TABLE OF CONTENTS
President's Letter..................................................... 1
PRINCIPAL PROTECTION FUNDS:
Investment Review...................................................... 3
Portfolios of Investments:
Aetna Principal Protection Fund I.....................................10
Aetna Principal Protection Fund II....................................16
Aetna Principal Protection Fund III...................................22
Statements of Assets and Liabilities...................................23
Statements of Operations...............................................24
Statements of Changes in Net Assets....................................25
Notes to Financial Statements..........................................28
Financial Highlights...................................................32
<PAGE>
PRESIDENT'S LETTER
Dear Fellow Shareholder,
Thank you for investing in the Aetna Series Fund, Inc. With nearly 9,000 mutual
funds available in today's market, we appreciate your confidence in us.
A brief review of the economy over the past six months lends some interesting
insights into the performance of financial markets. The U.S. economy grew at an
astonishing annualized rate of 7.3% in the fourth quarter of 1999 and 5.4% in
the first quarter of 2000, as measured by real Gross Domestic Product. The pace
of this wealth-induced growth, combined with other inflation concerns, has led
the Federal Reserve to raise the Federal Funds rate by 0.75% since November to
its current 6.00%, and the end is not yet in sight. Still, consumers remained
confident about the economy, and economic statistics continued to show strength.
Equity markets experienced significant volatility but ended positively despite
rising interest rates. Often extreme, this volatility plagued all facets of the
stock market during the first four months of 2000, but was most noticeable in
the technology sector. Domestic bonds produced positive returns despite interest
rate increases by the Federal Reserve, and short-term interest rates moved
higher than long-term interest rates.
The Fund and its advisor, Aeltus Investment Management, Inc., strive to
continuously improve its products and services. Here are some highlights of our
recent efforts:
o AETNA PRINCIPAL PROTECTION FUND II enjoyed a successful offering, as
investors committed nearly $130 million to the fund; AETNA PRINCIPAL
PROTECTION FUND III is in its offering period until May 30, 2000. These
innovative total-return funds offer investors downside protection - while
providing investors the opportunity for upside market potential.
o On December 22, 1999, Aeltus announced the acquisition of a minority equity
interest in ELIJAH ASSET MANAGEMENT, LLC (EAM), headquartered in San
Francisco. EAM is known as a skilled manager of specialized growth and
technology funds.
o AETNA TECHNOLOGY FUND was launched on March 1, 2000. Sub-advised by EAM,
this fund seeks long-term capital appreciation by investing primarily in
common stocks of companies in the technology sector.
o Your Board of Directors considered and agreed to submit to you a proposal
(proxy) to LIQUIDATE FOUR FUNDS: Aetna Mid Cap Fund, Aetna Real Estate
Securities Fund, Aetna High Yield Fund and Aetna Index Plus Bond Fund.
Proxy materials will be mailed to those of you in these funds on or about
May 30, 2000, with a proposed liquidation date on or before September 1,
2000.
o On March 31, five of our funds were recognized by Morningstar, Inc. with
four and five star ratings.
This is merely a sample of some of the ways we have set out to fulfill our
commitment to bringing you our best in products and services. Again, we very
much appreciate and value your continued confidence in our funds and in Aeltus.
Sincerely,
/s/ J. Scott Fox
J. Scott Fox
President
Aetna Series Fund, Inc.
A prospectus containing more complete information including charges and expenses
is available from your financial advisor, at www.aetnafunds.com, or by calling
800-238-6263, option 2. Read the prospectus carefully before investing.
1
<PAGE>
Aetna Principal Protection Fund I
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Aetna Principal Lehman Brothers
Protection I Aggregate S&P 500
(Class A) Bond Index Index
<S> <C> <C> <C>
10/7/1999 10,000 10,000 10,000
10/99 10,139 10,094 10,288
10,362 10,012 10,557
04/00 10,482 10,238 11,027
</TABLE>
[END PLOT POINTS]
Aetna Principal Protection Fund II
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Aetna Principal Lehman Brothers
Protection II Aggregate S&P 500
(Class A) Bond Index Index
<S> <C> <C> <C>
12/21/1999 10,000 10,000 10,000
9,760 9,970 9,843
04/00 9,850 10,194 10,283
</TABLE>
[END PLOT POINTS]
<TABLE>
<CAPTION>
Average Annual Total Returns
for the period ended April 30, 2000*
-----------------------------------------
Principal Principal
Protection Protection
Fund I Fund II
-----------------------------------------
Inception Inception
-----------------------------------------
<S> <C> <C>
Class A:
POP (1) -0.16% -6.16%
NAV (2) 4.82% -1.50%
-----------------------------------------
Class B:
w/CDSC (3) -0.70% -6.67%
NAV 4.30% -1.78%
-----------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Investment
return and principal of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
See Definition of Terms. 3
<PAGE>
AETNA PRINCIPAL PROTECTION FUND I & II
HOW DID THE FUNDS PERFORM DURING THE PERIOD?
Aetna Principal Protection Fund I (PPF I) Class A shares generated a 3.38% total
return, net of fund expenses, for the six month period ended April 30, 2000.
Aetna Principal Protection Fund II (PPF II) Class A shares generated a -1.50%
total return, net of fund expenses, for the period from December 21, 1999 to
April 30, 2000. The benchmarks, Standard & Poor's (S&P) 500 Index(a) and Lehman
Brothers Aggregate Bond Index(b), returned 7.20% and 1.42%, respectively, for
the six month period, and returned 2.83% and 1.94%, respectively, for the period
from December 21, 1999 to April 30, 2000.
Currently closed to new deposits, the Funds invest primarily in common stocks
and bonds in varying proportions in response to market fluctuations. The
allocation, based on net assets as of April 30, 2000, was 80% equities and 20%
fixed income for PPF I and 67% equities and 33% fixed income for PPF II. This
strategy is complemented by a guarantee provided by MBIA Insurance Corporation
that the market value of an investor's assets will not be less than their market
value on the last day of each Fund's Offering Period if the assets are held to
each Fund's maturity.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUNDS?
The economy expanded at a 7.3% annual pace in the fourth quarter of 1999 and
continued to grow at a healthy pace of 5.4% in the first quarter of 2000, as
measured by real Gross Domestic Product. This wealth-induced growth, combined
with inflation concerns (increased labor costs, high oil prices, continued tight
labor markets, and strong National Association of Purchasing Management prices
paid index results) has led to a gradual tightening strategy by the Federal Open
Market Committee. Since November, the Federal Funds rate was increased 75 basis
points to 6.00%, and the end of the tightening is not yet in sight. (One basis
point is equal to one hundredth of a percent, or 0.01%.) Despite the three rate
hikes by the Federal Reserve (the Fed), consumers continued to be confident
about the economy and economic statistics continued to show strength.
Over the past six months, equity markets experienced significant volatility but
ended up advancing despite the rise in interest rates. Equity performance, as
measured by the by the S&P 500 Index, returned 7.20% for the period. After
strong performance during the last two months of 1999, volatility plagued the
S&P 500 Index during the first four months of 2000. The S&P 500 Index ended the
four month period by returning -0.78%. Despite the volatility, year-to-date
sales of mutual funds remained strong. During the first three months of the new
year, Financial Research Corporation estimated that mutual funds received
inflows of $68.1 billion, compared to $50.9 billion for the same period a year
ago.
The domestic bond market, as measured by the Lehman Brothers Aggregate Bond
Index, produced a total return of 1.42% during the six month period, despite the
Fed's rate increases. The big story in Treasuries was not the change in yield
levels as much as the violent change in the shape of the yield curve, from a
positively sloped curve to an inverted one. (An inverted yield curve occurs when
short-term interest rates are higher than long-term interest rates.) While
30-year bond yields declined 20 basis points, two-year bond yields increased 89
basis points. This inversion is due not only to the lower supply of Treasuries
in the long end (much of the Treasuries buyback program will be concentrated in
the long end), but also reflects a Treasury market that expects the Fed to
continue raising the Fed Funds rate in order to slow the economy.
There was little good news in spread products as swap spreads widened due to a
myriad of factors. The reduction in government debt, high levels of private
debt, increased volatility, the resurgence of leveraged buyout risk and talk of
loss of government support for government sponsored agencies, all contributed to
drive spreads throughout the bond markets to levels not seen in ten years.
WHAT INVESTMENTS INFLUENCED THE FUNDS' PERFORMANCE OVER THE PAST SIX MONTHS?
The Funds' overall performance is influenced by the contribution of the
underlying equity and fixed income components in addition to market volatility.
4 See Definition of Terms.
<PAGE>
The equity component of PPF I outperformed the S&P 500 Index during the period,
however, since inception PPF II underperformed the S&P 500 Index. The
quantitative model used to manage these Funds provided good discrimination
between those stocks with high relative returns and those with low relative
returns. The model's factors relating to equity analyst earnings estimates and
price momentum were particularly effective. The model's P/E factor, like other
value factors, performed poorly during the time period. The average return of
the 10% of stocks in the S&P 500 Index with the lowest P/E was lower than the
average return of the 10% of stocks with the highest P/E by 40%. (The
Price/Earnings multiple, or P/E, is calculated by dividing the price of one
share by the earnings per share generated by the firm. A measure of the
attractiveness of a particular security, the P/E ratio gives investors an idea
of how much they are paying for earning power.)
The Funds benefited from the large number of well-ranked stocks in the
technology sector such as Cisco, Texas Instruments and Yahoo. (Technology had
the highest absolute return during the period.) Conversely, there were very few
well-ranked stocks in the consumer non-durables sector. Our resulting
underweight in that sector added to performance as consumer non-durables had the
lowest absolute returns during the period. The Funds were hurt by poor model
security selection in the consumer services sector due to an underweight in
Disney.
The fixed income component, our overweight position in Treasuries and agencies
underperformed the Lehman Brothers Aggregate Bond Index due to a widening in
spread products and increases in the Federal Funds rate which impacted the short
end of the yield curve.
At the overall Fund level, volatility in both equity and fixed income markets
hurt performance. The daily asset mix of the Funds is driven by a complex model
that works best in periods of low volatility. The model performs less well in
markets with rapid price increases and declines. Such volatility causes us to
sell equities when the market dips and buy into rising markets. Recent market
movements have caused an inordinate number of these allocation trades to occur,
thereby negatively impacting performance.
WHAT IS YOUR OUTLOOK GOING FORWARD?
The impact of the five Fed interest rate hikes since June 1999 and the prospect
of additional Fed intervention could weigh heavily on the equity markets over
the next few months. As investors, we are faced with these questions: When will
the economy begin to slow, and what will be the impact on the equity markets? If
the Fed has done its job correctly, the slowdown should be modest. Under these
conditions, equity markets could continue to show strength, but perhaps at a
slower pace and with a broader participation in the number of stocks than prior
years. Many of the factors that have positively influenced the economy and the
equity market are still intact. Those factors include low inflation,
productivity improvements, technological advances, and global economic strength.
This strong foundation should continue to have a positive effect on the
direction of the stock market. On the bond side, we expect the yield curve to
remain inverted until it appears likely the Fed is nearing its goal.
Going forward, the biggest risk to this strategy is continued extreme volatility
in the equity markets (specifically, the S&P 500 Index) which tends to increase
the number of trades into and out of holdings and erode performance.
See Definition of Terms. 5
<PAGE>
PRINCIPAL PROTECTION FUND I:
<TABLE>
<CAPTION>
--------------------------------------------------------------------
ASSET ALLOCATION: % OF ECONOMIC
NET ASSETS NOTIONAL VALUE* EXPOSURE*
ASSET CLASS 04/30/00 OF FUTURES 04/30/00
--------------------------------------------------------------------
<S> <C> <C> <C>
Large Cap Stocks 72% 5% 77%
Mid Cap Stocks 1% -- 1%
International Stocks 2% -- 2%
Fixed Income 19% -- 19%
Cash Equivalents 6% (5)% 1%
--------------------------------------------
100% -- 100%
============================================
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
----------------------------------------------------------------------
<S> <C> <C> <C>
Basic Materials 2.5% 2.3% 0.2%
Commercial Services 0.9% 1.2% (0.3)%
Consumer Discretionary 9.4% 11.1% (1.7)%
Consumer Non-Discretionary 3.8% 5.2% (1.4)%
Energy 7.7% 6.1% 1.6%
Finance 11.7% 12.8% (1.1)%
Healthcare 8.4% 10.4% (2.0)%
Manufacturing 10.0% 10.0% --
Technology 37.3% 31.9% 5.4%
Utilities 8.3% 9.0% (0.7)%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
------------------------------------------------
<S> <C>
Intel Corp. 3.8%
Cisco Systems, Inc. 3.7%
General Electric Co. 3.1%
Microsoft Corp. 2.6%
Exxon Mobil Corp. 2.4%
Oracle Corp. 2.0%
Citigroup Inc. 1.5%
Wal-Mart Stores, Inc. 1.5%
Hewlett Packard Co. 1.2%
International Business Machines Corp. 1.2%
</TABLE>
6 See Definition of Terms.
<PAGE>
PRINCIPAL PROTECTION FUND II:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
% OF ECONOMIC
ASSET ALLOCATION: NET ASSETS NOTIONAL VALUE* EXPOSURE*
ASSET CLASS 04/30/00 OF FUTURES 04/30/00
---------------------------------------------------------------------
<S> <C> <C> <C>
Large Cap Stocks 60% 4% 64%
Mid Cap Stocks 1% -- 1%
International Stocks 2% -- 2%
Fixed Income 32% -- 32%
Cash Equivalents 5% (4)% 1%
--------------------------------------------
100% -- 100%
============================================
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
--------------------------------------------------------------------
<S> <C> <C> <C>
Basic Materials 2.7% 2.3% 0.4%
Commercial Services 1.0% 1.2% (0.2)%
Consumer Discretionary 9.2% 11.1% (1.9)%
Consumer Non-Discretionary 3.9% 5.2% (1.3)%
Energy 7.7% 6.1% 1.6%
Finance 11.8% 12.8% (1.0)%
Healthcare 8.3% 10.4% (2.1)%
Manufacturing 10.0% 10.0% --
Technology 37.1% 31.9% 5.2%
Utilities 8.3% 9.0% (0.7)%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
-------------------------------------------------
<S> <C>
Intel Corp. 3.1%
Cisco Systems, Inc. 3.0%
General Electric Co. 2.5%
Microsoft Corp. 2.2%
Exxon Mobil Corp. 2.0%
Oracle Corp. 1.7%
Citigroup Inc. 1.3%
Wal-Mart Stores, Inc. 1.2%
Hewlett Packard Co. 1.0%
International Business Machines Corp. 1.0%
</TABLE>
* Notional value refers to the economic value at risk or the exposure to the
financial instruments underlying the options and futures positions. Economic
exposure reflects the Fund's exposure to both changes in the value of the
portfolio of investments as well as the financial instruments underlying the
options and futures positions.
