A MESSAGE FROM THE PRESIDENT
Dear Principal Mutual Life Insurance Company Customers
This is the Annual Report for the Principal Mutual Funds. The Report contains
important financial information resulting from the operation of the Funds for
the year ended December 31, 1995. Several different Principal Mutual variable
annuity and variable life insurance contracts offer these Funds within the
investment options. Please see your contract prospectus for a description of the
Funds specifically available in your contract.
Last year proved to be an excellent one for investors. U.S. stock and bond
markets finished the year at levels significantly higher than 1994.
International stock markets also performed fairly well. However, often their
gains were overshadowed by the spectacular run in U.S. equities. Principal
Mutual variable annuity and variable life contract owners benefited from these
robust markets. For the one-year period ending 12/31/95, all the Funds posted
positive returns.
Looking to the new year, most market strategists expect to see continued
economic growth, moderate inflation and limited movement in interest rates.
These factors should be favorable for the U.S. stock and bond markets. Though
foreign markets lagged U.S. equity markets in 1995, potential gains from
international investing remain good for the long term.
Thank you for helping make 1995 a very successful year. The Principal Mutual
Funds continue to grow in both assets and the number of contracts. We look
forward to another fine year in 1996.
Sincerely,
Stephan L. Jones
President
<PAGE>
CONTENTS
Page
Financial Statements and Financial Highlights
Statements of Assets and Liabilities................................. 2
Statements of Operations ............................................ 4
Statements of Changes in Net Assets.................................. 6
Notes to Financial Statements............................................. 10
Schedules of Investments
Principal Aggressive Growth Fund, Inc............................ 16
Principal Asset Allocation Fund, Inc............................. 17
Principal Balanced Fund, Inc..................................... 24
Principal Bond Fund, Inc......................................... 26
Principal Capital Accumulation Fund, Inc......................... 28
Principal Emerging Growth Fund, Inc...... ....................... 30
Principal Government Securities Fund, Inc........................ 33
Principal Growth Fund, Inc....................................... 33
Principal High Yield Fund, Inc................................... 35
Principal Money Market Fund, Inc................................. 37
Principal World Fund, Inc........................................ 38
Financial Highlights................................................. 44
Report of Independent Auditors....... ............................... 48
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal
Aggressive Asset Principal Principal
Growth Allocation Balanced Bond
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Assets
<S> <C> <C> <C> <C>
Investment in securities -- at value
(cost -- $28,658,034; $34,130,116; $39,330,608;
$32,445,537; $110,642,942; $46,991,820;
$48,231,081; $37,269,334; $11,147,545;
$32,473,125 and $29,713,996, respectively)
(Note 4)......................................... $31,356,080 $37,006,764 $45,086,052 $35,080,896
Cash ................................................. 4,752,850 3,982,848 1,311 1,745
Receivables:
Dividends and interest........................... 84,799 354,862 437,908 640,478
Investment securities sold....................... 316,798 125,148 - -
Capital Stock sold............................... 74,551 28,561 103,970 231,404
Total Assets 36,585,078 41,498,183 45,629,241 35,954,523
Liabilities
Accrued expenses...................................... 26,223 33,743 27,191 17,237
Payables:
Investment securities purchased.................. 2,914,773 385,906 191,789 -
Capital Stock reacquired......................... 1,141 4,496 6,935 59,627
Total Liabilities 2,942,137 424,145 225,915 76,864
Net Assets Applicable to Outstanding Shares ....... $33,642,941 $41,074,038 $45,403,326 $35,877,659
Capital Stock (par value: $.01 a share)
Shares authorized..................................... 100,000,000 100,000,000 100,000,000 100,000,000
Shares issued and outstanding......................... 2,599,416 3,697,872 3,251,073 3,059,029
Net Asset Value Per Share .......................... $12.94 $11.11 $13.97 $11.73
Net Assets Consist of:
Capital Stock......................................... $ 25,994 $ 36,979 $ 32,511 $ 30,590
Additional paid-in capital............................ 29,359,130 37,717,137 38,773,913 33,508,257
Accumulated undistributed (overdistributed)
net investment income............................ 3,483 19,826 11,765 -
Accumulated undistributed net realized
gain (loss) from:
Investment transactions ......................... 1,556,288 423,448 829,693 (296,547)
Foreign currency transactions.................... - - - -
Net unrealized appreciation of investments............ 2,698,046 2,876,648 5,755,444 2,635,359
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies.. - - - -
Total Net Assets $33,642,941 $41,074,038 $45,403,326 $35,877,659
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal Principal
Capital Emerging Government Principal
Accumulation Growth Securities Growth
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Assets
<S> <C> <C> <C> <C>
Investment in securities -- at value
(cost -- $28,658,034; $34,130,116; $39,330,608;
$32,445,537; $110,642,942; $46,991,820;
$48,231,081; $37,269,334; $11,147,545;
$32,473,125 and $29,713,996, respectively)
(Note 4)......................................... $136,067,278 $59,360,369 $50,430,539 $42,551,459
Cash ................................................. 4,843 8,083 4,295 4,302
Receivables:
Dividends and interest........................... 228,412 56,659 739,240 68,862
Investment securities sold....................... - - - -
Capital Stock sold............................... 270,874 249,011 141,581 115,143
Total Assets 136,571,407 59,674,122 51,315,655 42,739,766
Liabilities
Accrued expenses...................................... 62,272 35,324 25,560 23,186
Payables:
Investment securities purchased.................. 270,239 1,101,914 964,688 -
Capital Stock reacquired......................... 599,216 16,444 245,938 9,059
Total Liabilities 931,727 1,153,682 1,236,186 32,245
Net Assets Applicable to Outstanding Shares ....... $135,639,680 $58,520,440 $50,079,469 $42,707,521
Capital Stock (par value: $.01 a share)
Shares authorized..................................... 100,000,000 100,000,000 100,000,000 100,000,000
Shares issued and outstanding......................... 4,878,949 2,310,202 4,748,214 3,437,095
Net Asset Value Per Share .......................... $27.80 $25.33 $10.55 $12.43
Net Assets Consist of:
Capital Stock......................................... 48,789 $ 23,102 $ 47,482 $ 34,371
Additional paid-in capital............................ 107,046,263 45,375,332 48,531,472 37,381,406
Accumulated undistributed (overdistributed)
net investment income............................ 59,420 6,354 16,895 5,761
Accumulated undistributed net realized
gain (loss) from:
Investment transactions ......................... 3,060,872 747,103 (715,838) 3,858
Foreign currency transactions.................... - - - -
Net unrealized appreciation of investments............ 25,424,336 12,368,549 2,199,458 5,282,125
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies.. - - - -
Total Net Assets $135,639,680 $58,520,440 $50,079,469 $42,707,521
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995
STATEMENTS OF ASSETS AND LIABILITIES
Principal Principal
High Money Principal
Yield Market World
Fund, Inc. Fund, Inc. Fund, Inc.
Assets
<S> <C> <C> <C>
Investment in securities -- at value
(cost -- $28,658,034; $34,130,116; $39,330,608;
$32,445,537; $110,642,942; $46,991,820;
$48,231,081; $37,269,334; $11,147,545;
$32,473,125 and $29,713,996, respectively)
(Note 4)......................................... $11,389,212 $32,473,125 $31,760,990
Cash ................................................. 199,133 15,245 20,131
Receivables:
Dividends and interest........................... 249,185 21,953 68,426
Investment securities sold....................... - - -
Capital Stock sold............................... 658 560,671 34,058
Total Assets 11,838,188 33,070,994 31,883,605
Liabilities
Accrued expenses...................................... 7,928 17,431 30,169
Payables:
Investment securities purchased.................. - - 1,229,880
Capital Stock reacquired......................... 327 383,644 57,936
Total Liabilities 8,255 401,075 1,317,985
Net Assets Applicable to Outstanding Shares ....... $11,829,933 $32,669,919 $30,565,620
Capital Stock (par value: $.01 a share)
Shares authorized..................................... 100,000,000 500,000,000 100,000,000
Shares issued and outstanding......................... 1,409,500 32,669,919 2,852,252
Net Asset Value Per Share .......................... $8.39 $1.000 $10.72
Net Assets Consist of:
Capital Stock......................................... 14,095 $ 326,699 $ 28,523
Additional paid-in capital............................ 12,805,331 32,343,220 28,349,066
Accumulated undistributed (overdistributed)
net investment income............................ (25,104) - 12,505
Accumulated undistributed net realized
gain (loss) from:
Investment transactions ......................... (1,206,056) - 133,579
Foreign currency transactions.................... - - (5,526)
Net unrealized appreciation of investments............ 241,667 - 2,046,994
Net unrealized appreciation on translation
of assets and liabilities in foreign currencies.. - - 479
Total Net Assets $11,829,933 $32,669,919 $30,565,620
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
STATEMENTS OF OPERATIONS
Principal Principal
Aggressive Asset Principal Principal
Growth Allocation Balanced Bond
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
<S> <C> <C> <C> <C>
Income:
Dividends........................................ $ 423,403 $ 498,964 $ 469,990 $ -
Less: Withholding tax on foreign dividends...... - - - -
Interest......................................... 83,079 1,191,139 1,177,066 1,928,613
Total Income 506,482 1,690,103 1,647,056 1,928,613
Expenses:
Management and investment advisory
fees (Note 3)................................ 180,022 272,724 206,614 122,783
Custodian fees................................... 14,717 20,436 11,315 6,124
Directors' fees.................................. 7,765 7,765 7,811 7,811
Other............................................ 1,426 1,553 1,580 1,328
Total Expenses 203,930 302,478 227,320 138,046
Net Investment Income 302,552 1,387,625 1,419,736 1,790,567
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net realized gain (loss) from:
Investment transactions.......................... 4,905,174 1,628,048 1,509,204 (178,683)
Foreign currency transactions.................... - - - -
Net increase in unrealized
appreciation/depreciation o
Investments ..................................... 2,660,711 3,340,632 4,627,533 3,151,543
Translation of assets and liabilities in
foreign currencies.......................... - - - -
Net Realized and Unrealized Gain on
Investments and Foreign Currency 7,565,885 4,955,102 6,136,737 2,972,860
Net Increase in Net Assets
Resulting from Operations $7,868,437 $6,356,305 $7,556,473 $4,763,427
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
STATEMENTS OF OPERATIONS
Principal Principal Principal
Capital Emerging Government Principal
Accumulation Growth Securities Growth
Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C> <C>
Dividends........................................ $ 3,049,810 $ 361,828 $ - $ 450,045
Less: Withholding tax on foreign dividends...... - - - -
Interest......................................... 275,913 425,555 2,951,088 282,243
Total Income 3,325,723 787,383 2,951,088 732,288
Expenses:
Management and investment advisory
fees (Note 3)................................ 591,891 264,411 202,554 137,029
Custodian fees................................... 17,774 11,636 11,376 13,433
Directors' fees.................................. 7,838 7,811 7,811 8,046
Other............................................ 1,356 1,430 2,149 1,483
Total Expenses 618,859 285,288 223,890 159,991
Net Investment Income 2,706,864 502,095 2,727,198 572,297
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net realized gain (loss) from:
Investment transactions.......................... 11,294,865 1,202,668 (41,117) 298,608
Foreign currency transactions.................... - - - -
Net increase in unrealized
appreciation/depreciation o
Investments ..................................... 19,225,574 8,417,614 4,199,844 5,280,826
Translation of assets and liabilities in
foreign currencies.......................... - - - -
Net Realized and Unrealized Gain on
Investments and Foreign Currency 30,520,439 9,620,282 4,158,727 5,579,434
Net Increase in Net Assets
Resulting from Operations $33,227,303 $10,122,377 $6,885,925 $6,151,731
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
STATEMENTS OF OPERATIONS
Principal Principal
High Money Principal
Yield Market World
Fund, Inc. Fund, Inc. Fund, Inc.
Net Investment Income
Income:
<S> <C> <C> <C>
Dividends........................................ $ - $ - $ 585,383
Less: Withholding tax on foreign dividends...... - - (69,955)
Interest......................................... 1,054,837 1,664,566 223,115
Total Income 1,054,837 1,664,566 738,543
Expenses:
Management and investment advisory
fees (Note 3)................................ 64,422 140,895 172,258
Custodian fees................................... 4,819 12,512 37,884
Directors' fees.................................. 7,811 7,663 7,792
Other............................................ 1,371 1,354 1,427
Total Expenses 78,423 162,424 219,361
Net Investment Income 976,414 1,502,142 519,182
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net realized gain (loss) from:
Investment transactions.......................... (49,300) - 174,169
Foreign currency transactions.................... - - (5,526)
Net increase in unrealized
appreciation/depreciation o
Investments ..................................... 664,483 - 2,573,961
Translation of assets and liabilities in
foreign currencies.......................... - - 304
Net Realized and Unrealized Gain on
Investments and Foreign Currency 615,183 - 2,742,908
Net Increase in Net Assets
Resulting from Operations $1,591,597 $1,502,142 $3,262,090
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Aggressive Growth Asset Allocation
Fund, Inc. Fund, Inc.
1995 1994(a) 1995 1994(a)
Operations
<S> <C> <C> <C> <C>
Net investment income....................... $ 302,552 $ 76,039 $ 1,387,625 $ 663,604
Net realized gain (loss) from investment transactions 4,905,174 91,717 1,628,048 (136,298)
Net increase (decrease) in unrealized appreciation/
depreciation on investments and translation of
assets and liabilities in foreign currencies .. 2,660,711 37,335 3,340,632 (463,984)
Net Increase (Decrease) in Net Assets
Resulting from Operations 7,868,437 205,091 6,356,305 63,322
Dividends and Distributions to Shareholders
From net investment income.................. (305,795) (69,313) (1,398,405) (633,124)
From net realized gain on investments and foreign
currency transactions................. (3,377,897) (62,706) (1,026,374) -
Excess distribution of net realized gain on
investments (Note 1)................... - - - (41,928)
(3,683,692) (132,019) (2,424,779) (675,052)
Capital Share Transactions (Note 5)
Shares sold................................. 14,807,229 13,605,360 7,552,421 27,985,523
Shares issued in reinvestment of dividends
and distributions...................... 3,683,692 132,019 2,424,779 675,052
Shares redeemed............................. (2,803,211) (39,965) (875,745) (7,788)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 15,687,710 13,697,414 9,101,455 28,652,787
Total Increase (Decrease) 19,872,455 13,770,486 13,032,981 28,041,057
Net Assets
Beginning of period......................... 13,770,486 - 28,041,057 -
End of period (including undistributed net
investment income as set forth below).. $33,642,941 $13,770,486 $41,074,038 $28,041,057
Undistributed Net Investment Income......... $ 3,483 $ 6,726 $ 19,826 $ 30,480
(a) Period from May 23, 1994 (date operations
commenced) through December 31, 1994.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
Principal Principal
Balanced Bond
Fund, Inc. Fund, Inc.
1995 1994 1995 1994
Operations
<S> <C> <C> <C> <C>
Net investment income....................... $ 1,419,736 $ 749,475 $ 1,790,567 $1,135,608
Net realized gain (loss) from investment transactions 1,509,204 754,708 (178,683) (105,044)
Net increase (decrease) in unrealized appreciation/
depreciation on investments and translation of
assets and liabilities in foreign currencies .. 4,627,533 (2,010,252) 3,151,543 (1,416,499)
Net Increase (Decrease) in Net Assets
Resulting from Operations 7,556,473 (506,069) 4,763,427 (385,935)
Dividends and Distributions to Shareholders
From net investment income.................. (1,419,914) (742,989) (1,807,251) (1,129,640)
From net realized gain on investments and foreign
currency transactions................. (1,126,793) (359,204) - -
Excess distribution of net realized gain on
investments (Note 1)................... - - - -
(2,546,707) (1,102,193) (1,807,251) (1,129,640)
Capital Share Transactions (Note 5)
Shares sold................................. 18,469,155 4,652,236 15,942,301 3,317,198
Shares issued in reinvestment of dividends
and distributions...................... 1,530,787 1,102,194 1,815,744 1,129,640
Shares redeemed............................. (4,649,589) (501,945) (1,944,884) (209,853)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 15,350,353 5,252,485 15,813,161 4,236,985
Total Increase (Decrease) 20,360,119 3,644,223 18,769,337 2,721,410
Net Assets
Beginning of period......................... 25,043,207 21,398,984 17,108,322 14,386,912
End of period (including undistributed net
investment income as set forth below).. $45,403,326 $25,043,207 $35,877,659 $ 17,108,322
Undistributed Net Investment Income......... $ 11,765 $ 11,943 $ - $ 16,684
(a) Period from May 23, 1994 (date operations
commenced) through December 31, 1994.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL
CAPITAL ACCUMULATION
FUND, INC.
1995 1994
Operations
<S> <C> <C>
Net investment income....................... $ 2,706,864 $ 3,083,195
Net realized gain (loss) from investment transactions 11,294,865 3,704,610
Net increase (decrease) in unrealized appreciation/
depreciation on investments and translation of
assets and liabilities in foreign currencies. 19,225,574 (5,902,482)
Net Increase (Decrease) in Net Assets
Resulting from Operations 33,227,303 885,323
Dividends and Distributions to Shareholders
From net investment income.................. (2,707,756) (3,039,878)
From net realized gain on investments and foreign
currency transactions................. (10,552,706) (3,606,801)
Excess distribution of net realized gain on
investments (Note 1)................... - -
(13,260,462) (6,646,679)
Capital Share Transactions (Note 5)
Shares sold................................. 38,113,651 33,765,050
Shares issued in reinvestment of dividends
and distributions...................... 13,137,194 6,592,055
Shares redeemed............................. (56,149,805) (42,538,618)
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (4,898,960) (2,181,513)
Total Increase (Decrease) 15,067,881 (7,942,869)
Net Assets
Beginning of period......................... 120,571,799 128,514,668
End of period (including undistributed net
investment income as set forth below).. $135,639,680 $120,571,799
Undistributed Net Investment Income......... $ 59,419 $ 60,311
(a) Period from May 23, 1994 (date operations commenced)
through December 31, 1994.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Principal Principal
Emerging Growth Government Securities
Fund, Inc. Fund, Inc.
1995 1994 1995 1994
Operations
<S> <C> <C> <C> <C>
Net investment income........................................ $ 502,095 $ 166,792 $ 2,727,198 $ 2,755,820
Net realized gain (loss) from investment transactions........ 1,202,668 677,550 (41,117) (674,721)
Net realized gain (loss) from foreign currency transactions.. - - - -
Net increase (decrease) in unrealized appreciation/depreciation
on investments and translation of assets and
liabilities in foreign currencies....................... 8,417,614 (716,715) 4,199,844 (3,960,440)
Net Increase (Decrease) in Net Assets Resulting from Operations 10,122,377 127,627 6,885,925 (1,879,341)
Dividends and Distributions to Shareholders
From net investment income................................... (496,559) (165,538) (2,764,369) (2,694,877)
Excess distribution of net investment income (Note 1)........ - - - -
From net realized gain on investments and foreign currency
transactions (473,643) (824,006) - -
(970,202) (989,544) (2,764,369) (2,694,877)
Capital Share Transactions (Note 5)
Shares sold.................................................. 33,010,562 12,744,993 24,755,653 20,568,925
Shares issued in reinvestment of dividends
and distributions...................................... 825,122 989,544 2,708,209 2,626,308
Shares redeemed.............................................. (8,379,384) (1,148,919) (17,627,312) (19,158,954)
Net Increase in Net Assets from
Capital Shares Transactions 25,456,300 12,585,618 9,836,550 4,036,279
Total Increase (Decrease) 34,608,475 11,723,701 13,958,106 (537,939)
Net Assets
Beginning of period.......................................... 23,911,965 12,188,264 36,121,363 36,659,302
End of period (including undistributed (overdistributed) net
investment income as set forth below)................... $58,520,440 $23,911,965 $50,079,469 $36,121,363
Undistributed (Overdistributed) Net Investment Income........ $ 6,354 $ 1,353 $ 16,895 $ 79,009
(b) Period from March 23, 1994 (date operations
commenced) through December 31, 1994.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Principal Principal
Growth High Yield
Fund, Inc. Fund, Inc.
