A Message To Shareholders
Dear Shareholder,
This is the first shareholder report of the new millenium. The transition away
from Y2K concerns went well during the early months of 2000-- from an economic
standpoint as well as organizational. All the advance preparation paid off as
computer systems and account recordkeeping services operated smoothly.
The economic boom continued which, in early February, became the longest in U.S.
history. The first quarter of the new year saw indications of a significant
shift in stock market leadership. After dominating the market through the late
1990s, large-cap growth stocks slowed and began to trail their small-cap peers,
partly in response to fading Y2K concerns and an improved global economic
outlook. In the continuing effort to slow the pace of the U.S. economy and
forestall inflation, the Federal Reserve Board raised interest rates in February
and again in March.
We continue to add to our fund offerings with five new funds introduced since
the last financial report. Two of the funds are domestic growth-oriented funds
managed by firms not affiliated with the Principal Financial Group. Principal
Partners MidCap Growth Fund is managed by Turner Investment Partners, and
Principal Partners LargeCap Growth Fund is managed by Duncan-Hurst Capital
Management. Two international regional funds--Principal European Equity Fund and
Principal Pacific Basin Fund--are managed by BT Funds Management (International)
Limited, in Sydney, Australia--a company of the Principal Financial Group that
was acquired in 1999. We believe that by giving you a variety of money
management styles, you can achieve greater management-style diversification in
your portfolio. Principal LargeCap Stock Index Fund is an index fund, designed
to mirror the holdings and weightings of the Standard & Poor's 500 Index--an
index of widely held common stocks traded on the major U.S. exchanges.
In addition to new fund offerings, I'd like to tell you about some changes
regarding the portfolio managers for two existing funds. Principal Growth Fund
is now managed by Mary Sunderland. Mary joined Invista Capital Management,
LLC--a company of the Principal Financial Group--to manage the Fund after a
successful 10-year career with a Wall Street investment management company. Mary
and her team of three analysts manage the Fund from their offices in New York.
Principal MidCap Fund is now managed by Bill Nolin. Bill has been a portfolio
strategist and manager since joining Invista in 1996. He earned his MBA from
Yale School of Management. We're happy to welcome Mary and Bill to the Principal
Mutual Funds portfolio-management team.
I'm pleased to tell you that we've been working hard to improve our quarterly
shareholder statements. We understand your need to be fully informed about your
accounts, and want to make that process as simple as possible. The new format
features pie charts showing consolidated portfolio allocations by investment
class, historical portfolio values for comparative purposes, detailed long-term
summary of fund account purchases and redemptions, and current fund account
allocations.
Finally, Principal Mutual Funds recently unveiled an innovative
retirement income program. Principal Path for Income is designed to help you
achieve both your income needs and long-term accumulation goals as you enter
retirement. It provides asset allocation services for investors seeking income
distributions from their retirement assets while remaining invested in stock and
bond markets.
As you can see, many changes continue at Principal Mutual Funds. We're committed
to providing the competitive products and services your registered
representative needs to help you work toward your financial goals effectively.
Thank you for your confidence and the opportunity to serve you.
Sincerely,
/s/ Ralph C. Eucher
Ralph C. Eucher
President
Principal Mutual Funds
Table of Contents
Page
Portfolio Managers' Comments............................................. 4
Growth Funds (Domestic) Financial Statements and Highlights
Statements of Assets and Liabilities.................................. 16
Statements of Operations.............................................. 20
Statements of Changes in Net Assets................................... 24
Notes to Financial Statements......................................... 28
Schedules of Investments
Balanced Fund....................................................... 38
Blue Chip Fund...................................................... 42
Capital Value Fund.................................................. 43
Growth Fund......................................................... 44
LargeCap Stock Index Fund........................................... 45
MidCap Fund......................................................... 53
Partners Aggressive Growth Fund..................................... 54
Partners LargeCap Growth Fund....................................... 56
Partners MidCap Growth Fund......................................... 57
Real Estate Fund.................................................... 59
SmallCap Fund....................................................... 60
Utilities Fund...................................................... 62
Financial Highlights.................................................. 64
Growth Funds (International) Financial Statements and Highlights
Statements of Assets and Liabilities.................................. 92
Statements of Operations.............................................. 93
Statements of Changes in Net Assets................................... 94
Notes to Financial Statements......................................... 96
Schedules of Investments
International Emerging Markets Fund................................. 102
International Fund.................................................. 104
International SmallCap Fund......................................... 106
Financial Highlights.................................................. 110
Income Funds Financial Statements and Highlights
Statements of Assets and Liabilities.................................. 118
Statements of Operations.............................................. 120
Statements of Changes in Net Assets................................... 122
Notes to Financial Statements......................................... 124
Schedules of Investments
Bond Fund........................................................... 132
Government Securities Income Fund................................... 135
High Yield Fund..................................................... 135
Limited Term Bond Fund.............................................. 137
Tax-Exempt Bond Fund................................................ 138
Financial Highlights.................................................. 142
Money Market Fund Financial Statements and Highlights
Statement of Assets and Liabilities................................... 154
Statement of Operations............................................... 155
Statements of Changes in Net Assets................................... 156
Notes to Financial Statements......................................... 158
Schedule of Investments
Cash Management Fund................................................ 162
Financial Highlights.................................................. 166
Results from Shareholder Meeting......................................... 170
Principal Mutual Funds................................................... 176
<TABLE>
<CAPTION>
Principal Mutual Funds Performance
Average Annual Total Returns
As of March 31, 2000
1 Year 5 Years 10 Years
with without with without with without
sales sales sales sales sales sales
A Shares of: charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C>
Balanced (2.40)% 2.50% 10.64% 11.72% 10.15% 10.69%
Blue Chip (0.50) 4.46 17.02 18.17 13.13(a) 13.74(a)
Bond (6.26) (1.62) 5.56 6.60 7.26 7.78
Capital Value (13.06) (8.73) 13.60 14.71 11.89 12.44
Government Securities Income (3.36) 1.43 5.95 6.98 7.22 7.74
Growth 12.54 18.16 19.80 20.97 17.79 18.37
High Yield (8.28) (3.72) 4.43 5.45 6.42 6.94
International 21.31 27.42 16.47 17.60 11.97 12.51
International Emerging Markets 62.26 70.47 9.10(b) 11.17(b)
International SmallCap 91.40 100.94 38.11(b) 40.71(b)
LargeCap Stock Index 7.03(c) 8.62(c)
Limited Term Bond (0.07) 1.46 4.44(d) 4.83(d)
MidCap 24.32 30.52 16.63 17.77 16.13 16.70
Partners Aggressive Growth 16.86(e) 22.70(e)
Partners LargeCap Growth (10.34)(c) (5.87)(c)
Partners MidCap Growth (13.45)(c) (9.13)(c)
Real Estate (0.60) 4.33 (9.31)(f) (7.31)(f)
SmallCap 64.74 72.88 19.57(f) 22.19(f)
Tax-Exempt Bond (6.81) (2.19) 4.52 5.53 6.08 6.60
Utilities 10.75 16.26 16.94 18.08 11.84(g) 12.60(g)
</TABLE>
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
with without with without with without
B Shares of: CDSC* CDSC* CDSC* CDSC* CDSC* CDSC*
<S> <C> <C> <C> <C> <C> <C>
Balanced (2.09)% 1.73% 10.58% 10.85% 11.60%(h) 11.72%(h)
Blue Chip (0.33) 3.67 17.05 17.27 18.25(h) 18.34(h)
Bond (6.07) (2.38) 5.51 5.83 6.37(h) 6.51(h)
Capital Value (12.76) (9.49) 13.50 13.74 14.97(h) 15.08(h)
Government Securities Income (3.10) 0.72 5.92 6.24 6.95(h) 7.09(h)
Growth 13.27 17.27 20.05 20.24 21.82(h) 21.90(h)
High Yield (7.97) (4.46) 4.23 4.52 5.05(h) 5.18(h)
International 22.69 26.69 16.57 16.79 15.15(h) 15.26(h)
International Emerging Markets 65.31 69.31 9.58(b) 10.57(b)
International SmallCap 95.89 99.89 39.38(b) 40.06(b)
LargeCap Stock Index 7.27(c) 8.52(c)
Limited Term Bond (0.07) 1.13 4.31(d) 4.42(d)
MidCap 25.87 29.87 16.92 17.13 18.99(h) 19.08(h)
Partners Aggressive Growth 18.40(e) 22.40(e)
Partners LargeCap Growth (9.64)(c) (5.87)(c)
Partners MidCap Growth (12.76)(c) (9.13)(c)
Real Estate (0.47) 3.53 (9.01)(f) (7.86)(f)
SmallCap 67.95 71.95 20.36(f) 21.41(f)
Tax-Exempt Bond (6.36) (2.67) 4.52 4.85 6.39(h) 6.53(h)
Utilities 11.45 15.45 17.04 17.26 17.23(h) 17.32(h)
<FN>
* Contingent Deferred Sales Charge
</FN>
</TABLE>
Cumulative Returns
As of March 31, 2000
1 Year
with without
sales sales
C Shares of: charge charge
Balanced (5.03)%(i) (4.12)%(i)
Blue Chip (4.06)(i) (3.10)(i)
Bond (1.25)(i) (0.30)(i)
Capital Value (15.98)(i) (15.21)(i)
Government Securities Income 1.17(i) 2.15(i)
Growth 9.47(i) 10.47(i)
High Yield (5.48)(i) (4.58)(i)
International 19.87(i) 20.87(i)
International Emerging Markets 33.90(i) 34.90(i)
International SmallCap 80.05(i) 81.05(i)
LargeCap Stock Index 7.52(c) 8.52(c)
Limited Term Bond 1.28(i) 1.77(i)
MidCap 17.81(i) 18.81(i)
Partners Aggressive Growth 21.40(e) 22.40(e)
Partners LargeCap Growth (6.81)(c) (5.87)(c)
Partners MidCap Growth (10.03)(c) (9.13)(c)
Real Estate (7.46)(i) (6.54)(i)
SmallCap 38.05(i) 39.05(i)
Tax-Exempt Bond (2.67)(i) (1.72)(i)
Utilities 1.38(i) 2.33(i)
Average Annual Total Returns
As of March 31, 2000
R Shares of: 1 Year 5 Years
Balanced 1.85% 9.34%(d)
Blue Chip 3.94 15.06(d)
Bond (2.12) 4.38(d)
Capital Value (9.22) 10.91(d)
Government Securities Income 0.99 5.00(d)
Growth 17.49 18.51(d)
High Yield (4.28) 2.68(d)
International 26.80 15.52(d)
International Emerging Markets 70.71 11.11(b)
International SmallCap 101.01 40.82(b)
LargeCap Stock Index 8.52(c)
Limited Term Bond 0.84 4.22(d)
MidCap 29.77 13.84(d)
Partners Aggressive Growth 22.50(e)
Partners LargeCap Growth (5.87)(c)
Partners MidCap Growth (9.13)(c)
Real Estate 3.84 (7.43)(f)
SmallCap 72.20 21.97(f)
Utilities 15.53 14.80(d)
(a) Partial period, from effective date 3/1/91
(b) Partial period, from effective date 8/29/97
(c) Partial period, from effective date 3/1/00
(d) Partial period, from effective date 2/29/96
(e) Partial period, from effective date 11/1/99
(f) Partial period, from effective date 12/31/97
(g) Partial period, from effective date 12/16/92
(h) Partial period, from effective date 12/9/94
(i) Partial period, from effective date 6/30/99
Total return represents the overall performance of an investment for a specific
period of time, assuming the reinvestment of dividends and capital gains and
after applicable expenses. Average annual total returns for A shares are with
and without maximum 4.75% (1.50% for the Limited Term Bond and LargeCap Stock
Index Funds) sales charge. Average annual total returns for B shares are with
and without maximum 4.0% (1.25% for the Limited Term Bond and LargeCap Stock
Index Funds) contingent deferred sales charge. The returns for Class C shares
are cumulative returns since June 30, 1999. They are shown with and without
maximum 1.00% (0.50% for the Limited Term Bond and LargeCap Stock Index Funds)
contingent deferred sales charge. The returns reflect past performance. Past
performance does not predict future performance. The investment return and
principal value of an investment will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
MANAGER'S COMMENTS
Principal Management Corporation, the manager of the Principal funds, is staffed
with investment professionals who manage several of the funds. In addition, the
Manager has selected a Sub-Advisor for certain funds based on the Sub-Advisor's
experience with the investment strategy for which it was selected. In the
following paragraphs, comments by the individuals who are responsible for the
day-to-day portfolio management summarize in capsule form the general strategy
and recent results of each fund over the past six months. We believe any
Principal fund should, under normal circumstances, represent only a portion of
an investor's total investments. For most investors a portfolio should be
balanced among stocks, bonds, and cash reserves to fit their own needs and risk
tolerance. Those who maintain this balanced approach should be aware of the
short-term results, but focus on the long term. Past performance is no guarantee
of future results. Fund values will fluctuate so that the shares, upon
redemption, may be worth more or less than their original cost.
Growth-Oriented Funds
DOMESTIC GROWTH FUNDS
Principal Balanced Fund
Marty Schafer Mary Sunderland Judi Vogel
With fundamental factors such as strong economic growth, increasing corporate
profits growth, and high levels of consumer confidence in place, common stocks
produced extraordinary returns for five of the past six months. More
specifically, the new economy sectors, which include technology, media, and
telecommunications (TMT), were the drivers of strong equity market performance
both in the U.S. and overseas. Old economy value stocks lagged new economy
growth stocks by a considerable margin. Bonds suffered by comparison as all the
strong economic readings caused inflation fears to mount, prompting the Federal
Reserve to raise interest rates three times during the period. The Fed Funds
rate* stood at 6.0% on April 30. There is a high probability that the Fed will
move the target rate up another .50% to 6.5% at their policy-making meeting in
mid-May.
About mid-March a rotation out of technology and into more value-oriented,
defensive sectors occurred, causing a shift in return patterns. Although the
majority of companies continued to report earnings in line with or exceeding
expectations, interest rate concerns took on more importance, causing investors
to question some of the valuations of previous high flying sectors and
companies. A by-product of this rotation has been extraordinarily high intra-day
volatility in the markets.
The Principal Balanced Fund has exposure to high quality growth companies, value
stocks selling at attractive valuations, international markets (through American
and Global Depository Receipts), and fixed-income securities. In the first half
of the fiscal year, performance of the Fund was negatively impacted by not
having maximum exposure to TMT themes in the equity market. At the same time,
value stock holdings caused returns to lag. Results have improved since the
rotation in March and April. Looking ahead, the strategy of maintaining balanced
exposure to growth, value, and international equities, as well as bonds with an
emphasis on incremental yield, will ensure that the Fund participates in a
variety of market environments. This is important given the high level of
volatility currently present in the markets.
The Fund's domestic equity portfolio accounts for 60% of total assets,
reflective of generally positive fundamentals for stocks in the U.S.
International stocks make up 5% of the Fund with the strategy of capturing
strong global growth as foreign economies improve. The fixed-income portfolio
accounts for 35% of assets and remains duration neutral vs. the benchmark Lehman
Government/Corporate Bond Index. Fund managers prefer higher yielding corporate
and mortgage-backed securities vs. Treasuries in this strong economic
environment. Despite near term market value fluctuations, higher yielding
instruments will out-earn their lower yielding Treasury counterparts over the
long term.
* The Fed Funds rate is the rate at which banks lend to each other on an
overnight basis.
Principal Blue Chip Fund
Mark Williams
The objective of the Principal Blue Chip Fund is to invest primarily in high
quality companies. It takes advantage of the strong management teams, powerful
competitive positions, demonstrated earnings power and the significant growth
opportunities these firms have. Large firms typically have less business risk,
easier access to financing, and less volatility in earnings than smaller firms,
so they deserve a place in the portfolios of many investors.
During the six months ended April 30, the S&P Barra Value Index returned 2.2%.
The Fund had a return of 2.1%, underperforming by just over 4%. This was
primarily due to poor performance in the technology and consumer staples
sectors. Technology stocks soared in the fourth quarter as investors chased
growth, and consumer staples and healthcare underperformed as investors shed
more defensive holdings. Hewlett Packard was the Fund's main contributor in
technology with a return of 75%. The Fund was helped by its performance in basic
materials, capital goods, communication services, financial and utility sectors.
In financials, Citigroup was the best contributor with a return of 17%.
In general, the Fund seeks to create performance through securities selection
rather than sector bets. Fund managers feel this will reduce the risk of the
Fund relative to the average core equity fund.
Principal Capital Value Fund
Catherine Zaharis
The Principal Capital Value Fund has had major weighting changes that have aided
the performance of the Fund during the last six months. The first three months
of this fiscal year were still difficult for value managers, but the next three
months were beneficial to those with a more value-oriented approach.
Financial stocks have been a most difficult sector as these companies have been
impacted by concerns over rising interest rates. Fund managers have focused on
banks, which have not performed as strongly as brokerage stocks. The Fund's
weighting has been decreased during the past six months, as Fund managers feel
the Fed will continue tightening interest rates to ward off higher inflation.
Rising interest rates have also hurt our investments in consumer cyclicals. The
market is concerned that the consumer will disappear given higher interest rates
and maybe a slowing job market. However, this has not transpired in the
fundamentals of these companies. The Fund remains underweight relative to its
benchmark.
The Fund's technology stocks were quite strong during the first half of the
year, with several companies rising over 50%. The major factor to this
performance was the supply/demand situation with semiconductors. As more items
now include semiconductors in their production, the suppliers cannot keep up
with demand. Given that, the pricing scenario has improved markedly and these
companies are increasing profits and margins. Utilities have also had a positive
absolute return, as growth prospects for these companies have grown during the
past six months.
Although the Fund still enjoys a strong economy, the Fed is quite concerned
about the impact of a rising inflationary environment, and it is committed to
keeping rates at a point that will contain this threat. The possibility of a
period of rising rates and slowing economic growth could continue to create a
market with greater volatility. Fund managers will monitor these events closely
to structure a portfolio to take advantage of this scenario.
Principal Growth Fund
Mary Sunderland
The Principal Growth Fund outperformed the S&P 500 Stock Index for the six
months ended April 2000. A new fund management team was hired at the end of
1999. During the transition, the Fund was repositioned in faster growing
industries including technology, communications and healthcare. In addition, it
is now more focused on the highest quality growth names.
An overweighted position in technology shares powered the Fund for most of the
six months. Corporations around the world continue to spend on productivity
enhancing technology and communications products. Internet demand continues to
grow at a spectacular rate. Fund managers feel they're in the early stages of
the Internet buildout, which will sustain growth in the technology sector for
many years ahead. Technology shares have corrected over 25% since the end of
March. Although growth rates remain strong for the technology companies,
concerns of higher inflation recently have dampened valuation in this segment.
Fund managers feel interest in unproven Internet companies raced ahead of the
fundamentals and is now being corrected. The managers believe the market share
leading technology stocks in the Fund will resume solid performance once the
economy slows somewhat and inflation fears recede.
Healthcare performance also positively contributed to performance as the Fund
overweighted the faster growing device companies and pharmaceuticals and
underweighted the stressed healthcare services sector. An aging worldwide
population will lead to solid demand for healthcare products and services over
the next decade.The financial sector also provided above average returns over
the past half year. The Fund's financial stocks significantly outperformed the
sector thanks to emphasis on the faster growing participants who are benefiting
from growing fee-based financial services. The financials offer solid long-term
growth potential as the world population ages and requires additional financial
products.
Principal LargeCap Stock Index Fund
Robert Baur Rhonda VanderBeek
The economic backdrop for investors has been excellent in recent periods. The
economy has been remarkably strong with average real growth for three quarters
above 6%. Companies continue to report rapidly rising earnings. Increasing wage
costs have so far been countered by improved productivity so unit labor costs
have been contained. But, from the standpoint of the Federal Reserve, this seems
to have been too much good news. The Federal Open Market Committee (FOMC), which
sets the short-term rates that banks charge for overnight reserve loans, has
been concerned that economic growth is too fast and that inflation is becoming a
problem. As a result, FOMC members have raised interest rates and continue to
watch for signs of inflation.
In general, rising interest rates are detrimental to stock market performance.
Investors have been reading the economic data tea leaves looking for indications
of how fast and how far the Fed might push up interest rates. Since successive
economic reports may each have different implications, the stock market has been
quite volatile over the last few months as it reacted to the news of the day. As
the Principal LargeCap Stock Index Fund is designed to mirror the return of the
Standard & Poor's 500 Index, Fund performance has been similarly volatile.
Principal MidCap Fund
William Nolin
Over the last six months, the Principal MidCap Fund trailed the S&P 400 MidCap
Index slightly. Technology has been the story for the market as a whole. The
last six months have been unusual. Technology was up big, but almost everything
else was unchanged through mid-March. Beginning in mid-March, technology stocks
have cooled off substantially. The divergence between the Fund and the Index was
mainly due to the pulling ahead of a couple of technology stocks in the Index
that are not in the Fund's portfolio. One of these companies is no longer part
of the Index and the other continues to be overvalued in the opinion of Fund
managers.
The Fund changed managers in the fourth quarter of 1999. The underlying
philosophy of investing as an owner of a business and the process using
fundamental analysis has not changed.
The Fund is positioned to take advantage of the growth in technology and
communications going forward. Technology will continue to benefit from the
substitution of capital for labor, the growth of the Internet, and the
acceleration of global economic growth. The cost of labor is going up 3% per
year, while the cost of capital equipment is falling 4% per year. This
divergence is causing companies to either provide their workers with better
tools or replace those workers with machines. This process is being accelerated
by the low availability of workers in this country. Communications benefit from
many of the same trends as technology. Valuations remain high in these sectors,
but Fund managers feel the strong business fundamentals justify the valuations.
Principal Partners Aggressive Growth Fund
William Auslander Philip Friedman
The Principal Partners Aggressive Growth Fund seeks to provide long-term capital
appreciation by investing primarily in growth-oriented common stocks of large
capitalization U.S. corporations and, to a limited extent, foreign corporations.
The Fund generated excellent returns over the past six months ended April 30.
The portfolio had a total return of 16.9% versus 7.2% for the S&P 500 Stock
Index. Major contributors to the strong fourth quarter results were Cisco
Systems, Intel, Tyco, Warner Lambert, and Applied Materials. The Fund maintained
and benefited from its philosophy of looking for opportunities driven by
bottom-up fundamental company analysis and an emphasis on gaining an
"information edge" in the sectors and companies in which it invests. Major
detractors to performance during the first quarter were Bell Atlantic, Johnson &
Johnson, Worldcom, Bristol Myers, and Procter & Gamble.
Fund managers remain pleased with the success of their bottom-up stock picking
approach. Over 95% of the Fund's outperformance relative to the S&P 500 was
driven by stock-picking versus sector allocation. In particular, the Fund's
strong results were achieved despite a continued relatively neutral posture
toward technology versus the index weight. The stock picking in this sector
remains very good, however, as technology in general accounted for about 40% of
the Fund's total outperformance for the period. Over 95% of that relative
outperformance was attributable to successful stock picking within the group.
The absence of a large overweight bet in technology helped the Fund's relative
performance versus many other large capitalization growth funds toward quarter
end as many stocks in this group experienced downside volatility. The Fund's
positions in such "old economy" names such as Tyco, United Technologies and even
Pfizer/Warner Lambert helped sustain strong performance during this period.
Fund managers remain upbeat about the prospects for large capitalization growth
stocks going forward. Inflation remains in check, interest rates have moderated
after an early year surge, and the Fed seems to be prudently applying the brakes
to prevent the economy from overheating. This offers a good environment for
growth.
Principal Partners LargeCap Growth Fund
David Magee
Market volatility is now at an all-time high, especially so on the NASDAQ where
volatility is about two times higher than at any time in that market's history.
Behind the highly volatile market environment of early 2000 is uncertainty
stemming from the apparent, and quite sudden, resumption of inflation after a
period of disinflation.
Inflation categorically lowers equity prices by dropping the quality of earnings
and by inducing higher financial risk in the economy and the market in the form
of higher interest rates. The damage is greatest for future earnings. Today,
this means emerging technology stocks, like those common on the NASDAQ.
We believe inflation will plateau at moderate levels similar to those observed
throughout most of the 1990s and the volatility of the stock market will follow
suit. Monetary policy and oil prices have each had a major role to play in this
bout of inflation. The money supply has now been radically reduced to normal
levels and the factors driving oil from $10 a barrel in February 1999 to $30 a
barrel today are reversing. Therefore, Fund managers feel the market will begin
focusing on corporate earnings and less on interest rates and inflation.
The portfolio weighting in technology stocks has been reduced, from 75% in
mid-February 1999 to just under 50% currently, due to lower stock prices and the
selling of those positions that violated buy parameters. Not all technology
stocks will re-emerge from this volatile period with their growth prospects in
tact, but several of the large, dominant, global leaders have suffered
relatively minor damage and remain in the portfolio. If lowered stock prices,
higher interest rates, and slower economic growth combine to cut down the
otherwise exceptionally strong capital expenditures in the second half of this
year, more reductions in the technology portfolio could ensue.
The information economy will not disappear, however. Data will continue to be
created, stored and transmitted in greater and greater volumes at greater and
greater speeds and at lower cost. Wireless Internet applications are emerging to
add to the data avalanche. Several generations of tools and equipment will be
developed to enable the broad sweep of technology to reach further into the
world and deeper into existing industries.
Sudden increases in energy prices have led to rapid earnings acceleration in
several energy areas. After two years of under-investment in this sector,
capital is now being aggressively deployed to catch up energy supplies with
demand. Also, European deregulation of its energy markets and the continuation
of U.S. power deregulation are opening new opportunities for energy marketing,
transportation and "outsourcing." A portion of the portfolio is now invested in
the huge consumer and industrial energy markets, which will become more flexible
and efficient, all enabled by a few inventive companies that will profit
enormously from this trend.
Principal Partners MidCap Growth Fund
Christopher McHugh
During the last quarter of 1999 and into the beginning of 2000 the markets did
very well with technology issues leading the way. Since the market peak of
mid-March, the markets have become much more volatile with technology issues
taking the brunt of this volatility. Remember that the NASDAQ doubled in five
months from October 1 to the peak in mid-March 2000, so a pull back here should
not be unexpected. The only fundamental change in the stock market has been
valuation. With robust productivity and profits, corporate America has never
been in better shape. Fund managers feel earnings will remain strong for the
remainder of the year. This should help support the market in spite of the wall
of worry investors face as the Fed attempts to slow the white-hot economy. Fund
managers feel their investment philosophy works well in this type of market
environment. Being sector neutral to the index keeps managers focused on picking
the best stocks in each sector. Stock selection will be a key driver to
performance when the market finally gains some stability. The ability of Fund
managers to select those securities with market leadership should bode well for
the Principal Partners MidCap Growth Fund going forward.
For the six months ended April 30, the Fund outperformed the Russell MidCap
Growth Index at 45.1% versus 41.1%. The major contributors to return were in the
technology, healthcare and consumer discretionary sectors. The Fund's sector
neutrality helped it blunt the downslide in technology stocks late in the first
quarter of 2000, as the Fund was also invested in lagging sectors, such as
financials, energy, and consumer staples. Fund managers are still very positive
and continue to feel that technology stocks will lead the way over the next
twelve months as this sector has the best upside earnings potential. As always,
the Fund remains sector neutral to the Index and strives to stay invested in the
best growth companies with the strongest fundamentals within each sector.
Principal Real Estate Fund
Kelly Rush
The Principal Real Estate Fund enjoyed a period of strong positive returns the
past six months. The Class A shares provided a 10.1% return at a time when the
S&P 500 Stock Index increased only 3.4%. The Fund still lagged the soaring
NASDAQ Composite Index that was up 30.1% for the period.
During the last sixty days of this six-month period, real estate stocks enjoyed
their strongest gains. From March 1 through April 30, Class A shareholders
earned a 9.3% return. This performance easily outdistanced the S&P 500's 5.3%
return and NASDAQ's -19.3%.
The bulk of the Fund's management strategies worked successfully in the past six
months. The Fund's heavy weighting in the owners of apartments, office and
industrial properties has proven correct. These sectors delivered good
performance and the Fund held many of the best stocks within each sector. The
chief factor restraining fund performance was the price erosion of two shopping
center companies. Both companies made unrelated negative announcements that
materially damaged the credibility of their management teams.
Rising interest rates have not adversely impacted real estate stock performance.
Some industry watchers have questioned whether rising interest rates might
attract capital away from high dividend paying real estate stocks and toward
fixed-income assets. Instead, investors have been attracted to the reliable
earnings of real estate companies and the inflation protection their real assets
have historically provided.
Despite the run-up in real estate stock prices from March 1-April 30, the
underpinnings behind the rally remain in place. First, the real estate business
is robust and is expected to remain so. Second, the valuation of real estate
companies remains attractive relative to historical standards as prices are
still recovering from weak performance in 1998 and 1999. Finally, investor
appetite for higher dividend paying, lower volatility stocks has returned. Fund
managers feel that if these conditions continue, real estate stock performance
should be favorable.
Principal SmallCap Fund
John McClain Mark Williams
The Principal SmallCap Fund had a good first half of the fiscal year with a
total return of 22.4%. The two primary benchmark indexes, the Russell 2000 Index
and S&P 600 returned 17.9% and 17.5% respectively.
The primary sector responsible for the outperformance was the health care
sector, which returned 91.5% compared to 42.74% for the S&P 600 holdings. All of
the healthcare outperformance was due to superior stock selection as the sector
was evenly weighted. Coming into this period the Fund had an above-average
weighting in biotechnology, which experienced a buying frenzy in the first
quarter of 2000. Fund managers stuck to a price discipline and sold or trimmed
holdings. Toward the end of the period the sector began a significant downward
correction. Fortunately, by that time the Fund had moved to a significant
underweight. Fund managers will look to re-build the weighting if and when the
prices of attractive companies return to levels allowing adequate upside return
given the above-average risk associated with the sector.
Two sectors, financials and technology, underperformed. Although Fund managers
correctly underweighted a poor-performing sector, the stock selection was poor,
returning -23.3% compared to +1.0% for the index financials. Much of this was
due to the smaller market caps and poorer liquidity of the Fund's holdings
during a period where liquidity in general became more of a concern.
A less dramatic version of the same phenomenon occurred with the Fund's
technology holdings. Technology in general was strong, returning 37% for the
Index. The Fund's holdings were somewhat smaller and less liquid, returning
23.6%.
Overall, the Fund again benefited from an overweight of growth names over value
stocks, but by the end of this period the winds had changed and value stocks had
begun to noticeably outperform. Looking forward, the earnings outlook for many
growth areas such as technology and communications continue to be robust.
Similarly, the outlook for many traditional value sectors remains cloudy. For
these reasons Fund managers have decided, at least for now, to maintain a growth
overweight.
Principal Utilities Fund
Catherine Zaharis
Utilities stocks have had one of the more volatile periods in recent memory. A
few of the stocks in the portfolio have doubled in price, and a couple of the
stocks have been cut in half. The bottom-line theme is consistent, even between
telecom and utility stocks--that deregulation has had an impact on stock price
performance.
The electric side of the equation has now separated companies between those
aggressively pursuing growth opportunities, and those keeping the status quo.
Those aggressive companies successful in their pursuit have enjoyed expanding
P/E multiples and double digit price growth. Those, which have pursued
aggressive strategies and have slipped up, particularly in international
investments, have been pummeled. The companies continue to plod along with much
more stable returns.
The gas industry is taking advantage of a long-term trend. For years, no major
new capacity has been added to electric generation in the U.S. As more of the
economy is utilizing electric products and the economy continues to grow, usage
of electricity has picked up. This has meant that the reserve margin for
electricity is the lowest it has been in years. Nearly all new plants use
natural gas. Fund managers have markedly increased the Fund's positions in this
area to take advantage of these structural changes. They have also added a
company which makes products for distributed generation, a growing need as the
country gets less able to meet the electric needs of the population. Distributed
generation is a small, mini-plant developed right at the site of the user, so
users do not have to worry about electricity reaching their facility, as they
can manufacture their own. This will be a growing business in the future.
The issues for telecommunications companies are a bit different. All companies
are growing, and most have seen strong growth. However, huge investment in
infrastructure is needed to create the ability to serve new generations of
telecom products and services. As the funds are needed, these stocks move up and
down more dramatically. However, the growth profile for most of these product
lines is still greater than for electricity and gas usage.
INTERNATIONAL GROWTH FUNDS
Principal International Emerging Markets
Kurt Spieler
Emerging markets outperformed international markets in the first half of the
Principal International Emerging Markets Fund's fiscal year. The U.S. dollar
based return for the benchmark Morgan Stanley Capital International EMF
(Emerging Market Free) Index was 25.8%. Most of the returns were from November
to February with emerging markets correcting in April. The Fund's total return
was 26.8% in the first half, slightly outperforming the EMF Index.
The strong performance is primarily a result of two factors. First, emerging
economies benefited from accelerating global economic growth. Certain emerging
countries, Brazil, Chile, South Africa, Russia and Indonesia focus on
manufacturing of various commodities. Commodity prices firmed as a result of the
economic growth with strong equity performance in related industries. Second,
emerging markets benefited from the performance of TMT (telecom, media, and
technology). Emerging market indices have a high exposure to telecom and
technology stocks. In particular, telecom stocks in Latin America and Eastern
Europe and technology stocks in Taiwan, Korea and Israel were strong performers.
In March, TMT and cyclical stocks corrected as a result of interest rate hikes
and concerns of a slowdown in global growth. Due to the exposure to these
industries, emerging markets were negatively impacted. Looking forward, emerging
markets are better positioned to absorb a series of interest rate increases than
in 1994. Asian and Latin American economies have less debt now and stock
valuations relative to developed markets are much lower than six years ago.
Growth momentum in Latin America and Asia is also much better. The primary risk
remains a significant slowdown in the U.S. economy.
In terms of fund exposure, the Fund remains overweighted in telecom and
information technology stocks and underweighted in materials and utilities.
Principal International Fund
Scott Opsal Kurt Spieler
Global equity markets were strong in the first half of the Fund's fiscal year.
The local currency return for the benchmark Morgan Stanley Capital International
EAFE (Europe, Australia and Far East) Index was about 16%. However, the strong
U.S. Dollar vs. the Euro, Australian Dollar and Japanese Yen reduced the
benchmark return by about 9%, resulting in about 7% appreciation for global
equity markets when converted back to U.S. Dollars. The Fund had a total return
of about 13% in the first half, outperforming the EAFE Index by a wide margin.
Global equity markets were particularly strong from the end of last October to
the first week in March. This period was characterized by accelerating economic
growth in almost every corner of the world. The dramatic reduction in late 1998
of short-term interest rates by the Fed and the European Central Bank set the
stage for the phenomenal growth seen, especially in the U.S. economy. An
additional liquidity boost was provided to the global economic system by central
banks in late 1999. This was intended to prevent any Y2K related problems (of
which there appear to have been almost none).
With all parts of the world growing well, corporations reported very strong
earnings growth and were giving very upbeat forecasts for future growth. This
was especially the case with the TMT (telecom, media, technology) sectors. TMT
stocks were the key drivers of the sharp upward move in global equity markets
until early March. The Fund's outperformance in the first half was largely a
result of the overweight position in TMT. Advanced communications networks
enabled by digital technologies are rapidly changing the way business is
conducted and the way we live our lives. This rapid change continues to create
attractive investment opportunities. Specifically, Fund managers are positive on
wireless communications networks, wireless telecom equipment, broadband enabling
telecom equipment and media companies that own "must have" content or valuable
subscriber bases.
Early March brought renewed inflation fears and more interest rate hikes. These
factors, combined with lofty valuations in TMT stocks, caused equity markets to
sell off. The period from the first week in March to the end of April saw
rotation of investment capital out of TMT and into the more reasonably valued
"old-economy" sectors. However, even after the recent correction, the returns
posted by TMT stocks far outpaced those in other areas in the first half.
Fund managers continue to find attractive investment opportunities in TMT and
are still overweight in media and information technology. The portfolio is also
overweight in oil related equities due to attractive near term fundamentals and
reasonable valuations. Elsewhere, it is underweight in utilities because of the
poor fundamental outlook and underweight in materials because of an expected
slowdown in global growth.
The Japan weight is currently about 50% of the benchmark weight. The holdings in
Japan are attractively valued investments in the same themes Fund managers are
analyzing globally.
The Fund remains unhedged. Fund managers feel the U.S. economy will slow
considerably from its recent growth rate and will result in a weakening of the
U.S. Dollar, especially vs. the Euro.
Principal International SmallCap
Dan Sherman Darren Sleister
The past six months have been a roller coaster for the international small cap
market. A rally in the TMT (technology, media and telecom) sector starting in
approximately November 1999 had sent valuations to extreme levels by the
beginning of March 2000. At that point in time, the Fed tightening, combined
with macroeconomic numbers that suggested inflation was picking up, finally
cracked over-heated TMT shares. Internet and software companies were the first
to get hit, but the selling slowly spread to most technology companies.
Currently, the technology sector has seen corrections ranging from 30-70%. The
correction has served to slow new companies coming to the market and made seed
money to the new economy business models harder to come by.
The majority of the stocks in the Japanese stock market fell during the last six
months. Japan also experienced the most concentrated market in the fourth
quarter of 1999, with only a "chosen few" tech and Internet stocks rallying.
This narrow market phenomenon also made Japan one of the first markets in the
world to experience the TMT correction in 2000. Fund managers were able to
side-step much of this correction, but anticipate keeping Japan as an
underweight position in the portfolio while the country continues to slowly
restructure its economy. In Japan, managers are buying companies in recovering
segments that have a domestic bias (rather than export bias) to their business.
In Asia, except for Japan, most of the portfolio's tech exposure was sold early
in 2000 to avoid falling expectations for U.S. consumption. Going forward, Fund
manager's hope to pick up companies that will benefit from further Japanese and
European outsourcing of manufacturing to Asia.
In Europe over the last six months, the Fund was positioned in companies that
had strong franchises in a broad spectrum of emerging technologies. Even though
the Fund owned companies with superior business models and prospects of well
above-average growth, tech exposure was hurt as the market soured on TMT stocks
in general. Overall tech exposure has been lowered, but the Fund remains in
niche companies that are well positioned for positive future changes. Fund
Managers remain positive on the European economy as the Fund continues to
overweight this region, and find niche companies at low valuations relative to
their growth prospects.
Important Notes for Growth-Oriented Funds
Duration is the dollar weighted, present value of cash flows, principal and
interest, expressed in time.
The values of these indexes will vary according to the aggregate value of the
common equity of each of the securities included. The indexes represent asset
types which are subject to risk, including possible loss of principal. 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.
Principal Utilities Fund is subject to market conditions directly related to the
utilities industry.
Principal Real Estate Fund's investing involves risks inherent to the real
estate industry and REITs, such as general and local economic conditions.
Lehman Brothers Government/Corporate Bond Index: This index consists of publicly
issued securities from the Government Index and the Corporate Index. The
Government Index includes U.S. Treasuries and Agencies. The Corporate Index
includes U.S. Corporate and Yankee debentures and secured notes from the
Industrial, Utility, Finance and Yankee categories.
Morgan Stanley EAFE (Europe, Australia and Far East) Index: This average
reflects an arithmetic, market value weighted average of performanceof more than
900 securities which are listed on the stock exchanges of the following
countries: Australia, Austria, Belgium, Denmark, Netherlands, New Zealand,
Norway, Singapore/Malaysia, spain, Sweden, Switzerland and the United Kingdom.
Morgan Stanley 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.
NASDAQ Composite Index: A weighted index of 100 stocks traded on the NASDAQ
exchange.
Russell 2000 Index: This index measures the performance of the 2,000 smalles
companies in the Russell 3000 Index. These companies have an average market
capitalization of $526.4 million.
Russell MidCap Growth Index: This index measures the performance of those
Russell Midcap companies with higher price-to-book ratios and higher forecasted
growth values. The stocks are also members of the Russell 1000 Growth Index.
Standard & Poor's 500 Barra Value Index: This is a market
capitalization-weighted index of the stocks in the Standard & Poor's 500 Index
having the highest book to price ratios. The index consists of approximately
half of the S&P 500 on a market capitalization basis.
Standard & Poor's 500 Stock Index: 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 MidCap 500 Index: This index measures the performance of the
mid-size company segment of the U.S. 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
On all but the long end of the Treasury curve constraining total returns,
interest rates moved significantly higher during the past six months. Rates have
moved higher on the continued strength of the U.S. and World economies and
growing signs of inflation. The U.S. economy has not been slowed by the Fed rate
hikes, which should keep the Fed active and continuing to pressure rates.
Investors have been increasing quality and liquidity across the fixed-income
market as well as pulling money out of fixed-income and into cash or equities.
Corporate bonds have performed poorly in this risk averse environment with
investors disregarding strong corporate profits and moving out of the asset
class. The spread between corporate and Treasury yields has widened to extreme
levels for good economic times, with spreads now wider than during the economic
crisis of 1998, representing long-term value.
Corporate bonds have also been under pressure from an increasing number of
actions unfriendly to bondholders, such as stock buybacks and severe bond price
declines on company specific news. These price declines have largely been
confined to BBB-corporates (the main credit rating class of the Principal Bond
Fund). This negative surprise risk has hurt all lower rated corporate bonds as
investors sell to avoid the risk.
The Principal Bond Fund was not immune from large price declines causing
underperformance during the period. Several of these securities were sold during
the period as Fund managers viewed them as permanently impaired, but others are
expected to recover and thus were not sold at depressed prices. Portfolio
activity has been focused on moving up in liquidity and quality. This was
accomplished by adding to the Fund's exposure in safer sectors such as telecom
and selling out of the service sector, which has been particularly hard hit by
negative surprises.
Principal Government Securities Income Fund
Marty Schafer
The Federal Reserve is raising short-term rates, the U.S. Treasury is buying
back long-term treasuries. CPI (a measure of inflation) is rising, core
inflation (excluding food and energy) is not moving much. Productivity is
improving dramatically and unemployment levels are at 30-year lows. Large
inflows into equity funds and large outflows from fixed-income funds have been
seen. FNMA and FHLMC securities are under attack for their implicit
government-guarantees (they are instrumentalities of the U.S. Government).
With such a mix of fixed-income indicators, Fund managers must stay very close
to the benchmark, purchase good value bonds, and be patient. The Fund's
performance was very close to the Index, outperforming by .01%. The Fund's pure
GNMA style compensated for the portfolio's longer duration, producing excess
return. Fund managers did not get caught up in the day-to-day swings in the
market, choosing to be patient in very interesting times.
Fund managers feel any pressure to privatize the FNMA and FHLMC agencies will
not happen in an election year. If they are privatized in the future, existing
securities will be grandfathered. Most importantly, given the high level of FNMA
and FHLMC securities held at banks, thrifts and credit unions, if these agencies
failed, the U.S. financial system would probably fail. The argument that the
agencies are too big to fail should hold.
Fund managers continue to stay close to duration benchmarks and wait patiently
for the opportunity to strategically lengthen duration.
Principal High Yield Fund
Mark Denkinger
In spite of the continual strength of the U.S. economy, the high yield market
continued to be under pressure for the six months ended April 30. The Principal
High Yield Fund underperformed both the Lipper High Current Fund Average and
Lehman Brothers High Yield Composite Bond Index. Performance was negatively
impacted by the underperformance of several holdings. These issuers experienced
financial difficulties around the beginning of the year and the market continued
to punish issuers with poor results.
The high yield market typically thrives on a strong economy. Unfortunately, as
of late, this has not been the case. The Federal Reserve, concerned about
inflation, has increased rates several times and more increases are expected.
This rise in rates, combined with weak technical factors in the high yield
market, has put pressure on the high yield market's performance. Cash inflows
into mutual funds, historically one of the few indicators of high yield demand,
continue to run negative. Default rates continue to drift higher. These
conditions have led high yield managers to favor the larger, more liquid issues.
Market liquidity has decreased while the volatility in prices, primarily driven
by the equity markets, has dramatically increased.
The Fund maintains a BB- average quality, primarily composed of BB and B bonds.
This is a relatively conservative risk position compared to other funds in the
high yield market. Fund managers have maintained an overweighting in BBs until
market conditions show signs of improvement. Going forward the Fund will move
more aggressively into the B market when market conditions warrant the risk. The
Fund is well diversified in numerous industries, with the largest weightings in
telecom, media and energy. With high yield spreads setting recent highs, Fund
managers continue to feel the high yield market looks attractive over the long
term and these short-term fluctuations create a buying opportunity.
Principal Limited Term Bond Fund
Marty Schafer
The Federal Reserve is raising short-term rates; the U.S. Treasury is buying
back long-term treasuries. The Consumer Price Index (a measure of inflation) is
rising; core inflation (excluding food and energy) is not moving much.
Productivity is improving dramatically and unemployment levels are at 30-year
lows. Large inflows into equity funds and large outflows from fixed-income funds
are being seen. FNMA and FHLMC securities are under attack for their implicit
government guarantees (they are instrumentalities of the U.S. Government). With
such a mix of fixed-income indicators, Fund managers must stay very close to the
benchmark, purchase good value bonds and be patient.
However, the Fund's performance suffered as Treasuries, a major component of the
benchmark, encountered panic buying, triggered by the Treasury buyback program.
Fund managers feel there are two reasons this occurred. First, many core
fixed-income managers hold very few Treasuries in their portfolios, opting
instead to invest in higher yielding securities (spread products). Second,
private sector debt has expanded to fund investment and to enhance stock
valuations by using debt to fund stock buybacks. Fixed-income managers, seeing
the Treasury supply shrink and viewing the deterioration of credit by the
increase of debt and leverage, began to sense the dynamic change in potential
performance. Momentum took over as managers tried to rebalance their portfolios.
It is important to understand that there was no permanent impact on performance,
just a current repricing of assets. Since bonds mature at a price of par, absent
a default, this is a timing of performance issue, as spread securities will out
earn their lower yielding Treasury counterparts in the future. For the quarter,
Fund managers did not get caught up in the day-to-day swings in the market,
choosing to be patient in very interesting times. Fund managers feel any
pressure to privatize the FNMA and FHLMC agencies will not happen in an election
year. If they are privatized in the future, existing securities will be
grandfathered. Most importantly, given the high level of FNMA and FHLMC
securities held at banks, thrifts and credit unions, if these agencies failed
then the U.S. financial system would probably fail. The argument that the
agencies are too big to fail should hold.
Fund managers continue to stay close to duration benchmarks and patiently wait
for the return to reasonable market pricing.
Principal Tax-Exempt Bond Fund
Dan Garrett
Principal Tax-Exempt Bond Fund continued to provide competitive tax-exempt
income for shareholders over the past six months. Consistent results were
delivered by the long-term strategy. The disciplined focus of value-priced
investments within the industrial and utility revenue bond sectors added to the
return.
Revenue bonds tend to provide higher income than the average municipal bond in
the broader Lehman Municipal Bond Index or the Fund's Lipper peer group.
Municipal bond values were steadier than other bond sectors during the recent
increase in risk premiums as investors favored tax-exempt bonds 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 its 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 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.
Lehman Brothers High Yield Composite Bond Index: An unmanaged index of all
publicly issued fixed, dollar-denominated, SEC-registered corporate debt rated
Ba1 or lower with at least $100 million outstanding and one year or more to
maturity.
Lehman Brothers Municipal Bond Index: An unmanaged index of investment-grade,
tax-exempt bonds which have been issued within the last five years and at least
one year or more to maturity. This index is classified into four main sectors:
General Obligation, Revenue, Insured and Prerefunded.
Lipper High Current Yield Fund Average: This average consists of funds which aim
at high (relative) current yield from fixed-income securities. No quality or
maturity restrictions. They tend to invest in lower grade debt issues. The
one-year average currently contains 306 funds.
Money Market Funds
Principal Cash Management Fund
Mike Johnson Alice Robertson
On November 16, 1999 the Federal Reserve stepped in and raised its targeted Fed
funds rate* by .25% from 5.25% to 5.50 %. The Fed then held off on any further
rate adjustments at their December meeting due to market uncertainties
associated with the move into the new millenium. Once this milestone quietly
passed, the Fed returned to its quest of trying to keep inflation under control
by implementing two separate .25% rate hikes. The first, which took place on
February 2, established the rate at 5.75%, and the second, on March 21 resulted
in a 6.00% rate. The Fed continued to maintain its inflationary bias going
forward. The industry average days until maturity declined from the low 60s
level down to the low 50s due to Y2K related concerns at the end of the year
followed by market anticipation of the Fed returning to its mission of raising
interest rates. The Principal Cash Management Fund strives to stay aligned with
the industry average. The Fund manager actively monitors the industry averages
in order to keep both yields and average maturities in line. The Fund continues
to invest from a list of high quality investments that is actively monitored by
the Manager's fixed-income analytical staff.
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.
Important Notes for Money Market Funds
Principal Cash Management Fund shares are not guaranteed by the U.S. Government
FDIC. While the Fund strives to maintain a $1.00 per share value, it is possible
to lose money by investing in the Fund.
April 30, 2000
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............ $136,872,957 $224,921,479 $527,121,291
Assets
Investment in securities -- at value (Note 4).. $141,744,958 $290,150,632 $545,758,515
Cash........................................... 10,000 10,001 10,001
Receivables:
Dividends and interest...................... 648,998 88,185 393,523
Investment securities sold.................. -- 1,184,564 2,830,329
Capital Shares sold......................... 89,211 362,238 212,996
Prepaid Expenses............................... -- -- --
Other assets................................... 6,079 5,211 34,036
Total Assets 142,499,246 291,800,831 549,239,400
Liabilities
Accrued expenses............................... 46,716 53,893 193,079
Payables:
Investment securities purchased............. 295,000 1,622,500 380,138
Capital Shares reacquired................... 160,481 572,258 613,194
Variation margin on futures contracts (Note 7). -- -- --
Total Liabilities 502,197 2,248,651 1,186,411
Net Assets Applicable to
Outstanding Shares ............................ $141,997,049 $289,552,180 $548,052,989
Net Assets Consist of:
Capital Stock.................................. $ 100,471 $ 120,152 $ 227,685
Additional paid-in capital..................... 134,423,829 230,260,551 500,909,432
Accumulated undistributed (overdistributed)
net investment income ...................... 144,403 (275,309) 2,417,336
Accumulated undistributed net realized
gain (loss) on investment transactions...... 2,456,345 (5,782,367) 25,861,312
Net unrealized appreciation of investments..... 4,872,001 65,229,153 18,637,224
Total Net Assets $141,997,049 $289,552,180 $548,052,989
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 $96,988,667 $177,150,478 $467,111,839
Shares issued and outstanding........ 6,847,705 7,325,507 19,383,970
Net asset value per share............ $14.16 $24.18 $24.10
Maximum offering price per share(a) . $14.87 $25.39 $25.30
Class B: Net Assets........................... $20,918,726 $56,060,373 $42,329,071
Shares issued and outstanding........ 1,483,614 2,345,583 1,768,397
Net asset value per share(b)......... $14.10 $23.90 $23.94
Class C: Net Assets........................... $407,616 $1,098,177 $599,075
Shares issued and outstanding........ 28,801 45,607 25,003
Net asset value per share(b)......... $14.15 $24.08 $23.96
Class R: Net Assets........................... $23,682,040 $55,243,152 $38,013,004
Shares issued and outstanding........ 1,686,962 2,298,526 1,591,127
Net asset value per share............ $14.04 $24.03 $23.89
Principal Principal Principal
Growth LargeCap Stock MidCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Index Fund, Inc. Fund, Inc.
Investment in securities -- at cost............ $585,093,793 $7,772,369 $378,651,876
Assets
Investment in securities -- at value (Note 4).. $699,201,775 $8,053,284 $452,737,831
Cash........................................... 10,002 10,870 10,680
Receivables:
Dividends and interest...................... 394,438 4,077 202,433
Investment securities sold.................. -- -- 1,153,357
Capital Shares sold......................... 388,311 162,269 195,491
Prepaid Expenses............................... 154,103 -- --
Other assets................................... 19,655 -- 8,479
Total Assets 700,168,284 8,230,500 454,308,271
Liabilities
Accrued expenses............................... -- 27,919 200,266
Payables:
Investment securities purchased............. -- -- --
Capital Shares reacquired................... 840,816 -- 540,539
Variation margin on futures contracts (Note 7). -- 7,100 --
Total Liabilities 840,816 35,019 740,805
Net Assets Applicable to
Outstanding Shares ............................ $699,327,468 $8,195,481 $453,567,466
Net Assets Consist of:
Capital Stock.................................. $ 99,980 $ 7,641 $ 94,885
Additional paid-in capital..................... 376,588,958 7,901,423 272,331,703
Accumulated undistributed (overdistributed)
net investment income ...................... -- 5,945 --
Accumulated undistributed net realized
gain (loss) on investment transactions...... 208,530,548 (20,901) 107,054,923
Net unrealized appreciation of investments..... 114,107,982 301,373 74,085,955
Total Net Assets $699,327,468 $8,195,481 $453,567,466
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 $530,980,500 $4,131,249 $346,560,784
Shares issued and outstanding........ 7,575,822 385,030 7,211,250
Net asset value per share............ $70.09 $10.73 $48.06
Maximum offering price per share(a) . $73.59 $10.89 $50.46
Class B: Net Assets........................... $108,721,413 $1,501,853 $76,943,138
Shares issued and outstanding........ 1,563,348 140,058 1,638,335
Net asset value per share(b)......... $69.54 $10.72 $46.96
Class C: Net Assets........................... $1,894,055 $1,087,952 $538,266
Shares issued and outstanding........ 27,235 101,444 11,317
Net asset value per share(b)......... $69.55 $10.72 $47.56
Class R: Net Assets........................... $57,731,500 $1,474,427 $29,525,278
Shares issued and outstanding........ 831,622 137,542 627,589
Net asset value per share............ $69.42 $10.72 $47.05
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end
sales charge of 4.75% (1.50% with respect to Principal LargeCap Stock
Index Fund, Inc.) of the offering price or 4.99% of the net asset
value (1.52% with respect to Principal LargeCap Stock Index Fund,
Inc.).
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
</FN>
</TABLE>
April 30, 2000
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Principal
Partners Aggressive Partners LargeCap Partners MidCap
GROWTH FUNDS (DOMESTIC) Growth Fund, Inc. Growth Fund, Inc. Growth Fund, Inc.