The opinions expressed reflect those of the portfolio manager only through April
30, 2000. The manager's opinions are subject to change at any time based on
market and other conditions. The composition, industries and holdings of each
Fund is subject to change.
See Definition of Terms. 7
<PAGE>
AETNA PRINCIPAL PROTECTION FUND III
ACCUMULATION PERIOD
Aetna Principal Protection Fund III Class A and Class B is being offered from
March 1, 2000 through May 31, 2000 as a funding option issued by Aetna Series
Fund, Inc. Fund assets will be invested entirely in money market instruments
prior to May 31, 2000. After that date, the Fund will allocate its investments
between equities and fixed income securities in proportions that are intended to
help the Fund attain its investment objective.
8 See Definition of Terms.
<PAGE>
--------------------
DEFINITION OF TERMS
--------------------
(a) The S&P 500 is the Standard & Poor's 500 Index. Performance is calculated
on a total return basis and dividends are reinvested, as reported by Frank
Russell Company.
(b) The Lehman Brothers Aggregate Bond Index is an unmanaged index and is
composed of securities from Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index and the Asset-Backed Securities Index.
The unmanaged indices described above are not available for individual
investment.
9
<PAGE>
PRINCIPAL PROTECTION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
PRINCIPAL PROTECTION FUND I
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
COMMON STOCKS (75.5%)
AIR TRANSPORT (0.2%)
AMR Corp. + .......................... 800 $ 27,250
Delta Air Lines, Inc. ................ 1,100 58,025
FedEx Corporation + .................. 2,300 86,681
Southwest Airlines Co. ............... 4,300 93,257
---------------
265,213
---------------
ALUMINUM (0.2%)
Alcan Aluminum Ltd. .................. 2,600 85,150
Alcoa Inc. ........................... 3,100 201,113
Reynolds Metals Co. .................. 900 59,850
---------------
346,113
---------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. ................. 1,000 42,063
Briggs & Stratton Corp. .............. 200 7,675
Cooper Tire & Rubber Co. ............. 300 4,050
Genuine Parts Co. .................... 1,300 34,125
Snap-On, Inc. ........................ 700 18,506
Stanley Works (The) .................. 800 23,600
---------------
130,019
---------------
AUTOMOTIVE (1.2%)
Dana Corp. ........................... 1,900 57,713
Delphi Automotive Systems Corp. ...... 7,700 147,263
Eaton Corp. .......................... 700 58,800
Ford Motor Co. ....................... 11,800 645,312
General Motors Corp. + ............... 9,500 889,437
Harley-Davidson, Inc. ................ 2,500 99,531
Johnson Controls, Inc. ............... 900 56,981
TRW, Inc. ............................ 1,200 70,200
---------------
2,025,237
---------------
BANKS AND THRIFTS (2.6%)
Bank of America Corp. ................ 7,800 382,200
Bank of New York Co., Inc. ........... 6,700 275,119
Bank One Corp. ....................... 100 3,050
BB&T Corp. ........................... 1,500 39,938
Chase Manhattan Corp. ................ 8,000 576,500
Comerica, Inc. ....................... 1,600 67,800
Fifth Third Bancorp .................. 2,600 164,125
First Union Corp. .................... 8,800 280,500
Firstar Corp. ........................ 4,100 101,987
Fleet Boston Financial Corp. ......... 8,800 311,850
Golden West Financial Corp. .......... 1,600 54,600
Huntington Bancshares Inc. ........... 1,200 21,900
J.P. Morgan & Co. .................... 2,300 295,262
Mellon Financial Corp. ............... 4,600 147,775
Northern Trust Corp. ................. 2,200 141,075
Old Kent Financial Corp. ............. 800 24,100
PNC Bank Corp. ....................... 2,400 104,700
Regions Financial Corp. .............. 200 4,088
SouthTrust Corp. ..................... 800 19,100
State Street Corp. ................... 1,600 155,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
BANKS AND THRIFTS (CONTINUED)
Summit Bancorp ....................... 1,600 $ 40,600
Suntrust Banks, Inc. ................. 2,700 137,025
Synovus Financial Corp. .............. 2,600 48,263
U.S. Bancorp ......................... 3,500 71,094
Union Planters Co. ................... 900 25,481
Wachovia Corp. ....................... 1,700 106,569
Washington Mutual, Inc. .............. 100 2,556
Wells Fargo & Co. .................... 16,200 665,212
---------------
4,267,469
---------------
BIOTECH AND MEDICAL PRODUCTS (1.0%)
Alza Corp. + ......................... 1,100 48,469
Amgen, Inc. + ........................ 9,300 520,800
Bard (C.R.) Inc. ..................... 700 30,494
Bausch & Lomb, Inc. .................. 800 48,300
Becton, Dickinson & Co. .............. 2,200 56,375
Biogen, Inc. + ....................... 1,400 82,337
Biomet, Inc. ......................... 1,000 35,688
Boston Scientific Corp. + ............ 100 2,650
Guidant Corp. + ...................... 2,700 154,912
Mallinckrodt Inc. .................... 600 16,125
Medtronic, Inc. + .................... 11,600 602,475
Saint Jude Medical, Inc. + ........... 300 9,356
Watson Pharmaceuticals, Inc. + ....... 1,100 49,431
---------------
1,657,412
---------------
CHEMICALS (0.6%)
Dow Chemical Co. ..................... 2,200 248,600
Du Pont (E.I.) de Nemours ............ 9,500 450,656
Eastman Chemical Co. ................. 1,000 52,313
Rohm & Haas Co. ...................... 2,200 78,375
Union Carbide Corp. .................. 1,400 82,600
---------------
912,544
---------------
COMMERCIAL SERVICES (0.3%)
Deluxe Corp. ......................... 600 15,113
Interpublic Group of Co., Inc. (The) . 3,000 123,000
Omnicom Group, Inc. .................. 1,900 173,019
Paychex, Inc. ........................ 2,500 131,562
RR Donnelley & Sons Co. .............. 1,300 27,625
Sabre Holdings Corporation ........... 1,373 47,969
Young And Rubicam, Inc. + ............ 900 50,119
---------------
568,407
---------------
COMPUTERS (4.9%)
Apple Computer, Inc. + ............... 2,100 260,531
Cabletron Systems, Inc. + ........... 2,100 48,038
Compaq Computer Corp. ................ 15,300 447,525
Dell Computer Corp. + ................ 24,900 1,248,112
Gateway, Inc. + ...................... 2,600 143,650
Hewlett Packard Co. .................. 14,600 1,971,000
International Business Machines Corp. 17,600 1,964,600
NCR Corp. + .......................... 1,000 38,625
Sun Microsystems, Inc. + ............. 20,100 1,847,944
</TABLE>
10 See Notes to Portfolio of Investments
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
COMPUTERS (CONTINUED)
Unisys Corp. + ....................... 3,300 $ 76,519
---------------
8,046,544
---------------
CONGLOMERATE AND AEROSPACE (3.7%)
Boeing Co. ........................... 8,000 317,500
Crane Co. ............................ 700 18,813
General Dynamics Corp. ............... 2,000 117,000
General Electric Co. ................. 32,000 5,032,000
Goodrich (B.F.) Co. .................. 400 12,750
Loews Corp. .......................... 500 27,562
National Service Industries, Inc. .... 400 8,600
Northrop Grumman Corp. ............... 1,000 70,875
Perkin-Elmer Inc. + .................. 600 32,850
Textron, Inc. ........................ 1,600 99,100
United Technologies Corp. ............ 4,600 286,062
---------------
6,023,112
---------------
CONSUMER FINANCE (0.9%)
Capital One Financial Corp. .......... 2,000 87,500
Countrywide Credit Industries, Inc. .. 100 2,762
Federal National Mortgage Association 10,000 603,125
Freddie Mac Corp. .................... 6,700 307,781
Household International, Inc. ........ 4,700 196,225
MBNA Corp. ........................... 6,700 177,969
Ryder System, Inc. ................... 700 15,531
SLM Holding Corp. .................... 1,500 46,969
---------------
1,437,862
---------------
CONSUMER PRODUCTS (0.8%)
Alberto-Culver Co. ................... 500 11,813
Avon Products, Inc. .................. 2,500 103,750
Clorox Co. ........................... 1,000 36,750
Colgate-Palmolive Co. ................ 5,600 319,900
Gillette Co. ......................... 4,500 166,500
International Flavors & Fragrances,
Inc.................................. 1,000 34,437
Kimberly-Clark Corp. ................. 5,400 313,537
Procter & Gamble Co. ................. 6,000 357,750
---------------
1,344,437
---------------
CONSUMER SERVICES (0.4%)
Cendant Corp. + ...................... 7,300 112,694
Darden Restaurants, Inc. ............. 1,400 25,813
H&R Block, Inc. ...................... 900 37,631
Harrah's Entertainment, Inc. + ....... 1,400 28,788
Marriott International, Inc. ......... 2,500 80,000
McDonald's Corp. ..................... 5,600 213,500
Mirage Resorts, Inc. + ............... 1,700 34,637
Tricon Global Restaurants, Inc. + .... 800 27,300
Wendy's International, Inc. .......... 1,300 29,087
---------------
589,450
---------------
CONSUMER SPECIALTIES (0.0%)
Brunswick Corp. ...................... 900 17,269
Hasbro, Inc. ......................... 2,000 31,875
Jostens, Inc. ........................ 300 7,406
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
CONSUMER SPECIALTIES (CONTINUED)
Mattel, Inc. ......................... 100 $ 1,225
---------------
57,775
---------------
DATA AND IMAGING SERVICES (12.1%)
Adobe Systems, Inc. .................. 1,500 181,406
America Online, Inc. + ............... 22,300 1,333,819
Autodesk, Inc. ....................... 800 30,700
Automatic Data Processing, Inc. ...... 6,100 328,256
BMC Software, Inc. + ................. 2,600 121,713
Cisco Systems, Inc. + ................ 86,600 6,003,816
Citrix Systems, Inc. + ............... 1,900 116,019
Computer Associates International,
Inc.................................. 8,100 452,081
Computer Sciences Corp. + ............ 1,600 130,500
Compuware Corp. + .................... 4,000 50,250
Eastman Kodak Co. .................... 2,700 151,031
Electronic Data Systems Corp. ........ 4,600 316,250
EMC Corp. + .......................... 9,900 1,375,481
First Data Corp. ..................... 3,400 165,537
Microsoft Corp. + .................... 61,300 4,275,675
Network Appliance, Inc. + ............ 3,900 288,356
Novell, Inc. + ....................... 2,500 49,063
Oracle Corp. + ....................... 41,400 3,309,412
Parametric Technology Co. + .......... 3,300 26,916
Peoplesoft, Inc. + ................... 2,400 33,450
Seagate Technology, Inc. + ........... 1,900 96,544
VERITAS Software Corp. + ............. 3,600 386,156
Yahoo! Inc. + ........................ 5,100 664,275
---------------
19,886,706
---------------
DISCRETIONARY RETAIL (4.1%)
AutoZone, Inc. + ..................... 1,600 36,700
Bed Bath & Beyond, Inc. + ............ 1,500 55,031
Best Buy Co., Inc. + ................. 2,200 177,650
Circuit City Stores, Inc. ............ 2,800 164,675
Costco Wholesale Corp. + ............. 3,800 205,438
Dollar General Corp. ................. 1,500 34,313
Federated Department Stores, Inc. + .. 2,800 95,200
Gap, Inc. ............................ 10,100 371,175
Home Depot, Inc. ..................... 33,700 1,889,306
J.C. Penney Co., Inc. ................ 100 1,381
Kmart Corp. + ........................ 5,900 47,938
Kohl's Corp. + ....................... 2,800 134,400
Lowe's Co., Inc. ..................... 3,200 158,400
May Department Stores Co. ............ 3,400 93,500
Nordstrom, Inc. ...................... 800 22,250
Sears, Roebuck & Co. ................. 5,200 190,450
Staples, Inc. + ...................... 2,100 40,031
Tandy Corp. .......................... 2,100 119,700
Target Corporation ................... 4,000 266,250
The Limited, Inc. .................... 2,300 103,931
TJX Companies, Inc. .................. 2,900 55,644
Toys "R" Us, Inc. + .................. 100 1,525
</TABLE>
See Notes to Portfolio of Investments 11
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
DISCRETIONARY RETAIL (CONTINUED)
Wal-Mart Stores, Inc. ................ 43,500 $2,408,812
---------------
6,673,700
---------------
DIVERSIFIED FINANCIAL SERVICES (2.0%)
American Express Co. ................. 4,300 645,269
Citigroup Inc. ....................... 42,800 2,543,925
Providian Financial Corp. ............ 1,200 105,675
---------------
3,294,869
---------------
DRUGS (5.3%)