1995 1994(b) 1995 1994
Operations
<S> <C> <C> <C> <C>
Net investment income........................................ $ 572,297 $ 107,760 $ 976,414 $ 862,613
Net realized gain (loss) from investment transactions........ 298,608 (8) (49,300) (113,805)
Net realized gain (loss) from foreign currency transactions.. - - - -
Net increase (decrease) in unrealized appreciation/depreciation
on investments and translation of assets and
liabilities in foreign currencies....................... 5,280,826 1,299 664,483 (691,913)
Net Increase (Decrease) in Net Assets Resulting from Operations 6,151,731 109,051 1,591,597 56,895
Dividends and Distributions to Shareholders
From net investment income................................... (566,536) (107,760) (991,915) (854,622)
Excess distribution of net investment income (Note 1)........ - (199) (25,104) -
From net realized gain on investments and foreign currency
transactions (294,742) - - -
(861,278) (107,959) (1,017,019) (854,622)
Capital Share Transactions (Note 5)
Shares sold.................................................. 29,355,706 13,353,752 673,188 120,658
Shares issued in reinvestment of dividends
and distributions...................................... 753,669 107,959 1,017,019 854,623
Shares redeemed.............................................. (5,778,425) (376,685) (131,664) (56,349)
Net Increase in Net Assets from
Capital Shares Transactions 24,330,950 13,085,026 1,558,543 918,932
Total Increase (Decrease) 29,621,403 13,086,118 2,133,121 121,205
Net Assets
Beginning of period.......................................... 13,086,118 - 9,696,812 9,575,607
End of period (including undistributed (overdistributed) net
investment income as set forth below)................... $42,707,521 $13,086,118 $11,829,933 $9,696,812
Undistributed (Overdistributed) Net Investment Income........ $ 5,761 $ - $ (25,104) $ 16,274
(b) Period from March 23, 1994 (date operations
commenced) through December 31, 1994.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Except as Noted
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Principal Principal
Money Market World
Fund, Inc. Fund, Inc.
1995 1994 1995 1994(b)
Operations
<S> <C> <C> <C> <C>
Net investment income........................................ $ 1,502,142 $ 958,162 $ 519,182 $ 74,661
Net realized gain (loss) from investment transactions........ - - 174,169 8,912
Net realized gain (loss) from foreign currency transactions.. - - (5,526) 14,084
Net increase (decrease) in unrealized appreciation/depreciation
on investments and translation of assets and
liabilities in foreign currencies....................... - - 2,574,265 (526,792)
Net Increase (Decrease) in Net Assets Resulting from Operations 1,502,142 958,162 3,262,090 (429,135)
Dividends and Distributions to Shareholders
From net investment income................................... (1,502,142) (958,162) (506,808) (74,661)
Excess distribution of net investment income (Note 1)........ - - - (25,968)
From net realized gain on investments and foreign currency
transactions - - (23,834) (4,568)
(1,502,142) (958,162) (530,642) (105,197)
Capital Share Transactions (Note 5)
Shares sold.................................................. 94,151,329 73,870,425 15,630,379 14,270,677
Shares issued in reinvestment of dividends
and distributions...................................... 1,130,170 706,556 530,642 105,196
Shares redeemed.............................................. (91,983,464) (67,958,011) (2,072,943) (95,447)
Net Increase in Net Assets from
Capital Shares Transactions 3,298,035 6,618,970 14,088,078 14,280,426
Total Increase (Decrease) 3,298,035 6,618,970 16,819,526 13,746,094
Net Assets
Beginning of period.......................................... 29,371,884 22,752,914 13,746,094 -
End of period (including undistributed (overdistributed) net
investment income as set forth below)................... $32,669,919 $29,371,884 $30,565,620 $13,746,094
Undistributed (Overdistributed) Net Investment Income........ $ - $ - $ 12,505 $ (11,884)
(b) Period from March 23, 1994 (date operations
commenced) through December 31, 1994.
See accompanying notes.
</TABLE>
<PAGE>
December 31, 1995
NOTES TO FINANCIAL STATEMENTS
Principal Aggressive Growth Fund, Inc.
Principal Asset Allocation Fund, Inc.
Principal Balanced Fund, Inc.
Principal Bond Fund, Inc.
Principal Capital Accumulation Fund, Inc.
Principal Emerging Growth Fund, Inc.
Principal Government Securities Fund, Inc.
Principal Growth Fund, Inc.
Principal High Yield Fund, Inc.
Principal Money Market Fund, Inc.
Principal World Fund, Inc.
Note 1 - Significant Accounting Policies
Principal Aggressive Growth Fund, Inc., Principal Asset Allocation Fund, Inc.,
Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal High
Yield Fund, Inc., Principal Money Market Fund, Inc. and Principal World Fund,
Inc. (the "Funds") are registered under the Investment Company Act of 1940, as
amended, as open-end diversified management investment companies and operate in
the mutual fund industry.
On March 23, 1994, the initial purchases of 500,000 shares of Capital Stock of
the Principal Growth Fund, Inc. and 500,000 shares of Capital Stock of the
Principal World Fund, Inc. were made by Principal Mutual Life Insurance Company.
On May 23, 1994, the initial purchases of 1,000,000 shares of Capital Stock of
the Principal Aggressive Growth Fund, Inc. and 2,500,000 shares of Capital Stock
of the Principal Asset Allocation Fund, Inc. were made by Principal Mutual Life
Insurance Company (see Note 3).
Principal Money Market Fund, Inc. values its securities at amortized cost, which
approximates market. Under the amortized cost method, a security is valued by
applying a constant amortization to maturity of the difference between the
principal amount due at maturity and the cost of the security to the fund.
The other funds value securities for which market quotations are readily
available at market value, which is determined using the last reported sale
price or, if no sales are reported, as is regularly the case for some securities
traded over-the-counter, the last reported bid price. When reliable market
quotations are not considered to be readily available, which may be the case,
for example, with respect to certain debt securities and preferred stocks, the
investments are valued by using market quotations, prices provided by market
makers or estimates of market values obtained from yield data and other factors
relating to instruments or securities with similar characteristics in accordance
with procedures established in good faith by each fund's Board of Directors.
Securities with remaining maturities of 60 days or less are valued at amortized
cost, which approximates market.
With respect to Principal World Fund, Inc., the value of foreign securities in
foreign currency amounts is expressed in U.S. dollars at the closing daily rate
of exchange. The identified cost of the portfolio holdings is translated at
approximate rates prevailing when acquired. Income and expense amounts are
translated at approximate rates prevailing when received or paid, with daily
accruals of such amounts reported at approximate rates prevailing at the date of
valuation.
Since the carrying amount of the foreign securities in the Principal World Fund,
Inc. is determined based on the exchange rate and market values at the close of
the period, it is not practicable to isolate that portion of the results of
operations arising as a result of changes in the foreign exchange rates from the
fluctuations arising from changes in the market prices of securities during the
period.
The Funds record investment transactions generally one day after the trade date.
The identified cost basis has been used in determining the net realized gain or
loss from investment transactions and unrealized appreciation or depreciation of
investments. Dividends are taken into income on an accrual basis as of the
ex-dividend date and interest income is recognized on an accrual basis.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amount of dividends and foreign withholding taxes recorded on the fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
With respect to Principal Money Market Fund, Inc., all net investment income and
any realized gains and losses from investment transactions are declared as
dividends daily to shareholders of record as of that day. Dividends and
distributions to shareholders of the other funds are recorded on the ex-dividend
date.
Dividends and distributions to shareholders from net investment income and net
realized gain from investment and foreign currency transactions is determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. To the extent these "book/tax" differences are
permanent in nature (i.e. that they result from other than timing of recognition
- - "temporary"), such amounts are reclassified within the capital accounts based
on their federal tax-basis treatment; temporary differences do not require
reclassification. Reclassifications made for the years ended December 31, 1995
and 1994 were not material.
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains (losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains (losses) are recorded for
financial statement purposes by the fund. The differences between the income and
gains distributed on a book versus tax basis are shown as excess distributions
of net investment income and net realized gain on investments in the
accompanying Statements of Changes in Net Assets.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Federal Income Taxes
No provision for federal income taxes is considered necessary because each fund
is qualified as a "regulated investment company" under the Internal Revenue Code
and intends to distribute each year, substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
approximately the same for both federal income tax and financial reporting
purposes.
At December 31, 1995, Principal Bond Fund, Inc. had a net capital loss
carryforward of approximately $297,000 expiring in 1999 through 2004. Principal
Government Securities Fund, Inc. had a net capital loss carryforward of
approximately $716,000 expiring in 2002 and 2003. Principal High Yield Fund,
Inc. had a net capital loss carryforward of approximately $1,206,000 expiring in
1997 through 2004.
Note 3 - Management Agreement and Transactions With Affiliates
The Funds have agreed to pay investment advisory and management fees to Princor
Management Corporation (wholly owned by Princor Financial Services Corporation,
a subsidiary of Principal Mutual Life Insurance Company) (the "Manager"),
computed at an annual percentage rate of each fund's average daily net assets.
The annual rate used in this calculation for Principal Bond Fund, Inc.,
Principal Capital Accumulation Fund, Inc., Principal Government Securities Fund,
Inc., Principal Growth Fund, Inc. and Principal Money Market Fund, Inc. is .50%
of the first $100 million of the fund's average daily net assets and .45% of the
next $100 million of the fund's average daily net assets. The annual rate used
in this calculation for Principal Asset Allocation Fund, Inc. and Principal
Aggressive Growth Fund, Inc. is .80% of the first $100 million of the fund's
average daily net assets. With respect to Principal Balanced Fund, Inc. and
Principal High Yield Fund, Inc., the annual rate used in this calculation is
.60% of the first $100 million of the fund's average daily net assets. With
respect to Principal Emerging Growth Fund, Inc. and Principal World Fund, Inc.,
the annual rate used in this calculation is .65% and .75%, respectively, of the
first $100 million of the fund's average daily net assets.
Brokerage commissions were paid to affiliates by certain of the funds, as
follows:
Year Ended Year Ended
December 31, December 31,
1995 1994
Principal Balanced Fund, Inc. $ 219 $ 669
Principal Capital Accumulation
Fund, Inc. 3,885 8,243
Principal Emerging Growth
Fund, Inc. 910 357
Principal Growth Fund, Inc. 4,252 632
Principal World Fund, Inc. 2,207 -
All of the shares of the Funds are owned by Principal Mutual Life Insurance
Company and/or one or more Separate Accounts sponsored by Principal Mutual Life
Insurance Company.
Note 4 - Investment Transactions
For the year ended December 31, 1995, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Funds were as follows:
Purchases Sales
Principal Aggressive Growth Fund, Inc. $47,132,569 $35,553,552
Principal Asset Allocation Fund, Inc. 17,840,056 14,515,105
Principal Balanced Fund, Inc. 10,450,120 6,649,589
Principal Bond Fund, Inc. 15,684,250 1,364,080
Principal Capital Accumulation Fund, Inc. 57,328,669 71,739,432
Principal Emerging Growth Fund, Inc. 27,041,960 4,585,280
Principal Government Securities Fund, Inc. 10,622,207 3,096,381
Principal Growth Fund, Inc. 29,143,961 1,567,901
Principal High Yield Fund, Inc. 5,276,816 3,539,464
Principal World Fund, Inc. 18,300,514 3,049,748
At December 31, 1995, net unrealized appreciation of investments held by
the Funds was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Appreciation
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
Principal Aggressive Growth Fund, Inc. $ 3,213,961 $ (515,915) $ 2,698,046
Principal Asset Allocation Fund, Inc. 3,913,777 (1,037,129) 2,876,648
Principal Balanced Fund, Inc. 6,281,111 (525,667) 5,755,444
Principal Bond Fund, Inc. 2,638,218 (2,859) 2,635,359
Principal Capital Accumulation Fund, Inc. 28,143,974 (2,719,638) 25,424,336
Principal Emerging Growth Fund, Inc. 13,876,605 (1,508,056) 12,368,549
Principal Government Securities Fund, Inc. 2,263,134 (63,676) 2,199,458
Principal Growth Fund, Inc. 6,432,155 (1,150,030) 5,282,125
Principal High Yield Fund, Inc. 466,848 (225,181) 241,667
Principal World Fund, Inc. 3,485,222 (1,438,228) 2,046,994
</TABLE>
Principal Government Securities Fund, Inc. may trade portfolio securities on a
"to-be-announced" (TBA) basis. In a TBA transaction, the fund commits to
purchase or sell securities for which all specific information is not known at
the time of the trade. Securities purchased on a TBA basis are not settled until
they are delivered to the fund, normally 15 to 30 days later. These transactions
are subject to market fluctuations and their current value is determined in the
same manner as for other portfolio securities. As of December 31, 1995, TBA
purchase commitments involved securities with a face amount of $1,000,000, cost
of $964,688 and market value of $967,510. Principal Government Securities Fund,
Inc. has set aside investment securities and other assets in excess of the
commitments to serve as collateral.
At December 31, 1995, Principal Asset Allocation Fund, Inc., Principal Balanced
Fund, Inc., Principal Emerging Growth Fund, Inc., Principal High Yield Fund,
Inc. and Principal World Fund, Inc. held the following securities which may
require registration under the Securities Act of 1933 or an exemption therefrom
in order to effect a sale in the ordinary course of business.
<TABLE>
<CAPTION>
Value at Value as a
Date of Dec. 31, Percentage of
Fund Security Description Acquisition Cost 1995 Net Assets
<S> <C> <C> <C> <C>
Principal Asset
Allocation Fund, Inc. Telebras GDR 9/14/94 $ 1,012 $ 853 .00%
HMC Acquisition Properties;
Senior Notes 12/15/95 200,000 200,000 .49%
200,853 .49%
Principal Balanced Federal-Mogul Corp.; Series D
Fund, Inc. Convertible 10/15/92 248,325 258,538 .57%
Principal Emerging Ciba-Geigy Corp.; Exchangeable
Growth Fund, Inc. Subordinated Debentures 3/20/91 150,000 151,500 .26%
Sierra On Line; Convertible
Subordinated Debentures 8/17/94 100,375 225,087 .38%
376,587 .64%
Principal High Yield California Energy Casecnan
Fund, Inc. Water & Energy Co., Inc.;
Senior Secured Series B 11/21/95 300,000 303,000 2.56%
Continental Cablevision, Inc.;
Senior Notes 12/8/95 299,037 300,000 2.54%
Howmet Corp.; Senior
Subordinated Notes 11/22/95 150,000 157,500 1.33%
760,500 6.43%
Principal World
Fund, Inc. Alfa SA; Convertible
Subordinated Debentures 9/25/95 398,000 392,000 1.28%
Koninklijke KNP BT NV 3/7/95 91,891 71,966 .25%
3/29/95 46,567 41,123 .13%
Royal Plastics Group 11/23/94 41,703 73,854 .24%
9/25/95 132,960 144,812 .47%
Voest-Alpine Stahl 10/30/95 280,007 264,025 .86%
</TABLE>
The Fund's investments are with various issuers in various industries. The
Schedules of Investments contained herein summarize concentrations of credit
risk by industry and issuer except for Principal World Fund, Inc. which is
summarized by country, industry and issuer.
Note 5 - Capital Share Transactions
Transactions in Capital Stock by fund were as follows:
<TABLE>
<CAPTION>
Principal Aggressive Principal Asset Principal Balanced
Growth Fund, Inc. Allocation Fund, Inc. Fund, Inc.
Year Ended December 31, 1995:
<S> <C> <C> <C>
Shares sold................................... 1,161,931 692,541 1,392,999
Shares issued in reinvestment of
dividends and distributions.................. 287,452 219,390 115,881
Shares redeemed............................... (211,535) (78,261) (354,061)
Net Increase 1,237,848 833,670 1,154,819
Period Ended December 31, 1994:(1)
Shares sold................................... 1,352,371 2,796,023 368,768
Shares issued in reinvestment of
dividends and distributions.................. 13,058 68,953 91,841
Shares redeemed............................... (3,861) (774) (39,693)
Net Increase 1,361,568 2,864,202 420,916
(1)Principal Aggressive Growth Fund, Inc. and Principal Asset Allocation
Fund, Inc., period from May 23, 1994 (date operations commenced) through
December 31, 1994.
</TABLE>
<TABLE>
<CAPTION>
Principal Principal Capital Principal Emerging
Bond Fund, Inc. Accumulation Fund, Inc. Growth Fund, Inc.
Year Ended December 31, 1995:
<S> <C> <C> <C>
Shares sold................................... 1,388,036 1,462,128 1,443,488
Shares issued in reinvestment of
dividends and distributions.................. 155,537 493,432 32,984
Shares redeemed............................... (174,815) (2,220,452) (363,945)
Net Increase (Decrease) 1,368,758 (264,892) 1,112,527
Year Ended December 31, 1994:
Shares sold................................... 308,755 1,381,360 618,438
Shares issued in reinvestment of
dividends and distributions.................. 111,513 275,405 49,050
Shares redeemed............................... (19,236) (1,735,373) (56,074)
Net Increase (Decrease) 401,032 (78,608) 611,414
</TABLE>
<TABLE>
<CAPTION>
Principal Government Principal Growth Principal High
Securities Fund, Inc. Fund, Inc. Yield Fund, Inc.
Year Ended December 31, 1995:
<S> <C> <C> <C>
Shares sold................................... 2,389,165 2,597,297 77,400
Shares issued in reinvestment of
dividends and distributions.................. 258,394 61,037 121,455
Shares redeemed............................... (1,752,028) (517,157) (15,228)
Net Increase 895,531 2,141,177 183,627
Period Ended December 31, 1994:(2)
Shares sold................................... 1,999,929 1,322,072 14,057
Shares issued in reinvestment of
dividends and distributions.................. 279,684 10,689 107,934
Shares redeemed............................... (1,881,876) (36,843) (6,581)
Net Increase 397,737 1,295,918 115,410
(2)Principal Growth Fund, Inc., period from March 23, 1994 (date operations
commenced) through December 31, 1994.
</TABLE>
<TABLE>
<CAPTION>
Principal Money Principal World
Market Fund, Inc. Fund, Inc.
Year Ended December 31, 1995:
<S> <C> <C>
Shares sold................................... 94,151,329 1,566,265
Shares issued in reinvestment of
dividends and distributions.................. 1,130,170 49,808
Shares redeemed............................... (91,983,464) (202,182)
Net Increase 3,298,035 1,413,891
Period Ended December 31, 1994:(3)
Shares sold................................... 73,870,425 1,437,009
Shares issued in reinvestment of
dividends and distributions.................. 706,556 11,004
Shares redeemed............................... (67,958,011) (9,652)
Net Increase 6,618,970 1,438,361
(3)Principal World Fund, Inc., period from March 23, 1994 (date operations
commenced) through December 31, 1994.
</TABLE>
Note 6 - Line of Credit
The Funds have an unsecured line of credit with a bank which allows each
fund to borrow up to $500,000. Borrowings are made solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements. Interest
is charged to each fund, based on its borrowings, at a rate equal to the bank's
Fed Funds Unsecured Rate plus 100 basis points. Additionally, a commitment fee
is charged at the annual rate of .25% on the line of credit. At December 31,
1995, the Funds had no outstanding borrowings under the line of credit.
<PAGE>
December 31, 1995
SCHEDULES OF INVESTMENTS
PRINCIPAL AGGRESSIVE GROWTH FUND, INC.