<S> <C> <C> <C>
Investment in securities -- at cost............ $55,668,409 $5,474,994 $5,783,817
Assets
Investment in securities -- at value (Note 4).. $59,282,673 $5,348,422 $5,582,311
$ 120,662,427
Cash........................................... 1,751,523 388,647 298,292
Receivables:
Dividends and interest...................... 28,533 110 131
Investment securities sold.................. 341,705 -- 303,787
Capital Shares sold......................... 316,381 23,541 32,112
Prepaid Expense................................ 67,436 -- --
Other assets................................... -- -- 885
Total Assets 61,788,251 5,760,720 6,217,518
Liabilities
Accrued expenses............................... -- 20,460 21,356
Payables:
Investment securities purchased............. 436,041 45,950 202,697
Capital Shares reacquired................... 40,009 -- --
Total Liabilities 476,050 66,410 224,053
Net Assets Applicable to
Outstanding Shares ............................ $61,312,201 $5,694,310 $5,993,465
$ 120,152,185
Net Assets Consist of:
Capital Stock.................................. $ 52,462 $ 6,932 $ 7,309
Additional paid-in capital..................... 57,780,183 6,355,745 6,600,807
Accumulated undistributed net investment
income ..................................... -- -- --
Accumulated undistributed net realized
gain (loss) on investment transactions...... (134,708) (541,795) (413,145)
Net unrealized appreciation (depreciation)
of investments.............................. 3,614,264 (126,572) (201,506)
Total Net Assets $61,312,201 $5,694,310 $5,993,465
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.......................... $39,461,685 $2,706,398 $2,964,022
Shares issued and outstanding....... 3,373,072 329,206 361,180
Net asset value per share........... $11.70 $8.22 $8.21
Maximum offering price per share(a) $12.28 $8.63 $8.62
Class B: Net Assets........................... $14,312,033 $1,136,699 $1,314,476
Shares issued and outstanding........ 1,227,449 138,488 160,424
Net asset value per share(b)......... $11.66 $8.21 $8.19
Class C: Net Assets........................... $2,024,436 $871,575 $843,346
Shares issued and outstanding........ 173,603 106,181 102,939
Net asset value per share(b)......... $11.66 $8.21 $8.19
Class R: Net Assets........................... $5,514,407 $979,638 $871,621
Shares issued and outstanding........ 472,068 119,286 106,340
Net asset value per share............ $11.68 $8.21 $8.20
Principal Principal Principal
Real Estate SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Investment in securities -- at cost............ $14,151,750 $106,013,735 $112,867,926
Assets
Investment in securities -- at value (Note 4).. $14,645,320 $103,816,132 $120,662,427
Cash........................................... 126,521 10,000 10,000
Receivables:
Dividends and interest...................... 26,288 37,460 231,709
Investment securities sold.................. 79,859 -- --
Capital Shares sold......................... 8,221 242,503 85,474
Prepaid Expense................................ 14,381 17,732 --
Other assets................................... -- 1,915 2,524
Total Assets 14,900,590 104,125,742 120,992,134
Liabilities
Accrued expenses............................... -- -- 7,329
Payables:
Investment securities purchased............. -- 210,819 590,000
Capital Shares reacquired................... 4,136 143,109 242,620
Total Liabilities 4,136 353,928 839,949
Net Assets Applicable to
Outstanding Shares ............................ $14,896,454 $103,771,814 $120,152,185
Net Assets Consist of:
Capital Stock.................................. $ 17,900 $ 81,146 $ 73,168
Additional paid-in capital..................... 16,871,638 85,293,033 86,874,835
Accumulated undistributed net investment
income ..................................... 48,133 -- 86,060
Accumulated undistributed net realized
gain (loss) on investment transactions...... (2,534,787) 20,595,238 25,323,621
Net unrealized appreciation (depreciation)
of investments.............................. 493,570 (2,197,603) 7,794,501
Total Net Assets $14,896,454 $103,771,814 $120,152,185
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.......................... $7,487,681 $63,403,819 $93,205,989
Shares issued and outstanding....... 898,766 4,936,826 5,673,642
Net asset value per share........... $8.33 $12.84 $16.43
Maximum offering price per share(a) $8.75 $13.48 $17.25
Class B: Net Assets........................... $3,733,160 $22,730,380 $17,738,684
Shares issued and outstanding........ 449,519 1,798,155 1,081,412
Net asset value per share(b)......... $8.30 $12.64 $16.40
Class C: Net Assets........................... $110,055 $884,162 $411,440
Shares issued and outstanding........ 13,207 69,315 25,111
Net asset value per share(b)......... $8.33 $12.76 $16.39
Class R: Net Assets........................... $3,565,558 $16,753,453 $8,796,072
Shares issued and outstanding........ 428,538 1,310,330 536,622
Net asset value per share............ $8.32 $12.79 $16.39
<FN>
(a) Maximum offering price is equal to net asset value plus a front-end
sales charge of 4.75% of the offering price or 4.99% of the net asset
value.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
</FN>
</TABLE>
Six Months Ended April 30, 2000
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Principal
Balanced Blue Chip Capital Value
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................... $ 752,064 $ 2,063,141 $ 6,980,253
Interest.................................... 2,137,617 135,982 598,428
Total Income 2,889,681 2,199,123 7,578,681
Expenses:
Management and investment advisory
fees (Note 3)............................ 434,204 777,611 1,453,743
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 316,200 664,789 787,442
Transfer and administrative services
(Notes 1 and 3)......................... 318,097 650,792 674,115
Registration fees (Note 1).................. 26,893 43,139 49,414
Custodian fees.............................. 2,435 1,143 1,582
Auditing and legal fees..................... 3,550 2,701 3,057
Directors' fees............................. 3,054 3,103 3,143
Other....................................... 19,839 20,586 28,624
Total Gross Expenses 1,124,272 2,163,864 3,001,120
Less: Management and investment
advisory fees waived.................... -- 118,834 --
Total Net Expenses 1,124,272 2,045,030 3,001,120
Net Investment Income (Operating Loss) 1,765,409 154,093 4,577,561
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from:
Investment transactions .................... 2,455,366 (5,782,965) 25,860,143
Futures Contracts (Note 7).................. -- -- --
Change in unrealized appreciation/depreciation of:
Investments................................. (5,968,116) (3,522,273) (95,889,679)
Futures Contracts (Note 7).................. -- -- --
Net Realized and Unrealized
Gain (Loss) on Investments (3,512,750) (9,305,238) (70,029,536)
Net Increase (Decrease) in Net Assets
Resulting from Operations $(1,747,341) $(9,151,145) $(65,451,975)
Principal Principal Principal
Growth LargeCap Stock MidCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Index Fund, Inc.(a) Fund, Inc.
Net Investment Income
Income:
Dividends................................... $ 2,057,238 $ 8,082 $1,046,038
Interest.................................... 321,030 7,086 693,357
Total Income 2,378,268 15,168 1,739,395
Expenses:
Management and investment advisory
fees (Note 3)............................ 1,655,024 3,043 1,265,613
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 1,310,806 3,609 795,832
Transfer and administrative services
(Notes 1 and 3)......................... 882,615 22,630 787,221
Registration fees (Note 1).................. 41,693 6,349 39,336
Custodian fees.............................. 2,371 5,120 3,873
Auditing and legal fees..................... 1,922 1,111 3,202
Directors' fees............................. 3,134 499 3,069
Other....................................... 36,326 73 59,760
Total Gross Expenses 3,933,891 42,434 2,957,906
Less: Management and investment
advisory fees waived.................... -- 33,211 --
Total Net Expenses 3,933,891 9,223 2,957,906
Net Investment Income (Operating Loss) (1,555,623) 5,945 (1,218,511)
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from:
Investment transactions .................... 208,525,694 224 105,981,382
Futures Contracts (Note 7).................. -- (21,125) 1,898,876
Change in unrealized appreciation/depreciation of:
Investments................................. (138,488,154) 280,915 (28,676,961)
Futures Contracts (Note 7).................. -- 20,458 --
Net Realized and Unrealized
Gain (Loss) on Investments 70,037,540 280,472 79,203,297
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 68,481,917 $286,417 $ 77,984,786
<FN>
(a) Period from February 24, 2000 (date operations commenced) through
April 30, 2000.
See accompanying notes.
</FN>
</TABLE>
Six Months Ended April 30, 2000
STATEMENTS OF OPERATIONS (Continued)
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Principal
Partners Aggressive Partners LargeCap Partners MidCap
GROWTH FUNDS (DOMESTIC) Growth Fund, Inc. Growth Fund, Inc.(a) Growth Fund, Inc.(a)
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends................................... $ 88,456 $ 914 $ 471
Interest.................................... 38,896 2,240 2,144
Total Income 127,352 3,154 2,615
Expenses:
Management and investment advisory
fees (Note 3)............................ 117,006 6,654 6,823
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 75,350 3,869 4,001
Transfer and administrative services
(Notes 1 and 3)......................... 92,285 17,510 17,510
Registration fees (Note 1).................. 10,580 6,349 6,349
Custodian fees.............................. 4,915 2,048 2,048
Auditing and legal fees..................... 1,851 1,111 1,111
Directors' fees............................. 3,275 499 499
Other....................................... 2,002 61 61
Total Gross Expenses 307,264 38,101 38,402
Less: Management and investment
advisory fees waived.................... 15,281 21,542 21,243
Total Net Expenses 291,983 16,559 17,159
Net Investment Income (Operating Loss) (164,631) (13,405) (14,544)
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions (134,708) (541,795) (413,145)
Net realized gains from investment companies... -- -- --
Change in unrealized appreciation/depreciation of
investments................................. 3,614,264 (126,572) (201,506)
Net Realized and Unrealized
Gain (Loss) on Investments 3,479,556 (668,367) (614,651)
Net Increase (Decrease) in Net Assets
Resulting from Operations $3,314,925 $(681,772) $(629,195)
Principal Principal Principal
Real Estate SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
Dividends................................... $ 403,301 $ 394,864 $1,582,632
Interest.................................... 19,025 144,882 124,164
Total Income 422,326 539,746 1,706,796
Expenses:
Management and investment advisory
fees (Note 3)............................ 59,277 383,667 358,206
Distribution and shareholder servicing
fees (Notes 1 and 3)..................... 32,693 213,222 229,419
Transfer and administrative services
(Notes 1 and 3)......................... 43,165 192,741 195,808
Registration fees (Note 1).................. 17,886 25,620 18,759
Custodian fees.............................. 1,186 3,630 1,103
Auditing and legal fees..................... 1,186 2,984 2,879
Directors' fees............................. 3,208 3,231 3,103
Other....................................... 2,756 8,921 9,183
Total Gross Expenses 161,357 834,016 818,460
Less: Management and investment
advisory fees waived.................... 16,831 15,219 --
Total Net Expenses 144,526 818,797 818,460
Net Investment Income (Operating Loss) 277,800 (279,051) 888,336
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) from investment transactions (1,191,065) 20,593,868 25,322,712
Net realized gains from investment companies... 32,541 -- --
Change in unrealized appreciation/depreciation of
investments................................. 2,215,670 (3,189,256) (27,123,423)
Net Realized and Unrealized
Gain (Loss) on Investments 1,057,146 17,404,612 (1,800,711)
Net Increase (Decrease) in Net Assets
Resulting from Operations $1,334,946 $17,125,561 $(912,375)
<FN>
(a) Period from February 24, 2000 (date operations commenced) through
April 30, 2000.
See accompanying notes.
</FN>
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Principal
Balanced Blue Chip Capital Value
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Six Months Periods Six Months Periods Six Months Periods
Ended Ended Ended Ended Ended Ended
April 30, October 31, April 30, October 31, April 30, October 31,
2000 1999(b) 2000 1999(b) 2000 1999(b)
Operations
<S> <C> <C> <C> <C> <C> <C>
Net investment income(operating loss) $ 1,765,409 $ 3,909,315 $ 154,093 $ 977,006 $ 4,577,561 $11,270,813
Net realized gain (loss) from investment
transactions 2,455,366 6,771,675 (5,782,965) 3,421,073 25,860,143 57,024,202
Change in unrealized appreciation/depreciation of
investments................................ (5,968,116) (4,100,582) (3,522,273) 31,100,972 (95,889,679) (49,482,847)
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,747,341) 6,580,408 (9,151,145) 35,499,051 (65,451,975) 18,812,168
Dividends and Distributions to Shareholders From net investment income:
Class A.................................... (1,411,075) (3,153,964) (407,993) (874,272) (5,196,875) (9,877,196)
Class B ................................... (213,543) (454,611) (16,065) (17,657) (280,373) (458,266)
Class C.................................... (4,535) (959) -- -- (1,767) --
Class R.................................... (252,568) (501,400) (43,640) (49,100) (292,054) (391,502)
From net realized gain on investments:
Class A ................................... (4,720,700) (3,108,449) (2,127,452) (24,683) (48,608,727) (35,544,917)
Class B ................................... (998,139) (579,595) (661,890) (8,209) (4,488,526) (2,882,612)
Class C ................................... (11,070) -- (6,749) -- (28,770) --
Class R.................................... (1,038,106) (605,230) (605,970) (6,612) (3,896,432) (2,464,152)
Total Dividends and Distributions (8,649,736) (8,404,208) (3,869,759) (980,533) (62,793,524) (51,618,645)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 7,295,929 23,834,020 31,254,609 62,427,545 23,780,853 71,171,390
Class B ................................... 2,773,545 8,208,037 11,052,203 23,559,014 5,913,226 18,742,374
Class C.................................... 585,492 248,890 890,293 326,943 462,384 217,569
Class R.................................... 4,608,762 9,709,321 15,576,290 22,787,946 7,643,919 17,677,992
Shares issued in reinvestment of dividends and distributions:
Class A.................................... 5,996,337 6,090,364 2,462,499 862,557 52,596,432 44,385,520
Class B ................................... 1,192,278 1,015,205 672,065 26,997 4,683,328 3,292,087
Class C.................................... 10,783 487 5,486 -- 22,209 --
Class R.................................... 1,288,221 1,105,036 648,863 97,845 4,184,928 2,860,407
Shares redeemed:
Class A ................................... (21,385,467) (20,782,453) (32,831,793)(28,208,067) (73,353,876) (78,893,780)
Class B ................................... (5,097,558) (4,290,594) (9,563,262) (7,490,289) (11,361,050) (11,104,390)
Class C ................................... (393,615) (500) (93,531) (500) (33,668) (525)
Class R ................................... (4,593,983) (5,978,278) (9,208,593)(11,035,085) (8,966,845) (12,307,726)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions (7,719,276) 19,159,535 10,865,129 63,354,906 5,571,840 56,040,918
Total Increase (Decrease) (18,116,353) 17,335,735 (2,155,775) 97,873,424 (122,673,659) 23,234,441
Net Assets
Beginning of period........................... 160,113,402 142,777,667 291,707,955 193,834,531 670,726,648 647,492,207
End of period [including undistributed (overdistributed)
net investment income as set forth below].. $141,997,049 $160,113,402 $289,552,180$291,707,955 $548,052,989 $670,726,648
Undistributed (Overdistributed)
Net Investment Income..................... $ 144,403 $ 260,715 $ (275,309) $ 38,296 $2,417,336 $ 3,610,844
Principal Principal Principal
Growth LargeCap Stock MidCap
GROWTH FUNDS (DOMESTIC) Fund, Inc. Index Fund, Inc.(a) Fund, Inc.
Six Months Periods Period Six Months Periods
Ended Ended Ended Ended Ended
April 30, October 31, April 30, April 30, October 31,
2000 1999(b) 2000 2000 1999(b)
Operations
Net investment income(operating loss) $ (1,555,623) $ 1,229,342 $ 5,945 $ (1,218,511) $ (1,219,956)
Net realized gain (loss) from investment
transactions 208,525,694 28,017,681 (20,901) 107,880,258 19,056,817
Change in unrealized appreciation/depreciation of
investments................................ (138,488,154) 57,955,516 301,373 (28,676,961) 6,184,268
Net Increase (Decrease) in Net Assets
Resulting from Operations 68,481,917 87,202,539 286,417 77,984,786 24,021,129
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... -- (2,147,442) -- -- --
Class B ................................... -- (31,614) -- -- --
Class C.................................... -- -- -- -- --
Class R.................................... -- -- -- -- --
From net realized gain on investments:
Class A ................................... (18,109,107) -- -- (14,934,238) --
Class B ................................... (3,570,951) -- -- (3,314,853) --
Class C ................................... (1,789,897) -- -- (11,626) --
Class R.................................... (28,596) -- -- (1,223,767) --
Total Dividends and Distributions (23,498,551) (2,179,056) -- (19,484,484) --
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 48,341,112 107,477,838 4,058,821 28,099,182 56,319,162
Class B ................................... 15,971,740 35,315,526 1,438,109 7,863,769 17,773,544
Class C.................................... 1,576,513 453,795 1,015,323 308,772 231,675
Class R.................................... 13,283,528 22,266,474 1,406,149 4,698,109 8,646,117
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... 17,638,120 2,075,575 -- 4,634,844 130
Class B ................................... 3,529,938 32,011 -- 3,279,489 378
Class C.................................... 25,061 -- -- 7,192 --
Class R.................................... 1,786,489 -- -- 1,221,314 --
Shares redeemed:
Class A ................................... (63,085,408) (80,471,364) -- (55,455,164) (94,562,580)
Class B ................................... (13,439,423) (15,502,723) (8,938) (12,477,286) (21,056,757)
Class C ................................... (236,153) (1,820) -- (26,015) --
Class R ................................... (7,925,545) (11,110,814) (400) (4,809,019) (8,490,660)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 17,465,972 60,534,498 7,909,064 (12,654,813) (41,138,991)
Total Increase (Decrease) 62,449,338 145,557,981 8,195,481 45,845,489 (17,117,862)
Net Assets
Beginning of period........................... 636,878,130 491,320,149 -- 407,721,977 424,839,839
End of period [including undistributed (overdistributed
net investment income as set forth below].. $699,327,468 $636,878,130 $8,195,481 $453,567,466 $407,721,977
Undistributed (Overdistributed)
Net Investment Income..................... $-- $ -- $ 5,945 $-- $ --
<FN>
(a) Period from February 24, 2000 (date operations commenced) through
April 30, 2000.
(b) Class C share information is provided for the period from June 30,
1999 (inception date of Class) through October 31, 1999.
See accompanying notes.
</FN>
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
<TABLE>
<CAPTION>
Principal Principal Principal
Partners Aggressive Partners LargeCap Partners MidCap
GROWTH FUNDS (DOMESTIC) Growth Fund, Inc.(a) Growth Fund, Inc.(b) Growth Fund, Inc.(b)
Period Period Period
Ended Ended Ended
April 30, April 30, April 30,
2000 2000 2000
Operations
<S> <C> <C> <C>
Net investment income(operating loss) $ (164,631) $ (13,405) $ (14,544)
Net realized gain (loss) from investment transactions (134,708) (541,795) (413,145)
Change in unrealized appreciation/depreciation of
investments................................ 3,614,264 (126,572) (201,506)
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,314,925 (681,772) (629,195)
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... -- -- --
Class B ................................... -- -- --
Class C.................................... -- -- --
Class R.................................... -- -- --
From net realized gain on investments:
Class A ................................... -- -- --
Class B ................................... -- -- --
Class C.................................... -- -- --
Class R.................................... -- -- --
Total Dividends and Distributions -- -- --
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 39,795,593 2,851,389 3,071,158
Class B ................................... 14,077,327 1,321,826 1,481,466
Class C.................................... 1,875,784 1,053,500 1,022,069
Class R.................................... 5,920,311 1,154,548 1,048,148
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... -- -- --
Class B ................................... -- -- --
Class C.................................... -- -- --
Class R.................................... -- -- --
Shares redeemed:
Class A ................................... (2,279,095) (1,181) (181)
Class B ................................... (603,074) (4,000) --
Class C ................................... (54,785) -- --
Class R ................................... (734,785) -- --
Net Increase in Net Assets from
Capital Share Transactions 57,997,276 6,376,082 6,622,660
Total Increase (Decrease) 61,312,201 5,694,310 5,993,465
Net Assets
Beginning of period........................... -- -- --
End of period (including undistributed net investment
income as set forth below)................. $61,312,201 $5,694,310 $5,993,465
Undistributed Net Investment Income........... $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Principal
Real Estate SmallCap Utilities
GROWTH FUNDS (DOMESTIC) Fund, Inc. Fund, Inc. Fund, Inc.
Six Months Periods Six Months Periods Six Months Periods
Ended Ended Ended Ended Ended Ended
April 30, October 31, April 30, October 31, April 30, October 31,
2000 1999(c) 2000 1999(c) 2000 1999(c)
Operations
<S> <C> <C> <C> <C> <C> <C>
Net investment income(operating loss) $ 277,800 $ 442,943 $ (279,051) $ (611,523) $ 888,336 $2,088,421
Net realized gain (loss) from investment transactions (1,158,524) (763,156) 20,593,868 9,424,406 25,322,712 8,056,360
Change in unrealized appreciation/depreciation of
investments................................ 2,215,670 (326,793) (3,189,256) 4,379,531 (27,123,423) 4,964,248
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,334,946 (647,006) 17,125,561 13,192,414 (912,375) 15,109,029
Dividends and Distributions to Shareholders
From net investment income:
Class A.................................... (141,059) (229,521) -- -- (856,007) (1,891,969)
Class B ................................... (61,753) (99,626) -- -- (94,471) (191,707)
Class C.................................... (1,716) (659) -- -- (1,278) (465)
Class R.................................... (62,886) (111,209) -- -- (48,597) (80,547)
From net realized gain on investments:
Class A ................................... -- -- (4,730,629) -- (6,329,850) (1,242,661)
Class B ................................... -- -- (1,623,318) -- (1,171,902) (171,044)
Class C.................................... -- -- (36,318) -- (15,990) --
Class R.................................... -- -- (1,194,462) -- (537,438) (61,770)
Total Dividends and Distributions (267,414) (441,015) (7,584,727) -- (9,055,533) (3,640,163)
Capital Share Transactions (Note 5)
Shares sold:
Class A.................................... 1,251,511 2,032,088 23,793,212 20,126,957 7,421,743 22,591,597
Class B ................................... 289,846 585,157 7,672,328 6,236,906 2,995,081 8,701,893
Class C.................................... 3,334 109,653 680,392 189,192 223,653 224,590
Class R.................................... 333,929 587,916 5,878,349 5,317,338 2,468,265 5,229,592
Shares issued in reinvestment of dividends
and distributions:
Class A.................................... 137,595 224,609 4,187,241 -- 6,763,552 2,896,775
Class B ................................... 61,175 99,447 1,237,750 -- 1,201,744 336,342
Class C.................................... 941 4 25,066 -- 10,098 --
Class R.................................... 62,886 111,264 816,080 -- 584,283 142,351
Shares redeemed:
Class A ................................... (901,398) (761,086) (12,347,785) (5,249,038) (12,981,600) (18,619,898)
Class B ................................... (234,577) (171,784) (2,224,471) (1,561,009) (3,297,740) (3,605,259)
Class C ................................... (1,041) -- (34,522) (2,315) (30,591) --
Class R ................................... (184,587) (257,676) (1,574,114) (1,905,434) (1,683,954) (1,850,085)
Net Increase in Net Assets from
Capital Share Transactions 819,614 2,559,592 28,109,526 23,152,597 3,674,534 16,047,898
Total Increase (Decrease) 1,887,146 1,471,571 37,650,360 36,345,011 (6,293,374) 27,516,764
Net Assets
Beginning of period........................... 13,009,308 11,537,737 66,121,454 29,776,443 $126,445,559 98,928,795
End of period (including undistributed net investment
income as set forth below)................. $14,896,454 $13,009,308 $103,771,814 $66,121,454 $120,152,185$126,445,559
Undistributed Net Investment Income........... $ 48,133 $ 37,747 $ -- $ -- $ 86,060 $ 198,077
</TABLE>
(a) Period from October 28, 1999 (date operations commenced) through April
30, 2000.
(b) Period from February 24, 2000 (date operations commenced) through
April 30, 2000.
(c) Class C share information is provided for the period from June 30,
1999 (inception date of Class) through October 31, 1999.
See accompanying notes.
April 30, 2000
NOTES TO FINANCIAL STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Balanced Fund, Inc. Principal LargeCap Stock Index Fund, Inc. Principal Partners MidCap Growth Fund, Inc.
Principal Blue Chip Fund, Inc. Principal MidCap Fund, Inc. Principal Real Estate Fund, Inc.
Principal Capital Value Fund, Inc. Principal Partners Aggressive Growth Fund, Inc. Principal SmallCap Fund, Inc.
Principal Growth Fund, Inc. Principal Partners LargeCap Growth Fund, Inc. Principal Utilities Fund, Inc.
</TABLE>
Note 1 -- Significant Accounting Policies
Principal Balanced Fund, Inc., Principal Blue Chip Fund, Inc., Principal Capital
Value Fund, Inc., Principal Growth Fund, Inc., Principal LargeCap Stock Index
Fund, Inc., Principal MidCap Fund, Inc., Principal Partners Aggressive Growth
Fund, Inc., Principal Partners LargeCap Growth Fund, Inc., Principal Partners
MidCap Growth Fund, Inc., Principal Real Estate Fund, Inc., Principal SmallCap
Fund, Inc. and Principal Utilities Fund, Inc. (the "Domestic Growth Funds") are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies and operate in the mutual fund industry.
On February 24, 2000, the initial purchase of 100,000 shares of each Class A, B,
C and R of the Principal LargeCap Stock Index Fund, Inc., Principal Partners
LargeCap Growth Fund, Inc., and Principal Partners MidCap Growth Fund, Inc. was
made by Principal Life Insurance Company. Effective March 1, 2000, Principal
LargeCap Stock Index Fund, Inc., Principal Partners LargeCap Growth Fund, Inc.,
and Principal Partners MidCap Growth Fund, Inc. began offering Class A, B and C
shares to the public and Class R shares to eligible purchasers.
On October 28, 1999 the initial purchase of 100,000 shares of each Class A, B, C
and R of Principal Partners Aggressive Growth Fund, Inc. was made by Principal
Life Insurance Company. Effective November 1, 1999, Class A, B and C shares were
offered to the public and Class R shares were offered to eligible purchasers.
On June 30, 1999, the initial purchase of Class C shares of the Domestic Growth
Funds were made by Principal Life Insurance Company (See Note 3). Effective June
30, 1999, the Domestic Growth Funds began offering Class C shares to the public.
Class A shares generally are sold with an initial sales charge based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") upon redemption. Class B shares are sold without an
initial sales charge, but are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class C shares are sold without an initial
sales charge, but are subject to a CDSC on certain redemptions made within the
first twelve months of purchase. Class R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear higher ongoing distribution fees than Class A shares. Class
B shares automatically convert into Class A shares, based on relative net asset
value (without a sales charge) seven years after purchase. Class C shares do not
convert into Class A shares. Class R shares automatically convert into Class A
shares, based on relative net asset value (without a sales charge) four years
after purchase. All classes of shares for each fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by each of the Domestic Growth
Funds' respective Board of Directors. In addition, the Board of Directors of
each fund declares separate dividends on each class of shares.
The Domestic Growth Funds allocate daily all income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses to each
class of shares based upon the relative proportion of the value of shares
outstanding of each class. Expenses specifically attributable to a particular
class are charged directly to such class. Class-specific expenses charged to
each class during the period ended April 30, 2000, which are included in the
corresponding captions of the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services
Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Balanced Fund, Inc. $128,717 $101,200 $2,315 $ 83,968 $ 69,129 $21,214 $ 91 $18,527
Principal Blue Chip Fund, Inc. 222,029 249,351 3,908 189,501 115,846 52,395 220 38,277
Principal Capital Value Fund, Inc. 488,414 208,308 2,121 88,599 183,596 48,808 142 36,329
Principal Growth Fund, Inc. 611,576 506,056 6,836 186,338 205,959 63,015 291 31,649
Principal LargeCap Stock Index Fund, Inc. 447 995 926 1,241 704 205 102 102
Principal MidCap Fund, Inc. 447,732 253,248 1,810 93,042 243,166 71,015 117 32,301
Principal Partners Aggressive Growth Fund, Inc. 24,059 36,215 7,447 7,629 4,159 1,763 78 445
Principal Partners LargeCap Growth Fund, Inc. 575 791 1,669 834 704 205 102 102
Principal Partners MidCap Growth Fund , Inc. 615 826 1,699 861 704 205 102 102
Principal Real Estate Fund, Inc. 8,163 12,935 499 11,096 2,631 905 32 365
Principal SmallCap Fund, Inc. 70,751 78,895 2,726 60,850 33,350 11,868 323 5,819
Principal Utilities Fund, Inc. 118,954 78,555 1,414 30,496 47,543 12,875 109 5,815
</TABLE>
<TABLE>
<CAPTION>
Registration Fees
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Balanced Fund, Inc. $ 5,807 $4,676 $ 909 $ 3,551
Principal Blue Chip Fund, Inc. 10,067 6,082 737 5,943
Principal Capital Value Fund, Inc. 15,221 5,116 1,179 5,925
Principal Growth Fund, Inc. 11,688 5,204 1,006 5,620
Principal LargeCap Stock Index Fund, Inc. 2,560 1,536 205 1,024
Principal MidCap Fund, Inc. 11,569 5,653 1,448 5,355
Principal Partners Aggressive Growth Fund, Inc. 3,929 2,364 53 2,168
Principal Partners LargeCap Growth Fund, Inc. 2,560 1,536 205 1,024
Principal Partners MidCap Growth Fund, Inc. 2,560 1,536 205 1,024
Principal Real Estate Fund, Inc. 3,765 4,887 1,188 2,443
Principal SmallCap Fund, Inc. 7,457 4,004 1,230 3,190
Principal Utilities Fund, Inc. 4,970 3,568 823 3,032
</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 (except Principal Partners Aggressive Growth Fund,
Inc., Principal Partners LargeCap Growth Fund, Inc. and Principal Partners
MidCap Growth Fund, Inc.) 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, 1999
aggregated $1,219,956 and $611,523, respectively. Other reclassifications made
for the period ended October 31, 1999 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 rates used in this calculation for the Domestic Growth Funds are as
follows:
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
<S> <C> <C> <C> <C> <C>
Principal Balanced Fund, Inc. 0.60% 0.55% 0.50% 0.45% 0.40%
Principal Blue Chip Fund, Inc.* 0.50 0.45 0.40 0.35 0.30
Principal Capital Value Fund, Inc.* 0.50 0.45 0.40 0.35 0.30
Principal Growth Fund, Inc.* 0.50 0.45 0.40 0.35 0.30
Principal MidCap Fund, Inc. 0.65 0.60 0.55 0.50 0.45
Principal Real Estate Fund, Inc. 0.90 0.85 0.80 0.75 0.70
Principal SmallCap Fund, Inc. 0.85 0.80 0.75 0.70 0.65
Principal Utilities Fund, Inc. 0.60 0.55 0.50 0.45 0.40
<FN>
* At the meetings of the shareholders of the Principal Blue Chip Fund,
Inc. and Principal Capital Value Fund, Inc. held on November 2, 1999,
and the meeting of shareholders of the Principal Growth Fund, Inc.
held on November 9, 1999, the management fee schedules for each of
these Funds were modified. The modifications were effective as of
January 1, 2000. The new management fee schedule for each of these
Funds is as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$250 $250 $250 $250 $1,000
<S> <C> <C> <C> <C> <C>
0.60% 0.55% 0.50% 0.45% 0.40%
</TABLE>
A management fee schedule for Principal Partners Agressive Growth Fund, Inc., is
summarized in the following schedule.
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$250 $250 $250 $250 $1,000
<S> <C> <C> <C> <C> <C>
Principal Partners Aggressive Growth Fund, Inc. 0.75% 0.70% 0.65% 0.60% 0.55%
</TABLE>
A management fee schedule for Principal LargeCap Stock Index Fund, Inc.,
Principal Partners LargeCap Growth Fund, Inc. and Principal Partners MidCap
Growth Fund, Inc. is summarized in the following schedule.
Overall Fee
Principal LargeCap Stock Index Fund, Inc. 0.35%
Principal Partners LargeCap Growth Fund, Inc. 0.90
Principal Partners MidCap Growth Fund, Inc. 0.90
The Domestic Growth Funds also reimburse the Manager for transfer and
administrative services, including the cost of accounting, data processing,
supplies and other services rendered.
The Manager voluntarily waives a portion of its fee for certain Funds. The
waivers are in amounts that maintain total operating expenses within certain
limits. The limits are expressed as a percentage of average daily net assets
attributable to each class on an annualized basis during the reporting period.
The amounts waived and the operating expense limits, which were maintained at or
below that shown, are as follows:
<TABLE>
<CAPTION>
Amount Waived for the Expense
Periods Ended April 30, 2000 Limit
<S> <C> <C>
Principal Blue Chip Fund, Inc.
Class A $76,554 1.20%
Class B 17,507 1.95
Class C 23,975 1.95
Class R 798 1.70
Principal LargeCap Stock Index Fund, Inc.
Class A 11,743 0.80
Class B 7,994 1.15
Class C 7,213 1.15
Class R 6,261 1.30
Principal Partners Aggressive Growth Fund, Inc.
Class A 11,936 1.60
Class B 2,781 2.35
Class C 494 2.35
Class R 70 2.10
Principal Partners LargeCap Growth Fund, Inc.
Class A 8,284 1.80
Class B 4,716 2.55
Class C 4,468 2.55
Class R 4,074 2.30
Principal Partners MidCap Growth Fund, Inc.
Class A 8,400 1.80
Class B 4,616 2.55
Class C 4,312 2.55
Class R 3,915 2.30
Principal Real Estate Fund, Inc.
Class A 9,566 1.90
Class B 2,354 2.65
Class C 3,559 2.65
Class R 1,352 2.40
Principal SmallCap Fund, Inc.
Class A 2,978 1.80
Class B 365 2.55
Class C 11,127 2.55
Class R 749 2.30
</TABLE>
The manager intends to continue the described waiver for the Funds through the
period ending October 31, 2000.
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00%, and Class C shares at 1.00% (.25%, 1.25% and .50% for
Principal LargeCap Stock Index Fund, Inc. share classes, respectively), of the
lesser of the current market value or the cost of shares being redeemed. Princor
Financial Services Corporation also retains sales charges on sales of Class A
shares based on declining rates which begin at 4.75% (1.50% for Principal
LargeCap Stock Index Fund, Inc.) of the offering price. The aggregate amount of
these charges retained, by fund, for the periods ended April 30, 2000, were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal Balanced Fund, Inc. $196,368 $ 62,062 $3,896
Principal Blue Chip Fund, Inc. 592,948 154,486 422
Principal Capital Value Fund, Inc. 456,527 139,446 250
Principal Growth Fund, Inc. 971,424 187,123 471
Principal LargeCap Stock Index Fund, Inc. 5,955 -- --
Principal MidCap Fund, Inc. 577,150 169,350 145
Principal Partners Aggressive Growth Fund, Inc. 365,392 7,541 189
Principal Partners LargeCap Growth Fund, Inc. 25,149 -- --
Principal Partners MidCap Growth Fund, Inc. 25,722 -- --
Principal Real Estate Fund, Inc. 20,859 4,882 --
Principal SmallCap Fund, Inc. 303,745 25,297 255
Principal Utilities Fund, Inc. 151,320 43,359 269
</TABLE>
No brokerage commissions were paid by the Domestic Growth Funds to Princor
Financial Services Corporation during the period. Brokerage commissions were
paid to other affiliates by the following funds:
<TABLE>
<CAPTION>
Periods Ended Year Ended
April 30, 2000 October 31, 1999
<S> <C> <C>
Principal Balanced Fund, Inc. $ 3,655 $ 10,866
Principal Blue Chip Fund, Inc. 28,855 30,170
Principal Capital Value Fund, Inc. 65,698 109,485
Principal Growth Fund, Inc. 49,856 46,158
Principal LargeCap Stock Index Fund, Inc. -- N/A
Principal MidCap Fund, Inc. 36,405 53,939
Principal Partners Aggressive Growth Fund, Inc. 2,670 N/A
Principal Partners LargeCap Growth Fund, Inc. 50 N/A
Principal Partners MidCap Growth Fund, Inc. 479 N/A
Principal Real Estate Fund, Inc. 1,619 10,580
Principal SmallCap Fund, Inc. 2,680 6,230
Principal Utilities Fund, Inc. 13,670 7,435
</TABLE>
The Domestic Growth Funds bear distribution and shareholder servicing fees with
respect to each class computed at an annual rate of the average daily net assets
attributable to each class of each fund. The annual rate will not exceed the
following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Distribution and Shareholder Servicing fees
(except LargeCap Stock Index Fund) 0.25% 1.00% 1.00% 0.75%
Distribution and Shareholder Servicing fees
LargeCap Stock Index Fund 0.15% 0.50% 0.50% 0.65%
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees is subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class A, Class B and Class
R shares, fees that are unused by the principal underwriter at the end of the
fiscal year are returned to the respective Domestic Growth Funds which generated
the excess.
At April 30, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company and benefit plans sponsored on behalf of Principal Life
Insurance Company owned shares of the Domestic Growth Funds as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Balanced Fund, Inc. -- -- 5,460 --
Principal Blue Chip Fund, Inc. -- -- 3,922 --
Principal Capital Value Fund, Inc. 5,908,486 -- 3,144 --
Principal Growth Fund, Inc. -- -- 1,473 --
Principal LargeCap Stock Index Fund, Inc. 100,000 100,000 100,000 100,000
Principal MidCap Fund, Inc. -- -- 2,184 --
Principal Partners Aggressive Growth Fund, Inc. 100,000 100,000 100,000 100,000
Principal Partners LargeCap Growth Fund, Inc. 100,000 100,000 100,000 100,000
Principal Partners MidCap Growth Fund, Inc. 100,000 100,000 100,000 100,000
Principal Real Estate Fund, Inc. 422,404 322,240 11,642 324,785
Principal SmallCap Fund, Inc. 27,548 300,319 8,977 300,319
Principal Utilities Fund, Inc. -- -- 5,869 --
</TABLE>
Note 4 -- Investment Transactions
For the periods ended April 30, 2000, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Domestic Growth Funds were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Principal Balanced Fund, Inc. $ 63,031,615 $ 74,376,885
Principal Blue Chip Fund, Inc. 139,234,648 128,533,954
Principal Capital Value Fund, Inc. 350,707,283 398,836,413
Principal Growth Fund, Inc. 715,778,489 722,081,968
Principal LargeCap Stock Index Fund, Inc. 6,228,136 22,678
Principal MidCap Fund, Inc. 381,787,080 414,999,929
Principal Partners Aggressive Growth Fund, Inc. 67,604,937 11,801,820
Principal Partners LargeCap Growth Fund, Inc. 8,211,465 2,194,676
Principal Partners MidCap Growth Fund, Inc. 8,930,451 2,733,489
Principal Real Estate Fund, Inc. 10,428,661 9,954,999
Principal SmallCap Fund, Inc. 80,293,032 59,476,230
Principal Utilities Fund, Inc. 82,061,173 88,693,777
</TABLE>
At April 30, 2000, net unrealized appreciation (depreciation) of investments by
the Domestic Growth Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Gross Unrealized (Depreciation)
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Balanced Fund, Inc. $ 14,596,838 $ (9,724,837) $ 4,872,001
Principal Blue Chip Fund, Inc. 72,035,761 (6,806,608) 65,229,153
Principal Capital Value Fund, Inc. 58,202,926 (39,565,702) 18,637,224
Principal Growth Fund, Inc. 140,251,406 (26,143,424) 114,107,982
Principal LargeCap Stock Index Fund, Inc. 520,586 (219,213) 301,373
Principal MidCap Fund, Inc. 112,809,789 (38,723,834) 74,085,955
Principal Partners Aggressive Growth Fund, Inc. 6,768,533 (3,154,269) 3,614,264
Principal Partners LargeCap Growth Fund, Inc. 196,171 (322,743) (126,572)
Principal Partners MidCap Growth Fund, Inc. 483,730 (685,236) (201,506)
Principal Real Estate Fund, Inc. 936,735 (443,165) 493,570
Principal SmallCap Fund, Inc. 13,632,037 (15,829,640) (2,197,603)
Principal Utilities Fund, Inc. 17,078,972 (9,284,471) 7,794,501
</TABLE>
Note 4 -- Investment Transactions
The Domestic Growth Funds held the following securities which were purchased in
private placement transactions and may require registration, or an exemption
therefrom, in order to effect their sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of April 30, Percentage of
Security Description Acquisition Cost 2000 Net Assets
<S> <C> <C> <C> <C>
Principal Utilities Fund, Inc. Liberty Media Group
Convertible Bond 11/18/99 $2,412,960 $2,753,520 2.29%
</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, 2000:
Shares sold:
Class A ......................................... 508,248 1,285,470 943,284 713,153
Class B ......................................... 193,766 458,685 239,135 237,244
Class C ......................................... 40,584 36,159 18,360 23,347
Class R ......................................... 323,067 638,438 300,115 197,119
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 414,368 97,794 2,028,077 270,565
Class B ........................................... 82,765 26,905 181,581 54,424
Class C ........................................ 746 218 860 386
Class R ......................................... 89,825 25,863 162,652 27,603
Shares redeemed:
Class A ......................................... (1,500,020) (1,354,332) (2,971,921) (928,378)
Class B............................................ (357,881) (399,805) (459,932) (199,502)
Class C ......................................... (28,549) (3,932) (1,393) (3,425)
Class R ......................................... (324,718) (382,753) (367,313) (117,689)
Net Increase (Decrease) (557,799) 428,710 73,505 274,847
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 1,543,354 2,598,298 2,320,532 1,698,273
Class B ......................................... 534,435 983,832 614,916 556,338
Class C ......................................... 16,020 13,182 7,194 6,956
Class R ......................................... 635,088 955,361 583,231 353,782
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 397,074 36,318 1,458,213 33,237
Class B ........................................... 66,344 1,213 108,859 536
Class C ......................................... 33 -- -- --
Class R ......................................... 72,639 4,124 94,789 --
Shares redeemed:
Class A ......................................... (1,348,209) (1,175,462) (2,583,273) (1,270,168)
Class B............................................ (279,766) (313,216) (364,952) (243,384)
Class C ......................................... (33) (20) (18) (29)
Class R ......................................... (391,795) (462,525) (405,657) (177,102)
Net Increase 1,245,184 2,641,105 1,833,834 958,439
</TABLE>
<TABLE>
<CAPTION>
Principal Principal
Principal Principal Partners Partners
LargeCap Stock MidCap Aggressive Growth LargeCap Growth
Index Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C>
Periods Ended April 30, 2000:
Shares sold:
Class A ......................................... 385,030 586,634 3,571,485 329,359
Class B ......................................... 140,908 167,052 1,280,266 138,990
Class C ......................................... 101,444 6,405 178,522 106,181
Class R ......................................... 137,581 100,886 536,441 119,286
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 335,276 -- --
Class B ........................................... -- 76,731 -- --
Class C ......................................... -- 166 -- --
Class R ......................................... -- 28,509 -- --
Shares redeemed:
Class A ......................................... -- (1,165,667) (198,413) (153)
Class B ......................................... (850) (267,804) (52,817) (502)
Class C ......................................... -- (543) (4,919) --
Class R ......................................... (39) (103,249) (64,373) --
Net Increase(Decrease) 764,074 (235,604) 5,246,192 (693,161)
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... N/A 1,325,967 N/A N/A
Class B ......................................... N/A 424,898 N/A N/A
Class C ......................................... N/A 5,289 N/A N/A
Class R ......................................... N/A 206,999 N/A N/A
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... N/A 3 N/A N/A
Class B ........................................... N/A 9 N/A N/A
Class C ......................................... N/A -- N/A N/A
Class R ......................................... N/A -- N/A N/A
Shares redeemed:
Class A ......................................... N/A (2,215,756) N/A N/A
Class B ......................................... N/A (502,335) N/A N/A
Class C ......................................... N/A -- N/A N/A
Class R ......................................... N/A (202,547) N/A N/A
Net Decrease (957,473)
</TABLE>
Note 5 -- Capital Share Transactions (Continued)
Transactions in Capital Shares by fund were as follows:
<TABLE>
<CAPTION>
Principal
Partners Principal Principal Principal
MidCap Growth Real Estate SmallCap Utilities
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
<S> <C> <C> <C> <C>
Periods Ended April 30, 2000:
Shares sold:
Class A ......................................... 361,202 160,474 1,845,916 447,039
Class B ......................................... 160,424 37,228 601,624 181,777
Class C ......................................... 102,939 424 53,035 13,687
Class R ......................................... 106,340 42,752 461,538 149,733
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... -- 17,914 362,219 417,601
Class B ........................................... -- 7,981 108,575 74,397
Class C ......................................... -- 121 2,176 625
Class R ......................................... -- 8,198 70,779 36,207
Shares redeemed:
Class A ......................................... (22) (115,192) (940,411) (782,324)
Class B ......................................... -- (30,469) (175,334) (199,851)
Class C ......................................... -- (128) (2,641) (1,833)
Class R ......................................... -- (23,762) (121,510) (102,905)
Net Increase 730,883 105,541 2,265,966 234,153
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... N/A 245,069 2,014,656 1,320,329
Class B ......................................... N/A 71,200 631,644 507,818
Class C ......................................... N/A 12,790 16,954 12,620
Class R ......................................... N/A 70,415 539,084 304,565
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... N/A 27,713 -- 171,345
Class B ........................................... N/A 12,295 -- 19,977
Class C ......................................... N/A -- -- 12
Class R ......................................... N/A 13,702 -- 8,437
Shares redeemed:
Class A ......................................... N/A (91,613) (531,725) (1,083,938)
Class B ......................................... N/A (20,911) (159,547) (210,456)
Class C ......................................... N/A -- (209) --
Class R ......................................... N/A (31,207) (194,374) (108,625)
Net Increase 309,453 2,316,483 942,084
</TABLE>
Note 6 -- Line of Credit
The Domestic Growth Funds participate with other funds and portfolios managed by
Principal Management Corporation in an unsecured joint line of credit with two
banks which allow the funds to borrow up to $75,000,000 collectively. Borrowings
are made solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each fund, based on its
borrowings, at a rate equal to the Fed Funds Rate plus .50%. Additionally, a
commitment fee is charged at the annual rate of .09% on the 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, 2000, the Domestic Growth Funds had no
outstanding borrowings under the line of credit.
Note 7 -- Futures Contracts
The Domestic Growth Funds may enter into futures contracts as a hedge against
changes in market conditions. Initial margin deposits are made by cash deposits
or segregation of specific securities as may be required by the exchange on
which the transaction was conducted. Pursuant to the contracts, a fund agrees to
receive from or pay to the broker, an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the fund as a variation margin receivable
or payable on futures contracts. During the period the futures contracts are
open, daily changes in the value of the contracts are recognized as unrealized
gains or losses. These unrealized gains or losses are included in the net
unrealized appreciation (depreciation) of investments on the Statement of Assets
and Liabilities. When the contracts are closed, the fund recognizes a realized
gain or loss equal to the difference between the proceeds from, or cost of, the
closing transaction and the fund's cost basis in the contract.
April 30, 2000
SCHEDULES OF INVESTMENTS
GROWTH FUNDS (DOMESTIC)
PRINCIPAL BALANCED FUND, INC.
Shares
Held Value
Common Stocks (64.82%)
Accounting, Auditing, &
Bookkeeping (0.72%)
Paychex, Inc. 19,500 $ 1,026,188
Air Transportation, Scheduled (0.07%)
Ryanair Holdings PLC ADR 2,400(a) 97,800
Auto & Home Supply Stores (0.30%)
Autozone, Inc. 18,600(a) 426,638
Bakery Products (0.36%)
Sara Lee Corp. 33,800 507,000
Beverages (0.71%)
PepsiCo, Inc. 24,900 913,518
Seagram Co. Ltd. 1,700 91,800
---------
1,005,318
Blast Furnace & Basic Steel
Products (0.04%)
Pohang Iron & Steel ADR 2,900 60,900
Cable & Other Pay TV Services (1.37%)
Comcast Corp. 31,200 1,249,950
MediaOne Group, Inc. 7,850(a) 593,656
United Pan-Europe
Communications NV ADR 2,600(a) 95,063
---------
1,938,669
Chemicals & Allied Products (0.23%)
Dow Chemical Co. 2,900 327,700
Commercial Banks (3.61%)
ABN-AMRO Holdings NV ADR 8,100 168,581
Bank of America Corp. 9,700 475,300
Chase Manhattan Corp. 6,900 497,230
Dresdner Bank AG ADR 1,200 49,864
Fifth Third Bancorp 13,800 871,125
First Union Corp. 14,692 468,308
Fleet Boston Financial Corp. 13,240 469,193
HSBC Holdings PLC 1,700 97,219
National Australia Bank Ltd., ADR 1,400 95,463
PNC Financial Corp. 8,500 370,813
Royal Bank of Canada 2,000 94,000
San Paol IMI SPA ADR 4,300 125,775
State Street Corp. 5,300 513,437
The Bank of Tokyo-Mitsubishi Ltd. ADR 11,500 148,781
Wells Fargo Co. 16,700 685,743
---------
5,130,832
Commercial Printing (0.22%)
Creo Products, Inc. 1,900(a) 68,875
R.R. Donnelley & Sons Co. 11,700 248,625
-------
317,500
Communications Equipment (3.99%)
Alcatel ADR 4,200 $ 190,838
Canon, Inc. ADR 5,100 236,831
Ericsson LM Telefon ADR 2,400 212,250
Koninklijke Philips Electronic 7,000 312,375
Korea Telecom Corp. ADR 800 27,600
Lucent Technologies, Inc. 7,400 460,188
Motorola, Inc. 5,770 686,991
Nortel Networks Corp. 15,300 1,732,725
Qualcom, Inc. 2,900(a) 314,469
Siemens AG- Unsponsored ADR 850 125,712
Tellabs, Inc. 24,900(a) 1,364,830
---------
5,664,809
Computer & Data Processing Services (4.49%)
3COM Corp. 5,400(a) 212,963
America Online, Inc. 5,600(a) 334,950
Baltimore Technologies PLC ADR 800(a) 84,800
BMC Software, Inc. 9,700(a) 454,081
Compuware Corp. 12,100(a) 152,006
Electronic Data Systems Corp. 12,500 859,375
First Data Corp. 17,000 827,688
Microsoft Corp. 14,900(a) 1,039,275
Oracle Systems Corp. 4,700(a) 375,706
Sun Microsystems, Inc. 18,300(a) 1,682,455
Synopsys, Inc. 2,800(a) 117,600
Unisys Corp. 8,600(a) 199,413
Via Net.works, Inc. 1,900(a) 37,881
---------
6,378,193
Computer & Office Equipment (7.40%)
Automatic Data Processing, Inc. 13,600 731,850
Cabletron Systems, Inc. 14,400(a) 329,400
Cisco Systems, Inc. 56,600(a) 3,923,971
Compaq Computer Corp. 25,700 751,725
Dell Computer Corp. 9,000(a) 451,125
EMC Corp. 9,300(a) 1,292,119
Gateway, Inc. 12,800(a) 707,200
Hewlett-Packard Co. 7,100 958,500
Hitachi Ltd. ADR 900 110,531
International Business Machines Corp. 8,300 926,488
NEC Corp. ADR 2,000 272,125
Orbotech Ltd. ADR 700(a) 59,675
----------
10,514,709
Consumer Products (0.49%)
Fortune Brands, Inc. 13,500 337,500
Hanson PLC ADR 2,100 76,781
Philip Morris Cos., Inc. 12,800 280,000
-------
694,281
Crude Petroleum & Natural Gas (0.52%)
Texaco, Inc. 14,900 737,550
Department Stores (1.01%)
Kohl's Corp. 20,400(a) 979,200
Wal-Mart Stores, Inc. 8,100 448,538
---------
1,427,738
Dimension Stone (0.05%)
Potash Corp. of Saskatchewan 1,200 64,575
Drugs (5.63%)
Abbott Laboratories 20,800 $ 799,500
American Home Products Corp. 14,000 786,625
Astrazeneca Group PLC ADR 2,500 105,313
Aventis ADR 3,000 168,750
Bristol-Myers Squibb Co. 27,800 1,457,762
Elan Corp. PLC ADR 4,200(a) 180,075
Glaxo Wellcome PLC ADR 1,000 62,813
Johnson & Johnson 11,000 907,500
Merck & Co., Inc. 12,400 861,800
Pfizer, Inc. 49,400 2,080,975
Pharmacia Corp. 11,543 576,428
---------
7,987,541
Electric Services (1.21%)
Central & Southwest Corp. 25,500 553,031
Dominion Resources, Inc. 8,900 400,500
Potomac Electric Power Co. 13,800 323,438
Reliant Energy, Inc. 16,600 441,975
---------
1,718,944
Electrical Industrial Apparatus (0.52%)
Emerson Electric Co. 13,400 735,325
Electronic Components &
Accessories (3.66%)
Intel Corp. 25,500 3,233,719
Maxim Integrated Products, Inc. 17,700(a) 1,147,181
STMicroelectronics NV 1,100 208,656
Texas Instruments 3,700 602,638
---------
5,192,194
Farm & Garden Machinery (0.02%)
CNH Global NV 2,600 35,100
Fats & Oils (0.23%)
Archer Daniels Midland Co. 33,077 328,703
Federal & Federally-Sponsored
Credit (1.18%)
Federal National Mortgage Association 27,800 1,676,687
Finance Services (0.08%)
Nomura Securities Co. Ltd. ADR 460 115,775
Fire, Marine & Casualty Insurance (1.72%)
American International Group, Inc. 15,400 1,689,188
Berkshire Hathaway, Inc., Class A 4(a) 237,200
Hartford Financial Services Group, Inc. 4,800 250,500
Loews Corp. 4,800 264,600
---------
2,441,488
Furniture & Home Furnishings Store (0.84%)
Bed Bath & Beyond, Inc. 32,500(a) 1,192,344
General Industrial Machinery (0.24%)
Pall Corp. 15,100 336,919
Grain Mill Products (0.25%)
Ralston-Ralston Purina Group 20,300 359,056
Groceries & Related Products (1.00%)
SYSCO Corp. 35,600 1,339,450
Unilever PLC ADR 3,200 79,600
---------
1,419,050
Grocery Stores (0.36%)
Albertson's, Inc. 15,881 $ 517,125
Heavy Construction (0.07%)
Vivendi ADR 4,700 93,196
Hospitals (0.21%)
Tenet Healthcare Corp. 11,500 293,250
Household Appliances (2.26%)
General Electric Co. 20,400 3,207,900
Household Audio & Video
Equipment (0.10%)
Sony Corp. ADR 600 135,375
Industrial Inorganic Chemicals (0.50%)
Eastman Chemical Co. 5,550 290,334
Praxair, Inc. 9,600 426,600
-------
716,934
Investment Offices (0.07%)
Amvescap PLC 1,400 100,100
Life Insurance (0.50%)
Axa ADR 2,840 217,970
ING Groep NV ADR 3,900 214,256
Lincoln National Corp. 7,900 275,019
-------
707,245
Lumber & Other Building
Materials (0.92%)
Home Depot, Inc. 23,400 1,311,862
Machinery, Equipment & Supplies (0.43%)
Grainger (W. W.), Inc. 14,100 611,588
Management & Public Relations (0.28%)
Dun & Bradstreet Corp. 13,400 403,675
Measuring & Controlling Devices (0.46%)
Agilent Technologies, Inc. 2,384(a) 211,282
JDS Uniphase Corp. 4,200(a) 435,750
-------
647,032
Meat Products (0.13%)
Tyson Foods, Inc. 17,550 183,178
Medical Instruments & Supplies (1.59%)
Becton, Dickinson & Co. 7,800 199,875
Guidant Corp. 26,600(a) 1,526,175
St. Jude Medical, Inc. 16,950(a) 528,628
---------
2,254,678
Medical Services & Health
Insurance (0.30%)
Aon Corp. 5,500 148,844
Pacificare Health Systems, Inc. 5,400(a) 277,762
-------
426,606
Miscellaneous Apparel & Accessories (0.08%)
Energizer Holdings, Inc. 6,766(a) 115,445
Miscellaneous Chemical Products (0.49%)
Du Pont (E.I.) De Nemours 14,653 695,102
Miscellaneous Converted Paper
Products (0.48%)
Minnesota Mining & Mfg. Co. 7,800 $ 674,700
Miscellaneous Food & Kindred
Products (0.06%)
Groupe Danone 2,000 89,750
Miscellaneous Furniture & Fixtures (0.31%)
Newell Rubbermaid, Inc. 17,200 433,225
Miscellaneous Manufacturers (0.38%)
Tyco International Ltd. 11,900 546,656
Miscellaneous Non-Durable Goods (0.11%)
Diageo PLC ADR 4,500 153,000
Miscellaneous Shopping Goods (0.70%)
Staples, Inc. 52,400(a) 998,875
Miscellaneous Transportation (0.21%)
FMC Corp. 5,200(a) 302,575
Motion Picture Production & Services (0.19%)
Walt Disney Co. 6,200 268,538
Newspapers (0.12%)
News Corp. Ltd. ADR 2,300 118,306
United News & Media PLC ADR 2,400 57,600
-------
175,906
Oil & Gas Field Services (0.57%)
Diamond Offshore Drilling 8,800 354,750
Petroleum Geo-Services ADR 4,700(a) 76,375
Schlumberger Ltd. 4,900 375,156
-------
806,281
Paper Mills (0.56%)
Fort James Corp. 15,362 367,728
Kimberly Clark Corp. 7,400 429,662
-------
797,390
Petroleum Refining (1.48%)
Amerada Hess Corp. 3,500 222,688
BP Amoco PLC 12,248 624,648
Conoco, Inc., Class B 13,803 343,350
Exxon Mobil Corp. 9,000 699,187
Total Fina Elf ADR 2,800 211,750
---------
2,101,623
Pulp Mills (0.16%)
Boise Cascade Corp. 7,100 231,194
Radio & Television Broadcasting (0.08%)
Carlton Communications PLC ADR 900 54,450
Grupo Televisa SA GDR 1,000(a) 63,438
-------
117,888
Research & Testing Services (0.07%)
Qiagen NV ADR 700(a) $ 101,588
Rubber & Plastics Footwear (0.48%)
Nike, Inc. 15,800 686,313
Sanitary Services (0.20%)
Waste Management, Inc. 17,642 280,067
Savings Institutions (2.06%)
Citigroup, Inc. 49,150 2,921,352
Security Brokers & Dealer (0.29%)
Bear Stearns Cos., Inc. 4,968 213,003
Morgan Stanley Dean Witter & Co. 2,500 191,875
-------
404,878
Telegraph & Other Communications (0.02%)
Sonera Corp. ADR 600 32,700
Telephone Communication (5.30%)
360networks, Inc. 8,169(a) 124,067
AT&T Corp. 24,950 1,164,852
AT&T Wireless Group 10,000(a) 318,125
Alltel Corp. 6,900 459,713
BellSouth Corp. 13,600 662,150
British Telecommunications PLC ADR 720 131,760
Cable & Wireless PLC ADR 2,300 113,563
GTE Corp. 11,400 772,350
Hellenic Telecom Organization SA ADR 7,300 85,319
Jazztel PLC ADS 400(a) 20,800
Koninklijke KPN NV ADR 1,530 156,060
MCI Worldcom, Inc. 41,800(a) 1,899,287
Nokia Corp. ADR, Class A 3,600 204,750
NTT Docomo, Inc. ADR 600 102,600
SBC Communications, Inc. 14,170 620,823
Sprint Corp. 5,800 356,700
Telecom Corp. of New Zealand Ltd. ADR 2,800 95,025
Telecomunicacoes De Sao Palo 1,600 40,400
Versatel Telecom International ADR 2,000(a) 80,875
Vodafone Group PLC ADR 2,500 117,500
---------
7,526,719
Tires & Inner Tubes (0.08%)
Rhodia SA ADR 5,800 109,475
Total Common Stocks 92,040,510
Principal
Amount Value
Bonds (18.33%)
Beverages (0.68%)
Seagram Co., Ltd. Notes;
6.50%; 4/1/2003 $1,000,000 $ 957,272
Blast Furnace & Basic Steel
Products (0.72%)
Carpenter Technology Corp.
