399,673 524,979 246,265 329,918
Shares redeemed:
Class A....................................................... (16,022,575) (27,535,115) (41,278,271) (53,118,031)
Class B....................................................... (2,427,023) (2,514,110) (3,299,984) (2,741,242)
Class R....................................................... (2,250,931) (3,120,947) (1,700,941) (1,161,190)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 19,263,157 35,049,172 10,084,910 11,731,172
Total Increase (Decrease) 13,790,840 46,874,396 6,263,570 14,566,488
Net Assets
Beginning of period............................................. 182,742,664 145,806,002 283,981,376 269,414,888
End of period (including undistributed (overdistributed)
net investment income as set forth below)..................... $196,533,504 $182,742,664 $290,244,946 $283,981,376
Undistributed (Overdistributed) Net Investment Income........... $ 133,133 $ 33,837 $124,327 $ 254,305
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
High Yield Limited Term Bond
INCOME FUNDS Fund, Inc. Fund, Inc.
Six Months Year Six Months Year
Ended Ended Ended Ended
April 30, October 31, April 30, October 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operations
Net investment income............................................ $ 1,918,168 $ 3,598,836 $ 899,327 $1,556,035
Net realized gain (loss) from investment transactions ........... (1,180,010) 148,393 3,293 (2,668)
Change in unrealized appreciation/depreciation
of investments................................................ 1,338,556 (5,300,030) (431,412) 172,616
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,076,714 (1,552,801) 471,208 1,725,983
Dividends and Distributions to Shareholders
From net investment income:
Class A....................................................... (1,356,382) (2,856,403) (778,038) (1,431,290)
Class B....................................................... (311,421) (571,855) (53,428) (53,434)
Class R....................................................... (104,121) (189,231) (60,387) (78,892)
Excess distribution of net investment income:
Class A....................................................... -- (50,532) -- --
Class B....................................................... -- (10,117) -- --
Class R....................................................... -- (3,347) -- --
From net realized gain on investments:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class R....................................................... -- -- -- --
Total Dividends and Distributions (1,771,924) (3,681,485) (891,853) (1,563,616)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 3,906,756 11,927,135 8,428,044 12,780,385
Class B....................................................... 1,219,810 4,358,175 1,030,340 1,373,038
Class R....................................................... 367,394 1,736,594 1,294,060 1,710,613
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 844,918 1,574,414 597,770 1,358,983
Class B....................................................... 242,419 427,433 47,923 42,187
Class R....................................................... 103,889 191,997 59,004 77,461
Shares redeemed:
Class A....................................................... (5,509,857) (14,350,135) (10,108,045) (7,216,941)
Class B....................................................... (1,617,993) (1,816,211) (222,802) (344,198)
Class R....................................................... (481,938) (839,238) (331,952) (370,918)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (924,602) 3,210,164 794,342 9,410,610
Total Increase (Decrease) (619,812) (2,024,122) 373,697 9,572,977
Net Assets
Beginning of period............................................. 44,734,802 46,758,924 31,370,705 21,797,728
End of period (including undistributed (overdistributed) net investment
income as set forth below).................................... $44,114,990 $44,734,802 $31,744,402 $31,370,705
Undistributed (Overdistributed) Net Investment Income........... $ 97,313 $ (48,931) $ 32,064 $24,590
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
Six Months Year
Ended Ended
April 30, October 31,
1999 1998
<S> <C> <C>
Operations
Net investment income............................................ $ 5,108,134 $ 9,965,827
Net realized gain (loss) from investment transactions ........... 1,751,791 919,377
Change in unrealized appreciation/depreciation
of investments................................................ (3,776,846) 2,567,043
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,083,079 13,452,247
Dividends and Distributions to Shareholders
From net investment income:
Class A....................................................... (4,815,970) (9,655,683)
Class B....................................................... (245,886) (408,929)
Class R....................................................... N/A N/A
Excess distribution of net investment income:
Class A....................................................... -- --
Class B....................................................... -- --
Class R....................................................... -- --
From net realized gain on investments:
Class A....................................................... (81,087) --
Class B....................................................... (4,524) --
Class R....................................................... N/A N/A
Total Dividends and Distributions (5,147,467) (10,064,612)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 12,516,055 30,673,603
Class B....................................................... 1,444,921 4,178,912
Class R....................................................... N/A N/A
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 3,374,265 6,533,809
Class B....................................................... 192,229 306,980
Class R....................................................... N/A N/A
Shares redeemed:
Class A....................................................... (19,188,375) (28,581,284)
Class B....................................................... (806,713) (1,005,105)
Class R....................................................... N/A N/A
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (2,467,618) 12,106,915
Total Increase (Decrease) (4,532,006) 15,494,550
Net Assets
Beginning of period............................................. 216,283,905 200,789,355
End of period (including undistributed (overdistributed) net investment
income as set forth below).................................... $211,751,899 $216,283,905
Undistributed (Overdistributed) Net Investment Income........... $ 129,669 $ 83,391
<FN>
See accompanying notes.
</FN>
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(unaudited)
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.
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.
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 redemptions. 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 R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B 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 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 declare 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
period ended April 30, 1999, 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 R Class A Class B Class R Class A Class B Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. $207,213 $115,942 $48,992 $59,838 $14,966 $8,109 $ 6,471 $5,445 $5,166
Principal Government Securities Income Fund, Inc. 259,022 115,811 34,493 80,420 11,312 4,220 6,298 5,241 4,670
Principal High Yield Fund, Inc. 38,191 28,274 8,234 18,773 6,700 2,919 5,891 5,277 3,941
Principal Limited Term Bond Fund, Inc. 20,592 5,360 9,243 3,803 952 1320 6,032 4,843 4,382
Principal Tax-Exempt Bond Fund, Inc. 225,664 41,323 N/A 27,634 1,782 N/A 10,784 6,618 N/A
</TABLE>
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.
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. Reclassifications made for the year ended October
31, 1998 were not material.
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.
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.
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 rate
used in this calculation for the Income Funds is as follows:
<TABLE>
Net Asset Value of Funds
(in millions)
<CAPTION>
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.
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
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>
Amount
Waived
<CAPTION>
Period Ended Year Ended Expense
April 30, 1999 October 31, 1998 Limit
<S> <C> <C> <C>
Principal Limited Term Bond Fund, Inc.
Class A $11,013 $76,952 1.00%
Class B 6,021 11,537 1.35
Class R 6,053 11,781 1.60
</TABLE>
The Manager intends to continue its voluntary waiver and, if necessary, pay
expenses normally payable by Principal Limited Term Bond Fund, Inc. through
October 31, 1999.
For the year ended October 31, 1998, the Manager voluntarily waived a portion of
its fee for the Principal Bond Fund, Inc. The amounts waived for Class A shares,
Class B shares and Class R shares were $121,092, $26,130 and $25,144,
respectively. The Manager ceased its waiver of expenses October 31, 1998.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A and Class B share redemptions. The
charge is based on declining rates which for Class A shares begin at .75%, and
for Class B shares at 4.00% (.25% and 1.25% for Principal Limited Term Bond
Fund, Inc., 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 period ended
April 30, 1999 were as follows:
Class A Class B
Principal Bond Fund, Inc. $453,004 $43,373
Principal Government Securities Income Fund, Inc. 471,628 50,753
Principal High Yield Fund, Inc. 90,038 36,918
Principal Limited Term Bond Fund, Inc. 51,799 2,574
Principal Tax-Exempt Bond Fund, Inc. 288,889 17,736
No brokerage commissions were paid by the Income Funds to affiliated broker
dealers during the periods.
The Income Funds bear distribution and shareholder servicing fees with respect
to Class A shares computed at an annual rate of up to .25% (.15% for the
Principal Limited Term Bond Fund, Inc.) of the average daily net assets
attributable to Class A shares of each fund. Each of the Income Funds adopted a
distribution plan with respect to Class B shares that provides for distribution
and shareholder servicing fees computed at an annual rate of up to 1.00% of the
average daily net assets attributable to Class B shares of each fund (.50% for
the Principal Limited Term Bond Fund, Inc.). Each of the Income Funds, with the
exception of Principal Tax-Exempt Bond Fund, Inc., adopted a distribution plan
with respect to Class R shares that provides for distribution and shareholder
servicing fees computed at an annual rate of up to .75% of the average daily net
assets attributable to Class R shares of each fund. 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, fees unused by the principal underwriter at the end of
the fiscal year are returned to the respective Income Fund which generated the
excess.
At April 30, 1999, 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 B Class R
<S> <C> <C> <C>
Principal Bond Fund, Inc. 102,217 128 108
Principal Government Securities Income Fund, Inc. 8,605 125 106
Principal High Yield Fund, Inc. 396,345 181 5,248
Principal Limited Term Bond Fund, Inc. 720,910 120 4,849
Principal Tax-Exempt Bond Fund, Inc. 7,981 115 N/A
</TABLE>
Note 4 -- Investment Transactions
For the period ended April 30, 1999, 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:
Purchases Sales
Principal Bond Fund, Inc. $65,406,716 $46,441,166
Principal High Yield Fund, Inc. 16,633,486 17,056,313
Principal Limited Term Bond Fund, Inc. 4,348,920 3,302,803
Principal Tax-Exempt Bond Fund, Inc. 22,603,395 28,422,365
At April 30, 1999, net unrealized appreciation (depreciation) of investments by
the Income Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Appreciation (Depreciation)
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Bond Fund, Inc. $ 5,298,909 $(1,504,419) $ 3,794,490
Principal Government Securities Income Fund, Inc. 6,767,035 (839,080) 5,927,955
Principal High Yield Fund, Inc. 1,093,963 (4,065,413) (2,971,450)
Principal Limited Term Bond Fund, Inc. 142,751 (412,960) (270,209)
Principal Tax-Exempt Bond Fund, Inc. 11,252,396 (437,283) 10,815,113
</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 April 30, 1999, Principal Government
Securities Income Fund, Inc. had a TBA purchase commitment involving a security
with a face amount of $6,000,000, cost of $6,131,833 and market value of
$6,090,000. The fund has set aside investment securities and other assets in
excess of the commitment to serve as collateral.
At April 30, 1999, 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 a sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of April 30, Percentage of
Security Description Acquisition Cost 1999 Net Assets
<S> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. CE Generation LLC
Senior Secured Notes 2/24/99 $2,000,000 $2,010,240 1.02%
Equistar Chemicals LP Notes 2/9/99 3,999,680 4,096,196 2.08
John Hancock Mutual Life
Insurance Co. Surplus Notes 1/8/97 2,396,100 2,612,513 1.33
Marlin Water Trust
Senior Secured Notes 12/8/98 3,850,000 3,892,908 1.98
12/9/98 1,003,750 1,011,145 .52
Principal Bond Fund, Inc. Marriott International,
(Continued) Inc. Notes 11/10/98 2,495,200 2,498,945 1.27%
12/03/98 1,519,005 1,499,367 .77
Orix Credit Alliance
Short Term Notes 2/26/99 5,000,000 4,997,395 2.54
QWest Communications
International Senior Notes 12/15/98 2,085,000 2,092,500 1.06
Raytheon Co. Notes 12/9/98 995,870 945,835 .48
25,657,044 13.05
Principal High Yield Fund, Inc. California Steel Industries, Inc.
Senior Notes 3/30/99 375,000 383,438 .87
Chancellor Media Corp.
Unsecured Notes 11/11/98 746,633 772,500 1.75
Charter Communications Holding
LLC Senior Notes 3/12/99 1,495,995 1,533,750 3.48
Echostar DBS Corp. Senior Notes 1/15/99 1,500,000 1,565,625 3.55
Equistar Chemicals LP Notes 2/9/99 1,499,880 1,536,073 3.48
Integrated Electrical Services
Senior Subordinated Notes 1/25/99 372,000 381,563 .87
3/3/99 1,129,219 1,144,687 2.59
Level 3 Communications, Inc.
Step-up Senior Discount Notes 12/18/98 828,750 971,250 2.20
QWest Communications International
Senior Notes 4/15/99 731,500 732,375 .66
Special Devices, Inc. Senior
Subordinated Notes 12/11/98 500,000 505,000 1.14
1/26/99 1,017,500 1,010,000 2.29
York Power Funding Ltd. Senior
Secured Bonds 7/31/98 900,000 900,000 2.04
11,436,262 25.92
Principal Limited Term Bond Fund, Inc. Orix Credit Alliance, Inc.
Medium-Term Notes 11/8/96 850,000 849,963 2.68
Principal Tax-Exempt Bond Fund, Inc. Eddyville, Iowa, IDR Ref. Bonds,
Cargill, Inc. Project 1/11/95 859,910 1,036,250 .49
</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
Transactions in Capital Shares by fund were as follows:
<TABLE>
<CAPTION>
Principal Principal Principal
Bond Government Securities High Yield
Fund, Inc. Income Fund, Inc. Fund, Inc.