Abbott Laboratories .................. 15,100 580,406
Allergan, Inc. ....................... 1,500 88,313
American Home Products Corp. ......... 5,900 331,506
Baxter International, Inc. ........... 2,400 156,300
Bristol-Myers Squibb Co. ............. 19,300 1,012,044
Eli Lilly & Co. ...................... 5,300 409,756
Johnson & Johnson .................... 6,800 561,000
Merck & Co., Inc. .................... 22,800 1,584,600
Pfizer, Inc. ......................... 37,800 1,592,325
Pharmacia Corporation ................ 12,207 609,587
Schering Plough ...................... 14,400 580,500
Warner Lambert Co. ................... 10,900 1,240,556
---------------
8,746,893
---------------
ELECTRIC UTILITIES (1.3%)
AES Corp. + .......................... 1,700 152,894
Ameren Corp. ......................... 1,200 44,025
American Electric Power Co. .......... 2,300 84,237
Carolina Power & Light Co. ........... 1,700 62,156
Central & South West Corp. ........... 2,100 45,544
Cinergy Corp. ........................ 1,900 50,825
Consolidated Edison, Inc. ............ 2,300 80,931
Constellation Energy Group ........... 1,200 39,675
Dominion Resources, Inc. ............. 2,489 112,005
DTE Energy Co. ....................... 1,300 42,412
Duke Energy Corp. .................... 3,000 172,500
Edison International Inc. ............ 3,800 72,437
Entergy Corp. ........................ 2,400 61,050
FirstEnergy Corp. .................... 2,400 61,050
Florida Progress Corp. ............... 1,600 78,400
FPL Group, Inc. ...................... 1,700 76,819
GPU, Inc. ............................ 1,400 39,288
New Century Energies, Inc. ........... 1,400 45,675
Northern States Power Co. ............ 1,900 41,444
Peco Energy Co. ...................... 1,900 79,206
PG&E Corp. ........................... 5,100 132,281
Pinnacle West Capital Corp. .......... 1,000 35,125
PPL Corporation ...................... 1,300 31,038
Public Service Enterprise Group, Inc. 2,300 82,512
Reliant Energy Inc. .................. 2,800 74,550
Southern Co. ......................... 5,700 142,144
Texas Utilities Co. .................. 2,900 97,694
Unicom Corp. ......................... 2,200 87,450
---------------
2,125,367
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
ELECTRICAL MACHINERY AND INSTRUMENTS (0.3%)
Lexmark International Group, Inc. + .. 1,100 $ 129,800
PE Corp-PE Biosystems Group .......... 1,800 108,000
Pitney Bowes, Inc. ................... 2,600 106,275
Rockwell International Corp. ......... 1,700 66,938
Tektronix, Inc. ...................... 400 23,150
Xerox Corp. .......................... 3,100 81,956
---------------
516,119
---------------
ELECTRONIC MEDIA (1.2%)
CBS Corp. + .......................... 67 3,936
Comcast Corp. + ...................... 3,900 156,244
Mediaone Group, Inc. + ............... 2,600 196,625
Time Warner, Inc. .................... 6,300 566,606
Viacom, Inc. + ....................... 3,000 163,125
Walt Disney Co. (The) + .............. 20,100 870,581
---------------
1,957,117
---------------
FOOD AND BEVERAGE (1.7%)
Anheuser-Busch Co., Inc. ............. 4,600 324,587
Archer-Daniels-Midland Co. ........... 6,000 59,625
Bestfoods ............................ 2,900 145,725
Brown-Forman Corp. + ................. 500 27,281
Coca-Cola Co. ........................ 12,000 564,750
Coca-Cola Enterprises, Inc. .......... 4,300 91,644
Conagra, Inc. ........................ 4,800 90,600
Coors (Adolph) Co. ................... 400 20,400
Fortune Brands, Inc. ................. 1,000 25,000
General Mills, Inc. .................. 3,000 109,125
Heinz (H.J.) Co. ..................... 3,500 119,000
Hershey Foods Corp. .................. 1,500 68,063
Kellogg Co. .......................... 3,200 78,200
PepsiCo, Inc. ........................ 13,300 487,944
Quaker Oats Co. ...................... 1,400 91,262
Ralston-Ralston Purina Group ......... 1,400 24,763
Sara Lee Corp. ....................... 8,000 120,000
Seagram Co. Ltd. ..................... 2,200 118,800
Unilever NV .......................... 5,200 236,925
Wrigley (Wm.) Jr. Co. + .............. 1,000 72,375
---------------
2,876,069
---------------
FOOD AND DRUG RETAIL (0.6%)
Albertson's, Inc. .................... 2,100 68,381
CVS Corp. ............................ 3,600 156,600
Great Atlantic & Pacific Tea Co., Inc. 300 5,494
Kroger Co. (The) + ................... 4,400 81,675
Longs Drug Stores, Inc. .............. 300 6,975
Safeway, Inc. + ...................... 4,300 189,737
SUPERVALU, Inc. ...................... 1,300 26,894
Sysco Corp. .......................... 3,300 124,163
Walgreen Co. ......................... 9,300 261,562
---------------
921,481
---------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.5%)
Ball Corp. ........................... 300 9,450
Bemis Co., Inc. ...................... 700 25,769
</TABLE>
12 See Notes to Portfolio of Investments
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
FOREST PRODUCTS AND BUILDING MATERIALS (CONTINUED)
Boise Cascade Corp. .................. 500 $ 16,281
Champion International Corp. ......... 1,200 78,900
Fort James Corp. ..................... 1,100 26,331
Georgia-Pacific Corp. ................ 1,900 69,825
International Paper Co. .............. 3,400 124,950
Louisiana-Pacific Corp. .............. 1,400 18,725
Masco Corp. .......................... 3,700 83,019
Mead Corp. ........................... 1,100 38,294
Owens Corning ........................ 700 12,731
Owens-Illinois, Inc. + ............... 800 10,800
Pactiv Corp. + ....................... 2,000 16,375
Potlatch Corp. ....................... 300 11,831
Sealed Air Corp. + ................... 800 44,500
Temple-Inland Inc. ................... 500 25,063
Vulcan Materials Co. ................. 900 39,431
Westvaco Corp. ....................... 900 27,787
Weyerhaeuser Co. ..................... 1,900 101,531
Willamette Industries, Inc. .......... 1,300 49,644
---------------
831,237
---------------
GAS UTILITIES (0.6%)
Coastal Corp. (The) .................. 2,200 110,412
Columbia Energy Group ................ 800 50,200
Eastern Enterprises .................. 200 12,175
El Paso Energy Corp. ................. 1,900 80,750
Enron Corp. .......................... 6,500 452,969
NICOR, Inc. .......................... 500 16,937
ONEOK, Inc. .......................... 300 7,575
People's Energy Corp. ................ 200 6,213
Sempra Energy ........................ 2,400 44,550
Williams Co., Inc. (The) ............. 3,700 138,056
---------------
919,837
---------------
HEALTH SERVICES (0.4%)
Cardinal Health, Inc. ................ 2,300 126,644
Columbia/HCA Healthcare Corp. ........ 5,800 164,937
IMS Health, Inc. ..................... 3,200 54,600
Shared Medical Systems Corp. ......... 200 8,288
Tenet Healthcare Corp. + ............. 2,900 73,950
UnitedHealth Group Incorporated ...... 1,800 120,037
Wellpoint Health Networks, Inc. + .... 700 51,625
---------------
600,081
---------------
HEAVY MACHINERY (0.2%)
Caterpillar, Inc. .................... 2,000 78,875
Cummins Engine Co., Inc. ............. 500 17,781
Deere & Co. .......................... 2,400 96,900
NACCO Industries, Inc. ............... 100 4,488
Navistar International Corp. + ....... 700 24,500
PACCAR, Inc. ......................... 800 38,050
---------------
260,594
---------------
HOUSING AND FURNISHINGS (0.1%)
Centex Corp. ......................... 900 21,712
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
HOUSING AND FURNISHINGS (CONTINUED)
Kaufman & Broad Home Corp. ........... 300 $ 5,775
Leggett & Platt, Inc. ................ 2,200 47,025
Newell Rubbermaid Inc. ............... 100 2,519
Pulte Corp. .......................... 400 8,600
Tupperware Corp. ..................... 500 9,438
Whirlpool Corp. ...................... 800 52,100
---------------
147,169
---------------
INDUSTRIAL SERVICES (0.0%)
Fluor Corp. .......................... 800 26,850
---------------
INSURANCE (1.8%)
AFLAC, Inc. .......................... 2,300 112,269
Allstate Corp. (The) ................. 3,700 87,412
American General Corp. ............... 2,500 140,000
American International Group, Inc. ... 15,100 1,656,281
Aon Corp. ............................ 1,100 29,769
Chubb Corp. .......................... 1,800 114,525
CIGNA Corp. .......................... 2,200 175,450
Cincinnati Financial Corp. ........... 1,700 68,531
Conseco, Inc. ........................ 700 3,806
Hartford Financial Services Group,
Inc.................................. 1,400 73,063
Jefferson-Pilot Corp. ................ 1,100 73,219
Lincoln National Corp. ............... 2,100 73,106
Marsh & McLennan Co., Inc. ........... 2,500 246,406
MBIA, Inc. ........................... 600 29,663
MGIC Investment Corp. ................ 1,500 71,719
Progressive Corp. .................... 100 6,544
St. Paul Co., Inc. ................... 1,400 49,875
Torchmark Corp. ...................... 1,300 32,581
UnumProvident Corp. .................. 100 1,700
---------------
3,045,919
---------------
INVESTMENT SERVICES (1.5%)
Bear Stearns Co., Inc. (The) ......... 1,705 73,102
Charles Schwab Corp. ................. 7,500 333,750
Franklin Resources, Inc. ............. 2,600 83,850
Lehman Brothers Holdings Inc. ........ 1,600 131,300
Merrill Lynch & Co., Inc. ............ 4,400 448,525
Morgan Stanley Dean Witter & Co. ..... 16,800 1,289,400
Paine Webber Group Inc. .............. 2,000 87,750
T. Rowe Price & Associates ........... 1,100 41,937
---------------
2,489,614
---------------
MAJOR TELECOMMUNICATIONS (5.0%)
ALLTEL Corp. ......................... 2,800 186,550
AT&T Corp. ........................... 31,300 1,461,319
Bell Atlantic Corp. .................. 15,200 900,600
BellSouth Corp. ...................... 18,300 890,981
CenturyTel, Inc. ..................... 700 17,150
GTE Corp. ............................ 9,500 643,625
MCI Worldcom, Inc. + ................. 27,750 1,260,891
Nextel Communications, Inc. + ........ 3,300 361,144
SBC Communications, Inc. ............. 33,200 1,454,575
Sprint Corp. ......................... 7,900 485,850
</TABLE>
See Notes to Portfolio of Investments 13
<PAGE>
PRINCIPAL PROTECTION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
PRINCIPAL PROTECTION FUND I (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
MAJOR TELECOMMUNICATIONS (CONTINUED)
Sprint PCS + ......................... 3,600 $ 198,000
U.S. WEST, Inc. ...................... 4,700 334,581
---------------
8,195,266
---------------
MISCELLANEOUS METALS (0.1%)
Barrick Gold Corp. ................... 1,700 28,581
Freeport-McMoRan Copper & Gold, Inc. + 1,300 12,513
Inco Ltd. + .......................... 3,600 56,250
Newmont Mining Corp. ................. 700 16,406
Placer Dome, Inc. .................... 4,300 34,938
---------------
148,688
---------------
OIL (4.9%)
Amerada Hess Corp. ................... 1,200 76,350
Anadarko Petroleum Corp. ............. 1,900 82,531
Apache Corp. ......................... 1,500 72,656
Ashland Oil, Inc. .................... 800 27,300
Burlington Resources, Inc. ........... 2,600 102,213
Chevron Corp. ........................ 9,500 808,687
Conoco Inc. .......................... 5,100 126,862
Exxon Mobil Corp. .................... 50,600 3,930,987
Kerr-McGee Corp. ..................... 1,400 72,450
Occidental Petroleum Corp. ........... 5,400 115,763
Phillips Petroleum Co. ............... 3,300 156,544
Royal Dutch Petroleum Co. ............ 31,500 1,807,312
Sunoco Inc. .......................... 1,300 39,406
Texaco, Inc. ......................... 7,600 376,200
Union Pacific Resources Group Inc. ... 3,400 65,238
Unocal Corp. ......................... 3,600 116,325
USX-Marathon Group ................... 4,600 107,238
---------------
8,084,062
---------------
OIL SERVICES (0.4%)
McDermott International, Inc., ADR ... 600 4,875
Rowan Co., Inc. + .................... 1,300 36,319
Schlumberger, Ltd. ................... 5,000 382,812
Tosco Corp. .......................... 1,900 60,919
Transocean Sedco Forex Inc. .......... 2,155 101,285
---------------
586,210
---------------
PRINT MEDIA (0.4%)
Dow Jones & Co., Inc. ................ 1,300 84,337
Dun & Bradstreet Corp. ............... 1,800 54,225
Equifax, Inc. ........................ 600 14,663