Medium-Term Notes;
6.99%; 4/20/2018 $ 800,000 $ 716,432
Quanex Corp. Convertible
Subordinated Debentures;
6.88%; 6/30/2007 350,000 305,375
---------
1,021,807
Commercial Banks (1.59%)
NationsBank Corp.
Subordinated Notes;
7.80%; 9/15/2016 2,300,000 2,251,937
Communications Equipment (0.88%)
Motorola, Inc. Debentures;
7.50%; 5/15/2025 1,291,000 1,244,623
Computer & Office Equipment (1.63%)
Seagate Technology, Inc.
Senior Notes; 7.13%; 3/1/2004 1,750,000 1,600,818
Senior Notes; 7.37%; 3/1/2007 813,000 709,910
---------
2,310,728
Consumer Products (1.03%)
Philip Morris Cos., Inc. Notes;
7.25%; 9/15/2001 1,500,000 1,466,017
Department Stores (1.40%)
Dillard's, Inc. Notes;
6.43%; 8/1/2004 1,500,000 1,321,299
7.38%; 6/1/2006 772,000 664,297
---------
1,985,596
Farm & Garden Machinery (0.80%)
Deere & Co. Senior Debentures;
8.50%; 1/9/2022 1,100,000 1,137,980
Fire, Marine & Casualty Insurance (0.76%)
St. Paul Cos., Inc.
Medium-Term Notes, Series C;
6.38%; 12/15/2008 1,200,000 1,082,892
Funeral Service & Crematories (1.19%)
Service Corp. International Notes;
6.75%; 6/1/2001 1,961,000 1,686,460
General Industrial Machinery (1.03%)
Ingersoll-Rand Medium-Term Notes;
6.46%; 11/19/2003 1,000,000 960,159
Timken Co. Medium-Term Notes;
7.30%; 8/13/2002 500,000 495,644
---------
1,455,803
Medical Services & Health
Insurance (0.27%)
Aetna Services, Inc. Notes;
6.38%; 8/15/2003 400,000 378,546
Miscellaneous Investing (1.00%)
Kimco Realty Corp. Senior Notes;
6.50%; 10/1/2003 1,500,000 1,418,922
Paper & Paper Products (0.33%)
Boise Cascade Office Products Corp.
Notes; 7.05%; 5/15/2005 $ 500,000 $ 467,554
Petroleum & Petroleum Products (1.01%)
Enron Corp. Notes;
6.75%; 9/1/2004 1,500,000 1,436,940
Railroads (0.81%)
Norfolk Southern Debentures;
9.00%; 3/1/2021 1,100,000 1,153,553
Security Brokers & Dealers (1.39%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
6.13%; 2/1/2001 1,000,000 989,179
7.25%; 4/15/2003 1,000,000 979,973
---------
1,969,152
Surety Insurance (1.82%)
Allstate Corp. Debentures;
6.75%; 5/15/2018 2,000,000 1,715,760
MBIA, Inc. Debentures;
7.00%; 12/15/2025 1,000,000 873,707
---------
2,589,467
Trucking & Courier Services,
Except Air (0.00%)
Builders Transport, Inc. Convertible
Subordinated Debentures;
6.50%; 5/1/2011 306,000(b) 765
Total Bonds 26,016,014
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation (FHLMC)
Certificates (3.77%)
FHLMC 6.00% 1/1/2029 $ 935,265 $ 858,755
FHLMC 6.50 10/1/2027-1/1/2029 3,415,997 3,209,179
FHLMC 7.00 12/1/2027 1,289,849 1,289,849
Total FHLMC Certificates 5,357,783
Government National Mortgage Association (GNMA)
Certificates (3.50%)
GNMA II 6.00 6/20/2026-7/1/2029 5,236,437 4,972,944
Asset-Backed Securities (6.15%)
Mortgage Pass-Through Securities (5.45%)
DLJ Commercial Mortgage Corp.
Mortgage Pass-Through Cert.,
Class A-1B, Series 1998-CF1;
6.41%; 2/18/2008 $2,100,000 $ 1,929,790
Mortgage Pass-Through Cert.,
Class A-2, Series 1998-CF1;
6.59%; 2/15/2008 700,000 645,509
First Union Commercial Mortgage Trust
Commercial Mortgage Pass-Through
Cert., Series 1999-C1, Class B;
6.22%; 12/15/2008 1,435,000 1,296,158
GMAC Commercial Mortgage Securities,
Inc. Mortgage Pass-Through Cert.,
Series 1998-C2, Class C;
6.50%; 8/15/2008 2,000,000 1,823,300
J.P. Morgan Commercial Mortgage Fin.
Corp. Mortgage Pass-Through Cert.,
Series 97-C5, Class A-2;
7.06%; 9/15/2029 220,000 214,822
Corp. Mortgage Pass-Through Cert.,
Series 1999-C7, Class B;
6.66%; 10/15/2035 450,000 416,680
Morgan Stanley Capital I, Inc. Commercial
Mortgage, Series 1999-RM1, Class B;
6.81%; 12/15/2031 1,500,000 1,410,469
---------
7,736,728
Personal Credit Institutions (0.70%)
Chase Manhattan Credit Card Master Trust
Asset-Backed Certificates, Series 97-2,
Class A; 6.30%; 4/15/2003 1,000,000 999,220
Total Asset-Backed Securities 8,735,948
Commercial Paper (3.25%)
Personal Credit Institutions (3.25%)
Investment in Joint Trade Account,
Associates Corp.; 6.04%; 5/1/2000 $4,621,759 $ 4,621,759
Total Portfolio Investments (99.82%) 141,744,958
Cash, receivables and other assets,
net of liabilities (0.18%) 252,091
Total Net Assets (100.00%) $141,997,049
(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 (99.03%)
Beverages (4.66%)
Anheuser-Busch Cos., Inc. 108,400 $ 7,648,975
PepsiCo, Inc. 159,200 5,840,650
----------
13,489,625
Commercial Banks (3.35%)
Fleet Boston Financial Corp. 99,200 3,515,400
J.P. Morgan & Co., Inc. 48,300 6,200,512
---------
9,715,912
Communications Equipment (3.12%)
Motorola, Inc. 75,900 9,036,844
Computer & Data Processing
Services (7.39%)
Microsoft Corp. 85,000(a) 5,928,750
Oracle Systems Corp. 125,600(a) 10,040,150
Sun Microsystems, Inc. 59,000(a) 5,424,313
----------
21,393,213
Computer & Office Equipment (17.61%)
Automatic Data Processing, Inc. 188,900 10,165,181
Cisco Systems, Inc. 160,400(a) 11,120,231
Dell Computer Corp. 174,500(a) 8,746,813
EMC Corp. 68,500(a) 9,517,219
Hewlett-Packard Co. 84,800 11,448,000
----------
50,997,444
Department Stores (3.25%)
Wal-Mart Stores, Inc. 169,800 9,402,675
Drugs (8.45%)
American Home Products Corp. 84,300 4,736,606
Bristol-Myers Squibb Co. 30,000 1,573,125
Johnson & Johnson 95,900 7,911,750
Merck & Co., Inc. 121,200 8,423,400
Pharmacia Corp. 36,530 1,824,217
----------
24,469,098
Eating & Drinking Places (2.52%)
McDonald's Corp. 191,500 7,300,937
Electrical Industrial Apparatus (2.49%)
Emerson Electric Co. 131,400 7,210,575
Electronic Components &
Accessories (3.28%)
Intel Corp. 74,900 9,498,256
Fire, Marine & Casualty Insurance (3.23%)
American International Group, Inc. 85,168 9,341,865
Gas Production & Distribution (3.06%)
Williams Cos., Inc. 237,100 8,846,794
Groceries & Related Products (2.13%)
SYSCO Corp. 163,800 6,162,975
Household Appliances (4.12%)
General Electric Co. 75,800 11,919,550
Medical Instruments & Supplies (1.91%)
Becton, Dickinson & Co. 215,300 $ 5,517,063
Miscellaneous Chemical Products (2.21%)
Du Pont (E.I.) De Nemours 135,000 6,404,062
Miscellaneous Converted Paper
Products (1.60%)
Minnesota Mining & Mfg. Co. 53,700 4,645,050
Newspapers (2.35%)
New York Times Co., Class A 165,200 6,804,175
Personal Credit Institutions (1.06%)
Capital One Financial Corp. 70,400 3,080,000
Petroleum Refining (5.23%)
Exxon Mobil Corp. 103,419 8,034,364
Royal Dutch Petroleum Co. ADR 123,800 7,103,025
----------
15,137,389
Savings Institutions (3.27%)
Citigroup, Inc. 159,500 9,480,281
Security Brokers & Dealers (0.89%)
Morgan Stanley Dean Witter & Co. 33,500 2,571,125
Special Industry Machinery (3.17%)
Applied Materials, Inc. 90,200(a) 9,183,487
Telephone Communication (8.68%)
AT&T Corp. 164,150 7,663,753
AT&T Wireless Group 55,000(a) 1,749,688
Alltel Corp. 71,200 4,743,700
GTE Corp. 63,900 4,329,225
Sprint Corp. 108,200 6,654,300
----------
25,140,666
Total Common Stocks 286,749,061
Principal
Amount Value
Commercial Paper (1.17%)
Personal Credit Institutions (1.17%)
Investment in Joint Trade Account,
Associates First Capital Corp.;
6.04%; 5/1/2000 $3,401,571 $ 3,401,571
Total Portfolio Investments (100.20%) 290,150,632
Liabilities, net of cash, receivables and
other assets (-0.20%) (598,452)
Total Net Assets (100.00%) $289,552,180
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL CAPITAL VALUE FUND, INC.
Shares
Held Value
Common Stocks (97.37%)
Aircraft & Parts (1.68%)
Honeywell International, Inc. 164,000 $ 9,184,000
Bakery Products (0.78%)
Sara Lee Corp. 286,600 4,299,000
Beverages (3.49%)
PepsiCo, Inc. 292,000 10,712,750
Seagram Co. Ltd. 156,200 8,434,800
----------
19,147,550
Combination Utility Services (1.16%)
Montana Power Co. 144,700 6,375,844
Commercial Banks (12.56%)
Bank of America Corp. 236,800 11,603,199
Bank One Corp. 397,964 12,137,902
Chase Manhattan Corp. 175,000 12,610,938
Comerica, Inc. 253,500 10,742,063
Fleet Boston Financial Corp. 305,500 10,826,156
PNC Financial Corp. 250,400 10,923,700
----------
68,843,958
Communications Equipment (2.22%)
Motorola, Inc. 102,000 12,144,375
Computer & Data Processing (2.56%)
Electronic Data Systems Corp. 87,335 6,004,281
First Data Corp. 121,200 5,900,925
3COM Corp. 54,500(a) 2,149,344
----------
14,054,550
Computer & Office Equipment (5.74%)
Compaq Computer Corp. 242,800 7,101,900
Hewlett-Packard Co. 76,300 10,300,500
Pitney Bowes, Inc. 343,500 14,040,563
----------
31,442,963
Consumer Products (1.90%)
Fortune Brands, Inc. 415,500 10,387,500
Crude Petroleum & Natural Gas (2.90%)
Texaco, Inc. 321,200 15,899,400
Department Stores (2.33%)
Sears, Roebuck & Co. 246,200 9,017,075
Target Corp. 56,400 3,754,125
----------
12,771,200
Drugs (7.09%)
Abbott Laboratories 345,100 13,264,781
American Home Products Corp. 170,600 9,585,588
Merck & Co., Inc. 230,700 16,033,649
----------
38,884,018
Electric Services (6.56%)
AES Corp. 113,400(a) 10,198,913
Duke Energy Corp. 192,000 11,040,000
Enron Corp. 211,000 14,704,062
----------
35,942,975
Electrical Industrial Apparatus (2.57%)
Emerson Electric Co. 256,500 $14,075,438
Electronic Components &
Apparatus (3.59%)
Analog Devices, Inc. 97 7,504,581
LSI Logic Corp. 102,700(a) 6,418,750
Micron Technology, Inc. 41,000(a) 5,709,250
----------
19,632,581
Forest Products (2.64%)
Weyerhaeuser Co. 271,100 14,486,906
Groceries & Related Products (2.15%)
SYSCO Corp. 313,500 11,795,438
Grocery Stores (1.11%)
Albertson's, Inc. 187,200 6,095,700
Highway & Street
Construction (1.67%)
Halliburton Co. 206,800 9,137,975
Life Insurance (2.05%)
American General Corp. 200,600 11,233,600
Measuring & Controlling
Devices (1.30%)
Teradyne, Inc. 64,700(a) 7,117,000
Miscellaneous Chemical
Products (1.28%)
Du Pont (E.I.) De Nemours 147,500 6,997,031
Miscellaneous Converted
Paper Products (1.17%)
Minnesota Mining & Mfg. Co. 74,000 6,401,000
Motor Vehicles & Equipment (1.73%)
General Motors Corp. 101,300 9,484,213
Paper Mills (2.77%)
Kimberly Clark Corp. 261,500 15,183,344
Petroleum Refining (6.11%)
Chevron Corp. 204,500 17,408,062
Exxon Mobil Corp. 207,300 16,104,619
----------
33,512,681
Primary Non-Ferrous Metal (3.02%)
Alcoa, Inc. 255,400 16,569,075
Rental of Railroad Cars (1.51%)
GATX Corp. 231,192 8,265,114
Savings Institutions (1.25%)
Citigroup, Inc. 115,100 6,841,256
Search & Navigational Equipment (1.08%)
Raytheon Co. 258,000 5,917,875
Security Brokers & Dealers (1.10%)
Morgan Stanley Dean Witter & Co. 78,800 $ 6,047,900
Telephone Communications (8.30%)
AT&T Corp. 330,750 15,441,890
Alltel Corp. 93,800 6,249,425
GTE Corp. 84,800 5,745,200
MCI Worldcom, Inc. 267,800(a) 12,168,162
Sprint Corp. 95,300 5,860,950
----------
45,465,627
Total Common Stocks 533,637,087
Principal
Amount Value
Commercial Paper (2.21%)
Personal Credit Institutions (2.21%)
Investment in Joint Trade Account,
Associates Corp.; 6.04%; 5/1/2000 $8,097,767 $ 8,097,767
Norwest Financial Inc.;
5.99%; 5/1/2000 4,020,312 4,023,661
----------
Total Commercial Paper 12,121,428
Total Portfolio Investments (99.58%) 545,758,516
Cash, receivables and other assets,
net of liabilities (0.42%) 2,294,474
Total Net Assets (100.00%) $548,052,989
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL GROWTH FUND, INC.
Shares
Held Value
Common Stocks (98.85%)
Accounting, Auditing, &
Bookkeeping (2.59%)
Paychex, Inc. 344,400 $18,124,050
Cable & Other Pay TV Services (2.62%)
Comcast Corp. 456,900(a) 18,304,556
Commercial Banks (4.13%)
Fifth Third Bancorp. 247,700 15,636,062
State Street Corp. 137,000 13,271,875
----------
28,907,937
Communications Equipment (7.11%)
Motorola, Inc. 1 119
Nortel Networks Corp. 271,600 30,758,700
Qualcom, Inc. 51,300(a) 5,562,844
Tellabs, Inc. 244,400(a) 13,396,175
----------
49,717,838
Computer & Data Processing
Services (6.90%)
America Online, Inc. 98,800(a) 5,909,475
Microsoft Corp. 176,500(a) 12,310,875
Sun Microsystems, Inc. 326,600(a) 30,026,787
----------
48,247,137
Computer & Office Equipment (15.66%)
Automatic Data Processing, Inc. 240,400 $12,936,525
Cisco Systems, Inc. 879,000(a) 60,939,422
EMC Corp. 165,800(a) 23,035,837
Gateway, Inc. 227,100(a) 12,547,275
----------
09,459,059
Department Stores (2.20%)
Kohl's Corp. 321,200(a) 15,417,600
Drugs (7.94%)
Bristol-Myers Squibb Co. 289,400 15,175,412
Pfizer, Inc. 873,300 36,787,763
Johnson & Johnson 43,000 3,547,500
----------
55,510,675
Electronic Components &
Accessories (10.35%)
Intel Corp. 329,000 41,721,313
Linear Technology Corp. 190,000 10,853,750
Maxim Integrated Products, Inc. 140,100(a) 9,080,231
Texas Instruments 65,600 10,684,600
----------
72,339,894
Federal & Federally Sponsored
Credit (2.91%)
Federal National Mortgage Association 337,900 20,379,594
Fire, Marine & Casualty Insurance (3.29%)
American International Group, Inc. 209,800 23,012,438
Furniture & Home Furnishings
Stores (3.01%)
Bed Bath & Beyond, Inc. 573,200(a) 21,029,275
Groceries & Related Products (2.36%)
SYSCO Corp. 439,400 16,532,425
Household Appliances (4.59%)
General Electric Co. 204,200 $32,110,450
Lumber & Other Building
Materials (3.33%)
Home Depot, Inc. 415,000 23,265,938
Measuring & Controlling Devices (1.08%)
JDS Uniphase Corp. 72,700(a) 7,542,625
Medical Instruments & Supplies (3.85)
Guidant Corp. 469,500(a) 26,937,563
Miscellaneous Shopping Goods
Stores (2.56%)
Staples, Inc. 940,000(a) 17,918,750
Savings Institutions (4.98%)
Citigroup, Inc. 586,275 34,846,720
Telephone Communication (7.39%)
AT&T Corp. 220,895 10,313,035
BellSouth Corp. 240,600 11,714,213
MCI Worldcom, Inc. 517,943(a) 23,534,035
Sprint Corp. 100,000 6,150,000
----------
51,711,283
Total Common Stocks 691,315,807
Principal
Amount Value
Commercial Paper (1.13%)
Personal Credit Institutions (1.13%)
Investment in Joint Trading Account,
Associates First Corp;
6.04%; 5/1/2000 $7,885,968 $7,885,968
Total Portfolio Investments (99.98%) 699,201,775
Cash, receivables and other assets,
net of liabilities (0.02%) 125,693
Total Net Assets (100.00%) $699,327,468
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Shares
Held Value
Common Stocks (79.14%)
Accounting, Auditing &
Bookkeeping (0.08%)
Paychex, Inc. 131 $ 6,894
Advertising (0.20%)
Interpublic Group of Cos., Inc. 149 6,109
Omnicom Group, Inc. 94 8,560
Young & Rubicam, Inc. 23 1,281
------
15,950
Air Transportation, Scheduled (0.22%)
AMR Corp. 50(a) 1,703
Delta Air Lines, Inc. 69 3,640
FedEx Corp. 154(a) 5,804
Southwest Airlines Co. 270 5,856
US Airways Group, Inc. 24(a) 667
------
17,670
Aircraft & Parts (0.93%)
B.F. Goodrich Co. 37 1,179
Boeing Co. 464 18,415
General Dynamics Corp. 106 6,201
Honeywell International, Inc. 423 23,688
Northrop Grumman Corp. 23 1,630
Rockwell International Corp. 101 3,977
Textron, Inc. 80 4,955
United Technologies Corp. 254 15,796
------
75,841
Auto & Home Supply Stores (0.01%)
Autozone, Inc. 49(a) 1,124
Automotive Rentals, No Drivers (0.01%)
Ryder Systems, Inc. 22 488
Bakery Products (0.09%)
Sara Lee Corp. 487 7,305
Beer, Wine & Distilled Beverages (0.02%)
Brown-Forman Corp. 23 1,255
Beverages (1.54%)
Adolph Coors Co., Class B 12 $ 612
Anheuser-Busch Cos., Inc. 248 17,500
Coca-Cola Co. 1,322 62,217
Coca-Cola Enterprises 228 4,859
PepsiCo, Inc. 780 28,616
Seagram Co. Ltd. 232 12,528
-------
126,332
Blankbooks & Bookbinding (0.01%)
Deluxe Corp. 25 630
Blast Furnace & Basic Steel
Products (0.04%)
Allegheny Technologies, Inc. 32 774
Bethlehem Steel Corp. 45(a) 242
Nucor Corp. 29 1,247
USX-U.S. Steel Group 30 752
Worthington Industries, Inc. 30 371
-----
3,386
Books (0.08%)
Harcourt General, Inc. 24 897
McGraw-Hill Cos., Inc. 104 5,460
Meredith Corp. 17 473
-----
6,830
Broadwoven Fabric Mills, Cotton (0.00%)
Springs Industries, Inc. 6 246
Business Credit Institutions (0.19%)
Associates First Capital Corp., Class A 390 8,653
Providian Financial Corp. 75 6,605
------
15,258
Cable & Other Pay TV Services (0.54%)
Comcast Corp. 496(a) 19,871
MediaOne Group, Inc. 327(a) 24,729
------
44,600
Chemicals & Allied Products (0.17%)
Dow Chemical Co. 116 13,108
Sigma-Aldrich Corp. 34 999
------
14,107
Combination Utility Services (0.16%)
Cinergy Corp. 54 1,445
Constellation Energy Group, Inc. 51 1,686
Entergy Corp. 131 3,332
Northern States Power Co. 53 1,156
PG&E Corp. 206 5,343
------
12,962
Commercial Banks (3.84%)
AmSouth Bancorp. 209 3,044
Bank of America Corp. 914 44,786
Bank of New York Co., Inc. 394 16,179
Bank One Corp. 615 18,757
BB&T Corp. 185 4,926
Chase Manhattan Corp. 442 31,852
Comerica, Inc. 84 3,560
Fifth Third Bancorp. 164 10,352
First Union Corp. 528 16,830
Firstar Corp. 524 $ 13,035
FleetBoston Financial Corp. 490 17,364
Huntington Bancshares, Inc. 78 1,423
J.P. Morgan & Co., Inc. 91 11,682
KeyCorp 239 4,422
MBNA Corp. 429 11,395
Mellon Financial Corp. 270 8,674
National City Corp. 328 5,576
Northern Trust Corp. 117 7,503
Old Kent Financial Corp. 40 1,205
PNC Financial Corp. 156 6,805
Regions Financial Corp. 75 1,533
Southtrust Corp. 57 1,361
State Street Corp. 85 8,234
Summit Bancorp. 60 1,522
Suntrust Banks, Inc. 171 8,678
Synovus Financial Corp. 96 1,782
Union Planters Corp. 48 1,359
US Bancorp. 403 8,186
Wachovia Corp. 107 6,708
Wells Fargo Co. 883 36,258
-------
314,991
Commercial Printing (0.01%)
R.R. Donnelley & Sons Co. 43 914
Communications Equipment (3.93%)
ADC Telecommunications, Inc. 160(a) 9,720
Andrew Corp. 28(a) 824
Lucent Technologies, Inc. 1,709 106,278
Motorola, Inc. 380 45,244
Network Appliance, Inc. 162(a) 11,978
Nortel Networks Corp. 775 87,769
Qualcom, Inc. 395(a) 42,833
Scientific-Atlanta, Inc. 84 5,465
Tellabs, Inc. 216(a) 11,840
-------
321,951
Communications Services, NEC (0.26%)
Nextel Communications, Inc. 195(a) 21,340
Computer & Data Processing
Services (7.54%)
3COM Corp. 183(a) 7,217
Adobe Systems, Inc. 63 7,619
America Online, Inc. 1,221(a) 73,031
Autodesk, Inc. 20 768
BMC Software, Inc. 130(a) 6,086
Citrix Systems, Inc. 95(a) 5,801
Computer Associates International, Inc. 313 17,469
Computer Sciences Corp. 90(a) 7,341
Compuware Corp. 123(a) 1,545
Electronic Data Systems Corp. 252 17,325
First Data Corp. 223 10,857
IMS Health, Inc. 105 1,792
Microsoft Corp. 2,790(a) 194,603
Novell, Inc. 174(a) 3,415
Oracle Systems Corp. 1,512(a) 120,865
Parametric Technology Corp. 92(a) 750
Peoplesoft, Inc. 92(a) 1,282
Shared Medical Systems Corp. 9 373
Sun Microsystems, Inc. 845(a) $ 77,687
Unisys Corp. 165(a) 3,826
Veritas Software Corp. 207 22,204
Yahoo!, Inc. 280(a) 36,470
-------
618,326
Computer & Office Equipment (8.23%)
Apple Computer, Inc. 86(a) 10,669
Automatic Data Processing, Inc. 337 18,135
Cabletron Systems, Inc. 62(a) 1,418
Ceridian Corp. 49(a) 1,063
Cisco Systems, Inc. 3,666(a) 254,157
Compaq Computer Corp. 907 26,530
Comverse Technology, Inc. 81(a) 7,224
Dell Computer Corp. 1,373(a) 68,822
EMC Corp. 545(a) 75,721
Gateway, Inc. 169(a) 9,337
Hewlett-Packard Co. 538 72,630
International Business Machines Corp. 966 107,830
Lexmark International Group, Inc. 68(a) 8,024
NCR Corp. 33(a) 1,275
Pitney Bowes, Inc. 141 5,763
Seagate Technology, Inc. 115(a) 5,843
Silicon Graphics 63(a) 453
-------
674,894
Construction & Related Machinery (0.23%)
Baker Hughes, Inc. 175 5,567
Caterpillar, Inc. 189 7,454
Dover Corp. 107 5,437
------
18,458
Consumer Products (0.38%)
Fortune Brands, Inc. 56 1,400
Nabisco Group Holdings Corp. 112 1,442
Philip Morris Cos., Inc. 1,267 27,716
UST, Inc. 58 870
------
31,428
Credit Reporting & Collection (0.01%)
Equifax, Inc. 48 1,173
Crude Petroleum & Natural Gas (0.44%)
Anadarko Petroleum Co. 43 1,868
Apache Corp. 61 2,955
Burlington Resources, Inc. 115 4,521
Kerr-McGee Corp. 51 2,639
Occidental Petroleum Corp. 196 4,202
Texaco, Inc. 295 14,602
Union Pacific Resources Group, Inc. 86 1,650
USX-Marathon Group, Inc. 165 3,847
------
36,284
Crushed & Broken Stone (0.02%)
Vulcan Materials Co. 34 1,490
Cutlery, Handtools & Hardware (0.44%)
Danaher Corp. 75 4,284
Gillette Co. 575 21,275
Illinois Tool Works, Inc. 160 10,250
Snap-On, Inc. 20 529
------
36,338
Department Stores (2.12%)
Dillard's, Inc., Class A 36 $ 502
Federated Department Stores, Inc. 112(a) 3,808
J.C. Penney Co., Inc. 89 1,229
Kohl's Corp. 172(a) 8,256
May Department Stores Co. 176 4,840
Sears, Roebuck & Co. 201 7,361
Target Corp. 234 15,576
Wal-Mart Stores, Inc. 2,386 132,125
-------
173,697
Drug Stores & Proprietary Stores (0.31%)
CVS Corp. 210 9,135
Longs Drug Stores Corp. 13 302
Rite Aid Corp. 89 445
Walgreen Co. 539 15,159
------
25,041
Drugs (6.87%)
Abbott Laboratories 823 31,634
ALZA Corp. 35(a) 1,542
American Home Products Corp. 699 39,275
Amgen, Inc. 548(a) 30,688
Biogen, Inc. 80(a) 4,705
Bristol-Myers Squibb Co. 1,061 55,636
Johnson & Johnson 745 61,463
Lilly (Eli) & Co. 585 45,228
Merck & Co., Inc. 1,252 87,014
Pfizer, Inc. 2,075 87,409
Pharmacia Corp. 670 33,458
Schering-Plough Corp. 787 31,726
Warner-Lambert Co. 458 52,126
Watson Pharmaceuticals, Inc. 32(a) 1,438
-------
563,342
Drugs, Proprietaries & Sundries (0.13%)
Cardinal Health, Inc. 149 8,204
McKesson HBOC, Inc. 151 2,548
------
10,752
Eating & Drinking Places (0.38%)
Darden Restaurants, Inc. 45 830
McDonald's Corp. 724 27,603
Tricon Global Restaurants, Inc. 52(a) 1,774
Wendy's International, Inc. 41 917
------
31,124
Electric Lighting & Wiring
Equipment (0.02%)
Cooper Industries, Inc. 32 1,098
National Service Industries, Inc. 13 280
Thomas & Betts Corp. 19 585
-----
1,963
Electric Services (1.47%)
AES Corp. 109(a) 9,803
Ameren Corp. 47 1,724
American Electric Power Co., Inc. 102 3,736
Carolina Power & Light Co. 85 3,108
Central & Southwest Corp. 73 1,583
CMS Energy Corp. 39 741
Consolidated Edison, Inc. 117 4,117
Dominion Resources, Inc. 126 5,670
DTE Energy Co. 49 1,599
Duke Energy Corp. 195 11,212
Edison International 185 $ 3,527
Enron Corp. 382 26,621
FirstEnergy Corp. 125 3,180
Florida Progress Corp. 33 1,617
FPL Group, Inc. 95 4,293
GPU, Inc. 42 1,179
New Century Energies, Inc. 39 1,272
Niagara Mohawk Holdings, Inc. 64(a) 888
Peco Energy Co. 98 4,085
Pinnacle West Capital Corp. 29 1,019
PPL Corp. 49 1,170
Public Service Enterprise Group, Inc. 116 4,161
Reliant Energy, Inc. 158 4,207
Sempra Energy 70 1,299
Southern Co. 359 8,952
Texas Utilities Holdings Co. 147 4,952
Unicom Corp. 115 4,571
-------
120,286
Electrical Industrial Apparatus (0.15%)
Emerson Electric Co. 231 12,676
Electronic Components &
Accessories (5.07%)
Adaptec, Inc. 35(a) 945
Advanced Micro Devices, Inc. 79(a) 6,932
Altera Corp. 107 10,941
Analog Devices, Inc. 186(a) 14,287
Conexant Systems, Inc. 113 6,766
Intel Corp. 1,791 227,121
Linear Technology Corp. 165 9,426
LSI Logic Corp. 159(a) 9,937
Micron Technology, Inc. 143(a) 19,913
Molex, Inc. 104 5,713
National Semiconductor Corp. 91(a) 5,528
Solectron Corp. 316(a) 14,793
Texas Instruments, Inc. 434 70,688
Xilinx, Inc. 171(a) 12,526
-------
415,516
Engines & Turbines (0.02%)
Briggs & Stratton Corp. 7 268
Brunswick Corp. 31 595
Cummins Engine Co., Inc. 14 498
-----
1,361
Fabricated Rubber Products, NEC (0.00%)
Cooper Tire & Rubber Co. 26 351
Family Clothing Stores (0.26%)
Gap, Inc. 454 16,685
Nordstrom, Inc. 47 1,307
TJX Cos., Inc. 165 3,166
------
21,158
Farm & Garden Machinery (0.06%)
Deere & Co. 125 5,047
Fats & Oils (0.04%)
Archer Daniels Midland Co. 325 3,230
Federal & Federally Sponsored
Credit (0.64%)
Federal National Mortgage Association 549 $ 33,111
Freddie Mac 371 17,043
SLM Holdings Corp. 85 2,662
------
52,816
Finance Services (0.04%)
Cincinnati Financial Corp. 89 3,588
Fire, Marine & Casualty Insurance (1.64%)
Aetna, Inc. 75 4,341
Allstate Corp. 431 10,182
American International Group, Inc. 828 90,821
Chubb Corp. 93 5,917
Cigna Corp. 90 7,178
Hartford Financial Services Group, Inc. 117 6,106
Loews Corp. 57 3,142
Progressive Corp. 25 1,636
SAFECO Corp. 44 973
St. Paul Cos., Inc. 120 4,275
-------
134,571
Forest Products (0.08%)
Weyerhaeuser Co. 125 6,680
Furniture & Home Furnishing
Stores (0.02%)
Bed Bath & Beyond, Inc. 48(a) 1,761
Gas Production & Distribution (0.21%)
Columbia Energy Group 27 1,694
Eastern Enterprises 9 548
El Paso Natural Gas 121 5,142
Nicor, Inc. 16 542
Oneok, Inc. 10 252
Peoples Energy Corp. 12 373
Williams Cos., Inc. 232 8,657
------
17,208
General Industrial Machinery (0.07%)
Ingersoll-Rand Co. 86 4,037
Pall Corp. 42 937
Timken Co. 21 388
-----
5,362
Glass & Glassware, Pressed or
Blown (0.36%)
Corning, Inc. 147 29,033
Owens-Illinois, Inc. 51(a) 688
------
29,721
Gold & Silver Ores (0.08%)
Barrick Gold Corp. 211 3,547
Homestake Mining Co. 89 534
Newmont Mining Corp. 57 1,336
Placer Dome, Inc. 111 902
-----
6,319
Grain Mill Products (0.23%)
General Mills, Inc. 160 5,820
Kellogg Co. 217 5,303
Quaker Oats Co. 72 4,693
Ralston-Ralston Purina Group 160 2,830
------
18,646
Greeting Cards (0.00%)
American Greetings Corp. 22 $ 399
Groceries & Related Products (0.41%)
Safeway, Inc. 270(a) 11,914
SUPERVALU, Inc. 47 972
SYSCO Corp. 175 6,584
Unilever NV 305 13,897
------
33,367
Grocery Stores (0.20%)
Albertson's, Inc. 226 7,359
Great Atlantic & Pacific Tea Co., Inc. 13 238
Kroger Co. 446(a) 8,279
Winn-Dixie Stores, Inc. 51 845
------
16,721
Health & Allied Services, NEC (0.01%)
HEALTHSOUTH Corp. 132(a) 1,064
Heavy Construction, Except Highway (0.00%)
McDermott International, Inc. 20 162
Highway & Street Construction (0.13%)
Halliburton Co. 236 10,428
Hospitals (0.16%)
Columbia/HCA Healthcare Corp. 301 8,560
Humana, Inc. 57(a) 438
Tenet Healthcare Corp. 165(a) 4,207
------
13,205
Hotels & Motels (0.08%)
Hilton Hotels Corp. 126 1,071
Marriott International, Inc., Class A 132 4,224
Mirage Resorts, Inc. 66(a) 1,345
6,640
Household Appliances (3.41%)
General Electric Co. 1,758(b) 276,445
Maytag Corp. 29 999
Whirlpool Corp. 25 1,628
-------
279,072
Household Furniture (0.02%)
Leggett & Platt, Inc. 67 1,432
Industrial Inorganic Chemicals (0.17%)
Air Products & Chemicals, Inc. 121 3,759
Eastman Chemical Co. 26 1,360
Great Lakes Chemical Corp. 19 512
Praxair, Inc. 85 3,777
Union Carbide Corp. 72 4,248
W.R. Grace & Co. 24(a) 312
------
13,968
Industrial Machinery, NEC (0.02%)
Parker-Hannifin Corp. 38 1,767
Industrial Organic Chemicals (0.02%)
International Flavors & Fragrances, Inc. 36 1,240
Insurance Agents, Brokers & Services (0.17%)
Marsh & McLennan Cos., Inc. 142 13,996
Jewlery, Silverware & Plated Ware (0.00%)
Jostens, Inc. 11 $ 272
Knitting Mills (0.00%)
Russell Corp. 11 216
Life Insurance (0.18%)
American General Corp. 131 7,336
Jefferson-Pilot Corp. 55 3,661
Lincoln National Corp. 104 3,620
------
14,617
Lumber & Construction Materials (0.01%)
Crane Co. 22 591
Lumber & Other Building Materials (0.97%)
Home Depot, Inc. 1,232 69,069
Lowe's Cos., Inc. 205 10,147
------
79,216
Machinery, Equipment & Supplies (0.02%)
Grainger (W. W.), Inc. 32 1,388
Management & Public Relations (0.04%)
Dun & Bradstreet Corp. 55 1,657
Fluor Corp. 26 873
Perkinelmer, Inc. 15 821
-----
3,351
Measuring & Controlling Devices (0.43%)
Allergan, Inc. 70 4,121
Eaton Corp. 25 2,100
Johnson Controls, Inc. 29 1,836
KLA-Tencor Corp. 96(a) 7,188
Mallinckrodt, Inc. 23 618
Millipore Corp. 15 1,076
PE Corp.-PE Biosystems Group 109 6,540
Tektronix, Inc. 16 926
Teradyne, Inc. 90(a) 9,900
Thermo Electron Corp. 54(a) 1,046
------
35,351
Medical Instruments & Supplies (0.79%)
Bard (C.R.), Inc. 17 741
Baxter International, Inc. 154 10,029
Becton, Dickinson & Co. 133 3,408
Biomet, Inc. 38 1,356
Boston Scientific Corp. 222(a) 5,883
Guidant Corp. 164(a) 9,410
Medtronic, Inc. 639 33,188
St. Jude Medical, Inc. 28(a) 873
------
64,888
Medical Services & Health Insurance (0.26%)
AFLAC, Inc. 141 6,883
Aon Corp. 137 3,707
Conseco, Inc. 112 609
Torchmark Corp. 45 1,128
United Healthcare Corp. 90 6,002
UnumProvident Corp. 82 1,394
Wellpoint Health Networks, Inc. 21(a) 1,549
------
21,272
Men's & Boys' Furnishings (0.01%)
V.F. Corp. 40 1,130
Metal Cans & Shipping Containers (0.01%)
Ball Corp. 10 $ 315
Crown Cork & Seal Co., Inc. 44 715
-----
1,030
Metal Mining Services (0.01%)
Freeport-McMoRan Cooper &
Gold, Inc., Class B 56(a) 539
Metalworking Machinery (0.03%)
Black & Decker Corp. 29 1,220
Stanley Works 30 885
-----
2,105
Millwork, Plywood & Structural
Members (0.04%)
Georgia-Pacific Group 90 3,307
Miscellaneous Amusement, Recreation
Services (0.01%)
Harrahs Entertainment, Inc. 44(a) 905
Miscellaneous Business Services (0.07%)
Cendant Corp. 376(a) 5,805
Miscellaneous Chemical Products (0.32%)
Du Pont (E.I.) De Nemours 560 26,565
Miscellaneous Converted Paper
Products (0.29%)
Avery Dennison Corp. 61 4,003
Bemis Co., Inc. 17 626
Minnesota Mining & Mfg. Co. 212 18,338
Pactiv Corp. 58(a) 475
------
23,442
Miscellaneous Food & Kindred
Products (0.16%)
Bestfoods 148 7,437
Campbell Soup Co. 228 5,928
------
13,365
Miscellaneous Furniture & Fixtures (0.05%)
Newell Rubbermaid, Inc. 151 3,803
Miscellaneous General Merchandise
Stores (0.01%)
Consolidated Stores Corp. 38(a) 473
Miscellaneous Manufacturers (0.51%)
Armstrong World Industries, Inc. 13 254
Nacco Industries, Inc. 2 90
Tyco International Ltd. 905 41,573
------
41,917
Miscellaneous Non-Metallic Mineral
Products (0.00%)
Owens Corning 18 327
Miscellaneous Personal Services (0.02%)
H&R Block, Inc. 33 1,380
Miscellaneous Plastics Products, NEC (0.02%)
Sealed Air Corp. 28(a) $ 1,557
Tupperware Corp. 19 359
-----
1,916
Miscellaneous Shopping Goods Stores (0.09%)
Office Depot, Inc. 113(a) 1,193
Staples, Inc. 252(a) 4,804
Toys `R' Us, Inc. 84(a) 1,281
-----
7,278
Miscellaneous Transportation
Equipment (0.01%)
FMC Corp. 10(a) 582
Mortgage Bankers & Brokers (0.01%)
Countrywide Credit Industries, Inc. 38 1,050
Motion Picture Production &
Services (1.59%)
Time Warner, Inc. 688 61,877
Viacom, Inc., Class B 373(a) 20,282
Walt Disney Co. 1,108 47,990
-------
130,149
Motor Vehicles & Equipment (0.99%)
Dana Corp. 56 1,701
Delphi Automotive Systems Corp. 301 5,757
Ford Motor Co. 645 35,273
General Motors Corp. 342 32,020
ITT Industries, Inc. 30 947
Navistar International Corp. 21(a) 735
PACCAR, Inc. 26 1,237
TRW, Inc. 65 3,802
------
81,472
Motor Vehicles, Parts & Supplies (0.02%)
Genuine Parts Co. 61 1,601
Motorcycles, Bicycles & Parts (0.08%)
Harley Davidson, Inc. 162 6,450
Newspapers (0.31%)
Dow Jones & Co., Inc. 48 3,114
Gannett Co. 148 9,453
Knight-Ridder, Inc. 28 1,374
New York Times Co., Class A 90 3,707
Times Mirror Co., Class A 32 3,122
Tribune Co. 126 4,898
------
25,668
Non-Ferrous Rolling & Drawing (0.02%)
Reynolds Metals Co. 21 1,397
Nursing & Personal Care Facilities (0.01%)
Manor Care, Inc. 35(a) 418
Oil & Gas Field Services (0.35%)
Rowan Cos., Inc. 31(a) 866
Schlumberger Ltd. 292 22,356
Transocean Sedco Forex, Inc. 111 5,217
------
28,439
Operative Builders (0.01%)
Centex Corp. 20 482
Pulte Corp. 14 301
783
Opthalmic Goods (0.01%)
Bausch & Lomb, Inc. 19 $ 1,147
Ordnance & Accessories, NEC (0.06%)
Lockheed Martin Corp. 211 5,249
Paints & Allied Products (0.02%)
Sherwin-Williams Co. 57 1,418
Paper Mills (0.27%)
Fort James Corp. 74 1,771
Kimberly Clark Corp. 297 17,245
Potlatch Corp. 9 355
Westvaco Corp. 34 1,050
Willamette Industries, Inc. 38 1,451
------
21,872
Paperboard Containers & Boxes (0.01%)
Temple-Inland, Inc. 19 952
Passenger Transportation
Arrangement (0.02%)
Sabre Group Holdings, Inc. 44 1,537
Personal Credit Institutions (0.62%)
American Express Co. 239 35,865
Capital One Financial Corp. 105 4,594
Household International Corp. 252 10,521
------
50,980
Petroleum Refining (3.30%)
Amerada Hess Corp. 48 3,054
Ashland, Inc. 24 819
Chevron Corp. 350 29,794
Coastal Corp. 113 5,671
Conoco, Inc., Class B 334 8,308
Exxon Mobil Corp. 1851 143,800
Phillips Petroleum Co. 133 6,309
Royal Dutch Petroleum Co. ADR 1148 65,866
Sunoco, Inc. 31 940
Tosco Corp. 49 1,571
Unocal Corp. 128 4,136
-------
270,268
Photographic Equipment &
Supplies (0.23%)
Eastman Kodak Co. 169 9,454
Polaroid Corp. 15 303
Xerox Corp. 355 9,385
------
19,142
Plastic Materials & Synthetics (0.12%)
Hercules, Inc. 36 560
PPG Industries, Inc. 91 4,948
Rohm & Haas Co. 116 4,133
-----
9,641
Plumbing & Heating, Except
Electric (0.07%)
Masco Corp. 239 5,363
Preserved Fruits & Vegetables (0.14%)
Conagra, Inc. 264 4,983
Heinz (H.J.) Co. 189 6,426
------
11,409
Primary Non-Ferrous Metals (0.24%)
Alcan Aluminum Ltd. 116 $ 3,799
Alcoa, Inc. 196 12,715
Engelhard Corp. 43 755
Inco Ltd. 65(a) 1,016
Phelps Dodge Corp. 27 1,249
------
19,534
Professional & Commercial
Equipment (0.00%)
Ikon Office Solutions, Inc. 51 300
Pulp Mills (0.15%)
Boise Cascade Corp. 19 619
Champion International Corp. 33 2,170
International Paper Co. 221 8,122
Mead Corp. 35 1,218
------
12,129
Radio & Television Broadcasting (0.45%)
CBS Corp. 407(a) 23,911
Clear Channel Communications, Inc. 181(a) 13,032
------
36,943
Radio, Television & Computer
Stores (0.25%)
Best Buy, Inc. 107(a) 8,640
Circuit City Stores - Circuit City Group 107 6,293
Tandy Corp. 102 5,814
------
20,747
Railroads (0.25%)
Burlington Northern Sante Fe Corp. 244 5,886
CSX Corp. 75 1,570
Kansas City Southern Industries, Inc. 59 4,241
Norfolk Southern Corp. 205 3,613
Union Pacific Corp. 132 5,561
------
20,871
Research & Testing Services (0.01%)
Quintiles Transnational Corp. 39(a) 558
Residential Building Construction (0.00%)
Kaufman & Broad Home Corp. 16 308
Retail Stores, NEC (0.16%)
Costco Wholesale Corp. 237(a) 12,813
Rubber & Plastics Footwear (0.08%)
Nike, Inc. 147 6,385
Reebok International Ltd. 19(a) 323
-----
6,708
Sanitary Services (0.07%)
Allied Waste Industries, Inc. 64(a) 392
Waste Management, Inc. 332 5,270
-----
5,662
Savings Institutions (1.43%)
Citigroup, Inc. 1,807 107,403
Golden West Financial Corp. 55 1,877
Washington Mutual, Inc. 307 7,848
-------
117,128
Sawmills & Planning Mills (0.01%)
Louisiana Pacific Corp. 36 482
Search & Navigation Equipment (0.05%)
Raytheon Co., Class B 181 $ 4,016
Security & Commodity Services (0.07%)
Franklin Resources, Inc. 132 4,257
Price (T. Rowe) Associates, Inc. 41 1,563
-----
5,820
Security Brokers & Dealers (1.17%)
Bear Stearns Cos., Inc. 40 1,715
Charles Schwab Corp. 439 19,535
Lehman Brothers Holdings, Inc. 63 5,170
Merrill Lynch & Co., Inc. 197 20,082
Morgan Stanley Dean Witter & Co. 612 46,971
Paine Webber Group, Inc. 49 2,150
------
95,623
Soap, Cleaners & Toilet Goods (0.88%)
Alberto-Culver Co., Class B 19 449
Avon Products, Inc. 128 5,312
Clorox Co. 126 4,630
Colgate-Palmolive Co. 311 17,766
Ecolab, Inc. 44 1,719
Procter & Gamble Co. 705 42,036
------
71,912
Special Industry Machinery (0.51%)
Applied Materials, Inc. 410(a) 41,743
Milacron, Inc. 12 219
------
41,962
Sugar & Confectionery Products (0.10%)
Hershey Foods Corp. 74 3,358
Wrigley (Wm.) Jr. Co. 62 4,487
-----
7,845
Surety Insurance (0.04%)
MBIA, Inc. 34 1,681
MGIC Investment Corp. 36 1,721
-----
3,402
Telephone Communication (5.63%)
AT&T Corp. 1,713 79,976
Alltel Corp. 167 11,126
Bell Atlantic Corp. 830 49,178
BellSouth Corp. 1,008 49,077
Centurytel, Inc. 48 1,176
Global Crossing Ltd. 417(a) 13,136
GTE Corp. 520 35,230
MCI Worldcom, Inc. 1,521(a) 69,110
SBC Communications, Inc. 1,828 80,089
Sprint Corp. 465 28,597
Sprint PCS Group 460(a) 25,300
U.S. West, Inc. 270 19,221
-------
461,216
Tires & Inner Tubes (0.02%)
Goodyear Tire & Rubber Co. 53 1,464
Toys & Sporting Goods (0.03%)
Hasbro, Inc. 61 972
Mattel, Inc. 144 1,764
-----
2,736
Variety Stores (0.06%)
Dollar General Corp. 141 $ 3,225
Kmart Corp. 169(a) 1,373
-----
4,598
Water Transportation of Passengers (0.10%)
Carnival Corp. 330 8,209
Women's & Misses' Outerwear (0.01%)
Liz Claiborne, Inc. 20 926
Women's Clothing Stores (0.06%)
Limited, Inc. 113 5,106
Total Common Stocks 6,486,596
Principal
Amount Value
Commercial Paper (19.12%)
Federal & Federally Sponsored Credit (19.12%)
Investment in Joint Trade Account,
Federal Home Loan Bank System;
5.88%; 5/1/2000 $1,567,199 $1,566,688
Total Portfolio Investments (98.26%) 8,053,284
Cash and receivables, net of liabilities (1.74%) 142,197
Total Net Assets (100.00%) $8,195,481
Contract Opening Current Unrealized
Type Commitment Market Value Market Value Gain(Loss)
Futures Contracts
4 S&P 500 Buy $1,439,542 $1,460,000 $20,458
June 2000
Futures
(a) Non-income producing security - No dividend paid during the period.
(b) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end the value of
securities pledged amounted to $110,075.
PRINCIPAL MIDCAP FUND, INC.
Shares
Held Value
Common Stocks (93.00%)
Accounting, Auditing, &
Bookkeeping (1.93%)
Paychex, Inc. 166,714 $ 8,773,324
Commercial Banks (4.65%)
Associated Banc-Corp. 156,535 4,001,426
North Fork Bancorp., Inc. 371,487 6,013,446
Peoples Heritage Financial Group, Inc.188,800 2,466,200
State Street Corp. 89,000 8,621,875
----------
21,102,947
Communications Equipment (4.19%)
Comverse Technology, Inc. 155,200(a) 13,841,900
Metricom, Inc. 62,000(a) 1,739,875
Phone.com, Inc. 40,500(a) 3,402,000
----------
18,983,775
Communications Services, NEC (1.48%)
Leap Wireless International, Inc. 39,000(a) 2,003,625
NTL, Inc. 61,750(a) 4,723,875
---------
6,727,500
Computer & Data Processing
Services (17.68%)
At Home Corp. 203,000(a) 3,780,875
BMC Software, Inc. 134,000(a) 6,272,875
Brocade Communications Systems, Inc. 65,500(a) 8,122,000
Cadence Design Systems, Inc. 159,200(a) 2,676,550
Citrix Systems, Inc. 138,200(a) 8,438,837
Data Return Corp. 62,100(a) 1,525,331
Digex, Inc. 76,000(a) 5,928,000
Entrust Technologies, Inc. 57,000(a) 2,800,125
IMS Health, Inc. 448,400 7,650,825
Intuit, Inc. 113,000(a) 4,060,938
Organic, Inc. 52,800(a) 792,000
Sungard Data Systems, Inc. 145,900(a) 5,042,669
Symantec Corp. 95,000(a) 5,931,562
Synopsys, Inc. 79,900(a) 3,355,800
Veritas Software Corp. 128,825(a) 13,818,494
----------
80,196,881
Computer & Office Equipment (1.82%)
Emulex Corp. 40,500(a) 1,837,687
Lexmark International 54,500(a) 6,431,000
---------
8,268,687
Crude Petroleum & Natural Gas (2.69%)
Devon Energy Corp. 135,000 6,505,312
Newfield Exploration Co. 140,000(a) 5,687,500
----------
12,192,812
Drugs (5.82%)
Biochem Pharma Inc. 104,000(a) 2,392,000
Biogen, Inc. 51,000(a) 2,999,437
Forest Laboratories, Inc. 55,900(a) 4,699,094
Genzyme Corp. - General Division 187,200 9,137,700
Watson Pharmaceuticals 159,200(a) 7,154,050
----------
26,382,281
Electrical Industrial Apparatus (0.93%)
American Power Conversion 119,400(a) $4,216,312
Electronic Components &
Accessories (11.87%)
Adaptec, Inc. 187,000(a) 5,049,000
Celestica, Inc. 30,188(a) 1,647,133
Cobalt Networks, Inc. 45,763(a) 1,447,255
E-Tek Dynamics, Inc. 22,500(a) 4,606,875
Flextronics International, Ltd. 56,738(a) 3,985,844
Integrated Device Technology, Inc. 78,000(a) 3,748,875
Jabil Circuit, Inc. 274,000(a) 11,216,875
Maxim Integrated Products, Inc. 140,600(a) 9,112,637
Novellus Systems, Inc. 111,600(a) 7,442,325
Qlogic Corp. 55,500(a) 5,567,344
----------
53,824,163
Fabricated Rubber Product, NEC (0.42%)
Weatherford International 47,300(a) 1,921,562
General Industrial Machinery (0.84%)
Pentair, Inc. 99,200 3,794,400
Hospitals (0.93%)
Universal Health Services, Inc., Class B 76,800(a) 4,204,800
Hotels & Motels (3.90%)
Four Seasons Hotel, Inc. 156,100 8,741,600
Marriott International, Inc., Class A 280,100 8,963,200
----------
17,704,800
Household Appliance Stores (1.31%)
Williams Sonoma, Inc. 172,000(a) 5,955,500
Investment Offices (1.05%)
Amvescap PLC 66,820 4,777,630
Measuring & Controlling Devices (5.05%)
ISCO, Inc. 1(a) 3
Millipore Corp. 128,400 9,204,675
Roper Industries, Inc. 198,300 6,246,450
Teradyne, Inc. 67,800(a) 7,458,000
----------
22,909,128
Medical Instruments & Supplies (2.83%)
Becton, Dickinson & Co. 126,700 3,246,688
Guidant Corp. 167,000(a) 9,581,625
----------
12,828,313
Medical Services & Health Insurance (0.47%)
AFLAC, Inc. 44,000 2,147,750
Miscellaneous Business Services (3.07%)
Cendant Corp. 255,000(a) 3,936,563
Convergys Corp. 227,200(a) 9,996,800
----------
13,933,363
Miscellaneous Personal Services (0.41%)
H&R Block, Inc. 45,000 1,881,563
Miscellaneous Shopping Goods
Stores (1.03%)
Staples, Inc. 244,000(a) 4,651,250
Periodicals (0.23%)
Primedia, Inc. 50,000(a) $1,043,750
Radio & Television Broadcasting (0.76%)
USA Networks, Inc. 150,000(a) 3,450,000
Savings Institutions (1.95%)
TCF Financial Corp. 377,400 8,821,725
Search & Navigation Equipment (1.05%)
SCI Systems, Inc. 89,000(a) 4,739,250
Security Brokers & Dealers (1.60%)
Lehman Brothers Holdings, Inc. 69,000 5,662,313
WIT Capital Group, Inc. 150,000(a) 1,584,375
---------
7,246,688
Telephone Communication (10.90%)
Broadwing, Inc. 158,900 4,498,856
Dobson Communications Corp. A 137,000(a) 3,510,625
Intermedia Communications, Inc. 275,900(a) 11,242,925
IXnet, Inc. 90,000(a) 3,318,750
McLeodUSA, Inc. 379,662(a) 9,491,550
RCN Corp. 118,100(a) 3,380,613
Telephone and Data Systems 86,000 8,772,000
Western Wireless Corp. 105,000 5,217,188
----------
49,432,507
Variety Stores (2.14%)
Family Dollar Stores 508,500 9,693,281
Total Common Stocks 421,805,942
Principal
Amount Value
Commercial Paper (6.82%)
Business Credit Institutions (0.72%)
American Express Credit Corp.;
5.96%; 5/2/2000 $ 2,838,589 $ 2,838,590
6.02%; 5/3/2000 414,722 414,722
---------
3,253,312
Personal Credit Institutions (6.10%)
Investment in Joint Trade Account,
Associates First Capital Corp.;
6.04%; 5/1/2000 19,896,107 19,896,107
Ford Motor Credit Co.;
5.85%; 5/1/2000 7,782,470 7,782,470
----------
27,678,577
Total Commercial Paper 30,931,889
Total Portfolio Investments (99.82%) 452,737,831
Liabilities, net of cash, receivables and
other assets (0.18%) 829,635
Total Net Assets (100.00%) $453,567,466
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL PARTNERS AGGRESSIVE GROWTH
FUND, INC.