<S> <C> <C> <C>
Period Ended April 30, 1999:
Shares sold:
Class A ......................................... 2,039,149 3,227,699 504,901
Class B ......................................... 544,835 681,240 158,679
Class R............................................ 458,102 346,332 48,509
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 350,537 544,416 109,373
Class B ......................................... 55,444 56,240 31,541
Class R............................................ 34,838 21,469 13,664
Shares redeemed:
Class A ......................................... (1,400,302) (3,566,785) (712,163)
Class B ......................................... (212,263) (286,115) (209,376)
Class R............................................ (196,071) (148,101) (63,456)
Net Increase (Decrease) 1,674,269 876,395 (118,328)
Year Ended October 31, 1998:
Shares sold:
Class A ......................................... 3,558,782 3,449,728 1,429,263
Class B ......................................... 911,403 919,042 520,583
Class R............................................ 751,757 414,918 208,702
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 544,557 1,053,198 190,004
Class B ........................................... 72,083 76,520 51,887
Class R............................................ 45,324 28,745 23,509
Shares redeemed:
Class A ......................................... (2,379,170) (4,587,595) (1,722,188)
Class B ......................................... (216,720) (237,166) (222,473)
Class R............................................ (268,084) (100,699) (101,674)
Net Increase 3,019,932 1,016,691 377,613
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
Limited Term Bond Tax-Exempt Bond
Fund, Inc. Fund, Inc.
Period Ended April 30, 1999:
Shares sold:
<S> <C> <C>
Class A ......................................... 852,170 997,233
Class B ......................................... 103,806 115,099
Class R............................................ 131,006 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 60,597 269,649
Class B ......................................... 4,835 15,352
Class R............................................ 5,985 N/A
Shares redeemed:
Class A ......................................... (1,022,543) (1,530,219)
Class B ......................................... (22,395) (64,354)
Class R............................................ (33,596) N/A
Net Increase (Decrease) 79,865 (197,240)
Year Ended October 31, 1998:
Shares sold:
Class A ......................................... 1,291,180 2,447,392
Class B ......................................... 138,167 333,971
Class R............................................ 173,119 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 137,689 522,117
Class B ......................................... 4,256 24,507
Class R............................................ 7,859 N/A
Shares redeemed:
Class A ......................................... (729,920) (2,279,032)
Class B ......................................... (34,626) (80,155)
Class R............................................ (37,539) N/A
Net Increase 950,185 968,800
</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 a
bank, which allows the funds to borrow up to $60,000,000, 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 .08% on the
average unused portion 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 quarter. At April 30, 1999, the Income Funds had no
outstanding borrowings under the line of credit.
SCHEDULES OF INVESTMENTS
INCOME FUNDS
PRINCIPAL BOND FUND, INC.
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Bonds (94.82%)
Air Transportation, Scheduled (1.87%)
Federal Express Corp. 1994 Pass
Through Cert., Series A310-A3;
8.40%; 3/23/2010 $1,500,000 $ 1,625,985
Federal Express Corp. Pass-Through
Cert.; 7.58%; 7/2/2019 1,000,000 1,056,060
Northwest Airlines Pass-Through Cert.,
Series 1999-1, Class 1A;
6.81%; 2/1/2020 1,000,000 995,490
------------
3,677,535
Beverages (1.15%)
Joseph E. Seagram & Sons
Guaranteed Debentures;
8.38%; 2/15/2007 1,000,000 1,093,625
8.88%; 9/15/2011 1,000,000 1,153,042
------------
2,246,667
Business Credit Institutions (0.51%)
Case Credit Corp. Medium-Term Notes;
5.95%; 8/1/2000 1,000,000 1,000,402
Cable & Other Pay TV Services (1.04%)
CSC Holdings, Inc. Senior Notes;
7.25%; 7/15/2008 2,000,000 2,040,000
Cash Grains (1.31%)
Aktiebolaget SKF Senior Notes;
7.63%; 7/15/2003 2,500,000 2,575,088
Combination Utility Services (3.93%)
MidAmerican Energy Co.
Medium-Term Notes;
6.38%; 6/15/2006 2,000,000 1,979,068
PG Energy, Inc. First Mortgage
Bonds; 8.38%; 12/1/2002 500,000 533,128
Public Service Electric & Gas
Medium-Term Notes;
8.16%; 5/26/2009 1,250,000 1,405,428
Puget Sound Power & Light Co.
1st Mortgage Medium-Term Notes,
Series A; 7.75%; 2/1/2007 3,500,000 3,808,374
------------
7,725,998
Communications Equipment (1.06%)
QWest Communications International
Senior Notes; 7.50%; 11/1/2008 2,000,000(a) 2,092,500
Computer & Data Processing
Services Medium-Term Notes (2.61%)
Comdisco, Inc.;
6.65%; 11/13/2001 2,000,000 2,022,486
6.00%; 1/30/2002 3,100,000 3,097,631
------------
5,120,117
Computer & Office Equipment (1.49%)
Seagate Technology, Inc. Senior Notes;
7.37%; 3/1/2007 $3,000,000 $ 2,934,234
Construction & Related
Machinery (0.62%)
Caterpillar, Inc. Global Debentures;
9.38%; 8/15/2011 1,000,000 1,226,157
Consumer Products (0.56%)
RJR Nabisco Capital Corp. Senior
Notes; 8.75%; 4/15/2004 1,000,000 1,097,500
Credit Reporting & Collection (2.54%)
Orix Credit Alliance Short Term Notes;
7.00%; 3/15/2001 5,000,000(a) 4,997,395
Crude Petroleum & Natural Gas (0.27%)
Occidental Petroleum Corp.
Medium-Term Notes;
9.73%; 6/15/2001 500,000 528,892
Department Stores (2.68%)
Harcourt General, Inc. Subordinated
Notes; 9.50%; 3/15/2000 400,000 410,013
Fred Meyer, Inc. Senior Notes;
7.38%; 3/1/2005 2,000,000 2,073,662
Penney (J.C.) Co., Inc. Debentures;
7.13%; 11/15/2023 1,000,000 947,024
Sears Roebuck Co.
Medium-Term Notes;
9.05%; 2/6/2012 500,000 606,341
9.12%; 2/13/2012 1,000,000 1,218,869
------------
5,255,909
Drug Stores & Proprietary
Stores (0.97%)
Rite Aid Corp. Senior Debentures;
6.88%; 8/15/2013 2,000,000 1,903,240
Eating & Drinking Places (2.55%)
Aramark Services, Inc. Notes;
6.75%; 8/1/2004 5,000,000 5,011,505
Electric Services (5.61%)
Calpine Corp. Notes; 7.75%; 4/15/2009 3,000,000 3,007,500
CE Generation LLC Senior Secured
Notes; 7.42%; 12/15/2018 2,000,000(a) 2,010,240
Commonwealth Edison Co.
Debentures; 6.95%; 7/15/2018 1,000,000 1,012,816
East Coast Power, LLC Senior Secured
Notes; 7.54%; 6/30/2017 3,000,000 2,957,670
Southern California Edison Co.
Notes; 6.38%; 1/15/2006 1,000,000 1,007,243
Toledo Edison Co. Debentures;
8.70%; 9/1/2002 1,000,000 1,045,130
------------
11,040,599
Engines & Turbines (0.49%)
Brunswick Corp. Debentures;
7.38%; 9/1/2023 1,000,000 953,574
Fabricated Rubber Products, NEC (0.84%)
M. A. Hanna Co. Senior Notes;
9.38%; 9/15/2003 $1,500,000 $ 1,654,053
Farm & Garden Machinery (1.29%)
Case Corp. Notes; 7.25%; 1/15/2016 1,000,000 959,488
Tenneco, Inc. Notes;
10.08%; 2/1/2001 500,000 530,877
8.08%; 10/1/2002 1,000,000 1,047,180
------------
2,537,545
Funeral Service & Crematories (1.20%)
Service Corp. International Notes;
6.00%; 12/15/2005 2,500,000 2,361,355
General Government, NEC (2.30%)
Ontario Hydro Debentures;
7.45%; 3/31/2013 2,000,000 2,219,240
Province of Saskatchewan, Canada
Global Notes; 8.00%; 2/1/2013 2,000,000 2,307,800
------------
4,527,040
General Industrial Machinery (0.51%)
Timken Co. Medium-Term
Notes; 6.20%; 1/15/2008 1,000,000 996,793
Gold & Silver Ores (0.62%)
Placer Dome, Inc. Notes;
7.13%; 6/15/2007 1,250,000 1,208,469
Grain Mill Products (0.55%)
Ralston Purina Co. Debentures;
7.75%; 10/1/2015 1,000,000 1,084,143
Grocery Stores (2.54%)
American Stores Co. Bond;
8.00%; 6/1/2026 2,500,000 2,811,455
Food Lion, Inc.
Medium-Term Notes;
8.67%; 8/28/2006 1,000,000 1,115,582
Notes; 7.55%; 4/15/2007 1,000,000 1,063,747
------------
4,990,784
Highway & Street Construction (1.18%)
Foster Wheeler Corp. Notes;
6.75%; 11/15/2005 2,500,000 2,317,588
Hotel & Motels (2.04%)
Marriott International, Inc. Notes;
6.63%; 11/15/2003 4,000,000(a) 3,998,312
Household Furniture (1.02%)
Masco Corp. Debentures;
7.13%; 8/15/2013 2,000,000 2,009,900
Industrial Inorganic Chemicals (2.08%)
Equistar Chemicals LP Notes;
8.50%; 2/15/2004 4,000,000(a) 4,096,196
Life Insurance (1.33%)
John Hancock Mutual Life Insurance Co.
Surplus Notes; 7.38%; 2/15/2024 $2,500,000(a) $ 2,612,513
Machinery, Equipment, & Supplies (0.13%)
AAR Corp. Notes; 7.25%; 10/15/2003 250,000 254,617
Management & Public Relations (0.51%)
Servicemaster Co. Ltd. Notes;
6.95%; 8/15/2007 1,000,000 1,010,353
Medical Instruments & Supplies (0.89%)
Delphi Automotive Systems Corp.
6.13%; 5/1/2004 1,750,000 1,745,188
Millwork, Plywood & Structural
Members (0.37%)
Georgia-Pacific Corp.
Debentures; 9.50%; 12/1/2011 600,000 729,112
Miscellaneous Investing (2.41%)
BRE Properties, Inc. Notes;
7.20%; 6/15/2007 2,000,000 1,950,772
First Industrial LP Medium-Term
Notes; 7.00%; 12/1/2006 1,500,000 1,508,320
Weingarten Realty Investors
Medium-Term Notes;
7.29%; 5/23/2005 1,250,000 1,268,273
------------
4,727,365
Miscellaneous Metal Ores (0.35%)
Cyprus Minerals Co. Notes;
10.13%; 4/1/2002 650,000 693,646
Mortgage Bankers & Brokers (1.01%)
Chase Commercial Mortgage Securities
Corp., Class C Notes; 6.60%;
12/19/2007 2,000,000 1,976,600
Motor Vehicles & Equipment (2.21%)
Ford Motor Co. Debentures;
7.50%; 8/1/2026 1,000,000 1,058,588
8.90%; 1/15/2032 1,000,000 1,226,002
Ford Motor Credit Co. Senior Notes;
5.80%; 1/12/2009 1,000,000 956,320
General Motors Corp. Global
Medium-Term Notes;
8.88%; 5/15/2003 1,000,000 1,100,142
------------
4,341,052
Newspapers (1.25%)
News America Holdings, Inc.
Guaranteed Senior Notes;
8.50%; 2/15/2005 2,250,000 2,460,166
Oil & Gas Field Services (1.53%)
Petroleum Geo-Services ASA Notes;
7.50%; 3/31/2007 2,500,000 2,577,548
R&B Falcon Senior Notes;
6.75%; 4/15/2005 500,000 422,500
------------
3,000,048
Operative Builders (1.20%)
Pulte Corp.
Senior Notes; 8.38%; 8/15/2004 $ 500,000 $ 515,449
Notes; 7.63%; 10/15/2017 2,000,000 1,842,326
------------
2,357,775
Paper & Paper Products (1.49%)
Boise Cascade Office Products Corp.;
7.05%; 5/15/2005 3,000,000 2,934,054
Paper Mills (3.04%)
Bowater, Inc. Debentures;
9.50%; 10/15/2012 1,000,000 1,240,625
9.38%; 12/15/2021 1,500,000 1,844,196
Champion International Corp.
Notes; 9.88%; 6/1/2000 750,000 781,715
Chesapeake Corp. Notes;
9.88%; 5/1/2003 1,000,000 1,106,435
James River Corp. Notes;
6.70%; 11/15/2003 1,000,000 1,009,255
------------
5,982,226
Paperboard Mills (0.88%)
Federal Paper Board Co., Inc.
Debentures; 8.88%; 7/1/2012 1,500,000 1,722,829
Personal Credit Institutions (0.55%)
General Motors Acceptance Corp.
Global Notes; 8.50%; 1/1/2003 1,000,000 1,080,703
Petroleum Refining (4.98%)
Ashland, Inc. Medium-Term Notes;
7.71%; 5/11/2007 500,000 527,230
Ashland Oil, Inc. Medium-Term Notes;
7.73%; 7/15/2013 750,000 798,992
7.72%; 7/15/2013 1,000,000 1,064,426
Mapco, Inc. Medium-Term Notes;
8.48%; 8/5/2013 1,000,000 1,156,403
Sun Co., Inc.
Debentures; 9.00%; 11/1/2024 2,000,000 2,316,370
Notes; 7.13%; 3/15/2004 300,000 307,226
Tosco Corp. Notes; 7.25%; 1/1/2007 2,500,000 2,567,118
Ultramar Credit Corp. Guaranteed
Notes; 8.63%; 7/1/2002 1,000,000 1,052,164
------------
9,789,929
Pulp Mills (1.42%)
ITT Rayonier, Inc. Notes;
7.50%; 10/15/2002 1,875,000 1,955,132
International Paper Co.
Medium-Term Notes;
9.70%; 8/15/2000 800,000 835,605
------------
2,790,737
Railroads (1.78%)
Union Pacific Corp.