Gannett Co., Inc. .................... 2,300 146,912
Harcourt General, Inc. ............... 700 26,163
Knight-Ridder, Inc. .................. 900 44,156
McGraw-Hill Co., Inc. ................ 2,100 110,250
Meredith Corp. ....................... 400 11,125
New York Times Co. ................... 2,500 102,969
Times Mirror Co. ..................... 600 58,538
Tribune Co. .......................... 2,400 93,300
---------------
746,638
---------------
PRODUCER GOODS (2.2%)
Allegheny Technologies Incorporated .. 900 21,769
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
PRODUCER GOODS (CONTINUED)
Avery Dennison Corp. ................. 1,200 $ 78,750
Cooper Industries, Inc. .............. 1,100 37,744
Corning, Inc. ........................ 3,500 691,250
Danaher Corp. ........................ 1,400 79,975
Dover Corp. .......................... 2,200 111,787
Ecolab, Inc. ......................... 1,300 50,781
Emerson Electric Co. ................. 3,600 197,550
FMC Corp. + .......................... 300 17,456
Grainger (W.W.), Inc. ................ 900 39,038
Honeywell International Inc. ......... 7,050 394,800
Ikon Office Solutions, Inc. .......... 1,600 9,400
Illinois Tool Works, Inc. ............ 2,500 160,156
Ingersoll-Rand Co. ................... 1,700 79,794
ITT Industries, Inc. ................. 1,100 34,719
Milacron, Inc. ....................... 200 3,650
Millipore Corp. ...................... 400 28,675
Minnesota Mining and Manufacturing Co. 3,600 311,400
Pall Corp. ........................... 1,300 29,006
Parker-Hannifin Corp. ................ 1,100 51,150
PPG Industries, Inc. ................. 1,800 97,875
Sherwin-Williams Co. ................. 1,600 39,800
Thermo Electron Corp. + .............. 2,000 38,750
Timken Co. ........................... 500 9,250
Tyco International Ltd. .............. 21,500 987,656
---------------
3,602,181
---------------
SEMICONDUCTORS AND ELECTRONICS (11.2%)
Adaptec, Inc. + ...................... 1,200 32,400
ADC Telecommunications, Inc. + ....... 4,100 249,075
Advanced Micro Devices Corp. + ....... 1,800 157,950
Altera Corp. + ....................... 1,800 184,050
Analog Devices, Inc. + ............... 4,800 368,700
Andrew Corp. + ....................... 1,200 35,325
Applied Materials, Inc. + ............ 11,200 1,140,300
Comverse Technology, Inc. + .......... 1,700 151,619
Conexant Systems, Inc. + ............. 2,800 167,650
Intel Corp. .......................... 48,800 6,188,450
KLA Instruments Corp. + .............. 2,300 172,213
Linear Technology Corp. .............. 3,400 194,225
LSI Logic Corp. + .................... 4,500 281,250
Lucent Technologies, Inc. ............ 31,100 1,934,031
Micron Technology, Inc. + ............ 2,400 334,200
Molex, Inc. .......................... 2,500 137,344
Motorola, Inc. ....................... 6,935 825,698
National Semiconductor Corp. + ....... 2,600 157,950
Nortel Networks Corp. ................ 14,000 1,585,500
QUALCOMM Inc. + ...................... 9,400 1,019,312
Scientific-Atlanta, Inc. ............. 2,400 156,150
Solectron Corp. + .................... 5,400 252,788
Tellabs, Inc. + ...................... 2,100 115,106
Teradyne, Inc. + ..................... 2,300 253,000
Texas Instruments, Inc. .............. 11,900 1,938,212
</TABLE>
14 See Notes to Portfolio of Investments.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
SEMICONDUCTORS AND ELECTRONICS (Continued)
Xilinx, Inc. + ....................... 4,500 $ 329,625
---------------
18,362,123
---------------
SPECIALTY CHEMICALS (0.1%)
Air Products and Chemicals, Inc. ..... 2,500 77,656
Engelhard Corp. ...................... 600 10,538
Grace (W.R.) & Co. + ................. 500 6,500
Great Lakes Chemical Corp. ........... 600 16,163
Praxair, Inc. ........................ 1,500 66,656
Sigma-Aldrich Corp. .................. 1,000 29,375
---------------
206,888
---------------
STEEL (0.0%)
Nucor Corp. .......................... 800 34,400
USX-US Steel Group, Inc. ............. 1,100 27,569
---------------
61,969
---------------
SURFACE TRANSPORT (0.2%)
Burlington Northern Santa Fe Corp. ... 3,800 91,675
Kansas City Southern Industries, Inc. 1,300 93,438
Union Pacific Corp. .................. 2,700 113,737
---------------
298,850
---------------
TEXTILES AND APPAREL (0.1%)
Liz Claiborne, Inc. .................. 700 32,419
Nike, Inc. ........................... 2,300 99,906
Reebok International Ltd. + .......... 500 8,500
Russell Corporation .................. 400 7,850
Springs Industries, Inc. ............. 200 8,213
---------------
156,888
---------------
TOBACCO (0.3%)
Nabisco Group Holdings Corp. ......... 3,200 41,200
Philip Morris Co., Inc. .............. 21,500 470,313
UST, Inc. ............................ 1,600 24,000
---------------
535,513
---------------
TOTAL COMMON STOCKS
(COST $108,617,736) 123,976,492
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
--------------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (18.7%)
Federal Home Loan Mortgage Corp., Zero
Coupon, 08/16/04..................... $ 8,133,000 6,009,555
U.S. Treasury Note, Zero
Coupon, 08/15/04..................... 32,728,000 24,758,405
---------------
TOTAL LONG-TERM BONDS AND NOTES 30,767,960
(COST $31,115,148) ---------------
SHORT-TERM INVESTMENTS (4.3%)
Federal Farm Credit
Bank, 5.88%, 05/01/00................ 6,424,000 6,424,000
U.S. Treasury Bill, 5.45%, 05/18/00 @ 400,000 398,971
U.S. Treasury Bill, 5.61%, 05/18/00 @ 200,000 199,470
---------------
TOTAL SHORT-TERM INVESTMENTS 7,022,441
(COST $7,022,441) ---------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
<S> <C>
TOTAL INVESTMENTS
(COST $146,755,325)(a) $161,766,893
OTHER ASSETS LESS LIABILITIES 2,481,181
---------------
TOTAL NET ASSETS $164,248,074
===============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$164,391,677. Unrealized gains and losses, based on identified tax cost at
April 30, 2000, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................. $ 7,357,012
Unrealized losses............................ (9,981,796)
-------------
Net unrealized loss......................... $(2,624,784)
=============
</TABLE>
Information concerning open futures contracts at April 30, 2000 is shown below:
<TABLE>
<CAPTION>
NO. OF NOTIONAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
------------ ------------- ------------- --------------
LONG CONTRACTS
----------------------
<S> <C> <C> <C> <C>
S&P 500 Index Futures... 24 $8,760,000 Jun 00 $ 122,691
========== ===========
</TABLE>
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at April 30, 2000.
Category percentages are based on net assets.
See Notes to Finanacial Statesments. 15
<PAGE>
PRINCIPAL PROTECTION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
PRINCIPAL PROTECTION FUND II
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
COMMON STOCKS (63.0%)
AIR TRANSPORT (0.2%)
AMR Corp. + ........................... 800 $ 27,250
Delta Air Lines, Inc. ................. 800 42,200
FedEx Corporation + ................... 1,900 71,606
Southwest Airlines Co. ................ 3,300 71,569
---------------
212,625
---------------
ALUMINUM (0.2%)
Alcan Aluminum Ltd. ................... 2,000 65,500
Alcoa Inc. ............................ 2,200 142,725
Reynolds Metals Co. ................... 400 26,600
---------------
234,825
---------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. .................. 600 25,237
Briggs & Stratton Corp. ............... 100 3,838
Cooper Tire & Rubber Co. .............. 200 2,700
Genuine Parts Co. ..................... 800 21,000
Snap-On, Inc. ......................... 400 10,575
Stanley Works (The) ................... 500 14,750
---------------
78,100
---------------
AUTOMOTIVE (1.0%)
Dana Corp. ............................ 1,100 33,413
Delphi Automotive Systems Corp. ....... 4,500 86,062
Eaton Corp. ........................... 400 33,600
Ford Motor Co. ........................ 7,200 393,750
General Motors Corp. + ................ 5,700 533,662
Harley-Davidson, Inc. ................. 1,500 59,719
Johnson Controls, Inc. ................ 700 44,319
TRW, Inc. ............................. 700 40,950
---------------
1,225,475
---------------
BANKS AND THRIFTS (2.2%)
Bank of America Corp. ................. 5,100 249,900
Bank of New York Co., Inc. ............ 4,100 168,356
Bank One Corp. ........................ 100 3,050
BB&T Corp. ............................ 900 23,963
Chase Manhattan Corp. ................. 4,900 353,106
Comerica, Inc. ........................ 900 38,138
Fifth Third Bancorp ................... 1,900 119,937
First Union Corp. ..................... 5,400 172,125
Firstar Corp. ......................... 2,500 62,187
Fleet Boston Financial Corp. .......... 5,400 191,362
Golden West Financial Corp. ........... 1,400 47,775
Huntington Bancshares Inc. ............ 1,200 21,900
J.P. Morgan & Co. ..................... 1,400 179,725
Mellon Financial Corp. ................ 2,800 89,950
Northern Trust Corp. .................. 1,300 83,362
Old Kent Financial Corp. .............. 500 15,063
PNC Bank Corp. ........................ 1,800 78,525
Regions Financial Corp. ............... 100 2,044
SouthTrust Corp. ...................... 900 21,488
State Street Corp. .................... 800 77,500
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
BANKS AND THRIFTS (CONTINUED)
Summit Bancorp ........................ 900 $ 22,838
Suntrust Banks, Inc. .................. 2,000 101,500
Synovus Financial Corp. ............... 1,500 27,844
U.S. Bancorp .......................... 2,200 44,687
Union Planters Co. .................... 800 22,650
Wachovia Corp. ........................ 1,200 75,225
Washington Mutual, Inc. ............... 100 2,556
Wells Fargo & Co. ..................... 9,900 406,519
---------------
2,703,275
---------------
BIOTECH AND MEDICAL PRODUCTS (0.8%)
Alza Corp. + .......................... 700 30,844
Amgen, Inc. + ......................... 5,700 319,200
Bard (C.R.) Inc. ...................... 400 17,425
Bausch & Lomb, Inc. ................... 400 24,150
Becton, Dickinson & Co. ............... 1,600 41,000
Biogen, Inc. + ........................ 800 47,050
Biomet, Inc. .......................... 600 21,413
Boston Scientific Corp. + ............. 100 2,650
Guidant Corp. + ....................... 1,600 91,800
Mallinckrodt Inc. ..................... 400 10,750
Medtronic, Inc. + ..................... 7,000 363,562
Saint Jude Medical, Inc. + ............ 200 6,238
Watson Pharmaceuticals, Inc. + ........ 700 31,456
---------------
1,007,538
---------------
CHEMICALS (0.5%)
Dow Chemical Co. ...................... 1,300 146,900
Du Pont (E.I.) de Nemours ............. 5,800 275,138
Eastman Chemical Co. .................. 900 47,081
Hercules, Inc. ........................ 700 10,894
Rohm & Haas Co. ....................... 1,400 49,875
Union Carbide Corp. ................... 900 53,100
---------------
582,988
---------------
COMMERCIAL SERVICES (0.2%)
Deluxe Corp. .......................... 300 7,556
Interpublic Group of Co., Inc. (The) .. 1,800 73,800
Omnicom Group, Inc. ................... 900 81,956
Paychex, Inc. ......................... 1,400 73,675
RR Donnelley & Sons Co. ............... 700 14,875
Sabre Holdings Corporation ............ 578 20,194
Young And Rubicam, Inc. + ............. 600 33,413
---------------
305,469
---------------
COMPUTERS (4.1%)
Apple Computer, Inc. + ................ 1,500 186,094
Cabletron Systems, Inc. + ............ 1,900 43,463
Compaq Computer Corp. ................. 10,000 292,500
Dell Computer Corp. + ................. 15,200 761,900
Gateway, Inc. + ....................... 1,600 88,400
Hewlett Packard Co. ................... 8,900 1,201,500
International Business Machines Corp. . 10,700 1,194,387
NCR Corp. + ........................... 600 23,175
Sun Microsystems, Inc. + .............. 12,200 1,121,637
</TABLE>
16 See Notes to Portfolio of Investments
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
COMPUTERS (CONTINUED)
Unisys Corp. + ........................ 1,500 $ 34,781
---------------
4,947,837
---------------
CONGLOMERATE AND AEROSPACE (3.0%)
Boeing Co. ............................ 5,200 206,375
Crane Co. ............................. 400 10,750