Shares
Held Value
Common Stocks (93.20%)
Agricultural Chemicals (0.44%)
IMC Global Group, Inc. 3,600 $ 147,150
Air Transportation, Scheduled (0.86%)
AMR Corp. 2,000(a) 148,500
USAir Group, Inc. 10,600(a) 140,450
288,950
Aircraft & Parts (8.48%)
Boeing Co. 3,700 289,988
Lockheed Martin Corp. 2,300 181,700
McDonnell Douglas Corp. 7,300 671,600
Sunstrand Corp. 8,900 626,337
Textron, Inc. 4,800 324,000
United Technologies Corp. 8,000 759,000
2,852,625
Auto & Home Supply Stores (1.08%)
Autozone, Inc. 12,600(a) 363,825
Bakery Products (0.29%)
Interstate Bakeries 4,400 98,450
Beverages (1.14%)
Coca-Cola Enterprises 14,300 382,525
Commercial Banks (9.68%)
Chase Manhattan Bank Corp. 4,600 278,875
Citicorp 5,900 396,775
First Interstate Bancorp. 5,800 791,700
J. P. Morgan & Co. 4,400 353,100
Wells Fargo & Co. 6,650 1,436,400
3,256,850
Computer & Data Processing
Services (2.82%)
First Data Corp. 4,700 314,313
Microsoft Corp. 3,900(a) 342,225
Oracle Systems Corp. 6,900(a) 292,387
948,925
Computer & Office Equipment (4.17%)
Bell & Howell Holdings 3,300(a) 92,400
Cisco Systems 2,700(a) 201,487
Hewlett-Packard Co. 4,000 335,000
International Business
Machines Corp. 5,900 541,325
Seagate Technology Co. 4,900(a) 232,750
1,402,962
Consumer Products (10.27%)
Philip Morris Cos., Inc. 33,500 3,031,750
RJR Nabisco 13,700 422,987
3,454,737
Department Stores (0.81%)
Harcourt General, Inc. 6,500 272,188
Drugs (3.26%)
American Home Products Corp. 3,300 320,100
Pfizer, Inc. 5,900 371,700
Schering-Plough Corp. 7,400 405,150
1,096,950
Eating & Drinking Places (0.55%)
Boston Chicken, Inc. 5,800(a) 186,325
Electronic Components &
Accessories (1.92%)
Intel Corp. 4,100 $ 232,675
Logic Corp. 5,700(a) 186,675
Texas Instruments 4,400 227,700
647,050
Federal & Federally Sponsored
Credit (3.85%)
Federal Home Loan Mortgage Corp. 4,800 400,800
Federal National Mortgage
Association 4,600 570,975
Student Loan Marketing Association
(non-voting) 4,900 322,787
1,294,562
Finance Services (2.35%)
Loews Corp. 10,100 791,587
Fire, Marine, & Casualty
Insurance (1.70%)
Aetna Life & Casualty Co. 3,600 249,300
Cigna Corp. 2,600 268,450
GCR Holdings Limited 2,400(a) 54,000
571,750
Grain Mill Products (1.62%)
Kellogg Co. 4,000 309,000
Ralston-Ralston Purina Group 3,800 237,025
546,025
Hospitals (1.03%)
Columbia/HCA Healthcare Corp. 6,800 345,100
Hotels & Motels (0.77%)
La Quinta Motor Inns 8,000 219,000
Trump Hotels & Casinos 1,800(a) 38,700
257,700
Industrial Inorganic Chemicals (1.40%)
Monsanto Co. 1,900 232,750
Olin Corp. 3,200 237,600
470,350
Industrial Machinery, NEC (0.99%)
Applied Materials, Inc. 8,500(a) 334,688
Insurance Agents, Brokers, &
Services (1.47%)
Exel Ltd. 8,100 494,100
Life Insurance (0.19%)
The Guarantee Life Co. 4,000(a) 63,000
Lumber & Other Building
Materials (0.94%)
Home Depot, Inc. 6,600 315,975
Manifold Business Forms (0.62%)
Reynolds & Reynolds 5,400 209,925
Medical Service & Health
Insurance (1.31%)
United Healthcare Corp. 2,800 183,400
U.S. HealthCare, Inc. 5,500 255,750
439,150
Miscellaneous Business Services (0.82%)
CUC International, Inc. 8,050 274,706
Miscellaneous Electrical Equipment &
Supplies (0.66%)
Motorola, Inc. 3,900 $ 222,300
Miscellaneous Food Stores (1.18%)
General Nutrition Cos. 17,300 397,900
Miscellaneous Investing (1.92%)
HFS, Inc. 7,900(a) 645,825
Motion Picture Production &
Services (0.95%)
Walt Disney Productions 5,400 318,600
Motion Picture Theaters (0.31%)
AMC Entertainment 4,500(a) 105,188
Newspapers (1.68%)
Gannett Co. 6,100 374,387
New York Times Co. 6,400 189,600
563,987
Nonstore Retailers (0.55%)
AMRE Inc. 12,600 184,275
Periodicals (1.16%)
K III Communications 32,300(a) 391,638
Personal Credit Institutions (2.49%)
Dean Witter, Discover & Co. 8,000 376,000
Household International Corp. 7,800 461,175
837,175
Photographic Equipment &
Supplies (0.91%)
Eastman Kodak Co. 4,550 304,850
Plastic Materials & Synthetics (0.90%)
Hercules, Inc. 5,400 304,425
Primary Nonferrous Metals (0.47%)
Aluminum Co. of America 3,000 158,625
Radio, Television & Computer
Stores (0.32%)
Tandy Corp. 2,600 107,900
Radio & Television
Broadcasting (1.49%)
Infinity Broadcasting 8,400(a) 312,900
New World Communications 10,700(a) 187,250
500,150
Refrigeration & Service
Machinery (1.24%)
American Standard, Inc. 14,900 417,200
Retail Stores, NEC (0.29%)
PETsMART Inc. 3,200(a) 99,200
Rubber & Plastics Footwear (0.46%)
Nike, Inc. 1,400 97,475
Reebok International Ltd. 2,000 56,500
153,975
Search & Navigation Equipment (1.29%)
Litton Industries, Inc. 1,500(a) 66,750
Watkins Johnson Co. 8,400 367,500
434,250
Security & Commodity Services (0.82%)
Franklin Resources, Inc. 5,500 $ 277,063
Security Brokers & Dealers (2.84%)
American Express Co. 23,100 955,762
Ship & Boat Building &
Repairing (0.51%)
General Dynamics Corp. 2,900 171,463
Sugar & Confectionary
Products (0.84%)
Wrigley, (Wm.) Jr. Co. 5,400 283,500
Surety Insurance (0.76%)
Ace Ltd. 6,400 254,400
Telephone Communication (2.33%)
AT&T Corp. 5,300 343,175
Airtouch Communications, Inc. 4,900(a) 138,425
MCI Communications Corp. 11,600 303,050
784,650
Tires & Inner Tubes (0.96%)
Goodyear Tire & Rubber Co. 7,100 322,163
Toys & Sporting Goods (0.27%)
Toy Biz, Inc. 4,200(a) 91,350
Video Tape Rental (0.77%)
Viacom Inc., Class B 5,491(a) 260,136
Total Portfolio Investments (93.20%) 31,356,080
Cash and receivables, net of liabilities (6.80%) 2,286,861
Total Net Assets (100.00%) $33,642,941
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL ASSET ALLOCATION FUND, INC.
Shares
Held Value
Common Stocks (53.00%)
Aerospace Industries (0.48%)
Gencorp, Inc. 4,800 $ 58,800
Rockwell International Corp. 1,500 79,312
Thiokol Corp. 1,700 57,588
195,700
Agricultural Chemicals (0.10%)
IMC Global Group, Inc. 1,000 40,875
Air Transportation, Scheduled (0.93%)
AMR Corp. 1,200(a) 89,100
Airborne Freight Corp. 2,500 66,563
British Airways PLC ADR 1,400 101,850
Cathay Pacific Airways ADR 8,500 64,860
SkyWest Airlines, Inc. 2,700 34,762
USAir Group, Inc. 1,700(a) 22,525
379,660
Aircraft & Parts (1.32%)
Boeing Co. 800 $ 62,700
Lockheed Martin Corp. 600 47,400
McDonnell Douglas Corp. 2,500 230,000
Sunstrand Corp. 1,800 126,675
United Technologies Corp. 800 75,900
542,675
Auto & Home Supply Stores (0.21%)
Autozone, Inc. 3,000(a) 86,625
Automotive Rentals,
No Drivers (0.17%)
Ryder Systems, Inc. 2,800 69,300
Bakery Products (0.04%)
Interstate Bakeries 700 15,662
Bituminous Coal &
Lignite Mining (0.11%)
Ashland Coal, Inc. 2,000 42,750
Beverages (0.98%)
Bass PLC ADR 5,000 111,250
Coca-Cola Enterprises 2,800 74,900
Coors (Adolph); Class B 3,200 70,800
Kirin Brewery 1,200 143,400
400,350
Blast Furnace & Basic Steel
Products (0.48%)
Acesita-Cia Acos Especiais
Itabira ADR 2,260 23,648
Australian National Industries 8,960 26,660
Birmingham Steel 3,800 56,525
British Steel PLC ADS 3,500 89,687
196,520
Bowling Centers (0.31%)
Meija Seika Kaisha Ltd. ADR 2,100 126,629
Broadwoven Fabric Mills,
Cotton (0.15%)
Springs Industries, Inc. 1,500 62,062
Chemicals & Allied Products (0.67%)
Aceto, Inc. 4,400 70,400
Bayer AG Sponsored ADR 3,300 87,268
Ciba-Geigy Sponsored ADR 2,700 119,085
276,753
Cogeneration - Small Power
Producer (0.13%)
Zurn Industries 2,500 53,437
Combination Utility Services (0.86%)
Central Hudson Gas & Electric Corp. 1,900 58,663
Commonwealth Energy Systems 1,500 67,125
NIPSCO Industries, Inc. 2,550 97,537
Orange & Rockland Utilities, Inc. 1,700 60,775
Washington Water Power Co. 4,000 70,000
354,100
Commercial Banks (5.21%)
ABN-AMRO Holdings NV ADR 2,600 $ 118,566
Allied Irish Banks ADR 2,900 94,250
Banco Central ADR 6,500 65,812
Banco Fraces Del Rio De La Plata 2,875 77,266
BankAmerica Corp. 1,050 67,988
Banker's Trust 1,150 76,475
Brierly Investments Ltd. ADR 5,550 87,805
Chase Manhattan Bank Corp. 900 54,562
Chemical Banking Corp. 1,400 82,250
Citicorp 1,600 107,600
Commerzbank AG ADR 1,800 85,267
Finova Group, Inc. 1,400 67,550
First of America Bank Corp. 1,800 79,875
First Security Corp. 1,800 69,300
HSBC Holdings ADR 600 90,792
Mellon Bank Corp. 1,300 69,875
National Westminster ADR 1,900 115,425
Onbankcorp, Inc. 1,800 60,075
PNC Financial Corp. 2,600 83,850
Peoples Heritage Financial
Group, Inc. 2,400 54,600
Summit Bancorp. 80 2,520
Trustmark Corp. 3,200 72,800
Union Planter's Corp. 2,000 63,750
Wells Fargo & Co. 1,300 280,800
Westpac Banking ADR 4,900 110,250
2,139,303
Commercial Printing (0.17%)
Bowne & Co., Inc. 3,500 70,000
Communications Equipment (0.52%)
Alcatel Alsthom ADR 4,700 82,250
Hanson PLC ADR 3,850 58,712
Harris Corp. 1,350 73,744
214,706
Communications Services,
NEC (0.15%)
Comsat Corp. 3,200 59,600
Computer & Data Processing
Services (0.43%)
First Data Corp. 900 60,188
Microsoft Corp. 700(a) 61,425
Oracle Systems Corp. 1,300(a) 55,087
176,700
Computer & Office Equipment (1.25%)
Apple Computer, Inc. 1,800 57,375
Bell & Howell Holdings 600(a) 16,800
Cisco Systems 500(a) 37,313
Hewlett-Packard Co. 900 75,375
Hitachi Ltd. ADR 1,300 130,650
International Business
Machines Corp. 1,000 91,750
National Computer Systems, Inc. 3,000 56,625
Seagate Technology Co. 1,000(a) 47,500
513,388
Concrete, Gypsum & Plaster
Products (0.36%)
Ameron, Inc. 1,900 71,488
Italcementi Fabriche S P A ADR 13,000 77,849
149,337
Concrete Work (0.16%)
Pioneer International Ltd. ADR 25,000 $ 64,530
Construction & Related
Machinery (0.15%)
Cascade Corp. 4,400 61,600
Consumer Products (1.58%)
American Brands, Inc. 1,800 80,325
Philip Morris Cos., Inc. 6,300 570,150
650,475
Crude Petroleum &
Natural Gas (0.76%)
Broken Hill Proprietary Ltd. ADR 1,100 62,150
Petrofina SA ADR 2,900 88,786
Societe Generale ADR 3,600 89,073
Texaco, Inc. 900 70,650
310,659
Cutlery, Handtools &
Hardware (0.17%)
Starrett (L.S.); Class A 2,700 69,862
Deep Sea Foreign Transportation
of Freight (0.12%)
Overseas Shipholding Group, Inc. 2,700 51,300
Department Stores (0.69%)
Harcourt General, Inc. 1,200 50,250
Marui Corp. ADR 3,800 158,407
J. C. Penney 1,600 76,200
284,857
Dimension Stone (0.19%)
English China Clays ADR 5,300 79,500
Drugs (1.16%)
Baxter International, Inc. 1,900 79,563
Hafslund Nycomed ADR 4,400 115,500
Novo Nordisk ADR 3,200 108,800
Pfizer, Inc. 1,800 113,400
Schering-Plough Corp. 1,100 60,225
477,488
Drugs, Proprietaries &
Sundries (0.70%)
Amway Japan Lrd ADS 7,000 146,125
Bergen Brunswig 2,700 67,163
Bindley Western Industries, Inc. 4,300 73,100
286,388
Eating & Drinking Places (0.35%)
Boston Chicken, Inc. 1,000(a) 32,125
Piccadilly Cafeterias 6,000 57,000
Sbarro, Inc. 2,500 53,750
142,875
Electric Light & Wiring
Equipment (0.17%)
National Service Industries 2,100 67,987
Electric Services (1.47%)
EVN Energie-Vansorgung Nied ADR 3,000 82,520
Empresa Nacional De Electricidad
SA ADR 1,400 80,150
General Public Utilities Corp. 2,900 98,600
National Power ADR 3,300 92,400
Pinnacle West Capital Corp. 3,400 97,750
Shangdong Huaneng Power
Development Ltd. 8,000 $ 54,000
Texas Utilities Co. 2,400 98,700
604,120
Electronic Components &
Accessories (0.86%)
Aida Engineering Ltd. ADR 800 61,424
Intel Corp. 900 51,075
Logic Corp. 1,300(a) 42,575
Nintendo Ltd. ADR 17,600 167,422
Texas Instruments 800 41,400
363,896
Electronic Distribution
Equipment (0.32%)
Matsushita Electrical ADR 800 131,600
Engineering & Architectural
Services (0.14%)
Gilbert Associates, Inc.; Class A 4,700 58,750
Family Clothing Stores (0.32%)
Ross Stores, Inc. 1,900 36,338
TJX Cos., Inc. 5,000 94,375
130,713
Farm & Garden Machinery (0.20%)
Deere & Co. 2,300 81,075
Federal & Federally Sponsored
Credit (0.70%)
Federal Home Loan Mortgage Corp. 1,100 91,850
Federal National
Mortgage Association 1,000 124,125
Student Loan Marketing Association
(Non-Voting) 1,100 72,462
288,437
Finance Services (0.53%)
Greenpoint Financial Corp. 2,600 69,550
Loews Corp. 1,900 148,913
218,463
Fire Marine & Casualty
Insurance (0.61%)
Argonaut Group, Inc. 1,700 55,250
CIGNA Corp. 500 51,625
GCR Holdings Limited 500(a) 11,250
St. Paul Cos., Inc. 1,300 72,313
Selective Insurance Group, Inc. 1,700 60,350
250,788
Gas Production & Distribution (0.29%)
Eastern Enterprises 1,800 63,450
Oneok, Inc. 2,400 54,900
118,350
General Industrial Machinery (0.44%)
Amer Group Ltd. ADR 5,500 43,004
Binks Mfg. 2,100 49,350
SKF AB ADR 4,500 87,750
180,104
Glass & Glassware, Pressed or
Blown (0.05%)
Vitro Sociedad Anonima ADR 3,960 18,810
Grain Mill Products (0.44%)
Kellogg Co. 1,200 92,700
Ralston-Ralston Purina Group 1,400 87,325
180,025
Groceries & Related Products (0.29%)
Fleming Cos., Inc. 3,450 $ 71,156
Nash Finch Co. 2,600 47,450
118,606
Highway & Street Construction (0.07%)
Emprasas ICA Sociedad Controladora
SA ADR 2,700 27,675
Holding Offices (0.15%)
Jardine Strategic Holdings Ltd.