Debentures; 7.00%; 2/1/2016 2,500,000 2,461,455
Notes; 7.25%; 11/1/2008 1,000,000 1,043,576
------------
3,505,031
Real Estate Operators & Lessors (0.63%)
First Industrial, L.P. Notes;
7.60%; 5/15/2007 $1,250,000 $ 1,238,940
Rental of Railroad Cars (1.33%)
GATX Capital Corp. Medium-Term Notes;
Series B; 9.50%; 1/10/2002 1,500,000 1,613,205
Series C; 6.86%; 10/13/2005 1,000,000 1,005,776
------------
2,618,981
Rubber & Plastics Footwear (1.26%)
Reebok International Ltd. Debentures;
6.75%; 9/15/2005 2,500,000 2,470,282
Sanitary Services (1.69%)
Laidlaw, Inc.
Notes; 7.70%; 8/15/2002 1,000,000 1,012,927
Senior Notes; 7.88%; 4/15/2005 750,000 761,414
WMX Technologies, Inc. Notes;
7.00%; 10/15/2006 1,500,000 1,549,716
------------
3,324,057
Search & Navigation Equipment (0.48%)
Raytheon Co. Notes; 6.40%; 12/15/2018 1,000,000(a) 945,835
Security Brokers & Dealers (3.16%)
Bear Stearns Cos., Inc.
Senior Notes; 7.00%; 3/1/2007 2,500,000 2,551,818
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.38%; 1/15/2007 3,545,000 3,664,218
------------
6,216,036
Telephone Communication (8.38%)
Airtouch Communications, Inc. Notes;
6.65%; 5/1/2008 2,500,000 2,546,518
GTE Corp. Notes; 6.36%; 4/15/2006 2,500,000 2,499,480
Sprint Capital Corp. Notes;
8.13%; 7/15/2002 1,500,000 1,585,683
5.70%; 11/15/2003 4,500,000 4,427,019
Worldcom, Inc. Notes;
7.75%; 4/1/2007 5,000,000 5,414,060
------------
16,472,760
Variety Stores (0.63%)
Dayton-Hudson Corp. Debentures;
9.25%; 8/15/2011 1,000,000 1,233,184
Water Supply (2.50%)
Marlin Water Trust Senior Secured
Notes; 7.09%; 12/15/2001 4,850,000(a) 4,904,053
------------
Total Bonds 186,347,562
Asset-Backed Securities (3.08%)
Investment Offices (1.50%)
Morgan Stanley Capital I, Inc. Comml
Mtg Pass-Through Cert., Ser 99-WF1
CL C; 6.54%; 10/15/2008 3,000,000 2,954,070
Security Brokers & Dealers (1.58%)
Merrill Lynch Mortgage Investors, Inc.
Collateralized Mortgage-Backed
Security, Series 95-C3, 7.37%*
Class C; 12/26/2025 3,000,000 3,108,090
------------
Total Asset-Backed Securities 6,062,160
Commercial Paper (0.72%)
Personal Credit Institutions (0.72%)
Investment in Joint Trade Account,
Associates Corp.; 4.92%; 5/3/1999 $1,408,033 $ 1,408,033
------------
Total Portfolio Investments (98.62%) 193,817,755
Cash, receivables and other assets,
net of liabilities (1.38%) 2,715,749
------------
Total Net Assets (100.00%) $196,533,504
============
(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 (99.13%)
GNMA I 6.00% 10/15/2023-4/15/2024 $14,248,522 $ 12,885,540
GNMA I 6.50 7/15/2008-2/15/2029 86,082,114 85,796,332
GNMA I 7.00 10/15/2022-5/15/2029 75,533,035 76,817,495
GNMA I 7.25 9/15/2025-10/15/2025 3,612,919 3,697,069
GNMA I 7.50 4/15/2017-10/15/2027 32,840,373 33,925,785
GNMA I 8.00 8/15/2016-2/15/2022 7,747,784 8,164,630
GNMA II 6.00 1/20/2024-3/20/2029 54,852,329 53,999,462
GNMA II 6.50 3/20/2024-3/20/2027 12,549,984 12,435,867
------------
Total GNMA Certificates 287,722,180
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Federal Agency Short-Term Obligation (2.05%)
Investment in Joint Trade Account,
Federal Home Loan Mortgage Corp.;
4.82%; 5/31/1999 $5,961,345 $ 5,961,345
------------
Total Portfolio Investments (101.18%) 293,683,525
Liabilities, net of cash, receivables and
other assets (-1.18%) (3,438,579)
Total Net Assets (100.00%) $290,244,946
============
PRINCIPAL HIGH YIELD FUND, INC.
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Bonds (95.96%)
Advertising (3.66%)
Lamar Advertising Co.
Senior Subordinated Notes;
9.63%; 12/1/2006 $1,500,000 $ 1,612,500
Aircraft & Parts (1.81%)
BE Aerospace Senior Subordinated
Notes; 9.50%; 11/1/2008 750,000 800,625
Blast Furnace & Basic Steel
Products (0.87%)
California Steel Industries, Inc. Senior
Notes; 8.50%; 4/1/2009 375,000(a) 383,438
Cable & Other Pay TV Services (3.82%)
Century Communications Senior Notes;
8.75%; 10/1/2007 900,000 936,000
Jones Intercable, Inc. Senior Notes;
9.63%; 3/15/2002 700,000 747,250
-----------
1,683,250
Cogeneration - Small Power
Producer (5.27%)
AES Corp. Senior Subordinated
Notes; 8.38%; 8/15/2007 1,500,000 1,490,625
Calpine Corp. Senior Notes;
8.75%; 7/15/2007 800,000 834,000
-----------
2,324,625
Communications Equipment (5.39%)
Echostar DBS Corp. Senior Notes;
9.38%; 2/1/2009 1,500,000(a) 1,565,625
FWT, Inc. Senior Subordinated
Notes; 9.88%; 11/15/2007 800,000(b) 79,000
QWest Communications International
Senior Notes; 7.50%; 11/1/2008 700,000(a) 732,375
-----------
2,377,000
Communication Services, NEC (5.68%)
Charter Communications Holdings LLC
Senior Notes; 8.25%; 4/1/2007 1,500,000(a) 1,533,750
Level 3 Communications, Inc. Step-Up*
Senior Discount Notes; 12/1/2008 1,500,000(a)(c) 971,250
-----------
2,505,000
Computer & Data Processing
Services (0.18%)
DecisionOne Corp. Senior Subordinated
Notes; 9.75%; 8/1/2007 1,500,000(b) 76,875
Crude Petroleum & Natural Gas (3.42%)
Chesapeake Energy Corp. Senior
Notes, Series A; 9.63%; 5/1/2005 750,000 686,250
Ocean Energy, Inc. Senior Subordinated
Notes; 8.88%; 7/15/2007 800,000 822,000
-----------
1,508,250
Eating & Drinking Places (5.37%)
Cafeteria Operators LP Senior Secured
Notes; 12.00%; 12/31/2001 $1,500,000 $ 1,488,750
Foodmaker, Inc. Senior Subordinated
Notes; 8.38%; 4/15/2008 900,000 880,875
-----------
2,369,625
Electric Services (2.04%)
York Power Funding Ltd. Senior Secured
Bonds; 12.00%; 10/30/2007 900,000(a) 900,000
Electric Work (3.46%)
Integrated Electrical Services Senior
Subordinated Notes;
9.38%; 2/1/2009 1,500,000(a) 1,526,250
Finance Services (1.78%)
DVI, Inc. Senior Notes;
9.88%; 2/1/2004 800,000 784,000
Funeral Service & Crematories (1.74%)
Loewen Group International, Inc. Senior
Guaranteed Notes; 7.50%; 4/15/20011,500,000 765,000
Grocery Stores (1.92%)
Marsh Supermarkets Senior
Subordinated Notes;
8.88%; 8/1/2007 800,000 846,000
Heavy Construction, Except
Highway (3.32%)
Mastec, Inc. Senior Subordinated
Notes; 7.75%; 2/1/2008 1,500,000 1,466,250
Hotels & Motels (3.13%)
HMH Properties, Inc. Senior Notes;
7.88%; 8/1/2008 750,000 726,563
John Q. Hammons Hotels LP &
Finance Corp. First Mortgage
Notes; 8.88%; 2/15/2004 700,000 651,875
-----------
1,378,438
Industrial Inorganic Chemicals (3.48%)
Equistar Chemicals LP Notes;
8.50%; 2/15/2004 1,500,000(a) 1,536,073
Men's & Boys' Clothing Stores (0.47%)
Edison Brothers Stores, Inc. Senior
Notes; 11.00%; 9/26/2007 700,000(b) 209,125
Miscellaneous Amusement, Recreation
Service (3.54%)
Rio Hotel & Casino, Inc. Senior
Subordinated Notes;
9.50%; 4/15/2007 700,000 787,500
Station Casinos, Inc. Senior
Subordinated Notes;
8.88%; 12/1/2008 $ 750,000 $ 776,250
-----------
1,563,750
Miscellaneous Equipment Rental &
Leasing (3.43%)
Rental Service Corp. Senior Subordinated
Notes; 9.00%; 5/15/2008 1,500,000 1,515,000
Miscellaneous Shopping Goods
Stores (2.09%)
Zale Corp. Senior Notes;
8.50%; 10/1/2007 900,000 922,500
Motor Vehicles, Parts & Supplies (3.43%)
Special Devices, Inc. Senior Subordinated
Notes; 11.38%; 12/15/2008 1,500,000(a) 1,515,000
Newspapers (1.90%)
Hollinger International Publishing, Inc.
Senior Subordinated Notes;
9.25%; 3/15/2007 800,000 838,000
Paper Mills (1.22%)
Indah Kiat Finance Mauritius Ltd.
Guaranteed Senior Notes;
10.00%; 7/1/2007 800,000 540,000
Personal Credit Institutions (1.27%)
MacSaver Financial Services, Inc.
Notes; 7.60%; 8/1/2007 800,000 560,000
Petroleum Refining (1.46%)
Crown Central Petroleum Corp.
Senior Notes; 10.88%; 2/1/2005 700,000 644,000
Pulp Mills (1.56%)
Pen-Tab Industries, Inc. Senior
Subordinated Notes;
10.88%; 2/1/2007 800,000 688,000
Radio & Television Broadcasting (3.73%)
Antenna TV S.A. Senior Notes;
9.00%; 8/1/2007 900,000 874,125
Chancellor Media Corp. Unsecured
Notes; 8.00%; 11/1/2008 750,000(a) 772,500
-----------
1,646,625
Residential Building Construction (1.68%)
D.R. Horton, Inc. Senior Notes;
8.00%; 2/1/2009 750,000 740,625
Retail Stores, NEC (1.88%)
Cole National Group, Inc.
Senior Subordinated Notes;
9.88%; 12/31/2006 800,000 828,000
Telephone Communication (8.85%)
Clearnet Communications Step-Up*
Senior Discount Notes; 12/15/2005 750,000(c) 697,500
Intermedia Communications, Inc. Senior
Notes; 8.50%; 1/15/2008 $ 800,000 $ 798,000
NEXTLINK Communications, Inc.
Senior Notes; 9.00%; 3/15/2008 800,000 792,000
Rogers Cablesystems, Ltd. Senior
Secured Second Priority Notes;
9.63%; 8/1/2002 750,000 810,000
Rogers Cantel, Inc. Senior Secured
Debentures; 9.75%; 6/1/2016 700,000 806,750
-----------
3,904,250
Water Transportation of Freight,
NEC (3.11%)
Cenargo International PLC First
Mortgage Notes; 9.75%; 6/15/2008 1,500,000 1,372,500
-----------
Total Bonds 42,330,574
- --------------------------------------------------------------------------------
Shares
Held Value
- --------------------------------------------------------------------------------
Preferred Stock (0.01%)
Fuel Dealers (0.01%)
Star Gas Partners LP 308 $ 4,684
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Commercial Paper (1.87%)
Personal Credit Institutions (1.87%)
Investment in Joint Trade Account,
Associates Corp; 4.92%; 5/3/1999 $ 825,973 $ 825,973
-----------
Total Portfolio Investments (97.84%) 43,161,231
Cash and receivables, net of liabilities (2.16%) 953,759
-----------
Total Net Assets (100.00%) $44,114,990
============
(a) Restricted security - See Note 4 to the financial statements.
(b) Non-income producing security - Security in default.
(c) Non-income producing security - Zero-step coupon bond.
* Variable rate
PRINCIPAL LIMITED TERM BOND FUND, INC.
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Bonds (53.92%)
Business Credit Institutions (5.87%)
CIT Group Holdings
Senior Medium-Term Notes;
6.38%; 10/1/2002 $1,000,000 $ 1,013,635
Orix Credit Alliance, Inc.
Medium-Term Notes;
6.46%; 5/17/1999 $ 850,000(a) $ 849,963
-----------
1,863,598
Combination Utility Services (0.79%)
Pacificorp First Mortgage Medium-Term
Notes; 9.50%; 5/20/1999 250,000 250,408
Department Stores (5.05%)
J.C. Penney Co., Inc. Notes;
9.05%; 3/1/2001 1,000,000 1,046,016
Sears Roebuck Acceptance Corp.