Shares
Held Value
Common Stocks (96.69%)
Advertising (0.92%)
Doubleclick, Inc. 1,800(a) $ 136,575
Omnicom Group, Inc. 4,700 427,994
-------
564,569
Aircraft & Parts (6.15%)
General Dynamics Corp. 14,500 848,250
Textron, Inc. 9,400 582,212
United Technologies Corp. 37,600 2,338,250
---------
3,768,712
Bakery Products (0.45%)
Keebler Foods Co. 8,700 273,506
Beverages (1.72%)
Anheuser-Busch Cos., Inc. 8,900 628,006
PepsiCo, Inc. 11,600 425,575
---------
1,053,581
Cable & Other Pay TV Services (2.34%)
Comcast Corp. 13,400(a) 536,837
MediaOne Group, Inc. 10,200(a) 771,375
TV Guide, Inc., Class A 4,200(a) 125,212
---------
1,433,424
Combination Utility Services (0.29%)
Montana Power Co. 4,000 176,250
Commercial Banks (2.26%)
Bank of New York Co., Inc. 21,500 882,844
Fleet Boston Financial Corp. 14,200 503,213
---------
1,386,056
Communications Equipment (5.43%)
Ciena Corp. 2,100(a) 259,612
Juniper Networks, Inc. 1,150(a) 244,591
Lucent Technologies, Inc. 7,400 460,187
Motorola, Inc. 9,200 1,095,375
Nortel Networks Corp. 9,400 1,064,550
QUALCOM, Inc. 1,900(a) 206,031
---------
3,330,346
Communications Services, NEC (0.88%)
Crown Castle International Corp. 7,500(a) 287,812
Nextel Communications, Inc. 1,800(a) 196,987
Spectrasite Holdings, Inc. 2,600(a) 54,600
-------
539,399
Computer & Data Processing
Services (5.87%)
Inktomi Corp. 1,700(a) 261,693
Microsoft Corp. 21,800(a) 1,520,550
Oracle Systems Corp. 9,100(a) 727,431
Sun Microsystems, Inc. 8,000(a) 735,500
Verisign, Inc. 500(a) 69,687
Yahoo!, Inc. 2,200(a) 286,550
---------
3,601,411
Computer & Office Equipment (5.89%)
Cisco Systems, Inc. 40,100(a) $2,780,058
EMC Corp. 1,400(a) 194,513
International Business Machines Corp. 4,400 491,150
Seagate Technology, Inc. 2,900(a) 147,356
---------
3,613,077
Consumer Products (0.44%)
Philip Morris Cos., Inc. 12,400 271,250
Department Stores (1.09%)
Wal-Mart Stores, Inc. 12,100 670,038
Drugs (12.62%)
Abbott Laboratories 5,100 196,031
American Home Products Corp. 12,800 719,200
Amgen, Inc. 4,350(a) 243,600
Bristol-Myers Squibb Co. 14,500 760,344
Johnson & Johnson 9,000 742,500
Lilly (Eli) & Co. 2,700 208,744
Medimmune, Inc. 1,000(a) 159,938
Merck & Co., Inc. 12,100 840,950
Pfizer, Inc. 25,000 1,053,125
Pharmacia Corp. 13,368 667,564
Tularik, Inc. 1,500(a) 42,375
Warner-Lambert Co. 18,500 2,105,531
---------
7,739,902
Eating & Drinking Places (0.18%)
Brinker International, Inc. 3,400 108,375
Electronic Components &
Accessories (8.72%)
Broadcom Corp., Class A 1,000(a) 172,375
DDI Corp. 7,600(a) 114,000
Infineon Technologies AG 2,900(a) 196,838
Intel Corp. 19,800 2,510,887
Intersil Holding Corp. 5,100(a) 178,500
Maxim Integrated Products, Inc. 11,200(a) 725,900
PMC Sierra, Inc. 500(a) 95,938
Texas Instruments, Inc. 8,300 1,351,863
---------
5,346,301
Federal & Federally Sponsored
Credit (0.90%)
Federal National Mortgage Association 9,100 548,844
Fire, Marine & Casualty Insurance (1.02%)
American International Group, Inc. 5,700 625,219
Glass & Glassware, Pressed or
Blown (0.61%)
Corning, Inc. 1,900 375,250
Grain Mill Products (0.42%)
Quaker Oats Co. 4,000 260,750
Groceries & Related Products (0.44%)
Safeway, Inc. 6,100(a) 269,163
Hospitals (0.32%)
Columbia/HCA Healthcare Corp. 7,000 199,063
Household Appliances (4.46%)
General Electric Co. 17,400 $2,736,150
Jewelry, Silverware & Plated Ware (0.26%)
Tiffany & Co. 2,200 159,913
Lumber & Other Building
Materials (2.67%)
Home Depot, Inc. 29,200 1,637,025
Measuring & Controlling Devices (1.46%)
JDS Uniphase Corp. 6,800(a) 705,500
PE Corp. - PE Biosystems Group 3,200 192,000
-------
897,500
Miscellaneous Business Services (0.55%)
eBay, Inc. 2,100(a) 334,294
Miscellaneous Manufacturers (5.81%)
Tyco International Ltd. 77,600 3,564,750
Motion Picture Production &
Services (3.87%)
AT&T Corp. - Liberty Media Group,
Class A 17,450(a) 871,409
Time Warner, Inc. 16,700 1,501,956
---------
2,373,365
Motor Vehicles & Equipment (0.68%)
General Motors Corp., Class H 4,300(a) 414,144
Personal Credit Institutions (1.47%)
American Express Co. 6,000 900,375
Radio & Television Broadcasting (4.97%)
American Tower Corp., Class A 12,000(a) 558,000
AmFm, Inc. 7,800(a) 517,725
CBS Corp. 7,000(a) 411,250
Clear Channel Communications 21,700(a) 1,562,400
---------
3,049,375
Real Estate Operators & Lessors (0.34%)
Pinnacle Holdings, Inc. 3,700(a) 207,894
Research & Testing Services (0.03%)
Luminex Corp. 900(a) 16,763
Retail Stores, NEC (1.71%)
Costco Wholesale Corp. 19,400(a) 1,048,812
Savings Institutions (1.79%)
Citigroup, Inc. 18,500 1,099,594
Soap, Cleaners & Toilet Goods (0.61%)
Procter & Gamble Co. 6,300 375,638
Special Industry Machinery (2.13%)
Applied Materials, Inc. 12,800(a) 1,303,200
Telephone Communication (3.98%)
AT&T Wireless Group 5,100(a) 162,244
BellSouth Corp. 3,000 146,062
GTE Corp. 13,700 928,175
IXnet, Inc. 5,900(a) 217,562
Nextlink Communications 800(a) 67,450
Sprint Corp. 14,900 916,350
---------
2,437,843
Women's Accessory & Specialty
Stores (0.11%)
Intimate Brands, Inc. 1,700 65,450
Women's Clothing Stores (0.83%)
Limited, Inc. 11,200 506,100
Total Portfolio Investments (96.69%) 59,282,673
Cash and receivables, net of liabilities (3.31%) 2,029,528
Total Net Assets (100.00%) $61,312,201
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL PARTNERS LARGECAP GROWTH
FUND, INC.
Shares
Held Value
Common Stocks (93.93%)
Communications Equipment (5.99%)
Echostar Communications Corp. 2,950(a) $ 187,878
Juniper Networks, Inc. 720 153,135
-------
341,013
Communications Services, NEC (2.40%)
Nextel Communications, Inc. 1,250(a) 136,797
Computer & Data Processing
Services (10.48%)
Oracle Systems Corp. 2,400(a) 191,850
Siebel Systems, Inc. 840(a) 103,215
Sun Microsystems, Inc. 1,810(a) 166,407
Veritas Software Corp. 1,260(a) 135,155
-------
596,627
Computer & Office Equipment (9.82%)
Cisco Systems, Inc. 5,260(a) 364,666
EMC Corp. 1,400(a) 194,512
-------
559,178
Construction & Related Machinery (1.97%)
Baker Hughes, Inc. 3,530 112,298
Department Stores (4.22%)
Kohl's Corp. 5,010(a) $ 240,480
Drugs (2.73%)
Pfizer, Inc. 3,690 155,441
Electronic Components &
Accessories (16.38%)
Broadcom Corp., Class A 890(a) 153,414
Intel Corp. 1,790 226,994
PMC Sierra, Inc. 860(a) 165,012
Stmicroelectronics NV 1,080 204,863
Texas Instruments 1,120 182,420
-------
932,703
Glass & Glassware, Pressed or
Blown (3.05%)
Corning, Inc. 880 173,800
Groceries & Related Products (2.61%)
Safeway, Inc. 3,370(a) 148,701
Household Appliances (2.82%)
General Electric Co. 1,020 160,395
Lumber & Other Building
Materials (4.51%)
Home Depot, Inc. 4,580 256,766
Measuring & Controlling Devices (2.31%)
JDS Uniphase Corp. 1,270(a) 131,763
Medical Instruments & Supplies (2.69%)
Medtronic, Inc. 2,950 153,216
Motion Picture Production &
Services (5.31%)
AT&T Corp. - Liberty Media Group,
Class A 6,050(a) 302,122
Oil & Gas Field Services (2.38%)
Schlumberger Ltd. 1,770 135,516
Retail Stores, NEC (5.53%)
Costco Wholesale Corp. 5,820(a) 314,644
Telephone Communication (8.73%)
AT&T Wireless Group 600(a) 19,087
Nokia Corp. ADR, Class A 5,240 298,025
Sprint PCS Group 3,270(a) 179,850
-------
496,962
Total Portfolio Investments (93.93%) 5,348,422
Cash and receivables, net of liabilities (6.07%) 345,888
Total Net Assets (100.00%) $5,694,310
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL PARTNERS MIDCAP GROWTH FUND, INC.
Shares
Held Value
Common Stocks (93.14%)
Accounting, Auditing, &
Bookkeeping (1.13%)
Paychex, Inc. 1,290 $ 67,886
Advertising (4.23%)
Doubleclick, Inc. 650(a) 49,319
Getty Images, Inc. 1,010(a) 30,679
Interpublic Group of Cos., Inc. 1,310 53,710
TMP Worldwide, Inc. 970(a) 63,414
Young & Rubicam, Inc. 1,010 56,244
-------
253,366
Air Transportation, Scheduled (0.86%)
Delta Air Lines, Inc. 980 51,695
Cable & Other Pay TV Services (0.39%)
TV Guide, Inc., Class A 790(a) 23,552
Commercial Banks (0.77%)
Northern Trust Corp. 720 46,170
Communications Equipment (5.72%)
Ciena Corp. 650(a) 80,356
Network Appliance, Inc. 1,100(a) 81,331
Phone.com, Inc. 340(a) 28,560
Powerwave Technologies, Inc. 150(a) 31,209
RF Micro Devices, Inc. 250(a) 26,016
Scientific-Atlanta, Inc. 810 52,701
Terayon Communication Systems, Inc. 460(a) 42,780
-------
342,953
Communications Services, NEC (1.48%)
Nextel Communications, Inc. 810 88,644
Computer & Data Processing
Services (23.17%)
Adobe Systems, Inc. 230 27,816
Aether Systems, Inc. 270(a) 44,951
Agile Software Corp. 1,210(a) 44,846
Art Technology Group, Inc. 500(a) 30,375
BEA Systems, Inc. 1,080(a) 52,110
Bisys Group, Inc. 490(a) 30,656
Brocade Communications Systems, Inc. 240(a) 29,760
Cacheflow, Inc. 140(a) 10,395
Check Point Software Technologies, Ltd. 150(a) 25,950
Checkfree Holdings Corp. 400(a) 20,325
CMGI, Inc. 710(a) 50,588
Digex, Inc. 380(a) 29,640
Extreme Networks, Inc. 620(a) 35,728
Fiserv, Inc. 950(a) 43,641
I 2 Technologies, Inc. 230(a) 29,728
Infospace.com, Inc. 930(a) 66,786
Inktomi Corp. 430(a) 66,193
Keynote Systems, Inc. 230(a) 10,321
Looksmart, Ltd. 1,040(a) 24,960
Mercury Interactive Corp. 490(a) 44,100
Micromuse, Inc. 460(a) $ 45,138
Network Solutions, Inc. 410(a) 60,680
Peregrine Systems, Inc. 910(a) 21,897
Portal Software, Inc. 750(a) 34,406
Priceline.com, Inc. 1,040(a) 65,780
Proxicom, Inc. 600(a) 20,513
Quest Software, Inc. 450(a) 16,959
Redback Networks 450(a) 35,719
Siebel Systems, Inc. 550(a) 67,581
Verisign, Inc. 410(a) 57,143
Veritas Software Corp. 1,820(a) 195,222
Vignette Corp. 1,010(a) 48,668
---------
1,388,575
Computer & Office Equipment (2.80%)
Comverse Technology, Inc. 620(a) 55,296
Electronics for Imaging, Inc. 490(a) 25,603
Lexmark International 520(a) 61,359
Safeguard Scientifics, Inc. 610(a) 25,468
-------
167,726
Construction & Related Machinery (0.90%)
Cooper Cameron Corp. 720(a) 54,000
Department Stores (1.05%)
Kohl's Corp. 1,310(a) 62,880
Drugs (2.19%)
Forest Laboratories, Inc. 310(a) 26,059
IDEC Pharmaceuticals 290(a) 18,560
Medimmune, Inc. 540(a) 86,367
-------
130,986
Drugs, Proprietaries & Sundries (0.42%)
Shire Pharmaceuticals GR - ADR 630(a) 25,358
Electric Services (0.99%)
AES Corp. 660(a) 59,359
Electrical Industrial Apparatus (0.37%)
American Power Conversion 620(a) 21,894
Electronic Components &
Accessories (18.55%)
Altera Corp. 810(a) 82,823
Analog Devices, Inc. 1,210(a) 92,943
Applied Micro Circuits Corp. 650(a) 83,769
Broadcom Corp., Class A 540(a) 93,083
Celestica, Inc. 610(a) 33,283
Cree, Inc. 290(a) 42,195
Globespan, Inc. 600(a) 57,000
LSI Logic Corp. 1,130(a) 70,625
Linear Technology Corp. 770 43,986
Microchip Technology, Inc. 370(a) 22,963
Micron Technology, Inc. 410(a) 57,093
National Semiconductor Corp. 490(a) 29,768
PMC Sierra, Inc. 560(a) 107,450
SCG Holding Corp 970(a) 21,279
SDL, Inc. 370(a) 72,150
Silicon Laboratories, Inc. 310(a) 26,970
Triquint Semiconductor Inc. 280(a) 28,788
Vitesse Semiconductor Corp. 890(a) 60,575
Xilinx, Inc. 1,160(a) 84,969
---------
1,111,712
Furniture & Home Furnishings
Stores (0.66%)
Bed Bath & Beyond, Inc. 1,070(a) $ 39,256
Gas Production & Distribution (0.64%)
Dynegy, Inc. 590 38,608
Grain Mill Products (0.77%)
Quaker Oats Co. 710 46,283
Groceries & Related Products (0.91%)
SYSCO Corp. 1,450 54,556
Hospitals (1.50%)
Health Management Association, Inc. 3,070(a) 48,928
Tenet Healthcare Corp. 1,600(a) 40,800
------
89,728
Jewelry, Silverware & Plated Ware (0.64%)
Tiffany & Co. 530 38,524
Measuring & Controlling Devices (7.27%)
Allergan, Inc. 630 37,091
JDS Uniphase Corp. 2,180(a) 226,175
KLA-Tencor Corp. 600(a) 44,925
PE Corp. - PE Biosystems Group 960 57,600
Tektronix, Inc. 450 26,044
Waters Corp. 460(a) 43,700
-------
435,535
Medical Instruments & Supplies (1.17%)
Becton, Dickinson & Co. 1,190 30,494
Minimed, Inc. 320(a) 39,340
------
69,834
Miscellaneous Business Services (0.70%)
Atmel Corp. 860(a) 42,086
Miscellaneous Converted Paper
Products (0.85%)
Avery Dennison Corp. 780 51,188
Miscellaneous Food & Kindred
Products (0.35%)
Starbucks Corp. 690(a) 20,862
Miscellaneous Plastics Products, NEC (0.66%)
Sealed Air Corp. 710(a) 39,494
Miscellaneous Shopping Goods
Stores (0.49%)
Dollar Tree Stores, Inc. 510(a) 29,516
Motor Vehicles & Equipment (0.90%)
SPX Corp. 490(a) 53,839
Personal Credit Institutions (0.60%)
Capital One Financial Corp. 820 35,875
Producers, Orchestras, And
Entertainers (0.47%)
Westwood One, Inc. 800(a) $ 28,300
Professional & Commercial
Equipment (0.46%)
Sybron International Corp. - Wisconsin 880(a) 27,390
Radio & Television Broadcasting (1.29%)
American Tower Corp., Class A 710(a) 33,015
Hispanic Broadcasting Corp. 440(a) 44,468
------
77,483
Radio, Television & Computer
Stores (1.85%)
Best Buy, Inc. 830(a) 67,023
Circuit City Stores - Circuit City Group 750 44,109
-------
111,132
Security Brokers & Dealers (0.64%)
Lehman Brothers Holdings, Inc. 470 38,568
Special Industry Machinery (0.54%)
LAM Research Corp. 700(a) 32,112
Telephone Communication (4.76%)
Broadwing, Inc. 1,380 39,071
Flag Telecom Holdings Ltd. 1,770(a) 34,515
McLeodUSA, Inc. 1,650(a) 41,250
Metromedia Fiber Networks, Inc. 1,450(a) 44,769
Nextlink Communications 820(a) 69,136
Universal Access, Inc. 590(a) 12,095
Voicestream Wireless Corp. 450(a) 44,550
-------
285,386
Total Common Stocks 5,582,311
Cash, receivables and other assets,
net of liabilities (6.86%) 411,154
Total Net Assets (100.00%) $5,993,465
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL REAL ESTATE FUND, INC.
Shares
Held Value
Common Stocks (93.82%)
Apartment REITs (22.32%)
Apartment Investment & Management Co. 13,800 $ 548,550
Archstone Communities Trust 7,100 153,537
Avalonbay Communities, Inc. 14,087 551,154
BRE Properties, Inc. 14,000 391,125
Charles E. Smith Residential
Realty, Inc. 8,200 309,038
Essex Property Trust, Inc. 8,050 310,931
Equity Residential Properties Trust 16,800 764,400
Home Properties of New York, Inc. 10,600 296,800
---------
3,325,535
Diversified REITs (2.53%)
Excel Legacy Corp. 4,000(a) 11,500
Vornado Realty Trust 10,600 365,700
-------
377,200
Factory Outlet REITs (0.37%)
Chelsea GCA Realty, Inc. 1,700 55,463
Hotel REITs (6.25%)
Hospitality Properties Trust 6,600 146,850
Lasalle Hotel Properties 7,700 116,462
Meristar Hospitality Corp. 11,300 223,175
Mirage Resorts, Inc. 21,800(a) 444,175
-------
930,662
Mall REITs (8.66%)
CBL & Associates Properties, Inc. 12,700 297,656
General Growth Properties, Inc. 13,300 437,238
Simon Property Group, Inc. 21,900 555,713
---------
1,290,607
Manufactured Housing REITs (0.50%)
Chateau Properties 2,836 73,736
Mortgage, Mixed Use &
Miscellaneous REITs (0.57%)
Eastgroup Properties, Inc. 4,105 85,435
Office & Industrial Reits (36.84%)
Arden Realty Group, Inc. 17,300 384,925
Bedford Property Investors 10,900 192,112
Boston Properties, Inc. 8,400 292,950
Centerpoint Properties Corp. 8,400 301,350
Cornerstone Properties 38,400 700,800
Duke-Weeks Realty Corp. 20,900 453,269
Equity Office Properties Trust 16,200 440,438
First Industrial Realty Trust, Inc. 4,700 141,294
Kilroy Realty Corp. 4,000 96,500
Liberty Property Trust 13,800 341,550
Mission West Properties, Inc. 18,500 154,938
Prologis Trust 33,750 664,453
Reckson Associates Realty Corp.,
Class B 12,018 258,387
SL Green Realty Corp. 11,500 295,406
Spieker Properties, Inc. 17,350 768,822
---------
5,487,194
Self Storage REITs (2.81%)
Public Storage, Inc. 7,700 $ 172,287
Storage USA, Inc. 8,400 245,700
-------
417,987
Shopping Center REITs (12.97%)
AMB Property Corp. 24,500 540,531
Developers Diversified Realty Corp. 7,100 107,831
First Washington Realty 4,800 99,900
JDN Realty Corp. 15,300 148,219
Kimco Realty Corp. 11,700 465,806
Pan Pacific Retail Properties, Inc. 13,900 264,100
Regency Realty Corp. 7,600 168,150
Weingarten Realty Investors 3,410 138,105
---------
1,932,642
Total Common Stocks 13,976,461
Principal
Amount Value
Commercial Paper (4.49%)
Personal Credit Institutions (4.49%)
Investment in Joint Trade Account,
Associates First Capital Corp.;
6.04%; 5/1/2000 $668,859 $ 668,859
Total Portfolio Investments (98.31%) 14,645,320
Cash and receivables, net of liabilities (1.69%) 251,134
Total Net Assets (100.00%) $14,896,454
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL SMALLCAP FUND, INC.
Shares
Held Value
Common Stocks (97.23%)
Advertising (0.77%)
R.H. Donnelley Corp. 39,700 $ 794,000
Apparel, Piece Goods, & Notions (0.75%)
Mens Wearhouse, Inc. 36,000(a) 771,750
Beverages (0.67%)
Canandaigua Brands, Inc.; Class A 13,700(a) 690,137
Blast Furnace & Basic Steel
Products (1.78%)
Carpenter Technology Corp. 28,600 573,788
Quanex Corp. 32,800 537,100
Texas Industries, Inc. 22,600 737,325
---------
1,848,213
Business Credit Institutions (0.88%)
ePlus, Inc. 39,000 916,500
Commercial Banks (0.78%)
Cullen Frost Bankers 33,000 814,687
Commercial Printing (0.71%)
Banta Corp. 37,900 741,419
Communications Equipment (6.21%)
Antec Corp. 23,800(a) 1,279,250
Aspect Communications, Inc. 26,700(a) 947,850
Harmonic, Inc. 13,500(a) 996,469
IPC Information Systems, Inc. 5,000(a) 835,000
Intervoice-Brite, Inc. 56,000(a) 892,500
Metricom, Inc. 25,300(a) 709,981
Natural Microsystems Corp. 12,000(a) 781,500
Titan Corp. 1(a) 32
---------
6,442,582
Computer & Data Processing
Services (14.47%)
AVT Corporation 76,500(a) 846,281
Bindview Dev. Corp. 93,400(a) 753,038
Caldera Systems, Inc. 73,410(a) 954,330
Ciber, Inc. 45,500(a) 821,844
F5 Networks Inc. 15,000 700,312
Homestore.com, Inc. 34,000(a) 620,500
Information Resource Engineering, Inc. 35,200 906,400
Interactive Intelligence, Inc. 33,700(a) 825,650
Internet Pictures Corp. 47,367(a) 746,030
Marimba, Inc. 33,700(a) 667,681
Matrixone, Inc. 36,100(a) 1,191,300
Metro Information Services, Inc. 26,000(a) 354,250
Netsolve, Inc. 30,000(a) 885,000
Netpliance, Inc. 35,400 318,600
OTG Software, Inc. 2,590(a) 56,980
Organic, Inc. 67,000(a) 1,005,000
Quadramed Corp. 130,000(a) $ 507,813
Quintus Corp. 76,700(a) 752,619
SPSS, Inc. 35,400(a) 1,008,900
Sonicwall, Inc. 18,000(a) 1,089,000
----------
15,011,528
Computer & Office Equipment (2.23%)
Emulex Corp. 17,400(a) 789,525
Micros Systems, Inc. 15,400(a) 619,850
Xircom, Inc. 23,000(a) 907,063
---------
2,316,438
Crude Petroleum & Natural Gas (1.19%)
Barrett Resources Corp. 11,700(a) 371,475
Basin Exploration, Inc. 61,700 863,800
---------
1,235,275
Drugs (3.61%)
Geltex Pharmaceuticals, Inc. 39,000(a) 621,563
Inhale Therapeutic Systems, Inc. 17,750(a) 1,098,281
Matritech, Inc. 202,900(a) 1,483,706
Sangstat Medical Corp. 19,000(a) 546,250
---------
3,749,800
Drugs, Proprietaries & Sundries (1.76%)
Amerisource Health Corp. - Class A 52,500(a) 1,050,000
Bindley Western Industries, Inc. 44,400 774,225
---------
1,824,225
Eating & Drinking Places (3.51%)
CEC Entertainment, Inc. 33,000(a) 990,000
Morton's Restaurant Group, Inc. 26,900(a) 511,100
P.F. Chang's China Bistro, Inc. 18,000(a) 630,000
Papa John's International, Inc. 15,300(a) 420,750
Rubio's Restaurants, Inc. 78,000(a) 594,750
Ruby Tuesday, Inc. 23,600 494,125
---------
3,640,725
Electric Services (1.53%)
Cleco Corp. 22,500 774,844
Idacorp, Inc. 22,000 811,250
---------
1,586,094
Electronic Components &
Accessories (6.99%)
Align-Rite International 37,600(a) 904,750
Cobalt Networks, Inc. 31,800(a) 1,005,675
Corcord Communication 41,400(a) 1,159,200
Galileo Technology ADR 48,000(a) 843,000
Hadco Corp. 15,600 1,284,075
Hutchinson Technology, Inc. 52,200(a) 665,550
International Rectifier Corp. 28,300(a) 1,390,238
---------
7,252,488
Elementary & Secondary
Schools (0.74%)
ITT Educational Services 43,000(a) 768,625
Engines & Turbines (0.78%)
Briggs & Stratton Corp. 21,100 809,712
Fabricated Structural Metal
Products (0.16%)
Circor International, Inc. 14,750(a) 168,703
Family Clothing Stores (1.40%)
Abercrombie & Fitch Co. 66,000(a) $ 726,000
American Eagle Outfitters, Inc. 43,000(a) 731,000
---------
1,457,000
Fire, Marine & Casualty Insurance (1.54%)
Horace Mann Educators 49,800 725,212
Selective Insurance Group, Inc. 46,100 873,019
---------
1,598,231
Footwear, Except Rubber (0.77%)
Wolverine World Wide, Inc. 66,800 801,600
Gas Production & Distribution (1.48%)
Peoples Energy Corp. 24,800 770,350
Piedmont Natural Gas Co. 27,100 765,575
---------
1,535,925
General Industrial Machinery (2.37%)
Applied Science & Technology 39,300(a) 1,068,469
Kaydon Corp. 31,200 729,300
Regal-Beloit Corp. 36,500 659,281
---------
2,457,050
Grain Mill Products (0.61%)
Ralcorp Holdings, Inc. 46,100(a) 636,756
Horticultural Specialties (0.51%)
Hines Horticulture, Inc. 66,400(a) 529,125
Hospitals (1.04%)
Universal Health Services, Inc.,
Class B 19,800 1,084,050
Household Audio & Video
Equipment (0.71%)
Harman International 11,300 738,737
Jewelry, Silverware & Plated
Ware (0.80%)
Jostens, Inc. 33,600 829,500
Laundry, Cleaning, & Garment
Services (0.62%)
Unifirst Corp. 66,600 641,025
Life Insurance (0.75%)
MONY Group, Inc. 25,200 779,625
Measuring & Controlling Devices (0.84%)
Integrated Measurement Systems, Inc. 44,400(a) 868,575
Meat Products (0.68%)
Michael Foods, Inc. 33,100 709,581
Medical Instruments & Supplies (3.72%)
ADAC Laboratories 64,100(a) 961,500
Focal, Inc. 120,000(a) 723,750
Hologic, Inc. 104,600(a) 817,188
Novoste Corp. 33,000(a) 1,353,000
---------
3,855,438
Medical Services & Health
Insurance (0.80%)
Foundation Health Systems, Inc. 82,000(a)$ 825,125
Men's & Boy's Clothing Stores (2.10%)
Hot Topic, Inc. 35,400(a) 1,088,550
Quiksilver, Inc. 57,600(a) 1,087,200
---------
2,175,750
Miscellaneous Chemical Products (0.44%)
Fuller (H.B.) Co. 11,900 457,406
Miscellaneous Electrical Equipment &
Supplies (0.74%)
Rayovac Corp. 37,000(a) 772,375
Miscellaneous Equipment Rental &
Leasing (0.61%)
Rent-A-Center, Inc. 31,000(a) 631,625
Miscellaneous Fabricated Metal
Products (0.63%)
Watts Industries, Inc. 48,900 654,037
Miscellaneous Investing (1.41%)
Centerpoint Properties Corp. 19,300 692,387
First Industrial Realty Trust, Inc. 25,600 769,600
---------
1,461,987
Miscellaneous Manufacturers (1.12%)
Russ Berrie & Co. 27,700 515,913
Zomax, Inc. 13,721 649,175
---------
1,165,088
Miscellaneous Shopping Goods
Stores (0.68%)
Zale Corp. 17,000(a) 701,250
Miscellaneous Textile Goods (0.68%)
Kellwood Co. 41,400 708,975
Motor Vehicles & Equipment (0.66%)
Modine Mfg. Co. 30,900 681,731
New & Used Car Dealers (0.77%)
Lithia Motors, Inc. 50,100(a) 798,469
Office Furniture (0.60%)
Kimball International, Inc. 44,600 624,400
Oil & Gas Field Services (2.63%)
Helmerich & Payne, Inc. 26,900 842,306
Pride International, Inc. 45,200(a) 1,022,650
Seacor Smit, Inc. 14,100 863,625
---------
2,728,581
Paints & Allied Products (0.66%)
RPM, Inc. 67,900 687,487
Personnel Supply Services (0.67%)
Remedytemp, Inc. 35,000(a) 693,438
Petroleum Refining (0.90%)
Valero Energy Corp. 32,200 933,800
Railroad Equipment (0.70%)
Trinity Industries, Inc. 32,700 $ 727,575
Refrigeration & Service
Machinery (0.79%)
York International Corp. 34,100 822,662
Retail Stores, NEC (0.90%)
The Children's Place Retail 42,000(a) 934,500
Rubber & Plastics Footwear (0.62%)
Vans, Inc. 42,200(a) 638,275
Savings Institutions (0.76%)
Community First Bankshares, Inc. 46,700 788,062
Soap, Cleaners & Toilet Goods (0.82%)
Carter-Wallace, Inc. 38,200 849,950
Social Services, NEC (0.58%)
Provantage Health Services 75,900(a) 602,456
Special Industry Machinery (0.85%)
Cymer, Inc. 22,600(a) 882,812
Surety Insurance (0.41%)
Enhance Financial Services Group, Inc. 42,400 429,300
Telephone Communication (3.92%)
Firstworld Communications, Inc. Class B74,200(a) 885,763
Focal Communications Corp. 23,000 766,188
ICG Communications, Inc. 46,100(a) 1,371,475
Intermedia Communications, Inc. 25,600(a) 1,043,200
---------
4,066,626
Trucking & Courier Services, Except
Air (0.96%)
Werner Enterprises, Inc. 53,400 1,001,250
Vocational Schools (0.98%)
Apollo Group, Inc. 35,000(a) 1,015,000
Women's & Children's
Undergarments (0.70%)
Warnaco Group, Inc. 68,500 727,813
Women's Clothing Stores (0.78%)
Anntaylor Stores Corp. 39,000(a) 806,813
Total Common Stocks 100,899,737
Principal
Amount Value
Commercial Paper (2.81%)
Personal Credit Institutions (2.81%)
Investment in Joint Trading Account,
Associates First Corp.;
6.04%; 5/1/2000 $2,916,394 $ 2,916,394
Total Portfolio Investments (100.04%) 103,816,131
Liabilities, net of cash, receivables and
other assets (-0.04%) (44,317)
Total Net Assets (100.00%) $103,771,814
(a) Non-income producing security - No dividend paid during the period.
PRINCIPAL UTILITIES FUND, INC.
Shares
Held Value
Common Stocks (94.03%)
Combination Utility Services (9.87%)
Citizens Utilities 141,591(a) $2,274,305
Constellation Energy Group, Inc. 76,700 2,535,894
Montana Power Co. 56,600 2,493,937
NiSource, Inc. 100,200 1,853,700
Utilicorp United, Inc. 140,100 2,696,925
----------
11,854,761
Electric Services (43.22%)
AES Corp. 46,700(a) 4,200,081
Allegheny Energy 67,100 2,038,163
Calpine Corp. 44,000(a) 4,026,000
DQE, Inc. 89,100 3,408,075
Duke Energy Corp. 62,600 3,599,500
Edison International 80,200 1,528,812
Enron Corp. 59,760 4,164,525
FPL Group, Inc. 74,500 3,366,469
Firstenergy Corp. 46,300 1,177,756
GPU, Inc. 39,900 1,119,694
Kansas City Power and Light 88,000 2,260,500
Niagara Mohawk Holdings, Inc. 252,400(a) 3,502,050
Peco Energy Co. 74,600 3,109,888
Pinnacle West Capital Corp. 116,800 4,102,600
Potomac Electric Power Co. 101,300 2,374,219
Reliant Energy, Inc. 104,000 2,769,000
Scottish Power PLC ADR 39,108 1,249,012
Southern Co. 84,200 2,099,737
Texas Utilities Holdings 54,400 1,832,600
51,928,681
Electrical Industrial Apparatus (1.40%)
Ballard Power Systems, Inc. 21,033(a) 1,682,640
Gas Production & Distribution (6.71%)
Columbia Energy Group 39,900 $ 2,503,725
Dynegy, Inc. 61,000 3,991,688
New Jersey Resources Corp. 20,900 841,225
Peoples Energy Corp. 23,300 723,756
8,060,394
Holding Offices (2.25%)
NSTAR 61,300 2,701,031
Radio & Television Broadcasting (3.51%)
Allegiance Telecom, Inc. 26,250(a) 1,857,188
Time Warner Telecom, Class A 43,100(a) 2,359,725
---------
4,216,913
Telegraph & Other Communications (1.85%)
Level 3 Communications, Inc. 25,000(a) 2,225,000
Telephone Communication (25.22%)
360networks, Inc. 44,604(a) 677,423
AT&T Corp. 44,750 2,089,266
AT&T Wireless Group 20,000(a) 636,250
Alltel Corp. 29,400 1,958,775
Covad Communications Group 58,350(a) 1,619,213
GTE Corp. 24,500 1,659,875
Intermedia Communications, Inc. 57,700(a) 2,351,275
MCI Worldcom, Inc. 57,386(a) 2,607,476
McLeodUSA, Inc. 122,700(a) 3,067,500
Nextlink Communications 26,000(a) 2,192,125
RCN Corp. 58,700(a) 1,680,287
Sprint Corp. 44,300 2,724,450
Teligent, Inc. 62,100(a) 2,328,750
Vodafone Group PLC ADR 44,800 2,105,600
Voicestream Wireless Corp. 26,320(a) 2,605,680
----------
30,303,945
Total Common Stocks 112,973,365
Principal
Amount Value
Bond (2.29%)
Motion Picture Production & Services (2.29%)
Liberty Media Group Convertible Bond;
4.00%; 11/15/2029 $2,112,000(b) $2,753,520
Commercial Paper (4.10%)
Personal Credit Institutions (4.10%)
Investment in Joint Trade Account,
Associates First Capital Corp.;
6.04%; 5/1/2000 4,935,542 4,935,542
Total Portfolio Investments (100.42%) 120,662,427
Liabilities, net of cash, receivables and
other assets (-0.42%) (510,242)
Total Net Assets (100.00%) $120,152,185
(a) Non-income producing security - No dividend paid during the period.
(b) 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 BALANCED FUND, INC.(a)
-----------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.13 $15.28 $15.11 $14.61 $13.74 $12.43
Income from Investment Operations:
Net Investment Income............................... .18 .40 .42 .35 .38 .41
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.32) .34 1.15 1.81 1.59 1.31
Total from Investment Operations .14 .74 1.57 2.16 1.97 1.72
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.19) (.44) (.37) (.36) (.43) (.36)
Distributions from Capital Gains.................... (.64) (.45) (1.03) (1.30) (.67) (.05)
Total Dividends and Distributions (.83) (.89) (1.40) (1.66) (1.10) (.41)
Net Asset Value, End of Period......................... $14.16 $15.13 $15.28 $15.11 $14.61 $13.74
Total Return(b) ....................................... (.96)%(c) 4.85% 11.00% 15.88% 15.10% 14.18%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $96,989 $112,329 $104,414 $85,436 $70,820 $57,125
Ratio of Expenses to Average Net Assets............. 1.29%(d) 1.28% 1.28% 1.33% 1.28% 1.37%
Ratio of Net Investment Income to
Average Net Assets................................ 2.57%(d) 2.67% 2.86% 2.42% 2.82% 3.21%
Portfolio Turnover Rate............................. 43.9%(d) 24.2% 57.0% 27.6% 32.6% 35.8%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(e)
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.06 $15.22 $15.05 $14.56 $13.71 $11.80
Income from Investment Operations:
Net Investment Income............................... .13 .29 .31 .25 .29 .31
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.31) .32 1.14 1.79 1.55 1.90
Total from Investment Operations (.18) .61 1.45 2.04 1.84 2.21
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.14) (.32) (.25) (.25) (.32) (.30)
Distributions from Capital Gains.................... (.64) (.45) (1.03) (1.30) (.67) --
Total Dividends and Distributions (.78) (.77) (1.28) (1.55) (.99) (.30)
Net Asset Value, End of Period......................... $14.10 $15.06 $15.22 $15.05 $14.56 $13.71
Total Return(b) ....................................... (1.28)%(c) 4.02% 10.18% 14.96% 14.10% 18.72%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $20,919 $23,570 $18,930 $11,885 $5,964 $1,263
Ratio of Expenses to Average Net Assets............. 2.07%(d) 2.02% 2.04% 2.14% 2.13% 1.91%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.79%(d) 1.93% 2.08% 1.58% 1.93% 2.53%(d)
Portfolio Turnover Rate............................. 43.9%(d) 24.2% 57.0% 27.6% 32.6% 35.8%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- ----
<S> <C> <C>
Net Asset Value, Beginning of Period................... $15.13 $15.94
Income from Investment Operations:
Net Investment Income............................... .09 .07
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.30) (.81)
Total from Investment Operations (.21) (.74)
Less Dividends:
Dividends from Net Investment Income................ (.13) (.07)
Distributions from Capital Gains.................... (.64) --
Total Dividends (.77) (.07)
Net Asset Value, End of Period......................... $14.15 $15.13
Total Return(b) ....................................... (1.65)%(c) (4.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $407 $242
Ratio of Expenses to Average Net Assets............. 2.35%(d) 2.11%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.47%(d) 1.78%(d)
Portfolio Turnover Rate............................. 43.9%(d) 24.2%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BALANCED FUND, INC.(a)
-----------------------------
Class R shares 2000* 1999 1998 1997 1996(g)
-------------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $14.99 $15.15 $14.98 $14.52 $13.81
Income from Investment Operations:
Net Investment Income............................... .14 .32 .33 .29 .24
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.30) .32 1.15 1.76 .73
Total from Investment Operations (.16) .64 1.48 2.05 .97
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.15) (.35) (.28) (.30) (.26)
Distributions from Capital Gains.................... (.64) (.45) (1.03) (1.29) --
Total Dividends and Distributions (.79) (.80) (1.31) (1.59) (.26)
Net Asset Value, End of Period......................... $14.04 $14.99 $15.15 $14.98 $14.52
Total Return........................................... (1.13)%(c) 4.21% 10.43% 15.16% 7.52%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $23,682 $23,972 $19,434 $9,745 $875
Ratio of Expenses to Average Net Assets............. 1.82%(d) 1.84% 1.88% 1.99% 1.49%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 2.04%(d) 2.11% 2.22% 1.66% 2.26%(d)
Portfolio Turnover Rate............................. 43.9%(d) 24.2% 57.0% 27.6% 32.6%(d)
* Six Months Ended April 30, 2000
</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 BLUE CHIP FUND, INC.(a)
------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
-------------------------------------------------------------------- ---- ------------------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $25.25 $21.71 $20.22 $17.10 $15.03 $12.45
Income from Investment Operations:
Net Investment Income(h) ......................... .04 .15 .12 .21 .23 .24
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.77) 3.53 3.57 3.58 2.45 2.55
Total from Investment Operations (.73) 3.68 3.69 3.79 2.68 2.79
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.05) (.14) (.12) (.21) (.26) (.21)
Distributions from Capital Gains.................... (.29) -- (2.08) (.46) (.35) --
Total Dividends and Distributions (.34) (.14) (2.20) (.67) (.61) (.21)
Net Asset Value, End of Period......................... $24.18 $25.25 $21.71 $20.22 $17.10 $15.03
Total Return(b) ....................................... (2.92)%(c) 17.00% 19.48% 22.57% 18.20% 22.65%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $177,151 $184,217 $126,740 $79,985 $44,389 $35,212
Ratio of Expenses to Average Net Assets(h) ....... 1.19%(d) 1.26% 1.31% 1.30% 1.33% 1.38%
Ratio of Net Investment Income to
Average Net Assets................................ .34%(d) .63% .57% 1.10% 1.41% 1.83%
Portfolio Turnover Rate............................. 90.3%(d) 16.4% .5% 55.4% 13.3% 26.1%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(e)
-------------------------------------------------------------------- ---- ------------------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $25.00 $21.55 $20.14 $17.03 $14.99 $11.89
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.05) (.02) (.02) .07 .11 .15
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.75) 3.48 3.53 3.54 2.41 3.10
Total from Investment Operations (.80) 3.46 3.51 3.61 2.52 3.25
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.01) (.01) (.02) (.04) (.13) (.15)
Distributions from Capital Gains.................... (.29) -- (2.08) (.46) (.35) --
Total Dividends and Distributions (.30) (.01) (2.10) (.50) (.48) (.15)
Net Asset Value, End of Period......................... $23.90 $25.00 $21.55 $20.14 $17.03 $14.99
Total Return(b) ....................................... (3.26)%(c) 16.09% 18.59% 21.59% 17.18% 26.20%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $56,060 $56,493 $34,223 $18,265 $6,527 $1,732
Ratio of Expenses to Average Net Assets(h) ....... 1.93%(d) 2.04% 2.02% 2.06% 2.19% 1.90%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.40)%(d) (.15)% (.14)% .32% 49% .97%(d)
Portfolio Turnover Rate............................. 90.3%(d) 16.4% .5% 55.4% 13.3% 26.1%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $25.17 $25.50
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.02) (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.78) (.30)
Total from Investment Operations (.80) (.33)
Less Distributions from Capital Gains.................. (.29) --
Net Asset Value, End of Period......................... $24.08 $25.17
Total Return(b) ....................................... (3.24)%(c) (1.29)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,098 $331
-
Ratio of Expenses to Average Net Assets(h) ....... 1.93%(d) 2.27%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................ (.55)%(d) (.72)%(d)
Portfolio Turnover Rate............................. 90.3%(d) 16.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BLUE CHIP FUND, INC.(a)
------------------------------
Class R shares 2000* 1999 1998 1997 1996(g)
-------------------------------------------------------------------- ------------------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $25.12 $21.63 $20.16 $17.08 $16.21
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.02) .03 .02 .13 .12
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.76) 3.49 3.57 3.53 .90
Total from Investment Operations (.78) 3.52 3.59 3.66 1.02
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.02) (.03) (.04) (.12) (.15)
Distributions from Capital Gains.................... (.29) -- (2.08) (.46) --
Total Dividends and Distributions (.31) (.03) (2.12) (.58) (.15)
Net Asset Value, End of Period......................... $24.03 $25.12 $21.63 $20.16 $17.08
Total Return........................................... (3.16)%(c) 16.31% 19.01% 21.82% 7.02%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $55,243 $50,667 $32,871 $15,502 $1,575
Ratio of Expenses to Average Net Assets(h) ....... 1.69%(d) 1.81% 1.85% 1.89% 1.48%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................ (.16)%(d) .08% .02% .45% .68%(d)
Portfolio Turnover Rate............................. 90.3%(d) 16.4% .5% 55.4% 13.3%(d)
* Six Months Ended April 30, 2000
</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 CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $29.58 $31.07 $29.69 $27.72 $23.69 $20.83
Income from Investment Operations:
Net Investment Income............................... .19 .52 .50 .50 .45 .45
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.89) .45 3.88 5.80 5.48 3.15
Total from Investment Operations (2.70) .97 4.38 6.30 5.93 3.60
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.25) (.51) (.53) (.48) (.43) (.39)
Distributions from Capital Gains.................... (2.53) (1.95) (2.47) (3.85) (1.47) (.35)
Total Dividends and Distributions (2.78) (2.46) (3.00) (4.33) (1.90) (.74)
Net Asset Value, End of Period......................... $24.10 $29.58 $31.07 $29.69 $27.72 $23.69
Total Return(b) ....................................... (9.73)%(c) 3.00% 15.59% 25.36% 26.41% 17.94%
Ratio/Supplemental Data: `
Net Assets, End of Period (in thousands)............ $467,112 $573,485 $565,052 $494,444 $435,617 $339,656
Ratio of Expenses to Average Net Assets............. .93%(d) .75% .74% .70% .69% .75%
Ratio of Net Investment Income to
Average Net Assets................................ 1.66%(d) 1.73% 1.67% 1.85% 1.82% 2.08%
Portfolio Turnover Rate........................... 120.6%(d) 44.5% 23.2% 30.8% 50.2% 46.0%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(e)
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $29.41 $30.90 $29.51 $27.58 $23.61 $19.12
Income from Investment Operations:
Net Investment Income............................... .08 .29 .26 .23 .21 .33
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.88) .44 3.86 5.77 5.45 4.46
Total from Investment Operations (2.80) .73 4.12 6.00 5.66 4.79
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.14) (.27) (.26) (.22) (.22) (.30)
Distributions from Capital Gains.................... (2.53) (1.95) (2.47) (3.85) (1.47) --
Total Dividends and Distributions (2.67) (2.22) (2.73) (4.07) (1.69) (.30)
Net Asset Value, End of Period......................... $23.94 $29.41 $30.90 $29.51 $27.58 $23.61
Total Return(b) ....................................... (10.11)%(c) 2.24% 14.71% 24.13% 25.19% 25.06%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $42,329 $53,169 $44,765 $27,240 $9,832 $2,248
Ratio of Expenses to Average Net Assets............. 1.81%(d) 1.52% 1.52% 1.65% 1.70% 1.50%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .78%(d) .96% .88% .84% .80% 1.07%(d)
Portfolio Turnover Rate................................ 120.6%(d) 44.5% 23.2% 30.8% 50.2% 46.0%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $29.45 $31.81
Income from Investment Operations:
Net Investment Income............................... .04 .01
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.89) (2.37)
Total from Investment Operations (2.85) (2.36)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.11) --
Distributions from Capital Gains.................... (2.53) --
Total Dividends and Distributions (2.64) (2.23)
Net Asset Value, End of Period......................... $23.96 $29.45
Total Return(b) ....................................... (11.01)%(c) (7.42)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $599 $211
Ratio of Expenses to Average Net Assets............. 2.29%(d) 2.07%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .12%(d) .23%(d)
Portfolio Turnover Rate............................. 120.6%(d) 44.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CAPITAL VALUE FUND, INC.(a)
----------------------------------
Class R shares 2000* 1999 1998 1997 1996(g)
-------------------------------------------------------------------- ------------------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $29.33 $30.80 $29.44 $27.57 $24.73
Income from Investment Operations:
Net Investment Income............................... .15 .32 .28 .30 .19
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (2.89) .44 3.84 5.74 2.81
Total from Investment Operations (2.74) .76 4.12 6.04 3.00
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.28) (.29) (.32) (.16)
Distributions from Capital Gains.................... (2.53) (1.95) (2.47) (3.85) --
Total Dividends and Distributions (2.70) (2.23) (2.76) (4.17) (.16)
Net Asset Value, End of Period......................... $23.89 $29.33 $30.80 $29.44 $27.57
Total Return........................................... (9.94)%(c) 2.35% 14.77% 24.36% 12.74%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $38,013 $43,862 $37,675 $18,326 $1,752
Ratio of Expenses to Average Net Assets............. 1.31%(d) 1.43% 1.50% 1.50% 1.16%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.28%(d) 1.05% .88% .93% 1.18%(d)
Portfolio Turnover Rate............................. 120.6%(d) 44.5% 23.2% 30.8% 50.2%(d)
* Six Months Ended April 30, 2000
</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 GROWTH FUND, INC.(a)
---------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
------------------------------------------------------------------- ---- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $65.57 $56.09 $50.43 $39.54 $37.22 $31.14
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.10) .21 .35 .31 .35 .35
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 7.03 9.56 7.14 11.26 3.50 6.67
Total from Investment Operations 6.93 9.77 7.49 11.57 3.85 7.02
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- (.30) (.34) (.31) (.35) (.31)
Distributions from Capital Gains.................... (2.41) -- (1.49) (.37) (1.18) (.63)
Total Dividends and Distributions (2.41) (.30) (1.83) (.68) (1.53) (.94)
Net Asset Value, End of Period......................... $70.09 $65.57 $56.09 $50.43 $39.54 $37.22
Total Return(b) ....................................... 10.85%(c) 17.46% 15.17% 29.55% 10.60% 23.29%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $530,981 $493,117 $395,954 $317,386 $228,361 $174,328
Ratio of Expenses to Average Net Assets............. 1.01%(d) .89% .95% 1.03% 1.08% 1.16%
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................ (.30)%(d) .33% .66% .68% .95% 1.12%
Portfolio Turnover Rate............................. 213.8%(d) 32.4% 21.9% 16.5% 1.8% 12.2%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(e)
------------------------------------------------------------------- -------------------------------------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $65.33 $55.98 $50.36 $39.43 $37.10 $28.33
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .78 (.17) .06 .09 .08 .21
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 5.84 9.55 7.14 11.23 3.48 8.76
Total from Investment Operations 6.62 9.38 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.................... (2.41) -- (1.49) (.37) (1.18) --
Total Dividends and Distributions (2.41) (.03) (1.58) (.39) (1.23) (.20)
Net Asset Value, End of Period......................... $69.54 $65.33 $55.98 $50.36 $39.43 $37.10
Total Return(b) ....................................... 10.40%(c) 16.75% 14.58% 28.92% 9.80% 31.48%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $108,721 $96,116 $64,809 $42,241 $24,019 $8,279
Ratio of Expenses to Average Net Assets............. 1.81%(d) 1.50% 1.46% 1.48% 1.79% 1.80%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.10)%(d) (.28)% .15% .23% .22% .31%(d)
Portfolio Turnover Rate............................. 213.8%(d) 32.4% 21.9% 16.5% 1.8% 12.2%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $65.34 $67.89
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.26) (.07)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 6.88 (2.48)
Total from Investment Operations 6.62 (2.55)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- --
Distributions from Capital Gains.................... (2.41) --
Total Dividends and Distributions (2.41) --
Net Asset Value, End of Period......................... $69.55 $65.34
Total Return(b) ....................................... 10.31%(c) (3.75)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,894 $452
Ratio of Expenses to Average Net Assets............. 1.89%(d) 1.85%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.23)%(d) (.58)%(d)
Portfolio Turnover Rate............................. 213.8%(d) 32.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GROWTH FUND, INC.(a)
---------------------------
Class R shares 2000* 1999 1998 1997 1996(g)
-------------------------------------------------------------------- ------------------------------ ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $65.13 $55.77 $50.16 $39.40 $39.27
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.24) (.13) .02 .06 .10
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 6.94 9.49 7.09 11.16 .13
Total from Investment Operations 6.70 9.36 7.11 11.22 .23
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- (.01) (.09) (.10)
Distributions from Capital Gains.................... (2.41) -- (1.49) (.37) --
Total Dividends and Distributions (2.41) -- (1.50) (.46) (.10)
Net Asset Value, End of Period......................... $69.42 $65.13 $55.77 $50.16 $39.40
Total Return........................................... 10.56%(c) 16.78% 14.46% 28.72% 1.12%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $57,731 $47,193 $30,557 $16,265 $2,014
Ratio of Expenses to Average Net Assets............. 1.54%(d) 1.46% 1.59% 1.69% 1.42%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.83)%(d) (.24)% .01% .00% .14%(d)
Portfolio Turnover Rate............................. 213.8%(d) 32.4% 21.9% 16.5% 1.8%(d)
* Six Months Ended April 30, 2000
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class A shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(h) ........................... .01
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .72
Total from Investment Operations .73
Net Asset Value, End of Period......................... $10.73
Total Return(b) ....................................... 6.34%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $4,131
Ratio of Expenses to Average Net Assets(h) ....... .79%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.00%(d)
Portfolio Turnover Rate............................. 3.8%(d)
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class B shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(h) ......................... .01
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .71
Total from Investment Operations .72
Net Asset Value, End of Period......................... $10.72
Total Return(b) ....................................... 6.24%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,502
Ratio of Expenses to Average Net Assets(h) ....... 1.13%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .60%(d)
Portfolio Turnover Rate............................. 3.8%(d)
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class C shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(h) ......................... .01
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .71
Total from Investment Operations .72
Net Asset Value, End of Period......................... $10.72
Total Return(b) ....................................... 6.24%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,088
Ratio of Expenses to Average Net Assets(h) ....... 1.13%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .60%(d)
Portfolio Turnover Rate............................. 3.8%(d)
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Class R shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income(h) ......................... .01
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .71
Total from Investment Operations .72
Net Asset Value, End of Period......................... $10.72
Total Return........................................... 6.24%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,474
Ratio of Expenses to Average Net Assets(h) ....... 1.27%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .46%(d)
Portfolio Turnover Rate............................. 3.8%(d)
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 MIDCAP FUND, INC.(a)
---------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
------------------------------------------------------------------- ---- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $42.12 $39.90 $45.33 $35.75 $31.45 $25.08
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.10) (.06) (.07) .07 .14 .12
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 8.07 2.28 (4.26) 10.80 5.05 6.45
Total from Investment Operations 7.97 2.22 (4.33) 10.87 5.19 6.57
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- -- (.11) (.14) (.06)
Distributions from Capital Gains.................... (2.03) -- (1.10) (1.18) (.75) (.14)
Total Dividends and Distributions (2.03) -- (1.10) (1.29) (.89) (.20)
Net Asset Value, End of Period......................... $48.06 $42.12 $39.90 $45.33 $35.75 $31.45
Total Return(b) ....................................... 19.40%(c) 5.56% (9.78)% 31.26% 16.89% 26.89%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $346,561 $313,984 $332,942 $346,666 $229,465 $150,611
Ratio of Expenses to Average Net Assets............. 1.19%(d) 1.22% 1.22% 1.26% 1.32% 1.47%
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.43)%(d) (.17)% (.14)% .20% .46% .47%
Portfolio Turnover Rate........................... 177.2%(d) 59.9% 25.1% 9.5% 12.3% 13.5%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(e)
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $41.29 $39.29 $44.88 $35.48 $31.31 $23.15
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.21) (.28) (.23) (.05) (.04) --
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 7.91 2.28 (4.26) 10.64 4.97 8.18
Total from Investment Operations 7.70 2.00 (4.49) 10.59 4.93 8.18
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- -- (.01) (.01) (.02)
Distributions from Capital Gains.................... (2.03) -- (1.10) (1.18) (.75) --
Total Dividends and Distributions (2.03) -- (1.10) (1.19) (.76) (.02)
Net Asset Value, End of Period......................... $46.96 $41.29 $39.29 $44.88 $35.48 $31.31
Total Return(b) ....................................... 19.12%(c) 5.09% (10.24)% 30.64% 16.07% 35.65%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $76,943 $68,639 $68,358 $59,554 $28,480 $8,997
Ratio of Expenses to Average Net Assets............. 1.65%(d) 1.67% 1.73% 1.69% 2.01% 2.04%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.89)%(d) (.62)% (.66)% (.24)% (.24)% (.17)%(d)
Portfolio Turnover Rate............................. 177.2%(d) 59.9% 25.1% 9.5% 12.3% 13.5%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $41.96 $45.79
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.35) (.11)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 7.98 (3.72)
Total from Investment Operations 7.63 (3.83)
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- --
Distributions from Capital Gains.................... (2.03) --
Total Dividends and Distributions (2.03) --
Net Asset Value, End of Period......................... $47.56 $41.96
Total Return(b) ....................................... 18.47%(c) (8.36)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $538 $222
Ratio of Expenses to Average Net Assets............. 2.64%(d) 2.25%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.88)%(d) (1.14)%(d)
Portfolio Turnover Rate............................. 177.2%(d) 59.9%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MIDCAP FUND, INC.(a)
---------------------------
Class R shares 2000* 1999 1998 1997 1996(g)
-------------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $41.36 $39.43 $45.10 $35.67 $33.77
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.18) (.34) (.28) (.12) .04
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 7.90 2.27 (4.29) 10.74 1.88
Total from Investment Operations 7.72 1.93 (4.57) 10.62 1.92
Less Dividends and Distributions:
Dividends from Net Investment Income................ -- -- -- (.01) (.02)
Distributions from Capital Gains.................... (2.03) -- (1.10) (1.18) --
Total Dividends and Distributions (2.03) -- (1.10) (1.19) (.02)
Net Asset Value, End of Period......................... $47.05 $41.36 $39.43 $45.10 $35.67
Total Return........................................... 19.13%(c) 4.89% (10.37)% 30.56% 6.20%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $29,525 $24,877 $23,540 $17,448 $2,016
Ratio of Expenses to Average Net Assets............. 1.69%(d) 1.85% 1.89% 1.87% 1.53%(d)
Ratio of Net Investment Income (Operating Loss).....
to Average Net Assets............................. (.93)%(d) (.80)% (.82)% (.45)% .29%(d)
Portfolio Turnover Rate............................. 177.2%(d) 59.9% 25.1% 9.5% 12.3%(d)
* Six Months Ended April 30, 2000
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class A shares 2000(j)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.79)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 2.49
Total from Investment Operations 1.70
Net Asset Value, End of Period......................... $11.70
Total Return(b) ....................................... 17.00%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $39,462
Ratio of Expenses to Average Net Assets(h) ....... 1.59%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.76)%(d)
Portfolio Turnover Rate............................. 65.8%(d)
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class B shares 2000(j)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.59)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 2.25
Total from Investment Operations 1.66
Net Asset Value, End of Period......................... $11.66
Total Return(b) ....................................... 16.60%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $14,312
Ratio of Expenses to Average Net Assets(h) ....... 2.33%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.50)%(d)
Portfolio Turnover Rate............................. 65.8%(d)
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class C shares 2000(j)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.11)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.77
Total from Investment Operations 1.66
Net Asset Value, End of Period......................... $11.66
Total Return(b) ....................................... 16.60%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,024
Ratio of Expenses to Average Net Assets(h) ....... 2.32%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.39)%(d)
Portfolio Turnover Rate............................. 65.8%(d)
PRINCIPAL PARTNERS AGGRESSIVE
GROWTH FUND, INC.