ADR 10,000 61,200
Hospitals (0.17%)
Columbia/HCA Healthcare Corp. 1,400 71,050
Hotels & Motels (0.34%)
La Quinta Motor Inns 1,700 46,538
Ladbroke Group ADR 37,000 84,156
Trump Hotels & Casinos 400(a) 8,600
139,294
Household Audio & Video
Equipment (0.37%)
Sony Corp. ADR 2,500 153,437
Industrial Inorganic
Chemicals (0.12%)
Monsanto Co. 400 49,000
Industrial Machinery, NEC (0.16%)
Applied Materials, Inc. 1,700(a) 66,937
Industrial Organic Chemicals (0.24%)
Nova Corp. ADR 6,700 53,600
Witco Corp. 1,500 43,875
97,475
Insurance Agents, Brokers &
Services (0.24%)
Exel Ltd. 1,600 97,600
Iron Ores (0.12%)
Cleveland-Cliffs, Inc. 1,200 49,200
Jewelry, Silverware & Plated
Ware (0.15%)
Oneida Ltd. 3,400 59,925
Knitting Mills (0.12%)
Guilford Mills, Inc. 2,500 50,937
Life Insurance (0.40%)
American General Corp. 2,200 76,725
The Guarantee Life Cos., Inc. 200(a) 3,150
Lincoln National Corp. 1,600 86,000
165,875
Logging (0.18%)
Weyerhaeuser Co. 1,700 73,525
Lumber & Other Building
Materials (0.15%)
Home Depot, Inc. 1,300 62,237
Machinery, Equipment &
Supplies (0.24%)
AAR Corp. 2,300 $ 50,600
Kaman Corp.; Class A 4,300 47,837
98,437
Management & Public Relations (0.35%)
Ogden Corp. 6,800 145,350
Manifold Business Forms (0.24%)
New England Business Service 2,800 60,900
Reynolds & Reynolds 1,000 38,875
99,775
Measuring & Controlling Devices (0.77%)
Analogic Corp. 3,000 55,500
Beckman Instruments, Inc. 1,700 60,138
Core Industries 5,600 72,100
Cubic Corp. 2,200 62,700
MTS Systems, Corp. 2,000 66,000
316,438
Meat Products (0.47%)
Groupe Danone 2,500 82,611
Nestle ADR 2,000 110,894
193,505
Medical Service & Health
Insurance (0.52%)
Provident Cos., Inc. 2,500 84,688
United Healthcare Corp. 500 32,750
United Wisconsin Services 2,000 44,000
US Life Corp. 1,800 53,775
215,213
Metal Cans & Shipping
Containers (0.13%)
Ball Corp. 1,900 52,250
Metal Forgings & Stampings (0.17%)
Zero Corp. 3,900 69,225
Metalworking Machinery (0.34%)
Makita Corp. ADR 9,000 140,625
Miscellaneous Amusement, Recreation
Service (0.12%)
Jackpot Enterprises 4,200 48,825
Miscellaneous Apparel &
Accessories (0.14%)
Angelica Corp. 2,900 59,450
Miscellaneous Business Services (0.15%)
CUC International, Inc. 1,800(a) 61,425
Miscellaneous Chemical
Products (0.08%)
Learonal, Inc. 1,500 34,500
Miscellaneous Converted Paper
Products (0.08%)
P. T. Inti Indorayon Utama ADR 10,000 31,490
Miscellaneous Electrical Equipment &
Supplies (0.46%)
Motorola, Inc. 700 39,900
TDK Corp. 2,800 147,000
186,900
Miscellaneous Fabricated Metal
Products (0.15%)
Barnes Group, Inc. 1,700 $ 61,200
Miscellaneous Fabricated Textile
Products (0.13%)
Alpargatas SAIC ADR 10,000(a) 52,510
Miscellaneous Food Stores (0.21%)
General Nutrition Cos. 3,800(a) 87,400
Miscellaneous Furniture &
Fixtures (0.15%)
Kinetic Concepts, Inc. 5,000 60,000
Miscellaneous Investing (0.63%)
HFS, Inc. 1,500(a) 122,625
Manufactured Home Communities 4,200 73,500
Southwest Property, Inc. 2,300 31,050
Wellsford Residential Property 1,300 29,900
257,075
Miscellaneous Petroleum & Coal
Products (0.14%)
Quaker Chemical Corp. 4,200 56,700
Miscellaneous Plastics Products,
NEC (0.15%)
Amer Filtrona Corp. 1,900 63,650
Miscellaneous Special Trade
Contractors (0.18%)
Hang Lung Development Co. ADR 9,400 74,768
Miscellaneous Transporation
Services (0.02%)
Petro PSC Properties Warrants 200(a) 6,800
Motion Picture Production &
Services (0.14%)
Walt Disney Productions 1,000 59,000
Motion Picture Theaters (0.05%)
AMC Entertainment 800(a) 18,700
Motor Vehicles & Equipment (2.03%)
Arvin Industries, Inc. 2,900 47,850
Augat, Inc. 4,000 68,500
Chrysler Corp. 900 49,838
Fiat SPA ADR 4,700 74,025
Ford Motor Co. 2,000 58,000
General Motors Corp. 1,400 74,025
Honda Motor ADR 4,400 184,800
Smith A.O. Corp. 2,500 51,875
Toyota Motor Corp. ADR 3,100 130,975
Volkswagen AG ADR 1,400 93,824
833,712
Newspapers (0.32%)
Gannett Co. 1,500 92,063
New York Times Co. 1,300 38,512
130,575
Non-Classifiable Establishments (0.19%)
Keppel Corp. Ltd. ADR 4,300 76,608
Non-Store Retailers (0.08%)
AMRE Inc. 2,300 33,638
Operative Builders (0.30%)
Fujita Corp. ADR 2,700 $ 121,975
Ophthalmic Goods (0.16%)
Bausch & Lomb 1,650 65,381
Paints & Allied Products (0.14%)
Dexter Corp. 2,400 56,700
Paper Mills (0.31%)
Potlatch Corp. 1,500 60,000
Willamette Industry, Inc. 1,200 67,500
127,500
Paperboard Containers & Boxes (0.09%)
Sealright Co. 3,300 36,712
Paperboard Mills (0.06%)
Groupo Industrial Durango ADR 3,800(a) 25,175
Partitions & Fixtures (0.17%)
Knape & Vogt Mfg. 4,060 70,543
Pens, Pencils, Office & Art
Supplies (0.12%)
Cross (A.T.) Co.; Class A 3,300 49,912
Periodicals (0.16%)
K III Communications 5,400(a) 65,475
Personal Credit Institutions (0.45%)
Dean Witter, Discover & Co. 1,900 89,300
Household International Corp. 1,600 94,600
183,900
Petroleum Refining (1.55%)
Ashland, Inc. 2,000 70,250
Atlantic Richfield Co. 800 88,600
Diamond Shamrock, Inc. 2,400 62,100
Exxon Corp. 400 32,050
Royal Dutch Petroleum Co. ADR 400 56,450
Shell Transport & Trading Co. ADR 1,000 81,375
Total SA IE Francaise ADR 2,800 95,200
Ultramar Corp. 2,600 66,950
YPF Sociedad Anonima ADR 3,800 82,175
635,150
Photographic Equipment &
Supplies (0.97%)
Eastman Chemical Co. 1,050 65,756
Eastman Kodak Co. 750 50,250
Fuji Photo Film 3,400 197,625
OCE Van Der Grinten NV ADR 1,400 84,350
397,981
Photographic Studios, Portrait (0.12%)
CPI Corp. 3,000 48,000
Plastic Materials & Synthetics (0.41%)
Hercules, Inc. 1,700 95,838
Shanghai Petrochemical Co. Ltd. ADR 2,600 74,100
169,938
Preserved Fruits & Vegetables (0.21%)
H. J. Heinz Co. 1,200 39,750
International Multifoods Corp. 2,400 48,300
88,050
Primary Nonferrous Metals (0.25%)
Aluminum Co. of America 600 $ 31,725
Phelps Dodge Corp. 1,150 71,587
103,312
Radio, Television &
Computer Stores (0.06%)
Tandy Corp. 600 24,900
Radio & Television
Broadcasting (0.25%)
Infinity Broadcasting 1,700(a) 63,325
New World Communications 2,300(a) 40,250
103,575
Refrigeration &
Service Machinery (0.37%)
American Standard, Inc. 2,700(a) 75,600
Tecumseh Products Co.;
Class A 1,500 77,625
153,225
Rental of Railroad Cars (0.12%)
GATX Corp. 1,000 48,625
Retail Stores, NEC (0.24%)
Koninklijke Bijenkorf Beheer NV ADR 2,400 79,352
PETsMART Inc. 600(a) 18,600
97,952
Rubber & Plastics Footwear (0.10%)
NIKE, Inc. 500 34,812
Reebok International Ltd. 200 5,650
40,462
Savings Institutions (0.30%)
Standard Federal Bancorp., Inc. 1,500 59,063
Washington Mutual, Inc. 2,200 63,525
122,588
Sawmills & Planning Mills (0.17%)
Louisiana Pacific Corp. 2,900 70,325
Search & Navigation
Equipment (0.26%)
Litton Industries, Inc. 500(a) 22,250
Watkins Johnson Co. 1,900 83,125
105,375
Security & Commodity Services (0.15%)
Franklin Resources, Inc. 1,200 60,450
Security Brokers & Dealers (0.43%)
American Express Co. 4,300 177,913
Services to Buildings (0.14%)
American Building Maintenance 2,000 55,500
Soap, Cleaners & Toilet Goods (0.67%)
Block Drug Co. 1,900 66,037
Kao Corp. ADR 1,200 148,907
Smithkline Beecham PLC ADR 1,100 61,050
275,994
Special Industry Machinery (0.28%)
Gerber Scientific Inc. 3,700 $ 60,125
Scitex Corp. 4,000 54,500
114,625
Subdividers & Developers (0.18%)
Singapore Land ADR 11,600 75,038
Sugar & Confectionary
Products (0.28%)
Perlis Plantations ADR 20,000 62,624
Wrigley, (WM.) Jr. Co. 1,000 52,500
115,124
Surety Insurance (0.31%)
ACE Ltd. 1,400 55,650
Enhance Financial Services Group 2,700 71,888
127,538
Telephone Communication (1.74%)
AT&T Corp. 1,000 64,750
Airtouch Communications, Inc. 1,000(a) 28,250
BCE, Inc. 2,200 75,900
MCI Communications Corp. 2,100 54,862
Nynex Corp. 1,700 91,800
SBC Communications, Inc. 1,400 80,500
Sprint Corp. 2,100 83,738
Telecommunicacoes
Brasileiras SA ADR 1,600 75,800
Telebras GDR 18(c) 853
Telefonica De Espana SA ADS 2,500 104,688
Telfonos De Mexico SA ADR 1,700 54,187
715,328
Tires & Inner Tubes (0.51%)
Bridgestone ADR 900 143,090
Goodyear Tire & Rubber Co. 1,500 68,063
211,153
Toys & Sporting Goods (0.17%)
Russ Berrie & Co. 3,900 49,238
Toy Biz, Inc. 900(a) 19,575
68,813
Variety Stores (0.25%)
K Mart Corp. 5,400 39,150
Woolworth Corp. 4,750 61,750
100,900
Video Tape Rental (0.13%)
Viacom Inc.; Class B 1,148(a) 54,386
Water Supply (0.16%)
SJW Corp. 1,700 64,175
Water Transportation of Freight,
NEC (0.19%)
Penninsular & Oriental Steamships
ADR 5,400 79,816
Women's & Children's
Undergarments (0.35%)
Wacoal Corp. ADR 2,100 142,013
Women's Clothing Stores (0.02%)
Deb Shops, Inc. 2,700 9,281
Total Common Stocks 21,769,279
Bonds (10.85%)
Advertising (0.52%)
Ackerly Communications, Inc.
Senior Notes; 10.75%; 10/1/03 $ 200,000 $ 213,000
Agricultural Chemicals (0.52%)
IMC Fertilizer Senior Notes;
9.25%; 10/1/00 200,000 213,000
Cable & Other Pay TV Services (0.52%)
Cablevision Systems Corp. Senior
Subordinated Notes; 9.88%;
2/15/13 200,000 213,000
Cash Grains (0.12%)
PM Holdings Corp. Subordinated
Notes; 9/5/05 100,000(b) 51,000
Cogeneration - Small Power
Producer (0.51%)
California Energy Co., Inc. Senior
Secured Notes; 9.88%; 6/30/03 200,000 208,000
Communications Equipment (0.26%)
Plantronics, Inc. Senior Notes;
10.00%; 1/15/01 100,000 105,125
Communications Services, NEC (1.11%)
Dial Call Communications, Inc.
Senior Discount Note, Series B;
12/15/05 500,000(b) 265,625
Helicon Group Senior Notes,
Series B; 9.00%*; 11/1/03 200,000 192,000
457,625
Crude Petroleum & Natural Gas (0.82%)
Gulf Canada Senior Subordinated
Debentures; 9.25%; 1/15/04 125,000 129,458
Maxus Energy Corp. Debentures;
11.50%; 11/15/15 200,000 206,500
335,958
Finance Services (0.36%)
Tiphook Finance Corp. Guaranteed
Notes; 8.00%; 3/15/00 200,000 148,000
Glass & Glassware, Pressed
or Blown (0.52%)
Owens Illinois, Inc. Senior
Subordinated Notes;
9.95%; 10/15/04 200,000 212,000
Health & Allied Services, NEC (0.26%)
Nacolah Holding Corp. Senior Notes;
9.50%; 12/1/03 100,000 105,000
Meat Products (0.33%)
Pilgrim's Pride Corp. Senior
Subordinated Notes;
10.88%; 8/1/03 150,000 136,500
Miscellaneous Amusement, Recreation
Service (0.85%)
Casino America, Inc. First Mortgage
Notes; 11.50%; 11/15/01 250,000 233,125
Six Flags Theme Park, Inc.
Senior Subordinated Notes;
6/15/05 $150,000(b) $ 117,375
350,500
Miscellaneous Chemical
Products (0.40%)
Arcadian Partners Senior Notes;
10.75%; 5/1/05 150,000 165,000
Miscellaneous Investing (0.49%)
HMC Acquisition Properties Senior
Notes; 9.00%; 12/15/07 200,000(c) 200,000
Miscellaneous Publishing (0.17%)
Marvel Parent Holding;
4/15/98 100,000(b) 70,000
Miscellaneous Shopping Goods
Stores (0.40%)
Southland Corp. Senior Subordinated
Debentures; 5.00%; 12/15/03 200,000 167,000
Miscellaneous Textile Goods (0.86%)
PT Polysindo EKA Senior Notes;
13.00%; 6/15/01 150,000 155,250
West Point Stevens Senior Subordinated
Debentures; 9.38%; 12/15/05 200,000 197,500
352,750
Non-Store Retailers (0.49%)
Corporate Express Senior Subordinated
Notes; 9.13%; 3/15/04 200,000 201,000
Radio & Television
Broadcasting (0.70%)
Heritage Media Senior Subordinated
Notes; 11.00%; 10/1/02 175,000 185,500
Viacom Subordinated Debentures ;
8.00%; 7/7/06 100,000 102,008
287,508
Telephone Communication (0.64%)
Paging Network Inc. Senior
Subordinated Notes;
10.13%; 8/1/07 100,000 108,875
Telefonica De Argentina Notes;
11.88%; 11/1/04 150,000 155,250
264,125
Total Bonds 4,456,091
U.S. Government Treasury Notes (26.25%)
8.00%; 1/15/97 3,809,000 3,912,555
7.88%; 11/15/04 5,931,000 6,868,839
Total Treasury Notes 10,781,394
Total Portfolio Investments (90.10%) 37,006,764
Cash and receivables, net of liabilities (9.90%) 4,067,274
Total Net Assets (100.00%) $41,074,038
(a) Non-income producing security - No dividend paid during the past twelve
months.
(b) Non-income producing security - zero-and zero-step coupon bonds.
(c) Restricted Security - See Note 4 to the financial statements.
* Variable Rate
Common Stocks (43.86%)
Advertising (0.37%)
Interpublic Group of Cos., Inc. 3,900 $ 169,163
Air Transportation, Scheduled (0.16%)
Southwest Airlines Co. 3,200 74,400
Automotive Rentals, No Drivers (0.39%)
Ryder Systems, Inc. 7,100 175,725
Beverages (1.41%)
Pepsico, Inc. 9,900 553,162
Universal Foods Corp. 2,200 88,275
641,437
Combination Utility Services (0.45%)
Cinergy Corp. 6,600 202,125
Commercial Banks (5.06%)
AmSouth Bancorp. 4,750 191,781
Banc One Corp. 7,921 299,018
Boatmen's Bancshares, Inc. 4,682 191,377
Chase Manhattan Bank Corp. 2,500 151,562
Comerica, Inc. 5,700 228,712
First of America Bank Corp. 3,600 159,750
Firstar Corp. 3,700 146,613
Keycorp. 7,900 286,375
Marshall & Ilsley Corp. 6,000 156,000
Mercantile Bankshares Corp. 3,400 94,775
Meridian Bancorp., Inc. 4,200 195,300
Nationsbank Corp. 2,800 194,950
2,296,213
Communications Equipment (1.47%)
Allen Group, Inc. 2,000 44,750
DSC Communications Corp. 5,000(a) 184,375
General Instrument Corp. 12,900(a) 301,538
Northern Telecom Ltd. 3,200 137,600
668,263
Computer & Office Equipment (0.91%)
Hewlett-Packard Co. 2,100 175,875
International Business
Machines Corp. 2,600 238,550
414,425
Construction & Related
Machinery (0.57%)
Caterpillar, Inc. 4,400 258,500
Crude Petroleum & Natural
Gas (0.90%)
Texaco, Inc. 5,200 408,200
Dairy Products (0.32%)
Dean Foods Co. 5,300 145,750
Department Stores (0.41%)
Sears, Roebuck & Co. 4,800 187,200
Drugs (3.85%)
American Home Products Corp. 3,000 291,000
Bristol-Myers Squibb Co. 5,400 463,725
Lilly (Eli) & Co. 4,200 236,250
Merck & Co., Inc. 8,000 $ 526,000
Warner-Lambert Co. 2,400 233,100
1,750,075
Eating & Drinking Places (0.42%)
McDonald's Corp. 4,200 189,525
Electric Services (1.39%)
Dominion Resources, Inc. 6,300 259,875
FPL Group, Inc. 4,300 199,412
Potomac Electric Power Co. 6,600 173,250
632,537
Electrical Industrial Apparatus (0.34%)
Emerson Electric Co. 1,900 155,325
Electronic Components &
Accessories (0.70%)
Duracell International, Inc. 6,100 315,675
Electronic Distribution
Equipment (1.17%)
General Electric Co. 7,400 532,800
Fats & Oils (0.63%)
Archer Daniels Midland Co. 16,000 288,000
Fire, Marine & Casualty
Insurance (0.48%)
Allstate Corp. 5,320 218,785
General Industrial Machinery (0.33%)
BW/IP Holdings, Inc.; Class A 2,900 47,850
Pall Corp. 3,800 102,125
149,975
Grain Mill Products (0.76%)
Ralston-Ralston Purina Group 5,500 343,063
Grocery Stores (2.01%)
Albertsons Inc. 7,500 246,562
American Stores Co. 10,800 288,900
Sysco Corp. 11,600 377,000
912,462
Household Furniture (0.50%)
Masco Corp. 7,300 229,038
Industrial Inorganic Chemicals (0.65%)
Dow Chemical Co. 4,200 295,575
Insurance Agents, Brokers &
Services (0.47%)
Equifax, Inc. 10,000 213,750
Jewelry, Silverware & Plated
Ware (0.21%)
Jostens, Inc. 3,900 94,575
Meat Products (1.33%)
Conagra, Inc. 8,142 335,850
Tyson Foods, Inc. 10,300 269,087
604,937
Medical Instruments &
Supplies (0.80%)
Becton, Dickinson & Co. 1,900 142,500
St. Jude Medical, Inc. 3,750(a) 161,250
United States Surgical Corp. 2,700 57,713
361,463
Medical Service & Health
Insurance (1.68%)
Aon Corp. 4,350 $ 216,956
Foundation Health Corp. 4,200(a) 180,600
Physicians Corp. of America 2,900(a) 49,300
U.S. Healthcare, Inc. 6,800 316,200
763,056
Metal Forgings & Stampings (0.92%)
Newell Co. 16,200 419,175
Metalworking Machinery (0.11%)
Giddings & Lewis 2,900 47,850
Miscellaneous Business Services (0.19%)
Safety-Kleen Corp. 5,400 84,375
Miscellaneous Converted Paper
Products (1.81%)
Avery Dennison Corp. 4,600 230,575
Minnesota Mining & Mfg. Co. 8,900 589,625
820,200
Miscellaneous Electrical Equipment
& Supplies (1.12%)
Motorola, Inc. 8,900 507,300
Miscellaneous Fabricated Metal
Products (0.15%)
Keystone International, Inc. 3,400 68,000
Miscellaneous Shopping
Goods Stores (0.65%)
Toys 'R' Us, Inc. 13,600(a) 295,800
Offices & Clinics of Medical
Doctors (0.32%)
FHP International Corp. 5,100(a) 145,350
Petroleum Refining (1.25%)
Atlantic Richfield Co. 1,800 199,350
Exxon Corp. 4,600 368,575
567,925
Photographic Equipment &
Supplies (0.21%)
Eastman Chemical Co. 1,550 97,069
Plastic Materials & Synthetics (0.14%)
Wellman, Inc. 2,800 63,700
Sanitary Services (1.57%)
Browning-Ferris Industries, Inc. 7,500 221,250
WMX Technologies, Inc. 16,400 489,950
711,200
Security Brokers & Dealers (0.24%)
Edwards (A.G.), Inc. 4,500 107,437
Soap, Cleaners & Toilet Goods (1.37%)
Avon Products 4,700 354,263
Colgate-Palmolive Co. 3,800 266,950
621,213
Telephone Communication (1.84%)
AT&T Corp. 7,300 472,675
MCI Communications Corp. 13,800 360,525
833,200
Variety Stores (1.83%)
Dayton-Hudson Corp. 6,300 $ 472,500
Wal-Mart Stores, Inc. 16,100 360,237
832,737
Total Common Stocks 19,914,548
Preferred Stocks (2.66%)
Motor Vehicles & Equipment (2.66%)
Federal-Mogul Corp.
Series D Convertible 4,300b) 258,538
Ford Motor Co.
