PRINCIPLED
EQUITY
MARKET
FUND
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
PRINCIPLED EQUITY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets:
Cash ................................................ $ 8,940,260
Deferred organizational expenses (Note 1)............ 46,000
-----------
Total assets.....................................
8,986,260
-----------
Liabilities:
Organizational costs payable (Note 1)................ 46,000
-----------
Total liabilities................................ 46,000
-----------
Net Assets:
Capital stock (unlimited shares authorized at no par
value,
amount paid in on 894,026 shares outstanding) (Note 1) 8,940,260
Accumulated undistributed net investment income...... --
------------
Net assets (equivalent to $10.00 per share, based
on 894,026 capital shares outstanding)............. $ 8,940,260
===========
<PAGE>
PRINCIPLED EQUITY MARKET FUND
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
PERIOD OF INCEPTION (OCTOBER 28, 1996) TO DECEMBER 31, 1996
Income................................... $ --
Expenses................................. --
-------------
Net investment income.................... --
Net realized gain (loss) from investment
securities............................... --
Unrealized gain (loss) on investments.... --
-------------
Net increase (decrease) in net assets
resulting from operations................ --
-------------
From capital share transactions:
Number of
Shares
Proceeds from sale of shares.. 894,026 8,940,260
Shares issued to shareholders
in -- --
distributions reinvested......
Cost of shares redeemed....... -- --
------------- -------------
Increase in net assets
resulting from capital 894,026 8,940,260
share transactions............
============= -------------
Net increase in net assets............... 8,940,260
Net assets, beginning of period.......... --
=============
Net assets, end of period................ $ 8,940,260
=============
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31,1996
Value
(Note 1)
CASH & OTHER ASSETS, LESS LIABILITIES -- 100.00%........ $ 8,940,260
-----------
Total Net Assets............................... $ 8,940,260
==========
<PAGE>
PRINCIPLED EQUITY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Significant accounting policies:
Principled Equity Market Fund, a Massachusetts business trust (the "Trust"),
is registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end investment management company. The following is a
summary of significant accounting policies followed by the Trust which are in
conformity with those generally accepted in the investment company industry.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. A. Investment securities--
Security transactions are recorded
on the date the investments are purchased or sold. Each day, at noon,
securities traded on national security exchanges are valued at the last sale
price on the primary exchange on which they are listed, or if there has been
no sale by noon, at the current bid price. Other securities for which market
quotations are readily available are valued at the last known sales price,
or, if unavailable, the known current bid price which most nearly represents
current market value. Temporary cash investments are stated at cost, which
approximates market value. Dividend income is recorded on the ex-dividend
date and interest income is recorded on the accrual basis. Gains and losses
from sales of investments are calculated using the "identified cost" method
for both financial reporting and federal income tax purposes.
B. Income Taxes-- The Trust has elected to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute each year all of its taxable income to its shareholders. No
provision for federal income taxes is necessary since the Trust intends to
qualify for and elect the special tax treatment afforded a "regulated
investment company" under subchapter M of the Internal Revenue Code.
C. Capital Stock-- The Trust records the sales and redemptions
of its capital stock on trade date.
D. Deferred Organizational Expenses - Costs to be incurred in connection with
organization and registration will be deferred and amortized over a period
of 60 months from the date upon which the Trust commences operations.
2. Investment advisory and sub-advisory agreements: The investment advisory
contract with F.L. Putnam Investment Management Company (the "investment
adviser") provides that the Trust will pay the adviser a fee for investment
advice based on a rate of 1/4% of 1% per annum of the average monthly net
assets. The adviser has elected to waive .10% of the annual fee in the
Trust's first year of operations. David W.C. Putnam, a Trustee of the Trust,
is President and a Director of the Adviser. Pursuant to the Investment
Advisory Contract, the investment adviser is responsible for the management
of the Trust's portfolio. The adviser is obligated to supervise the
performance of administrative and professional services provided by others to
the Trust and will provide all facilities, equipment and personnel and if
requested office space necessary to perform its duties under the Investment
Advisory Contract.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
2. Investment advisory and sub-advisory agreements (continued): The Trust has
also agreed to an Investment Sub-Advisory Contract between the adviser and
PanAgora Asset Management, Inc. (the sub-adviser), whereby the adviser will
pay an annual rate of .15% of the Trusts average net assets to the
sub-adviser Pursuant to the Investment Sub-Advisory Contract, the sub-adviser
is responsible for the investment and reinvestment of securities selected by
the adviser.
3. Administration and transfer agent services: The Trust has entered into an
agreement with Anchor Investment Management Corporation for administrative,
transfer agent and dividend disbursing agent services. Annual fees of $12,000
are payable under this agreement.
4. Related parties:
The President and Secretary of the trust is also a director and principal
stockholder of the Trust's investment adviser.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of Principled Equity Market
Fund:
We have audited the accompanying statement of assets and liabilities of
Principled Equity Market Fund (a Massachusetts business trust), including the
schedule of investments, as of December 31, 1996, the related statement of
operations and changes in net assets for the period from inception (October 28,
1996) to December 31, 1996. These financial statements are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Principled Equity Market Fund
as of December 31, 1996, and the results of its operations and the changes in
its net assets for the period from inception (October 28, 1996) to December 31,
1996, in conformity with generally accepted accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 17, 1997.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
OFFICERS AND TRUSTEES
DAVID W.C. PUTNAM President,
Secretary
Chairman, Board of Directors, F.L. Putnam and Trustee
Investment Management Company
President and Director, F.L. Putnam
Securities Company Incorporated
HOWARD R. BUCKLEY Trustee
President, Chief Executive Officer, Mercy
Hospital, Portland Maine; President, Chief
Executive Officer and Director, Mercy Health
Systems of Maine
SISTER ANNE MARY DONOVAN Trustee
General Treasurer of the Sisters of Notre
Dame de Namur, Boston
RONALD P. HOGAN Trustee
Chief Executive Officer, Saint Joseph's
Health System
WILLIAM H. IZLAR, JR. Trustee
Chairman and Director, Eastern Mercy
Health System
SISTER JUNE KETTERER Trustee
Provincial Superior, St. Joseph Province,
Sisters of Charity of Montreal
SISTER MARY LABOURE MORIN Trustee
President, Regional Community, Sisters of
Mercy of the Americas
C. KENT RUSSELL Treasurer
President, Chief Executive Officer and and Trustee
Director, Eastern Mercy Health System
JOEL M. ZIFF Trustee
Director, Eastern Mercy Health System
<PAGE>
PRINCIPLED EQUITY MARKET FUND
INVESTMENT ADVISER
F.L. Putnam Investment Management Company
10 Langley Road, Suite 400, Newton Centre, Massachusetts 02159
(617) 964-7600
SUB-ADVISOR
PanAgora Asset Management, Inc.
260 Franklin St., 22nd Floor, Boston, Massachusetts 02110
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, Massachusetts 02111
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02181
ADMINISTRATOR AND TRANSFER AGENT
Anchor Investment Management Corp.
2717 Furlong Road, Doylestown, Pennsylvania 18901
(215) 794-2980
LEGAL COUNSEL
Sullivan & Worchester
One Post Office Square, Boston, Massachusetts 02109