Class R shares 2000(j)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.17)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 1.85
Total from Investment Operations 1.68
Net Asset Value, End of Period......................... $11.68
Total Return........................................... 16.80%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $5,514
Ratio of Expenses to Average Net Assets(h) ....... 2.06%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.23)%(d)
Portfolio Turnover Rate............................. 65.8%(d)
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class A shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.01)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.77)
Total from Investment Operations (1.78)
Net Asset Value, End of Period......................... $8.22
Total Return(b) ....................................... (19.57)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,706
Ratio of Expenses to Average Net Assets(h) ..1.77% (d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.41)%(d)
Portfolio Turnover Rate............................. 289.3%(d)
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class B shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.76)
Total from Investment Operations (1.79)
Net Asset Value, End of Period......................... $8.21
Total Return(b) ....................................... (19.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,137
Ratio of Expenses to Average Net Assets(h) ...... 2.50%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.99)%(d)
Portfolio Turnover Rate............................. 289.3%(d)
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class C shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.76)
Total from Investment Operations (1.79)
Net Asset Value, End of Period......................... $8.21
Total Return(b) ....................................... (19.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $871
Ratio of Expenses to Average Net Assets(h) ...... 2.51%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (2.00)%(d)
Portfolio Turnover Rate............................. 289.3%(d)
PRINCIPAL PARTNERS LARGECAP
GROWTH FUND, INC.
Class R shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.76)
Total from Investment Operations (1.79)
Net Asset Value, End of Period......................... $8.21
Total Return........................................... (19.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $980
Ratio of Expenses to Average Net Assets(h) ...... 2.26%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.75)%(d)
Portfolio Turnover Rate............................. 289.3%(d)
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as noted):
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class A shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $ 10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.01)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.78)
Total from Investment Operations (1.79)
Net Asset Value, End of Period......................... $8.21
Total Return(b) ....................................... (21.13)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $2,964
Ratio of Expenses to Average Net Assets(h) ...... 1.72%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.30)%(d)
Portfolio Turnover Rate............................. 350.2%(d)
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class B shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.78)
Total from Investment Operations (1.81)
Net Asset Value, End of Period......................... $8.19
Total Return(b) ....................................... (21.33)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $1,314
Ratio of Expenses to Average Net Assets(h) ...... 2.54%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (2.44)%(d)
Portfolio Turnover Rate............................. 350.2%(d)
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class C shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.78)
Total from Investment Operations (1.81)
Net Asset Value, End of Period......................... $8.19
Total Return(b) ....................................... (21.33)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $843
Ratio of Expenses to Average Net Assets(h) ...... 2.54%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (2.12)%(d)
Portfolio Turnover Rate............................. 350.2%(d)
PRINCIPAL PARTNERS MIDCAP
GROWTH FUND, INC.
Class R shares 2000(i)
--------------------------------------------------------------------
Net Asset Value, Beginning of Period................... $10.00
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.03)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (1.77)
Total from Investment Operations (1.80)
Net Asset Value, End of Period......................... $8.20
Total Return........................................... (21.23)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $872
Ratio of Expenses to Average Net Assets(h) ...... 2.30%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.88)%(d)
Portfolio Turnover Rate............................. 350.2%(d)
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 REAL ESTATE FUND, INC.
Class A shares 2000* 1999 1998(k)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $7.73 $8.39 $10.15
Income from Investment Operations:
Net Investment Income(h) ......................... .16 .31 .20
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .61 (.67) (1.76)
Total from Investment Operations .77 (.36) (1.56)
Less Dividends:
Dividends from Net Investment Income................ (.17) (.30) (.20)
Total Dividends (.17) (.30) (.20)
Net Asset Value, End of Period......................... $8.33 $7.73 $8.39
Total Return(b) ....................................... 10.12%(c) (4.38)% (15.45)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $7,488 $6,459 $5,490
Ratio of Expenses to Average Net Assets(h) ...... 1.86%(d) 2.19% 2.25%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 4.53%(d) 3.77% 2.89%(d)
Portfolio Turnover Rate............................. 153.1%(d) 55.1% 60.4%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class B shares 2000* 1999 1998(k)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $7.71 $8.38 $10.15
Net Investment Income(h) ......................... .14 .24 .20
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .59 (.66) (1.78)
Total from Investment Operations .73 (.42) (1.58)
Less Dividends:
Dividends from Net Investment Income................ (.14) (.25) (.19)
Total Dividends (.14) (.25) (.19)
Net Asset Value, End of Period......................... $8.30 $7.71 $8.38
Total Return(b) ....................................... 9.65%(c) (5.10)% (15.67)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $3,733 $3,351 $3,120
Ratio of Expenses to Average Net Assets(h) ...... 2.62%(d) 2.98% 2.47%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 3.77%(d) 2.98% 2.67%(d)
Portfolio Turnover Rate............................. 153.1%(d) 55.1% 60.4%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $7.72 $8.66
Income from Investment Operations:
Net Investment Income(h) ......................... .14 .06
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .60 (.94)
Total from Investment Operations .74 (.88)
Less Dividends:
Dividends from Net Investment Income................ (.13) (.06)
Total Dividends (.13) (.06)
Net Asset Value, End of Period......................... $8.33 $7.72
Total Return(b) ....................................... 9.75%(c) (10.21)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $110 $99
Ratio of Expenses to Average Net Assets(h) ...... 2.62%(d) 3.13%(d)
Ratio of Net Investment Income to ..................
Average Net Assets................................ 3.77%(d) 2.00%(d)
Portfolio Turnover Rate............................. 153.1%(d) 55.1%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL REAL ESTATE FUND, INC.
Class R shares 2000* 1999 1998(k)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $7.72 $8.40 $10.15
Income from Investment Operations:
Net Investment Income(h) ......................... .15 .28 .23
Net Realized and Unrealized Gain (Loss)
on Investments.................................... .60 (.66) (1.78)
Total from Investment Operations .75 (.38) (1.55)
Less Dividends:
Dividends from Net Investment Income................ (.15) (.30) (.20)
Total Dividends (.15) (.30) (.20)
Net Asset Value, End of Period......................... $8.32 $7.72 $8.40
Total Return........................................... 9.93%(c) (4.70)% (15.37)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $3,565 $3,100 $2,928
Ratio of Expenses to Average Net Assets(h) ...... 2.37%(d) 2.53% 1.99%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 4.02%(d) 3.43% 3.07%(d)
Portfolio Turnover Rate............................. 153.1%(d) 55.1% 60.4%(d)
* Six Months Ended April 30, 2000
</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 SMALLCAP FUND, INC.
Class A shares 2000* 1999 1998(k)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $11.34 $8.43 $9.92
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.01) (.11) (.08)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 2.77 3.02 (1.41)
Total from Investment Operations 2.76 2.91 (1.49)
Less Distributions from Capital Gains.................. (1.26) -- --
Net Asset Value, End of Period......................... $12.84 $11.34 $8.43
Total Return(b) ....................................... 25.54%(c) 34.52% (15.95)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $63,404 $41,598 $18,438
Ratio of Expenses to Average Net Assets(h) ...... 1.60%(d) 1.92% 2.58%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.41)%(d) (1.04)% (1.65)%(d)
Portfolio Turnover Rate............................. 136.9%(d) 100.7% 20.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class B shares 2000* 1999 1998(k)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $11.21 $8.41 $9.91
Net Investment Income (Operating Loss)(h) ....... .01 (.11) (.11)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 2.68 2.91 (1.39)
Total from Investment Operations 2.69 2.80 (1.50)
Less Distributions from Capital Gains.................. (1.26) -- --
Net Asset Value, End of Period......................... $12.64 $11.21 $ 8.41
Total Return(b) ....................................... 25.19%(c) 33.29% (16.15)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $22,730 $14,158 $6,550
Ratio of Expenses to Average Net Assets(h) ...... 2.21%(d) 2.63% 2.80%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.02)%(d) (1.75)% (1.85)%(d)
Portfolio Turnover Rate............................. 136.9%(d) 100.7% 20.5%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $11.31 $11.14
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... (.06) (.05)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 2.77 .22
Total from Investment Operations 2.71 .17
Less Distributions from Capital Gains.................. (1.26) --
Net Asset Value, End of Period......................... $12.76 $11.31
Total Return(b) ....................................... 23.94%(c) 1.53%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $884 $189
Ratio of Expenses to Average Net Assets(h) ...... 2.51%(d) 2.60%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (1.32)%(d) (1.79)%(d)
Portfolio Turnover Rate............................. 136.9%(d) 100.7%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SMALLCAP FUND, INC.
Class R shares 2000* 1999 1998(k)
-------------------------------------------------------------------- ---- ----
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $11.31 $8.45 $9.91
Income from Investment Operations:
Net Investment Income (Operating Loss)(h) ....... -- (.10) (.07)
Net Realized and Unrealized Gain (Loss)
on Investments.................................... 2.74 2.96 (1.39)
Total from Investment Operations 2.74 2.86 (1.46)
Less Distributions from Capital Gains.................. (1.26) -- --
Net Asset Value, End of Period......................... $12.79 $11.31 $8.45
Total Return........................................... 25.41%(c) 33.85% (15.75)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $16,754 $10,177 $4,688
Ratio of Expenses to Average Net Assets(h) ...... 2.04%(d) 2.31% 2.07%(d)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.85)%(d) (1.43)% (1.12)%(d)
Portfolio Turnover Rate............................. 136.9%(d) 100.7% 20.5%(d)
* Six Months Ended April 30, 2000
</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 UTILITIES FUND, INC.(a)
------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $17.86 $16.11 $12.55 $11.40 $10.94 $9.25
Income from Investment Operations:
Net Investment Income(h) ......................... .13 .33 .41 .48 .44 .48
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.28) 2.00 3.59 1.12 .45 1.70
Total from Investment Operations (.15) 2.33 4.00 1.60 .89 2.18
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.15) (.34) (.44) (.45) (.43) (.49)
Distributions from Capital Gains.................... (1.14) (.24) -- -- -- --
Total Dividends and Distributions (1.29) (.58) (.44) (.45) (.43) (.49)
Net Asset Value, End of Period......................... $16.43 $17.86 $16.11 $12.55 $11.40 $10.94
Total Return(b) ....................................... (.65)%(c) 14.74% 32.10% 14.26% 8.13% 24.36%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $93,206 $99,857 $83,533 $64,366 $66,322 $65,873
Ratio of Expenses to Average Net Assets(h) ...... 1.20%(d) 1.20% 1.15% 1.15% 1.17% 1.04%
Ratio of Net Investment Income to
Average Net Assets................................ 1.60%(d) 1.94% 2.73% 3.90% 3.85% 4.95%
Portfolio Turnover Rate............................. 136.1%(d) 23.5% 11.9% 22.5% 34.2% 13.0%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(e)
-------------------------------------------------------------------- ------------------------------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $17.83 $16.09 $12.53 $11.38 $10.93 $9.20
Income from Investment Operations:
Net Investment Income(h) ......................... .07 .22 .30 .38 .36 .40
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.28) 1.98 3.59 1.13 .43 1.77
Total from Investment Operations (.21) 2.20 3.89 1.51 .79 2.17
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.09) (.22) (.33) (.36) (.34) (.44)
Distributions from Capital Gains.................... (1.14) (.24) -- -- -- --
Total Dividends and Distributions (1.23) (.46) (.33) (.36) (.34) (.44)
Net Asset Value, End of Period......................... $16.40 $17.83 $16.09 $12.53 $11.38 $10.93
Total Return(b) ....................................... (1.01)%(c) 13.85% 31.23% 13.41% 7.23% 24.18%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $17,739 $18,282 $11,391 $6,937 $5,579 $3,952
Ratio of Expenses to Average Net Assets(h) ....... 1.92%(d) 1.95% 1.90% 1.90% 1.93% 1.72%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .88%(d) 1.19% 2.04% 3.14% 3.07% 3.84%(d)
Portfolio Turnover Rate................................ 136.1%(d) 23.5% 11.9% 22.5% 34.2% 13.0%(d)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class C shares 2000* 1999(f)
-------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $17.84 $17.97
Income from Investment Operations:
Net Investment Income............................... .03 .05
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.27) (.14)
Total from Investment Operations (.24) (.09)
Less Dividends:
Dividends from Net Investment Income................ (.07) (.04)
Distributions from Capital Gains.................... (1.14) --
Total Dividends and Distributions (1.21) (.04)
Net Asset Value, End of Period......................... $16.39 $17.84
Total Return(b) ....................................... (1.62)%(c) (.47)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $411 $226
Ratio of Expenses to Average Net Assets............. 2.50%(d) 2.05%(d)
Ratio of Net Investment Income to
Average Net Assets................................ .30%(d) 1.08%(d)
Portfolio Turnover Rate............................. 136.1%(d) 23.5%(d)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL UTILITIES FUND, INC.(a)
------------------------------
Class R shares 2000* 1999 1998 1997 1996(g)
-------------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $17.82 $16.07 $12.49 $11.33 $11.75
Income from Investment Operations:
Net Investment Income(h) ......................... .08 .21 .33 .39 .28
Net Realized and Unrealized Gain (Loss)
on Investments.................................... (.28) 2.00 3.58 1.14 (.41)
Total from Investment Operations (.20) 2.21 3.91 1.53 (.13)
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.09) (.22) (.33) (.37) (.29)
Distributions from Capital Gains.................... (1.14) (.24) -- -- --
Total Dividends and Distributions (1.23) (.46) (.33) (.37) (.29)
Net Asset Value, End of Period......................... $16.39 $17.82 $16.07 $12.49 $11.33
Total Return........................................... (.97)%(c) 13.97% 31.47% 13.72% (.31)%(c)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $8,796 $8,081 $4,005 $1,512 $311
Ratio of Expenses to Average Net Assets(h) ....... 1.78%(d) 1.87% 1.65% 1.65% 1.47%(d)
Ratio of Net Investment Income to
Average Net Assets................................ 1.02%(d) 1.27% 2.21% 3.35% 3.77%(d)
Portfolio Turnover Rate............................. 136.1%(d) 23.5% 11.9% 22.5% 34.2%(d)
* Six Months Ended April 30, 2000
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Notes to Financial Highlights
(a) Effective January 1, 1998, the following changes were made to the names of
the Domestic Growth Funds:
<TABLE>
<CAPTION>
Former Fund Name New Fund Name
---------------------------------------------------------------------------
<S> <C>
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.
</TABLE>
(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' ClassB 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
Net Investment Per Share
Income Unrealized (Loss)
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 June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(g) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996. Certain of the Domestic
Growth Funds' Class R shares recognized net investment income for the
period from the initial purchase of Class R shares on February 27, 1996
through February 28, 1996 as follows, none of which was distributed to the
sole shareholder, Principal Management Corporation. Additionally, the
Domestic Growth Funds incurred unrealized gains (losses) on investments
during the initial interim period as follows. This represents Class R share
activities of each fund prior to the initial offering of Class R shares:
Per Share Per Share
Net Investment Unrealized
Income Gain (Loss)
Principal Balanced Fund, Inc. $-- $(.03)
Principal Blue Chip Fund, Inc. .01 (.02)
Principal Capital Value Fund, Inc. .01 (.11)
Principal Growth Fund, Inc. .01 .10
Principal MidCap Fund, Inc -- .19
(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, the following funds would have had per share net investment
income and the ratios of expenses to average net assets as shown:
<TABLE>
<CAPTION>
Periods Per Share Ratio of Expenses
Ended Net Investment to Average Net Amount
Fund April 30, Income Assets Waived
Principal Blue Chip Fund, Inc.
<S> <C> <C> <C> <C>
Class A 2000 $.03 1.27% $ 76,554
Class B 2000 (.05) 1.99 17,507
Class C 2000 (.04) 2.14 798
Class R 2000 (.03) 1.78 23,975
Principal LargeCap Stock Index Fund, Inc.
Class A 2000 $(.02) 4.55% $ 10,943
Class B 2000 (.04) 5.03 7,272
Class C 2000 (.05) 4.44 5,705
Class R 2000 (.04) 4.93 6,545
Principal Partners Aggressive Growth Fund, Inc.
Class A 2000 $(.90) 1.71% $ 11,936
Class B 2000 (.61) 2.40 2,781
Class C 2000 (.11) 2.33 70
Class R 2000 (.17) 2.09 494
Principal Partners LargeCap Growth Fund, Inc.
Class A 2000 $(.03) 5.25% $ 7,705
Class B 2000 (.06) 5.18 4,355
Class C 2000 (.07) 4.96 3,726
Class R 2000 (.06) 4.92 4,090
Principal Partners MidCap Growth Fund, Inc.
Class A 2000 $(.03) 5.07% $ 7,821
Class B 2000 (.05) 5.07 4,255
Class C 2000 (.07) 4.89 3,567
Class R 2000 (.07) 4.88 3,932
Principal Real Estate Fund, Inc.
Class A 2000 $.16 2.17% $ 9,566
Class B 2000 .14 2.75 2,354
Class C 2000 .04 5.32 1,352
Class R 2000 .14 2.59 3,559
Principal SmallCap Fund, Inc.
Class A 2000 $(.01) 1.61% $ 2,978
Class B 2000 .01 2.21 365
Class C 2000 (.08) 2.78 749
Class R 2000 -- 2.20 11,127
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
Notes to Financial Highlights (Continued)
<TABLE>
<CAPTION>
Year Ended
October 31, Per Share Ratio of Expenses
Except Net Investment to Average Net Amount
Fund as Noted Income Assets Waived
Principal Utilities Fund, Inc.
<S> <C> <C> <C> <C>
Class A 1998 .39 1.23% 60,477
1997 .46 1.25% 65,940
1996 .43 1.25% 54,932
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) --
<FN>
The Manager ceased its waiver of expenses for the Principal
Utilities Fund, Inc. as of October 31, 1998.
</FN>
</TABLE>
(i) Period from March 1, 2000, date Class A, Class B and Class C shares first
offered to the public and Class R shares first offered to eligible
purchasers, through April 30, 2000.
(j) Period from November 1, 1999, date Class A, Class B and Class C shares
first offered to the public and Class R shares first offered to eligible
purchasers, through April 30, 2000.
(k) Period from December 31, 1997, date Class A and Class B shares first
offered to the public and Class R shares first offered to eligible
purchasers, through October 31, 1998. With respect to Principal Real Estate
Fund, Inc. Class A, Class B and Class R shares, net investment income
aggregating $.03 per share for the period from the initial purchase of
shares on December 11, 1997 through December 30, 1997 was recognized, of
which $.01 per share was distributed to its sole shareholder, Principal
Life Insurance Company, during the period. With respect to Principal
SmallCap Fund, Inc. Class A, Class B and Class R shares, net investment
income aggregating $.02 per share from the initial purchase of shares on
December 11, 1997 through December 30, 1997 was recognized. Principal
SmallCap Fund, Inc. Class A, Class B and Class R did distribute $.01 per
share a taxable return of capital to the sole shareholder Principal Life
Insurance Company, during the period. Principal Real Estate Fund, Inc. and
Principal SmallCap Fund, Inc. Class A, Class B and Class R shares incurred
unrealized gains (losses) on investments during the initial interim period
as follows. This represents Class A, Class B and Class R share activities
of each fund prior to the initial public offering of each class of shares.
Per Share Unrealized
Gain (Loss)
Class Class Class
A B R
Principal Real Estate Fund, Inc. $ .13 $ .13 $ .13
Principal SmallCap Fund, Inc. (.09) (.09) (.09)
April 30, 2000
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........ $32,205,837 $394,851,046 $61,053,932
Assets
Investment in securities -- at value (Note 4) 34,968,934 $456,638,092 $64,782,186
Cash....................................... 280,835 333,054 466,197
Receivables:
Dividends and interest.................. 74,261 1,541,886 110,760
Investment securities sold.............. -- 2,295,644 1,345,888
Capital Shares sold..................... 28,253 1,219,470 767,830
Prepaid Expenses........................... 2,091 -- 130,260
Other assets............................... -- 9,132 --
Total Assets 35,354,374 462,037,278 67,603,121
Liabilities
Accrued expenses........................... -- 294,160 --
Payables:
Investment securities purchased......... 131,080 10,348,336 1,542,090
Capital Shares reacquired............... 70,836 474,998 40,408
Net foreign currency contract ......... -- -- 108,205
Total Liabilities 201,916 11,117,494 1,690,703
Net Assets Applicable to Outstanding Shares $35,152,458 $450,919,784 $65,912,418
Net Assets Consist of:
Capital Stock.............................. $ 32,540 $ 465,288
$ 34,938
Additional paid-in capital................. 30,240,738 358,533,587 44,896,667
Accumulated undistributed (overdistributed) net
investment income ..................... (32,925) 351,493 --
Accumulated undistributed net realized
gain from investment and
foreign currency transactions........... 2,146,682 29,909,303 17,254,681
Net unrealized appreciation of investments. 2,763,097 61,787,046 3,728,254
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in
foreign currencies...................... 2,326 (126,933) (2,122)
Total Net Assets $35,152,458 $450,919,784 $65,912,418
Capital Stock (par value: $.01 a share):
Shares authorized.......................... 100,000,000 125,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets....................... $21,879,762 $368,864,671 $38,725,769
Shares issued and outstanding. 2,018,971 38,036,525 2,046,160
Net asset value per share...... $10.84 $9.70 $18.93
Maximum offering price per share(a) $11.38 $10.18 $19.87
Class B: Net Assets....................... $7,639,705 $54,025,626 $16,951,514
Shares issued and outstanding. 714,231 5,593,193 907,738
Net asset value per share(b)... $10.70 $9.66 $18.67
Class C: Net Assets....................... $261,879 $890,806 $651,760
Shares issued and outstanding. 24,295 91,729 34,721
Net asset value per share(b). $10.78 $9.71 $18.77
Class R: Net Assets....................... $5,371,112 $27,138,681 $9,583,375
Shares issued and outstanding. 496,501 2,807,380 505,153
Net asset value per share.... $10.82 $9.67 $18.97
(a) Maximum offering price is equal to net asset value plus a front-end
sales charge of 4.75% of the offering price or 4.99% of the net asset
value.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See accompanying notes.
</TABLE>
Six Months Ended April 30, 2000
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
Principal Principal
International Principal International
Emerging Markets International SmallCap
GROWTH FUNDS (INTERNATIONAL) Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends............................. $ 224,928 $ 9,503,996 $ 213,137
Withholding tax on foreign dividends... (20,697) (534,275) (34,036)
Interest............................... 30,000 334,994 98,229
Total Income 234,231 9,304,715 277,330
Expenses:
Management and investment advisory
fees (Note 3)....................... 200,100 1,737,889 381,427
Distribution and shareholder servicing
fees (Notes 1 and 3)................ 62,968 633,856 131,522
Transfer and administrative services
(Notes 1 and 3)..................... 78,882 600,869 92,436
Registration fees (Note 1)............. 19,184 37,885 20,820
Custodian fees ........................ 19,633 114,285 15,432
Auditing and legal fees ............... 1,629 2,733 1,366
Directors' fees ....................... 3,145 3,355 3,237
Other ................................. 3,841 20,971 4,615
Total Gross Expenses 389,382 3,151,843 650,855
Less: Management and investment
advisory fees waived.................. 982 -- --
Total Net Expenses 388,400 3,151,843 650,855
Net Investment Income (Operating Loss) (154,169) 6,152,872 (373,525)
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currencies Net realized gain (loss) from:
Investment transactions................ 4,049,976 29,895,105 17,205,038
Foreign currency transactions.......... (26,706) (28,063) (130,661)
Change in unrealized appreciation/ depreciation of:
Investments............................ 1,659,676 17,200,906 (3,844,673)
Translation of assets and liabilities in
foreign currencies.................. 14,675 (128,884) 46,375
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 5,697,621 46,939,064 13,276,079
Net Increase in Net Assets
Resulting from Operations $5,543,452 $53,091,936 $12,902,554
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,
2000 1999(a) 2000 1999(a) 2000 1999(a)
Operations
<S> <C> <C> <C> <C> <C> <C>
Net investment income (operating loss).... $ (154,169) $ (89,427) $ 6,152,872 $ 4,872,374 $ (373,525)$ (359,168)
Net realized gain (loss) from investment and
foreign currency transactions.......... 4,023,270 (498,391) 29,867,042 49,666,886 17,074,377 4,501,772
Change in unrealized appreciation/
depreciation of investments and
translation of assets and liabilities in
foreign currencies 1,674,351 4,849,065 17,072,022 3,344,196 (3,798,298) 8,794,601
Net Increase in Net Assets
Resulting from Operations 5,543,452 4,261,247 53,091,936 57,883,456 12,902,554 12,937,205
Dividends and Distributions to Shareholders From net investment income:
Class A................................ (25,056) -- (8,902,215) (3,969,273) -- --
Class B ............................... -- -- (913,278) (251,681) -- --
Class C ............................... -- -- (6,309) -- -- --
Class R ............................... (7,869) -- (428,383) (86,216) -- --
From net realized gain on investments and foreign currency transactions:
Class A ............................... -- -- (44,156,072) (15,033,379) (2,370,795) (93,728)
Class B ............................... -- -- (6,362,398) (2,095,376) (1,102,237) (51,691)
Class C................................ -- -- (44,801) -- (20,957) --
Class R................................ -- -- (2,947,199) (904,521) (598,971) (25,931)
Total Dividends and Distributions (32,925) -- (63,760,655) (22,340,446) (4,092,960) (171,350)
Capital Share Transactions (Note 6)
Shares sold:
Class A................................ 7,635,900 5,344,227 38,133,690 86,190,514 22,027,478 9,483,933
Class B ............................... 1,814,015 1,240,621 6,578,807 11,341,699 6,275,635 2,071,973
Class C................................ 137,796 111,837 714,277 185,888 546,346 124,696
Class R................................ 1,241,320 1,141,426 5,835,558 6,962,176 4,220,092 1,131,774
Shares issued in reinvestment of dividends and distributions:
Class A................................ 24,482 -- 52,347,246 18,683,449 1,752,847 93,541
Class B ............................... -- -- 7,193,596 2,317,119 639,532 51,577
Class C................................ -- -- 36,063 -- 9,365 --
Class R................................ 7,869 -- 3,376,384 994,480 143,898 26,009
Shares redeemed:
Class A ............................... (2,488,618) (1,703,746) (50,901,220) (99,069,597) (13,726,884) (5,023,440)
Class B ............................... (495,924) (508,592) (6,879,614) (11,138,167) (3,321,542) (1,332,071)
Class C................................ (5,557) -- (20,328) -- (72,635) (3,360)
Class R ............................... (395,826) (510,451) (3,708,599) (5,300,263) (2,258,382) (190,655)
Net Increase in Net Assets from
Capital Share Transactions 7,475,457 5,115,322 52,705,860 11,167,298 16,235,750 6,433,977
Total Increase 12,985,984 9,376,569 42,037,141 46,710,308 25,045,344 19,199,832
Net Assets
Beginning of year......................... 22,166,474 12,789,905 408,882,643 362,172,335 40,867,074 21,667,242
End of year [including undistributed
(overdistributed) net investment income
as set forth below] $35,152,458 $22,166,474 $450,919,784 $408,882,643 $65,912,418 $40,867,074
Undistributed (Overdistributed)
Net Investment Income................. $ (32,925) $ -- $ 351,493 $4,476,869 $ -- $ --
(a) Class C share information is provided for the period from June 30,
1999 (inception date of Class) through October 31, 1999.
See accompanying notes.
</TABLE>
April 30, 2000
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.
On June 30, 1999, the initial purchases of Class C shares of the International
Growth Funds were made by Principal Life Insurance Company (See Note 3).
Effective June 30, 1999, the International Growth Funds began offering Class C
shares to the public.
Class A shares generally are sold with an initial sales charge based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") upon redemption. Class B shares are sold without an
initial sales charge, but are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class C shares are sold without an initial
sales charge, but are subject to a CDSC on certain redemptions made within the
first twelve months of purchase. Class R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear 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 C shares do not
convert into Class A shares. Class R shares automatically convert into Class A
shares, based on relative net asset value (without a sales charge) four years
after purchase. All classes of shares for each fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by each of the International
Growth Funds' respective Board of Directors. In addition, the Board of Directors
of each fund declares separate dividends on each class of shares.
The International Growth Funds allocate daily all income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses to each
class of shares based upon the relative proportion of the value of shares
outstanding of each class. Expenses specifically attributable to a particular
class are charged directly to such class. Class-specific expenses charged to
each class during the period ended April 30, 2000, which are included in the
corresponding captions of the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services
Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal International
Emerging Markets Fund, Inc. $ 24,536 $ 28,743 $ 931 $ 8,758 $ 12,359 $ 4,110 $ 41 $ 1,151
Principal International Fund, Inc. 381,512 172,830 2,903 76,611 188,450 51,652 189 28,059
Principal International
SmallCap Fund, Inc. 47,289 68,232 2,394 13,607 19,440 7,083 78 2,350
</TABLE>
<TABLE>
<CAPTION>
Registration Fees
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal International
Emerging Markets Fund, Inc. $ 4,486 $4,057 $1,293 $ 680
Principal International Fund, Inc. 10,200 5,073 1,274 4,208
Principal International
SmallCap Fund, Inc. 4,570 3,807 1,236 3,624
</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 funds are informed of the ex-dividend date. Interest
income is recognized on an accrual basis.
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.,
Principal International Fund, Inc. and Principal International SmallCap Fund,
Inc. for the year ended October 31, 1999 aggregated $161,177, $171,471 and
$412,899, respectively.
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>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
<S> <C> <C> <C> <C> <C>
Principal International Emerging Markets Fund, Inc. 1.25% 1.20% 1.15% 1.10% 1.05%
Principal International Fund, Inc.* 0.75 0.70 0.65 0.60 0.55
Principal International SmallCap Fund, Inc. 1.20 1.15 1.10 1.05 1.00
</TABLE>
* At the meeting of the shareholders of the Principal International Fund,
Inc. held on November 2, 1999, the management fee schedule for this Fund
was modified. The modification was effective as of January 1, 2000. The new
management fee schedule for this Fund is as follows:
<TABLE>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$250 $250 $250 $250 $1,000
<S> <C> <C> <C> <C> <C>
0.85% 0.80% 0.75% 0.70% 0.65%
</TABLE>
The Manager voluntarily waives a portion of its fee for the Principal
International Emerging Markets Fund, Inc. The waiver is in an amount that
maintains 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 and the operation
expense limit, which was maintained at or below that shown, are as follows:
<TABLE>
<CAPTION>
Amount Waived
Period Ended Expense
April 30, 2000 Limit
<S> <C> <C>
Principal International Emerging Markets Fund, Inc.
Class A $ 14 2.50%
Class B -- 3.25
Class C 968 3.25
Class R -- 3.00
</TABLE>
The Manager intends to continue the waiver and, if necessary, pay expenses
normally payable by the Fund through the period ending October 31, 2000.
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, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00%, and Class C shares at 1.00% of the lesser of the
current market value or the cost of shares being redeemed. Princor Financial
Services Corporation also retains sales charges on sales of Class A shares based
on declining rates which begin at 4.75% of the offering price. The aggregate
amount of these charges retained, by fund, for the period ended April 30, 2000,
were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal International Emerging Markets Fund, Inc. $101,027 $ 5,445 $ 37
Principal International Fund, Inc. 401,092 95,592 156
Principal International SmallCap Fund, Inc. 207,725 12,381 223
</TABLE>
No brokerage commissions were paid by the International Growth Funds to Princor
Financial Services Corporation during the periods. Brokerage commissions were
paid to other affiliates by the following funds:
<TABLE>
<CAPTION>
Period Ended Year Ended
April 30, 2000 October 31, 1999
<S> <C> <C>
Principal International Emerging Markets Fund, Inc. $ 7,659 $ 13,818
Principal International Fund, Inc. 134,703 232,934
Principal International SmallCap Fund, Inc. 14,456 45,132
</TABLE>
The International Growth Funds bear distribution and shareholder servicing fees
with respect to each class computed at an annual rate of the average daily net
assets attributable to each class of each fund. The annual rate will not exceed
the following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Distribution and Shareholder Servicing fees .25% 1.00% 1.00% .75%
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class A, Class B and Class
R shares, fees that are unused by the principal underwriter at the end of the
fiscal year are returned to the respective International Growth Funds which
generated the excess.
At April 30, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company and benefit plans sponsored on behalf of Principal Life
Insurance Company owned shares of the International Growth Funds as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal International Emerging Markets Fund, Inc. 389,365 300,000 11,186 300,501
Principal International Fund, Inc. 11,277,741 -- 10,406 --
Principal International SmallCap Fund, Inc. -- 217,357 7,710 302,272
</TABLE>
For the period ended April 30, 2000, the cost of investment securities purchased
and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the International Growth Funds
were as follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Principal International Emerging Markets Fund, Inc. $ 25,834,663 $ 20,193,583
Principal International Fund, Inc. 195,113,147 227,988,155
Principal International SmallCap Fund, Inc. 107,802,563 109,182,358
</TABLE>
At April 30, 2000, 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. $ 5,001,402 $ (2,238,305) $ 2,763,097
Principal International Fund, Inc. 86,834,080 (25,047,034) 61,787,046
Principal International SmallCap Fund, Inc. 8,681,282 (4,953,028) 3,728,254
</TABLE>
Note 4 -- Investment Transactions
The International Growth Funds held the following securities which were
purchased in private placement transactions and may require registration, or an
exemption therefrom, in order to effect their sale in the ordinary course of
business.
<TABLE>
<CAPTION>
Value at Value as a
Date of April 30, Percentage of
Security Description Acquisition Cost 2000 Net Assets
<S> <C> <C> <C> <C>
Principal International Agora SA GDR 2/23/99 $ 58,527 $ 146,549 .42%
Emerging Markets Fund, Inc. 8/16/99 12,650 25,587 .07
Principal International Al-Ahram Beverages Co. ADR 8/21/97 35,700 49,490 .14
Emerging Markets Fund, Inc. 9/28/98 19,350 21,210 .06
(Continued) 11/6/98 44,037 53,025 .15
12/14/98 36,400 49,490 .14
3/19/99 54,485 60,095 .17
4/1/99 57,780 63,630 .18
6/8/99 29,000 35,350 .10
8/19/99 30,250 35,350 .10
8/20/99 15,550 17,675 .05
10/25/99 20,300 24,745 .07
1/3/00 16,000 14,140 .04
1/17/00 22,780 17,675 .05
2/16/00 36,450 31,815 .09
Ceske Radiokomunikace GDR 6/12/98 33,477 93,439 .27
6/16/99 37,125 45,580 .13
1/17/00 26,580 27,348 .08
3/8/00 20,350 18,232 .05
3/23/00 74,480 63,813 .18
Hindalco Industries Ltd. GDR 5/6/99 79,205 72,670 .21
5/19/99 32,750 32,298 .09
6/3/99 52,870 54,906 .15
2/15/00 37,500 24,223 .07
3/31/00 104,811 93,664 .27
Mol Magyar Olaj-es Gazipari Rt. ADR 9/2/98 18,113 15,885 .04
9/23/98 20,570 19,415 .06
2/25/99 27,335 19,415 .06
6/16/99 72,645 51,184 .14
7/2/99 49,055 35,299 .10
1/27/00 88,250 70,599 .20
State Bank of India GDR 5/5/99 89,225 78,369 .22
5/6/99 83,880 67,982 .19
5/20/99 36,600 28,326 .08
8/10/99 26,290 20,772 .06
8/30/99 13,875 9,442 .03
2/2/00 28,000 18,884 .05
3/2/00 19,350 11,330 .03
3/31/00 96,515 91,588 .26
Videsh Sanchar Nigam Ltd. GDR 1/13/98 5,675 9,500 .03
6/5/98 19,800 34,200 .10
7/30/98 10,875 19,000 .06
9/28/98 16,688 28,500 .08
2/11/99 54,575 112,100 .32
5/20/99 35,850 57,000 .16
1/17/00 28,080 22,800 .07
2/2/00 28,875 19,000 .06
3/1/00 74,575 36,100 .10
3/28/00 41,207 24,700 .07
4/18/00 54,990 49,400 .14
2,122,789 6.04
</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.
Period Ended April 30, 2000:
Shares sold:
<S> <C> <C> <C>
Class A ......................................... 671,696 3,830,201 1,062,438
Class B ......................................... 162,722 661,186 311,433
Class C ......................................... 12,185 70,796 28,393
Class R ......................................... 109,288 588,277 205,848
Shares issued in reinvestment of dividends and distributions:
Class A ........................................... 2,282 5,592,629 107,471
Class B .......................................... -- 774,030 39,637
Class C ......................................... -- 3,869 576
Class R ......................................... 734 363,246 8,796
Shares redeemed:
Class A ......................................... (219,971) (5,081,116) (664,566)
Class B ......................................... (45,194) (692,599) (163,207)
Class C ......................................... (503) (2,001) (3,467)
Class R ......................................... (35,392) (375,195) (112,363)
Net Increase 657,847 5,733,323 820,989
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 667,274 9,027,584 767,113
Class B ......................................... 160,328 1,200,081 167,457
Class C ......................................... 12,613 19,065 9,453
Class R ......................................... 157,952 734,641 84,990
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... -- 2,098,559 9,098
Class B ......................................... -- 262,628 5,060
Class C ......................................... -- -- --
Class R ......................................... -- 112,716 2,530
Shares redeemed:
Class A ......................................... (219,971) (10,325,463) (412,770)
Class B ......................................... (65,736) (1,172,425) (113,345)
Class C ......................................... -- -- (234)
Class R ......................................... (73,370) (558,617) (16,099)
Net Increase 639,090 1,398,769 503,253
</TABLE>
Note 6 -- Line of Credit
The International Growth Funds participate with other funds and portfolios
managed by Principal Management Corporation in an unsecured joint line of credit
with two banks which allow the funds to borrow up to $75,000,000 collectively.
Borrowings are made solely to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Interest is charged to each fund,
based on its borrowings, at a rate equal to the Fed Funds Rate plus .50%.
Additionally, a commitment fee is charged at the annual rate of .09% on the
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, 2000, the International Growth Funds
had no outstanding borrowings under the line of credit.
GROWTH FUNDS (INTERNATIONAL)
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Shares
Held Value
Common Stocks (88.36%)
Advertising (0.72%)
Cheil Communications, Inc. 2,400 $ 251,957
Beer, Wine & Distilled Beverages (2.56%)
Hite Brewery Co. 17,041 483,720
South African Breweries Ltd. 56,362 415,694
-------
899,414
Beverages (3.80%)
Al-Ahram Beverages Co. ADR 26,800(a)(b) 473,690
Fomento Economico Mexicano SA ADR 10,250 422,813
Grupo Modelo SA de C.V. 131,000 275,549
PanAmerican Beverages ADR 9,900 162,731
---------
1,334,783
Blast Furnace & Basic Steel Products (1.53%)
Pohang Iron & Steel ADR 15,500 325,500
Tubos De Acero De Mexico SA ADR 14,300 213,606
-------
539,106
Cable & Other Pay TV Services (0.71%)
Ceske Radiokomunikace GDR 5,450(a)(b) 248,412
Commercial Banks (10.53%)
Banco Rio De La Plata SA ADR 13,200 183,150
Bank Hapoalim Ltd. 174,200 535,587
Bank Sinopac 334,198 185,547
Bank Slaski SA w Katowicach 3,500 211,369
BOE Ltd. 493,000 394,152
Grupo Financiero Banamex 129,700(a) 469,847
H&CB GDR 19,910(a) 340,889
ICICI Bank Ltd. 7,658(a) 132,101
Malayan Banking Berhad 82,600 343,442
Overseas Union Bank Ltd. 42,442 193,886
Shinhan Bank 40,000 383,882
State Bank of India GDR 34,600(b) 326,693
---------
3,700,545
Communications Equipment (1.41%)
Netas Northern Electric
Telekomunikasyon AS 2,931,000 494,266
Communications Services, NEC (0.95%)
Korea Telecom Corp. ADR 9,700 334,650
Computer & Data Processing
Services (3.43%)
Check Point Software Technologies Ltd. 3,000(a) 519,000
Datatec Ltd. 31,900(a) 231,982
Infosys Technologies Ltd. 2,200 408,190
Oridion Systems Ltd. 1,880(a) 45,348
---------
1,204,520
Computer & Office Equipment (6.02%)
Asustek Computer, Inc. 65,000 $ 719,638
Compal Electronics, Inc. 284,385 729,085
Comverse Technology, Inc. 2,380(a) 212,266
Orbotech Ltd. ADR 3,600(a) 306,900
Trigem Computer, Inc. 2,588 149,490
---------
2,117,379
Concrete, Gypsum & Plaster Products (0.89%)
Cemex SA CPO 72,000 313,602
Crude Petroleum & Natural Gas (0.60%)
Mol Magyar Olaj-es Gazipari Rt. ADR 12,000(b) 211,797
Department Stores (0.40%)
Pt Matahari Putra Prima 1,206,000(a) 140,768
Drugs (0.16%)
Ranbaxy Laboratories Ltd. GDR 2,900 55,326
Electric Services (3.08%)
Companhia Paranaense De Enersis ADR 44,400 327,450
Korean Electric Power ADR 32,200 527,275
RAO Unified Energy Systems ADR 12,200 227,408
---------
1,082,133
Electronic Components &
Accessories (10.27%)
Acer Peripherals, Inc. 98,760 408,012
Ambit Microsystems Corp. 13,000 120,152
Elec & Eltek International ADR 50,500 110,090
Samsung Electronics 3,900 1,054,325
Taiwan Semiconductor Manufacturing Co. 126,000(a) 810,658
Unisem (M) Berhad 44,900 398,783
United Microelectronics Corp. 210,000(a) 709,840
---------
3,611,860
Electronic Distribution Equipment (0.81%)
DBTEL, Inc. 59,000(a) 184,016
Procomp Informatics Co., Ltd. 13,000(a) 101,896
-------
285,912
Family Clothing Stores (1.09%)
Giordano International Ltd. 234,000 383,030
Fire, Marine & Casualty Insurance (1.21%)
Aksigorta AS 16,037,000 426,662
Foreign Banks, Branches &
Agencies (2.50%)
Credicorp Ltd. ADR 16,350 172,697
H&CB 5,900 101,017
Yapi Ve Kredi Bankasi AS 18,904,000 603,526
-------
877,240
Furniture & Home Furnishing
Stores (1.18%)
Grupo Elektra SA CPO 425,000 415,374
Gasoline Service Stations (0.75%)
President Chain Store Corp. 74,000 263,426
Holding Offices (1.65%)
The India Fund, Inc. ADR 40,500(a) $ 579,656
Hotels & Motels (1.20%)
Resorts World Berhad 130,000 420,790
Medical & Dental Laboratories (1.00%)
Ranbaxy Laboratories Ltd. 25,000 353,272
Medical Instruments & Supplies (0.48%)
Medison Co. Ltd. 15,700 169,773
Metal Mining Services (0.62%)
Compahia Vale Do Rio Doce 8,797 217,921
Miscellaneous Business Services (0.27%)
TelecomAsia Corp. Public Co. Ltd. 72,000(a) 96,419
Miscellaneous Investing (1.93%)
Banco Latino Americano
De Exportaciones ADR 10,900 269,094
Johnnies Industrial Corp. Ltd. 27,700(a) 408,599
-------
677,693
Miscellaneous Textile Goods (1.02%)
Esprit Holdings Ltd. 336,000 358,034
Newspapers (0.83%)
Agora SA GDR 7,400(a)(b) 172,136
New Straits Times Press Berhad 36,000 120,316
-------
292,452
Oil & Gas Field Services (0.70%)
Gulf Indonesia Resources Ltd. ADR 35,300(a) 247,100
Paper & Paper Products (0.76%)
Aracruz Celulose SA ADR 14,300 267,231
Petroleum Refining (2.35%)
Sasol Ltd. 94,600 555,381
SK Corp. 14,300 269,966
-------
825,347
Primary Non-Ferrous Metals (0.79%)
Hindalco Industries Ltd. GDR 17,200(b) 277,761
Producers, Orchestras &
Entertainers (0.98%)
Corporacion Interamericana
De Entretenimiento SA, Class B 81,300(a) 343,744
Radio & Television Broadcasting (1.01%)
Grupo Televisa SA GDR 5,584(a) 354,235
Real Estate Agents & Managers (0.71%)
Cheung Kong 21,000 250,732
Real Estate Operators & Lessors (0.26%)
SM Prime Holdings, Inc. 700,000 91,561
Savings Institutions (0.80%)
ICICI Ltd. ADR 70,200 $ 214,349
ICICI Ltd. ADS 2,600 65,975
280,324
Services to Buildings (0.07%)
Opicom Co., Ltd. 823(a) 25,061
Telephone Communication (15.06%)
Carso Global Telecom, Class A1 95,200(a) 255,870
China Telecom 55,000(a) 397,185
Compania Anonima Telefonos De
Venezuela ADR 11,600 336,400
Digi Swisscom Berhad 44,000(a) 90,316
Embratel Participacoes SA 27,300,000 491,702
Embratel Participacoes SA ADR 14,700 330,750
Hellenic Telecom Organization SA ADR 19,800 231,413
Hellenic Telecommunication 14,311 321,948
Manahagar Telephone Ltd. 13,000 67,014
Matav Tavkozlesi Rt. ADR 12,100 421,231
MobiNil-Egypt Mobile Phone 4,500(a) 171,558
Partner Communications Co. Ltd. ADR 28,050(a) 299,784
SK Telecom Co., Ltd. 12,600(a) 403,988
Tele Norte Leste Participacoes SA 12,900,000 220,189
Telefonos De Mexico SA ADR 14,300 841,019
Videsh Sanchar Nigam Ltd. GDR 21,700(b) 412,300
---------
5,292,667
Variety Stores (0.50%)
Hutchison Whampoa Ltd. 12,000 174,858
Vocational Schools (0.77%)
NIIT Ltd. 5,800 271,027
Total Common Stocks 31,059,820
Preferred Stocks (5.15%)
Beverages (0.42%)
Quilmes Industrial Quines SA ADR 15,500 147,250
Commercial Banks (1.02%)
Banco Estado De Sao Paulo SA 9,500,000 358,005
Gasoline Service Stations (1.35%)
Petroleo Brasileiro SA 2,000,000 473,829
Telephone Communication (2.36%)
Tele Celular Sul Participacoes SA ADR 7,600 293,550
Tele Norte Leste Participacoes ADR 19,044 339,224
Telesp Celular
Participacoes SA Preference B 11,162,530 197,956
830,730
Total Preferred Stocks 1,809,814
Principal
Amount Value
Commercial Paper (5.97%)
Business Credit Institutions (3.70%)
American Express Credit Corp.;
5.97%; 5/01/2000 $1,299,569 $1,299,569
Personal Credit Institutions (2.27%)
Associates Corp. of North America;
6.04%; 5/01/2000 799,731 799,731
Total Commercial Paper 2,099,300
Total Portfolio Investments (99.48%) 34,968,934
Cash, receivables and other assets,
net of liabilities (0.52%) 183,524
Total Net Assets (100.00%) $35,152,458
(a) Non-income producing security - No dividend paid during the period.
(b) Restricted security - See Note 4 to the financial statements.
Principal International Emerging Markets Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Argentina $ 330,400 0.94%
Brazil 3,517,807 10.06
Czech Republic 248,412 0.71
Egypt 645,248 1.85
Greece 553,360 1.58
Hong Kong 1,563,838 4.47
Hungary 633,029 1.81
India 3,163,667 9.05
Indonesia 387,868 1.11
Israel 1,918,885 5.49
Korea, Republic Of 4,821,493 13.79
Malaysia 1,373,646 3.93
Mexico 4,068,389 11.63
Panama 269,094 0.77
Peru 172,697 0.49
Philippines 91,562 0.26
Poland 383,505 1.10
Russia 227,408 0.65
Singapore 303,976 0.87
South Africa 2,005,808 5.74
Taiwan, Province Of China $4,232,269 12.10%
Thailand 96,419 0.28
Turkey 1,524,454 4.36
United States 2,099,300 6.00
Venezuela 336,400 0.96
Total $34,968,934 100.00%
PRINCIPAL INTERNATIONAL FUND, INC.
Shares
Held Value
Common Stocks (93.49%)
Agricultural Chemicals (0.44%)
Norsk Hydro ASA 54,000 $ 1,976,692
Cable & Other Pay TV Services (0.41%)
United Pan-Europe Communications NV 51,000 1,860,347
Combination Utility Services (2.71%)
Alcatel Alsthom 52,600 12,222,615
Commercial Banks (8.53%)
Bank of Ireland 811,832 5,518,782
Banque Nationale De Paris 106,800 5,038,487
Deutsche Bank AG 53,000 4,293,543
H&CB 220,000 1,388,407
National Australia Bank Ltd. 68,350 877,974
Nordic Baltic Holding AB 49,900 3,355,793
Nordic Baltic Holding AB FDR 1,211,423 7,683,220
Royal Bank of Canada Montreal, Quebec 93,500 1,600,862
Sanwa Bank Ltd. 305,437 4,181,175
Svenska Handelsbanken, Class B 468,000 4,520,861
----------
38,459,104
Communications Equipment (5.97%)
Siemens AG 152,200 13,549,351
Sony Corp. 55,800 8,135,652
Telefonaktiebolaget LM Ericsson 45,600 5,236,142
----------
26,921,145
Communications Services, NEC (2.68%)
Koninklijke KPN NV 59,600 2,056,200
Korea Telecom Corp. ADR 99,180 10,018,392
----------
12,074,592
Computer & Data Processing
Services (2.98%)
Cap Gemini SA 26,100 5,137,271
Getronics NV 139,000 8,309,155
----------
13,446,426
Computer & Office Equipment (8.50%)
Baltimore Technologies PLC 39,175(a) 3,339,669
Canon, Inc. 12,000 1,213,597
Compal Electronics, Inc. 184,000 8,410,456
Fujitsu Ltd. 803,300 2,059,436
NEC Corp. 241,000 6,823,595
Orbotech Ltd. ADR 371,000(a) 10,092,436
Toshiba Corp. 659,000 6,390,303
----------
38,329,492
Concrete, Gypsum & Plaster
Products (1.03%)
Lafarge SA 55,900 $ 4,640,539
Consumer Products (0.95%)
Swedish Match Co. 1,433,200 4,274,286
Crude Petroleum & Natural Gas (2.35%)
Total Fina Elf 69,785 10,613,451
Drugs (3.96%)
AstraZeneca Group PLC 76,224 3,188,520
Novartis AG 3,823 5,352,944
Rhodia, Inc. SA 226,000 4,201,233
Taisho Pharmaceutical Co. 62,000 2,076,706
Takeda Chemical
Industries 46,000 3,026,232
----------
17,845,635
Drugs, Proprietaries & Sundries (0.97%)
Glaxo Wellcome PLC 140,000 4,350,772
Electronic Components &
Accessories (1.46%)
Murata Mfg. Co., Ltd. 11,000 2,137,405
Samsung Electronics 9,300 2,514,160
United Microelectronics Corp. 572,000(a) 1,933,469
---------
6,585,034
Electronic Distribution Equipment (3.42%)
Koninklijke Philips Electronics 345,248 15,437,801
Family Clothing Stores (0.58%)
Fast Retailing Co., Ltd. 5,900 2,598,566
Fire, Marine & Casualty Insurance (1.35%)
Royal & Sun Alliance
Insurance Group PLC 1,075,000 6,068,395
Foreign Banks, Branches &
Agencies (1.56%)
Bank Austria AG 4,130 183,657
UBS AG 27,800 6,826,894
---------
7,010,551
Gas Production & Distribution (0.60%)
OMV AG 32,610 2,684,832
Heavy Construction,
Except Highway (1.41%)
Vivendi 64,000 6,345,226
Industrial Inorganic Chemicals (3.40%)
Aventis SA 128,000 7,056,731
Aventis SA 85,024(a) 4,625,451
Clariant AG 10,000 3,655,967
----------
15,338,149
Investment Offices (1.42%)
Amvescap PLC 436,400 6,388,333
Life Insurance (4.19%)
AXA 65,700 9,764,669
ING Groep NV 167,000 9,133,783
----------
18,898,452
Medical Instruments & Supplies (0.20%)
Terumo Corp. 29,000 $ 877,446
Miscellaneous Business Services (1.02%)
Brisa-Auto Estradas De Portugal SA 650,000 4,602,275
Miscellaneous Food &
Kindred Products (0.40%)
Danisco AS 59,150 1,778,570
Miscellaneous Investing (1.49%)
Investor AB, Class B 478,000 6,727,349
Miscellaneous Non-Durable Goods (2.35%)
Diageo PLC 1,047,179 8,496,278
Lagardere SCA 31,000 2,104,535
----------
10,600,813
Newspapers (3.21%)
News Corp. Ltd. ADR 147,000 7,561,313
Publishing & Broadcasting Ltd. 388,000 5,014,999
United News & Media PLC 244,000 1,893,608
----------
14,469,920
Oil & Gas Field Services (0.57%)
Petroleum Geo-Services ASA 163,000(a) 2,550,642
Paperboard Containers & Boxes (1.04%)
Buhrmann NV 188,500 4,869,705
Periodicals (1.22%)
VNU NV 102,301 5,486,111
Petroleum Refining (2.38%)
BP Amoco PLC 1,235,000 10,715,873
Radio & Television Broadcasting (0.89%)
Carlton Communications PLC 329,000 4,010,443
Security Brokers & Dealers (1.74%)
Nikko Securities Co., Ltd. 334,000 3,940,319
Nomura Securities Co., Ltd. 156,000 3,926,162
---------
7,866,481
Soap, Cleaners & Toilet Goods (1.08%)
Reckitt Benckiser PLC 472,797 4,886,598
Special Industry Machinery (0.76%)
Cookson Group 1,151,700 3,410,628
Telephone Communication (14.27%)
British Telecommunications PLC ADR 22,700 1,180,400
Cable & Wireless PLC 202,800 11,534,250
DDI Corp. 422,000 7,600,581
Hellenic Telecom Organization SA ADR 511,000 8,515,880
Jazztel PLC ADR 2,473,865(a) 11,400,405
Nokia Corp. ADR, Class A 240,000 2,805,000
NTT DoCoMo, Inc. 214,000 4,773,791
Telecom Corp. of New Zealand Ltd. 168 5,611,659
Telefonica, SA 336(a) 3,855,101
Vodafone Airtouch PLC 1,667,000 7,051,374
----------
64,328,441
Total Common Stocks 421,551,730
Principal
Amount Value
Commercial Paper (7.78%)
Business Credit Institutions (2.27%)
American Express Credit Corp.;
5.97%; 5/1/2000 $10,246,600 $10,246,600
Farm & Garden Machinery (2.56%)
Deere & Co.;
6.00%; 5/2/2000 11,544,225 11,544,225
Personal Credit Institutions (2.95%)
Associates Corp. of North America;
6.04%; 5/1/2000 13,295,537 13,295,537
Total Commercial Paper 35,086,362
Total Portfolio Investments (101.27%) 456,638,092
Liabilities, net of cash, receivables and
other assets (-1.27%) (5,718,308)
Total Net Assets (100.00%) $450,919,784
(a)Non-income producing security - No dividend paid during the period.