Medium-Term Notes, Series II;
6.69%; 8/13/2001 450,000 456,892
Sears Roebuck Co. Medium-Term
Notes; 6.46%; 5/12/2000 100,000 100,550
-----------
1,603,458
Federal & Federally Sponsored
Credit (0.43%)
Federal Home Loan Mortgage
Corporation Debentures;
6.57%; 2/27/2007 130,000 135,065
General Industrial Machinery (3.28%)
Timken Co. Medium-Term Notes;
7.30%; 8/13/2002 1,000,000 1,039,872
Medical Service & Health
Insurance (1.56%)
Aetna Services, Inc. Notes;
6.38%; 8/15/2003 500,000 494,628
Mortgage Bankers & Brokers (2.71%)
Countrywide Funding Corp.
Medium-Term Notes;
6.05%; 3/1/2001 860,000 859,955
Motor Vehicles & Equipment (1.68%)
General Motors Corp. Medium-Term
Notes; 9.20%; 7/2/2001 500,000 534,286
Paper Mills (3.21%)
International Paper Co. Notes;
7.00%; 6/1/2001 1,000,000 1,018,849
Paperboard Mills (3.32%)
Temple-Inland, Inc. Notes;
9.00%; 5/1/2001 1,000,000 1,053,278
Personal Credit Institutions (12.73%)
American General Finance Corp.
Medium-Term Notes, Series D;
7.46%; 3/28/2000 350,000 355,755
Associates Corp. of North America
Notes; 5.75%; 10/15/2003 1,000,000 985,824
Chrysler Financial Corp.
Medium-Term Notes;
8.45%; 1/28/2000 500,000 510,783
Personal Credit Institutions (Continued)
Ford Motor Credit Co. Notes;
7.50%; 1/15/2003 $1,117,000 $ 1,169,156
General Motors Acceptance Corp.
Notes; 6.63%; 10/1/2002 1,000,000 1,019,214
-----------
4,040,732
Plumbing & Heating, Except
Electric (3.27%)
Masco Corp. Notes; 6.13%; 9/15/2003 1,035,000 1,037,349
Security Brokers & Dealers (7.84%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.25%; 4/15/2003 1,200,000 1,231,289
Merrill Lynch & Co., Inc. Notes;
6.55%; 8/1/2004 1,230,000 1,257,568
-----------
2,488,857
Telephone Communication (2.19%)
Nynex Capital Funding Medium-Term
Notes, Series A; 9.40%; 6/1/2000 670,000 694,891
Total Bonds 17,115,226
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation (FHLMC) Certificates (8.36%)
FHLMC 7.00% 12/1/2022 $ 510,754 $ 519,943
FHLMC 7.00 3/1/2028 487,626 495,963
FHLMC 7.25 12/1/2007 389,000 394,716
FHLMC 8.00 12/1/2011-10/1/2022 416,031 433,896
FHLMC 8.25 1/1/2012 74,617 76,694
FHLMC 8.50 1/1/2000-4/1/2000 464,356 473,808
FHLMC 9.00 9/1/2009 240,360 257,840
Total FHLMC Certificates 2,652,860
Federal National Mortgage Association (FNMA)
Certificates (5.62%)
FNMA 6.00 7/1/2028 994,228 964,439
FNMA 8.00 10/1/2006-5/1/2027 346,659 359,113
FNMA 8.50 5/1/2022 281,918 298,287
FNMA 9.00 2/1/2025 151,592 162,191
Total FNMA Certificates 1,784,030
Government National Mortgage Association (GNMA)
Certificates (8.64%)
GNMA I 6.50% 6/15/2028-9/15/2028 $1,978,167 $1,967,420
GNMA I 8.00 1/20/2016 213,464 223,622
GNMA I 9.00 7/15/2017 75,414 81,240
GNMA II 6.00 7/20/2028 487,940 470,762
Total GNMA Certificates 2,743,044
Asset-Backed Securities (20.90%)
Personal Credit Institutions (0.89%)
Union Acceptance Corp. 1996-B Auto
Trust Pass-Through Certificates,
Class A; 6.45%; 7/8/2003 281,379 283,597
Mortgage Pass-Through Securities (20.00%)
DLJ Commercial Mortgage Corp.
Pass-Through Certificates, Class A1A,
Series 1998-CF1; 6.14%; 10/15/2006 647,466 646,346
Series 1999-CG1; 6.08%; 7/10/2008 1,493,936 1,488,976
GMAC Commercial Mortgage Securities,
Inc. Mortgage Pass-Through
Certificates, Series 1998-C2 CL C;
6.50%; 8/15/2008 1,000,000 982,770
J.P. Morgan Commercial Mortgage
Finance Corp. Mortgage
Pass-Through, Series 97-C5,
Class A-2; 7.06%; 9/15/2029 1,445,000 1,503,638
Prudential Securities Secured Financing
Corp. Mortgage Pass-Through
Certificates, Series 1998-C1,
Class A1A1; 6.11%; 11/15/2002 216,968 217,408
Lehman Large Loan, Class A1,
Series 1997-LLI; 6.79%; 6/12/2004 1,472,746 1,511,038
6,350,176
Total Asset-Backed Securities 6,633,772
Commercial Paper (1.22%)
Personal Credit Institutions (1.22%)
Investment in Joint Trade Account,
Associates Corp.; 4.92%; 5/3/1999 387,390 387,390
Total Portfolio Investments (98.65%) 31,316,322
Cash, receivables and other assets,
net of liabilities (1.35%) 428,080
Total Net Assets (100.00%) $31,744,402
(a) Restricted security - See Note 4 to the financial statements.
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
Principal
Amount Value
Long-Term Tax-Exempt Bonds (96.46%)
Alabama (0.45%)
Phenix County, Alabama IDB
Environmental Improvement Rev.
Bonds, Mead Coated Board, Inc.,
Series B; 5.25%; 4/1/2028 $1,000,000 $ 961,250
Arizona (1.99%)
Navajo County, Arizona Pollution
Control Corp. Rev. Ref. Bonds,
Arizona Public Service Co.,
Series 1993A; 5.88%; 8/15/2028 4,100,000 4,217,875
Arkansas (2.56%)
City of Blytheville, Arkansas Solid Waste
Recycling & Sewer Treatment Rev.
Bonds, Series 1992, Nucor Corp.
Project; 6.90%; 12/1/2021 4,610,000 4,926,937
Little River County, Arkansas Rev.
Georgia Pacific Corp. Project;
5.60%; 10/1/2026 500,000 500,625
5,427,562
California (4.01%)
ABAG Finance Authority for Nonprofit
Corp., Cert. of Participation,
Stanford University Hospital;
5.00%; 11/1/2004 750,000 796,875
5.25%; 11/1/2020 1,750,000 1,780,625
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 1,123,750
California Pollution Control Funding
Authority Rev. Bonds, Atlantic
Richfield Co. Project; 5.00%; 4/1/2008 2,500,000 2,615,625
City of Upland, California San Antonio
Comm. Hospital Cert. of Participation;
5.25%; 1/1/2004 2,080,000 2,165,800
8,482,675
Colorado (2.61%)
City & County of Denver, Colorado
Airport System Rev. Bonds,
Series 1991D; 7.75%; 11/15/2013 3,185,000 4,005,138
Colorado Health Fac. Authority Rev.
Bonds for Sisters of Charity
Healthcare Systems, Series 1994;
5.25%; 5/15/2014 1,500,000 1,520,625
5,525,763
Florida (1.11%)
Nassau County, Florida Pollution
Control Rev. Ref. Bonds; ITT
Rayonier, Inc. Project;
6.10%; 6/1/2005 1,000,000 1,057,500
7.65%; 6/1/2006 1,265,000 1,286,657
2,344,157
Georgia (2.44%)
Effingham County, Georgia Dev.
Authority Waste Disposal Rev. for
Fort James Project; 5.63%; 7/1/2018 $3,000,000 $3,037,500
Fulco, Georgia Hospital Authority Rev.
Anticipation Cert. for St. Joseph's
Hospital of Atlanta, Inc.;
5.50%; 10/1/2014 2,000,000 2,137,500
5,175,000
Illinois (14.34%)
Chicago, Illinois Midway Airport Rev.
Bonds, Series A, MBIA Insured;
5.50%; 1/1/2011 1,500,000 1,586,250
5.50%; 1/1/2013 500,000 525,625
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
American Airlines, Inc. Project-A;
7.88%; 11/1/2025 6,010,000 6,423,187
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
Lufthansa German Airlines Project;
7.13%; 5/1/2018 1,000,000 1,068,750
City of Chicago, Illinois Adj. Rate Gas
Supply Rev. Bonds, Series 1985A,
Peoples Gas Light & Coke Project;
6.88%; 3/1/2015 2,800,000 3,055,500
Illinois Health Fac. Authority Advocate
Health Care Network, Series B;
5.25%; 8/15/2018 2,910,000 2,840,887
Illinois Health Fac. Authority Ref. Rev.
Bonds for OSF Healthcare System;
5.75%; 11/15/2007 1,000,000 1,061,250
6.00%; 11/15/2010 500,000 535,000
6.00%; 11/15/2013 500,000 532,500
Illinois Health Fac. Authority Rev. Bonds,
Northwestern Memorial Hospital,
Series 1994A;
5.60%; 8/15/2006 500,000 538,125
5.75%; 8/15/2008 615,000 660,356
5.80%; 8/15/2009 840,000 898,800
6.10%; 8/15/2014 1,000,000 1,073,750
Illinois Health Fac. Authority Rev.
Bonds for Sarah Bush Lincoln
Health Center;
Series 1992; 7.25%; 5/15/2002 2,950,000 3,300,313
Series 1996B; 6.00%; 2/15/2011 1,000,000 1,077,500
Series 1996B; 5.50%; 2/15/2016 1,000,000 998,750
Illinois Health Fac. Authority Rev.
Bonds for South Suburban Hospital,
Series 1992;
7.00%; 2/15/2009 305,000 353,038
7.00%; 2/15/2018 720,000 870,300
Illinois Health Fac. Authority Rev. Ref.
Bonds for Advocate Healthcare,
Series A; 6.75%; 4/15/2012 680,000 748,000
Regional Transportation Authority,
Illinois General Obligation Bonds,
Series 1994A; 6.25%; 6/1/2015 2,000,000 2,217,500
30,365,381
Indiana (7.65%)
City of Mount Vernon, Indiana
Pollution Control Rev. Bonds for
Southern Indiana Gas & Electric
Co. Project; 7.25%; 3/1/2014 $ 700,000 $ 740,621
City of Petersburg, Indiana Pollution
Control Rev. Bonds, for Indianapolis
Power & Light Co. Project,
Series 1993A; 6.10%; 1/1/2016 4,000,000 4,300,000
Indiana Health Fac. Financing Authority
Hospital Rev. Bonds, Clarian Health
Partners, Inc.; 5.50%; 2/15/2009 2,520,000 2,652,300
Indiana Health Fac. Financing
Authority Hospital Rev. Ref. Bonds,
Schneck Memorial Hospital,
Series 1998;
4.70%; 2/15/2006 500,000 501,250
5.13%; 2/15/2017 500,000 478,125
Indiana Health Fac. Financing
Authority Hospital Rev. Ref. Bonds,
Welborn Memorial Baptist Hospital,
Series 1993; 5.63%; 7/1/2023 1,860,000 1,862,325
Lawrenceburg, Indiana Pollution
Control Rev. Ref. Bonds, Indiana
Michigan Power Co. Project,
Series D; 7.00%; 4/1/2015 1,000,000 1,068,750
Series E; 5.90%; 11/1/2019 3,220,000 3,312,575
Warrick County, Indiana
Environmental Improvement Rev.
Bonds, Southern Indiana Gas &
Electric, Series 1993B;
6.00%; 5/1/2023 1,190,000 1,282,225
16,198,171
Iowa (3.00%)
City of Muscatine, Iowa Electric Rev.
Ref. Bonds, Series 1986;
6.00%; 1/1/2006 150,000 150,364
5.00%; 1/1/2007 1,575,000 1,579,048
Eddyville, Iowa IDR Ref. Bonds,
Cargill, Inc.
Project; 5.63%; 12/1/2013 1,000,000(a) 1,036,250
Iowa Finance Authority Hospital Fac.
Ref. Rev. Bonds for Jennie
Edmundson Memorial Hospital;
7.40%; 11/1/2006 550,000 608,438
Iowa Finance Authority Hospital Fac.
Ref. Rev. Bonds, Iowa Health Systems,
Series A, MBIA Insured;
5.13%; 1/1/2028 3,000,000 2,970,000
6,344,100
Kentucky (0.90%)
City of Ashland, Kentucky Sewage
and Solid Waste Rev. Bonds for
Ashland, Inc. Project, Series 1995;
7.13%; 2/1/2022 750,000 835,312
City of Ashland, Kentucky Solid
Waste Rev. Bonds for Ashland
Oil, Inc. Project, Series 1991;
7.20%; 10/1/2020 $1,000,000 $ 1,073,750
1,909,062
Louisiana (0.98%)
St. Charles Parish, Louisiana Pollution
Control Rev. Bonds for Louisiana
Power & Light Co. Project;
7.50%; 6/1/2021 1,950,000 2,084,063
Michigan (3.59%)
Detroit, Michigan LOC Dev. Financing
Authority Ref. Bonds, Senior Series A
Chrysler Corp; 5.20%; 5/1/2010 1,700,000 1,763,750
Michigan State Hospital Financing
Authority Hospital Rev. Bonds for
Detroit Medical Center, Obligated-A;
5.25%; 8/15/2028 1,500,000 1,365,000
Michigan State Hospital Financing
Authority Hospital Rev. Bonds for
Detroit Medical Center, Series 1993B;
5.75%; 8/15/2013 600,000 594,000
5.50%; 8/15/2023 2,000,000 1,897,500
Michigan State Hospital Financing
Authority Rev. Ref. Bonds,
Daughters of Charity Hospital;
5.25%; 11/1/2015 1,000,000 1,008,750
Michigan State Hospital Financing
Authority Rev. Ref. Bonds,
Daughters of Charity National Health
System; 5.50%; 11/1/2005 900,000 967,500
7,596,500
Minnesota (0.74%)
City of Bass Brook, Minnesota Pollution
Control Rev. Ref. Bonds for
Minnesota Power & Light Project;
6.00%; 7/1/2022 1,500,000 1,567,500
Mississippi (0.24%)
Grenada County, Mississippi Rev. Ref.