Series A Convertible 10,000 947,500
1,206,038
Principal
Amount Value
Bonds (3.37%)
Blast Furnace & Basic Steel
Products (0.43%)
Quanex Corp. Convertible
Subordinated Debentures;
6.88%; 6/30/07 $200,000 $ 193,000
Electrical Lighting & Wiring
Equipment (0.47%)
Cooper Industries Inc. Convertible
Subordinated Debentures;
7.05%; 1/1/15 208,000 214,240
Electric Industrial Apparatus (0.53%)
Liebert Co. Convertible Subordinated
Debentures; 8.00%; 11/15/10 80,000 239,300
Engines & Turbines (0.46%)
Outboard Marine Corp. Convertible
Subordinated Debentures;
7.00%; 7/1/02 200,000 210,250
Lumber & Other Building
Materials (0.43%)
Hechinger Co. Convertible
Subordinated Debentures;
5.50%; 4/1/12 425,000 196,563
Petroleum Refining (0.56%)
Pennzoil Co. Senior Exchangeable
Debentures; 6.50%; 1/15/03 200,000 252,000
Trucking & Courier Services,
Ex., Air (0.49%)
Builders Transport, Inc. Convertible
Subordinated Debentures;
6.50%; 5/1/11 306,000 224,145
Total Bonds 1,529,498
U.S. Government Treasury Notes & Bonds (40.80%)
5.13%; 2/28/98 $1,500,000 $1,496,720
6.38%; 1/15/00 1,900,000 1,970,655
5.50%; 4/15/00 2,500,000 2,518,750
6.38%; 8/15/02 1,000,000 1,050,625
6.25%; 2/15/03 1,000,000 1,043,750
5.75%; 8/15/03 3,200,000 3,238,998
7.25%; 8/15/04 1,500,000 1,668,280
7.50%; 2/15/05 800,000 908,000
7.25%; 5/15/16 1,000,000 1,141,875
7.50%; 11/15/16 1,000,000 1,173,125
7.25%; 8/15/22 2,000,000 2,315,626
Total U. S. Government Treasury Notes & Bonds 18,526,404
Commercial Paper (8.61%)
Business Credit Institutions (4.62%)
American Express Credit Corp.;
5.75%; 1/2/96 2,100,000 2,100,000
Personal Credit Institutions (3.99%)
Ford Motor Credit Co. ;
5.77%; 1/2/96 885,000 885,000
5.65%; 1/5/96 925,000 924,564
1,809,564
Total Commercial Paper 3,909,564
Total Portfolio Investments (99.30%) 45,086,052
Cash and receivables, net of liabilities (0.70%) 317,274
Total Net Assets (100.00%) $45,403,326
(a) Non-income producing security - No dividend paid during the past twelve
months.
(b) Restricted Security - See Note 4 to the financial statements.
PRINCIPAL BOND FUND, INC.
Principal
Amount Value
Bonds (93.11%)
Aircraft & Parts (0.97%)
Textron, Inc. Medium-Term Notes,
Series C; 9.55%; 3/19/01 $300,000 $ 347,142
Auto & Home Supply Stores (1.74%)
Pep Boys-Manny, Moe & Jack Notes;
7.00%; 6/1/05 600,000 624,557
Bakery Products (1.29%)
Nabisco, Inc. Notes; 7.05%; 7/15/07450,000 462,924
Beverages (1.68%)
Joseph E. Seagram & Sons Guaranteed
Debentures; 8.88%; 9/15/11 $500,000 $ 601,538
Broadwoven Fabric Mills,
Cotton (2.17%)
Burlington Industries, Inc. Notes;
7.25%; 9/15/05 750,000 777,860
Cable & Other Pay TV Services (2.97%)
TCI Communications, Inc. Senior
Notes; 8.00%; 8/1/05 1,000,000 1,067,354
Cash Grains (0.84%)
Dekalb Corp. Notes;
10.00%; 4/15/98 300,000 300,750
Combination Utility Services (0.79%)
Public Service Electric & Gas
Medium-Term Notes;
8.16%; 5/26/09 250,000 285,565
Consumer Products (0.86%)
RJR Nabisco Capital Corp. Senior
Notes; 8.75%; 4/15/04 300,000 307,875
Copper Ores (0.88%)
Asarco, Inc. Notes; 7.38%; 2/1/03 300,000 315,953
Crude Petroleum & Natural Gas (0.81%)
Occidental Petroleum Corp.
Medium-Term Notes;
9.73%; 6/15/01 250,000 291,097
Department Stores (3.38%)
Dillard Investment Co. Notes;
9.25%; 5/1/97 200,000 209,405
Harcourt General, Inc. Subordinated
Notes; 9.50%; 3/15/00 350,000 394,434
Sears Roebuck Co. Medium-Term
Notes; 9.05%; 2/6/12 500,000 607,895
1,211,734
Drug Stores & Proprietary
Stores (1.36%)
Rite Aid Corp. Senior Debentures;
6.88%; 8/15/13 500,000 488,970
Eating & Drinking Places (2.23%)
Marriott International, Inc.;
Notes; 6.75%; 12/15/03 200,000 202,925
Senior Notes; 7.88%; 4/15/05 550,000 597,175
800,100
Electric Services (1.13%)
Cleveland Electric Illuminating Co.
First Mortgage Bonds;
8.75%; 11/15/05 400,000 404,000
Fabricated Rubber Products,
NEC (0.83%)
M. A. Hanna Co. Senior Notes;
9.38%; 9/15/03 250,000 298,436
Finance Services (2.87%)
GATX Capital Corp. Medium-Term
Notes, Series C; 6.86%; 10/13/05
1,000,000 1,030,790
Gas Production & Distribution (4.64%)
Enron Corp. Notes; 7.13%; 5/15/07 750,000 795,436
Tennessee Gas Pipeline Co. Notes;
9.00%; 1/15/97 $400,000 $ 413,536
Transco Energy Co. Notes;
9.38%; 8/15/01 400,000 460,754
1,669,726
General Government, NEC (3.11%)
Ontario Hydro Debentures;
7.45%; 3/31/13 500,000 545,975
Province of Saskatchewan, Canada
Global Notes; 8.00%; 2/1/13 500,000 568,310
1,114,285
Gold & Silver Ores (2.16%)
Placer Dome, Inc. Notes;
7.13%; 6/15/07 750,000 776,626
Grain Mill Products (3.03%)
Ralston Purina Co. Debentures;
7.75%; 10/1/15 1,000,000 1,085,340
Hospitals (1.67%)
Columbia/HCA Healthcare Corp.
Medium-Term Notes; 8.70%; 2/10/10
500,000 599,590
Household Appliances (1.63%)
Maytag Corp. Medium-Term Notes;
8.62%; 11/15/07 500,000 584,950
Household Furniture (1.44%)
Masco Corp. Debentures;
7.13%; 8/15/13 500,000 516,783
Industrial Inorganic Chemicals (2.09%)
FMC Corp. Senior Notes;
6.38%; 9/1/03 200,000 198,670
Grace, (W.R.) & Co. Guaranteed
Notes; 8.00%; 8/15/04 500,000 551,893
750,563
Iron Ores (1.17%)
Cyprus Minerals Co. Notes;
10.13%; 4/1/02 350,000 419,594
Machinery, Equipment &
Supplies (2.12%)
AAR Corp. Notes; 7.25%; 10/15/03 750,000 759,174
Metalworking Machinery (0.57%)
Black & Decker Corp. Notes;
7.00%; 2/1/06 200,000 206,194
Millwork, Plywood & Structural
Members (0.34%)
Georgia-Pacific Corp. Debentures;
9.50%; 12/1/11 100,000 122,863
Miscellaneous Chemical
Products (1.19%)
Ferro Corp. Senior Debentures;
7.63%; 5/1/13 400,000 426,336
Miscellaneous Investing (2.21%)
Weingarten Realty Investors
Medium-Term Notes;
7.29%; 5/23/05 750,000 792,765
Miscellaneous Metal Ores (1.19%)
Cyprus Amax Minerals Notes;
7.38%; 5/15/07 $400,000 $ 427,255
Motion Picture Production &
Services (1.06%)
Columbia Pictures Entertainment, Inc.
Senior Subordinated Notes;
9.88%; 2/1/98 350,000 378,691
Motor Vehicles & Equipment (3.12%)
Arvin Overseas Finance B.V.
Medium-Term Notes;
9.62%; 8/9/96 250,000 254,762
TRW, Inc. Medium-Term Notes;
9.25%; 12/30/11 700,000 864,066
1,118,828
Newpapers (2.36%)
News America Holdings, Inc. Guaranteed
Senior Notes; 8.50%; 2/15/05 750,000 845,198
Paper Mills (4.38%)
Bowater, Inc. Debentures;
9.38%; 12/15/21 200,000 256,778
Champion International Corp. Notes;
9.88%; 6/1/00 250,000 287,609
Chesapeake Corp. Notes;
7.20%; 3/15/05 400,000 421,244
Potlatch Corp. Medium-Term Notes;
8.75%; 1/14/22 500,000 604,820
1,570,451
Personal Credit Institutions (2.99%)
General Motors Acceptance Corp.
Medium-Term Notes;
8.25%; 2/24/04 500,000 560,025
General Motors Acceptance Corp.
Notes; 6.63%; 10/15/05 500,000 511,708
1,071,733
Petroleum Refining (7.51%)
Ashland Oil, Inc. Medium-Term Notes;
7.71%; 5/11/07 500,000 549,360
7.73%; 7/15/13 250,000 270,920
Pennzoil Co. Debentures;
10.13%; 11/15/09 325,000 415,187
Phillips Petroleum Co. Notes;
9.38%; 2/15/11 500,000 629,856
Sun Co., Inc. Debentures;
9.00%; 11/1/24 500,000 617,690
Sun Co., Inc. Notes;
7.13%; 3/15/04 200,000 210,706
2,693,719
Primary Nonferrous Metals (2.31%)
Amax, Inc. Notes; 9.88%; 6/13/01 100,000 113,767
Reynolds Metals Co.
Medium-Term Notes;
8.34%; 5/22/07 500,000 576,270
7.65%; 2/4/08 125,000 137,682
827,719
Pulp Mills (0.64%)
International Paper Co. Medium-Term
Notes; 9.70%; 8/15/00 200,000 229,492
Refrigeration & Service
Machinery (0.97%)
Westinghouse Electric Corp.
Debentures; 8.63%; 8/1/12 $350,000 $ 349,412
Rental of Railroad Cars (0.50%)
Signal Capital Corp. Equipment Trust
Certificates; 9.95%; 2/1/06 179,000 178,553
Sanitary Services (2.30%)
Laidlaw, Inc. Senior Notes;
7.88%; 4/15/05 750,000 825,367
Sawmills & Planning Mills (2.34%)
MacMillan Bloedel Delaware
Guaranteed Notes;
8.50%; 1/15/04 750,000 840,664
Telephone Communication (4.41%)
Sprint Corp. Notes;
8.13%; 7/15/02 500,000 553,081
U.S. West Capital Funding, Inc.;
6.83%; 11/15/07 1,000,000 1,029,430
1,582,511
Variety Stores (2.86%)
Dayton-Hudson Corp. Debentures;
9.63%; 2/1/08 150,000 188,632
Dayton-Hudson Corp. Sinking Fund
Debentures; 9.50%; 10/15/16 250,000 267,462
Shopko Stores, Inc. Senior Notes;
9.00%; 11/15/04 500,000 569,152
1,025,246
Total Bonds 33,406,273
Commercial Paper (4.67%)
Federal & Federally Sponsored
Credit (2.44%)
FHLMC
5.75%; 1/2/96 875,000 875,000
Personal Credit Institutions (2.23%)
Ford Motor Credit Co.
5.65%; 1/5/96 800,000 799,623
Total Commercial Paper 1,674,623
Total Portfolio Investments (97.78%) 35,080,896
Cash and receivables, net of liabilities (2.22%) 796,763
Total Net Assets (100.00%) $35,877,659
PRINCIPAL CAPITAL ACCUMULATION
FUND, INC.
Shares
Held Value
Common Stocks (98.32%)
Advertising (0.98%)
Interpublic Group of Cos., Inc. 31,000 $ 1,344,625
Air Transportation, Scheduled (0.44%)
Southwest Airlines Co. 25,500 592,875
Automotive Rentals, No Drivers (1.03%)
Ryder Systems, Inc. 56,800 1,405,800
Beverages (3.23%)
Pepsico, Inc. 66,100 3,693,337
Universal Foods Corp. 17,200 690,150
4,383,487
Combination Utility Services (1.05%)
Cinergy Corp. 46,500 1,424,063
Commercial Banks (7.63%)
Banc One Corp. 37,400 1,411,850
Boatmen's Bancshares, Inc. 31,200 1,275,300
Chase Manhattan Bank Corp. 20,900 1,267,063
Comerica, Inc. 37,300 1,496,662
First of America Bank Corp. 28,700 1,273,562
Firstar Corp. 31,300 1,240,263
KeyCorp 47,200 1,711,000
Nationsbank Corp. 9,600 668,400
10,344,100
Communications Equipment (3.25%)
Allen Group, Inc. 16,000 358,000
DSC Communications Corp. 36,200(a) 1,334,875
General Instrument Corp. 77,500(a) 1,811,563
Northern Telecom Ltd. 21,100 907,300
4,411,738
Computer & Office Equipment (2.23%)
Hewlett-Packard Co. 15,200 1,273,000
International Business
Machines Corp. 19,100 1,752,425
3,025,425
Construction & Related
Machinery (1.46%)
Caterpillar, Inc. 33,600 1,974,000
Crude Petroleum & Natural Gas (2.19%)
Texaco, Inc. 37,900 2,975,150
Dairy Products (0.71%)
Dean Foods Co. 35,000 962,500
Department Stores (0.99%)
Sears, Roebuck & Co. 34,500 1,345,500
Drugs (8.95%)
American Home Products Corp. 21,400 2,075,800
Bristol-Myers Squibb Co. 38,000 3,263,250
Lilly (Eli) & Co. 29,000 1,631,250
Merck & Co., Inc. 53,200 3,497,900
Warner-Lambert Co. 17,200 1,670,550
12,138,750
Eating & Drinking Places (1.13%)
McDonald's Corp. 34,000 $1,534,250
Electric Services (3.41%)
Dominion Resources, Inc. 44,400 1,831,500
FPL Group, Inc. 30,500 1,414,437
Potomac Electric Power Co. 52,400 1,375,500
4,621,437
Electrical Industrial Apparatus (1.95%)
Emerson Electric Co. 32,290 2,639,708
Electronic Components &
Accessories (1.59%)
Duracell International, Inc. 41,600 2,152,800
Electronic Distribution
Equipment (2.60%)
General Electric Co. 49,000 3,528,000
Engineering & Architectural
Services (0.05%)
Dun & Bradstreet Corp. 1,100 71,225
Fats & Oils (1.50%)
Archer Daniels Midland Co. 113,000 2,034,000
Fire, Marine & Casualty
Insurance (1.29%)
Allstate Corp. 42,643 1,753,693
General Industrial Machinery (0.88%)
BW/IP Holdings, Inc., Class A 23,000 379,500
Pall Corp. 30,100 808,937
1,188,437
Grain Mill Products (2.06%)
Ralston-Ralston Purina Group 44,800 2,794,400
Grocery Stores (4.40%)
Albertsons Inc. 48,100 1,581,288
American Stores Co. 68,500 1,832,375
Sysco Corp. 78,800 2,561,000
5,974,663
Household Furniture (1.27%)
Masco Corp. 55,100 1,728,763
Industrial Inorganic Chemicals (1.55%)
Dow Chemical Co. 29,800 2,097,175
Insurance Agents, Brokers &
Services (1.05%)
Equifax, Inc. 66,600 1,423,575
Jewelry, Silverware & Plated
Ware (0.57%)
Jostens, Inc. 31,700 768,725
Meat Products (1.37%)
Tyson Foods, Inc. 71,100 1,857,487
Medical Instruments & Supplies (2.01%)
Becton, Dickinson & Co. 13,500 $ 1,012,500
St. Jude Medical, Inc. 29,100 1,251,300
United States Surgical Corp. 21,900 468,113
2,731,913
Medical Service & Health
Insurance (3.87%)
Aon Corp. 28,450 1,418,944
Foundation Health Corp. 33,400(a) 1,436,200
Physicians Corp. of America 22,900(a) 389,300
U.S. Healthcare, Inc. 43,000 1,999,500
5,243,944
Metal Forgings & Stampings (2.02%)
Newell Co. 105,700 2,734,987
Metalworking Machinery (0.28%)
Giddings & Lewis 23,000 379,500
Miscellaneous Business Services (0.50%)
Safety-Kleen Corp. 43,500 679,688
Miscellaneous Converted Paper
Products (4.30%)
Avery Dennison Corp. 32,100 1,609,012
Minnesota Mining & Mfg. Co. 63,800 4,226,750
5,835,762
Miscellaneous Electrical Equipment
& Supplies (2.35%)
Motorola, Inc. 55,900 3,186,300
Miscellaneous Fabricated Metal
Products (0.40%)
Keystone International, Inc. 27,300 546,000
Miscellaneous Shopping Goods
Stores (1.42%)
Toys 'R' Us, Inc. 88,300(a) 1,920,525
Offices & Clinics of Medical
Doctors (0.86%)
FHP International Corp. 40,800(a) 1,162,800
Petroleum Refining (2.97%)
Atlantic Richfield Co. 12,900 1,428,675
Exxon Corp. 32,400 2,596,050
4,024,725
Photographic Equipment &
Supplies (0.60%)
Eastman Chemical Co. 12,900 807,863
Plastic Materials & Synthetics (0.39%)
Wellman, Inc. 23,000 523,250
Sanitary Services (3.68%)
Browning-Ferris Industries, Inc. 49,800 1,469,100
WMX Technologies, Inc. 117,900 3,522,263
4,991,363
Security Brokers & Dealers (0.63%)
Edwards (A.G.), Inc. 36,015 859,858
Soap, Cleaners, & Toilet Goods (3.12%)
Avon Products 33,900 $ 2,555,212
Colgate-Palmolive Co. 23,800 1,671,950
4,227,162
Telephone Communication (4.06%)
AT&T Corp. 48,300 3,127,425
MCI Communications Corp. 91,400 2,387,825
5,515,250
Variety Stores (4.05%)
Dayton-Hudson Corp. 41,800 3,135,000
Wal-Mart Stores, Inc. 105,700 2,365,037
5,500,037
Total Common Stocks 133,367,278
Principal
Amount Value
Commercial Paper (2.00%)
Business Credit Institutions (2.00%)
American Express Credit Co.
5.55%; 1/2/96 $2,700,000$ 2,700,000
Total Portfolio Investments (100.32%) 136,067,278
Liabilities, net of cash and receivables (-0.32%) (427,598)
Total Net Assets (100.00%) $135,639,680
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL EMERGING GROWTH FUND, INC.