General Dynamics Corp. ................ 1,200 70,200
General Electric Co. .................. 19,400 3,050,650
Goodrich (B.F.) Co. ................... 200 6,375
Loews Corp. ........................... 300 16,538
National Service Industries, Inc. ..... 200 4,300
Northrop Grumman Corp. ................ 600 42,525
Perkin-Elmer Inc. + ................... 400 21,900
Textron, Inc. ......................... 900 55,744
United Technologies Corp. ............. 2,700 167,906
---------------
3,653,263
---------------
CONSUMER FINANCE (0.7%)
Capital One Financial Corp. ........... 1,300 56,875
Countrywide Credit Industries, Inc. ... 600 16,575
Federal National Mortgage Association . 6,100 367,906
Freddie Mac Corp. ..................... 4,100 188,344
Household International, Inc. ......... 2,800 116,900
MBNA Corp. ............................ 4,800 127,500
Ryder System, Inc. .................... 400 8,875
SLM Holding Corp. ..................... 900 28,181
---------------
911,156
---------------
CONSUMER PRODUCTS (0.7%)
Alberto-Culver Co. .................... 300 7,088
Avon Products, Inc. ................... 1,400 58,100
Clorox Co. ............................ 600 22,050
Colgate-Palmolive Co. ................. 3,300 188,512
Gillette Co. .......................... 2,700 99,900
International Flavors & Fragrances,
Inc. ................................. 600 20,663
Kimberly-Clark Corp. .................. 3,300 191,606
Procter & Gamble Co. .................. 3,900 232,537
---------------
820,456
---------------
CONSUMER SERVICES (0.3%)
Cendant Corp. + ....................... 4,100 63,294
Darden Restaurants, Inc. .............. 1,500 27,656
H&R Block, Inc. ....................... 500 20,906
Harrah's Entertainment, Inc. + ........ 1,000 20,562
Hilton Hotels Corp. ................... 1,600 13,600
Marriott International, Inc. .......... 1,400 44,800
McDonald's Corp. ...................... 4,000 152,500
Mirage Resorts, Inc. + ................ 1,200 24,450
Tricon Global Restaurants, Inc. + ..... 500 17,063
Wendy's International, Inc. ........... 700 15,663
---------------
400,494
---------------
CONSUMER SPECIALTIES (0.0%)
Brunswick Corp. ....................... 500 9,594
Hasbro, Inc. .......................... 1,100 17,531
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
CONSUMER SPECIALTIES (CONTINUED)
Jostens, Inc. ......................... 200 $ 4,938
---------------
32,063
---------------
DATA AND IMAGING SERVICES (10.0%)
Adobe Systems, Inc. ................... 900 108,844
America Online, Inc. + ................ 13,500 807,469
Autodesk, Inc. ........................ 300 11,513
Automatic Data Processing, Inc. ....... 3,600 193,725
BMC Software, Inc. + .................. 1,600 74,900
Cisco Systems, Inc. + ................. 52,700 3,653,592
Citrix Systems, Inc. + ................ 1,500 91,594
Computer Associates International, Inc. 5,300 295,806
Computer Sciences Corp. + ............. 1,000 81,562
Compuware Corp. + ..................... 2,500 31,406
Eastman Kodak Co. ..................... 1,600 89,500
Electronic Data Systems Corp. ......... 2,800 192,500
EMC Corp. + ........................... 6,000 833,625
First Data Corp. ...................... 2,500 121,719
Microsoft Corp. + ..................... 37,400 2,608,650
Network Appliance, Inc. + ............. 2,400 177,450
Novell, Inc. + ........................ 1,500 29,437
Oracle Corp. + ........................ 25,100 2,006,431
Parametric Technology Co. + ........... 2,000 16,313
Peoplesoft, Inc. + .................... 1,700 23,694
Polaroid Corp. ........................ 100 2,019
Seagate Technology, Inc. + ............ 1,400 71,137
VERITAS Software Corp. + .............. 2,200 235,984
Yahoo! Inc. + ......................... 3,100 403,775
---------------
12,162,645
---------------
DISCRETIONARY RETAIL (3.4%)
AutoZone, Inc. + ...................... 900 20,644
Bed Bath & Beyond, Inc. + ............. 1,100 40,356
Best Buy Co., Inc. + .................. 1,600 129,200
Circuit City Stores, Inc. ............. 1,700 99,981
Consolidated Stores Corp. + ........... 700 8,706
Costco Wholesale Corp. + .............. 2,300 124,344
Dollar General Corp. .................. 1,400 32,025
Federated Department Stores, Inc. + ... 2,000 68,000
Gap, Inc. ............................. 6,200 227,850
Home Depot, Inc. ...................... 20,500 1,149,281
J.C. Penney Co., Inc. ................. 600 8,288
Kmart Corp. + ......................... 4,700 38,188
Kohl's Corp. + ........................ 2,000 96,000
Lowe's Co., Inc. ...................... 2,300 113,850
May Department Stores Co. ............. 2,000 55,000
Nordstrom, Inc. ....................... 800 22,250
Office Depot, Inc. + .................. 1,100 11,619
Sears, Roebuck & Co. .................. 3,200 117,200
Staples, Inc. + ....................... 1,200 22,875
Tandy Corp. ........................... 1,200 68,400
Target Corporation .................... 2,500 166,406
The Limited, Inc. ..................... 1,400 63,262
</TABLE>
See Notes to Portfolio of Investments 17
<PAGE>
PRINCIPAL PROTECTION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
PRINCIPAL PROTECTION FUND II (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
DISCRETIONARY RETAIL (CONTINUED)
TJX Companies, Inc. ................... 1,800 $ 34,538
Toys "R" Us, Inc. + ................... 100 1,525
Wal-Mart Stores, Inc. ................. 26,500 1,467,437
---------------
4,187,225
---------------
DIVERSIFIED FINANCIAL SERVICES (1.6%)
American Express Co. .................. 2,500 375,156
Citigroup Inc. ........................ 26,000 1,545,375
Providian Financial Corp. ............. 700 61,644
---------------
1,982,175
---------------
DRUGS (4.4%)
Abbott Laboratories ................... 9,200 353,625
Allergan, Inc. ........................ 1,000 58,875
American Home Products Corp. .......... 3,600 202,275
Baxter International, Inc. ............ 1,500 97,688
Bristol-Myers Squibb Co. .............. 11,700 613,519
Eli Lilly & Co. ....................... 3,000 231,937
Johnson & Johnson ..................... 4,100 338,250
Merck & Co., Inc. ..................... 13,900 966,050
Pfizer, Inc. .......................... 23,000 968,875
Pharmacia Corporation ................. 7,470 373,033
Schering Plough ....................... 8,800 354,750
Warner Lambert Co. .................... 6,600 751,162
---------------
5,310,039
---------------
ELECTRIC UTILITIES (1.1%)
AES Corp. + ........................... 1,200 107,925
Ameren Corp. .......................... 700 25,681
American Electric Power Co. ........... 1,400 51,275
Carolina Power & Light Co. ............ 1,000 36,562
Central & South West Corp. ............ 1,200 26,025
Cinergy Corp. ......................... 1,200 32,100
CMS Energy Corp. ...................... 700 13,300
Consolidated Edison, Inc. ............. 1,200 42,225
Constellation Energy Group ............ 700 23,144
Dominion Resources, Inc. .............. 1,604 72,180
DTE Energy Co. ........................ 1,100 35,888
Duke Energy Corp. ..................... 1,800 103,500
Edison International Inc. ............. 2,500 47,656
Entergy Corp. ......................... 2,000 50,875
FirstEnergy Corp. ..................... 1,300 33,069
Florida Progress Corp. ................ 600 29,400
FPL Group, Inc. ....................... 1,000 45,187
GPU, Inc. ............................. 1,000 28,063
New Century Energies, Inc. ............ 900 29,363
Northern States Power Co. ............. 900 19,631
Peco Energy Co. ....................... 1,100 45,856
PG&E Corp. ............................ 2,500 64,844
Pinnacle West Capital Corp. ........... 400 14,050
PPL Corporation ....................... 1,500 35,813
Public Service Enterprise Group, Inc. . 1,800 64,575
Reliant Energy Inc. ................... 1,600 42,600
Southern Co. .......................... 3,400 84,787
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
ELECTRIC UTILITIES (CONTINUED)
Texas Utilities Co. ................... 1,600 $ 53,900
Unicom Corp. .......................... 1,200 47,700
---------------
1,307,174
---------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.3%)
Lexmark International Group, Inc. + ... 700 82,600
PE Corp-PE Biosystems Group ........... 1,100 66,000
Pitney Bowes, Inc. .................... 1,500 61,312
Rockwell International Corp. .......... 1,000 39,375
Tektronix, Inc. ....................... 300 17,363
Xerox Corp. ........................... 1,900 50,231
---------------
316,881
---------------
ELECTRONIC MEDIA (1.0%)
Comcast Corp. + ....................... 2,300 92,144
Mediaone Group, Inc. + ................ 1,800 136,125
Time Warner, Inc. ..................... 3,600 323,775
Viacom, Inc. + ........................ 1,800 97,875
Walt Disney Co. (The) + ............... 12,200 528,412
---------------
1,178,331
---------------
FOOD AND BEVERAGE (1.5%)
Anheuser-Busch Co., Inc. .............. 2,800 197,575
Archer-Daniels-Midland Co. ............ 4,300 42,731
Bestfoods ............................. 1,800 90,450
Brown-Forman Corp. + .................. 300 16,369
Coca-Cola Co. ......................... 7,300 343,556
Coca-Cola Enterprises, Inc. ........... 3,000 63,937
Conagra, Inc. ......................... 2,700 50,963
Coors (Adolph) Co. .................... 200 10,200
Fortune Brands, Inc. .................. 900 22,500
General Mills, Inc. ................... 1,900 69,112
Heinz (H.J.) Co. ...................... 2,300 78,200
Hershey Foods Corp. ................... 900 40,838
Kellogg Co. ........................... 2,600 63,537
PepsiCo, Inc. ......................... 8,100 297,169
Quaker Oats Co. ....................... 800 52,150
Ralston-Ralston Purina Group .......... 1,700 30,069
Sara Lee Corp. ........................ 4,900 73,500
Seagram Co. Ltd. ...................... 1,200 64,800
Unilever NV ........................... 3,200 145,800
Wrigley (Wm.) Jr. Co. + ............... 800 57,900
---------------
1,811,356
---------------
FOOD AND DRUG RETAIL (0.5%)
Albertson's, Inc. ..................... 1,500 48,844
CVS Corp. ............................. 2,400 104,400
Great Atlantic & Pacific Tea Co., Inc. 200 3,663
Kroger Co. (The) + .................... 2,700 50,119
Longs Drug Stores, Inc. ............... 200 4,650
Safeway, Inc. + ....................... 3,100 136,787
SUPERVALU, Inc. ....................... 700 14,481
Sysco Corp. ........................... 1,600 60,200
Walgreen Co. .......................... 5,900 165,937
---------------
589,081
---------------
</TABLE>
18 See Notes to Portfolio of Investments.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
FOREST PRODUCTS AND BUILDING MATERIALS (0.5%)
Armstrong World Industries, Inc. ...... 200 $ 3,913
Ball Corp. ............................ 200 6,300
Bemis Co., Inc. ....................... 400 14,725
Boise Cascade Corp. ................... 500 16,281
Champion International Corp. .......... 900 59,175
Crown Cork & Seal Co., Inc. ........... 700 11,375
Fort James Corp. ...................... 700 16,756
Georgia-Pacific Corp. ................. 1,300 47,775
International Paper Co. ............... 2,000 73,500
Louisiana-Pacific Corp. ............... 800 10,700
Masco Corp. ........................... 2,800 62,825
Mead Corp. ............................ 700 24,369
Owens Corning ......................... 400 7,275
Owens-Illinois, Inc. + ................ 1,000 13,500
Pactiv Corp. + ........................ 1,100 9,006
Potlatch Corp. ........................ 200 7,888
Sealed Air Corp. + .................... 500 27,812
Temple-Inland Inc. .................... 500 25,063
Vulcan Materials Co. .................. 600 26,287
Westvaco Corp. ........................ 600 18,525
Weyerhaeuser Co. ...................... 1,500 80,156
Willamette Industries, Inc. ........... 900 34,369
---------------
597,575
---------------
GAS UTILITIES (0.5%)
Coastal Corp. (The) ................... 1,200 60,225
Columbia Energy Group ................. 600 37,650
El Paso Energy Corp. .................. 1,400 59,500
Enron Corp. ........................... 4,300 299,656
NICOR, Inc. ........................... 300 10,163
People's Energy Corp. ................. 100 3,106
Sempra Energy ......................... 600 11,137
Williams Co., Inc. (The) .............. 2,300 85,819
---------------
567,256
---------------