Bonds, Georgia Pacific Corp. Project;
5.45%; 9/1/2014 500,000 501,875
Missouri (1.14%)
Missouri State Health & Educational
Fac. Authority Health Fac. Rev.
Bonds, BJC Health System,
Series 1994A; 6.75%; 5/15/2012 2,000,000 2,407,500
Montana (1.00%)
Forsyth, Montana Pollution Control
Rev. Ref. Bonds, Montana Power
Co., Colstrip Project, Series 1993A;
6.13%; 5/1/2023 2,000,000 2,107,500
Nebraska (0.49%)
Dawson County, Nebraska Sanitary &
Improvement General Obligation
Ref. Bonds; 5.55%; 2/1/2017 1,000,000 1,046,250
Nevada (1.85%)
Clark County, Nevada IDR Ref.
Bonds, Nevada Power Co. Project,
Series 1992C; 7.20%; 10/1/2022 $3,600,000 $ 3,919,500
New Mexico (1.10%)
City of Lordsburg, New Mexico
Pollution Control Rev. Bonds
for Phelps Dodge Corp. Project;
6.50%; 4/1/2013 2,150,000 2,322,000
North Carolina (2.26%)
Martin County, North Carolina
Industrial Fac. & Pollution Control
Finance Authority Solid Waste
Rev. Bonds, Weyerhaeuser;
5.65%; 12/1/2023 1,000,000 1,003,750
6.80%; 5/1/2024 2,000,000 2,207,500
Wake County, North Carolina
Industrial Fac. & Pollution Control
Finance Authority Rev. Bond,
Carolina Power & Light Co.;
6.90%; 4/1/2009 1,500,000 1,567,455
4,778,705
North Dakota (0.98%)
Mercer County, North Dakota
Pollution Control Rev. Bonds,
Ottertail Power Co. Project,
Series 1991; 6.90%; 2/1/2019 1,950,000 2,081,625
Ohio (4.73%)
Akron Bath Copley, Ohio JT TWP
Hospital District Rev. Hospital
Facilities, Summa Health
Systems, Series A;
5.38%; 11/15/2018 5,760,000 5,515,200
5.38%; 11/15/2024 1,000,000 945,000
Lorain County, Ohio Hospital Ref.
Bonds, Humility Mary Health
Care, Series A; 5.90%; 12/15/2008 3,270,000 3,552,038
10,012,238
Oklahoma (1.16%)
Tulsa Industrial Authority Rev. Bonds,
St. John Medical Center Project,
Series 1994;
6.25%; 2/15/2014 1,280,000 1,379,200
6.25%; 2/15/2017 1,000,000 1,073,750
2,452,950
Rhode Island (1.49%)
Rhode Island State Industrial Facilities
Corp. Marine Term Rev. Bonds,
Mobil Oil Refining;
6.00%; 11/1/2014 2,900,000 3,146,500
South Carolina (4.72%)
Darlington County, South Carolina
Pollution Control Rev. Bonds for
Carolina Power & Light;
6.60%; 11/1/2010 1,000,000 1,091,250
Greenville Hospital System,
South Carolina Hospital Fac.
Rev. Ref. Bonds; 6.00%; 5/1/2020 $ 230,000 $ 255,587
Series C; 5.50%; 5/1/2016 2,500,000 2,553,125
Oconee County, South Carolina
Pollution Control Rev. Ref. Bonds,
Duke Energy Corp. Project, Series
1993; 5.80%; 4/1/2014 2,000,000 2,132,500
York County, South Carolina Exempt
Fac. Industrial Rev. Bonds for
Hoechst Celanese Project,
Series 1994; 5.70%; 1/1/2024 2,000,000 2,020,000
York County, South Carolina Pollution
Control Rev. Bonds, Bowater, Inc.
Project; 7.63%; 3/1/2006 1,700,000 1,946,500
9,998,962
South Dakota (0.51%)
Pennington County, South Dakota
Pollution Control Rev. Ref. Bonds
for Black Hills Power & Light Co.
Project; 6.70%; 6/1/2010 1,000,000 1,073,750
Tennessee (1.00%)
County of Louden, Tennessee Industrial
Development Solid Waste;
6.20%; 2/1/2023 1,950,000 2,108,437
Texas (11.39%)
Brazos River Authority, Texas Rev.
Industrial Bonds Project-A Houston
Industries, Inc.; 5.13%; 5/1/2019 2,000,000 1,992,500
Cass County, Texas Industrial
Dev. Corp. Pollution Control
Rev. Bonds for International
Paper Co. - Series B
5.35%; 4/1/2012 3,750,000 3,871,875
Guadalupe-Blanco River Authority,
Texas Industrial Dev. Corp.
Pollution Control Rev., E I Du Pont
1982 Series A; 6.35%; 7/1/2022 2,500,000 2,765,625
Gulf Coast Waste Disposal Authority
Texas Waste Disposal Rev., Valero
Energy Corp. Project;
5.70%; 4/1/2032 2,000,000 2,005,000
IDC Port of Corpus Christi Rev. Ref.
Bonds, Port Fac. Rev. Bonds,
Valero Energy Corp.; 5.13%; 4/1/2009 1,000,000 1,002,500
IDC Port of Corpus Christi Rev. Ref.
Bonds, Valero Refining & Marketing
Co. Project; 5.40%; 4/1/2018 2,000,000 1,970,000
Matagorda County, Texas
Navigational District No. 1 Pollution
Control Rev. Bonds for Central
Power & Light Co.;
6.00%; 7/1/2028 1,000,000 1,047,500
Milam County, Texas Industrial Dev.
Corp. Pollution Control Rev. Ref.
Bonds, Alcoa Project;
5.65%; 12/1/2012 2,000,000 2,115,000
Texas (Continued)
Red River Authority, Texas Pollution
Control Rev. Bonds, Hoechst
Celanese Corp. Project;
5.20%; 5/1/2007 $2,825,000 $ 2,863,844
San Antonio Texas Electric & Gas,
Series A; 4.50%; 2/1/2021 3,715,000 3,403,869
Tarrant County, Texas Health Fac.
Dev. Corp., Harris Methodist Health
System Rev. Bonds; 5.90%; 9/1/2006 1,000,000 1,111,250
24,148,963
Utah (0.92%)
Intermountain Power Agency, Utah
Power Supply, Rev. Ref. Bonds,
Series 1996D; 5.00%; 7/1/2021 2,000,000 1,942,500
Virginia (2.80%)
Albemarle County, Virginia IDA
Hospital Rev. Ref. Bonds, Martha
Jefferson Hospital; 5.50%; 10/1/2015 1,900,000 1,942,750
Bedford County, Virginia Industrial Dev.
Nekoosa Packing Corp., Georgia
Pacific; 5.60%; 12/1/2025 2,500,000 2,493,750
Chesapeake, Virginia IDA Rev. Ref.
Bonds for Cargill, Inc. Project;
5.88%; 3/1/2013 1,410,000 1,496,362
5,932,862
Washington (2.76%)
City of Seattle, Washington Municipal
Light and Power Rev. Bonds;
1993; 5.10%; 11/1/2005 1,950,000 2,057,250
1994; 6.63%; 7/1/2016 1,000,000 1,141,250
5.00%; 7/1/2018 1,225,000 1,212,750
1998; 4.88%; 6/1/2021 1,500,000 1,440,000
5,851,250
West Virginia (6.76%)
Braxton County, West Virginia Solid
Waste Disposal Rev. Weyerhaeuser
Co.; 5.40%; 5/1/2025 2,000,000 1,980,000
Marshall County, West Virginia
Pollution Control Rev. Bonds
for Ohio Power Co. Project;
Series C; 6.85%; 6/1/2022 1,200,000 1,293,000
Series D; 5.90%; 4/1/2022 4,500,000 4,764,375
Pleasants County, West Virgina
Pollution Control Rev. Bonds
for Potomac Edison Co.;
6.15%; 5/1/2015 2,000,000 2,150,000
Putnam County, West Virginia
Pollution Control Rev. Bonds for
Appalachian Power Co. Project,
Series C; 6.60%; 7/1/2019 3,875,000 4,131,719
14,319,094
Wisconsin (2.79%)
Kaukauna, Wisconsin Pollution
Control Rev. Ref. Bonds for
International Paper Co. Project,
Series A; 5.40%; 5/1/2004 $3,610,000 $ 3,749,887
Wisconsin Health & Educational
Fac. Authority Rev. Bonds;
Series 1995; Franciscan Skemp
Medical Center, Inc.;
5.88%; 11/15/2010 1,000,000 1,076,250
6.13%; 11/15/2015 1,000,000 1,078,750
5,904,887
Total Long-Term Tax-Exempt Bonds 204,256,407
Other (1.72%)
Municipal Fund for Temporary Investment -
Munifund 3,650,000 3,650,000
Total Portfolio Investments (98.18%) 207,906,407
Cash, receivables and other assets,
net of liabilities (1.82%) 3,845,492
Total Net Assets (100.00%) $211,751,899
(a) Restricted security - See Note 4 to the financial statements.