Principal International Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Australia $13,636,096 2.99%
Austria 2,868,490 0.63
Canada 5,038,487 1.10
Denmark 1,778,570 0.39
Finland 11,534,250 2.53
France 71,005,265 15.55
Germany 11,491,445 2.52
Greece 2,805,000 0.61
Israel 3,339,669 0.73
Japan 69,523,387 15.23
Korea, Republic of 6,171,222 1.35
Netherlands 55,115,293 12.07
New Zealand 7,051,374 1.54
Norway 4,527,334 0.99
Portugal 4,602,275 1.01
Spain 4,773,791 1.05
Sweden 37,689,107 8.25
Switzerland 15,835,805 3.47
Taiwan, Province of China 3,992,906 0.87
United Kingdom 87,591,563 19.18
United States 36,266,763 7.94
Total $ 456,638,092 100.00%
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Shares
Held Value
Common Stocks (78.42%)
Advertising (1.76%)
1&1 Aktiengeselschaft & Co. 200 $ 48,843
Mosaic Group, Inc. 82,664(a) 931,718
SR Teleperformance 661 175,882
---------
1,156,443
Agriculture Chemicals (0.26%)
Zeltia SA 3,500(a) 173,343
Air Transportation, Scheduled (1.86%)
H.I.S. Co. Ltd. 8,500 511,219
Ryanair Holdings PLC ADR 13,876(a) 565,447
West Jet Airlines Ltd. 8,600(a) 150,622
---------
1,227,288
Bakery Products (0.13%)
QAF 211,000 86,504
Beer, Wine & Distilled Beverages (0.58%)
Hite Brewery Co. 13,500 383,207
Business Credit Institutions (1.26%)
Japan Securities Finance Co. Ltd. 93,000 507,703
PhileoAllied Berhad 358,000(a) 322,200
-------
829,903
Commercial Printing (2.66%)
Creo Products, Inc. 34,555(a) 1,252,619
Sato Corp. 17,920 497,432
---------
1,750,051
Communications Equipment (1.50%)
Elcoteq Network Corp. 9,700 310,254
Indra Sistemas SA 11,100 261,268
Pandatel AG 3,200(a) 415,531
-------
987,053
Communications Services, NEC (2.21%)
A-Com AB 5,300(a) 65,120
Davnet Ltd. 17,000 24,303
Eyretel PLC 347,000(a) 803,619
GT Group Telecom, Inc., Class B 18,100(a) 234,169
Switchcore AB 4,575(a) 329,607
---------
1,456,818
Computer & Data Processing
Services (10.39%)
AIT Group PLC 20,115 289,579
Articon Information Systems AG 1,600(a) 110,808
Biodata Information Technology AG 1,200(a) 333,518
C.REL 70,000(a) 101,713
Casa Holdings Ltd. 44,000 74,474
Computershare Ltd. 9,162 37,354
Cresco Ltd. 6,180 571,825
Dansk Data Electronik AS - B 1,700(a) 130,909
Enea Data AB 1,993 351,508
F-Secure OYI 2,000(a) 25,515
GFI Informatique 770 112,968
Grenke Leasing 6,500(a) 117,278
Interactive Investor International 35,300(a) 57,999
ISION Internet AG 300(a) $20,421
Lectra Systems 26,040 424,749
LPKF Laser & Electronics 3,600 977,591
MaxxCom 70,600(a) 416,931
META4 NV 25,979(a) 298,285
Morse Holdings PLC 42,900(a) 252,744
Norman ASA 11,700(a) 192,237
Parsytec AG NPV 3,100(a) 601,699
Telelogic AB 5,000(a) 37,977
Telinfo - Strip VVPR 900(a) 8
TJ Group OYJ 4,500(a) 29,073
Unit 4 NV 9,600(a) 485,515
Via Net.Works,Inc. 20,500(a) 408,719
VISMA 64,250(a) 387,794
---------
6,849,191
Computer & Office Equipment (0.26%)
Imagination Technologies Group PLC 37,500(a) 167,238
Construction & Related
Machinery (2.52%)
Daifuku Co. Ltd. 10,000 98,728
Geberit AG-REG 1,300(a) 422,383
Pinguely-Haulotte 4,171 657,544
Swisslog Holding AG 1,100 484,634
---------
1,663,289
Crushed & Broken Stone (0.19%)
Brandrill Limited NPV 237,805 127,661
Eating & Drinking Places (1.96%)
Global-Dining, Inc. 3,000 208,189
Matsuya Foods Ltd. 16,000 467,823
NH Hoteles 25,400(a) 285,850
Telepizza 41,000 332,142
---------
1,294,004
Electric Services (2.42%)
Energy Developments Ltd. 38,073 181,283
Independent Energy Holdings ADR 16,416(a) 640,224
Vestas Wind Systems 2,300 770,299
---------
1,591,806
Electrical Industrial Apparatus (0.32%)
Chroma ATE, Inc. 53,000(a) 184,343
Yokowo Co. Ltd. 1,000 28,129
-------
212,472
Electrical Work (1.39%)
Bracknell Corp. 114,800(a) 503,625
International-Muller NV 22,400 414,364
-------
917,989
Electronic Components & Accessories (6.92%)
Austria Mikro Systeme International 7,700(a) 624,481
Chloride Group PLC 258,200 517,160
C-MAC Industries, Inc. 22,900 1,159,174
ELMOS Semiconductor AG 15,200(a) 606,675
Micronic Laser Systems AB 14,900 303,735
Nihon Denpa Kogyo Co. Ltd. 7,500 275,503
Prodisc Technology, Inc. 75,000(a) 734,824
SOITEC 560(a) 137,832
TOKYO DENPA CO. LTD. 3,000 200,416
---------
4,559,800
Electronic Distribution Equipment (0.80%)
Austria Technologie &
Systemtechnik AG 7,300(a) 525,519
Engineering & Architectural
Services (1.06%)
ALTEN 675(a) $ 94,109
FUGRO NV 12,900 605,390
-------
699,499
Engines & Turbines (1.40%)
Moritex Corp. 3,000 224,844
NEG Micon 15,500(a) 699,100
-------
923,944
Family Clothing Stores (0.85%)
Giordano International Ltd. 308,000 504,160
Macintosh Retail Group NV 1,900 52,374
-------
556,534
Fire, Marine & Casualty Insurance (0.20%)
Malaysian National Reinsurance Berhad 105,000 129,868
Furniture & Home Furnishings (0.12%)
Shaddy Co. Ltd. 3,600 81,943
General Industrial Machinery (0.93%)
Kyoritsu Electric Corp. 800 25,686
NIPPON Thompson Co. Ltd. 29,000 300,800
Whatman PLC 16,600 286,512
-------
612,998
Heavy Construction,
Except Highway (0.09%)
Boskalis Westminister NV 3,470 62,134
Holding Offices (1.30%)
Deutsche Beteiligung 10,971 379,899
Edipresse SA 980 475,624
-------
855,523
Hotels & Motels (0.53%)
Resorts World Berhad 108,000 349,579
Household Audio & Video
Equipment (0.20%)
NXT PLC 7,000(a) 129,253
Life Insurance (1.47%)
Industrial Alliance Life Insurance Co. 70,200(a) 971,276
Machinery, Equipment &
Supplies (1.54%)
FKI PLC 264,800 1,012,072
Management & Public Relations (0.09%)
IPSOS 516(a) 59,716
Measuring & Controlling Devices (0.43%)
Shimadzu Corp. 56,000 282,396
Medical & Dental Laboratories (1.69%)
Nobel Biocare AB 6,200 166,207
Unilabs 940 950,668
---------
1,116,875
Medical Instruments & Supplies (0.70%)
Cochlear Ltd. 35,300 458,304
Metal Forgings & Stamping (0.25%)
Arkivator AB 3,500 166,542
Metalworking Machinery (1.46%)
Makino Milling Machine Co. Ltd. 29,000 $ 288,725
Mikron Holding AG 876 633,906
Tsugami Corp. 7,000(a) 37,178
-------
959,809
Miscellaneous Amusement & Recreation
Service (0.38%)
Aristocrat Leisure Ltd. 20,101 179,104
SNAI SPA 2,900 69,501
-------
248,605
Miscellaneous Business Service (0.34%)
GFK AG 5,600(a) 220,960
Miscellaneous Electrical Equipment &
Supplies (0.60%)
Kaba Holding AG, Class B 345 397,042
Miscellaneous Food & Kindred
Products (0.28%)
Unigate PLC 41,000 182,687
Miscellaneous Investing (0.59%)
XAAR PLC 83,000(a) 387,687
Miscellaneous Personal Services (0.15%)
Integra SA 4,500(a) 102,106
Miscellaneous Primary Metal
Products (0.00%)
YBM Magnex International, Inc. 28,300(a) 191
Miscellaneous Textile Goods (0.31%)
United Arrow Ltd. 4,000 207,263
Miscellaneous Transportation
Services (0.83%)
IFCO Systems NV 22,300(a) 547,648
Motor Vehicles & Equipment (0.26%)
Torotrak PLC 40,500(a) 171,111
Motorcycles, Bicycles & Parts (0.64%)
Ducati Motor Holding SPA 160,600(a) 424,406
Non-Ferrous Rolling & Drawing (1.53%)
DRAKA Holdings NV 11,400 730,815
SAPA AB 15,200 278,441
---------
1,009,256
Office Furniture (0.42%)
Corporate Express Australia 103,046 273,584
Oil & Gas Field Services (1.06%)
TGS Nopec Geophysical Co. ASA 63,400(a) 701,550
Periodicals (1.52%)
Informa Group PLC 91,700 $ 982,922
Paramount Publishing Group 110,000 21,889
---------
1,004,811
Personnel Supply Services (0.26%)
N I C Corp. 5,100 92,019
Unique International NV 3,400 78,231
-------
170,250
Photographic Equipment &
Supplies (0.55%)
Gretag Imaging Holding 1,800 362,516
Preserved Fruits & Vegetables (0.04%)
Kikkoman Corp. 4,000 26,722
Professional & Commercial
Equipment (2.21%)
Azkoyen SA 115,000 1,016,501
Quality Healthcare Asia Ltd. 1,038,000(a) 426,437
Transiciel SA 100 13,377
---------
1,456,315
Radio & Television Broadcasting (0.19%)
Comptel PLC 5,575 126,294
Radio, Television & Computer
Stores (0.31%)
K's Denki Corp. 1,900 36,216
Yamada Denki 2,000 166,551
-------
202,767
Real Estate Operators & Lessors (1.01%)
Boardwalk Equities, Inc. 84,400(a) 666,469
Refrigeration & Service Machinery (1.64%)
Jenoptik AG 26,100 749,185
Takuma Co. Ltd. 39,000 331,992
---------
1,081,177
Research & Testing Services (0.31%)
Cambridge Antibody Technology Group 5,281(a) 203,494
Residential Building Construction (1.23%)
Urban Corp. 35,000 809,623
Security Brokers & Dealers (1.44%)
Kempen & Co. NV 7,900 329,709
O.S.K. Holdings Berhad 300,667 278,512
Okasan Securities Co. Ltd. 24,000 198,751
Sakura Friend Securities 15,000 49,549
Tokyo Securities Co. Ltd. 25,000 95,073
-------
951,594
Special Industry Machinery (2.22%)
Chen Hsong Holdings Ltd. 733,000 126,100
SCITEX Corp. 29,076(a) 345,278
SEZ Holding AG 350 324,474
Suess Microtec AG 18,300(a) 670,371
---------
1,466,223
Subdividers & Developers (0.38%)
Singapore Land Ltd. 138,000 250,551
Sugar & Confectionery Products (1.14%)
Nestle ( Malaysia) 157,000 $ 751,947
Telephone Communication (2.73%)
Clearnet Communications, Inc. 3,786(a) 162,325
Cybertron Telekom AG 600(a) 101,258
Microcell Telecommunications 8,200(a) 285,018
Nera Telecommunications Ltd. 301,000(a) 550,017
PowerLan Ltd. 218,400 207,088
Techniche Ltd. 82,780(a) 214,514
Versatel Telecom International NV 7,000(a) 281,303
---------
1,801,523
Variety Stores (0.03%)
Thanks Japan Corp. 1,600 17,025
Water Transportation Service (0.12%)
Johor Port Berhad 164,000 78,116
Total Common Stocks 51,689,357
Principal
Amount Value
Commercial Paper (19.86%)
Business Credit Institutions (6.43%)
John Deere Capital Corp.;
5.95%; 5/3/2000 $2,123,595 $2,123,595
General Electric Capital Corp.;
5.96%; 5/10/2000 2,116,139 2,116,139
---------
4,239,734
Personal Credit Institutions (13.43%)
Associates Corp. of North America;
6.04%; 5/1/2000 2,449,178 2,449,178
Ford Motor Credit Co.;
6.00%; 5/8/2000 1,977,030 1,977,030
General Motors Acceptance Corp.;
5.95%; 5/1/2000 1,979,345 1,979,345
Norwest Financial, Inc.;
6.02%; 5/5/2000 2,447,542 2,447,542
---------
8,853,095
Total Commercial Paper 13,092,829
Total Portfolio Investments (98.28%) 64,782,186
Cash, receivables and other assets,
net of liabilities (1.72%) 1,130,232
Total Net Assets (100.00%) $65,912,418
(a) Non-income producing security - No dividend paid during the period.
Principal International SmallCap Fund, Inc.
Investments by Country
Percentage of
Country Value Total Value
Australia $1,703,194 2.63%
Austria 1,251,257 1.93
Belgium 8 0.00
Canada 6,571,812 10.14
Denmark 1,600,308 2.47
Finland 491,137 0.76
France 1,778,283 2.75
Germany 5,252,779 8.11
Hong Kong 1,078,586 1.67
Ireland 565,447 0.87
Israel 345,278 0.53
Italy 493,907 0.76
Japan 6,639,325 10.25
Korea, Republic of 383,207 0.59
Malaysia 1,910,223 2.95
Netherlands 3,996,202 6.17
Norway 1,383,293 2.14
Singapore 961,546 1.48
Spain 2,367,389 3.66
Sweden 1,699,136 2.62
Switzerland 4,051,247 6.25
Taiwan, Province of China 919,167 1.42
United Kingdom 6,084,301 9.39
United States 13,255,154 20.46
Total $64,782,186 100.00%
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 2000* 1999 1998 1997(a)
------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $8.56 $6.54 $8.29 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.04) (.03) (.02) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 2.34 2.05 (1.73) (1.21)
Total from Investment Operations 2.30 2.02 (1.75) (1.22)
Less Dividends from Net Investment Income.............. (.02) -- -- --
Net Asset Value, End of Period......................... $10.84 $8.56 $6.54 $8.29
Total Return(c) ....................................... 26.81%(d) 30.89% (21.11)% (10.18)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $21,880 $13,401 $7,312 $5,039
Ratio of Expenses to Average Net Assets(b) ......... 2.27%(e) 2.75% 3.31% 2.03%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (.82)%(e) (.35)% (.36)% (.32)%(e)
Portfolio Turnover Rate............................. 134.2%(e) 95.8% 45.2% 21.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class B shares 2000* 1999 1998 1997(a)
------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $8.47 $6.52 $8.28 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.19) (.07) (.05) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 2.42 2.02 (1.71) (1.22)
Total from Investment Operations 2.23 1.95 (1.76) (1.23)
Net Asset Value, End of Period......................... $10.70 $8.47 $6.52 $8.28
Total Return(c) ....................................... 26.33%(d) 29.91% (21.26)% (10.29)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $7,639 $5,051 $3,275 $3,116
Ratio of Expenses to Average Net Assets............. 2.89%(e) 3.57% 3.59% 2.16%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.44)%(e) (1.12)% (.69)% (.46)%(e)
Portfolio Turnover Rate............................. 134.2%(e) 95.8% 45.2% 21.4%(e)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class C shares 2000* 1999(f)
------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $8.54 $8.94
Income from Investment Operations:
Net Investment Income (Operating Loss)(b) ......... (.10) (.06)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 2.34 (.34)
Total from Investment Operations 2.24 (.40)
Net Asset Value, End of Period......................... $10.78 $8.54
Total Return(c) ....................................... 26.23%(d) (4.47)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $262 $108
Ratio of Expenses to Average Net Assets(b) ......... 3.24%(e) 3.52%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.68)%(e) (2.24)%(e)
Portfolio Turnover Rate............................. 134.2%(e) 95.8%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
Class R shares 2000* 1999 1998 1997(a)
------------------------------------------------------------------- ----------- ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $8.55 $6.53 $8.28 $9.51
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.10) -- (.04) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 2.39 2.02 (1.71) (1.22)
Total from Investment Operations 2.29 2.02 (1.75) (1.23)
Less Dividends from Net Investment Income.............. (.02) -- -- --
Net Asset Value, End of Period......................... $10.82 $8.55 $6.53 $8.28
Total Return........................................... 26.76%(d) 30.93% (21.14)% (10.29)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $5,371 $3,606 $2,202 $2,510
Ratio of Expenses to Average Net Assets............. 2.27%(e) 2.67% 3.47% 2.20%(e)
Ratio of Net Investment Income (Operating Loss)
to Average Net Assets............................. (.82)%(e) (.22)% (.60)% (.51)%(e)
Portfolio Turnover Rate............................. 134.2%(e) 95.8% 45.2% 21.4%(e)
* Six Months Ended April 30, 2000
</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 FUND, INC.(g)
----------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
------------------------------------------------------------------- ----------- ----------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $10.04 $9.20 $9.33 $8.14 $7.28 $7.44
Income from Investment Operations:
Net Investment Income............................... .12 .13 .13 .09 .10 .08
Net Realized and Unrealized
Gain (Loss) on Investments........................ 1.09 1.28 .04 1.52 1.17 (.02)
Total from Investment Operations 1.21 1.41 .17 1.61 1.27 .06
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.24) (.11) (.10) (.11) (.08) (.03)
Distributions from Capital Gains.................... (1.31) (.46) (.20) (.31) (.33) (.19)
Total Dividends and Distributions (1.55) (.57) (.30) (.42) (.41) (.22)
Net Asset Value, End of Period......................... $9.70 $10.04 $9.20 $9.33 $8.14 $7.28
Total Return(c) ....................................... 12.94%(d) 16.18% 1.93% 20.46% 18.36% 1.03%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $368,865 $338,144 $302,757 $281,158 $172,276 $126,554
Ratio of Expenses to Average Net Assets............. 1.30%(e) 1.22% 1.25% 1.39% 1.45% 1.63%
Ratio of Net Investment Income
to Average Net Assets............................. 2.84%(e) 1.35% 1.45% 1.25% 1.43% 1.10%
Portfolio Turnover Rate............................. 88.6%(e) 58.7% 38.7% 26.6% 23.8% 35.4%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(g)
----------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(h)
------------------------------------------------------------------- ----------- ----------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.96 $9.14 $9.26 $8.07 $7.24 $6.71
Income from Investment Operations:
Net Investment Income............................... .10 .06 .07 .03 .03 .05
Net Realized and Unrealized
Gain (Loss) on Investments........................ 1.08 1.27 .04 1.51 1.15 .51
Total from Investment Operations 1.18 1.33 .11 1.54 1.18 .56
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.05) (.03) (.04) (.02) (.03)
Distributions from Capital Gains.................... (1.31) (.46) (.20) (.31) (.33) --
Total Dividends and Distributions (1.48) (.51) (.23) (.35) (.35) (.03)
Net Asset Value, End of Period......................... $9.66 $9.96 $9.14 $9.26 $8.07 $7.24
Total Return(c) ....................................... 12.70%(d) 15.27% 1.27% 19.62% 17.16% 9.77%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $54,025 $48,319 $41,676 $33,842 $15,745 $3,908
Ratio of Expenses to Average Net Assets............. 1.86%(e) 1.90% 1.91% 2.17% 2.28% 2.19%(e)
Ratio of Net Investment Income
to Average Net Assets............................. 2.28%(e) .67% .77% .42% .64% .58%(e)
Portfolio Turnover Rate................................ 88.6%(e) 58.7% 38.7% 26.6% 23.8% 35.4%(e)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(g)
----------------------------------
Class C shares 2000* 1999(f)
------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $9.99 $9.61
Income from Investment Operations:
Net Investment Income (Operating Loss).............. .09 (.02)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 1.07 .40
Total from Investment Operations 1.16 .38
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.13) --
Distributions from Capital Gains.................... (1.31) --
Total Dividends and Distributions (1.44) --
Net Asset Value, End of Period......................... $9.71 $9.99
Total Return(c) ....................................... 10.69%(d) 3.95%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $891 $191
Ratio of Expenses to Average Net Assets............. 2.51%(e) 2.38%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ .41%(e) (.95)%(e)
Portfolio Turnover Rate............................. 88.6%(e) 58.7%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL FUND, INC.(g)
----------------------------------
Class R shares 2000* 1999 1998 1997 1996(i)
------------------------------------------------------------------- ----------- ----------------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.96 $9.13 $9.27 $8.12 $7.48
Income from Investment Operations:
Net Investment Income............................... .11 .06 .06 .07 .01
Net Realized and Unrealized
Gain (Loss) on Investments........................ 1.08 1.27 .04 1.47 .63
Total from Investment Operations 1.19 1.33 .10 1.54 .64
Less Dividends and Distributions:
Dividends from Net Investment Income................ (.17) (.04) (.04) (.08) --
Distributions from Capital Gains.................... (1.31) (.46) (.20) (.31) --
Total Dividends and Distributions (1.48) (.50) (.24) (.39) --
Net Asset Value, End of Period......................... $9.67 $9.96 $9.13 $9.27 $8.12
Total Return........................................... 12.80%(d) 15.27% 1.13% 19.65% 9.29%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $27,139 $22,229 $17,739 $11,773 $1,057
Ratio of Expenses to Average Net Assets............. 1.84%(e) 1.93% 2.01% 2.10% 1.59%(e)
Ratio of Net Investment Income
to Average Net Assets............................. 2.20%(e) .64% .67% .44% .78%(e)
Portfolio Turnover Rate............................. 88.6%(e) 58.7% 38.7% 26.6% 23.8%(e)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class A shares 2000* 1999 1998 1997(a)
------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.32 $9.99 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.07) (.12) (.07) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 5.19 5.53 .10 (.07)
Total from Investment Operations 5.12 5.41 .03 (.08)
Less Distributions:
Distributions from Capital Gains.................... (1.51) (.08) -- --
Total Distributions (1.51) (.08) -- --
Net Asset Value, End of Period......................... $18.93 $15.32 $9.99 $9.96
Total Return(c) ....................................... 34.97%(d) 54.52% .30% .50%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $38,726 $23,612 $11,765 $6,210
Ratio of Expenses to Average Net Assets............. 1.87%(e) 2.21% 2.66% 1.99%(e)
Ratio of Net Investment Income (Operating Loss) to .
Average Net Assets................................ (1.00)%(e) (1.02)% (.81)% (.40)%(e)
Portfolio Turnover Rate............................. 372.5%(e) 191.5% 99.8% 10.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class B shares 2000* 1999 1998 1997(a)
------------------------------------------------------------------- ----------- ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.18 $9.97 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.08) (.20) (.10) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 5.08 5.49 .11 (.07)
Total from Investment Operations 5.00 5.29 .01 (.08)
Less Distributions:
Distributions from Capital Gains.................... (1.51) (.08) -- --
Total Distributions (1.51) (.08) -- --
Net Asset Value, End of Period......................... $18.67 $15.18 $9.97 $9.96
Total Return(c) ....................................... 34.47%(d) 53.42% .10% .50%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $16,951 $10,926 $6,585 $4,774
Ratio of Expenses to Average Net Assets............. 2.46%(e) 2.87% 2.90% 2.07%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.59)%(e) (1.68)% (1.05)% (.47)%(e)
Portfolio Turnover Rate............................. 372.5%(e) 191.5% 99.8% 10.4%(e)
* Six Months Ended April 30, 2000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class C shares 2000* 1999(f)
------------------------------------------------------------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period................... $15.28 $12.97
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.06) (.11)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 5.06 2.42
Total from Investment Operations 5.00 2.31
Less Distributions:
Distributions from Capital Gains.................... (1.51) --
Total Distributions (1.51) --
Net Asset Value, End of Period......................... $18.77 $15.28
Total Return(c) ....................................... 33.36%(d) 17.81%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $652 $141
Ratio of Expenses to Average Net Assets............. 3.03%(e) 2.96%(e)
Ratio of Net Investment Income (Operating Loss) to .
Average Net Assets................................ (2.06)%(e) (2.31)%(e)
Portfolio Turnover Rate............................. 372.5%(e) 191.5%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
Class R shares 2000* 1999 1998 1997(a)
------------------------------------------------------------------- ----------- ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $15.36 $10.01 $9.96 $10.04
Income from Investment Operations:
Net Investment Income (Operating Loss).............. (.06) (.10) (.07) (.01)
Net Realized and Unrealized
Gain (Loss) on Investments........................ 5.18 5.53 .12 (.07)
Total from Investment Operations 5.12 5.43 .05 (.08)
Less Distributions:
Distributions from Capital Gains.................... (1.51) (.08) -- --
Total Distributions (1.51) (.08) -- --
Net Asset Value, End of Period......................... $18.97 $15.36 $10.01 $9.96
Total Return........................................... 34.87%(d) 54.61% .50% .50%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............ $9,583 $6,188 $3,317 $3,004
Ratio of Expenses to Average Net Assets............. 1.94%(e) 2.12% 2.51% 2.15%(e)
Ratio of Net Investment Income (Operating Loss) to
Average Net Assets................................ (1.07)%(e) (.93)% (.68)% (.54)%(e)
Portfolio Turnover Rate............................. 372.5%(e) 191.5% 99.8% 10.4%(e)
* Six Months Ended April 30, 2000
</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.
<TABLE>
<CAPTION>
Per Share Per Share
Net Investment Unrealized
Income Gain (Loss)
<S> <C> <C>
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
</TABLE>
(b) Without the Managers voluntary waiver of a portion of certain expenses (see
Note 3 to the financial statements) for the periods indicated, Principal
International Emerging Markets Fund, Inc. would have had per share net
investment income and the ratios of expenses to average net assets as
shown:
Six Months Per Share Ratio of Expenses
Ended Net Investment to Average Amount
April 30, Income Net Assets Waived
Class A 2000 (.04) 2.27% $ 14
Class C 2000 (.14) 4.27% 968
(c) Total return is calculated without the front-end sales charge or contingent
deferred sales charge.
(d) Total return amounts have not been annualized.
(e) Computed on an annualized basis.
(f) Period from June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(g) Effective January 1, 1998, Princor World Fund, Inc. changed its name to
Principal International Fund, Inc.
(h) Period from December 9, 1994, date Class B shares first offered to the
public, through October 31, 1995. Principal International Fund, Inc. ClassB
shares recognized no net investment income for the period from the initial
purchase by Principal Management Corporation of Class B shares on
December5, 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.
(i) 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
ClassR shares on February27, 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.
<TABLE>
<CAPTION>
April 30, 2000
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost............................... $177,836,225 $263,957,502
Assets
Investment in securities -- at value (Note 4)..................... $165,709,889 $255,018,166
Cash ............................................................ -- 12,364
Receivables:
Interest....................................................... 3,597,748 1,369,172
Investment securities sold..................................... 1,010,640 --
Capital Shares sold............................................ 205,848 196,409
Prepaid Expenses.................................................. -- --
Other assets...................................................... 6,433 21,279
Total Assets 170,530,558 256,617,390
Liabilities
Accrued expenses.................................................. 53,056 87,498
Payables:
Capital Shares reacquired...................................... 299,458 312,740
Indebtedness (Note 6)............................................. 185,000 --
Total Liabilities 537,514 400,238
Net Assets Applicable to Outstanding Shares .................... $169,993,044 $256,217,152
Net Assets Consist of:
Capital Stock..................................................... $ 167,608 $ 235,853
Additional paid-in capital........................................ 185,244,136 267,250,459
Accumulated undistributed (overdistributed) net
investment income.............................................. 170,433 39,400
Accumulated net realized gain (loss) on investment transactions .. (3,462,797) (2,369,224)
Net unrealized (depreciation) of investments...................... (12,126,336) (8,939,336)
Total Net Assets $169,993,044 $256,217,152
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 125,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $130,813,291 $216,174,173
Shares issued and outstanding............................ 12,899,371 19,884,858
Net asset value per share................................ $10.14 $10.87
Maximum offering price per share(a) ................... $10.65 $11.41
Class B: Net Assets .............................................. $23,063,221 $26,879,621
Shares issued and outstanding............................ 2,275,570 2,483,423
Net asset value per share(b)............................. $10.14 $10.82
Class C: Net Assets............................................... $597,896 $793,989
Shares issued and outstanding............................ 59,035 73,034
Net asset value per share(b)............................. $10.13 $10.87
Class R: Net Assets............................................... $15,518,636 $12,369,369
Shares issued and outstanding............................ 1,526,835 1,143,937
Net asset value per share................................ $10.16 $10.81
<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% 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.
</FN>
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
April 30, 2000
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
Principal Principal
High Yield Limited Term Bond
INCOME FUNDS Fund, Inc. Fund, Inc.
<S> <C> <C>
Investment in securities -- at cost............................... $36,609,691 $32,097,719
Assets
Investment in securities -- at value (Note 4)..................... $32,297,263 $30,480,203
Cash ............................................................ 10,001 10,001
Receivables:
Interest....................................................... 938,203 367,061
Investment securities sold..................................... 1,432,500 28,941
Capital Shares sold............................................ 75,670 264,837
Prepaid Expenses.................................................. -- 10,184
Other assets...................................................... 2,497 264
Total Assets 34,756,134 31,161,491
Liabilities
Accrued expenses.................................................. 13,526 --
Payables:
Capital Shares reacquired...................................... 98,606 9,346
Indebtedness (Note 6)............................................. -- --
Total Liabilities 112,132 9,346
Net Assets Applicable to Outstanding Shares .................... $34,644,002 $31,152,145
Net Assets Consist of:
Capital Stock..................................................... $ 51,521 $ 33,295
Additional paid-in capital........................................ 45,243,000 32,912,522
Accumulated undistributed (overdistributed) net
investment income.............................................. (362,433) 21,033
Accumulated net realized gain (loss) on investment transactions .. (5,975,658) (197,189)
Net unrealized (depreciation) of investments...................... (4,312,428) (1,617,516)
Total Net Assets $34,644,002 $31,152,145
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $25,650,295 $24,091,587
Shares issued and outstanding............................ 3,805,384 2,577,938
Net asset value per share................................ $6.74 $9.35
Maximum offering price per share(a) ................... $7.08 $9.49
Class B: Net Assets .............................................. $6,444,121 $2,864,085
Shares issued and outstanding............................ 961,973 303,769
Net asset value per share(b)............................. $6.70 $9.43
Class C: Net Assets............................................... $262,996 $428,601
Shares issued and outstanding............................ 39,214 45,616
Net asset value per share(b)............................. $6.71 $9.40
Class R: Net Assets............................................... $2,286,590 $3,767,872
Shares issued and outstanding............................ 345,490 402,223
Net asset value per share................................ $6.62 $9.37
<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% 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.
</FN>
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
April 30, 2000
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
<S> <C>
Investment in securities -- at cost............................... $183,764,784
Assets
Investment in securities -- at value (Note 4)..................... $177,952,386
Cash ............................................................ 16,208
Receivables:
Interest....................................................... 3,397,194
Investment securities sold..................................... --
Capital Shares sold............................................ 55,903
Prepaid Expenses.................................................. --
Other assets...................................................... 10,374
Total Assets 181,432,065
Liabilities
Accrued expenses.................................................. 23,119
Payables:
Capital Shares reacquired...................................... 465,804
Indebtedness (Note 6)............................................. --
Total Liabilities 488,923
Net Assets Applicable to Outstanding Shares .................... $180,943,142
Net Assets Consist of:
Capital Stock..................................................... $ 158,485
Additional paid-in capital........................................ 186,059,682
Accumulated undistributed (overdistributed) net
investment income.............................................. 102,823
Accumulated net realized gain (loss) on investment transactions .. 434,550
Net unrealized (depreciation) of investments...................... (5,812,398)
Total Net Assets $180,943,142
Capital Stock (par value: $.01 a share):
Shares authorized................................................. 100,000,000
Net Asset Value Per Share:
Class A: Net Assets............................................... $169,734,789
Shares issued and outstanding............................ 14,868,410
Net asset value per share................................ $11.42
Maximum offering price per share(a) ................... $11.99
Class B: Net Assets .............................................. $10,765,301
Shares issued and outstanding............................ 941,168
Net asset value per share(b)............................. $11.44
Class C: Net Assets............................................... $443,052
Shares issued and outstanding............................ 38,912
Net asset value per share(b)............................. $11.39
Class R: Net Assets............................................... N/A
Shares issued and outstanding............................ N/A
Net asset value per share................................ 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% 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.
</FN>
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Six Months Ended April 30, 2000
STATEMENTS OF OPERATIONS
(unaudited)
Principal Principal Government
Bond Securities Income
INCOME FUNDS Fund, Inc. Fund, Inc.
Net Investment Income
<S> <C> <C>
Interest income.................................................... $ 7,178,607 $ 9,479,362
Expenses:
Management and investment advisory fees (Note 3)................ 428,024 603,464
Distribution and shareholder servicing fees (Notes 1 and 3)..... 343,889 536,779
Transfer and administrative services (Notes 1 and 3)............ 254,031 252,466
Registration fees (Note 1)...................................... 28,207 26,588
Custodian fees ................................................. 1,511 7,292
Auditing and legal fees ........................................ 2,026 2,651
Directors' fees ................................................ 3,107 3,103
Other .......................................................... 18,627 19,509
Total Gross Expenses 1,079,422 1,451,852
Less: Management and investment
advisory fees waived......................................... -- --
Total Net Expenses 1,079,422 1,451,852
Net Investment Income 6,099,185 8,027,510
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. (2,760,509) (355,063)
Change in unrealized appreciation/depreciation
of investments ................................................. (6,009,789) (5,284,730)
Net Realized and Unrealized
Loss on Investments (8,770,298) (5,639,793)
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (2,671,113) $ 2,387,717
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Six Months Ended April 30, 2000
STATEMENTS OF OPERATIONS
(unaudited)
Principal Principal
High Yield Limited Term Bond
INCOME FUNDS Fund, Inc. Fund, Inc.
Net Investment Income
<S> <C> <C>
Interest income.................................................... $ 1,880,088 $1,123,285
Expenses:
Management and investment advisory fees (Note 3)................ 112,280 78,389
Distribution and shareholder servicing fees (Notes 1 and 3)..... 72,271 40,145
Transfer and administrative services (Notes 1 and 3)............ 84,985 58,893
Registration fees (Note 1)...................................... 20,450 22,033
Custodian fees ................................................. 1,226 1,335
Auditing and legal fees ........................................ 2,293 2,141
Directors' fees ................................................ 3,054 2,630
Other .......................................................... 6,456 4,945
Total Gross Expenses 303,015 210,511
Less: Management and investment
advisory fees waived......................................... -- 38,053
Total Net Expenses 303,015 172,458
Net Investment Income 1,577,073 950,827
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. (2,362,527) (124,477)
Change in unrealized appreciation/depreciation
of investments ................................................. 63,114 (520,488)
Net Realized and Unrealized
Loss on Investments (2,299,413) (644,965)
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (722,340) $ 305,862
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Six Months Ended April 30, 2000
STATEMENTS OF OPERATIONS
(unaudited)
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
Net Investment Income
<S> <C>
Interest income.................................................... $ 5,627,667
Expenses:
Management and investment advisory fees (Note 3)................ 440,546
Distribution and shareholder servicing fees (Notes 1 and 3)..... 296,783
Transfer and administrative services (Notes 1 and 3)............ 86,113
Registration fees (Note 1)...................................... 19,889
Custodian fees ................................................. 1,354
Auditing and legal fees ........................................ 2,569
Directors' fees ................................................ 3,100
Other .......................................................... 14,553
Total Gross Expenses 864,907
Less: Management and investment
advisory fees waived......................................... --
Total Net Expenses 864,907
Net Investment Income 4,762,760
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from investment transactions.............. 432,356
Change in unrealized appreciation/depreciation
of investments ................................................. (3,268,666)
Net Realized and Unrealized
Loss on Investments (2,836,310)
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 1,926,450
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
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,
2000 1999(a) 2000 1999(a)
Operations
<S> <C> <C> <C> <C>
Net investment income............................................ $ 6,099,185 $ 11,662,268 $ 8,027,510 $ 16,851,924
Net realized gain (loss) from investment transactions ........... (2,760,509) (702,288) (355,063) (5,979)
Change in unrealized appreciation/depreciation of investments.... (6,009,789) (15,114,798) (5,284,730) (13,254,133)
Net Increase (Decrease) in Net Assets
Resulting from Operations (2,671,113) (4,154,818) 2,387,717 3,591,812
Dividends and Distributions to Shareholders
From net investment income:
Class A....................................................... (4,893,839) (9,680,816) (6,934,121) (14,951,275)
Class B....................................................... (765,524) (1,423,541) (765,467) (1,539,850)
Class C....................................................... (16,475) (3,357) (18,472) (3,699)
Class R....................................................... (513,608) (852,987) (326,168) (554,941)
Excess distribution of net investment income:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class C....................................................... -- -- -- --
Class R....................................................... -- -- -- --
From net realized gain on investments:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class R....................................................... -- -- -- --
Total Dividends and Distributions (6,189,446) (11,960,701) (8,044,228) (17,049,765)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 12,862,419 36,049,940 15,837,549 58,626,094
Class B....................................................... 2,839,776 9,965,885 3,131,130 13,731,533
Class C....................................................... 376,975 274,582 845,925 330,725
Class R....................................................... 3,413,823 9,183,266 3,037,876 6,980,668
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 3,928,626 7,799,345 5,718,239 12,386,671
Class B....................................................... 673,485 1,265,823 644,201 1,326,664
Class C....................................................... 11,337 1,182 15,174 2,056
Class R....................................................... 506,797 839,555 320,830 547,169
Shares redeemed:
Class A....................................................... (25,101,849) (33,235,273) (38,409,245) (73,060,063)
Class B....................................................... (4,696,866) (6,105,138) (6,023,999) (8,292,187)
Class C....................................................... (31,672) (500) (382,683) (801)
Class R....................................................... (3,721,889) (4,873,171) (2,294,263) (3,669,023)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (8,939,038) 21,165,496 (17,559,266) 8,909,506
Total Increase (Decrease) (17,799,597) 17,010,678 (23,215,777) (4,548,447)
Net Assets
Beginning of year............................................... 187,792,641 182,742,664 279,432,929 283,981,376
End of year [including undistributed (overdistributed) net investment
income as set forth below].................................... $169,993,044 $187,792,641 $256,217,152 $279,432,929
Undistributed (Overdistributed) Net Investment Income............ $ 170,433 $ 260,694 $ 39,400 $ 56,118
<FN>
(a)Class C share information is provided for the period from June 30, 1999 (inception date of Class) through October 31, 1999.
</FN>
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
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,
2000 1999(a) 2000 1999(a)
Operations
<S> <C> <C> <C> <C>
Net investment income............................................ $ 1,577,073 $ 3,487,499 $ 950,827 $ 1,827,383
Net realized gain (loss) from investment transactions ........... (2,362,527) (2,214,342) (124,477) (29,150)
Change in unrealized appreciation/depreciation of investments.... 63,114 (65,536) (520,488) (1,258,231)
Net Increase (Decrease) in Net Assets
Resulting from Operations (722,340) 1,207,621 305,862 540,002
Dividends and Distributions to Shareholders
From net investment income:
Class A....................................................... (1,385,039) (2,667,853) (769,093) (1,558,512)
Class B....................................................... (323,902) (614,039) (75,709) (125,037)
Class C....................................................... (11,543) (3,242) (10,730) (3,686)
Class R....................................................... (115,802) (202,365) (94,574) (142,252)
Excess distribution of net investment income:
Class A....................................................... -- (53,519) -- --
Class B....................................................... -- (7,154) -- --
Class C....................................................... -- (304) -- --
Class R....................................................... -- (10,362) -- --
From net realized gain on investments:
Class A....................................................... -- -- -- --
Class B....................................................... -- -- -- --
Class R....................................................... -- -- -- --
Total Dividends and Distributions (1,836,286) (3,558,838) (950,106) (1,829,487)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 2,116,880 6,088,348 4,480,112 13,486,229
Class B....................................................... 980,175 2,023,608 794,082 1,668,358
Class C....................................................... 99,819 186,235 102,728 349,050
Class R....................................................... 293,636 659,720 1,164,444 2,160,595
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 859,744 1,703,574 583,838 1,182,882
Class B....................................................... 257,820 486,899 67,798 110,918
Class C....................................................... 3,930 271 7,987 2,209
Class R....................................................... 115,690 212,231 93,069 139,519
Shares redeemed:
Class A....................................................... (5,504,206) (9,434,994) (7,551,246) (14,127,084)
Class B....................................................... (1,778,418) (3,144,289) (640,620) (692,401)
Class C....................................................... (2,037) -- (25,460) --
Class R....................................................... (552,450) (853,143) (698,826) (943,012)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (3,109,417) (2,071,540) (1,622,094) 3,337,263
Total Increase (Decrease) (5,668,043) (4,422,757) (2,266,338) 2,047,778
Net Assets
Beginning of year............................................... 40,312,045 44,734,802 33,418,483 31,370,705
End of year [including undistributed (overdistributed) net investment
income as set forth below].................................... $34,644,002 $40,312,045 $31,152,145 $ 33,418,483
Undistributed (Overdistributed) Net Investment Income............ $ (362,433) $ (103,220) $ 21,033 $ 20,312
<FN>
(a)Class C share information is provided for the period from June 30, 1999 (inception date of Class) through October 31, 1999.
</FN>
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
Principal
Tax-Exempt Bond
INCOME FUNDS Fund, Inc.
Six Months Year
Ended Ended
April 30, October 31,
2000 1999(a)
Operations
<S> <C> <C>
Net investment income............................................ $ 4,762,760 $ 10,118,426
Net realized gain (loss) from investment transactions ........... 432,356 1,798,045
Change in unrealized appreciation/depreciation of investments.... (3,268,666) (17,135,691)
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,926,450 (5,219,220)
Dividends and Distributions to Shareholders
From net investment income:
Class A....................................................... (4,534,801) (9,572,216)
Class B....................................................... (249,134) (498,767)
Class C....................................................... (5,805) (1,542)
Class R....................................................... N/A N/A
Excess distribution of net investment income:
Class A....................................................... -- --
Class B....................................................... -- --
Class C....................................................... -- --
Class R....................................................... N/A N/A
From net realized gain on investments:
Class A....................................................... (1,691,376) (81,082)
Class B....................................................... (102,928) (4,523)
Class R....................................................... (1,231) N/A
Total Dividends and Distributions (6,585,275) (10,158,130)
Capital Share Transactions (Note 5)
Shares sold:
Class A....................................................... 7,251,620 27,588,420
Class B....................................................... 513,015 2,296,619
Class C....................................................... 307,559 140,820
Class R....................................................... N/A N/A
Shares issued in reinvestment of dividends and distributions:
Class A....................................................... 4,633,012 6,665,020
Class B....................................................... 277,642 383,870
Class C....................................................... 4,302 292
Class R....................................................... N/A N/A
Shares redeemed:
Class A....................................................... (24,727,985) (37,634,782)
Class B....................................................... (1,243,601) (1,756,824)
Class C....................................................... (3,587) --
Class R....................................................... N/A N/A
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (12,988,023) (2,316,565)
Total Increase (Decrease) (17,646,848) (17,693,915)
Net Assets
Beginning of year............................................... 198,589,990 216,283,905
End of year [including undistributed (overdistributed) net investment
income as set forth below].................................... $180,943,142 $198,589,990
Undistributed (Overdistributed) Net Investment Income............ $ 102,823 $ 129,803
<FN>
(a)Class C share information is provided for the period from June 30, 1999 (inception date of Class) through October 31, 1999.
</FN>
</TABLE>
See accompanying notes.
April 30, 2000
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.
On June 30, 1999, the initial purchases of Class C shares of the Income Funds
were made by Principal Life Insurance Company (See Note 3). Effective June 30,
1999, the Income Funds began offering Class C shares to the public.
Class A shares generally are sold with an initial sales charge based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") upon redemption. Class B shares are sold without an
initial sales charge, but are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class C shares are sold without an initial
sales charge, but are subject to a CDSC on certain redemptions made within the
first twelve months of purchase. Class R shares are sold without an initial
sales charge and are not subject to a CDSC. Class B shares, Class C shares and
Class R shares bear higher ongoing distribution fees than Class A shares. Class
B shares automatically convert into Class A shares, based on relative net asset
value (without a sales charge) seven years after purchase. Class C shares do not
convert into Class A shares. Class R shares automatically convert into Class A
shares, based on relative net asset value (without a sales charge) four years
after purchase. All classes of shares for each fund represent interests in the
same portfolio of investments, and will vote together as a single class except
where otherwise required by law or as determined by each of the Income Funds'
respective Board of Directors. In addition, the Board of Directors of each fund
declares separate dividends on each class of shares.
The Income Funds allocate daily all income, expenses (other than class-specific
expenses) and realized and unrealized gains or losses to each class of shares
based upon the relative proportion of the value of shares outstanding of each
class. Expenses specifically attributable to a particular class are charged
directly to such class. Class-specific expenses charged to each class during the
period ended April 30, 2000, which are included in the corresponding captions of
the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services
Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. $186,938 $111,840 $2,544 $42,567 $64,722 $19,987 $ 77 $10,695
Principal Government Securities
Income Fund, Inc. 346,060 152,049 3,328 35,342 80,902 16,248 84 6,486
Principal High Yield Fund, Inc. 34,679 31,128 1,218 5,246 18,106 7,010 221 2,606
Principal Limited Term Bond Fund, Inc. 18,574 6,768 987 13,816 6,801 2,195 17 1,700
Principal Tax-Exempt Bond Fund, Inc. 258,591 36,903 1,289 N/A 23,885 1,859 35 N/A
</TABLE>
<TABLE>
<CAPTION>
Registration Fees
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Bond Fund, Inc. $7,057 $5,341 $1,318 $5,914
Principal Government Securities
Income Fund, Inc. 7,014 5,033 1,136 3,958
Principal High Yield Fund, Inc. 4,737 3,788 1,791 3,533
Principal Limited Term Bond Fund, Inc. 5,257 4,333 1,033 3,327
Principal Tax-Exempt Bond Fund, Inc. 9,613 4,263 909 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 Principal High Yield
Fund, Inc. aggregated $488,110 for the year ended October 31, 1999. Other
reclassifications made for the year ended October 31, 1999 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>
<CAPTION>
Net Asset Value of Funds
(in millions)
First Next Next Next Over
$100 $100 $100 $100 $400
<S> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. 0.50% 0.45% 0.40% 0.35% 0.30%
Principal Government Securities Income Fund, Inc. 0.50 0.45 0.40 0.35 0.30
Principal High Yield Fund, Inc. 0.60 0.55 0.50 0.45 0.40
Principal Limited Term Bond Fund, Inc. 0.50 0.45 0.40 0.35 0.30
Principal Tax-Exempt Bond Fund, Inc. 0.50 0.45 0.40 0.35 0.30
</TABLE>
The Income Funds also reimburse the Manager for transfer and administrative
services, including the cost of accounting, data processing, supplies and other
services rendered.
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>
<CAPTION>
Amount
Waived
Period Ended Year Ended Expense
April 30, 2000 October 31, 1999 Limit
Principal Limited Term Bond Fund, Inc.
<S> <C> <C> <C>
Class A $22,022 $40,285 1.00%
Class B 7,630 14,004 1.35
Class C 1,212 488 1.35
Class R 7,189 11,951 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, 2000.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00% and Class C shares at 1.00% (.25%, 1.25% and .50% for
Principal Limited Term Bond Fund, Inc. share classes, respectively), of the
lesser of the current market value or the cost of shares being redeemed. Princor
Financial Services Corporation also retains sales charges on sales of Class A
shares based on declining rates which begin at 4.75% of the offering price
(1.50% for Principal Limited Term Bond Fund, Inc.). The aggregate amount of
these charges retained, by fund, for the period ended April 30, 2000, were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal Bond Fund, Inc. $206,509 $63,174 $284
Principal Government Securities Income Fund, Inc. 240,619 58,790 204
Principal High Yield Fund, Inc. 40,312 17,051 8
Principal Limited Term Bond Fund, Inc. 18,751 3,191 100
Principal Tax-Exempt Bond Fund, Inc. 135,242 23,658 31
</TABLE>
No brokerage commissions were paid by the Income Funds to affiliated broker
dealers during the period.
The Income Funds bear distribution and shareholder servicing fees with respect
to each Class computed at an annual rate of the average daily net assets
attributable to each Class of each Fund. The annual rate will not exceed the
following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Principal Bond Fund, Inc. .25% 1.00% 1.00% .75%
Principal Government Securities Income Fund, Inc. .25% 1.00% 1.00% .75%
Principal High Yield Fund, Inc. .25% 1.00% 1.00% .75%
Principal Limited Term Bond Fund, Inc. .15% .50% .50% .75%
Principal Tax-Exempt Bond Fund, Inc. .25% 1.00% 1.00% N/A
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class A, Class B and Class
R shares, fees that are unused by the principal underwriter at the end of the
fiscal year are returned to the respective Income Funds which generated the
excess.
At April 30, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company and benefit plans sponsored on behalf of Principal Life
Insurance Company owned shares of the Income Funds as follows:
<TABLE>
<CAPTION>
Class A Class C
<S> <C> <C>
Principal Bond Fund, Inc. 93,529 8,681
Principal Government Securities Income Fund, Inc. -- 8,598
Principal High Yield Fund, Inc. 382,965 13,369
Principal Limited Term Bond Fund, Inc. 592,210 10,373
Principal Tax-Exempt Bond Fund, Inc. -- 7,974
</TABLE>
Note 4 -- Investment Transactions
For the period ended April 30, 2000, the cost of investment securities purchased
and proceeds from investment securities sold (not including short-term
investments and U. S. government securities) by the Income Funds were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Principal Bond Fund, Inc. $25,474,730 $34,319,095
Principal High Yield Fund, Inc. 15,081,838 18,267,741
Principal Limited Term Bond Fund, Inc. 3,571,329 5,015,460
Principal Tax-Exempt Bond Fund, Inc. 9,119,980 17,033,767
</TABLE>
At April 30, 2000, net unrealized depreciation of investments by the Income
Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Depreciation
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Bond Fund, Inc. $ 647,089 $(12,773,425) $(12,126,336)
Principal Government Securities Income Fund, Inc. 526,197 (9,465,533) (8,939,336)
Principal High Yield Fund, Inc. 190,441 (4,502,869) (4,312,428)
Principal Limited Term Bond Fund, Inc. 68 (1,617,584) (1,617,516)
Principal Tax-Exempt Bond Fund, Inc. 3,029,542 (8,841,940) (5,812,398)
</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, 2000, there were no TBA purchase or
sell commitments outstanding.
Note 4 -- Investment Transactions (Continued)
At April 30, 2000, the Income Funds held the following securities, which may
require registration under the Securities Act of 1933, or an exemption
therefrom, in order to effect their sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of April 30, Percentage of
Security Description Acquisition Cost 2000 Net Assets
<S> <C> <C> <C> <C> <C>
Principal Bond Fund, Inc. AES Ironwood LLC
Senior Secured Bonds 6/18/99 $4,000,000 $ 3,898,720 2.29%
Global Crossing Holdings Ltd.
Senior Notes 11/12/99 2,452,950 2,425,000 1.43
International Game Technology
Senior Notes 5/11/99 2,969,220 2,775,000 1.63
Orix Credit Alliance
Short Term Notes 2/26/99 5,000,000 4,963,005 2.92
Osprey Trust/Osprey I, Inc.
Senior Secured Notes 9/16/99 4,500,000 4,480,484 2.64
Park Place Entertainment
Senior Subordinated Notes 2/15/00 2,500,000 2,475,000 1.46
Southern Energy, Inc.
Senior Notes 7/21/99 2,998,890 2,845,638 1.67
Vodafone Airtouch
Unsubordinated Notes 2/7/00 2,484,525 2,461,267 1.45
26,324,114 15.49
Principal High Yield Fund, Inc. CE Casecnan Water & Energy Co., Inc.
Senior Notes 1/21/00 727,500 689,404 1.99
Charter Communications Holdings,
LLC Senior Notes 3/12/99 877,500 825,000 2.38
Covad Communications Group, Inc.
Senior Notes 1/21/00 750,000 705,000 2.03
2/15/00 757,500 705,000 2.03
Global Crossing Holdings Ltd.
Senior Notes 11/12/99 490,590 485,000 1.40
Globix Corp.
Senior Notes 1/28/00 750,000 660,000 1.91
Level 3 Communications, Inc.
Senior Discount Notes 2/24/00 399,810 388,125 1.12
4/5/00 453,375 465,750 1.34
Mercury Financial Services Corp.
Senior Notes 4/30/99 672,000 658,000 1.90
7/15/99 755,000 752,000 2.17
NEXTLINK Communications, Inc.
Senior Notes 11/12/99 700,000 675,000 1.95
Park Place Entertainment Corp.