Shares
Held Value
Common Stocks (79.86%)
Blast Furnace & Basic Steel
Products (1.47%)
Lukens, Inc. 30,000 $ 862,500
Carpets & Rugs (1.26%)
Shaw Industries, Inc. 50,000 737,500
Chemicals & Allied Products (0.85%)
Sigma-Aldrich Corp. 10,000 495,000
Commercial Banks (5.28%)
Boatmen's Bancshares, Inc. 6,100 249,337
First Federal Capital Corp. 40,665 731,970
Hawkeye Bancorp. 6,000 159,750
Independent Bank Corp. Michigan 25,200 674,100
Mercantile Bancorp., Inc. 5,373 247,158
Merchants Bancorp., Inc. 11,500 327,750
Peoples Heritage Financial
Group, Inc. 11,100 $ 252,525
Princeton National Bancorp., Inc. 25,800 445,050
3,087,640
Commercial Printing (0.49%)
Bowne & Co., Inc. 4,000 80,000
Merrill Corp. 13,000 208,000
288,000
Communications Equipment (0.48%)
California Amplifier, Inc. 10,000(a) 282,500
Computer & Data Processing
Services (5.96%)
American Management Systems, Inc. 35,000(a) 1,050,000
Cerner Corp. 50,000(a) 1,025,000
HBO & Co. 7,000 536,375
Microsoft Corp. 10,000(a) 877,500
3,488,875
Computer & Office Equipment (0.79%)
EMC Corp. 30,000(a) 461,250
Construction & Related
Machinery (0.43%)
Energy Ventures, Inc. 10,000(a) 252,500
Crude Petroleum & Natural
Gas (0.26%)
Devon Energy Corp. 6,000 153,000
Dairy Products (0.57%)
Dreyer's Grand Ice Cream, Inc. 10,000 332,500
Drugs (2.61%)
Alliance Pharmaceutical Corp. 30,000(a) 408,750
Forest Laboratories, Inc. 10,000(a) 452,500
Pharmacia & Upjohn, Inc. 15,000 581,250
Seragen, Inc. 20,000(a) 82,500
1,525,000
Eating & Drinking Places (0.60%)
Ryan's Family Steak Houses, Inc. 50,000(a) 350,000
Electronic Components &
Accessories (5.88%)
Intel Corp. 20,000 1,135,000
Linear Technology Corp. 25,000 981,250
Solectron Corp. 30,000(a) 1,323,750
3,440,000
Engineering & Architectural
Services (1.28%)
Paychex, Inc. 15,000 748,125
Finance Services (1.38%)
First Financial Corp. 35,000 805,000
Fire, Marine, & Casualty
Insurance (3.25%)
Avemco Corp. 35,000 560,000
Berkley W.R. Corp. 25,000 1,343,750
1,903,750
Footwear, Except Rubber (0.83%)
Nine West Group, Inc. 13,000(a) 487,500
General Industrial Machinery (5.76%)
Flow International Corp. 55,000(a) $ 515,625
Kaydon Corp. 25,000 759,375
Pentair, Inc. 20,000 995,000
Roper Industries, Inc. 30,000 1,102,500
3,372,500
Grocery Stores (0.93%)
Casey's General Stores, Inc. 25,000 546,875
Hardware Stores (0.88%)
Central Tractor Farm
& Country, Inc. 50,000(a) 512,500
Holding Offices (0.93%)
ISB Financial Corp. 20,000 300,000
Today's Bancorp., Inc. 11,000 244,063
544,063
Hose, Belting, Gaskets
& Packing (1.06%)
Mark IV Industries 31,500 622,125
Hospitals (3.77%)
Humana, Inc. 40,000(a) 1,095,000
Universal Health Services, Inc.;
Class B 25,000(a) 1,109,375
2,204,375
Industrial Inorganic Chemicals (0.92%)
AMSCO International, Inc. 36,000(a) 535,500
Insurance Agents, Brokers &
Services (1.83%)
Equifax, Inc. 50,000 1,068,750
Investment Offices (1.32%)
INVESCO PLC ADS 20,000 775,000
Iron & Steel Foundries (0.71%)
Atchison Casting Corp. 30,000(a) 360,000
Intermet Corp. 5,400(a) 56,700
416,700
Laundry, Cleaning & Garment
Services (0.85%)
G & K Services, Inc.; Class A 19,525 497,888
Life Insurance (0.65%)
First Colony Corp. 15,000 380,625
Measuring & Controlling
Devices (0.75%)
ISCO, Inc. 8,613 79,666
Photon Dynamics 45,000(a) 360,000
439,666
Meat Products (0.79%)
Michael Foods, Inc. 40,000 465,000
Medical Instruments
& Supplies (3.13%)
Andros Analyzers, Inc. 12,000(a) 183,000
Boston Scientific Corp. 17,417(a) 853,433
MDT Corp. 20,000(a) 97,500
Nellcor Puritan Bennett 12,000(a) 696,000
1,829,933
Medical Service & Health
Insurance (4.08%)
Foundation Health Corp. 25,000(a) $1,075,000
United Healthcare Corp. 20,000 1,310,000
2,385,000
Metal Forgings & Stampings (0.61%)
Varlen Corp. 16,656 358,104
Metal Services, NEC (1.51%)
BMC Industries, Inc. 38,000 883,500
Miscellaneous Chemical
Products (4.41%)
Cytec Industries 15,000(a) 935,625
H.B. Fuller Co. 20,000 695,000
Loctite Corp. 20,000 950,000
2,580,625
Miscellaneous Plastics Products,
NEC (0.17%)
Rubbermaid, Inc. 4,000 102,000
Nursing & Personal Care
Facilities (0.03%)
Horizon Healthcare Corp. 629(a) 15,882
Office Furniture (1.34%)
Chromcraft Revington, Inc. 20,000(a) 532,500
Kimball International, Inc.;
Class B 10,000 252,500
785,000
Operative Builders (0.60%)
Pulte Corp. 10,421 350,406
Paints & Allied Products (1.06%)
RPM, Inc. 37,500 618,750
Pens, Pencils, Office & Art
Supplies (0.14%)
Hunt Mfg. Co. 4,750 82,531
Personnel Supply Services (0.45%)
Olsten Corp. 6,703 264,769
Plastic Materials & Synthetics (1.15%)
A. Schulman, Inc. 30,000 675,000
Plumbing, Heating,
Air-Conditioning (1.47%)
Apogee Enterprises, Inc. 40,000 680,000
Metalclad Corp. 45,600(a) 182,400
862,400
Refrigeration & Service
Machinery (0.53%)
Tecumseh Products Co.; Class A 6,000 310,500
Sanitary Services (0.76%)
Browning-Ferris Industries, Inc. 15,000 442,500
Savings Institutions (0.31%)
Sterling Financial Corp. 13,200(a) 181,500
Screw Machine Products,
Bolts, Etc. (0.97%)
TriMas Corp. 30,000 566,250
Security Brokers & Dealers (0.81%)
Jefferies Group, Inc. 10,000 $ 472,500
Special Industry Machinery (0.14%)
Key Technology, Inc. 6,000(a) 83,250
Toys & Sporting Goods (0.74%)
Mattel, Inc. 14,000 430,500
Trucking & Courier Services,
Ex., Air (0.63%)
J. B. Hunt Transport Services, Inc.22,000 368,500
Total Common Stocks 46,731,607
Preferred Stocks (1.00%)
Gas Production & Distribution (0.09%)
Kelley Oil & Gas Corp.
Convertible 7,189 50,323
Offices & Clinics of Medical
Doctors (0.91%)
FHP International Corp.
Series A Convertible 20,000 532,500
Total Preferred Stocks 582,823
Principal
Amount Value
Bonds (2.07%)
Combination Utility Services (0.00%)
Bonneville Pacific Corp. Convertible
Subordinated Debentures;
7.75%; 8/15/09 $100,000(b) $ 0
Computer & Data Processing
Services (0.39%)
Sierra On Line Convertible
Subordinated Debentures;
6.50%; 4/1/01 110,000(c) 225,087
Drugs (0.21%)
Genzyme Corp.
Convertible Notes;
6.75%; 10/1/01 100,000 123,750
Industrial Inorganic Chemicals (0.81%)
Ciba-Geigy Corp. Exchangeable
Subordinated Debentures;
6.25%; 3/15/16 150,000(c) 151,500
ICN Pharmaceuticals, Inc. Convertible
Subordinated Debentures;
8.50%; 11/15/99 300,000 323,625
475,125
Nursing & Personal Care
Facilities (0.38%)
Greenery Rehabilitation Group, Inc.
Convertible Senior Subordinated
Notes; 8.75%; 4/1/15 $250,000 $ 222,500
Sanitary Services (0.28%)
Enclean, Inc. Convertible Subordinated
Debentures; 7.50%; 8/1/01 100,000 104,505
Sanifill, Inc. Convertible Subordinated
Debentures; 7.50%; 6/1/06 50,000 59,000
163,505
Total Bonds 1,209,967
Commercial Paper (18.51%)
Business Credit Institutions (7.37%)
American Express Credit Corp.;
5.75%; 1/2/96 2,470,000 2,470,000
John Deere Capital Corp.;
5.70%; 1/3/96 1,345,000 1,344,787
5.75%; 1/5/96 500,000 499,760
4,314,547
Life Insurance (4.32%)
Prudential Funding Corp.;
5.52%; 1/2/96 1,000,000 1,000,000
5.92%; 1/5/96 1,530,000 1,529,245
2,529,245
Personal Credit Institutions (6.82%)
Beneficial Corp.
5.80%; 1/4/96 1,520,000 1,519,510
Ford Motor Credit Co.;
5.65%; 1/8/96 2,475,000 2,472,670
3,992,180
Total Commercial Paper 10,835,972
Total Portfolio Investments (101.44%) 59,360,369
Liabilities, net of cash and receivables (-1.44%) (839,929)
Total Net Assets (100.00%) $58,520,440
(a) Non-income producing security - No dividend paid during the past twelve
months.
(b) Non-income producing security - Security in default.
(c) Restricted Security - See Note 4 to the financial statements.
PRINCIPAL GOVERNMENT SECURITIES
FUND, INC.
Description of Issue Principal
Type Rate Maturity Amount Value
Government National Mortgage Association (GNMA)
Certificates (21.67%)
GNMA I 7.00% 1/15/24 $ 876,586 $ 887,587
GNMA I 8.00 10/15/16-6/15/17 2,160,616 2,272,165
GNMA I 8.50 2/15/17-5/15/21 3,724,204 3,947,013
GNMA II 6.00 5/20/24-11/20/25 2,865,926 2,759,915
GNMA II 6.50 12/20/25 1,001,500 986,357
Total GNMA Certificates 10,853,037
Federal National Mortgage Association (FNMA)
Certificates (17.73%)
FNMA 6.00 11/1/23 1,188,896 1,149,531
FNMA 6.50 11/1/23-7/1/25 2,818,464 2,788,161
FNMA 7.00 8/1/23 842,981 850,104
FNMA 7.50 4/1/22 639,726 656,832
FNMA 8.00 6/1/17-8/15/25 597,128 619,912
FNMA GL 6.50 8/15/25 997,624 986,102
FNMA Major 7.50 4/1/22 569,013 583,910
FNMA Major 8.00 10/1/21 329,535 341,721
FNMA Note 8.01 2/16/99 900,000 903,328
Total FNMA Certificates 8,879,601
Federal Home Loan Mortgage Corporation (FHLMC) Certificates (24.82%)
FHLMC Gold 5.50 2/1/24-3/1/24 1,583,285 1,493,349
FHLMC Gold 6.00 12/1/23-1/15/26* 2,979,395 2,882,595
FHLMC Gold 6.50 4/1/24-10/15/25 2,403,422 2,377,922
FHLMC Gold 7.00 9/1/23-1/1/24 2,716,777 2,744,393
FHLMC Gold 7.50 2/1/22-6/1/24 1,974,440 2,028,110
FHLMC Gold 8.00 11/1/21 869,620 902,344
Total FHLMC Certificates 12,428,713
Principal
Amount Value
Student Loan Marketing Association (SLMA)
Certificates (18.26%)
Student Loan Marketing Association
Debentures; 7.30%; 8/1/12 7,500,000 8,126,789
Student Loan Marketing Association
Notes; 7.82%; 10/14/99 1,000,000 1,019,658
Total SLMA Certificates 9,146,447
Private Export Funding Corporation (PEFCO)
Certificates (16.70%)
Private Export Funding Corp.
Secured Notes;
5.80%; 2/1/04 $2,200,000 $2,210,956
6.62%; 10/1/05 1,000,000 1,053,870
9.45%; 12/31/99 4,500,000 5,097,915
Total PEFCO Certificates 8,362,741
Federal Agency Short-Term Obligations (1.52%)
Federal Home Loan Mortgage Corp.;
5.75%; 1/2/96 760,000 760,000
Total Portfolio Investments (100.70%) 50,430,539
Liabilities, net of cash and receivables (-0.70%) (351,070)
Total Net Assets (100.00%) $50,079,469
* Includes securities purchased on a to-be-announced basis (see Note 4 to the
financial statements).
PRINCIPAL GROWTH FUND, INC.
Shares
Held Value
Common Stocks (91.89%)
Advertising (1.02%)
Interpublic Group of Cos., Inc. 10,000 $ 433,750
Beverages (1.31%)
Pepsico, Inc. 10,000 558,750
Blast Furnace & Basic Steel
Products (0.84%)
Lukens, Inc. 12,500 359,375
Carpets & Rugs (1.21%)
Shaw Industries, Inc. 35,000 516,250
Cash Grains (1.95%)
Pioneer Hi-Bred International 15,000 834,375
Commercial Banks (5.62%)
Banc One Corp. 15,000 566,250
Barnett Banks, Inc. 5,000 295,000
Baybanks, Inc. 5,000 491,250
Boatmen's Bancshares, Inc. 6,000 245,250
Firstar Corp. 15,000 594,375
Princeton National Bancorp., Inc. 12,000 207,000
2,399,125
Communications Equipment (4.25%)
General Instrument Corp. 50,000(a) 1,168,750
Northern Telecom Ltd. 15,000 645,000
1,813,750
Computer & Data Processing
Services (1.23%)
Microsoft Corp. 6,000(a) $ 526,500
Computer & Office Equipment (3.27%)
Automatic Data Processing, Inc. 10,000 742,500
Hewlett-Packard Co. 5,000 418,750
Pitney Bowes, Inc. 5,000 235,000
1,396,250
Consumer Products (2.12%)
Philip Morris Cos., Inc. 10,000 905,000
Department Stores (0.99%)
May Department Stores 10,000 422,500
Drugs (9.42%)
Alliance Pharmaceutical Corp. 10,000(a) 136,250
Bristol-Myers Squibb Co. 10,000 858,750
Johnson & Johnson 10,000 856,250
Lilly (Eli) & Co. 20,000 1,125,000
Merck & Co., Inc. 10,000 657,500
Pharmacia & Upjohn, Inc. 10,000 387,500
4,021,250
Eating & Drinking Places (0.74%)
McDonald's Corp. 7,000 315,875
Electrical Goods (0.52%)
Avnet, Inc. 5,000 223,750
Electronic Components &
Accessories (3.17%)
Linear Technology Corp. 20,000 785,000
Intel Corp. 10,000 567,500
1,352,500
Electronic Distribution
Equipment (0.84%)
General Electric Co. 5,000 360,000
Engineering & Architectural
Services (0.76%)
Dun & Bradstreet Corp. 5,000 323,750
Footwear, Except Rubber (0.53%)
Stride Rite Corp. 30,000 225,000
General Industrial Machinery (2.49%)
Ingersoll-Rand Co. 10,000 351,250
Tyco International Ltd. 20,000 712,500
1,063,750
Grain Mill Products (2.31%)
Ralcorp Holdings, Inc. 15,000(a) 363,750
Ralston-Ralston Purina Group 10,000 623,750
987,500
Hose, Belting, Gaskets &
Packing (0.92%)
Mark IV Industries 20,000 395,000
Hospitals (3.48%)
Humana, Inc. 30,000(a) $ 821,250
Universal Health Services, Inc.,
Class B 15,000(a) 665,625
1,486,875
Household Furniture (1.10%)
Masco Corp. 15,000 470,625
Investment Offices (0.91%)
Invesco PLC ADR 10,000 387,500
Knitting Mills (0.65%)
Russell Corp. 10,000 277,500
Lumber & Other Building
Materials (1.68%)
Home Depot, Inc. 15,000 718,125
Medical Instruments & Supplies (6.23%)
Andros Analyzers, Inc. 20,000(a) 305,000
Becton, Dickinson & Co. 10,000 750,000
Boston Scientific Corp. 15,000(a) 735,000
Nellcor Puritan Bennett 15,000(a) 870,000
2,660,000
Medical Service & Health
Insurance (6.78%)
Aon Corp. 10,000 498,750
Foundation Health Corp. 15,000(a) 645,000
Health System International, Inc. 2,500(a) 80,312
United Healthcare Corp. 15,000 982,500
Value Health, Inc. 25,000(a) 687,500
2,894,062
Millwork, Plywood &
Structural Members (0.48%)
Georgia-Pacific Corp. 3,000 205,875
Miscellaneous Chemical
Products (1.11%)
Loctite Corp. 10,000 475,000
Miscellaneous Electrical Equipment
& Supplies (1.33%)
Motorola, Inc. 10,000 570,000
Miscellaneous Plastics Products,
NEC (0.60%)
Rubbermaid, Inc. 10,000 255,000
Miscellaneous Shopping Goods
Stores (0.76%)
Toys 'R' Us, Inc. 15,000(a) 326,250
Motor Vehicles & Equipment (2.67%)
Chrysler Corp. 10,000 553,750
Dana Corp. 20,000 585,000
1,138,750
Offices & Clinics of Medical
Doctors (0.50%)
FHP International Corp. 7,500 213,750
Paints & Allied Products (0.96%)
RPM, Inc. 25,000 412,500
Petroleum Refining (1.79%)
Atlantic Richfield Co. 4,000 $ 443,000
Exxon Corp. 4,000 320,500
763,500
Plastic Materials & Synthetics (0.79%)
A. Schulman, Inc. 15,000 337,500
Preserved Fruits & Vegetables (1.12%)
CPC International, Inc. 7,000 480,375
Radio, Television &
Computer Stores (0.49%)
Tandy Corp. 5,000 207,500
Refrigeration & Service
Machinery (0.91%)
Tecumseh Products Co.; Class A 7,500 388,125
Rubber & Plastics Footwear (1.63%)
Nike, Inc. 10,000 696,250
Sanitary Services (1.88%)
Browning-Ferris Industries, Inc. 12,000 354,000
WMX Technologies, Inc. 15,000 448,125
802,125
Security Brokers & Dealers (0.83%)
Salomon, Inc. 10,000 355,000
Soap, Cleaners & Toilet Goods (5.83%)
Colgate-Palmolive Co. 7,000 491,750
Ecolab, Inc. 20,000 600,000
International Flavors & Fragrances,
Inc. 6,000 288,000
Smithkline Beecham PLC ADR 20,000 1,110,000
2,489,750
Toys & Sporting Goods (1.08%)
Mattel, Inc. 15,000 461,250
Variety Stores (0.79%)
Wal-Mart Stores, Inc. 15,000 335,625
Total Common Stock 39,242,812
Preferred Stocks (0.76%)
Offices & Clinics of Medical
Doctors (0.76%)
FHP International Corp.;
Series A Convertible 12,182 324,346
Principal
Amount Value
Commercial Paper (6.98%)
Business Credit Institutions (3.51%)
American Express Credit Corp.
5.55%; 1/2/96 $1,500,000 $1,500,000
Personal Credit Institutions (3.47%)
Ford Motor Credit Co.
5.65%; 1/5/96 1,485,000 1,484,301
Total Commercial Paper 2,984,301
Total Portfolio Investments (99.63%) $42,551,459
Cash and receivables, net of liabilities (0.37%) 156,062
Total Net Assets (100.00%) $42,707,521
(a) Non-income producing security - No dividend paid during the past twelve
months.
PRINCIPAL HIGH YIELD FUND, INC.
Principal
Amount Value
Bonds (96.27%)
Agricultural Chemicals (2.71%)
IMC Fertilizer Group, Inc. Senior
Debentures; 9.45%; 12/15/11 $300,000 $321,000
Aircraft & Parts (2.36%)
Rohr Industries, Inc. Subordinated
Debentures; 9.25%; 3/1/17 300,000 279,000
Blast Furnace & Basic Steel
Products (3.64%)
Ivaco Senior Notes;
11.50%; 9/1/05 150,000 147,750
Weirton Steel Corp. Senior Notes;
10.75%; 6/1/05 300,000 282,750
430,500
Broadwoven Fabric Mills,
Cotton (2.54%)
J.P. Stevens & Co. Inc.