FINANCIAL HIGHLIGHTS
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.59 $11.44 $11.17 $11.42 $10.27
Income from Investment Operations:
Net Investment Income(b).............................. .35 .71 .75 .76 .78
Net Realized and Unrealized Gain (Loss) on Investments (.29) .16 .33 (.25) 1.16
Total from Investment Operations .06 .87 1.08 .51 1.94
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.35) (.72) (.81) (.76) (.78)
Distributions from Capital Gains...................... (.03) -- -- -- (.01)
Total Dividends and Distributions (.38) (.72) (.81) (.76) (.79)
Net Asset Value, End of Period........................... $11.27 $11.59 $11.44 $11.17 $11.42
Total Return(c).......................................... .47%(d) 7.76% 10.15% 4.74% 19.73%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $155,111 $148,081 $126,427 $113,437 $106,962
Ratio of Expenses to Average Net Assets(b)............ 1.02%(e) .95% .95% .95% .94%
Ratio of Net Investment Income to Average Net Assets.. 6.06%(e) 6.19% 6.70% 6.85% 7.26%
Portfolio Turnover Rate............................... 49.9%(e) 15.2% 12.8% 3.4% 5.1%
PRINCIPAL BOND FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(f)
Net Asset Value, Beginning of Period..................... $11.58 $11.42 $11.15 $11.41 $10.19
Income from Investment Operations:
Net Investment Income(b).............................. .30 .63 .67 .67 .63
Net Realized and Unrealized Gain (Loss) on Investments (.29) .16 .31 (.25) 1.19
Total from Investment Operations .01 .79 .98 .42 1.82
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.30) (.63) (.71) (.68) (.60)
Distributions from Capital Gains...................... (.03) -- -- -- --
Total Dividends and Distributions (.33) (.63) (.71) (.68) (.60)
Net Asset Value, End of Period........................... $11.26 $11.58 $11.42 $11.15 $11.41
Total Return(c).......................................... .09%(d) 7.04% 9.20% 3.91% 17.98%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $26,210 $22,466 $13,403 $7,976 $2,708
Ratio of Expenses to Average Net Assets(b)............ 1.77%(e) 1.67% 1.70% 1.69% 1.59%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.31%(e) 5.45% 5.92% 6.14% 6.30%(e)
Portfolio Turnover Rate............................... 49.9%(e) 15.2% 12.8% 3.4% 5.1%(e)
PRINCIPAL BOND FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(g)
Net Asset Value, Beginning of Period..................... $11.59 $11.43 $11.16 $11.27
Income from Investment Operations:
Net Investment Income(b).............................. .32 .63 .71 .51
Net Realized and Unrealized Gain (Loss) on Investments (.29) .16 .30 (.13)
Total from Investment Operations .03 .79 1.01 .38
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.31) (.63) (.74) (.49)
Distributions from Capital Gains...................... (.03) -- -- --
Total Dividends and Distributions (.34) (.63) (.74) (.49)
Net Asset Value, End of Period........................... $11.28 $11.59 $11.43 $11.16
Total Return(c).......................................... .22%(d) 7.05% 9.49% 3.75%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $15,213 $12,196 $5,976 $525
Ratio of Expenses to Average Net Assets(b)............ 1.56%(e) 1.45% 1.45% 1.28%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.52%(e) 5.66% 6.11% 6.51%(e)
Portfolio Turnover Rate............................... 49.9%(e) 15.2% 12.8% 3.4%(e)
<FN>
* Six months ended April 30, 1999
</FN>
</TABLE>
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.63 $11.51 $11.26 $11.31 $10.28
Income from Investment Operations:
Net Investment Income................................. .35 .70 .70 .70 .71
Net Realized and Unrealized Gain (Loss) on Investments (.15) .12 .29 (.05) 1.02
Total from Investment Operations .20 .82 .99 .65 1.73
Less Dividends from Net Investment Income:............... (.35) (.70) (.74) (.70) (.70)
Net Asset Value, End of Period........................... $11.48 $11.63 $11.51 $11.26 $11.31
Total Return(c).......................................... 1.77%(d) 7.38% 9.23% 6.06% 17.46%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $250,496 $251,455 $249,832 $259,029 $261,128
Ratio of Expenses to Average Net Assets............... .85%(e) .86% .84% .81% .87%
Ratio of Net Investment Income to Average Net Assets.. 5.98%(e) 6.07% 6.19% 6.31% 6.57%
Portfolio Turnover Rate............................... 22.7%(e) 17.1% 10.8% 25.9% 10.1%
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(f)
Net Asset Value, Beginning of Period..................... $11.60 $11.50 $11.23 $11.29 $10.20
Income from Investment Operations:
Net Investment Income................................. .31 .62 .64 .61 .56
Net Realized and Unrealized Gain (Loss) on Investments (.15) .12 .29 (.05) 1.07
Total from Investment Operations .16 .74 .93 .56 1.63
Less Dividends from Net Investment Income:............... (.32) (.64) (.66) (.62) (.54)
Net Asset Value, End of Period........................... $11.44 $11.60 $11.50 $11.23 $11.29
Total Return(c).......................................... 1.40%(d) 6.60% 8.65% 5.17% 16.07%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $29,190 $24,370 $15,431 $11,586 $4,699
Ratio of Expenses to Average Net Assets............... 1.55%(e) 1.57% 1.39% 1.60% 1.53%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.28%(e) 5.43% 5.63% 5.53% 5.68%(e)
Portfolio Turnover Rate............................... 22.7%(e) 17.1% 10.8% 25.9% 10.1%(e)
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(g)
Net Asset Value, Beginning of Period..................... $11.55 $11.42 $11.21 $11.27
Income from Investment Operations:
Net Investment Income................................. .31 .61 .64 .47
Net Realized and Unrealized Gain (Loss) on Investments (.15) .13 .24 (.08)
Total from Investment Operations .16 .74 .88 .39
Less Dividends from Net Investment Income:............... (.31) (.61) (.67) (.45)
Net Asset Value, End of Period........................... $11.40 $11.55 $11.42 $11.21
Total Return(c).......................................... 1.36%(d) 6.66% 8.19% 3.76%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $10,559 $8,156 $4,152 $481
Ratio of Expenses to Average Net Assets............... 1.50%(e) 1.64% 1.79% 1.18%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.33%(e) 5.39% 5.21% 5.84%(e)
Portfolio Turnover Rate............................... 22.7%(e) 17.1% 10.8% 25.9%(e)
<FN>
* Six months ended April 30, 1999
</FN>
</TABLE>
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.63 $8.52 $8.27 $8.06 $7.83
Income from Investment Operations:
Net Investment Income................................. .34 .64 .67 .68 .68
Net Realized and Unrealized Gain (Loss) on Investments .03 (.88) .31 .23 .20
Total from Investment Operations .37 (.24) .98 .91 .88
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.32) (.64) (.73) (.70) (.65)
Excess Distribution of Net Investment Income(i)....... -- (.01) -- -- --
Total Dividends and Distributions (.32) (.65) (.73) (.70) (.65)
Net Asset Value, End of Period........................... $7.68 $7.63 $8.52 $8.27 $8.06
Total Return(c).......................................... 4.85%(d) (3.18)% 12.33% 11.88% 11.73%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $32,934 $33,474 $38,239 $28,432 $23,396
Ratio of Expenses to Average Net Assets............... 1.39%(e) 1.40% 1.22% 1.26% 1.45%
Ratio of Net Investment Income to Average Net Assets.. 8.76%(e) 7.71% 7.99% 8.49% 8.71%
Portfolio Turnover Rate............................... 78.3%(e) 65.9% 39.2% 18.8% 40.3%
PRINCIPAL HIGH YIELD FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(f)
Net Asset Value, Beginning of Period..................... $7.59 $8.47 $8.22 $8.05 $7.64
Income from Investment Operations:
Net Investment Income................................. .32 .57 .62 .60 .53
Net Realized and Unrealized Gain (Loss) on Investments .02 (.87) .28 .20 .38
Total from Investment Operations .34 (.30) .90 .80 .91
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.29) (.57) (.65) (.63) (.50)
Excess Distribution of Net Investment Income(i)....... -- (.01) -- -- --
Total Dividends and Distributions (.29) (.58) (.65) (.63) (.50)
Net Asset Value, End of Period........................... $7.64 $7.59 $8.47 $8.22 $8.05
Total Return(c).......................................... 4.46%(d) (3.93)% 11.31% 10.46% 12.20%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $8,442 $8,527 $6,558 $2,113 $633
Ratio of Expenses to Average Net Assets............... 1.97%(e) 2.34% 2.13% 2.38% 2.10%(e)
Ratio of Net Investment Income to Average Net Assets.. 8.18%(e) 6.78% 7.03% 7.39% 7.78%(e)
Portfolio Turnover Rate............................... 78.3%(e) 65.9% 39.2% 18.8% 40.3%(e)
PRINCIPAL HIGH YIELD FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(g)
Net Asset Value, Beginning of Period..................... $7.51 $8.40 $8.20 $8.21
Income from Investment Operations:
Net Investment Income................................. .31 .57 .62 .46
Net Realized and Unrealized Gain (Loss) on Investments .02 (.87) .26 (.03)
Total from Investment Operations .33 (.30) .88 .43
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.29) (.58) (.68) (.44)
Excess Distribution of Net Investment Income(i)...... . -- (.01) -- --
Total Dividends and Distributions (.29) (.59) (.68) (.44)
Net Asset Value, End of Period........................... $7.55 $7.51 $8.40 $8.20
Total Return(c).......................................... 4.42%(d) (3.97)% 11.14% 5.60%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $2,739 $2,734 $1,961 $124
Ratio of Expenses to Average Net Assets............... 2.11%(e) 2.28% 2.42% 1.59%(e)
Ratio of Net Investment Income to Average Net Assets.. 8.04%(e) 6.84% 6.70% 7.84%(e)
Portfolio Turnover Rate............................... 78.3%(e) 65.9% 39.2% 18.8%(e)
<FN>
* Six months ended April 30, 1999
</FN>
</TABLE>
See accompanying notes.
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
Class A shares 1999* 1998 1997 1996(h)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.93 $9.88 $9.89 $9.90
Income from Investment Operations:
Net Investment Income(b).............................. .28 .57 .61 .38
Net Realized and Unrealized Gain (Loss) on Investments (.13) .06 .03 (.04)
Total from Investment Operations .15 .63 .64 .34
Less Dividends from Net Investment Income................ (.28) (.58) (.65) (.35)
Net Asset Value, End of Period........................... $9.80 $9.93 $9.88 $9.89
Total Return(c).......................................... 1.55%(d) 6.57% 6.75% 3.62%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $26,188 $27,632 $20,567 $17,249
Ratio of Expenses to Average Net Assets(b)............ 1.00%(e) .82% .90% .89%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.69%(e) 5.86% 6.20% 6.01%(e)
Portfolio Turnover Rate............................... 23.5%(e) 23.8% 17.4% 16.5%(e)
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
Class B shares 1999* 1998 1997 1996(h)
Net Asset Value, Beginning of Period..................... $9.98 $9.90 $9.89 $9.90
Income from Investment Operations:
Net Investment Income(b).............................. .26 .54 .56 .36
Net Realized and Unrealized Gain (Loss) on Investments .14 .06 .04 (.05)
Total from Investment Operations .40 .60 .60 .31
Less Dividends from Net Investment Income................ (.52) (.54) (.59) (.32)
Net Asset Value, End of Period........................... $9.86 $9.98 $9.90 $9.89
Total Return(c).......................................... 1.34%(d) 6.24% 6.31% 3.32%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $2,534 $1,705 $625 $112
Ratio of Expenses to Average Net Assets(b)............ 1.35%(e) 1.22% 1.24% 1.15%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.34%(e) 5.44% 5.84% 5.75%(e)
Portfolio Turnover Rate............................... 23.5%(e) 23.8% 17.4% 16.5%(e)
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(g)
Net Asset Value, Beginning of Period..................... $9.93 $9.85 $9.88 $9.90
Income from Investment Operations:
Net Investment Income(b).............................. .24 .52 .54 .36
Net Realized and Unrealized Gain (Loss) on Investments (.13) .07 .03 (.06)
Total from Investment Operations .11 .59 .57 .30
Less Dividends from Net Investment Income................ (.24) (.51) (.60) (.32)
Net Asset Value, End of Period........................... $9.80 $9.93 $9.85 $9.88
Total Return(c).......................................... 1.16%(d) 6.12% 6.01% 3.24%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $3,022 $2,034 $606 $83
Ratio of Expenses to Average Net Assets(b)............ 1.60%(e) 1.44% 1.48% 1.40%(e)
Ratio of Net Investment Income to Average Net Assets.. 5.09%(e) 5.21% 5.60% 5.64%(e)
Portfolio Turnover Rate............................... 23.5%(e) 23.8% 17.4% 16.5%(e)
<FN>
* Six months ended April 30, 1999
</FN>
</TABLE>
See accompanying notes.
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $12.59 $12.38 $12.04 $11.98 $10.93
Income from Investment Operations:
Net Investment Income................................. .31 .60 .63 .64 .65
Net Realized and Unrealized Gain (Loss) on Investments (.12) .22 .39 .07 1.05
Total from Investment Operations .19 .82 1.02 .71 1.70
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.30) (.61) (.68) (.65) (.65)
Distributions from Capital Gains...................... (.01) -- -- -- --
Total Dividends and Distributions (.31) (.61) (.68) (.65) (.65)
Net Asset Value, End of Period........................... $12.47 $12.59 $12.38 $12.04 $11.98
Total Return(c)......................................... 1.49%(d) 6.76% 8.71% 6.08% 16.03%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $199,617 $204,865 $193,007 $187,180 $179,715
Ratio of Expenses to Average Net Assets............... .80%(e) .83% .79% .78% .83%
Ratio of Net Investment Income to Average Net Assets.. 4.80%(e) 4.83% 5.14% 5.34% 5.67%
Portfolio Turnover Rate............................... 21.7%(e) 6.6% 8.9% 9.8% 17.6%
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(f)
Net Asset Value, Beginning of Period..................... $12.59 $12.39 $12.02 $11.96 $10.56
Income from Investment Operations:
Net Investment Income................................. .27 .53 .55 .55 .50
Net Realized and Unrealized Gain (Loss) on Investments (.12) .20 .40 .06 1.38
Total from Investment Operations .15 .73 .95 .61 1.88
Less Dividends and Distributions:
Dividends from Net Investment Income................. (.26) (.53) (.58) (.55) (.48)
Distributions from Capital Gains..................... (.01) -- -- -- --
Total Dividends and Distributions (.27) (.53) (.58) (.55) (.48)
Net Asset Value, End of Period........................... $12.47 $12.59 $12.39 $12.02 $11.96
Total Return(c).......................................... 1.18%(d) 6.01% 8.08% 5.23% 17.97%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $12,135 $11,419 $7,783 $5,794 $3,486
Ratio of Expenses to Average Net Assets............... 1.38%(e) 1.43% 1.45% 1.52% 1.51%(e)
Ratio of Net Investment Income to Average Net Assets.. 4.22%(e) 4.22% 4.46% 4.59% 4.78%(e)
Portfolio Turnover Rate............................... 21.7%(e) 6.6% 8.9% 9.8% 17.6%(e)
<FN>
* Six months ended April 30, 1999
</FN>
</TABLE>
See accompanying notes.
Notes to Financial Highlights
(a) Effective January 1, 1998, the following changes were made to the names of
the Income Funds:
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
Principal Bond Fund, Inc.:**
Class A 1998 $.70 1.04% $121,092
1997 .74 .98 41,256
1996 .76 .97 22,536
1995 .77 1.02 86,018
1994 .77 1.09 120,999
Class B 1998 .62 1.81 26,130
1997 .66 1.79 8,982
1996 .67 1.79 5,874
1995(b) .62 1.62(d) 300
Class R 1998 .61 1.72 25,144
1997 .69 1.78 10,427
1996(e) .51 1.28(d) 3
Principal Limited Term Bond Fund, Inc.:
Class A 1999* .28 1.08(e) 11,013
1998 .55 1.13 76,952
1997 .59 1.15 46,271
1996(f) .37 1.16(d) 22,716
Class B 1999* .23 1.92(e) 6,021
1998 .47 2.36 11,537
1997 .46 3.82 6,528
1996(h) .34 1.94(d) 259
Class R 1999* .23 2.10(e) 6,053
1998 .46 2.22 11,781
1997 .43 2.95 6,831
1996(g) .35 1.79(d) 60
<FN>
* Six Months ended April 30, 1999.
** The Manager ceased its waiver of expenses for Principal Bond Fund, Inc. on
October 31, 1998.
</FN>
</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 December 9, 1994, date Class B shares first offered to the
public, through October 31, 1995. Certain of the Income Funds' Class B
shares recognized net investment income as follows, for the period from the
initial purchase of Class B shares on December 5, 1994 through December 8,
1994, none of which was distributed to the sole shareholder, Principal
Management Corporation. Additionally, the Income Funds' Class B shares
incurred unrealized losses on investments during the initial interim period
as follows. This represents Class B share activities of each fund prior to
the initial public offering of Class B shares:
Per Share Per Share
Net Investment Unrealized
Income (Loss)
Principal Bond Fund, Inc. $.01 $ --
Principal Government Securities Income Fund, Inc. .01 (.02)
Principal High Yield Fund, Inc. .01 (.03)
Principal Tax-Exempt Bond Fund, Inc. -- (.05)
(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) 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.