HEALTH SERVICES (0.3%)
Cardinal Health, Inc. ................. 1,400 77,087
Columbia/HCA Healthcare Corp. ......... 3,500 99,531
IMS Health, Inc. ...................... 1,800 30,713
Shared Medical Systems Corp. .......... 200 8,288
Tenet Healthcare Corp. + .............. 2,600 66,300
UnitedHealth Group Incorporated ....... 1,100 73,356
Wellpoint Health Networks, Inc. + ..... 400 29,500
---------------
384,775
---------------
HEAVY MACHINERY (0.1%)
Caterpillar, Inc. ..................... 1,200 47,325
Cummins Engine Co., Inc. .............. 400 14,225
Deere & Co. ........................... 1,400 56,525
Navistar International Corp. + ........ 400 14,000
PACCAR, Inc. .......................... 800 38,050
---------------
170,125
---------------
HOUSING AND FURNISHINGS (0.1%)
Centex Corp. .......................... 500 12,062
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
HOUSING AND FURNISHINGS (CONTINUED)
Kaufman & Broad Home Corp. ............ 200 $ 3,850
Leggett & Platt, Inc. ................. 1,000 21,375
Maytag Corp. .......................... 100 3,444
Newell Rubbermaid Inc. ................ 100 2,519
Pulte Corp. ........................... 200 4,300
Tupperware Corp. ...................... 500 9,438
Whirlpool Corp. ....................... 700 45,587
---------------
102,575
---------------
INDUSTRIAL SERVICES (0.0%)
Fluor Corp. ........................... 500 16,781
USA Waste Management, Inc. ............ 100 1,588
---------------
18,369
---------------
INSURANCE (1.6%)
AFLAC, Inc. ........................... 1,700 82,981
Allstate Corp. (The) .................. 2,300 54,337
American General Corp. ................ 1,500 84,000
American International Group, Inc. .... 9,200 1,009,125
Aon Corp. ............................. 800 21,650
Chubb Corp. ........................... 1,200 76,350
CIGNA Corp. ........................... 1,300 103,675
Cincinnati Financial Corp. ............ 1,100 44,344
Hartford Financial Services Group, Inc. 1,300 67,844
Jefferson-Pilot Corp. ................. 800 53,250
Lincoln National Corp. ................ 1,200 41,775
Marsh & McLennan Co., Inc. ............ 1,600 157,700
MBIA, Inc. ............................ 300 14,831
MGIC Investment Corp. ................. 1,000 47,812
St. Paul Co., Inc. .................... 900 32,063
Torchmark Corp. ....................... 700 17,544
---------------
1,909,281
---------------
INVESTMENT SERVICES (1.3%)
Bear Stearns Co., Inc. (The) .......... 1,200 51,450
Charles Schwab Corp. .................. 4,600 204,700
Franklin Resources, Inc. .............. 1,600 51,600
Lehman Brothers Holdings Inc. ......... 1,100 90,269
Merrill Lynch & Co., Inc. ............. 2,700 275,231
Morgan Stanley Dean Witter & Co. ...... 10,200 782,850
Paine Webber Group Inc. ............... 1,400 61,425
T. Rowe Price & Associates ............ 700 26,688
---------------
1,544,213
---------------
MAJOR TELECOMMUNICATIONS (4.1%)
ALLTEL Corp. .......................... 1,700 113,263
AT&T Corp. ............................ 19,000 887,062
Bell Atlantic Corp. ................... 9,200 545,100
BellSouth Corp. ....................... 11,100 540,431
CenturyTel, Inc. ...................... 600 14,700
GTE Corp. ............................. 5,800 392,950
MCI Worldcom, Inc. + .................. 16,900 767,894
Nextel Communications, Inc. + ......... 2,000 218,875
SBC Communications, Inc. .............. 20,200 885,012
Sprint Corp. .......................... 5,200 319,800
</TABLE>
See Notes to Portfolio of Investments 19
<PAGE>
PRINCIPAL PROTECTION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
PRINCIPAL PROTECTION FUND II (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
MAJOR TELECOMMUNICATIONS (CONTINUED)
Sprint PCS + .......................... 2,600 $ 143,000
U.S. WEST, Inc. ....................... 2,800 199,325
---------------
5,027,412
---------------
MISCELLANEOUS METALS (0.1%)
Barrick Gold Corp. .................... 1,000 16,813
Freeport-McMoRan Copper & Gold, Inc. + 900 8,663
Inco Ltd. + ........................... 2,100 32,812
Newmont Mining Corp. .................. 1,100 25,781
Placer Dome, Inc. ..................... 2,100 17,062
---------------
101,131
---------------
OIL (4.1%)
Amerada Hess Corp. .................... 1,000 63,625
Anadarko Petroleum Corp. .............. 800 34,750
Apache Corp. .......................... 900 43,594
Ashland Oil, Inc. ..................... 400 13,650
Burlington Resources, Inc. ............ 1,600 62,900
Chevron Corp. ......................... 5,800 493,725
Conoco Inc. ........................... 3,100 77,112
Exxon Mobil Corp. ..................... 30,800 2,392,775
Kerr-McGee Corp. ...................... 900 46,575
Occidental Petroleum Corp. ............ 3,600 77,175
Phillips Petroleum Co. ................ 2,000 94,875
Royal Dutch Petroleum Co. ............. 19,100 1,095,862
Sunoco Inc. ........................... 800 24,250
Texaco, Inc. .......................... 4,700 232,650
Union Pacific Resources Group Inc. .... 2,600 49,888
Unocal Corp. .......................... 2,200 71,087
USX-Marathon Group .................... 3,100 72,269
---------------
4,946,762
---------------
OIL SERVICES (0.3%)
McDermott International, Inc., ADR .... 400 3,250
Rowan Co., Inc. + ..................... 700 19,556
Schlumberger, Ltd. .................... 3,300 252,657
Tosco Corp. ........................... 1,200 38,475
Transocean Sedco Forex Inc. ........... 1,090 51,230
---------------
365,168
---------------
PRINT MEDIA (0.4%)
Dow Jones & Co., Inc. ................. 800 51,900
Dun & Bradstreet Corp. ................ 1,000 30,125
Equifax, Inc. ......................... 300 7,331
Gannett Co., Inc. ..................... 1,700 108,587
Harcourt General, Inc. ................ 300 11,213
Knight-Ridder, Inc. ................... 500 24,531
McGraw-Hill Co., Inc. ................. 1,000 52,500
Meredith Corp. ........................ 200 5,563
New York Times Co. .................... 1,400 57,663
Times Mirror Co. ...................... 400 39,025
Tribune Co. ........................... 1,500 58,312
---------------
446,750
---------------
PRODUCER GOODS (1.8%)
Allegheny Technologies Incorporated ... 600 14,513
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
PRODUCER GOODS (CONTINUED)
Avery Dennison Corp. .................. 800 $ 52,500
Cooper Industries, Inc. ............... 600 20,588
Corning, Inc. ......................... 2,000 395,000
Danaher Corp. ......................... 900 51,412
Dover Corp. ........................... 1,500 76,219
Ecolab, Inc. .......................... 700 27,344
Emerson Electric Co. .................. 2,500 137,187
FMC Corp. + ........................... 200 11,638
Grainger (W.W.), Inc. ................. 500 21,687
Honeywell International Inc. .......... 4,300 240,800
Ikon Office Solutions, Inc. ........... 900 5,288
Illinois Tool Works, Inc. ............. 1,500 96,094
Ingersoll-Rand Co. .................... 1,200 56,325
ITT Industries, Inc. .................. 600 18,938
Milacron, Inc. ........................ 100 1,825
Millipore Corp. ....................... 300 21,506
Minnesota Mining and Manufacturing Co. 2,400 207,600
Pall Corp. ............................ 1,000 22,312
Parker-Hannifin Corp. ................. 900 41,850
PPG Industries, Inc. .................. 900 48,937
Sherwin-Williams Co. .................. 900 22,387
Thermo Electron Corp. + ............... 1,300 25,187
Thomas & Betts Corp. .................. 200 6,163
Timken Co. ............................ 400 7,400
Tyco International Ltd. ............... 13,100 601,781
---------------
2,232,481
---------------
SEMICONDUCTORS AND ELECTRONICS (9.3%)
Adaptec, Inc. + ....................... 1,000 27,000
ADC Telecommunications, Inc. + ........ 2,700 164,025
Advanced Micro Devices Corp. + ........ 1,400 122,850
Altera Corp. + ........................ 1,100 112,475
Analog Devices, Inc. + ................ 2,700 207,394
Andrew Corp. + ........................ 200 5,888
Applied Materials, Inc. + ............. 6,800 692,325
Comverse Technology, Inc. + ........... 1,000 89,187
Conexant Systems, Inc. + .............. 2,100 125,737
Intel Corp. ........................... 29,700 3,766,331
KLA Instruments Corp. + ............... 1,600 119,800
Linear Technology Corp. ............... 2,400 137,100
LSI Logic Corp. + ..................... 2,700 168,750
Lucent Technologies, Inc. ............. 18,900 1,175,344
Micron Technology, Inc. + ............. 1,600 222,800
Molex, Inc. ........................... 1,275 70,045
Motorola, Inc. ........................ 4,177 497,324
National Semiconductor Corp. + ........ 1,500 91,125
Nortel Networks Corp. ................. 8,500 962,625
QUALCOMM Inc. + ....................... 5,700 618,094
Scientific-Atlanta, Inc. .............. 1,400 91,087
Solectron Corp. + ..................... 3,500 163,844
Tellabs, Inc. + ....................... 1,000 54,813
Teradyne, Inc. + ...................... 1,400 154,000
</TABLE>
20 See Notes to Portfolio of Investments
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ---------------
<S> <C> <C>
SEMICONDUCTORS AND ELECTRONICS (CONTINUED)
Texas Instruments, Inc. ............... 7,200 $ 1,172,700
Xilinx, Inc. + ........................ 2,900 212,425
---------------
11,225,088
---------------
SPECIALTY CHEMICALS (0.1%)
Air Products and Chemicals, Inc. ...... 1,200 37,275
Engelhard Corp. ....................... 400 7,025
Grace (W.R.) & Co. + .................. 300 3,900
Great Lakes Chemical Corp. ............ 300 8,081
Praxair, Inc. ......................... 900 39,994
Sigma-Aldrich Corp. ................... 600 17,625
---------------
113,900
---------------
STEEL (0.0%)
Nucor Corp. ........................... 800 34,400
USX-US Steel Group, Inc. .............. 1,000 25,063
---------------
59,463
---------------
SURFACE TRANSPORT (0.2%)
Burlington Northern Santa Fe Corp. .... 2,800 67,550
CSX Corp. ............................. 100 2,094
Kansas City Southern Industries, Inc. . 1,100 79,062
Union Pacific Corp. ................... 1,600 67,400
---------------
216,106
---------------
TEXTILES AND APPAREL (0.1%)
Liz Claiborne, Inc. ................... 400 18,525
Nike, Inc. ............................ 1,400 60,813
Russell Corporation ................... 200 3,925
Springs Industries, Inc. .............. 100 4,106
---------------
87,369
---------------
TOBACCO (0.3%)
Nabisco Group Holdings Corp. .......... 1,800 23,175
Philip Morris Co., Inc. ............... 13,100 286,563
UST, Inc. ............................. 900 13,500
---------------
323,238
---------------
TOTAL COMMON STOCKS
(COST $71,725,445) 76,399,508
</TABLE> ---------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (32.2%)
U.S. Treasury Note, Zero
Coupon, 11/15/04 ..................... $52,598,000 39,018,249
---------------
TOTAL LONG-TERM BONDS AND NOTES
(COST $39,028,151) 39,018,249
---------------
SHORT-TERM INVESTMENTS (3.6%)
Federal Farm Credit Bank, 5.88%, 05/01/00 4,005,000 4,005,000
U.S. Treasury Bill, 5.45%, 05/18/00 @ . 100,000 99,743
U.S. Treasury Bill, 5.55%, 05/18/00 @ . 300,000 299,213
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,403,956) 4,403,956
---------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
---------------
<S> <C>
TOTAL INVESTMENTS
(COST $115,157,552)(a) $119,821,713
OTHER ASSETS LESS LIABILITIES 1,497,176
---------------
TOTAL NET ASSETS $121,318,889
===============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$124,753,995. Unrealized gains and losses, based on identified tax cost at
April 30, 2000, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................. $ 627,633
Unrealized losses............................ (5,559,915)
--------------
Net unrealized loss......................... $(4,932,282)
==============
</TABLE>
Information concerning open futures contracts at April 30, 2000 is shown below:
<TABLE>
<CAPTION>
NO. OF NOTIONAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
------------ ------------- ------------- ----------------
<S> <C> <C> <C> <C>
LONG CONTRACTS
----------------------
S&P 500 Index Futures... 14 $5,110,000 Jun 00 $ 66,459
=========== ============
</TABLE>
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at April 30, 2000.
Category percentages are based on net assets.