Sinking Fund Debentures;
9.00%; 3/1/17 300,000 300,000
Cable & Other Pay TV Services (5.26%)
Continental Cablevision, Inc.
Senior Notes; 8.30%; 5/15/06 300,000(a) 300,000
Jones Intercable, Inc. Senior Notes;
9.63%; 3/15/02 300,000 322,125
622,125
Cogeneration - Small Power
Producer (1.32%)
California Energy Co., Inc.
Ltd. Resource Senior Secured Notes;
9.88%; 6/30/03 150,000 156,000
Communications Equipment (2.67%)
Rogers Cantel Mobile, Inc. Senior
Secured Guaranteed Notes;
10.75%; 11/1/01 300,000 316,125
Computer & Data Processing
Services (2.81%)
Tenet Healthcare Corp.
Senior Subordinated Notes;
10.13%; 3/1/05 300,000 332,250
Computer & Office Equipment (3.74%)
Dell Computer Corp. Senior Notes;
11.00%; 8/15/00 400,000 442,000
Consumer Products (3.47%)
RJR Nabisco, Inc. Senior Notes;
8.75%; 8/15/05 $400,000 $ 410,500
Electric Services (3.45%)
Tucson Electric Power Co.
First Mortgage Bonds;
8.50%; 11/1/99 400,000 408,639
Engines & Turbines (2.43%)
Outboard Marine Debentures;
9.13%; 4/15/17 300,000 288,000
Ferroalloy Ores, Except
Vanadium (0.99%)
Geneva Steel Co. Senior Notes;
9.50%; 1/15/04 150,000 116,625
Forest Products (2.53%)
Doman Industries, Ltd. Senior
Notes; 8.75%; 3/15/04 300,000 299,511
Fuel Dealers (2.49%)
Petroleum Heat & Power Co., Inc.
Subordinated Notes;
10.13%; 4/1/03 300,000 294,000
General Government, NEC (1.07%)
Republic of Argentina Global
Bonds; 8.38%; 12/20/03 150,000 126,750
Groceries & Related Products (5.03%)
Fleming Cos., Inc. Senior Notes;
10.63%; 12/15/01 300,000 297,000
Rykoff-Sexton, Inc. Senior
Subordinated Notes;
8.88%; 11/1/03 300,000 298,500
595,500
Grocery Stores (5.91%)
Dominick's Finer Foods, Inc.
Senior Subordinated Notes;
10.88%; 5/1/05 150,000 158,250
Ralph's Grocery Co.
Senior Subordinated Notes;
11.00%; 6/15/05 300,000 292,500
Stater Brothers Holdings, Inc.
Senior Notes;
11.00%; 3/1/01 250,000 248,750
699,500
Hotels & Motels (5.06%)
Bally's Grand, Inc. First Mortgage
Notes; 10.38%; 12/15/03 300,000 304,500
John Q. Hammons Hotels, L.P. &
Finance Corp. First Mortgage
Notes; 8.88%; 2/15/04 300,000 294,375
598,875
Knitting Mills (2.58%)
Tultex Corp. Senior Notes
10.63%; 3/15/05 300,000 305,250
Miscellaneous Amusement, Recreation
Service (1.30%)
Rio Hotel & Casino, Inc.
Senior Subordinated Notes;
10.63%; 7/15/05 $150,000 $153,750
Miscellaneous Converted Paper
Products (1.27%)
Drypers Corp. Senior Notes;
12.50%; 11/1/02 300,000(b) 150,000
Miscellaneous Plastics Products,
NEC (5.14%)
Congoleum Corp. Senior Notes;
9.00%; 2/1/01 300,000 303,000
Plastic Containers, Inc. Senior
Secured Notes; 10.75%; 4/1/01 300,000 305,625
608,625
Motor Vehicles & Equipment (2.49%)
Lear Seating Corp. Subordinated
Notes; 8.25%; 2/1/02 300,000 294,000
Nonferrous Foundries (Casting) (1.33%)
Howmet Corp., Senior
Subordinated Debentures;
10.00%; 12/1/03 150,000(a) 157,500
Petroleum Refining (2.66%)
Crown Central Petroleum Corp.
Senior Notes; 10.88%; 2/1/05 300,000 315,000
Pulp Mills (3.08%)
Magnetek, Inc. Senior Subordinated
Debentures; 10.75%; 11/15/98 350,000 364,000
Radio, Television & Computer
Stores (2.54%)
Compusa, Inc. Senior
Subordinated Notes;
9.50%; 6/15/00 300,000 300,000
Radio & Television
Broadcasting (2.99%)
Act III Broadcasting, Inc.
Senior Subordinated Notes;
10.25%; 12/15/05 150,000 153,187
EZ Communications, Inc.
Senior Subordinated Notes;
9.75%; 12/1/05 200,000 201,000
354,187
Soap, Cleaners & Toilet Goods (2.69%)
Coty, Inc. Senior Subordinated
Notes; 10.25%; 5/1/05 300,000 318,000
Telephone Communication (6.16%)
Paging Network, Inc. Senior
Debentures; 8.88%; 2/1/06 300,000 307,125
Rogers Cablesystems Ltd. Senior
Secured Second Priority Notes;
9.63%; 8/1/02 250,000 262,500
Telecom Argentina Stet-France
Telecom SA Senior Notes;
12.00%; 11/15/02 150,000 159,375
729,000
Water Supply (2.56%)
California Energy Casecnan Water
& Energy Co., Inc. Senior
Secured Series B ;
11.95%; 11/15/10 $300,000(a) $ 303,000
Total Portfolio Investments (96.27%) 11,389,212
Cash and receivables, net of liabilities (3.73%) 440,721
Total Net Assets (100.00%) $11,829,933
(a) Restricted Security - See Note 4 to the financial statements.
(b) Non-income producing security - security in default.
PRINCIPAL MONEY MARKET FUND, INC.
Principal
Amount Value
Commercial Paper (95.57%)
Business Credit Institutions (17.90%)
American Express Credit Corp.;
5.58%; 3/15/96 $450,000 $ 444,908
5.47%; 3/19/96 325,000 321,198
5.53%; 4/10/96 350,000 344,677
5.52%; 5/3/96 150,000 147,194
5.58%; 5/28/96 290,000 283,392
CIT Group Holdings, Inc.;
5.65%; 2/14/96 400,000 397,301
5.56%; 2/16/96 200,000 198,610
5.65%; 2/29/96 150,000 148,635
5.56%; 4/12/96 425,000 418,370
General Electric Capital Corp.;
5.82%; 1/2/96 550,000 550,000
5.80%; 1/22/96 450,000 448,550
5.64%; 3/29/96 150,000 147,956
5.24%; 6/24/96 300,000 292,402
International Lease Finance Corp.;
5.72%; 1/8/96 200,000 199,809
5.77%; 1/9/96 300,000 299,663
5.65%; 2/13/96 250,000 248,352
5.65%; 2/26/96 200,000 198,274
5.55%; 3/20/96 200,000 197,595
5.55%; 3/29/96 170,000 167,720
John Deere Capital Corp.;
5.34%; 4/26/96 400,000 393,177
5,847,783
Combination Utility Services (1.90%)
Public Service Electric & Gas Co.;
5.90%; 1/23/96 275,000 274,054
5.77%; 2/23/96 350,000 347,083
621,137
Computer & Office Equipment (0.72%)
Pitney Bowes Credit Corp.;
5.95%; 1/5/96 235,000 234,884
Department Stores (4.25%)
Sears Roebuck Acceptance Corp.;
5.70%; 2/2/96 250,000 248,773
5.65%; 2/16/96 $350,000 $ 347,528
5.72%; 2/23/96 350,000 347,108
5.62%; 3/12/96 200,000 197,815
5.62%; 3/13/96 250,000 247,229
1,388,453
Electric Services (5.95%)
AES Shady Point, Inc.;
LOC Bank of Tokyo Ltd.;
5.90%; 1/18/96 250,000 249,344
5.90%; 1/19/96 1,000,000 997,214
Transmission Agency - Northern
California; LOC Industrial
Bank of Japan;
6.10%; 1/17/96 500,000 498,729
Wisconsin Power & Light Co.;
5.72%; 2/5/96 200,000 198,920
1,944,207
Electronic Components
& Accessories (1.83%)
SCI Systems, Inc.;
LOC ABN-Amro Bank NV;
5.72%; 1/29/96 250,000 248,927
5.61%; 1/30/96 350,000 348,473
597,400
Federal & Federally Sponsored
Credit (0.97%)
FNMA;
5.50%; 4/29/96 125,000 122,746
US Government Treasury Bills;
5.35%; 8/22/96 200,000 193,075
315,821
Finance Services (5.39%)
Mitsubishi International Corp.;
5.63%; 1/31/96 350,000 348,413
5.76%; 1/31/96 175,000 174,188
5.50%; 3/6/96 300,000 297,067
5.64%; 3/11/96 250,000 247,298
5.65%; 3/29/96 250,000 246,586
5.58%; 4/30/96 125,000 122,694
PHH Corp.;
5.76%; 1/10/96 325,000 324,584
1,760,830
Investment Offices (4.12%)
Morgan Stanley Group, Inc.;
6.00%; 1/3/96 500,000 499,917
5.77%; 1/8/96 200,000 199,807
5.70%; 2/7/96 400,000 397,720
5.70%; 2/9/96 250,000 248,496
1,345,940
Jewelry, Silverware, &
Plated Ware (0.67%)
Jostens, Inc.;
5.73%; 2/2/96 220,000 218,914
Life Insurance (3.13%)
Prudential Funding Corp.;
5.65%; 1/4/96 225,000 224,929
5.78%; 1/5/96 450,000 449,783
5.64%; 2/12/96 350,000 347,752
1,022,464
Miscellaneous Food &
Kindred Products (0.46%)
Cargill, Inc.;
5.57%; 1/26/96 150,000 149,443
Miscellaneous Investing (1.68%)
MLTC Funding, Inc.; LOC
Union Bank of Switzerland;
5.75%; 1/24/96 $550,000 $ 548,067
Motor Vehicles & Equipment (0.91%)
Echlin, Inc.;
5.75%; 1/29/96 300,000 298,706
Personal Credit Institutions (22.07%)
American General Finance Corp.;
5.78%; 1/9/96 500,000 499,438
5.55%; 3/18/96 300,000 296,485
Associates Corp. of North America;
5.71%; 2/5/96 325,000 323,247
5.66%; 2/26/96 300,000 297,406
5.69%; 2/27/96 375,000 371,681
5.60%; 3/5/96 300,000 297,060
5.58%; 3/7/96 200,000 197,985
Beneficial Corp.;
5.56%; 3/8/96 250,000 247,452
5.47%; 3/25/96 260,000 256,721
5.46%; 4/17/96 400,000 393,569
Ford Motor Credit Co.;
5.58%; 2/15/96 425,000 422,101
5.67%; 2/20/96 350,000 347,299
5.69%; 2/22/96 325,000 322,380
5.56%; 3/27/96 325,000 320,733
5.50%; 4/5/96 150,000 147,846
General Motors Acceptance Corp.;
5.73%; 2/6/96 300,000 298,329
5.75%; 2/8/96 250,000 248,523
5.75%; 2/12/96 150,000 149,018
5.69%; 2/13/96 240,000 238,407
5.64%; 3/8/96 300,000 296,898
5.50%; 4/1/96 160,000 157,800
5.50%; 4/30/96 150,000 147,273
Norwest Financial, Inc.;
5.79%; 1/25/96 450,000 448,335
5.69%; 2/28/96 250,000 247,748
5.46%; 3/22/96 240,000 237,088
7,210,822
Real Estate Operators &
Lessors (5.32%)
Maguire/Thomas Partners Westlake
Southlake Partnership; LOC
Sumitomo Bank;
6.02%; 1/4/96 250,000 249,916
5.78%; 3/4/96 250,000 247,511
5.70%; 3/5/96 500,000 495,013
5.78%; 3/12/96 400,000 395,505
Towson Town Center, Inc.; LOC
Mitsubishi Bank;
6.00%; 1/16/96 350,000 349,183
1,737,128
Security Brokers & Dealers (10.58%)
Bear Stearns Cos.;
5.72%; 1/11/96 400,000 399,428
Goldman Sachs Group, L.P.;
5.60%; 2/14/96 150,000 148,997
5.64%; 2/23/96 290,000 287,638
5.65%; 3/6/96 $250,000 $ 247,489
5.52%; 3/14/96 250,000 247,240
5.60%; 4/9/96 150,000 147,713
5.63%; 4/11/96 200,000 196,872
5.60%; 4/19/96 300,000 294,960
Merrill Lynch & Co., Inc.;
5.76%; 1/10/96 225,000 224,712
5.72%; 1/31/96 375,000 373,272
5.67%; 2/28/96 175,000 173,429
5.66%; 2/29/96 225,000 222,948
5.55%; 3/28/96 225,000 222,017
5.60%; 3/28/96 275,000 271,321
3,458,036
Subdividers & Developers (1.53%)
Hartz 667 Commercial Paper Corp.;
LOC Mitsubishi Bank;
6.00%; 1/8/96 500,000 499,500
Asset Backed Securities (6.19%)
Corporate Asset Funding Co.;
5.82%; 1/2/96 240,000 240,000
5.85%; 1/4/96 240,000 239,922
5.85%; 1/12/96 275,000 274,553
5.55%; 3/11/96 350,000 346,277
Retailer Funding Corp.;
5.75%; 1/12/96 300,000 299,521
5.77%; 1/17/96 325,000 324,219
5.77%; 1/17/96 175,000 174,579
5.77%; 1/26/96 125,000 124,519
2,023,590
Total Commercial Paper 31,223,125
Bank Notes (3.83%)
Commercial Banks (3.83%)
Lasalle National Bank;
5.75%; 7/8/96 250,000 250,000
5.75%; 8/26/96 500,000 500,000
5.72%; 8/30/96 500,000 500,000
1,250,000
Total Portfolio Investments (99.40%) 32,473,125
Cash and receivables, net of liabilities (0.60%) 196,794
Total Net Assets (100.00%) $32,669,919
PRINCIPAL WORLD FUND, INC.
Shares
Held Value
Common Stocks (89.42%)
AUSTRALIA (4.77%)
Commercial Banks (2.15%)
National Australia Bank Ltd. 72,886 $ 656,031
Crude Petroleum & Natural
Gas (0.34%)
Ampolex Ltd. 48,100(a) $ 105,193
Gas Production & Distribution (1.14%)
Australia Gas & Light 93,000 349,357
Miscellaneous Food &
Kindred Products (1.14%)
Burns, Philp & Co., Ltd. 155,631 348,464
1,459,045
AUSTRIA (2.69%)
Blast Furnace &
Basic Steel Products (0.86%)
Voest-Alpine Stahl 9,200(a)(b) 264,025
Gas Production & Distribution (1.42%)
OMV AG 5,000 434,447
Railroad Equipment (0.41%)
Vae AG 1,470 124,078
822,550
CANADA (0.92%)
Coal Mining Services (0.21%)
Morgan Hydrocarbons, Inc. 20,600(a) 62,683
Miscellaneous Plastics
Products, NEC (0.71%)
Royal Plastics Group 15,100(a)(b) 218,666
281,349
CHILE (0.43%)
Telephone Communication (0.43%)
Compania De
Telecomunicaciones ADR 1,600 132,600
DENMARK (1.52%)
Telephone Communication (1.52%)
Tele Danmark B 8,500 464,741
FINLAND (3.40%)
Forest Products (0.32%)
Metsa-Serla 3,200 98,756
Miscellaneous Wood Products (0.49%)
Enso-Gutzeit 22,300 148,941
Pulp Mills (0.88%)
Kymmene 10,100 267,503
Sugar & Confectionary
Products (0.57%)
Huhtamake I Free 7,200 174,113
Telephone Communication (1.14%)
Nokia Corp. Class A ADR 9,000 349,875
1,039,188
FRANCE (2.26%)
Drugs (2.26%)
Roussel-Uclaf 4,070 $ 690,765
GERMANY (3.99%)
Flat Glass (0.23%)
Weru AG 200 70,566
Industrial Inorganic Chemicals (1.75%)
Bayer AG 2,010 534,773
Miscellaneous Chemical
Products (2.01%)
Hoechst AG 2,250 613,089
1,218,428
GREECE (1.09%)
Central Reserve Depositories (0.50%)
Ergo Bank 3,800 151,713
Highway & Street Construction (0.59%)
Edrasis Psallidas 12,220 179,757
331,470
HONG KONG (4.51%)
Communications Equipment (0.25%)
ABC Communications
Holdings Ltd. 420,000 76,048
Electric Services (0.72%)
CEP-A Consolidated Electric
Power-Asia 121,000 219,874
Electronic Components &
Accessories (0.38%)
Varitronix 63,000 116,924
Holding Offices (1.24%)
First Pacific Co. Ltd. 340,382 378,597
Miscellaneous Textile Goods (0.40%)
Espirit Asia 356,000 122,013
Office Furniture (0.20%)
Lamex Holdings 242,000 59,781
Personal Credit Institutions (0.56%)
Manhattan Card Co. 402,000 171,574
Security Brokers & Dealers (0.76%)
Peregrine Investment Holdings 180,000 232,801
1,377,612
INDONESIA (0.77%)
Miscellaneous Furniture &
Fixtures (0.21%)
Pt Surya Toto 29,000 63,418
Pulp Mills (0.56%)
Asia Pacific Resources 36,300(a) 172,425
235,843
ITALY (2.80%)
Metalworking Machinery (0.15%)
Danieli & Co.-DR 17,400 $ 47,163
Telephone Communication (2.65%)
Telecom Italia-DI 300,200 367,492
Telecom Italia Mobile 419,200(a) 441,291
808,783
855,946
JAPAN (0.64%)
Computer & Office Equipment (0.24%)
Canon, Inc. 4,000 72,514
Electronic Components &
Accessories (0.12%)
Murata Mfg. 1,000 36,839
Engines & Turbines (0.28%)
Mabuchi Motor 1,400 87,134
196,487
MALAYSIA (0.39%)
Holding Offices (0.39%)
C.I. Holdings 34,000 120,525
MEXICO (0.88%)
Aircraft & Parts (0.08%)
Cemex SA 6,936 23,046
Cement, Hydraulic (0.08%)
Apasco SA 6,320 25,879
Commercial Banks (0.22%)
Grupo Financiero Bancomer
Series B 235,000(a) 66,186
Series L 8,704(a) 2,237
68,423
Concrete, Gypsum & Plaster
Products (0.04%)
Cementos De Mexico SA 3,200 11,484
Department Stores (0.04%)
Sears Roebuck De Mexico SA 5,300(a) 12,368
Telephone Communication (0.42%)
Telefonos De Mexico SA ADR 4,050 129,094
270,294
NETHERLANDS (14.76%)
Beer, Wine & Distilled
Beverages (0.42%)
Heineken Holdings 782 128,302
Commercial Banks (1.83%)
ABN-AMRO Holdings NV 12,235 557,944
Communications Services, NEC (2.31%)
KPN Royal PTT Nederland 19,389 705,169
Department Stores (0.97%)
Vendex International 10,000 $ 297,569
Electric Light & Wiring
Equipment (0.38%)
Otra NV 6,500 115,565
Electronic Distribution
Equipment (1.59%)
Phillips Electronics 13,400 484,844
Grocery Stores (1.36%)
Koninklijke Ahold NV 10,164 415,313
Meat Products (2.31%)
Unilever NV 5,030 707,594
Miscellaneous Durable Goods (1.55%)
Hagemeyer NV 9,050 473,110
Miscellaneous Transportation
Services (0.47%)
Koninklijke Pakhoed NV 5,281 145,286
Paperboard Containers & Boxes (0.37%)
Koninklijke KNP BT NV 4,400(b) 113,089
Plastic Materials & Synthetics (0.35%)
DSM NV 1,300 107,050
Special Industry Machinery (0.85%)
IHC Caland NV 7,700 259,391
4,510,226
NORWAY (3.06%)
Commercial Banks (0.57%)
Christiana Bank 74,000 173,350
Drugs (0.15%)
Hafslund Nycomed 1,867 47,430
Meat Products (1.80%)
Orkla B 11,500 549,712
Ship & Boat Building &
Repairing (0.54%)
Unitor Ships Service 11,930 164,282
934,774
NEW ZEALAND (3.48%)
Beverages (2.04%)
Lion Nathan 261,000 622,798
Household Appliances (0.88%)
Fisher & Paykel 88,000 267,516
Miscellaneous Manufacturers (0.56%)
Carter Holt Harvey LTD. 80,000 172,591
1,062,905
SINGAPORE (2.18%)
Electric Light & Wiring
Equipment (0.18%)
Clipsal Industries Holdings 25,000 56,500
Electronic Components &
Accessories (2.00%)
Amtek Engineering 209,250 $ 303,268
Elec & Eltek International 114,000 306,660
609,928
664,428
SPAIN (5.02%)
Combination Utility Services ( 0.53%)
Iberdrola 1 SA 17,600 161,034
Commercial Banks (1.28%)
Banco Popular 2,120 390,916
Oil & Gas Field Services (2.11%)
Repsol Petroleo, SA 19,660 644,172
Telephone Communication (1.10%)
Telefonica De Espana, SA 24,400 337,894
1,534,016
SWEDEN (6.96%)
Commercial Banks (1.48%)
Svenska Handelsbanken AB Free 22,500 451,548
Household Audio & Video
Equipment (1.11%)
SKF 'B' Free 17,700 339,192
Miscellaneous Transportation
Equipment (0.85%)
Autoliv AB 4,450 260,532
Motor Vehicles & Equipment (1.11%)
Volvo AB 16,450 337,578
Plastic Materials & Synthetics (1.43%)
Astra AB 11,000 436,534
Water Transportation of
Freight, NEC (0.98%)
Argonaut AB 'B' Free 17,100(a) 25,674
ICB Shipping AB 'B' Free 32,000 275,229
300,903
2,126,287
SWITZERLAND (10.45%)
Combination Utility Services (1.54%)
BBC AG (Brown Boveri) 405 471,646
Drugs (1.86%)
Galenica Holdings AG 480 146,005
Sandoz AG 460 422,161
568,166
Functions Closely Related to
Banking (1.17%)
Bil GT Group 605 357,537
Miscellaneous Chemical Products (2.11%)
Ciba Geiby AG-REG 730 643,940
Pulp Mills (0.20%)
Attisholz AG 110 62,521
Special Industry Machinery (1.56%)
Bobst SA 205 $ 320,688
Sulzer AG 290 154,999
475,687
Sugar & Confectionary
Products (2.01%)
Nestle 555 615,460
3,194,957
THAILAND (1.00%)
Commercial Banks (0.80%)
Bangkok Bank 20,100 244,176
Non-Classifiable Establishments (0.20%)
Thailand International Fund 2 60,500
304,676
UNITED KINGDOM (11.45%)
Commercial Banks (1.80%)
Bank of Ireland 75,000 549,620
Construction & Related
Machinery (1.14%)
Powerscreen International PLC 58,100 349,549
Crude Petroleum & Natural
Gas (0.89%)
Hardy Oil & Gas 86,200 271,683
Electric Services (1.39%)
Northern Ireland Electric 63,400 426,223
Investment Offices (0.85%)
Invesco PLC 66,000 259,765
Miscellaneous Non-Durable
Goods (1.92%)
Grand Metropolitan PLC 81,500 587,131
Primary Nonferrous Metals (1.00%)
British Steel PLC 121,300 306,508
Pulp Mills (0.30%)
Babcock International Group 41,000 90,392
Sand & Gravel (0.13%)
Bardon Group PLC 75,900 38,593
Sugar & Confectionary Products (1.03%)
Tate & Lyle 43,000 315,116
Telephone Communication (0.49%)
Cable & Wireless PLC 21,000 149,981
Water Supply (0.51%)
Wessex Water PLC 28,597 154,953
3,499,514
Total Common Stocks 27,330,626
Preferred Stocks (0.37%)
AUSTRIA (0.37%)
Highway & Street Construction (0.37%)
BAU Holdings AG 3,030 $ 114,036
Principal
Amount Value
Bond (1.28%)
MEXICO (1.28%)
Fire, Marine & Casualty
Insurance (1.28%)
Alfa SA Convertible Subordinated
Debentures; 8.00%; 9/15/00 $400,000(b) $ 392,000
Commercial Paper (12.84%)
UNITED STATES (12.84%)
Business Credit Institutions (7.35%)
American Express Credit Corp.;
5.75%; 1/2/96 1,345,000 1,345,000
John Deere Capital Corp.;
5.70%; 1/2/96 900,000 900,000
2,245,000
Life Insurance (4.41%)
Prudential Funding Corp.;
5.50%; 1/5/96 1,350,000 1,349,381
Personal Credit Institutions (1.08%)
Ford Motor Credit Co.;
5.80%; 1/3/96 330,000 329,947
Total Commercial Paper 3,924,328
Total Portfolio Investments (103.91%) $31,760,990
Liabilities, net of cash and receivables(-3.91%) (1,195,370)
Total Net Assets (100.00%) $ 30,565,620
(a)Non-income producing security - No dividend paid during the past twelve
months.