Senior Subordinated Notes 2/15/00 750,000 742,500 2.14
Winstar Communications, Inc.
Senior Notes 3/27/00 1,000,000 955,000 2.76
York Power Funding Ltd.
Senior Secured Bonds 7/31/98 900,000 909,000 2.62
9,614,779 27.74
Principal Tax-Exempt Bond Fund, Inc. Eddyville, Iowa, IDR Ref. Bonds,
Cargill, Inc. Project 1/11/95 859,910 972,500 .54
</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.
Period Ended April 30, 2000:
Shares sold:
<S> <C> <C> <C>
Class A ......................................... 1,226,801 1,450,816 300,836
Class B ......................................... 271,359 286,953 141,005
Class C............................................ 35,516 76,852 13,769
Class R............................................ 325,110 278,958 42,510
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 376,494 523,995 123,025
Class B ......................................... 64,567 59,285 37,112
Class C............................................ 1,090 1,391 566
Class R............................................ 48,484 29,566 16,862
Shares redeemed:
Class A ......................................... (2,400,258) (3,520,760) (785,856)
Class B ......................................... (450,090) (554,179) (257,325)
Class C............................................ (3,035) (35,133) (287)
Class R............................................ (355,336) (211,065) (80,543)
Net (Decrease) (859,298) (1,613,321) (448,326)
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 3,199,473 5,139,925 797,412
Class B ......................................... 887,883 1,209,279 267,743
Class C............................................ 25,400 29,810 25,128
Class R............................................ 818,782 617,460 88,610
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 700,226 1,093,369 225,486
Class B ......................................... 113,809 117,555 64,795
Class C............................................ 111 186 38
Class R............................................ 75,486 48,733 28,583
Shares redeemed:
Class A ......................................... (2,982,198) (6,419,532) (1,240,512)
Class B ......................................... (552,055) (735,814) (415,445)
Class C............................................ (47) (72) --
Class R............................................ (437,588) (326,089) (114,513)
Net Increase (Decrease) 1,849,282 774,810 (272,675)
</TABLE>
Note 5 -- Capital Share Transactions (Continued)
<TABLE>
<CAPTION>
Principal Principal
Limited Term Bond Tax-Exempt Bond
Fund, Inc. Fund, Inc.
Period Ended April 30, 2000:
Shares sold:
<S> <C> <C>
Class A ......................................... 476,051 629,945
Class B ......................................... 83,551 44,455
Class C............................................ 10,791 27,171
Class R............................................ 123,271 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 62,110 402,355
Class B ......................................... 7,154 24,066
Class C ......................................... 846 376
Class R............................................ 9,885 N/A
Shares redeemed:
Class A ......................................... (801,829) (2,158,593)
Class B ......................................... (67,629) (108,175)
Class C ......................................... (2,680) (305)
Class R............................................ (74,164) N/A
Net (Decrease) (172,643) (1,138,705)
Periods Ended October 31, 1999:
Shares sold:
Class A ......................................... 1,377,645 2,233,237
Class B ......................................... 169,744 185,513
Class C............................................ 36,427 11,645
Class R............................................ 221,185 N/A
Shares issued in reinvestment of dividends and distributions:
Class A ......................................... 121,669 542,861
Class B ......................................... 11,365 31,252
Class C ......................................... 232 25
Class R............................................ 14,381 N/A
Shares redeemed:
Class A ......................................... (1,439,398) (3,056,609)
Class B ......................................... (71,330) (142,639)
Class C ......................................... -- --
Class R............................................ (97,249) N/A
Net Increase (Decrease) 344,671 (194,715)
</TABLE>
Note 6 -- Line of Credit
The Income Funds participate with other funds and portfolios managed by
Principal Management Corporation in an unsecured joint line of credit with two
banks which allow the funds to borrow up to $75,000,000 collectively. Borrowings
are made solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each fund, based on its
borrowings, at a rate equal to the Fed Funds Rate plus .50%. Additionally, a
commitment fee is charged at the annual rate of .09% on the 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, 2000, the Principal Bond Fund, Inc. had an
outstanding borrowing of $185,000 at an annual rate of 6.63%. No other Income
Funds had outstanding borrowings at April 30, 2000 under the line of credit.
SCHEDULES OF INVESTMENTS
INCOME FUNDS
PRINCIPAL BOND FUND, INC.
Principal
Amount Value
Bonds (94.16%)
Air Transportation, Scheduled (4.75%)
Continental Airlines Pass-Through
Cert., Series 1999-2, Class A-1;
7.26%; 9/15/2021 $2,976,158 $ 2,856,041
Federal Express Corp. 1994
Pass-Through Cert., Series A310-A3;
8.40%; 3/23/2010 1,500,000 1,475,175
Federal Express Corp. Pass-Through
Cert.; 7.58%; 7/2/2019 1,000,000 957,620
Northwest Airlines Corp. Corporate Bond;
7.58%; 3/1/2019 1,989,683 1,888,149
Northwest Airlines Pass-Through Cert.,
Series 1999-1, Class 1A;
6.81%; 2/1/2020 985,006 897,705
8,074,690
Beverages (1.17%)
Joseph E. Seagram & Sons
Guaranteed Debentures;
8.38%; 2/15/2007 1,000,000 990,108
8.88%; 9/15/2011 1,000,000 1,006,644
1,996,752
Cable & Other Pay TV Services (1.98%)
Cox Communications, Inc. Notes;
7.75%; 8/15/2006 1,500,000 1,471,830
CSC Holdings, Inc. Debentures;
8.13%; 8/15/2009 2,000,000 1,888,958
3,360,788
Cash Grains (1.44%)
Aktiebolaget SKF Senior Notes;
7.63%; 7/15/2003 2,500,000 2,441,512
Combination Utility Services (2.32%)
PG Energy, Inc. First Mortgage
Bonds; 8.38%; 12/1/2002 500,000 504,386
Puget Sound Power & Light Co.
1st Mortgage Medium-Term Notes,
Series A; 7.75%; 2/1/2007 3,500,000 3,448,882
3,953,268
Computer & Data Processing
Services (2.92%)
Comdisco, Inc.
Medium-Term Notes; 6.65%; 11/13/2001 2,000,000 1,960,188
Notes; 6.00%; 1/30/2002 3,100,000 2,999,393
4,959,581
Computer & Office Equipment (3.17%)
International Game Technology
Senior Notes; 8.38%; 5/15/2009 3,000,000(a) 2,775,000
Seagate Technology, Inc. Senior Notes;
7.37%; 3/1/2007 3,000,000 2,619,594
5,394,594
Construction & Related
Machinery (0.65%)
Caterpillar, Inc. Global Debentures;
9.38%; 8/15/2011 $1,000,000 $ 1,115,110
Credit Reporting & Collection (2.92%)
Orix Credit Alliance Short-Term Notes;
7.00%; 3/15/2001 5,000,000(a) 4,963,005
Crude Petroleum & Natural Gas (1.37%)
Louis Dreyfus Natural Gas Corp.
Senior Notes; 6.88%; 12/1/2007 2,000,000 1,811,824
Occidental Petroleum Corp.
Medium-Term Notes;
9.73%; 6/15/2001 500,000 508,837
2,320,661
Electric Services (11.47%)
AES Ironwood LLC Senior Secured
Bonds; 8.88%; 11/30/2025 4,000,000(a) 3,898,720
Calpine Corp. Notes; 7.75%; 4/15/2009 3,000,000 2,790,000
CE Generation LLC Senior Secured
Notes; 7.42%; 12/15/2018 2,000,000 1,809,860
Central Vermont Public Services
Corporate Bonds;
8.13%; 8/1/2004 3,000,000 2,861,217
East Coast Power, LLC Senior Secured
Notes; 7.54%; 6/30/2017 3,000,000 2,665,380
Osprey Trust/Osprey I, Inc. Senior
Secured Notes; 8.31%; 1/15/2003 4,500,000(a) 4,480,483
Toledo Edison Co. Debentures;
8.70%; 9/1/2002 1,000,000 995,046
19,500,706
Engines & Turbines (0.52%)
Brunswick Corp. Debentures;
7.38%; 9/1/2023 1,000,000 891,577
Fabricated Rubber Products, NEC (0.91%)
M. A. Hanna Co. Senior Notes;
9.38%; 9/15/2003 1,500,000 1,551,048
Farm & Garden Machinery (0.53%)
Case Corp. Notes; 7.25%; 1/15/2016 1,000,000 896,088
Funeral Service & Crematories (0.87%)
Service Corp. International Notes;
6.00%; 12/15/2005 2,500,000 1,475,000
General Government, NEC (0.56%)
Mexican United States Corporate Bond;
8.63%; 3/12/2008 1,000,000 953,500
Gold & Silver Ores (0.67%)
Placer Dome, Inc. Notes;
7.13%; 6/15/2007 1,250,000 1,131,567
Grain Mill Products (0.58%)
Ralston Purina Co. Debentures;
7.75%; 10/1/2015 1,000,000 985,910
Grocery Stores (2.58%)
American Stores Co. Bonds;
8.00%; 6/1/2026 $2,500,000 $ 2,456,540
Food Lion, Inc.
Medium-Term Notes;
8.67%; 8/28/2006 1,000,000 1,001,964
Notes; 7.55%; 4/15/2007 1,000,000 927,887
4,386,391
Heavy Construction, Except
Highway (1.35%)
Mastec, Inc. Senior Subordinated Notes;
7.75%; 2/1/2008 2,500,000 2,300,000
Highway & Street Construction (1.23%)
Foster Wheeler Corp. Notes;
6.75%; 11/15/2005 2,500,000 2,095,730
Hotel & Motels (2.24%)
Marriott International, Inc. Notes;
6.63%; 11/15/2003 4,000,000 3,807,444
Industrial Inorganic Chemicals (2.28%)
Equistar Chemicals LP Senior Notes;
8.75%; 2/15/2009 4,000,000 3,870,148
Machinery, Equipment &
Supplies (0.14%)
AAR Corp. Notes; 7.25%; 10/15/2003 250,000 242,094
Medical Service & Health
Insurance (1.71%)
Conseco, Inc. Notes; 8.75%; 2/9/2004 5,000,000 2,900,000
Millwork, Plywood & Structural
Members (0.37%)
Georgia-Pacific Corp.
Debentures; 9.50%; 12/1/2011 600,000 635,953
Miscellaneous Amusement, Recreation
Service (1.46%)
Park Place Entertainment Corp. Senior
Subordinated Notes; 9.38%; 2/15/2007 2,500,000(a) 2,475,000
Miscellaneous Investing (2.55%)
BRE Properties, Inc. Notes;
7.20%; 6/15/2007 2,000,000 1,803,838
First Industrial LP Medium-Term
Notes; 7.00%; 12/1/2006 1,500,000 1,336,656
Weingarten Realty Investors
Medium-Term Notes;
7.29%; 5/23/2005 1,250,000 1,189,802
4,330,296
Miscellaneous Metal Ores (0.39%)
Cyprus Minerals Co. Notes;
10.13%; 4/1/2002 650,000 669,952
Mortgage Bankers & Brokers (1.08%)
Chase Commercial Mortgage Securities
Corp. Class C Notes;
6.60%; 12/19/2007 $2,000,000 $ 1,841,583
Motor Vehicles & Equipment (1.19%)
Ford Motor Co. Debentures;
7.50%; 8/1/2026 1,000,000 936,641
8.90%; 1/15/2032 1,000,000 1,080,321
2,016,962
Natural Gas Liquids (1.08%)
Enron Corp. Corporate Bonds;
7.38%; 5/15/2019 2,000,000 1,837,882
Newspapers (1.69%)
United News & Media PLC Notes;
7.75%; 7/1/2009 3,000,000 2,868,261
Oil & Gas Field Services (1.40%)
Petroleum Geo-Services ASA Notes;
7.50%; 3/31/2007 2,500,000 2,387,082
Operative Builders (1.30%)
Pulte Corp.
Senior Notes; 8.38%; 8/15/2004 500,000 490,604
Notes; 7.63%; 10/15/2017 2,000,000 1,711,460
2,202,064
Paper & Paper Products (1.65%)
Boise Cascade Office Products Corp.
Notes; 7.05%; 5/15/2005 3,000,000 2,805,324
Paper Mills (2.61%)
Bowater, Inc. Debentures;
9.50%; 10/15/2012 1,000,000 1,070,070
9.38%; 12/15/2021 1,500,000 1,598,969
Champion International Corp.
Notes; 9.88%; 6/1/2000 750,000 751,272
Chesapeake Corp. Notes;
9.88%; 5/1/2003 1,000,000 1,015,966
4,436,277
Paperboard Mills (0.95%)
Federal Paper Board Co., Inc.
Debentures; 8.88%; 7/1/2012 1,500,000 1,621,550
Petroleum Refining (4.68%)
Ashland Oil, Inc. Medium-Term Notes;
7.71%; 5/11/2007 500,000 484,355
7.72%; 7/15/2013 1,000,000 958,318
7.73%; 7/15/2013 750,000 719,336
Mapco, Inc. Medium-Term Notes;
8.48%; 8/5/2013 1,000,000 1,024,473
Sun Co., Inc.
Debentures; 9.00%; 11/1/2024 2,000,000 2,093,368
Notes; 7.13%; 3/15/2004 300,000 290,821
Tosco Corp. Notes; 7.25%; 1/1/2007 2,500,000 2,376,902
7,947,573
Plumbing & Heating, Except
Electric (1.08%)
Masco Corp. Debentures;
7.13%; 8/15/2013 $2,000,000 $ 1,833,956
Public Building & Related
Furniture (1.08%)
Lear Corp. Senior Notes;
7.96%; 5/15/2005 2,000,000 1,839,086
Pulp Mills (1.57%)
ITT Rayonier, Inc. Notes;
7.50%; 10/15/2002 1,875,000 1,863,283
International Paper Co.
Medium-Term Notes;
9.70%; 8/15/2000 800,000 805,182
2,668,465
Railroads (1.87%)
Union Pacific Corp.
Debentures; 7.00%; 2/1/2016 2,500,000 2,237,603
Notes; 7.25%; 11/1/2008 1,000,000 938,571
3,176,174
Real Estate Operators & Lessors (0.69%)
First Industrial, L.P. Notes;
7.60%; 5/15/2007 1,250,000 1,170,341
Rental of Railroad Cars (1.45%)
GATX Capital Corp. Medium-Term Notes;
Series B; 9.50%; 1/10/2002 1,500,000 1,527,045
Series C; 6.86%; 10/13/2005 1,000,000 932,919
2,459,964
Residential Building Construction (3.17%)
D.R. Horton, Inc. Senior Notes;
8.00%; 2/1/2009 3,000,000 2,535,000
Southern Energy, Inc. Senior Notes;
7.90%; 7/15/2009 3,000,000(a) 2,845,638
5,380,638
Sanitary Services (0.44%)
Laidlaw, Inc.
Senior Notes; 7.87%; 4/15/2005 750,000 288,750
Notes; 7.70%; 8/15/2002 1,000,000 460,000
748,750
Search & Navigation Equipment (0.47%)
Raytheon Co. Notes; 6.40%; 12/15/2018 1,000,000 801,100
Security Brokers & Dealers (1.99%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.38%; 1/15/2007 3,545,000 3,381,604
Telephone Communication (6.97%)
Global Crossing Holdings Ltd. Senior
Notes; 9.13%; 11/15/2006 $2,500,000(a) $2,425,000
Sprint Capital Corp.
Global Bonds; 6.88%; 11/15/2028 7,000,000 6,067,110
Notes; 6.90%; 5/1/2019 1,000,000 890,877
Vodafone Airtouch PLC
Unsubordinated Notes;
7.75%; 2/15/2010 2,500,000(a) 2,461,268
11,844,255
Variety Stores (0.65%)
Dayton-Hudson Corp. Debentures;
9.25%; 8/15/2011 1,000,000 1,111,503
Total Bonds 160,058,759
Asset-Backed Securities (3.32%)
Investment Offices (1.61%)
Morgan Stanley Capital I, Inc. Comml
Mtg Pass-Through Cert., Series 99-WF1
CL C; 6.54%; 10/15/2008 3,000,000 2,738,730
Security Brokers & Dealers (1.71%)
Merrill Lynch Mortgage Investors, Inc.
Collateralized Mortgage-Backed
Security, Series 95-C3, 7.37%*
Class C; 12/26/2025 3,000,000 2,912,400
Total Asset-Backed Securities 5,651,130
Total Portfolio Investments (97.48%) 165,709,889
Cash, receivables and other assets,
net of liabilities (2.52%) 4,283,155
Total Net Assets (100.00%) $169,993,044
(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 (97.87%)
GNMA I 5.50% 12/15/2013-3/15/2014 $4,096,257 $ 3,757,266
GNMA I 6.00 10/15/2023-4/15/2024 12,307,737 11,279,179
GNMA I 6.50 7/15/2008-1/15/2029 72,848,601 68,565,151
GNMA I 7.00 10/15/2022-4/15/2029 71,422,476 68,884,056
GNMA I 7.25 9/15/2025-10/15/2025 2,621,442 2,551,882
GNMA I 7.50 4/15/2017-10/15/2027 27,407,744 27,032,938
GNMA I 8.00 8/15/2016-2/15/2022 6,558,703 6,629,363
GNMA II 5.50 7/20/2014 993,671 851,060
GNMA II 6.00 1/20/2024-7/20/2029 56,247,592 51,015,449
GNMA II 6.50 3/20/2024-3/20/2027 10,901,837 10,191,516
Total GNMA Certificates 250,757,860
Principal
Amount Value
Federal Agency Short-Term Obligation (1.66%)
Investment in Joint Trade Account,
Federal Home Loan Mortgage Corp.;
5.88%; 5/1/2000 $4,261,698 $ 4,260,306
Total Portfolio Investments (99.53%) 255,018,166
Cash, receivables and other assets,
net of liabilities (0.47%) 1,198,986
Total Net Assets (100.00%) $256,217,152
PRINCIPAL HIGH YIELD FUND, INC.
Principal
Amount Value
Bonds (91.91%)
Advertising (4.30%)
Lamar Media Corp.
Senior Subordinated Notes;
9.63%; 12/1/2006 $1,500,000 $1,488,750
Blast Furnace & Basic Steel
Products (1.98%)
AK Steel Corp. Senior Notes;
7.88%; 2/15/2009 750,000 686,250
Communications Equipment (5.43%)
Century Communications Corp.
Senior Discount Notes;
1/15/2008 $1,500,000(b) $ 626,250
Williams Communication Group, Inc.
Senior Notes; 10.88%; 10/1/2009 1,250,000 1,256,250
1,882,500
Communications Services, NEC (6.35%)
Charter Communications Holdings, LLC
Senior Notes; 11.75%; 1/15/2010 1,500,000(a) 825,000
Level 3 Communications, Inc.
Senior Notes; 9.13%; 5/1/2008 600,000 522,000
Senior Discount Notes; 3/15/2010 1,650,000(a)(b) 853,875
2,200,875
Computer & Data Processing
Services (3.80%)
Globix Corp. Senior Notes;
12.50%; 2/1/2010 750,000(a) 660,000
PSINet, Inc. Senior Notes;
10.50%; 12/1/2006 750,000 658,125
1,318,125
Computer & Office Equipment (1.91%)
International Game Technology Senior
Notes; 7.88%; 5/15/2004 700,000 663,250
Crude Petroleum & Natural Gas (4.24%)
Chesapeake Energy Corp. Senior
Notes, Series A; 9.63%; 5/1/2005 750,000 720,000
Louis Dreyfus Natural Gas Co. Senior
Subordinated Notes; 9.25%; 6/15/2004 750,000 751,706
1,471,706
Eating & Drinking Places (2.36%)
Foodmaker, Inc. Senior Subordinated
Notes; 8.38%; 4/15/2008 900,000 816,750
Electric Services (4.75%)
AES Corp. Senior Notes;
9.50%; 6/1/2009 750,000 735,000
York Power Funding Ltd. Senior Secured
Bonds; 12.00%; 10/30/2007 900,000(a) 909,000
1,644,000
Funeral Service & Crematories (2.64%)
Service Corp. International Notes;
7.38%; 4/15/2004 1,500,000 915,000
Grocery Stores (1.88%)
Marsh Supermarkets, Inc. Senior
Subordinated Notes;
8.88%; 8/1/2007 700,000 651,000
Heavy Construction, Except
Highway (4.78%)
Mastec, Inc. Senior Subordinated
Notes; 7.75%; 2/1/2008 1,800,000 1,656,000
Hotels & Motels (5.58%)
HMH Properties, Inc. Senior Notes;
7.88%; 8/1/2005 $ 750,000 $ 675,000
7.88%; 8/1/2008 750,000 648,750
John Q. Hammons Hotels, LP &
Finance Corp. First Mortgage
Notes; 8.88%; 2/15/2004 700,000 609,000
1,932,750
Miscellaneous Amusement, Recreation
Service (4.22%)
Park Place Entertainment Corp. Senior
Subordinated Notes;
8.88%; 12/1/2008 750,000(a) 742,500
Station Casinos, Inc. Senior
Subordinated Notes;
8.88%; 12/1/2008 750,000 720,000
1,462,500
Personal Credit Institutions (5.43%)
Mercury Financial Services Corp.
Senior Notes; 10.00%; 3/23/2001 1,500,000(a) 1,410,000
MacSaver Financial Services, Inc.
Notes; 7.60%; 8/1/2007 800,000 472,000
1,882,000
Petroleum Refining (1.59%)
Crown Central Petroleum Corp.
Senior Notes; 10.88%; 2/1/2005 700,000 549,500
Public Building & Related
Furniture (1.93%)
Lear Corp. Senior Notes;
8.11%; 5/15/2009 750,000 668,689
Radio & Television Broadcasting (2.36%)
Antenna TV S.A. Senior Notes;
9.00%; 8/1/2007 900,000 816,750
Residential Building Construction (1.83%)
D.R. Horton, Inc. Senior Notes;
8.00%; 2/1/2009 750,000 633,750
Telephone Communication (18.92%)
Clearnet Communications, Inc. Step-up*
Senior Discount Notes; 12/15/2005 750,000(b) 761,250
Covad Communications Group, Inc.
Senior Notes; 12.00%; 2/15/2010 1,500,000(a) 1,410,000
Global Crosing Holdings Ltd.
Senior Notes; 9.13%; 11/15/2006 500,000(a) 485,000
Intermedia Communications, Inc. Senior
Notes; 8.50%; 1/15/2008 800,000 728,000
NEXTLINK Communications, Inc.
Senior Notes; 10.75%; 6/1/2009 800,000 786,000
10.50%; 12/1/2009 700,000(a) 675,500
Rogers Cantel, Inc. Senior Secured
Debentures; 9.75%; 6/1/2016 700,000 752,500
Winstar Communications, Inc. Senior
Notes; 12.75% 4/15/2010 1,000,000(a) 955,000
6,553,250
Water Supply (1.99%)
CE Casecnan Water & Energy Co., Inc.
Senior Notes; 11.45%; 11/15/2005 $ 750,000(a) $ 689,404
Water Transportation of Freight,
NEC (3.64%)
Cenargo International PLC First
Mortgage Notes; 9.75% 6/15/2008 1,500,000 1,260,000
Total Bonds 31,842,799
Shares
Held Value
Common Stocks (0.00%)
Communications Equipment (0.00%)
FWT, Inc. 14,933(c) $ 0
Computer & Data Processing (0.00%)
DecisionOne Corp. - Common 3,500(c) 0
DecisionOne Corp. - Warrants
Class A 2,054(c) 0
Class B 3,540(c) 0
Class C 2,100(c) 0
Total Common Stocks 0
Preferred Stocks (0.23%)
Communication Equipment (0.22%)
FWT, Inc. 149,333(c) 74,666
Fuel Dealers (0.01%)
Star Gas Partners LP 308 4,312
Total Preferred Stocks 78,978
Principal
Amount Value
Commercial Paper (1.08%)
Personal Credit Institutions (1.08%)
Investment in Joint Trade Account,
Associates First Capital Corp.;
6.04%; 5/1/2000 $ 375,000 $ 375,486
Total Portfolio Investments (93.22%) 32,297,263
Cash, receivables and other assets,
net of liabilities (6.78%) 2,346,739
Total Net Assets (100.00%) $34,644,002
(a) Restricted security - See Note 4 to the financial statements.
(b) Non-income producing security - Zero-step coupon bond.
(c) Non-income producing security - No dividends paid during the period.
* Variable rate (monthly).
PRINCIPAL LIMITED TERM BOND FUND, INC.
Principal
Amount Value
Bonds (48.92%)
Department Stores (7.87%)
Dillards, Inc. Notes;
6.43%; 8/1/2004 $ 490,000 $ 431,624
J.C. Penney Co., Inc. Notes;
9.05%; 3/1/2001 1,505,000 1,475,186
Sears Roebuck Acceptance Corp.
Medium-Term Notes, Series II;
6.69%; 8/13/2001 450,000 444,620
Sears Roebuck Co. Medium-Term
Notes; 6.46%; 5/12/2000 100,000 99,993
2,451,423
Federal & Federally Sponsored
Credit (0.40%)
Federal Home Loan Mortgage
Corp. Debentures;
6.57%; 2/27/2007 130,000 124,664
Funeral Services & Crematories (4.65%)
Service Corp. International Notes;
6.38%; 10/1/2000 1,500,000 1,447,500
General Industrial Machinery (3.18%)
Timken Co. Medium-Term Notes;
7.30%; 8/13/2002 $1,000,000 991,288
Medical Service & Health
Insurance (4.56%)
Aetna Services, Inc. Notes;
6.38%; 8/15/2003 1,500,000 1,419,548
Mortgage Bankers & Brokers (2.72%)
Countrywide Funding Corp.
Medium-Term Notes;
6.05%; 3/1/2001 860,000 849,201
Motor Vehicles & Equipment (1.64%)
General Motors Corp. Medium-Term
Notes; 9.20%; 7/2/2001 500,000 510,564
Paper Mills (3.17%)
International Paper Co. Notes;
7.00%; 6/1/2001 1,000,000 987,630
Paperboard Mills (4.86%)
Temple-Inland, Inc. Notes;
9.00%; 5/1/2001 1,500,000 1,514,685
Personal Credit Institutions (4.37%)
Ford Motor Credit Co. Notes;
7.50%; 1/15/2003 1,367,000 1,360,467
Security Brokers & Dealers (9.35%)
Lehman Brothers, Inc. Senior
Subordinated Notes;
7.25%; 4/15/2003 $1,500,000 $1,469,959
Merrill Lynch & Co., Inc. Notes;
6.55%; 8/1/2004 1,500,000 1,441,782
2,911,741
Telephone Communication (2.15%)
Nynex Capital Funding Medium-Term
Notes, Series A; 9.40%; 6/1/2000 670,000 671,668
Total Bonds 15,240,379
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation (FHLMC)
Certificates (7.41%)
FHLMC 7.00% 3/1/2028-12/1/2022 $ 983,556 $ 944,590
FHLMC 7.25 12/1/2007 293,648 292,870
FHLMC 7.50 12/1/2009 498,827 488,805
FHLMC 8.00 12/1/2011-10/1/2022 356,784 356,019
FHLMC 8.25 1/1/2012 38,517 38,892
FHLMC 9.00 9/1/2009 179,323 185,819
Total FHLMC Certificates 2,306,995
Federal National Mortgage Association (FNMA)
Certificates (9.67%)
FNMA 6.00 7/1/2028 956,086 866,880
FNMA 7.50 10/1/2009 1,483,293 1,452,621
FNMA 8.00 10/1/2006-5/1/2027 262,660 263,201
FNMA 8.50 5/1/2022 273,011 277,827
FNMA 9.00 2/1/2025 146,765 151,310
Total FNMA Certificates 3,011,839
Government National Mortgage Association (GNMA)
Certificates (7.36%)
GNMA I 6.50 6/15/2028-9/15/2028 1,820,660 1,707,990
GNMA I 9.00 7/15/2017 24,470 25,434
GNMA II 6.00 7/20/2028 456,562 413,091
GNMA II 8.00 1/20/2016 145,639 146,347
Total GNMA Certificates 2,292,862
Principal
Amount Value
Asset-Backed Securities (23.70%)
Mortgage Pass-Through Securities (23.70%)
DLJ Commercial Mortgage Corp.
Class A1A,
Series 1998-CF1; 6.14%; 10/15/2006 $ 595,541 $ 566,612
Series 1999-CG1; 6.08%; 7/10/2008 1,408,815 1,321,975
GMAC Commercial Mortgage Securities,
Inc., Series 1998-C2 CL C;
6.50%; 8/15/2008 1,000,000 911,650
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97-C5,
Class A-2; 7.06%; 9/15/2029 1,445,000 1,410,989
LB Commercial Conduit Mortgage Trust,
Series 1999-C1 CL A1;
6.41%; 8/15/07 1,274,694 1,214,279
Lehman Large Loan, Class A1,
Series 1997-LLI; 6.79%; 6/12/2004 1,434,314 1,408,770
Prudential Securities Secured Financing
Corp., Series 1998-C1,
Class A1A1; 6.11%; 11/15/2002 146,724 144,919
Salomon Brothers Mortgage SEC VII,
Class A2, Series 1996-C1;
6.78%; 1/20/28 262,178 257,108
Union Acceptance Corp. 1996-B Auto
Trust, Class A; 6.45%; 7/8/2003 148,067 147,616
Total Asset-Backed Securities 7,383,918
Commercial Paper (0.78%)
Personal Credit Institutions (0.78%)
Investment in Joint Trade Account,
Associates First Corp.;
6.04%; 5/1/2000 244,210 244,210
Total Portfolio Investments (97.84%) 30,480,203
Cash, receivables and other assets,
net of liabilities (2.16%) 671,942
Total Net Assets (100.00%) $31,152,145
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
Principal
Amount Value
Long-Term Tax-Exempt Bonds (97.57%)
Alabama (0.47%)
Phenix County, Alabama IDB
Environmental Improvement Rev.
Bonds, Mead Coated Board, Inc.,
Series B; 5.25%; 4/1/2028 $1,000,000 $ 850,000
Arkansas (2.64%)
City of Blytheville, Arkansas Solid Waste
Recycling & Sewer Treatment Rev.
Bonds, Nucor Corp. Project,
Series 1992; 6.90%; 12/1/2021 4,610,000 4,771,350
California (3.07%)
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 1,041,250
California Pollution Control Funding
Authority Rev. Bonds, Atlantic
Richfield Co. Project; 5.00%; 4/1/2008 2,500,000 2,478,125
City of Upland, California San Antonio
Comm. Hospital Cert. of Participation;
5.25%; 1/1/2004 2,080,000 2,043,600
5,562,975
Colorado (2.80%)
City & County of Denver, Colorado
Airport System Rev. Bonds,
Series 1991D; 7.75%; 11/15/2013 3,185,000 3,650,806
Colorado Health Fac. Authority Rev.
Bonds for Sisters of Charity
Healthcare Systems, Series 1994;
5.25%; 5/15/2014 1,500,000 1,411,875
5,062,681
Florida (0.56%)
Nassau County, Florida Pollution
Control Ref. Bonds for ITT
Rayonier, Inc. Project;
6.10%; 6/1/2005 1,000,000 1,007,500
Georgia (2.59%)
Effingham County, Georgia Dev.
Authority Waste Disposal Rev. for
Fort James Project; 5.63%; 7/1/2018 3,000,000 2,707,500
Fulco, Georgia Hospital Authority Rev.
Anticipation Cert. for St. Joseph's
Hospital of Atlanta, Inc.;
5.50%; 10/1/2014 2,000,000 1,975,000
4,682,500
Illinois (16.51%)
Chicago, Illinois Midway Airport Rev.
Bonds, Series A, MBIA Insured;
5.50%; 1/1/2011 $1,500,000 $ 1,513,125
5.50%; 1/1/2013 500,000 496,875
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
American Airlines, Inc. Project A;
7.88%; 11/1/2025 3,010,000 3,090,488
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
Lufthansa German Airlines Project;
7.13%; 5/1/2018 1,000,000 1,036,630
Chicago, Illinois O'Hare International
Airport Special Fac. Rev. Bonds for
United Airlines Project, Series A;
5.35%; 9/1/2016 5,000,000 4,350,000
City of Chicago, Illinois Adj. Rate Gas
Supply Rev. Bonds,
Peoples Gas Light & Coke Project,
Series 1985A;
6.88%; 3/1/2015 2,800,000 2,940,000
Illinois Development Finance Authority
Solid Waste Disposal Waste
Management, Inc; 5.05%; 1/1/2010 3,750,000 3,159,375
Illinois Health Fac. Authority Advocate
Health Care Network, Series B;
5.25%; 8/15/2018 2,910,000 2,509,875
Illinois Health Fac. Authority Ref. Rev.
Bonds for OSF Healthcare System;
5.75%; 11/15/2007 1,000,000 983,750
Illinois Health Fac. Authority Rev. Bonds,
Northwestern Memorial Hospital,
Series 1994A;
5.60%; 8/15/2006 500,000 502,500
5.75%; 8/15/2008 615,000 617,306
5.80%; 8/15/2009 840,000 841,050
6.10%; 8/15/2014 1,000,000 1,000,000
Illinois Health Fac. Authority Rev.
Bonds for Sarah Bush Lincoln
Health Center;
Series 1992; 7.25%; 5/15/2002 2,950,000 3,141,750
Series 1996B; 6.00%; 2/15/2011 1,000,000 973,750
Series 1996B; 5.50%; 2/15/2016 1,000,000 867,500
Illinois Health Fac. Authority Rev.
Bonds for South Suburban Hospital,
Series 1992;
7.00%; 2/15/2009 305,000 328,256
7.00%; 2/15/2018 720,000 810,900
Illinois Health Fac. Authority Rev. Ref.
Bonds for Advocate Healthcare,
Series A; 6.75%; 4/15/2012 680,000 716,550
29,879,680
Indiana (8.15%)
City of Petersburg, Indiana Pollution
Control Rev. Bonds for Indianapolis
Power & Light Co. Project,
Series 1993A; 6.10%; 1/1/2016 4,000,000 4,140,000
Indiana Health Fac. Financing Authority
Hospital Rev. Bonds, Clarian Health
Partners, Inc.; 5.50%; 2/15/2009 $2,520,000 $ 2,460,150
Indiana Health Fac. Financing
Authority Hospital Rev. Ref. Bonds,
Schneck Memorial Hospital,
Series 1998;
4.70%; 2/15/2006 500,000 458,125
5.13%; 2/15/2017 500,000 391,875
Indianapolis, Indiana Airport Authority
Special Fac. Rev. Bonds, Federal
Express Corp.; 7.10%; 1/15/2017 2,000,000 2,052,500
Lawrenceburg, Indiana Pollution
Control Rev. Ref. Bonds, Indiana
Michigan Power Co. Project,
Series D; 7.00%; 4/1/2015 1,000,000 1,031,250
Series E; 5.90%; 11/1/2019 3,220,000 3,059,000
Warrick County, Indiana
Environmental Improvement Rev.
Bonds, Southern Indiana Gas &
Electric, Series 1993B;
6.00%; 5/1/2023 1,190,000 1,160,250
14,753,150
Iowa (3.22%)
City of Muscatine, Iowa Electric Rev.
Ref. Bonds, Series 1986;
6.00%; 1/1/2006 150,000 150,144
5.00%; 1/1/2007 1,575,000 1,545,469
Eddyville, Iowa IDR Ref. Bonds,
Cargill, Inc. Project; 5.63%; 12/1/2013 1,000,000(a) 972,500
Iowa Finance Authority Hospital Fac.
Ref. Rev. Bonds for Jennie
Edmundson Memorial Hospital;
7.40%; 11/1/2006 550,000 580,937
Iowa Finance Authority Hospital Fac.
Ref. Rev. Bonds, Iowa Health Systems,
Series A, MBIA Insured;
5.13%; 1/1/2028 3,000,000 2,583,750
5,832,800
Kentucky (0.99%)
City of Ashland, Kentucky Sewage
and Solid Waste Rev. Bonds for
Ashland, Inc. Project, Series 1995;
7.13%; 2/1/2022 750,000 777,188
City of Ashland, Kentucky Solid
Waste Rev. Bonds for Ashland
Oil, Inc. Project, Series 1991;
7.20%; 10/1/2020 1,000,000 1,017,500
1,794,688
Louisiana (1.11%)
St. Charles Parish, Louisiana Pollution
Control Rev. Bonds for Louisiana
Power & Light Co. Project;
7.50%; 6/1/2021 1,950,000 2,017,373
Michigan (3.03%)
Detroit, Michigan LOC Dev. Financing
Authority Ref. Bonds for Chrysler
Corp., Senior Series A;
5.20%; 5/1/2010 $1,700,000 $ 1,629,875
Michigan State Hospital Financing
Authority Hospital Rev. Bonds for
Detroit Medical Center, Obligated-A;
5.25%; 8/15/2028 1,500,000 1,040,625
Michigan State Hospital Financing
Authority Hospital Rev. Bonds for
Detroit Medical Center, Series 1993B;
5.75%; 8/15/2013 600,000 503,250
5.50%; 8/15/2023 2,000,000 1,500,000
Michigan State Hospital Financing
Authority Rev. Ref. Bonds,
Daughters of Charity National Health
System; 5.50%; 11/1/2005 790,000 797,900
5,471,650
Minnesota (0.77%)
City of Bass Brook, Minnesota Pollution
Control Rev. Ref. Bonds for
Minnesota Power & Light Project;
6.00%; 7/1/2022 1,500,000 1,393,125
Mississippi (0.26%)
Grenada County, Mississippi Rev. Ref.
Bonds, Georgia Pacific Corp. Project;
5.45%; 9/1/2014 500,000 461,875
Montana (1.06%)
Forsyth, Montana Pollution Control
Rev. Ref. Bonds, Montana Power
Co., Colstrip Project, Series 1993A;
6.13%; 5/1/2023 2,000,000 1,925,000
Nebraska (0.54%)
Dawson County, Nebraska Sanitary &
Improvement General Obligation
Ref. Bonds; 5.55%; 2/1/2017 1,000,000 973,750
New Mexico (1.22%)
City of Lordsburg, New Mexico
Pollution Control Rev. Bonds
for Phelps Dodge Corp. Project;
6.50%; 4/1/2013 2,150,000 2,203,750
New York (3.25%)
Dutchess County, New York Industrial
Dev. Agency Bonds, IBM Corp.
Project; 5.45%; 12/1/2029 6,000,000 5,872,500
North Carolina (1.61%)
Martin County, North Carolina
Industrial Fac. & Pollution Control
Finance Authority Solid Waste
Rev. Bonds, Weyerhaeuser;
5.65%; 12/1/2023 $1,000,000 $ 891,250
6.80%; 5/1/2024 2,000,000 2,020,000
2,911,250
North Dakota (1.11%)
Mercer County, North Dakota
Pollution Control Rev. Bonds,
Ottertail Power Co. Project,
Series 1991; 6.90%; 2/1/2019 1,950,000 2,016,027
Ohio (4.81%)
Akron Bath Copley, Ohio JT TWP
Hospital District Rev. Hospital
Facilities, Summa Health
Systems, Series A;
5.38%; 11/15/2018 5,760,000 4,586,400
5.38%; 11/15/2024 1,000,000 772,500
Lorain County, Ohio Hospital Ref.
Bonds, Humility Mary Health
Care, Series A; 5.90%; 12/15/2008 3,270,000 3,339,487
8,698,387
Oklahoma (1.33%)
Tulsa Industrial Authority Rev. Bonds,
St. John Medical Center Project,
Series 1994;
6.25%; 2/15/2014 1,280,000 1,353,600
6.25%; 2/15/2017 1,000,000 1,057,500
2,411,100
Rhode Island (1.68%)
Rhode Island State Industrial Facilities
Corp. Marine Term Rev. Bonds,
Mobil Oil Refining;
6.00%; 11/1/2014 2,900,000 3,034,125
South Carolina (5.05%)
Darlington County, South Carolina
Pollution Control Rev. Bonds for
Carolina Power & Light;
6.60%; 11/1/2010 1,000,000 1,051,250
Greenville Hospital System,
South Carolina Hospital Fac.
Rev. Ref. Bonds; 6.00%; 5/1/2020 230,000 225,113
Series C; 5.50%; 5/1/2016 2,500,000 2,321,875
Oconee County, South Carolina
Pollution Control Rev. Ref. Bonds,
Duke Energy Corp. Project, Series
1993; 5.80%; 4/1/2014 2,000,000 1,985,000
York County, South Carolina Exempt
Fac. Industrial Rev. Bonds for
Hoechst Celanese Project,
Series 1994; 5.70%; 1/1/2024 2,000,000 1,727,500
York County, South Carolina Pollution
Control Rev. Bonds, Bowater, Inc.
Project; 7.63%; 3/1/2006 1,700,000 1,821,125
9,131,863
South Dakota (0.57%)
Pennington County, South Dakota
Pollution Control Rev. Ref. Bonds
for Black Hills Power & Light Co.
Project; 6.70%; 6/1/2010 $1,000,000 $ 1,037,500
Tennessee (1.63%)
County of Louden, Tennessee Industrial
Development Solid Waste;
6.20%; 2/1/2023 1,950,000 2,950,000
Texas (12.08%)
Brazos River Authority, Texas Rev.
Industrial Bonds Project-A Houston
Industries, Inc.; 5.13%; 5/1/2019 2,000,000 1,800,000
Cass County, Texas Industrial
Dev. Corp. Pollution Control
Rev. Bonds for International
Paper Co., Series B;
5.35%; 4/1/2012 3,750,000 3,562,500
Guadalupe-Blanco River Authority,
Texas Industrial Dev. Corp.
Pollution Control Rev.,
EI Dupont de Nemours,
1982 Series A; 6.35%; 7/1/2022 2,500,000 2,565,625
Gulf Coast Waste Disposal Authority
Texas Waste Disposal Rev., Valero
Energy Corp. Project;
5.70%; 4/1/2032 2,000,000 1,662,500
IDC Port of Corpus Christi Rev. Ref.
Bonds, Port Fac. Rev. Bonds,
Valero Energy Corp.; 5.13%; 4/1/2009 1,000,000 895,000
IDC Port of Corpus Christi Rev. Ref.
Bonds, Valero Refining & Marketing
Co. Project; 5.40%; 4/1/2018 2,000,000 1,705,000
Matagorda County, Texas
Navigational District No. 1 Pollution
Control Rev. Bonds for Central
Power & Light Co.;
6.00%; 7/1/2028 1,000,000 942,500
Milam County, Texas Industrial Dev.
Corp. Pollution Control Rev. Ref.
Bonds, Alcoa Project;
5.65%; 12/1/2012 2,000,000 1,980,000
Red River Authority, Texas Pollution
Control Rev. Bonds, Hoechst
Celanese Corp. Project;
5.20%; 5/1/2007 2,825,000 2,676,687
San Antonio Texas Electric & Gas,
Series A; 4.50%; 2/1/2021 3,715,000 3,027,725
Tarrant County, Texas Health Fac.
Dev. Corp., Harris Methodist Health
System Rev. Bonds; 5.90%; 9/1/2006 1,000,000 1,043,750
21,861,287
Virginia (1.99%)
Bedford County, Virginia Industrial Dev.
Nekoosa Packing Corp., Georgia
Pacific; 5.60%; 12/1/2025 2,500,000 2,181,250
Chesapeake, Virginia IDA Rev. Ref.
Bonds for Cargill, Inc. Project;
5.88%; 3/1/2013 1,410,000 1,420,575
3,601,825
Washington (2.98%)
City of Seattle, Washington Municipal
Light & Power Rev. Bonds;
1993; 5.10%; 11/1/2005 $1,950,000 $ 1,947,562
1994; 6.63%; 7/1/2016 1,000,000 1,075,000
5.00%; 7/1/2018 1,225,000 1,082,594
1998; 4.88%; 6/1/2021 1,500,000 1,284,375
5,389,531
West Virginia (7.38%)
Braxton County, West Virginia Solid
Waste Disposal Rev. Weyerhaeuser
Co.; 5.40%; 5/1/2025 2,000,000 1,722,500
Marshall County, West Virginia
Pollution Control Rev. Bonds
for Ohio Power Co. Project,
Series C; 6.85%; 6/1/2022 1,200,000 1,245,000
Series D; 5.90%; 4/1/2022 4,500,000 4,455,000
Pleasants County, West Virgina
Pollution Control Rev. Bonds
for Potomac Edison Co.;
6.15%; 5/1/2015 2,000,000 2,027,500
Putnam County, West Virginia
Pollution Control Rev. Bonds for
Appalachian Power Co. Project,
Series C; 6.60%; 7/1/2019 3,875,000 3,908,906
13,358,906
Wisconsin (3.11%)
Kaukauna, Wisconsin Pollution
Control Rev. Ref. Bonds for
International Paper Co. Project,
Series A; 5.40%; 5/1/2004 3,610,000 3,605,488
Wisconsin Health & Educational
Fac. Authority Rev. Bonds for
Franciscan Skemp Medical
Center, Inc., Series 1995;
5.88%; 11/15/2010 1,000,000 1,006,250
6.13%; 11/15/2015 1,000,000 1,022,500
5,634,238
Total Long-Term Tax-Exempt Bonds 176,552,386
Other (0.77%)
Municipal Fund for Temporary Investment -
Munifund Provident Institutional Funds 1,400,000 1,400,000
Total Portfolio Investments (98.34%) 177,952,386
Cash, receivables and other assets,
net of liabilities (1.66%) 2,990,756
Total Net Assets (100.00%) $180,943,142
(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 2000* 1999 1998 1997 1996 1995
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.66 $11.59 $11.44 $11.17 $11.42 $10.27
Income from Investment Operations:
Net Investment Income(b).............................. .36 .70 .71 .75 .76 .78
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.51) (.91) .16 .33 (.25) 1.16
Total from Investment Operations (.15) (.21) .87 1.08 .51 1.94
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.37) (.69) (.72) (.81) (.76) (.78)
Distributions from Capital Gains...................... -- -- -- -- -- (.01)
Excess Distributions from Capital Gains(i)............ -- (.03) -- -- -- --
Total Dividends and Distributions (.37) (.72) (.72) (.81) (.76) (.79)
Net Asset Value, End of Period........................... $10.14 $10.66 $11.59 $11.44 $11.17 $11.42
Total Return(c).......................................... (1.49)%(d) (1.92)% 7.76% 10.15% 4.74% 19.73%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $130,813 $145,975 $148,081 $126,427 $113,437 $106,962
Ratio of Expenses to Average Net Assets(b)............ 1.06%(e) 1.04% .95% .95% .95% .94%
Ratio of Net Investment Income to
Average Net Assets.................................. 6.93%(e) 6.25% 6.19% 6.70% 6.85% 7.26%
Portfolio Turnover Rate............................... 28.9%(e) 48.9% 15.2% 12.8% 3.4% 5.1%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(f)
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.65 $11.58 $11.42 $11.15 $11.41 $10.19
Income from Investment Operations:
Net Investment Income(b) ........................... .32 .61 .63 .67 .67 .63
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.50) (.91) .16 .31 (.25) 1.19
Total from Investment Operations (.18) (.30) .79 .98 .42 1.82
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.33) (.60) (.63) (.71) (.68) (.60)
Excess Distributions from Capital Gains(i)............ -- (.03) -- -- -- --
Total Dividends and Distributions (.33) (.63) (.63) (.71) (.68) (.60)
Net Asset Value, End of Period........................... $10.14 $10.65 $11.58 $11.42 $11.15 $11.41
Total Return(c).......................................... (1.77)%(d) (2.68)% 7.04% 9.20% 3.91% 17.98%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $23,063 $25,451 $22,466 $13,403 $7,976 $2,708
Ratio of Expenses to Average Net Assets(b)............ 1.82%(e) 1.79% 1.67% 1.70% 1.69% 1.59%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 6.17%(e) 5.50% 5.45% 5.92% 6.14% 6.30%(e)
Portfolio Turnover Rate............................... 28.9%(e) 48.9% 15.2% 12.8% 3.4% 5.1%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class C shares 2000* 1999(g)
--------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $10.66 $10.90
Income from Investment Operations:
Net Investment Income................................. .29 .20
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.50) (.24)
Total from Investment Operations (.21) (.04)
Less Dividends from Net Investment Income................ (.32) (.20)
Net Asset Value, End of Period........................... $10.13 $10.66
Total Return(c).......................................... (2.00)%(d) (.40)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $598 $271
Ratio of Expenses to Average Net Assets............... 2.21%(e) 1.84%(e)
Ratio of Net Investment Income to
Average Net Assets ............................... 5.72%(e) 5.81%(e)
Portfolio Turnover Rate ............................. 28.9%(e) 48.9%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BOND FUND, INC.(a)
-------------------------
Class R shares 2000* 1999 1998 1997 1996(h)
--------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $10.67 $11.59 $11.43 $11.16 $11.27
Income from Investment Operations:
Net Investment Income(b).............................. .34 .63 .63 .71 .51
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.52) (.90) .16 .30 (.13)
Total from Investment Operations (.18) (.27) .79 1.01 .38
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.33) (.62) (.63) (.74) (.49)
Excess Distributions from Capital Gains(i)............ -- (.03) -- -- --
Total Dividends and Distributions (.33) (.65) (.63) (.74) (.49)
Net Asset Value, End of Period........................... $10.16 $10.67 $11.59 $11.43 $11.16
Total Return............................................. (1.69)%(d) (2.45)% 7.05% 9.49% 3.75%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $15,519 $16,096 $12,196 $5,976 $525
Ratio of Expenses to Average Net Assets(b)............ 1.43%(e) 1.61% 1.45% 1.45% 1.28%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 6.56%(e) 5.68% 5.66% 6.11% 6.51%(e)
Portfolio Turnover Rate............................... 28.9%(e) 48.9% 15.2% 12.8% 3.4%(e)
</TABLE>
*Six months ended April 30, 2000
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 GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.10 $11.63 $11.51 $11.26 $11.31 $10.28
Income from Investment Operations:
Net Investment Income................................. .33 .69 .70 .70 .70 .71
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.23) (.52) .12 .29 (.05) 1.02
Total from Investment Operations .10 .17 .82 .99 .65 1.73
Less Dividends from Net Investment Income................ (.33) (.70) (.70) (.74) (.70) (.70)
Net Asset Value, End of Period........................... $10.87 $11.10 $11.63 $11.51 $11.26 $11.31
Total Return(c) ........................................ .97%(d) 1.47% 7.38% 9.23% 6.06% 17.46%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $216,174 $237,811 $251,455 $249,832 $259,029 $261,128
Ratio of Expenses to Average Net Assets............... .99%(e) .89% .86% .84% .81% .87%
Ratio of Net Investment Income to
Average Net Assets.................................. 6.16%(e) 6.04% 6.07% 6.19% 6.31% 6.57%
Portfolio Turnover Rate............................... 7.1%(e) 19.4% 17.1% 10.8% 25.9% 10.1%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(f)
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.05 $11.60 $11.50 $11.23 $11.29 $10.20
Income from Investment Operations:
Net Investment Income................................. .28 .61 .62 .64 .61 .56
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.22) (.54) .12 .29 (.05) 1.07
Total from Investment Operations .06 .07 .74 .93 .56 1.63
Less Dividends from Net Investment Income................ (.29) (.62) (.64) (.66) (.62) (.54)
Net Asset Value, End of Period........................... $10.82 $11.05 $11.60 $11.50 $11.23 $11.29
Total Return(c) ........................................ .60%(d) .65% 6.60% 8.65% 5.17% 16.07%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $26,880 $29,751 $24,370 $15,431 $11,586 $4,699
Ratio of Expenses to Average Net Assets............... 1.83%(e) 1.63% 1.57% 1.39% 1.60% 1.53%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.32%(e) 5.30% 5.43% 5.63% 5.53% 5.68%(e)
Portfolio Turnover Rate............................... 7.1%(e) 19.4% 17.1% 10.8% 25.9% 10.1%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class C shares 2000* 1999(g)
--------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $11.10 $11.17
Income from Investment Operations:
Net Investment Income................................. .28 .19
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.22) (.07)
Total from Investment Operations .06 .12
Less Dividends from Net Investment Income................ (.29) (.19)
Net Asset Value, End of Period........................... $10.87 $11.10
Total Return(c).......................................... .54%(d) 1.11%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $794 $332
Ratio of Expenses to Average Net Assets.................. 1.96%(e) 1.73%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.19%(e) 5.29%(e)
Portfolio Turnover Rate............................... 7.1%(e) 19.4%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.(a)
-------------------------------------------------
Class R shares 2000* 1999 1998 1997 1996(h)
--------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.03 $11.55 $11.42 $11.21 $11.27
Income from Investment Operations:
Net Investment Income................................. .31 .61 .61 .64 .47
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.23) (.52) .13 .24 (.08)
Total from Investment Operations .08 .09 .74 .88 .39
Less Dividends from Net Investment Income................ (.30) (.61) (.61) (.67) (.45)
Net Asset Value, End of Period........................... $10.81 $11.03 $11.55 $11.42 $11.21
Total Return............................................. .75%(d) .78% 6.66% 8.19% 3.76%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $12,369 $11,539 $8,156 $4,152 $481
Ratio of Expenses to Average Net Assets............... 1.38%(e) 1.53% 1.64% 1.79% 1.18%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.77%(e) 5.40% 5.39% 5.21% 5.84%(e)
Portfolio Turnover Rate............................... 7.1%(e) 19.4% 17.1% 10.8% 25.9%(e)
</TABLE>
*Six months ended April 30, 2000
FINANCIAL HIGHLIGHTS (Continued)
(unaudited)
Selected data for a share of Capital Stock outstanding throughout each year
ended October 31 (except as oted):
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.21 $7.63 $8.52 $8.27 $8.06 $7.83
Income from Investment Operations:
Net Investment Income................................. .30 .63 .64 .67 .68 .68
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.42) (.41) (.88) .31 .23 .20
Total from Investment Operations (.12) .22 (.24) .98 .91 .88
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.35) (.63) (.64) (.73) (.70) (.65)
Excess Distribution of Net Investment Income(i)....... -- (.01) (.01) -- -- --
Total Dividends and Distributions (.35) (.64) (.65) (.73) (.70) (.65)
Net Asset Value, End of Period........................... $6.74 $7.21 $7.63 $8.52 $8.27 $8.06
Total Return(c).......................................... (1.77)%(d) 2.81% (3.18)% 12.33% 11.88% 11.73%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $25,650 $30,065 $33,474 $38,239 $28,432 $23,396
Ratio of Expenses to Average Net Assets............... 1.42%(e) 1.31% 1.40% 1.22% 1.26% 1.45%
Ratio of Net Investment Income to
Average Net Assets.................................. 8.62%(e) 8.23% 7.71% 7.99% 8.49% 8.71%
Portfolio Turnover Rate............................... 85.9%(e) 86.1% 65.9% 39.2% 18.8% 40.3%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(f)
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.17 $7.59 $8.47 $8.22 $8.05 $7.64
Income from Investment Operations:
Net Investment Income................................. .27 .57 .57 .62 .60 .53
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.42) (.41) (.87) .28 .20 .38
Total from Investment Operations (.15) .16 (.30) .90 .80 .91
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.32) (.57) (.57) (.65) (.63) (.50)
Excess Distribution of Net Investment Income(i)....... -- (.01) (.01) -- -- --
Total Dividends and Distributions (.32) (.58) (.58) (.65) (.63) (.50)
Net Asset Value, End of Period........................... $6.70 $7.17 $7.59 $8.47 $8.22 $8.05
Total Return(c).......................................... (2.15)%(d) 2.02% (3.93)% 11.31% 10.46% 12.20%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $6,444 $7,467 $8,527 $6,558 $2,113 $633
Ratio of Expenses to Average Net Assets............... 2.21%(e) 1.99% 2.34% 2.13% 2.38% 2.10%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 7.83%(e) 7.55% 6.78% 7.03% 7.39% 7.78%(e)
Portfolio Turnover Rate............................... 85.9%(e) 86.1% 65.9% 39.2% 18.8% 40.3%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class C shares 2000* 1999(g)
--------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $7.22 $7.48
Income from Investment Operations:
Net Investment Income................................. .23 .18
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.42) (.25)
Total from Investment Operations (.19) (.07)
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.32) (.18)
Excess Distribution of Net Investment Income(i)....... -- (.01)
Total Dividends and Distributions (.32) (.19)
Net Asset Value, End of Period........................... $6.71 $7.22
Total Return(c).......................................... (2.77)%(d) (.99)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $263 $182
Ratio of Expenses to Average Net Assets............... 3.66%(e) 2.01%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 6.32%(e) 7.15%(e)
Portfolio Turnover Rate............................... 85.9%(e) 86.1%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL HIGH YIELD FUND, INC.(a)
-------------------------------
Class R shares 2000* 1999 1998 1997 1996(h)
--------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $7.08 $7.51 $8.40 $8.20 $8.21
Income from Investment Operations:
Net Investment Income................................. .27 .56 .57 .62 .46
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.41) (.40) (.87) .26 (.03)
Total from Investment Operations (.14) .16 (.30) .88 .43
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.32) (.56) (.58) (.68) (.44)
Excess Distribution of Net Investment Income(i)....... -- (.03) (.01) -- --
Total Dividends and Distributions (.32) (.59) (.59) (.68) (.44)
Net Asset Value, End of Period........................... $6.62 $7.08 $7.51 $8.40 $8.20
Total Return............................................. (1.98)%(d) 2.01% (3.97)% 11.14% 5.60%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $2,287 $2,598 $2,734 $1,961 $124
Ratio of Expenses to Average Net Assets............... 1.94%(e) 2.09% 2.28% 2.42% 1.59%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 8.10%(e) 7.43% 6.84% 6.70% 7.84%(e)
Portfolio Turnover Rate............................... 85.9%(e) 86.1% 65.9% 39.2% 18.8%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class A shares 2000* 1999 1998 1997 1996(j)
--------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.54 $9.93 $9.88 $9.89 $9.90
Income from Investment Operations:
Net Investment Income(b).............................. .29 .57 .57 .61 .38
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.05) (.39) .06 .03 (.04)
Total from Investment Operations .24 .18 .63 .64 .34
Less Dividends from Net Investment Income................ (.29) (.57) (.58) (.65) (.35)
Net Asset Value, End of Period........................... $9.49 $9.54 $9.93 $9.88 $9.89
Total Return(c) ........................................ 1.09%(d) 1.83% 6.57% 6.75% 3.62%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $24,091 $27,096 $27,632 $20,567 $17,249
Ratio of Expenses to Average Net Assets(b)............ 1.00%(e) 1.00% .82% .90% .89%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 6.16%(e) 5.76% 5.86% 6.20% 6.01%(e)
Portfolio Turnover Rate............................... 23.4%(e) 20.9% 23.8% 17.4% 16.5%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class B shares 2000* 1999 1998 1997 1996(j)
--------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.60 $9.98 $9.90 $9.89 $9.90
Income from Investment Operations:
Net Investment Income(b).............................. .27 .52 .54 .56 .36
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.18) (.39) .06 .04 (.05)
Total from Investment Operations .09 .13 .60 .60 .31
Less Dividends from Net Investment Income................ (.26) (.51) (.54) (.59) (.32)
Net Asset Value, End of Period........................... $9.43 $9.60 $9.98 $9.90 $9.89
Total Return(c).......................................... .98%(d) 1.29% 6.24% 6.31% 3.32%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $2,864 $2,696 $1,705 $625 $112
Ratio of Expenses to Average Net Assets(b)............ 1.35%(e) 1.35% 1.22% 1.24% 1.15%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.81%(e) 5.41% 5.44% 5.84% 5.75%(e)
Portfolio Turnover Rate............................... 23.4%(e) 20.9% 23.8% 17.4% 16.5%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class C shares 2000* 1999(g)
--------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $9.56 $9.64
Income from Investment Operations:
Net Investment Income(b).............................. .27 .16
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.18) (.08)
Total from Investment Operations (.09) .08
Less Dividends from Net Investment Income................ (.25) (.16)
Net Asset Value, End of Period........................... $9.40 $9.56
Total Return(c).......................................... .95%(d) .84(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $429 $350
Ratio of Expenses to Average Net Assets(b)............ 1.35%(e) 1.34%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.81%(e) 5.52%(e)
Portfolio Turnover Rate............................... 23.4%(e) 20.9%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LIMITED TERM BOND FUND, INC.(a)
--------------------------------------
Class R shares 2000* 1999 1998 1997 1996(h)
--------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $9.55 $9.93 $9.85 $9.88 $9.90
Income from Investment Operations:
Net Investment Income(b).............................. .26 .50 .52 .54 .36
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.19) (.39) .07 .03 (.06)
Total from Investment Operations .07 .11 .59 .57 .30
Less Dividends from Net Investment Income................ (.25) (.49) (.51) (.60) (.32)
Net Asset Value, End of Period........................... $9.37 $9.55 $9.93 $9.85 $9.88
Total Return............................................. .77%(d) 1.13% 6.12% 6.01% 3.24%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $3,768 $3,276 $2,034 $606 $83
Ratio of Expenses to Average Net Assets(b)............ 1.60%(e) 1.41% 1.44% 1.48% 1.40%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 5.56%(e) 5.35% 5.21% 5.60% 5.64%(e)
Portfolio Turnover Rate............................... 23.4%(e) 20.9% 23.8% 17.4% 16.5%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
------------------------------------
Class A shares 2000* 1999 1998 1997 1996 1995
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.69 $12.59 $12.38 $12.04 $11.98 $10.93
Income from Investment Operations:
Net Investment Income................................. .26 .60 .60 .63 .64 .65
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.16) (.90) .22 .39 .07 1.05
Total from Investment Operations .10 (.30) .82 1.02 .71 1.70
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.26) (.59) (.61) (.68) (.65) (.65)
Distributions from Capital Gains...................... (.11) (.01) -- -- -- --
Total Dividends and Distributions (.37) (.60) (.61) (.68) (.65) (.65)
Net Asset Value, End of Period........................... $11.42 $11.69 $12.59 $12.38 $12.04 $11.98
Total Return(c) ........................................ 1.12%(d) (2.51)% 6.76% 8.71% 6.08% 16.03%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $169,735 $186,973 $204,865 $193,007 $187,180 $179,715
Ratio of Expenses to Average Net Assets............... .22%(e) .80% .83% .79% .78% .83%
Ratio of Net Investment Income to
Average Net Assets.................................. 1.24%(e) 4.84% 4.83% 5.14% 5.34% 5.67%
Portfolio Turnover Rate............................... 9.9%(e) 15.6% 6.6% 8.9% 9.8% 17.6%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
------------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(f)
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $11.70 $12.59 $12.39 $12.02 $11.96 $10.56
Income from Investment Operations:
Net Investment Income................................. .53 .53 .53 .55 .55 .50
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.16) (.89) .20 .40 .06 1.38
Total from Investment Operations .37 (.36) .73 .95 .61 1.88
Less Dividends and Distributions:
Dividends from Net Investment Income.................. (.52) (.52) (.53) (.58) (.55) (.48)
Distributions from Capital Gains...................... (.11) (.01) -- -- -- --
Total Dividends and Distributions (.63) (.53) (.53) (.58) (.55) (.48)
Net Asset Value, End of Period........................... $11.44 $11.70 $12.59 $12.39 $12.02 $11.96
Total Return(c).......................................... .93%(d) (3.01)% 6.01% 8.08% 5.23% 17.97%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $10,765 $11,480 $11,419 $7,783 $5,794 $3,486
Ratio of Expenses to Average Net Assets............... .33%(e) 1.32% 1.43% 1.45% 1.52% 1.51%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. 1.13%(e) 4.32% 4.22% 4.46% 4.59% 4.78%(e)
Portfolio Turnover Rate............................... 9.9%(e) 15.6% 6.6% 8.9% 9.8% 17.6%(e)
</TABLE>
*Six months ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL TAX-EXEMPT BOND FUND, INC.(a)
------------------------------------
Class C shares 2000* 1999(g)
--------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................... $11.69 $12.16
Income from Investment Operations:
Net Investment Income................................. .21 .16
Net Realized and Unrealized Gain (Loss)
on Investments...................................... (.28) (.47)
Total from Investment Operations (.07) (.31)
Less Dividends from Net Investment Income................ (.24) (.16)
Net Asset Value, End of Period........................... $11.39 $11.69
Total Return(c).......................................... .36%(d) (2.59)%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands).............. $443 $136
Ratio of Expenses to Average Net Assets............... .56%(e) 1.78%(e)
Ratio of Net Investment Income to
Average Net Assets.................................. .91%(e) 3.96%(e)
Portfolio Turnover Rate............................... 9.9%(e) 15.6%(e)
</TABLE>
*Six months ended April 30, 2000
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> <C>
Princor Bond Fund, Inc. Principal Bond Fund, Inc.