See Notes to Financial of Investments. 21
<PAGE>
PRINCIPAL PROTECTION FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
PRINCIPAL PROTECTION FUND III
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------------- --------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (89.2%)
America Honda Finance
Corp., 6.05%, 05/24/00................. $ 975,000 $ 971,231
America Honda Finance
Corp., 6.06%, 06/02/00................. 1,100,000 1,094,075
American Home Products, 6.03%, 06/02/00 2,000,000 1,989,280
CVS Corp., 6.15%, 06/02/00 ............. 2,000,000 1,989,067
Eureka Securitization, 6.07%, 06/05/00 ++ 2,000,000 1,988,197
Federal Farm Credit Bank, 5.88%, 05/01/00 4,607,000 4,607,000
Federal Farm Credit Bank, 5.97%, 06/02/00 5,000,000 4,973,467
Federal Home Loan Bank, 5.78%, 05/10/00 1,300,000 1,298,122
Federal Home Loan Bank, 5.84%, 06/02/00 600,000 596,885
Federal Home Loan Bank, 5.93%, 06/02/00 6,968,000 6,931,271
Federal Home Loan
Mortgage, 5.85%, 06/01/00.............. 1,300,000 1,293,451
Federal Home Loan
Mortgage, 5.91%, 06/01/00.............. 2,000,000 1,989,822
Federal National Mortgage
Association, 5.88%, 06/01/00........... 600,000 596,962
Federal National Mortgage
Association, 5.83%, 05/25/00........... 1,300,000 1,294,947
Federal National Mortgage
Association, 5.88%, 06/01/00........... 600,000 596,962
Federal National Mortgage
Association, 5.96%, 06/01/00........... 2,100,000 2,089,222
General Electric Capital
Corp., 6.06%, 05/17/00................. 1,000,000 997,307
GMAC Discount, 6.04%, 05/30/00 ......... 1,200,000 1,194,161
Goldman Sachs Group LP, 5.99%, 05/26/00 600,000 597,504
Jefferson Smurfit Finance
Co., 6.10%, 05/23/00................... 1,100,000 1,095,899
Merrill Lynch & Co.,
Inc., 6.07%, 06/02/00.................. 900,000 895,144
Proctor & Gamble Co., 6.05%, 06/02/00 .. 1,300,000 1,293,009
Prudential Funding Corp., 6.03%,
06/02/00 ++............................ 1,050,000 1,044,372
SBC Communications Inc., 6.00%, 06/01/00 600,000 596,900
Sheffield Receivable Cor, 6.07%,
06/05/00 ++............................ 1,500,000 1,491,148
Student Loan Marketing, 5.85%, 05/30/00 5,693,000 5,666,172
Wood Street Funding Corp., 6.08%,
05/31/00 ++........................... 1,100,000 1,094,427
Xerox Corp., 6.08%, 06/01/00 ++ ........ 975,000 969,895
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $51,235,899) 51,235,899
--------------
TOTAL INVESTMENTS (COST $51,235,899)(a) 51,235,899
OTHER ASSETS LESS LIABILITIES 6,174,576
--------------
TOTAL NET ASSETS $57,410,475
==============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
There were no unrealized gains or losses as of April 30, 2000.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Directors.
Category percentages are based on net assets.
22 See Notes to Financial Statements.
<PAGE>
PRINCIPAL PROTECTION FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
PROTECTION PROTECTION PROTECTION
FUND I FUND II FUND III
---------------- -------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investments, at market
value................ $161,766,893 $119,821,713 $51,235,899
Cash ................. 866 945 932
Receivable for:
Dividends and
interest............. 103,229 55,243 84
Investments sold .... 9,229,879 6,035,738 --
Fund shares sold .... -- 75 6,259,543
Reimbursement from
Investment Adviser .. 10,783 13,058 15,731
Prepaid expenses ..... 409 -- --
Other assets ......... -- -- 23,473
------------ ------------ -----------
Total assets .... 171,112,059 125,926,772 57,535,662
------------ ------------ -----------
LIABILITIES:
Payable for:
Investments purchased 6,346,678 4,320,729 --
Fund shares redeemed 163,204 37,312 51,360
Variation margin .... 43,800 25,550 --
Other liabilities .... 310,303 224,292 73,827
------------ ------------ -----------
Total liabilities 6,863,985 4,607,883 125,187
------------ ------------ -----------
NET ASSETS ..... $164,248,074 $121,318,889 $57,410,475
============ ============ ===========
NET ASSETS REPRESENTED
BY:
Paid-in capital ...... $157,346,513 $123,714,983 $57,216,922
Net unrealized gain on
investments and open
futures contracts ... 15,134,259 4,730,620 --
Undistributed
(distributions in
excess of) net
investment income ... (293,657) 52,222 193,553
Accumulated net
realized loss on
investments.......... (7,939,041) (7,178,936) --
------------ ------------ -----------
NET ASSETS ...... $164,248,074 $121,318,889 $57,410,475
============ ============ ===========
Cost of investments .. $146,755,325 $115,157,552 $51,235,899
CAPITAL SHARES, $.001
PAR VALUE:
Class A:
Outstanding ......... 2,003,071 1,175,524 652,050
Net Assets .......... $ 21,001,298 $ 11,602,529 $ 6,565,475
Net Asset Value and
redemption price per
share (net assets
divided by shares
outstanding)......... $ 10.48 $ 9.87 $ 10.07
Offering price (net
asset value divided
by 1 minus maximum
sales load) ......... $ 11.00 $ 10.36 $ 10.57
Class B:
Outstanding ......... 13,717,049 11,149,310 5,056,424
Net Assets .......... $143,246,776 $109,716,360 $50,845,000
Net Asset Value,
offering and
redemption price per
share (net assets
divided by shares
outstanding)......... $ 10.44 $ 9.84 $ 10.06
</TABLE>
See Notes to Financial Statements. 23
<PAGE>
PRINCIPAL PROTECTION FUNDS
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
PROTECTION PROTECTION PROTECTION
FUND I FUND II FUND III
---------------- ------------------- --------------------
PERIOD FROM
MARCH 1, 2000
SIX MONTH SIX MONTH (COMMENCEMENT OF
PERIOD ENDED PERIOD ENDED OPERATIONS)
APRIL 30, 2000 APRIL 30, 2000 TO APRIL 30, 2000
(UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------- ------------------- --------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ............ $ 702,505 $ 303,517 $ --
Interest ............. 1,105,514 1,367,693 259,384
----------- ----------- --------
1,808,019 1,671,210 259,384
Foreign taxes withheld
on dividends ........ (875) (137) --
----------- ----------- --------
Total investment
income........... 1,807,144 1,671,073 259,384
----------- ----------- --------
INVESTMENT EXPENSES:
Investment advisory
fees................. 547,588 314,895 12,086
Administrative
services fees ....... 84,244 54,073 4,834
Distribution plan fees
- Class A ........... 26,950 13,506 1,564
Distribution plan fees
- Class B ........... 550,982 365,030 31,567
Shareholder services
fees - Class B ...... 183,661 121,677 10,523
Printing and postage . 1,596 -- 842
Custody fees ......... 33,358 23,427 4,731
Transfer agent fees .. 84,102 40,288 18,000
Audit fees ........... 16,653 20,394 6,317
Directors' fees ...... 1,773 1,221 496
Registration fees .... 27,883 32,493 15,636
Miscellaneous expenses 280,816 148,188 193
----------- ----------- --------
Expenses before
reimbursement and
waiver from
Investment Adviser .. 1,839,606 1,135,192 106,789
Expense reimbursement
and waiver from
Investment Adviser .. (31,796) (30,388) (40,958)
----------- ----------- --------
Net investment
expenses......... 1,807,810 1,104,804 65,831
----------- ----------- --------
Net investment income
(loss)............... (666) 566,269 193,553
----------- ----------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ......... (6,017,861) (6,873,746) --
Futures ............. (353,327) (305,190) --
----------- ----------- --------
Net realized loss
on investments .. (6,371,188) (7,178,936) --
----------- ----------- --------
Net change in
unrealized gain or
loss on:
Investments ......... 11,337,330 4,664,161 --
Futures ............. 56,827 66,459 --
----------- ----------- --------
Net change in
unrealized gain
or loss on
investments...... 11,394,157 4,730,620 --
----------- ----------- --------
Net realized and
change in unrealized
gain or loss on
investments.......... 5,022,969 (2,448,316) --
----------- ----------- --------
Net increase
(decrease) in net
assets resulting from
operations........... $ 5,022,303 $(1,882,047) $193,553
=========== =========== ========
</TABLE>
24 See Notes to Financial Statements.
<PAGE>
PRINCIPAL PROTECTION FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL PROTECTION FUND I
-----------------------------------
PERIOD FROM
SIX MONTH AUGUST 6, 1999
PERIOD ENDED (COMMENCEMENT OF
APRIL 30, 2000 OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1999
-------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) ........... $ (666) $ 442,649
Net realized loss on investments........ (6,371,188) (1,567,853)
Net change in unrealized gain or loss on
investments............................ 11,394,157 3,740,102
------------ ------------
Net increase in net assets resulting
from operations....................... 5,022,303 2,614,898
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class A:
From net investment income............. (136,092) --
Class B:
From net investment income............. (599,548) --
------------ ------------
Decrease in net assets from
distributions to shareholders......... (735,640) --
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Class A:
Proceeds from shares sold.............. 87,657 20,861,153
Net asset value of shares issued upon
reinvestment of distributions......... 129,949 --
Payments for shares redeemed........... (862,482) (143,490)
Class B:
Proceeds from shares sold.............. -- 142,404,291
Net asset value of shares issued upon
reinvestment of distributions......... 583,660 --
Payments for shares redeemed........... (5,351,235) (362,990)
------------ ------------
Net increase (decrease) in net assets
from fund share transactions.......... (5,412,451) 162,758,964
------------ ------------
Net change in net assets................ (1,125,788) 165,373,862
NET ASSETS:
Beginning of period..................... 165,373,862 --
------------ ------------
End of period........................... $164,248,074 $165,373,862
============ ============
End of period net assets includes
undistributed (distributions in excess
of) net investment income.............. $ (293,657) $ 442,649
============ ============
SHARE TRANSACTIONS:
Class A:
Number of shares sold.................. 8,432 2,079,001
Number of shares issued upon
reinvestment of distributions......... 12,271 --
Number of shares redeemed.............. (82,249) (14,384)
------------ ------------
Net increase (decrease)................ (61,546) 2,064,617
============ ============
Class B:
Number of shares sold.................. -- 14,203,802
Number of shares issued upon
reinvestment of distributions......... 55,166 --
Number of shares redeemed.............. (505,514) (36,405)
------------ ------------
Net increase (decrease)................ (450,348) 14,167,397
============ ============
</TABLE>
See Notes to Financial Statements. 25
<PAGE>
PRINCIPAL PROTECTION FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL PROTECTION FUND II
-----------------------------------
PERIOD FROM
SIX MONTH OCTOBER 7, 1999
PERIOD ENDED (COMMENCEMENT OF
APRIL 30, 2000 OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1999
-------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .................. $ 566,269 $ 25,434
Net realized loss on investments........ (7,178,936) --
Net change in unrealized gain or loss on
investments............................ 4,730,620 --
------------ -----------
Net increase (decrease) in net assets
resulting from operations............. (1,882,047) 25,434
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Class A:
From net investment income............. (65,405) --
Class B:
From net investment income............. (474,076) --
------------ -----------
Decrease in net assets from
distributions to shareholders......... (539,481) --
------------ -----------
FROM FUND SHARE TRANSACTIONS:
Class A:
Proceeds from shares sold.............. 11,124,504 2,076,588
Net asset value of shares issued upon
reinvestment of distributions......... 64,539 --
Payments for shares redeemed........... (1,480,126) --
Class B:
Proceeds from shares sold.............. 88,988,554 24,641,340
Net asset value of shares issued upon
reinvestment of distributions......... 464,733 --
Payments for shares redeemed........... (1,837,017) (328,132)
------------ -----------
Net increase in net assets from fund
share transactions.................... 97,325,187 26,389,796
------------ -----------
Net change in net assets................ 94,903,659 26,415,230
NET ASSETS:
Beginning of period..................... 26,415,230 --
------------ -----------
End of period........................... $121,318,889 $26,415,230
============ ===========
End of period net assets includes
undistributed net investment income.... $ 52,222 $ 25,434
============ ===========
SHARE TRANSACTIONS:
Class A:
Number of shares sold.................. 1,106,686 207,499
Number of shares issued upon
reinvestment of distributions......... 6,333 --
Number of shares redeemed.............. (144,994) --
------------ -----------
Net increase........................... 968,025 207,499
============ ===========
Class B:
Number of shares sold.................. 8,860,007 2,462,302
Number of shares issued upon
reinvestment of distributions......... 45,607 --
Number of shares redeemed.............. (185,825) (32,781)
------------ -----------
Net increase........................... 8,719,789 2,429,521
============ ===========
</TABLE>
26 See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL PROTECTION
FUND III
----------------------
PERIOD FROM
MARCH 1, 2000
(COMMENCEMENT OF
OPERATIONS)
TO APRIL 30, 2000
(UNAUDITED)
-----------------
<S> <C>
FROM OPERATIONS:
Net investment income ................................. $ 193,553
-----------
Net increase in net assets resulting from operations.. 193,553
-----------
FROM FUND SHARE TRANSACTIONS:
Class A:
Proceeds from shares sold............................ 6,537,859
Payments for shares redeemed......................... (1,250)
Class B:
Proceeds from shares sold............................ 50,813,662
Payments for shares redeemed......................... (133,349)
-----------
Net increase in net assets from fund share
transactions......................................... 57,216,922
-----------
Net change in net assets............................... 57,410,475
NET ASSETS:
Beginning of period.................................... --
-----------
End of period.......................................... $57,410,475
===========
End of period net assets includes undistributed net
investment income..................................... $ 193,553
===========
SHARE TRANSACTIONS:
Class A:
Number of shares sold................................ 652,174
Number of shares redeemed............................ (124)
-----------
Net increase.......................................... 652,050
===========
Class B:
Number of shares sold................................ 5,069,700
Number of shares redeemed............................ (13,276)
-----------
Net increase.......................................... 5,056,424
===========
</TABLE>
See Notes to Financial Statements. 27
<PAGE>
AETNA PRINCIPAL PROTECTION FUNDS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds, each of which has it's
own investment objective, policies and restrictions.
This report covers three funds, (each a Fund; collectively, the Funds) Aetna
Principal Protection Fund I (PPF I), Aetna Principal Protection Fund II (PPF II)
and Aetna Principal Protection Fund III (PPF III). Each Fund seeks to achieve
maximum total return by participating in favorable equity market performance
while preserving the principal amount of the Fund as of the inception of each
Fund's Guarantee Period. Each Funds' Guarantee is backed by an unconditional
irrevocable guarantee from MBIA Insurance Corporation (MBIA), an AAA/Aaa rated
monoline financial guarantor. Each Fund pays MBIA a guarantee fee of 0.33% of
its average daily net assets.