(b) Restricted Security - See Note 4 to the financial statements.
<PAGE>
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<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
Income from
Investment Operations Less Distributions
Net Realized
and
Net Asset Net Unrealized Total Dividends Excess
Value at Invest- Gain from from Net Distributions Distributions
Beginning ment (Loss) on Investment Investment from from
of Period Income Investments Operations Income Capital Gains Capital Gains
Principal Aggressive
Growth Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1995 $10.11 $ .13 $4.31 $4.44 $(.13) $(1.48) $ -
Period Ended December 31, 1994(d) 9.92 .05 .24 .29 (.05) (.05) -
Principal Asset
Allocation Fund, Inc.
Year Ended December 31, 1995 9.79 .40 1.62 2.02 (.40) (.30) -
Period Ended December 31, 1994(d) 9.98 .23 (.18) .05 (.23) - (.01)
Principal Balanced Fund, Inc.
Year Ended December 31,
1995 11.95 .45 2.44 2.89 (.45) (.42) -
1994 12.77 .37 (.64) (.27) (.37) (.18) -
1993 12.58 .42 .95 1.37 (.42) (.76) -
Six Months Ended December 31, 1992(a) 12.93 .23 .75 .98 (.47) (.86) -
Year Ended June 30,
1992 11.33 .47 1.61 2.08 (.48) - -
1991 10.79 .54 .59 1.13 (.57) (.02) -
Principal Bond Fund, Inc.
Year Ended December 31,
1995 10.12 .62 1.62 2.24 (.63) - -
1994 11.16 .72 (1.04) (.32) (.72) - -
1993 10.77 .88 .38 1.26 (.87) - -
Six Months Ended December 31, 1992(a) 11.08 .45 .13 .58 (.89) - -
Year Ended June 30,
1992 10.64 .91 .46 1.37 (.93) - -
1991 10.72 .94 (.06) .88 (.96) - -
Principal Capital
Accumulation Fund, Inc.
Year Ended December 31,
1995 23.44 .60 6.69 7.29 (.60) (2.33) -
1994 24.61 .62 (.49) .13 (.61) (.69) -
1993 25.19 .61 1.32 1.93 (.60) (1.91) -
Six Months Ended December 31, 1992(a) 26.03 .31 1.84 2.15 (.64) (2.35) -
Year Ended June 30,
1992 23.35 .65 2.70 3.35 (.67) - -
1991 22.48 .74 1.22 1.96 (.79) (.30) -
Principal Emerging
Growth Fund, Inc.
Year Ended December 31,
1995 19.97 .22 5.57 5.79 (.22) (.21) -
1994 20.79 .14 .03 .17 (.14) (.85) -
1993 18.91 .17 3.47 3.64 (.17) (1.59) -
Six Months Ended December 31, 1992(a) 15.97 .10 3.09 3.19 (.21) (.04) -
Year Ended June 30,
1992 13.93 .21 2.04 2.25 (.21) - -
1991 14.25 .20 .50 .70 (.23) (.79) -
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for a share of Capital Stock outstanding throughout each period:
Ratios/Supplemental Data
Ratio of Net
Net Asset Ratio of Investment
Value at Net Assets at Expenses to Income to Portfolio
Total End of Total End of Period Average Average Turnover
Distributions Period Return (in thousands) Net Assets Net Assets Rate
Principal Aggressive
Growth Fund, Inc.
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1995 $(1.61) $12.94 44.19% $ 33,643 .90% 1.34% 172.9%
Period Ended December 31, 1994(d) (.10) 10.11 2.59%(c) 13,770 1.03%(b) 1.06%(b) 105.6%(b)
Principal Asset
Allocation Fund, Inc.
Year Ended December 31, 1995 (.70) 11.11 20.66% 41,074 .89% 4.07% 47.1%
Period Ended December 31, 1994(d) (.24) 9.79 .52%(c) 28,041 .95%(b) 4.27%(b) 60.7%(b)
Principal Balanced Fund, Inc.
Year Ended December 31,
1995 (.87) 13.97 24.58% 45,403 .66% 4.12% 25.7%
1994 (.55) 11.95 (2.09)% 25,043 .69% 3.42% 31.5%
1993 (1.18) 12.77 11.06% 21,399 .69% 3.30% 15.8%
Six Months Ended December 31, 1992(a) (1.33) 12.58 8.00%(c) 18,842 .73%(b) 3.71%(b) 38.4%(b)
Year Ended June 30,
1992 (.48) 12.93 18.78% 17,344 .72% 3.80% 26.6%
1991 (.59) 11.33 11.36% 14,555 .73% 5.27% 27.1%
Principal Bond Fund, Inc.
Year Ended December 31,
1995 (.63) 11.73 22.17% 35,878 .56% 7.28% 5.9%
1994 (.72) 10.12 (2.90)% 17,108 .58% 7.86% 18.2%
1993 (.87) 11.16 11.67% 14,387 .59% 7.57% 14.0%
Six Months Ended December 31, 1992(a) (.89) 10.77 5.33%(c) 12,790 .62%(b) 8.10%(b) 6.7%(b)
Year Ended June 30,
1992 (.93) 11.08 13.57% 12,024 .62% 8.47% 6.1%
1991 (.96) 10.64 8.94% 10,552 .63% 9.17% 2.7%
Principal Capital
Accumulation Fund, Inc.
Year Ended December 31,
1995 (2.93) 27.80 31.91% 135,640 .51% 2.25% 49.2%
1994 (1.30) 23.44 .49% 120,572 .51% 2.36% 44.5%
1993 (2.51) 24.61 7.79% 128,515 .51% 2.49% 25.8%
Six Months Ended December 31, 1992(a) (2.99) 25.19 8.81%(c) 105,355 .55%(b) 2.56%(b) 39.7%(b)
Year Ended June 30,
1992 (.67) 26.03 14.53% 94,596 .54% 2.65% 34.8%
1991 (1.09) 23.35 9.46% 76,537 .53% 3.53% 14.0%
Principal Emerging
Growth Fund, Inc.
Year Ended December 31,
1995 (.43) 25.33 29.01% 58,520 .70% 1.23% 13.1%
1994 (.99) 19.97 .78% 23,912 .74% 1.15% 12.0%
1993 (1.76) 20.79 19.28% 12,188 .78% .89% 22.4%
Six Months Ended December 31, 1992(a) (.25) 18.91 20.12%(c) 9,693 .81%(b) 1.24%(b) 8.6%(b)
Year Ended June 30,
1992 (.21) 15.97 16.19% 7,829 .82% 1.33% 10.1%
1991 (1.02) 13.93 5.72% 6,579 .89% 1.70% 11.1%
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (Continued)
Selected data for a share of Capital Stock outstanding throughout each period:
Income from
Investment Operations Less Distributions
Net Realized
and Excess
Net Asset Net Unrealized Total Dividend Distributions
Value at Invest- Gain from from Net from Net Distributions
Beginning ment (Loss) on InvestmentInvestment Investment from
of PeriodIncome InvestmentsOperations Income Income Capital Gains
Principal Government Securities Fund, Inc.
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $ 9.38 $ .60 $ 1.18 $1.78 $(.61) $ - $ -
1994 10.61 .76 (1.24) (.48) (.75) - -
1993 10.28 .71 .33 1.04 (.71) - -
Six Months Ended December 31, 1992(a) 10.93 .40 .04 .44 (.78) - (.31)
Year Ended June 30,
1992 10.24 .80 .71 1.51 (.81) - (.01)
1991 10.05 .80 .24 1.04 (.81) - (.04)
Principal Growth Fund, Inc
Year Ended December 31, 1995 10.10 .17 2.42 2.59 (.17) - (.09)
Period Ended December 31, 1994(e) 9.60 .07 .51 .58 (.08) - -
Principal High Yield Fund, Inc.
Year Ended December 31,
1995 7.91 .76 .51 1.27 (.77) (.02) -
1994 8.62 .77 (.72) .05 (.76) - -
1993 8.38 .80 .23 1.03 (.79) - -
Six Months Ended December 31, 1992(a) 8.93 .45 (.10) .35 (.90) - -
Year Ended June 30,
1992 8.28 .92 .66 1.58 (.93) - -
1991 8.96 .99 (.53) .46 (1.14) - -
Principal Money Market Fund, Inc.
Year Ended December 31,
1995 1.000 .054 - .054 (.054) - -
1994 1.000 .037 - .037 (.037) - -
1993 1.000 .027 - .027 (.027) - -
Six Months Ended December 31, 1992(a) 1.000 .016 - .016 (.016) - -
Year Ended June 30,
1992 1.000 .046 - .046 (.046) - -
1991 1.000 .070 - .070 (.070) - -
Principal World Fund, Inc.
Year Ended December 31, 1995 9.56 .19 1.16 1.35 (.18) - (.01)
Period Ended December 31, 1994(e) 9.94 .03 (.33) (.30) (.05) (.02) (.01)
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
Ratio of Net
Net Asset Ratio of Investment
Value at Net Assets at Expenses to Income to Portfolio
Total End of Total End of Period Average Average Turnover
istributions Period Return (in thousands) Net Assets Net Assets Rate
Principal Government Securities Fund, Inc
Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ (.61) $10.55 19.07% 50,079 .55% 6.73% 9.8%
1994 (.75) 9.38 (4.53)% 36,121 .56% 7.05% 23.2%
1993 (.71) 10.61 10.07% 36,659 .55% 7.07% 20.4%
Six Months Ended December 31, 1992(a) (1.09) 10.28 4.10%(c) 31,760 .59%(b) 7.35%(b) 34.5%(b)
Year Ended June 30,
1992 (.82) 10.93 15.34% 33,022 .58% 7.84% 38.9%
1991 (.85) 10.24 10.94% 26,021 .59% 8.31% 4.2%
Principal Growth Fund, Inc
Year Ended December 31, 1995 (.26) 12.43 25.62% 42,708 .58% 2.08% 6.9%
Period Ended December 31, 1994(e) (.08) 10.10 5.42%(c) 13,086 .75%(b) 2.39%(b) 0.9%(b)
Principal High Yield Fund, Inc.
Year Ended December 31,
1995 (.79) 8.39 16.08% 11,830 .73% 9.09% 35.1%
1994 (.76) 7.91 .62% 9,697 .73% 9.02% 30.6%
1993 (.79) 8.62 12.31% 9,576 .74% 8.80% 28.7%
Six Months Ended December 31, 1992(a) (.90) 8.38 4.06%(c) 8,924 .77%(b) 10.33%(b) 20.6%(b)
Year Ended June 30,
1992 (.93) 8.93 20.70% 8,556 .77% 11.00% 31.3%
1991 (1.14) 8.28 6.35% 7,085 .82% 12.58% 6.4%
Principal Money Market Fund, Inc.
Year Ended December 31,
1995 (.054) 1.000 5.59% 32,670 .58% 5.32% N/A
1994 (.037) 1.000 3.76% 29,372 .60% 3.81% N/A
1993 (.027) 1.000 2.69% 22,753 .60% 2.64% N/A
Six Months Ended December 31, 1992(a) (.016) 1.000 1.54%(c) 27,680 .59%(b) 3.10%(b) N/A
Year Ended June 30,
1992 (.046) 1.000 4.64% 25,194 .57% 4.54% N/A
1991 (.070) 1.000 7.20% 26,509 .56% 6.94% N/A
Principal World Fund, Inc.
Year Ended December 31, 1995 (.19) 10.72 14.17% 30,566 .95% 2.26% 15.6%
Period Ended December 31, 1994(e) (.08) 9.56 (3.37)%(c) 13,746 1.24%(b) 1.31%(b) 14.4%(b)
See accompanying notes.
</TABLE>
Notes to Financial Highlights
(a) Effective July 1, 1992 the fund changed its fiscal year end from June 30 to
December 31.
(b) Computed on an annualized basis.
(c) Total return amounts have not been annualized.
(d) Period from June 1, 1994, date shares first offered to public, through
December 31, 1994. Net investment income, aggregating $.01 per share for
Principal Aggressive Growth Fund, Inc. and $.01 per share for Principal
Asset Allocation Fund, Inc. for the period from the initial purchase of
shares on May 23, 1994 through May 31, 1994, was recognized, none of which
was distributed to the sole stockholder, Principal Mutual Life Insurance
Company, during the period. Additionally, Principal Aggressive Growth Fund,
Inc. and Principal Asset Allocation Fund, Inc. incurred unrealized losses
on investments of $.09 and $.03 per share, respectively, during the initial
interim period. This represented activities of each fund prior to the
initial public offering of fund shares.
(e) Period from May 1, 1994, date shares first offered to public, through
December 31, 1994. Net investment income, aggregating $.01 per share for
Principal Growth Fund, Inc. and $.04 per share for Principal World Fund,
Inc. for the period from the initial purchase of shares on March 23, 1994
through April 30, 1994, was recognized, none of which was distributed to
the sole stockholder, Principal Mutual Life Insurance Company, during the
period. Additionally, Principal Growth Fund, Inc. and Principal World Fund,
Inc. incurred unrealized losses on investments of $.41 and $.10 per share,
respectively, during the initial interim period. This represented
activities of each fund prior to the initial public offering of fund
shares.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Boards of Directors and Shareholders
Principal Aggressive Growth Fund, Inc.
Principal Asset Allocation Fund, Inc.
Principal Balanced Fund, Inc.
Principal Bond Fund, Inc.
Principal Capital Accumulation Fund, Inc.
Principal Emerging Growth Fund, Inc.
Principal Government Securities Fund, Inc.
Principal Growth Fund, Inc.
Principal High Yield Fund, Inc.
Principal Money Market Fund, Inc.
Principal World Fund, Inc.
We have audited the accompanying statements of assets and liabilities of
Principal Aggressive Growth Fund, Inc., Principal Asset Allocation Fund, Inc.,
Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal High
Yield Fund, Inc., Principal Money Market Fund, Inc., and Principal World Fund,
Inc., including the schedules of investments, as of December 31, 1995, and the
related statements of operations for the year then ended, and the statements of
changes in net assets and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion. In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Principal Aggressive Growth Fund, Inc., Principal Asset Allocation
Fund, Inc., Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal
Capital Accumulation Fund, Inc., Principal Emerging Growth Fund, Inc., Principal
Government Securities Fund, Inc., Principal Growth Fund, Inc., Principal High
Yield Fund, Inc., Principal Money Market Fund, Inc., and Principal World Fund,
Inc. at December 31, 1995, and the results of their operations for the year then
ended, and the changes in their net assets and the financial highlights for each
of the periods indicated therein, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Des Moines, Iowa
January 19, 1996
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