(i) 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.
April 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
(unaudited)
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
Assets
Investment in securities -- at value
(approximates cost) (Note 1)........... $355,406,774
Cash............................. 3,765,877
Receivables:
Interest .............................. 541,794
Capital Shares sold.................... 2,264,890
Other assets.............................. 27,346
Total Assets 362,006,681
Liabilities
Accrued expenses.......................... 233,622
Payables:
Capital Shares reacquired.............. 3,208,205
Total Liabilities 3,441,827
Net Assets Applicable to
Outstanding Shares ..................... $358,564,854
Net Assets Consist of:
Capital Stock............................. $ 3,585,649
Additional paid-in capital................ 354,979,205
Total Net Assets $358,564,854
Capital Stock (par value: $.01 a share):
Shares authorized......................... 2,000,000,000
Net Asset Value Per Share:
Class A: Net Assets....................... $339,509,079
Shares issued and outstanding.... 339,509,079
Net asset value per share........ $1.000
Class B: Net Assets....................... $4,390,444
Shares issued and outstanding.... 4,390,444
Net asset value per share(a)..... $1.000
Class R: Net Assets....................... $14,665,331
Shares issued and outstanding.... 14,665,331
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.
Six Months Ended April 30, 1999
STATEMENT OF OPERATIONS
(unaudited)
Principal Cash Management
MONEY MARKET FUND Fund, Inc.
Net Investment Income
Interest income......................... $8,598,084
Expenses:
Management and investment
advisory fees (Note 3)............ 737,958
Distribution and shareholder
servicing fees (Notes 1 and 3).... 31,346
Transfer and administrative
services (Notes 1 and 3).......... 279,928
Registration fees (Note 1)........... 46,715
Custodian fees....................... 4,038
Auditing and legal fees.............. 2,212
Directors' fees...................... 3,662
Other................................ 22,390
Total Expenses 1,128,249
Net Investment Income $7,469,835
See accompanying notes.
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
Principal Cash Management
MONEY MARKET FUND Fund, Inc.
Six Months Year
Ended Ended
April 30, October 31,
1999 1998
Operations
Net investment income .................. $ 7,469,835 $ 28,360,062
Dividends to Shareholders from Net
Investment Income:
Class A.............................. (7,138,135) (28,008,033)
Class B.............................. (73,706) (70,945)
Class R .................... (257,994) (281,084)
Total Dividends (7,469,835) (28,360,062)
Capital Share Transactions (Note 4)
Shares sold:
Class A.............................. 402,263,011 2,363,859,504
Class B.............................. 4,632,247 5,040,642
Class R ..................... 12,655,514 11,918,726
Shares issued in reinvestment of dividends:
Class A.............................. 6,920,075 26,466,497
Class B.............................. 70,654 66,630
Class R ...................... 249,825 273,695
Shares redeemed:
Class A.............................. (364,591,454) (2,931,480,148)
Class B.............................. (3,914,821) (2,497,006)
Class R ............................. (8,653,782) (6,074,611)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 49,631,269 (532,426,071)
Total Increase (Decrease) 49,631,269 (532,426,071)
Net Assets
Beginning of period..................... 308,933,585 841,359,656
End of period........................... $358,564,854 $ 308,933,585
See accompanying notes.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
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.
A significant portion of the shares issued by Principal Cash Management Fund,
Inc. Class A shares has been issued through Principal Financial Securities, Inc.
("PFS"), a previously affiliated broker-dealer. PFS was sold in January, 1998.
Subsequent to the sale, assets of PFS clients of approximately $536 million were
redeemed.
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 sold without an initial sales
charge, but are subject to a declining ("CDSC") on certain redemptions made
within six years of purchase. Class R shares are sold without an initial sales
charge and are not subject to a CDSC. Class B 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 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.
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. Class-specific expenses charged to each class during the period
ended April 30, 1999, 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 R Class A Class B Class R Class A Class B Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Cash Management Fund, Inc. N/A $6,415 $24,931 $133,083 $523 $2,076 $9,443 $5,179 $4,393
</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 and distributions to shareholders from net investment income
and net realized gain from investments are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. 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. Reclassifications made for the year
ended October 31, 1998 were not material.
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 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:
<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 Cash Management Fund, Inc. 0.50% 0.45% 0.40% 0.35% 0.30%
</TABLE>
The Fund also reimburses the Manager for transfer and administrative services,
including the cost of accounting, data processing, supplies and other services
rendered.
For the year ended October 31, 1998, the Manager voluntarily waived a portion of
its fee for Class B shares in the amount of $1,343. The Manager ceased its
waiver of expenses March 1, 1998.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A and Class B share redemptions. The
charge is based on declining rates which for Class A shares begin at .75%, and
for Class B shares at 4.00%, 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 period ended April 30, 1999, was
$2,173 and $31,486 for Fund for Class A and Class B shares, respectively.
No brokerage commissions were paid by the Fund to affiliated broker dealers
during the periods.
The Fund adopted a distribution plan with respect to Class B shares that
provides for distribution and shareholder servicing fees computed at an annual
rate of up to 1.00% of the average daily net assets attributable to Class B
shares of the fund. The Fund also adopted a distribution plan with respect to
Class R shares that provides for distribution and shareholder servicing fees
computed at an annual rate of up to .75% of the average daily net assets
attributable to Class R shares of the fund. 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, fees unused by the principal underwriter at the end of
the fiscal year are returned to the Fund. There are no distribution or
shareholder servicing fees with respect to Class A shares.
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
At April 30, 1999, 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 shares of the Fund as
follows:
Class A Class B Class R
Principal Cash Management Fund, Inc. 25,268,242 31,069 28,711
Note 4 -- Capital Share Transactions
Transactions in Capital Shares were as follows:
Principal Cash
Management
Fund, Inc.
Periods Ended April 30, 1999:
Shares sold:
Class A ................................................. 382,756,186
Class B ................................................ 4,632,247
Class R ................................................. 12,655,514
Shares issued in connection with the acquisition of
Principal Tax-Exempt Cash Management Fund, Inc.:
Class A .................................................. 19,506,825
Class B .................................................. N/A
Class R ................................................. N/A
Shares issued in reinvestment of dividends:
Class A ................................................ 6,920,075
Class B ................................................ 70,654
Class R ................................................. 249,825
Shares redeemed:
Class A ................................................ (364,591,454)
Class B ............................................... (3,914,821)
Class R ................................................ (8,653,782)
Net Increase 49,631,269
Year Ended October 31, 1998:
Shares sold:
Class A ................................................. 2,363,859,504
Class B ................................................ 5,040,642
Class R ................................................. 11,918,726
Shares issued in reinvestment of dividends:
Class A .................................................. 26,466,497
Class B .................................................. 66,630
Class R ................................................. 273,695
Shares redeemed:
Class A ................................................ (2,931,480,148)
Class B ................................................ (2,497,006)
Class R ................................................. (6,074,611)
Net Decrease (532,426,071)
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 a bank, which
allows the funds to borrow up to $60,000,000, 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 .08% on the average unused portion 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 quarter. At
April 30, 1999, 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 shares to Principal Cash
Management Fund, Inc. (valued at $19,506,825) for the 19,506,825 shares from
Principal Tax-Exempt Cash Management Fund, Inc. outstanding on April 8, 1999.
The aggregate net assets of Principal Cash Management Fund, Inc. immediately
before the acquisition were approximately $355,081,000.
SCHEDULES OF INVESTMENTS
PRINCIPAL CASH MANAGEMENT FUND, INC.
Principal
Amount Value
Commercial Paper (88.70%)
Asset-Backed Securities (13.84%)
CXC, INC.;
4.86%; 5/5/1999 $4,500,000 $ 4,498,785
5.40%; 5/6/1999 1,000,000 999,550
4.85%; 5/10/1999 1,000,000 999,057
4.85%; 5/17/1999 2,000,000 1,996,220
4.81%; 5/20/1999 1,250,000 1,247,161
4.85%; 5/28/1999 3,500,000 3,488,212
4.82%; 6/18/1999 5,250,000 5,217,666
Corporate Asset Funding Co.;
4.85%; 5/3/1999 3,000,000 3,000,000
4.84%; 5/10/1999 2,500,000 2,497,647
4.85%; 5/12/1999 1,125,000 1,123,636
4.85%; 5/13/1999 3,000,000 2,995,958
4.80%; 6/22/1999 2,000,000 1,986,667
4.80%; 7/19/1999 4,275,000 4,231,110
Corporate Receivables Corp.;
4.85%; 5/4/1999 2,000,000 1,999,730
4.83%; 5/7/1999 2,025,000 2,023,913
4.85%; 5/10/1999 4,100,000 4,096,133
4.85%; 5/26/1999 1,000,000 996,901
4.81%; 6/10/1999 5,250,000 5,223,345
4.83%; 6/21/1999 1,002,000 995,413
49,617,104
Business Credit Institutions (7.65%)
American Express Credit Corp.;
4.80%; 12/20/1999 1,250,000 1,211,500
Aon Corp.;
4.86%; 5/13/1999 1,300,000 1,298,245
4.85%; 5/17/1999 4,500,000 4,491,512
4.82%; 5/24/1999 3,000,000 2,991,565
4.85%; 6/1/1999 3,500,000 3,486,326
General Electric Capital Corp.;
4.82%; 6/3/1999 475,000 473,028
4.82%; 6/3/1999 650,000 647,302
4.81%; 8/9/1999 500,000 493,453
4.83%; 8/9/1999 1,175,000 1,159,551
4.80%; 8/27/1999 725,000 713,787
4.79%; 8/31/1999 1,000,000 984,033
4.78%; 9/3/1999 1,200,000 1,180,402
4.81%; 9/10/1999 425,000 417,618
4.83%; 9/10/1999 550,000 540,407
4.82%; 9/13/1999 750,000 736,645
4.83%; 9/14/1999 750,000 736,516
4.79%; 10/19/1999 425,000 415,443
4.81%; 10/19/1999 1,775,000 1,734,826
4.78%; 11/5/1999 1,350,000 1,316,660
4.88%; 11/23/1999 675,000 656,334
4.92%; 11/23/1999 600,000 583,272
4.90%; 11/29/1999 475,000 461,423
4.82%; 12/10/1999 725,000 703,548
27,433,396
Commercial Banks (2.71%)
J.P. Morgan & Co., Inc.;
4.85%; 7/12/1999 $3,625,000 $ 3,590,814
4.78%; 7/13/1999 3,250,000 3,219,361
4.82%; 12/10/1999 2,000,000 1,940,821
4.82%; 12/10/1999 1,000,000 970,411
9,721,407
Computer & Office Equipment (0.33%)
Xerox Credit Corp.;
5.11%; 3/21/2000 1,200,000 1,199,521
Crude Petroleum & Natural Gas (2.44%)
Chevron U.K. Investment PLC;
4.82%; 8/19/1999 3,475,000 3,424,751
4.83%; 8/20/1999 3,000,000 2,956,128
4.83%; 8/23/1999 2,400,000 2,363,936
8,744,815