<TABLE>
<CAPTION>
OFFERING GUARANTEE MATURITY
PERIOD PERIOD DATE
------ ------ ----
<S> <C> <C> <C>
PPF I* 08/06/99 - 10/06/99 10/07/99 - 10/06/04 10/06/04
PPF II* 10/07/99 - 12/20/99 12/21/99 - 12/20/04 12/20/04
PPF III 03/01/00 - 05/31/00 06/01/00 - 05/31/05 05/31/05
* Closed to new investors.
</TABLE>
The Funds are authorized to offer two classes of shares, Class A and Class B.
Information regarding sales charges and fees pursuant to Rule 12b-1 of the Act
are as follows:
CLASS A: Generally, subject to a front-end sales charge; distribution fees of
0.25% (of average net assets of the class per year).
CLASS B: No front-end sales charge; contingent deferred sales charge (CDSC)
applies if you sell your shares prior to the Maturity Date;
distribution fees of 0.75%; service fees of 0.25%.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment advisor to
each Fund. Aeltus Capital, Inc. (ACI) is each Fund's principal underwriter.
Aeltus and ACI are indirect wholly owned subsidiaries of Aetna Inc. (Aetna).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of each Fund have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Actual results may differ from these estimates.
A. VALUATION OF INVESTMENTS
Exchange traded equity investments are stated at market values based upon prices
furnished by external pricing sources as reported on national securities
exchanges. Over-the-counter securities are stated at the last sale price, or if
there has been no sale that day, at the mean of the bid and asked prices. Fixed
income securities, maturing in more than sixty days for which market quotations
are readily available are valued at the mean of the last bid and asked price.
Short-term investments maturing in sixty days or less are valued at amortized
cost, which when combined with accrued interest, approximates market value.
28
<PAGE>
Securities and fixed income investments for which market quotations are not
considered to be readily available are valued using methods approved by the
Board or Directors (Board).
B. FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument, including an
index of stocks, at a set price on a future date. The Funds may invest in
futures contracts on the S&P 500 Index and U.S. Treasury Securities as a hedge
against their existing portfolio securities, to manage the risk of changes in
interest rates, equity prices, or in anticipation of future purchases and sales
of portfolio securities.
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Funds equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by the Funds as
unrealized gains or losses. When a contract is closed, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by the Funds are closed prior to expiration.
The risks associated with financial futures may arise from an imperfect
correlation between the change in market value of the securities held by the
Funds and the price of the contracts. Risks may also arise from an illiquid
secondary market or from the inability of counterparties to meet the terms of
the contracts.
Realized and unrealized gains or losses on financial futures are reflected in
the accompanying financial statements. The amounts at risk under such futures
may exceed the amounts reflected in the financial statements. For federal income
tax purposes, any futures contracts which remain open at year end are
marked-to-market and the resultant net gain or loss is reported to shareholders
as federal taxable income.
C. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Funds to sell them promptly at an
acceptable price. Restricted securities are those sold under Rule 144A of the
Securities Act of 1933 (1933 Act) or are securities offered pursuant to Section
4(2) of the 1933 Act, and are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the 1933 Act.
Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures approved by the
Board. The Funds will not pay the costs of disposition of restricted securities
other than ordinary brokerage fees, if any.
D. FEDERAL INCOME TAXES
Each Fund has met the requirements to be taxed as a regulated investment company
for the fiscal year ended October 31, 1999, and intends to meet the requirements
for the current year. As such, the Funds are relieved of federal income taxes by
distributing all of its net taxable investment income and capital gains, if any,
in compliance with the applicable provisions of the Internal Revenue Code
(Code). Furthermore, by distributing substantially all of its net taxable
investment income and capital gains during the calendar year, each Fund will
avoid federal excise taxes in accordance with the applicable provisions of the
Code. Thus, the financial statements contain no provision for federal income
taxes.
29
<PAGE>
AETNA PRINCIPAL PROTECTION FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
E. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for futures contracts and repurchases of
certain securities sold at a loss. In addition, distributions of realized gains
from sales of securities held one year or less are taxable to shareholders at
ordinary income tax rates rather than preferred capital gain tax rates in
accordance with the applicable provisions of the Internal Revenue Code.
F. OTHER
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are accreted or amortized, respectively, using an effective yield
method over the life of the security. Dividend income and stock splits are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are determined on an identified cost basis.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
Each Fund pays Aeltus an investment advisory fee expressed as a percentage of
each Fund's average daily net assets. The advisory fee for each Fund is 0.25% of
the Fund's average daily net assets during its Offering Period (see table in
Section 1 - Organization) and 0.65% of each Fund's average daily net assets
during its Guarantee Period.
The Company and Aeltus have entered into an Administrative Services Agreement
under which Aeltus acts as administrator and provides certain administrative and
shareholder services and is responsible for the supervision of other service
providers for each Fund. Each Fund pays Aeltus an administrative services fee at
an annual rate of 0.10% of its average daily net assets.
The Company has adopted a Shareholder Services Plan for the Class B shares.
Under the Shareholder Services Plan, ACI is paid a service fee at an annual rate
of 0.25% of the average daily net assets of Class B shares. This fee is used as
compensation for expenses incurred in servicing shareholders' accounts.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the Act
for the Class A and Class B shares. The Distribution Plan provides for payments
to ACI at an annual rate of 0.25% of the average daily net assets of Class A
shares of each Fund and 0.75% of the average daily net assets of Class B shares
of each Fund. Amounts paid by the Funds are used to pay expenses incurred by ACI
in promoting the sale of Class A and Class B shares.
Presently, the Funds' class-specific expenses are limited to distribution fees
incurred in connection with the Class A and Class B shares and service fees
incurred in connection with the Class B shares.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated, through the Maturity Date, to reimburse the
Funds for some or all of their operating expenses or to waive fees in order to
maintain a certain expense ratio. Reimbursement and waiver arrangements, will
increase the Fund's total return. Actual expenses for the period ended April 30,
2000 were at contractual limits. Actual expense ratios are included in the
Financial Highlights.
30
<PAGE>
--------------------------------------------------------------------------------
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the period ended April 30, 2000 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
PPF I $318,134,228 $332,029,873
PPF II 281,050,187 164,178,905
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
As of April 30, 2000, PPF I incurred a capital loss carryforward of $1,113,968.
This capital loss carryforward may be used to offset future capital gains until
October 31, 2007, at which time the carryforward will expire. It is the policy
of the Fund to reduce future distributions of realized gains to shareholders to
the extent of the unexpired capital loss carryforward.
7. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 14.8 billion shares. Of those 14.8
billion shares, each Fund has been allocated 100 million shares each of Class A
and Class B.
31
<PAGE>
PRINCIPAL PROTECTION FUNDS
FINANCIAL HIGHLIGHTS
PRINCIPAL PROTECTION FUND I
--------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH AUGUST 6, 1999
PERIOD ENDED (COMMENCEMENT
APRIL 30, 2000 OF OPERATIONS)
CLASS A (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 10.20 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.02 0.07+
Net realized and change in unrealized
gain or loss on investments .......... 0.33 0.13
------- -------
Total income from investment
operations.......................... 0.35 0.20
------- -------
LESS DISTRIBUTIONS:
From net investment income ............ (0.07) --
------- -------
Total distributions ................. (0.07) --
------- -------
Net asset value, end of period ......... $ 10.48 $ 10.20
======= =======
Total return ........................... 3.38% 1.39%*
Net assets, end of period (000's) ...... $21,001 $21,069
Ratio of net investment expenses to
average net assets .................... 1.50%(1) 1.06%(1)
Ratio of net investment income to
average net assets .................... 0.65%(1) 2.76%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 1.53%(1) 1.46%(1)
Portfolio turnover rate ................ 195.64% 41.95%
</TABLE>
* Represents performance beginning on the first day of the Guarantee Period.
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
32 See Notes to Financial Statements.
<PAGE>
PRINCIPAL PROTECTION FUND I
--------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH AUGUST 6, 1999
PERIOD ENDED (COMMENCEMENT
APRIL 30, 2000 OF OPERATIONS)
CLASS B (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 10.19 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. (0.01) 0.05+
Net realized and change in unrealized
gain or loss on investments .......... 0.30 0.14
-------- --------
Total income from investment
operations.......................... 0.29 0.19
-------- --------
LESS DISTRIBUTIONS:
From net investment income ............ (0.04) --
-------- --------
Total distributions ................. (0.04) --
-------- --------
Net asset value, end of period ......... $ 10.44 $ 10.19
======== ========
Total return ........................... 2.86% 1.39%*
Net assets, end of period (000's) ...... $143,247 $144,305
Ratio of net investment expenses to
average net assets .................... 2.25%(1) 1.80%(1)
Ratio of net investment income to
average net assets .................... (0.10)%(1) 2.01%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 2.28%(1) 2.21%(1)
Portfolio turnover rate ................ 195.64% 41.95%
</TABLE>
* Represents performance beginning on the first day of the Guarantee Period.
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 33
<PAGE>
PRINCIPAL PROTECTION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
PRINCIPAL PROTECTION FUND II
--------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH OCTOBER 7, 1999
PERIOD ENDED (COMMENCEMENT
APRIL 30, 2000 OF OPERATIONS)
CLASS A (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 10.02 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.04 0.02+
Net realized and change in unrealized
gain or loss on investments .......... (0.14) --
------- ------
Total income from investment
operations.......................... (0.10) 0.02
------- ------
LESS DISTRIBUTIONS:
From net investment income ............ (0.05) --
------- ------
Total distributions ................. (0.05) --
------- ------
Net asset value, end of period ......... $ 9.87 $10.02
======= ======
Total return* .......................... (1.50)% --
Net assets, end of period (000's) ...... $11,603 $2,079
Ratio of net investment expenses to
average net assets .................... 1.36%(1) 0.58%(1)
Ratio of net investment income to
average net assets .................... 1.72%(1) 3.85%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 1.42%(1) 6.47%(1)
Portfolio turnover rate ................ 135.09% --
</TABLE>
* PPF II was in its accumulation period. Total return started to be calculated
on December 21, 1999, the first day of the Guarantee Period.
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
34 See Notes to Financial Statements.
<PAGE>
PRINCIPAL PROTECTION FUND II
--------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH OCTOBER 7, 1999
PERIOD ENDED (COMMENCEMENT
APRIL 30, 2000 OF OPERATIONS)
CLASS B (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 10.02 $ 10.00
-------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.03 0.02+
Net realized and change in unrealized
gain or loss on investments .......... (0.17) --
-------- -------
Total income from investment
operations.......................... (0.14) 0.02
-------- -------
LESS DISTRIBUTIONS:
From net investment income ............ (0.04) --
-------- -------
Total distributions ................. (0.04) --
-------- -------
Net asset value, end of period ......... $ 9.84 $ 10.02
======== =======
Total return* .......................... (1.78)% --
Net assets, end of period (000's) ...... $109,716 $24,336
Ratio of net investment expenses to
average net assets .................... 2.11%(1) 1.30%(1)
Ratio of net investment income to
average net assets .................... 0.97%(1) 3.12%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 2.17%(1) 7.19%(1)
Portfolio turnover rate ................ 135.09% --
</TABLE>
* PPF II was in its accumulation period. Total return started to be calculated
on December 21, 1999, the first day of the Guarantee Period.
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 35
<PAGE>
PRINCIPAL PROTECTION FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
PRINCIPAL PROTECTION FUND III
--------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1, 2000
(COMMENCEMENT
OF OPERATIONS)
TO APRIL 30, 2000
CLASS A (UNAUDITED)
---------------------------------------------------------- -----------------
<S> <C>
Net asset value, beginning of period ..................... $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.04
Net realized and change in unrealized gain or loss on
investments............................................. 0.03
------
Total income from investment operations ............... 0.07
------
Net asset value, end of period ........................... $10.07
======
Total return* ............................................ --
Net assets, end of period (000's) ........................ $6,565
Ratio of net investment expenses to average net assets ... 0.71%(1)
Ratio of net investment income to average net assets ..... 4.63%(1)
Ratio of expenses before reimbursement and waiver to
average net assets ...................................... 1.55%(1)
</TABLE>
* PPF III is in its accumulation period. Total return will start to be
calculated on June 1, 2000, the first day of the Guarantee Period.
(1) Annualized.
36 See Notes to Financial Statements.
<PAGE>
PRINCIPAL PROTECTION FUND III
--------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1, 2000
(COMMENCEMENT
OF OPERATIONS)
TO APRIL 30, 2000
CLASS B (UNAUDITED)
---------------------------------------------------------- -----------------
<S> <C>
Net asset value, beginning of period ..................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................... 0.03
Net realized and change in unrealized gain or loss on
investments............................................. 0.03
-------
Total income from investment operations ............... 0.06
-------
Net asset value, end of period ........................... $ 10.06
=======
Total return*............................................. --
Net assets, end of period (000's) ........................ $50,845
Ratio of net investment expenses to average net assets ... 1.46%(1)
Ratio of net investment income to average net assets ..... 3.88%(1)
Ratio of expenses before reimbursement and waiver to
average net assets ...................................... 2.30%(1)
</TABLE>
* PPF III is in its accumulation period. Total return will start to be
calculated on June 1, 2000, the first day of the Guarantee Period.
(1) Annualized.
See Notes to Financial Statements. 37