Princor Government Securites Income Fund, Inc. Principal Government Securities Income Fund, Inc.
Princor High Yield Fund, Inc. Principal High Yield Fund, Inc.
Princor Limited Term Bond Fund, Inc. Principal Limited Term Bond Fund, Inc.
Princor Tax-Exempt Bond Fund, Inc. Principal Tax-Exempt Bond Fund, Inc.
</TABLE>
(b) Without the Manager's voluntary waiver of a portion of certain of its
expenses (see Note 3 to the financial statements) for the periods
indicated, the following funds would have had per share net investment
income and the ratios of expenses to average net assets as shown:
<TABLE>
<CAPTION>
Year Ended
October 31, Per Share Ratio of Expenses
Except Net Investment to Average Net Amount
as Noted Income Assets Waived
Principal Bond Fund, Inc.:*
<S> <C> <C> <C> <C>
Class A 1998 $.70 1.04% $121,092
1997 .74 .98 41,256
1996 .76 .97 22,536
1995 .77 1.02 86,018
Class B 1998 .62 1.81 26,130
1997 .66 1.79 8,982
1996 .67 1.79 5,874
1995(d) .62 1.62(f) 300
Class R 1998 .61 1.72 25,144
1997 .69 1.78 10,427
1996(h) .51 1.28(f) 3
Principal Limited Term Bond Fund, Inc.:
Class A 2000** .30 1.17 22,022
1999 .55 1.14 40,285
1998 .55 1.13 76,952
1997 .59 1.15 46,271
1996(j) .37 1.16(f) 22,716
Class B 2000** .30 1.91 7,630
1999 .47 1.92 14,004
1998 .47 2.36 11,537
1997 .46 3.82 6,528
1996(j) .34 1.94(f) 259
Class C 2000** .08 1.96 1,212
1999(g) .15 2.05(f) 488
Class R 2000** .25 2.01 7,189
1999 .46 2.02 11,951
1998 .46 2.22 11,781
1997 .43 2.95 6,831
1996(h) .35 1.79(f) 60
<FN>
* The Manager ceased its waiver of expenses for Principal Bond Fund,
Inc. on October 31, 1998.
** Six months ended April 30, 2000.
</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:
<TABLE>
<CAPTION>
Per Share Per Share
Net Investment Unrealized
Income (Loss)
<S> <C> <C>
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)
</TABLE>
(g) Period from June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(h) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996. The 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:
<TABLE>
<CAPTION>
Per Share
Unrealized (Loss)
<S> <C>
Principal Bond Fund, Inc. $(.03)
Principal Government Securities Income Fund, Inc. (.03)
Principal Limited Term Bond Fund, Inc. (.02)
</TABLE>
(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.
(j) 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.
<TABLE>
<CAPTION>
April 30, 2000
STATEMENT OF ASSETS AND LIABILITIES
(unaudited)
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
Assets
<S> <C>
Investment in securities -- at value
(approximates cost) (Note 1)........... $373,196,783
Cash.............................1,510,552
Receivables:
Interest .............................. 793,857
Capital Shares sold.................... 7,341,273
Other assets.............................. 27,155
Total Assets 382,869,620
Liabilities
Accrued expenses.......................... 112,774
Payables:
Investment securities purchased........ 2,134,770
Capital Shares reacquired.............. 2,912,044
Total Liabilities 5,159,588
Net Assets Applicable to
Outstanding Shares ....................... $377,710,032
Net Assets Consist of:
Capital Stock............................. $ 3,777,100
Additional paid-in capital................ 373,932,932
Total Net Assets $377,710,032
Capital Stock (par value: $.01 a share):
Shares authorized......................... 2,000,000,000
Net Asset Value Per Share:
Class A: Net Assets....................... $355,589,656
Shares issued and outstanding.... 355,589,656
Net asset value per share........ $1.000
Class B: Net Assets....................... $5,754,920
Shares issued and outstanding.... 5,754,920
Net asset value per share(a)..... $1.000
Class C: Net Assets....................... $190,120
Shares issued and outstanding.... 190,120
Net asset value per share(a)..... $1.000
Class R: Net Assets....................... $16,175,336
Shares issued and outstanding.... 16,175,336
Net asset value per share........ $1.000
<FN>
(a)Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
</FN>
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
Six Months Ended April 30, 2000
STATEMENT OF OPERATIONS
(unaudited)
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
Net Investment Income
<S> <C>
Interest income......................... $11,161,505
Expenses:
Management and investment
advisory fees (Note 3)............ 809,721
Distribution and shareholder
servicing fees (Notes 1 and 3).... 50,539
Transfer and administrative
services (Notes 1 and 3).......... 401,598
Registration fees (Note 1)........... 45,266
Custodian fees....................... 5,337
Auditing and legal fees.............. 2,716
Directors' fees...................... 3,573
Other................................ 50,615
Total Expenses 1,369,365
Net Investment Income $9,792,140
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
Principal Cash
Management
MONEY MARKET FUND Fund, Inc.
Six Months Year
Ended Ended
April 30, October 31,
2000 1999(a)
Operations
<S> <C> <C>
Net investment income .................. $ 9,792,140 $ 15,507,659
Dividends to Shareholders from Net
Investment Income:
Class A.............................. (9,260,726) (14,771,870)
Class B.............................. (145,362) (179,184)
Class C.............................. (2,155) (1,121)
Class R ............................. (383,897) (555,484)
Total Dividends (9,792,140) (15,507,659)
Capital Share Transactions (Note 4)
Shares sold:
Class A.............................. 432,419,308 737,117,679
Class B.............................. 5,277,484 10,129,211
Class C.............................. 272,012 131,662
Class R ............................. 11,038,371 20,194,531
Class A shares issued in connection with the
acquisition of Principal Tax-Exempt
Cash Management Fund, Inc. (Note 6).. N/A 19,506,825
Shares issued in reinvestment of dividends:
Class A.............................. 8,918,059 14,313,193
Class B.............................. 135,506 170,825
Class C.............................. 376 222
Class R ............................. 368,146 536,604
Shares redeemed:
Class A.............................. (438,422,499) (693,673,532)
Class B.............................. (5,988,198) (7,572,270)
Class C.............................. (214,152) --
Class R ............................. (10,802,239) (15,573,852)
Net Increase in Net Assets
from Capital Share Transactions 3,002,174 65,774,273
Total Increase 3,002,174 65,774,273
Net Assets
Beginning of year....................... 374,707,858 308,933,585
End of year............................. $377,710,032 $374,707,858
<FN>
(a)Class C share information is provided for the period from June 30, 1999
(inception date of Class) through October 31, 1999.
</FN>
</TABLE>
See accompanying notes.
April 30, 2000
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.
On June 30, 1999, the initial purchase of Class C shares of the Fund was made by
Principal Life Insurance Company (See Note 3). Effective June 30, 1999, the Fund
began offering Class C shares to the public.
Shares of the Fund are sold at net asset value; no sales charge applies to
purchases of the Fund. Certain purchases of Class A shares of the Fund may be
subject to a contingent deferred sales charge ("CDSC") if redeemed within
eighteen months of purchase. Class B shares are sold without an initial sales
charge, but are subject to a declining CDSC on certain redemptions made within
six years of purchase. Class C shares are sold without an initial sales charge,
but a subject to a CDSC on certain redemptions made within twelve months of
purchase. Class R shares are sold without an initial sales charge and are not
subject to a CDSC. Class B shares, Class C shares and Class R shares bear higher
ongoing distribution fees than Class A shares. Class B shares automatically
convert into Class A shares based on relative net asset value (without a sales
charge) seven years after purchase. Class C shares do not convert into Class A
shares. Class R shares automatically convert into Class A shares based on
relative net asset value (without a sales charge) four years after purchase. All
classes of shares 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. Principal Cash Management Fund, Inc. class-specific expenses charged
to each class during the period ended April 30, 2000, which are included in the
corresponding captions of the Statement of Operations, were as follows:
<TABLE>
<CAPTION>
Distribution and Transfer and
Shareholder Servicing Fees Administrative Services Registration Fees
Class A Class B Class C Class R Class A Class B Class C Class R Class A Class B Class C Class R
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N/A $11,876 $740 $37,923 $170,090 $2,358 $47 $3,946 $21,158 $3,630 $1,037 $4,357
</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, 1999 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>
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.
Princor Financial Services Corporation, as principal underwriter, receives
proceeds of any CDSC on certain Class A, Class B and Class C share redemptions.
The charge is based on declining rates which for Class A shares begin at .75%,
Class B shares at 4.00%, and Class C shares at 1.00% of the lesser of the
current market value or the cost of shares being redeemed. The aggregate amount
of these charges retained by Princor Financial Services Corporation for the
period ended April 30, 2000, was as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Principal Cash Management Fund, Inc. $11,816 $51,246 --
</TABLE>
No brokerage commissions were paid by the Fund to affiliated broker dealers
during the period.
Note 3 -- Management Agreement and Transactions With Affiliates (Continued)
The Fund bears distribution and shareholder servicing fees with respect to each
Class computed at an annual rate of the average daily net assets attributable to
each Class of the Fund. The annual rate will not exceed the following limits:
<TABLE>
<CAPTION>
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
Distribution and Shareholder Servicing fees N/A 1.00% 1.00% .75%
</TABLE>
Distribution and shareholder servicing fees are paid to Princor Financial
Services Corporation. A portion of the fees are subsequently remitted to retail
dealers. Pursuant to the distribution agreements for Class B and Class R shares,
fees that are unused by the principal underwriter at the end of the fiscal year
are returned to the Fund.
At April 30, 2000, Principal Life Insurance Company, subsidiaries of Principal
Life Insurance Company, benefit plans sponsored on behalf of Principal Life
Insurance Company and several joint ventures (in each of which a subsidiary of
Principal Life Insurance Company is a participant) owned Class A and Class C
shares of the Fund of 27,395,431 and 100,114, respectively.
Note 4 -- Capital Share Transactions
Transactions in Capital Shares were as follows:
Principal Cash
Management
Fund, Inc.
Period Ended April 30, 2000:
Shares sold:
Class A ................................................ 432,419,308
Class B ............................................... 5,277,484
Class C ............................................... 272,012
Class R ................................................ 11,038,371
Shares issued in reinvestment of dividends:
Class A ............................................... 8,918,059
Class B ............................................... 135,506
Class C ............................................... 376
Class R ................................................ 368,146
Shares redeemed:
Class A ............................................... (438,422,499)
Class B ............................................... (5,988,198)
Class C ............................................... (214,152)
Class R ................................................ (10,802,239)
Net Increase 3,002,174
Principal Cash
Management
Fund, Inc.
Periods Ended October 31, 1999:
Shares sold:
Class A ................................................ 717,610,854
Class B ............................................... 10,129,211
Class C ............................................... 131,662
Class R ................................................ 20,194,531
Shares issued in connection with the acquisition of
+Principal Tax-Exempt Cash Management Fund, Inc. (Note 6):
Class A ................................................. 19,506,825
Class B ................................................. N/A
Class C ............................................... N/A
Class R ................................................ N/A
Shares issued in reinvestment of dividends:
Class A ............................................... 14,313,193
Class B ............................................... 170,825
Class C ............................................... 222
Class R ................................................ 536,604
Shares redeemed:
Class A ............................................... (693,673,532)
Class B ............................................... (7,572,270)
Class C ............................................... --
Class R ................................................ (15,573,852)
Net Increase 65,774,273
Note 5 -- Line of Credit
The Fund participates with other funds and portfolios managed by Principal
Management Corporation in an unsecured joint line of credit with two banks which
allow the funds to borrow up to $75,000,000 collectively. Borrowings are made
solely to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each fund, based on its borrowings, at
a rate equal to the Fed Funds Rate plus .50%. Additionally, a commitment fee is
charged at the annual rate of .09% on the 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, 2000, the Fund had no outstanding borrowings under the line of credit.
Note 6-- Acquisition of Principal Tax-Exempt Cash Management Fund, Inc.
On April 8, 1999, Principal Cash Management Fund, Inc. acquired all the assets
and assumed all the liabilities of Principal Tax-Exempt Cash Management Fund,
Inc. pursuant to a plan of acquisition approved by shareholders of Principal
Tax-Exempt Cash Management Fund, Inc. on April 7, 1999. The acquisition was
accomplished by a tax-free exchange of 19,506,825 Class A shares of Principal
Cash Management Fund, Inc. (valued at $19,506,825) for the 19,506,825 shares of
Principal Tax-Exempt Cash Management Fund, Inc. outstanding on April 8, 1999.
The aggregate net assets of Principal Cash Management Fund, Inc. and Principal
Tax-Exempt Cash Management Fund, Inc. immediately before the acquisition were
approximately $355,081,000 and $19,507,000, respectively.
Apil 30, 2000
SCHEDULE OF INVESTMENTS
PRINCIPAL CASH MANAGEMENT FUND, INC.
Principal
Amount Value
Commercial Paper (86.32%)
Asset-Backed Securities (20.80%) CXC, Inc.;
5.90%; 5/9/2000 $2,000,000 $ 1,997,378
6.08%; 5/15/2000 2,400,000 2,394,325
5.91%; 5/17/2000 3,500,000 3,490,807
5.89%; 5/18/2000 3,500,000 3,490,265
6.07%; 6/7/2000 2,250,000 2,235,963
Corporate Asset Funding Co.;
6.06%; 5/9/2000 2,500,000 2,496,633
6.05%; 5/19/2000 475,000 473,563
5.90%; 5/24/2000 3,000,000 2,988,692
5.90%; 5/26/2000 3,000,000 2,987,708
6.10%; 6/26/2000 2,500,000 2,476,278
6.12%; 7/12/2000 1,500,000 1,481,640
Corporate Receivables Corp.;
5.95%; 5/16/2000 4,000,000 3,990,083
5.93%; 5/25/2000 2,000,000 1,992,093
5.92%; 5/26/2000 2,500,000 2,489,722
6.08%; 6/19/2000 1,250,000 1,239,656
6.13%; 7/13/2000 3,000,000 2,962,709
6.13%; 7/17/2000 2,000,000 1,973,777
Quincy Capital Corp.;
6.07%; 5/5/2000 2,500,000 2,498,314
6.05%; 5/25/2000 4,000,000 3,983,867
6.07%; 6/6/2000 2,000,000 1,987,860
6.18%; 6/12/2000 625,000 620,494
6.07%; 6/14/2000 2,400,000 2,382,195
6.09%; 6/19/2000 2,500,000 2,479,277
6.10%; 6/19/2000 1,450,000 1,437,961
Receivables Capital Corp.;
5.96%; 5/9/2000 3,250,000 3,245,696
5.94%; 5/10/2000 1,450,000 1,447,847
6.10%; 6/8/2000 1,250,000 1,241,951
6.11%; 6/8/2000 1,175,000 1,167,422
6.10%; 6/15/2000 3,000,000 2,977,125
6.07%; 6/23/2000 2,500,000 2,477,659
6.16%; 7/14/2000 4,000,000 3,949,351
Sheffield Receivables Corp.;
6.10%; 5/18/2000 1,900,000 1,894,527
6.04%; 5/19/2000 1,500,000 1,495,470
6.11%; 5/30/2000 1,006,000 1,001,049
6.19%; 7/17/2000 1,125,000 1,110,105
78,559,462
Business Credit Institutions (11.41%)
American Express Credit Corp.;
6.04%; 6/2/2000 $3,125,000 $ 3,108,222
CIT Group Holdings, Inc.;
5.87%; 5/2/2000 2,500,000 2,499,592
6.00%; 5/2/2000 1,640,000 1,639,727
6.04%; 5/3/2000 675,000 674,774
6.04%; 5/5/2000 3,000,000 2,997,987
6.02%; 5/11/2000 600,000 598,997
6.04%; 5/19/2000 3,000,000 2,990,940
6.07%; 6/7/2000 2,700,000 2,683,156
Deere (John) Credit Group PLC;
5.91%; 5/2/2000 3,300,000 3,299,458
5.92%; 5/15/2000 1,500,000 1,496,547
6.08%; 6/8/2000 3,000,000 2,980,747
6.09%; 6/12/2000 3,000,000 2,978,685
6.11%; 6/26/2000 2,825,000 2,798,150
6.09%; 7/6/2000 1,000,000 988,835
General Electric Capital Corp.;
5.84%; 5/11/2000 1,000,000 998,378
5.85%; 5/12/2000 1,000,000 998,212
6.03%; 5/24/2000 950,000 946,340
5.75%; 6/12/2000 1,200,000 1,191,950
5.82%; 6/16/2000 1,000,000 992,563
5.73%; 7/19/2000 500,000 493,713
5.75%; 8/25/2000 950,000 932,399
5.80%; 9/8/2000 2,075,000 2,031,541
5.90%; 9/15/2000 1,000,000 977,547
6.26%; 10/2/2000 450,000 437,949
5.94%; 10/13/2000 500,000 486,387
6.06%; 11/13/2000 900,000 870,306
43,093,102
Chemicals & Allied Products (1.12%)
Sinochem American CP, Inc.;
6.09%; 6/5/2000 4,250,000 4,224,836
Commercial Banks (1.85%)
Citicorp;
6.03%; 5/23/2000 4,000,000 3,985,260
Wells Fargo & Co.;
6.05%; 5/12/2000 3,000,000 2,994,454
6,979,714
Commodity Contracts
Brokers, Dealers (0.66%)
Louis Dreyfus Corp.;
6.04%; 5/18/2000 2,500,000 2,492,869
Crude Petroleum & Natural Gas (0.78%)
Chevron U.K. Investment PLC;
6.04%; 6/6/2000 1,500,000 1,490,940
6.15%; 8/7/2000 1,500,000 1,474,888
2,965,828
Cutlery, Handtools &
Hardware (0.80%)
Stanley Works;
5.88%; 5/4/2000 $3,025,000 $ 3,023,518
Department Stores (0.82%)
Wal-Mart Stores, Inc.;
6.18%; 6/13/2000 3,125,000 3,101,932
Electric Services (2.16%)
Alliant Energy Corp.;
6.07%; 5/17/2000 1,000,000 997,302
6.08%; 5/17/2000 3,000,000 2,991,893
6.07%; 5/24/2000 1,175,000 1,170,443
Teco Finance, Inc.;
6.05%; 5/22/2000 3,000,000 2,989,413
8,149,051
Farm & Garden Machinery (1.25%)
Caterpillar Financial Services Corp.;
6.08%; 8/17/2000 1,200,000 1,178,112
6.10%; 9/18/2000 1,200,000 1,171,533
6.13%; 9/18/2000 1,500,000 1,464,242
6.12%; 11/14/2000 936,000 930,749
4,744,636
Federally & Federally Sponsored
Credit (0.65%)
Private Export Funding Corp.;
6.08%; 6/15/2000 2,500,000 2,481,000
Foreign Banks, Branches &
Agencies (4.21%)
Deutsche Bank Financial, Inc.;
6.09%; 5/30/2000 2,750,000 2,736,509
6.10%; 5/30/2000 700,000 696,560
6.07%; 6/1/2000 2,575,000 2,561,541
6.10%; 6/1/2000 5,118,000 5,091,116
6.08%; 6/7/2000 1,300,000 1,291,876
6.10%; 6/7/2000 1,600,000 1,589,969
6.22%; 10/10/2000 2,000,000 1,944,020
15,911,591
Insurance Agents, Brokers &
Services (1.48%)
Marsh & McLennan Cos.;
5.85%; 5/19/2000 3,000,000 2,991,225
Marsh USA, Inc.;
5.90%; 5/23/2000 2,000,000 1,992,789
5.93%; 6/14/2000 600,000 595,651
5,579,665
Investment Offices (1.32%)
Morgan Stanley Group, Inc.;
6.05%; 5/15/2000 2,000,000 1,995,294
6.10%; 6/20/2000 1,500,000 1,487,292
6.00%; 6/27/2000 1,500,000 1,485,750
4,968,336
Life Insurance (3.28%)
American General Corp.;
5.89%; 5/1/2000 $1,425,000 $ 1,425,000
6.04%; 5/4/2000 2,000,000 1,998,994
6.04%; 5/8/2000 4,000,000 3,995,302
6.03%; 5/30/2000 2,000,000 1,990,285
6.10%; 6/20/2000 3,000,000 2,974,583
12,384,164
Miscellaneous Chemical Products (0.49%)
Du Pont (E.I.) De Nemours;
6.09%; 6/8/2000 1,875,000 1,862,947
Miscellaneous Electrical Equipment &
Supplies (0.79%)
Motorola, Inc.;
6.08%; 6/12/2000 3,000,000 2,978,720
Miscellaneous Investing (4.55%)
Delaware Funding Corp.;
6.05%; 5/11/2000 4,000,000 3,993,278
5.95%; 5/22/2000 3,550,000 3,537,679
6.10%; 6/14/2000 800,000 794,036
6.18%; 6/20/2000 3,000,000 2,974,250
6.13%; 6/26/2000 1,000,000 990,464
6.17%; 7/19/2000 2,000,000 1,972,921
MLTC Funding, Inc.;
6.07%; 5/24/2000 2,925,000 2,913,657
17,176,285
Miscellaneous Manufacturers (1.14%)
Dover Corp.;
6.03%; 5/15/2000 2,500,000 2,494,137
6.02%; 5/17/2000 1,800,000 1,795,184
4,289,321
Motor Vehicles & Equipment (0.95%)
Paccar Financial Corp.;
5.88%; 5/3/2000 800,000 799,739
5.88%; 5/5/2000 1,850,000 1,848,791
5.80%; 8/1/2000 945,000 930,993
3,579,523
Paint, Glass & Wallpaper Stores (2.46%)
Sherwin-Williams Co.;
6.04%; 5/16/2000 1,525,000 1,521,162
6.03%; 5/24/2000 1,075,000 1,070,859
6.03%; 5/25/2000 842,000 838,615
6.02%; 5/31/2000 990,000 985,034
6.05%; 6/5/2000 2,000,000 1,988,236
6.11%; 6/13/2000 2,915,000 2,893,726
9,297,632
Personal Credit Institutions (11.85%)
American General Finance Corp.;
6.24%; 6/21/2000 $2,650,000 $ 2,626,574
Associates First Capital Corp.;
6.07%; 5/5/2000 1,500,000 1,498,988
6.07%; 5/10/2000 4,000,000 3,993,930
5.88%; 5/16/2000 1,050,000 1,047,427
6.05%; 5/24/2000 3,000,000 2,988,404
6.06%; 5/30/2000 2,500,000 2,487,796
6.07%; 6/16/2000 2,500,000 2,480,610
6.10%; 6/19/2000 2,475,000 2,454,451
Commoloco, Inc.;
5.78%; 7/7/2000 1,200,000 1,187,091
5.76%; 7/26/2000 1,000,000 986,240
5.80%; 7/28/2000 1,150,000 1,133,696
5.71%; 8/11/2000 850,000 836,248
5.70%; 8/14/2000 1,300,000 1,278,388
5.72%; 8/18/2000 400,000 393,072
5.79%; 9/1/2000 1,000,000 980,217
6.25%; 10/4/2000 1,000,000 972,917
6.14%; 10/10/2000 750,000 729,278
6.13%; 11/6/2000 1,000,000 967,817
6.23%; 11/17/2000 500,000 482,694
6.29%; 11/17/2000 1,000,000 965,056
6.47%; 11/17/2000 700,000 674,839
Ford Motor Credit Co.;
6.27%; 9/7/2000 750,000 733,149
General Motors Acceptance Corp.;
5.96%; 5/1/2000 2,000,000 2,000,000
6.08%; 5/31/2000 1,600,000 1,591,893
6.06%; 6/1/2000 1,150,000 1,143,999
6.08%; 6/5/2000 1,350,000 1,342,020
6.26%; 6/21/2000 3,000,000 2,973,395
6.14%; 7/11/2000 1,850,000 1,827,598
Household Finance Corp.;
6.20%; 8/2/2000 2,000,000 1,967,967
44,745,754
Security Brokers & Dealers (10.24%)
Bear Stearns Cos., Inc.;
5.92%; 5/3/2000 3,000,000 2,999,013
5.87%; 5/4/2000 2,500,000 2,498,777
5.94%; 5/12/2000 2,500,000 2,495,463
5.92%; 5/31/2000 3,500,000 3,482,733
6.04%; 6/23/2000 2,000,000 1,982,216
Merrill Lynch & Co., Inc.;
6.10%; 6/13/2000 1,100,000 1,091,985
5.79%; 6/15/2000 2,000,000 1,985,525
5.94%; 6/23/2000 800,000 793,004
6.15%; 7/10/2000 1,500,000 1,482,062
6.13%; 7/24/2000 2,000,000 1,971,393
Salomon Smith Barney Holdings, Inc.;
6.00%; 5/1/2000 $3,000,000 $ 3,000,000
5.97%; 5/3/2000 725,000 724,760
6.00%; 5/3/2000 3,000,000 2,999,000
6.06%; 6/2/2000 3,750,000 3,729,800
6.07%; 6/6/2000 3,500,000 3,478,755
6.06%; 6/9/2000 4,000,000 3,973,740
38,688,226
Telephone Communication (1.26%)
Bell Atlantic;
5.90%; 5/5/2000 1,000,000 999,344
SBC Communications, Inc.;
6.05%; 6/9/2000 2,660,000 2,642,566
6.17%; 6/14/2000 636,000 631,204
6.25%; 10/11/2000 500,000 485,850
4,758,964
Total Commercial Paper 326,037,076
Bonds (12.48%)
Beverages (0.17%) PepsiCo, Inc.;
6.80%; 5/15/2000 500,000 500,197
5.88%; 6/1/2000 150,000 149,989
650,186
Business Credit Institutions (2.16%)
American Express Credit Corp.
Notes; 6.13%; 6/15/2000 910,000 910,450
Senior Notes; 6.50%; 8/1/2000 1,500,000 1,501,523
CIT Group Holdings, Inc.
Medium-Term Notes;
6.70%; 5/2/2000 500,000 500,016
Notes;
5.63%; 2/2/2001 350,000 346,985
5.80%; 2/26/2001 1,100,000 1,091,375
Senior Notes;
5.00%; 10/6/2000 1,250,000 1,241,900
6.20%; 10/20/2000 1,600,000 1,599,256
General Electric Capital Corp.
Notes;
8.38%; 3/1/2001 505,000 511,052
5.92%; 4/3/2001 450,000 446,211
8,148,768
Commercial Banks (0.56%)
Bank of America Corp.
Notes; 5.75%; 3/15/2001 625,000 619,524
Norwest Corp.
Medium-Term Notes;
6.13%; 10/15/2000 500,000 499,799
Senior Notes;
6.75%; 5/12/2000 1,000,000 1,000,277
2,119,600
Miscellaneous Equipment Rental &
Leasing (1.11%)
International Lease Finance Corp.
Notes;
6.20%; 5/1/2000 $1,575,000 $ 1,575,000
7.00%; 5/15/2000 500,000 500,217
6.63%; 8/15/2000 650,000 650,955
6.25%; 10/15/2000 1,475,000 1,473,517
4,199,689
Personal Credit Institutions (7.28%)
American General Finance Corp.
Notes;
5.88%; 7/1/2000 1,200,000 1,199,704
Senior Notes; 6.13%; 9/15/2000 250,000 249,947
Associates Corp. of North America
Notes;
5.85%; 1/15/2001 200,000 198,812
Senior Notes;
6.00%; 6/15/2000 2,110,000 2,110,658
6.38%; 6/15/2000 1,050,000 1,050,331
6.25%; 9/15/2000 1,850,000 1,849,871
Avco Financial Services, Inc.
Senior Notes;
6.35%; 9/15/2000 1,000,000 999,948
Commercial Credit Co.
Notes;
6.75%; 5/15/2000 500,000 500,196
5.75%; 7/15/2000 1,480,000 1,478,415
Ford Motor Credit Co.
Notes;
6.85%; 8/15/2000 3,415,000 3,422,342
6.38%; 10/6/2000 1,325,000 1,325,164
6.25%; 11/8/2000 1,550,000 1,548,276
5.75%; 1/25/2001 750,000 743,683
General Motors Acceptance Corp.
Debentures; 9.63%; 5/15/2000 1,450,000 1,452,109
Notes;
5.63%; 2/15/2001 1,000,000 991,382
5.80%; 2/23/2001 820,000 813,869
5.95%; 4/20/2001 1,600,000 1,587,644
7.13%; 5/1/2001 1,205,000 1,208,124
Household Finance Corp.
Notes;
6.38%; 6/30/2000 2,535,000 2,536,329
Senior Notes;
6.00%; 5/8/2000 1,800,000 1,800,016
Norwest Financial, Inc.
Senior Notes; 6.88%; 6/15/2000 439,000 439,525
27,506,345
Security Brokers & Dealers (1.20%)
Bear Stearns Cos., Inc.
Senior Notes; 6.75%; 8/15/2000 $1,800,000 $ 1,802,522
Merrill Lynch & Co.
Notes;
6.70%; 8/1/2000 1,000,000 1,000,936
6.00%; 1/15/2001 1,300,000 1,291,823
Morgan Stanley Dean Witter & Co.
Medium-Term Notes; 5.25%; 2/8/2001 445,000 439,838
4,535,119
Total Bonds 47,159,707
Total Portfolio Investments (98.80%) 373,196,783
Cash, receivables and other assets,
net of liabilities (1.20%) 4,513,249
Total Net Assets (100.00%) $377,710,032
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 2000* 1999 1998 1997 1996 1995
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b) ............................ .026 .045 .051 .050 .049 .052
Total from Investment Operations .026 .045 .051 .050 .049 .052
Less Dividends:
Dividends From Net Investment Income................. (.026) (.045) (.051) (.050) (.049) (.052)
Total Dividends (.026) (.045) (.051) (.050) (.049) (.052)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Total Return(c) ........................................ 2.63%(d) 4.56% 5.10% 4.96% 5.00% 5.36%
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $355,590 $352,675 $294,918 $836,072 $694,962 $623,864
Ratio of Expenses to Average Net Assets(b) .......... .70%(e) .69% .56%(f) .63% .66% .72%
Ratio of Net Investment Income to
Average Net Assets................................. 5.20%(e) 4.45% 5.12% 4.98% 4.88% 5.24%
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class B shares 2000* 1999 1998 1997 1996 1995(g)
--------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
Net Investment Income(b) ............................ .024 .039 .042 .041 .041 .041
Total from Investment Operations .024 .039 .042 .041 .041 .041
Less Dividends:
Dividends from Net Investment Income................. (.024) (.039) (.042) (.041) (.041) (.041)
Total Dividends (.024) (.039) (.042) (.041) (.041) (.041)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Total Return(c) ........................................ 2.39%(d) 4.00% 4.25% 4.05% 4.13% 4.19%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $5,755 $6,330 $3,602 $992 $520 $208
Ratio of Expenses to Average Net Assets(b) .......... 1.17%(e) 1.19% 1.41%(f) 1.47% 1.50% 1.42%(e)
Ratio of Net Investment Income to
Average Net Assets................................. 4.73%(e) 4.00% 4.23% 4.08% 4.08% 4.50%(e)
</TABLE>
* Six Months Ended April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class C shares 2000* 1999(h)
--------------
<S> <C> <C>
Net Asset Value, Beginning of Period.................... $1.000 $1.000
Income from Investment Operations:
Net Investment Income .............................. .014 .010
Total from Investment Operations .014 .010
Less Dividends:
Dividends from Net Investment Income................. (.014) (.010)
Total Dividends (.014) (.010)
Net Asset Value, End of Period.......................... $1.000 $1.000
Total Return(c) ........................................ 1.44%(d) 1.01%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $190 $132
Ratio of Expenses to Average Net Assets ............. 3.04%(e) 2.26%(e)
Ratio of Net Investment Income to
Average Net Assets................................. 2.90%(e) 3.01%(e)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL CASH MANAGEMENT FUND, INC.(a)
------------------------------------
Class R shares 2000* 1999 1998 1997 1996(i)
--------------
<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) ............................ .024 .040 .046 .044 .030
Total from Investment Operations .024 .040 .046 .044 .030
Less Dividends:
Dividends from Net Investment Income................. (.024) (.040) (.046) (.044) (.030)
Total Dividends (.024) (.040) (.046) (.044) (.030)
Net Asset Value, End of Period.......................... $1.000 $1.000 $1.000 $1.000 $1.000
Total Return............................................ 2.40%(d) 4.04% 4.56% 4.16% 2.97%(d)
Ratio/Supplemental Data:
Net Assets, End of Period (in thousands)............. $16,175 $15,571 $10,414 $4,296 $1,639
Ratio of Expenses to Average Net Assets(b) .......... 1.16%(e) 1.15% 1.05%(d) 1.26% .99%(e)
Ratio of Net Investment Income to
Average Net Assets................................. 4.74%(e) 3.99% 4.62% 4.40% 4.41%(e)
</TABLE>
* Six Months Ended April 30, 2000
Notes to Financial Highlights
(a) Effective January 1, 1998, the following change was made to the name of the
Money Market Fund:
<TABLE>
<CAPTION>
Former Fund Name New Fund Name
<S> <C> <C>
Princor Cash Management Fund, Inc. Principal Cash Management 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 Fund 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> <C>
Class A 1998 $.051 .56% $ -- (d)
1997 .050 .63 --
1996 .049 .67 7,102
Class B 1998 .041 1.49 1,343(d)
1997 .036 2.14 5,492
1996 .029 3.94 6,140
Class R 1998 .046 1.05 -- (d)
1997 .043 1.34 2,441
1996(i) .030 .99 --
</TABLE>
The Manager ceased its waiver of expenses for Principal Cash Management
Fund, Inc. on March 1, 1998.
(c) Total return is calculated without the front-end sales charge or contingent
deferred sales charge.
(d) Total return amounts have not been annualized.
(e) Computed on an annualized basis.
(f) Management fee waivers apply to November 1, 1997 through February 28, 1998.
(g) Period from December 9, 1994, date Class B shares first offered to the
public, through October 31, 1995.
(h) Period from June 30, 1999, date Class C shares first offered to the public
and the date of the initial purchase of Class C shares by Principal Life
Insurance Company, through October 31, 1999.
(i) Period from February 29, 1996, date Class R shares first offered to
eligible purchasers, through October 31, 1996.
SHAREHOLDER MEETING RESULTS
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL BALANCED FUND, INC. HELD NOVEMBER 2,
1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 5,271,055 213,728
Davis 5,269,985 214,798
Eucher 5,274,538 210,245
Ferguson 5,271,425 213,358
Gilbert 5,276,821 207,962
Griswell 5,273,784 210,999
Kimball 5,276,601 208,182
Lukavsky 5,269,981 214,802
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
5,254,622 51,626 178,535
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
5,057,073 167,238 260,472
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
5,085,472 139,957 259,355
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
4,988,251 114,869 224,371 157,293
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL BLUE CHIP FUND, INC. HELD NOVEMBER 2,
1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 5,491,722 176,015
Davis 5,476,935 190,802
Eucher 5,491,753 175,984
Ferguson 5,485,569 182,168
Gilbert 5,493,469 174,267
Griswell 5,482,708 185,029
Kimball 5,494,956 172,781
Lukavsky 5,484,844 182,893
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
5,454,234 89,018 124,485
3. Amendment of Management Agreement to
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
5,154,224 246,290 267,223
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
5,201,060 202,369 264,308
C. Modify management fee schedule.
In Favor Opposed Abstain Broker Non-Votes
4,582,032 573,303 265,039 247,362
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
5,026,053 203,681 190,640 247,362
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL BOND FUND, INC. HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 9,368,123 263,608
Davis 9,321,192 310,539
Eucher 9,359,933 271,798
Ferguson 9,327,347 304,384
Gilbert 9,368,024 263,707
Griswell 9,357,082 274,649
Kimball 9,370,272 261,459
Lukavsky 9,307,947 323,784
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
9,354,520 131,120 146,092
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
8,947,669 336,921 347,140
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
9,020,320 284,091 327,320
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
8,439,042 424,473 283,670 484,547
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL CAPITAL VALUE FUND, INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 12,538,898 238,010
Davis 12,541,368 235,541
Eucher 12,541,399 235,509
Ferguson 12,545,240 231,668
Gilbert 12,550,868 226,040
Griswell 12,530,824 246,084
Kimball 12,550,802 226,106
Lukavsky 12,535,776 241,132
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
12,475,417 92,974 208,517
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
12,156,804 290,555 329,549
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
12,197,462 241,745 337,701
C. Modify management fee schedule.
In Favor Opposed Abstain Broker Non-Votes
11,137,907 816,480 339,395 483,125
4. Approval of changes to fundamental investment restrictions regarding:
A. Financial Futures and Options.
In Favor Opposed Abstain Broker Non-Votes
11,585,937 378,819 329,028 483,12
B. Short Sales.
In Favor Opposed Abstain Broker Non-Votes
11,537,426 401,707 354,650 438,125
C. Lending of Portfolio Securities.
In Favor Opposed Abstain Broker Non-Votes
11,477,058 465,783 350,942 483,125
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
11,680,055 299,467 314,260 483,125
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL CASH MANAGEMENT FUND, INC. HELD
NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 192,848,522 10,002,300
Davis 193,216,893 9,633,929
Eucher 192,566,960 10,283,862
Ferguson 193,174,334 9,676,488
Gilbert 193,348,777 9,502,045
Griswell 191,727,467 11,123,355
Kimball 193,331,074 9,519,748
Lukavsky 193,303,022 9,547,800
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
196,221,336 2,075,494 4,553,992
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
186,757,557 8,468,121 7,625,144
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
188,128,792 6,751,715 7,970,315
4. Approval of changes to fundamental investment restrictions regarding:
C. Lending of Portfolio Securities.
In Favor Opposed Abstain Broker Non-Votes
176,524,883 18,045,626 7,729,898 550,414
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL GOVERNMENT SECURITIES INCOME FUND,
INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 12,904,043 992,242
Davis 12,849,981 1,046,304
Eucher 12,894,729 1,001,556
Ferguson 12,856,289 1,039,997
Gilbert 12,906,769 989,516
Griswell 12,899,717 996,568
Kimball 12,901,454 994,831
Lukavsky 12,868,475 1,027,810
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
13,335,158 156,875 404,253
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
12,689,082 587,133 620,070
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
12,795,785 496,146 604,354
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL GROWTH FUND, INC. HELD NOVEMBER 9,
1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 4,734,297 165,183
Davis 4,730,017 169,464
Eucher 4,733,147 166,333
Ferguson 4,734,388 165,092
Gilbert 4,737,229 162,251
Griswell 4,730,023 169,457
Kimball 4,739,000 160,481
Lukavsky 4,734,309 165,172
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
4,707,799 64,548 127,133
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
4,463,874 219,803 215,804
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
4,514,314 170,733 214,433
C. Modify management fee schedule.
In Favor Opposed Abstain Broker Non-Votes
3,876,803 532,210 215,844 274,624
4. Approval of changes to fundamental investment restrictions regarding:
A. Financial Futures and Options.
In Favor Opposed Abstain Broker Non-Votes
4,164,379 239,293 221,184 274,624
B. Short Sales.
In Favor Opposed Abstain Broker Non-Votes
4,140,096 257,257 227,504 274,624
C. Lending of Portfolio Securities.
In Favor Opposed Abstain Broker Non-Votes
4,126,324 268,548 229,984 274,624
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
4,247,628 166,066 211,162 274,624
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL HIGH YIELD FUND, INC. HELD NOVEMBER 2,
1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 3,148,861 72,503
Davis 3,143,628 77,736
Eucher 3,149,059 72,305
Ferguson 3,156,178 65,186
Gilbert 3,157,407 63,957
Griswell 3,147,515 73,850
Kimball 3,157,407 63,957
Lukavsky 3,145,565 75,800
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
3,120,574 36,881 63,910
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
3,048,114 101,280 71,970
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
3,062,425 86,483 72,456
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
2,670,612 96,748 58,721 395,283
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND,
INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 1,570,455 14,173
Davis 1,570,947 13,681
Eucher 1,570,947 13,681
Ferguson 1,570,821 13,807
Gilbert 1,569,686 14,942
Griswell 1,567,279 17,349
Kimball 1,570,827 13,801
Lukavsky 1,570,732 13,896
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
1,570,671 6,679 7,278
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
1,548,635 16,328 19,665
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
1,551,551 13,982 19,095
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL INTERNATIONAL FUND, INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 21,798,119 489,340
Davis 21,780,958 506,501
Eucher 21,799,246 488,213
Ferguson 21,799,766 487,692
Gilbert 21,806,329 481,129
Griswell 21,779,538 507,921
Kimball 21,813,889 473,569
Lukavsky 21,781,880 505,578
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
21,777,175 182,686 327,597
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
21,192,363 607,960 487,136
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
21,286,955 514,114 486,390
C. Modify management fee schedule.
In Favor Opposed Abstain Broker Non-Votes
18,734,826 1,452,816 500,568 1,599,249
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
19,765,528 495,696 426,985 1,599,249
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 1,644,154 17,603
Davis 1,644,602 17,155
Eucher 1,644,387 17,370
Ferguson 1,644,485 17,273
Gilbert 1,644,600 17,158
Griswell 1,642,275 19,483
Kimball 1,643,970 17,787
Lukavsky 1,644,325 17,432
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
1,650,019 6,067 5,671
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
1,634,641 12,187 14,930
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
1,633,760 11,009 16,989
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL LIMITED TERM BOND FUND, INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 2,054,333 35,432
Davis 2,054,333 35,432
Eucher 2,054,333 35,432
Ferguson 2,054,631 35,135
Gilbert 2,054,333 35,432
Griswell 2,054,333 35,432
Kimball 2,054,333 35,432
Lukavsky 2,054,333 35,432
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
2,060,164 17,198 12,404
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
2,013,069 47,205 29,492
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
2,015,502 41,515 32,749
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
1,946,701 33,550 36,837 72,677
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL MIDCAP FUND, INC. HELD DECEMBER 10,
1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 4,745,279 198,657
Davis 4,746,303 197,633
Eucher 4,748,312 195,624
Ferguson 4,748,676 195,261
Gilbert 4,748,696 195,240
Griswell 4,739,764 204,173
Kimball 4,750,508 193,429
Lukavsky 4,742,194 201,742
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
4,696,288 102,941 144,707
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
4,478,868 236,297 228,771
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
4,526,140 148,427 219,370
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
4,185,183 164,986 196,538 397,229
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL REAL ESTATE FUND, INC. HELD NOVEMBER
2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 1,247,884 6,195
Davis 1,248,708 5,371
Eucher 1,248,383 5,696
Ferguson 1,248,556 5,523
Gilbert 1,247,545 6,534
Griswell 1,248,556 5,523
Kimball 1,248,556 5,523
Lukavsky 1,248,556 5,523
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
1,250,973 621 2,485
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
1,244,056 7,417 2,605
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
1,245,589 6,147 2,343
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
1,231,109 4,555 2,244 16,171
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL SMALLCAP FUND, INC. HELD NOVEMBER 2,
1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 2,870,563 56,009
Davis 2,869,920 56,652
Eucher 2,870,713 55,859
Ferguson 2,868,226 58,346
Gilbert 2,867,356 59,216
Griswell 2,868,734 57,838
Kimball 2,868,585 57,987
Lukavsky 2,866,708 59,864
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
2,871,127 27,015 28,430
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
2,794,222 83,685 48,665
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
2,811,143 62,346 53,083
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
2,740,528 55,755 31,905 98,384
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL TAX-EXEMPT BOND FUND, INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 10,686,110 225,267
Davis 10,667,063 244,314
Eucher 10,704,515 206,862
Ferguson 10,669,283 242,094
Gilbert 10,700,345 211,032
Griswell 10,698,489 212,887
Kimball 10,702,906 208,471
Lukavsky 10,612,570 298,806
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
10,717,493 49,089 144,794
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
10,198,577 301,115 411,685
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
10,192,476 224,387 494,514
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
9,291,661 390,983 264,948 963,784
SPECIAL MEETING OF SHAREHOLDERS PRINCIPAL UTILITIES FUND, INC.
HELD NOVEMBER 2, 1999
1. Election of the Board of Directors.
For Withheld
Aschenbrenner 3,673,542 98,956
Davis 3,675,446 97,051
Eucher 3,672,972 99,525
Ferguson 3,672,579 99,918
Gilbert 3,675,660 96,838
Griswell 3,673,292 99,205
Kimball 3,675,028 97,469
Lukavsky 3,669,360 103,137
2. Ratification of selection of Ernst & Young LLP as independent public
auditors.
In Favor Opposed Abstain
3,658,722 48,302 65,474
3. Amendment of Management Agreement to:
A. Provide transfer agency services through a separate agreement.
In Favor Opposed Abstain
3,502,271 122,505 147,721
B. Clarify changes to delegation provision.
In Favor Opposed Abstain
3,523,700 101,369 147,429
4. Approval of changes to fundamental investment restrictions regarding:
D. Diversification.
In Favor Opposed Abstain Broker Non-Votes
3,092,608 145,798 102,821 431,270
PRINCIPAL MUTUAL FUNDS
The Principal Mutual Funds provide a choice of investment objectives through
Domestic Growth Funds, International Growth Funds, Income Funds and a Money
Market Fund. More complete information about any of the Funds, including charges
and expenses, is provided in the Funds' prospectus. A free copy is available
from Princor Financial Services Corporation, The Principal Financial Group, Des
Moines, Iowa 50392-0200 (telephone 1-800-247-4123). Please read it carefully
before you invest or send money.
Investment Objective
DOMESTIC GROWTH FUNDS
Principal Balanced Fund To seek the generation of a
total return consisting of current income and
capital appreciation while assuming
reasonable risks in furtherance of this
objective.
Principal Blue Chip Fund To seek growth of capital and
growth of income by investing primarily in
common stocks of well capitalized,
established companies.
Principal Capital Value Fund To seek long-term capital
appreciation and a secondary objective of
growth of investment income.
Principal Growth Fund To seek growth of capital with
realization of current income incidental to
the objective of growth of capital.
Principal LargeCap Stock To seek long-term growth
Index Fund of capital by investing in widely held common
stocks representing industrial, financial,
utilities and transportation companies.
Principal MidCap Fund To seek capital appreciation by
investing primarily in securities of emerging
and other growth-oriented companies.
Principal Partners Aggressive To seek long-term capital appreciation from
Growth Fund a portfolio of primarily equity securities.
Principal Partners LargeCap To seek long-term growth of
Growth Fund capital by investing primarily in common
stocks of larger capitalization
domestic companies.
Principal Partners MidCap To seek long-term growth of
Growth Fund capital by investing primarily in medium
capitalization U.S. companies
with strong earnings growth potential.
Principal Real Estate Fund To seek the generation of
total return by investing primarily in equity
securities of companies principally engaged
in the real estate industry.
Principal SmallCap Fund To seek long-term growth of
capital by investing primarily in equity
securities of companies with comparatively
smaller market capitalizations.
Principal Utilities Fund To seek current income and
long-term growth of income and capital by
investing primarily in equity and fixed
income securities of companies in the public
utilities industry.
INTERNATIONAL GROWTH FUNDS
Principal International To seek long-term growth of
Emerging Markets Fund capital by 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
SmallCap Fund capital by 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
Securities Income Fund income, liquidity and safety of principal.
Principal High Yield Fund To seek high current income. Capital growth
is a secondary objective when consistent
with seeking high current income.
Principal Limited Term To seek a high level of current income
Bond Fund consistent with a relatively high
level of principal stability by
investing in a portfolio of securities with a
dollar weighted average maturity of five
years or less.
Principal Tax-Exempt Bond Fund To seek as high a level of current
income exempt from federal taxation as is
consistent with preservation of capital.
MONEY MARKET FUND
Principal Cash Management Fund To seek as high a level of current
income 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.