Crushed & Broken Stone (4.64%)
Vulcan Materials Co.;
4.80%; 6/3/1999 2,000,000 1,991,733
4.80%; 6/17/1999 4,000,000 3,976,000
4.80%; 6/29/1999 5,500,000 5,458,200
4.81%; 6/29/1999 3,680,000 3,651,974
4.80%; 6/30/1999 1,575,000 1,562,820
16,640,727
Cutlery, Handtools &
Hardware (0.62%)
Stanley Works; 4.78%; 6/24/1999 2,250,000 2,234,465
Department Stores (4.32%)
Sears Roebuck Acceptance Corp.;
4.89%; 5/24/1999 4,250,000 4,237,877
4.81%; 5/26/1999 3,300,000 3,289,859
4.79%; 6/3/1999 1,150,000 1,145,257
4.83%; 6/4/1999 1,100,000 1,095,277
4.85%; 6/9/1999 1,750,000 1,741,277
4.85%; 6/11/1999 4,000,000 3,978,983
15,488,530
Drugs (5.17%)
Receivables Capital Corp.;
4.86%; 5/4/1999 2,750,000 2,749,629
4.86%; 5/5/1999 1,300,000 1,299,649
4.86%; 5/5/1999 4,000,000 3,998,920
4.86%; 5/6/1999 4,750,000 4,748,076
4.85%; 5/7/1999 3,750,000 3,747,979
4.82%; 5/21/1999 1,000,000 997,590
4.84%; 6/16/1999 1,000,000 994,085
18,535,928
Electric Services (0.59%)
Southern California Edison;
4.82%; 7/16/1999 2,150,000 2,128,698
Farm & Garden Machinery (2.86%)
Caterpillar Financial Services Corp.;
4.80%; 6/2/1999 825,000 821,700
4.83%; 6/18/1999 2,125,000 2,111,885
4.83%; 6/18/1999 3,000,000 2,981,485
4.83%; 6/25/1999 650,000 645,378
Deere & Co.;
4.80%; 6/14/1999 $1,000,000 $ 994,400
4.78%; 8/3/1999 750,000 740,839
4.80%; 8/13/1999 2,000,000 1,972,800
10,268,487
Federally & Federally Sponsored
Credit (0.42%)
Private Export Funding Corp.;
4.83%; 6/15/1999 1,500,000 1,491,346
Investment Offices (3.46%)
Morgan Stanley Group, Inc.;
4.85%; 6/2/1999 3,000,000 2,987,875
4.83%; 7/8/1999 2,500,000 2,477,863
4.83%; 7/9/1999 5,000,000 4,955,054
4.83%; 7/29/1999 2,000,000 1,976,655
12,397,447
Life Insurance (1.47%)
American General Corp.;
4.79%; 5/19/1999 1,900,000 1,895,955
4.80%; 5/19/1999 1,375,000 1,372,067
4.86%; 6/1/1999 2,000,000 1,992,170
5,260,192
Miscellaneous Converted Paper
Products (3.39%)
Bemis Co., Inc.;
4.83%; 5/3/1999 1,375,000 1,375,000
4.84%; 5/13/1999 3,275,000 3,270,597
4.80%; 6/9/1999 5,000,000 4,975,333
4.80%; 6/11/1999 2,550,000 2,536,740
12,157,670
Miscellaneous Electrical Equipment &
Supplies (5.35%)
General Electric Co.;
4.78%; 5/7/1999 2,500,000 2,498,669
4.84%; 5/11/1999 3,100,000 3,096,666
4.83%; 5/17/1999 2,750,000 2,744,835
4.81%; 6/24/1999 3,100,000 3,078,462
4.80%; 6/25/1999 5,750,000 5,709,113
4.80%; 6/25/1999 1,500,000 1,489,400
4.81%; 11/12/1999 575,000 560,172
19,177,317
Miscellaneous Investing (4.30%)
Delaware Funding Corp.;
4.88%; 5/6/1999 3,459,000 3,457,593
4.81%; 5/18/1999 3,500,000 3,492,985
4.82%; 5/20/1999 3,000,000 2,993,172
4.81%; 6/16/1999 3,000,000 2,982,363
4.80%; 6/21/1999 2,500,000 2,483,667
15,409,780
Miscellaneous Manufacturers (2.43%)
Dover Corp.;
4.82%; 5/11/1999 2,500,000 2,497,322
4.83%; 5/12/1999 4,000,000 3,995,170
4.80%; 5/25/1999 2,225,000 2,218,474
8,710,966
Mortgage Bankers & Brokers (3.44%)
Countrywide Home Loan, Inc.;
4.88%; 5/21/1999 4,500,000 4,489,020
4.87%; 5/24/1999 600,000 598,296
4.81%; 5/26/1999 2,725,000 2,716,626
4.83%; 5/27/1999 $2,000,000 $ 1,993,560
4.86%; 5/27/1999 1,000,000 996,760
4.88%; 5/27/1999 1,550,000 1,544,957
12,339,219
Ordinance & Accessories, NEC (0.56%)
Harsco Corp.; 4.83%; 5/11/1999 2,000,000 1,997,853
Personal Credit Institutions (12.41%)
Associates Corp. of North America;
4.93%; 5/3/1999 2,000,000 2,000,000
4.82%; 6/15/1999 1,150,000 1,143,379
Associates First Capital Corp.;
4.94%; 5/4/1999 1,225,000 1,224,832
4.84%; 5/7/1999 1,500,000 1,499,193
4.83%; 5/13/1999 3,000,000 2,995,975
4.93%; 5/28/1999 475,000 473,374
4.90%; 6/1/1999 800,000 796,842
4.85%; 6/11/1999 450,000 447,636
4.93%; 6/18/1999 2,000,000 1,987,401
4.83%; 7/2/1999 3,000,000 2,975,850
4.75%; 7/20/1999 1,000,000 989,708
Comoloco, Inc.;
5.42%; 5/14/1999 1,200,000 1,198,013
4.72%; 5/20/1999 2,500,000 2,494,428
4.62%; 7/23/1999 1,250,000 1,237,006
4.89%; 8/6/1999 1,500,000 1,480,644
4.88%; 8/27/1999 500,000 492,138
4.80%; 9/17/1999 1,000,000 981,733
4.91%; 9/24/1999 1,500,000 1,470,540
4.72%; 10/12/1999 1,200,000 1,174,512
4.82%; 10/20/1999 800,000 781,791
4.73%; 10/22/1999 700,000 684,181
4.74%; 10/22/1999 700,000 684,147
4.82%; 10/22/1999 350,000 341,940
4.80%; 11/9/1999 1,100,000 1,072,133
4.82%; 11/16/1999 1,000,000 973,624
4.83%; 11/19/1999 1,000,000 973,167
4.87%; 11/19/1999 500,000 486,472
4.91%; 11/22/1999 400,000 388,925
4.85%; 12/3/1999 750,000 728,377
General Motors Acceptance Corp.;
4.82%; 5/10/1999 375,000 374,649
4.87%; 5/25/1999 3,500,000 3,489,584
Norwest Financial, Inc.;
5.40%; 5/7/1999 1,500,000 1,499,100
4.85%; 6/10/1999 5,000,000 4,974,403
44,515,697
Security Brokers & Dealers (5.46%)
Goldman Sachs Group LP;
4.82%; 5/28/1999 5,000,000 4,983,264
4.85%; 5/28/1999 1,750,000 1,744,106
4.90%; 5/28/1999 1,500,000 1,494,896
4.83%; 9/17/1999 2,000,000 1,963,238
4.84%; 9/17/1999 2,500,000 2,453,972
4.83%; 10/14/1999 2,500,000 2,444,991
4.82%; 10/28/1999 800,000 780,934
4.82%; 10/28/1999 750,000 732,126
Merrill Lynch & Co., Inc.;
4.83%; 6/4/1999 3,000,000 2,987,120
19,584,647
Telephone Communication (0.84%)
Ameritech Capital Funding;
4.84%; 5/14/1999 $3,000,000 $ 2,995,563
Total Commercial Paper 318,050,775
Bonds (10.42%)
Business Credit Institutions (4.84%)
American Express Credit Corp.
Debentures; 8.50%; 6/15/1999 490,000 491,497
CIT Group Holdings, Inc.
Notes; 6.25%; 10/25/1999 2,389,000 2,401,464
Medium-Term Notes;
5.87%; 12/9/1999 435,000 436,636
Senior Notes;
6.37%; 5/21/1999 1,000,000 1,000,277
John Deere Capital Corp.
Notes; 6.30%; 6/1/1999 800,000 800,283
Ford Motor Credit Co.
Debentures; 8.87%; 6/15/1999 500,000 501,741
9.50%; 4/15/2000 275,000 285,685
Notes; 7.25%; 5/15/1999 1,500,000 1,500,670
7.47%; 7/29/1999 500,000 502,794
6.37%; 9/15/1999 1,075,000 1,079,498
8.37%; 1/15/2000 739,000 754,595
6.37%; 4/15/2000 325,000 328,137
General Motors Acceptance Corp.
Debentures; 8.40%; 10/15/1999 1,990,000 2,017,484
Notes; 7.12%; 6/1/1999 300,000 300,431
8.62%; 6/15/1999 708,000 710,633
6.15%; 9/20/1999 1,250,000 1,254,666
6.05%; 10/4/1999 450,000 451,423
7.00%; 3/1/2000 1,940,000 1,966,441
9.37%; 4/1/2000 560,000 580,054
17,364,409
Department Stores (0.09%)
Wal-Mart Stores, Inc. Notes;
6.12%; 10/1/1999 325,000 326,201
Fire, Marine & Casualty Insurance (0.34%)
International Lease Finance Corp.
Notes; 6.12%; 11/1/1999 1,200,000 1,205,455
Miscellaneous Chemical Products (0.09%)
Dupont EI de Nemours Co.
Debentures; 9.15%; 4/15/2000 300,000 310,687
Miscellaneous Equipment Rental &
Leasing (0.91%)
International Lease
Finance Corp. Notes;
5.75%; 12/15/1999 2,760,000 2,769,939
6.20%; 5/1/2000 500,000 504,463
3,274,402
Miscellaneous Food & Kindred
Products (0.06%)
Heinz (H.J.) Co.; 6.75%; 10/15/1999 $ 222,000 $ 223,508
Personal Credit Institutions (3.88%)
American General Finance Corp.
Notes; 7.70%; 10/15/1999 475,000 480,344
7.25%; 4/15/2000 776,000 789,480
Senior Notes; 6.87%; 7/1/1999 400,000 400,671
Associates Corp. of North America
Notes; 6.75%; 10/15/1999 250,000 251,687
8.25%; 12/1/1999 1,230,000 1,251,390
6.00%; 3/15/2000 1,710,000 1,720,360
5.25%; 3/30/2000 510,000 509,420
Senior Notes;
7.25%; 9/1/1999 1,320,000 1,328,372
Avco Financial Services, Inc.
Senior Notes;
7.25%; 7/15/1999 2,560,000 2,567,288
8.50%; 10/15/1999 650,000 658,753
Commercial Credit Co. Notes;
6.00%; 4/15/2000 300,000 301,639
Household Finance Corp. Notes;
7.75%; 6/1/1999 1,200,000 1,201,784
8.95%; 9/15/1999 250,000 253,349
Norwest Corp. Notes;
7.62%; 10/15/1999 500,000 505,380
Norwest Financial, Inc. Notes;
6.05%; 11/19/1999 1,500,000 1,507,336
7.25%; 3/15/2000 170,000 172,604
13,899,857
Security Brokers & Dealers (0.21%)
Merrill Lynch & Co. Notes;
8.37%; 2/9/2000 735,000 751,480
Total Bonds 37,355,999
Total Portfolio Investments (99.12%) 355,406,774
Cash, receivables and other assets,
net of liabilities (0.88%) 3,158,080
Total Net Assets (100.00%) $358,564,854
FINANCIAL HIGHLIGHTS
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
Class A shares 1999* 1998 1997 1996 1995
<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)............................. .023 .051 .050 .049 .052
Total from Investment Operations .023 .051 .050 .049 .052
Less Dividends From Net Investment Income............... (.023) (.051) (.050) (.049) (.052)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000
Total Return(c)......................................... 2.26%(d) 5.10% 4.96% 5.00% 5.36%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $339,509 $294,918 $836,072 $694,962 $623,864
Ratio of Expenses to Average Net Assets(b)........... .65%(f) .56%(e) .63% .66% .72%
Ratio of Net Investment Income to Average Net Assets. 4.47%(f) 5.12% 4.98% 4.88% 5.24%
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
Class B shares 1999* 1998 1997 1996 1995(g)
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b)............................. .020 .042 .041 .041 .041
Total from Investment Operations .020 .042 .041 .041 .041
Less Dividends from Net Investment Income............... (.020) (.042) (.041) (.041) (.041)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000
Total Return(c)......................................... 1.96%(d) 4.25% 4.05% 4.13% 4.19%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $4,391 $3,602 $992 $520 $208
Ratio of Expenses to Average Net Assets(b)........... 1.20%(f) 1.41%(e) 1.47% 1.50% 1.42%(f)
Ratio of Net Investment Income to Average Net Assets. 3.92%(f) 4.23% 4.08% 4.08% 4.50%(f)
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
Class R shares 1999* 1998 1997 1996(h)
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b)............................. .021 .046 .044 .030
Total from Investment Operations .021 .046 .044 .030
Less Dividends from Net Investment Income............... (.021) (.046) (.044) (.030)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000
Total Return(c)......................................... 2.05%(d) 4.56% 4.16% 2.97%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $14,665 $10,414 $4,296 $1,639
Ratio of Expenses to Average Net Assets(b)........... 1.06%(f) 1.05%(e) 1.26% .99%(f)
Ratio of Net Investment Income to Average Net Assets. 4.06%(f) 4.62% 4.40% 4.41%(f)
<FN>
* Six months ended April 30, 1999
</FN>
</TABLE>
See accompanying notes.
Notes to Financial Highlights
(a) Effective January 1, 1998, the following changes were made to the names of
the Money Market Funds:
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 Money Market Funds would have had per share net investment
income and the ratios of expenses to average net assets as shown:
<TABLE>
<CAPTION>
Year Ended Ratio of
October 31, Per Share Expenses
Except Net Investment to Average Amount
as Noted Income Net Assets Waived
<S> <C> <C> <C> <C>
Principal Cash Management Fund, Inc.:*
Class A 1998 $.051 .56% $ --(e)
1997 .050 .63 --
1996 .049 .67 7,102
1995 .052 .78 296,255
1994 .031 .90 595,343
Class B 1998 .041 1.49 1,343(e)
1997 .036 2.14 5,492
1996 .029 3.94 6,140
1995(f) .041 1.63(d) 104
Class R 1998 .046 1.05 --(e)
1997 .043 1.34 2,441
<FN>
* The Manager ceased its waiver of expenses for Principal Cash Management
Fund, Inc. on March 1, 1998.
</FN>
</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) Management fee waivers apply to November 1, 1997 through February 28, 1998.
(f) Computed on an annualized basis.
(g) Period from December 9, 1994, date Class B shares first offered to the
public, through October 31, 1995.
(h) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996.
PRINCIPAL MUTUAL FUNDS
The Principal Mutual Funds provide a choice of investment objectives through
Domestic Growth-Oriented Funds, Internationl Growth-Oriented Funds,
Income-Oriented 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 MidCap Fund To seek capital appreciation by
investing primarily in securities of emerging
and other growth-oriented companies.
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.
INTERNATIONAL GROWTH FUNDS
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.
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
Bond Fund income 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
Bond Fund income 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.
