PRINCIPLED
EQUITY
MARKET
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1998
(UNAUDITED)
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PRINCIPLED EQUITY MARKET FUND
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STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(Unaudited)
Assets:
Investments at quoted market value (cost $19,181,177 ;
see Schedule of Investments, Notes 1, 2, & 6)................. $26,191,843
Cash ......................................................... 127,925
Dividends and interest receivable.............................. 36,448
Organizational costs (Note 1).................................. 33,097
------------
Total assets.............................................. 26,389,313
------------
Liabilities:
Accrued expenses and other liabilities (Note 3 )............... 31,321
------------
Total liabilities......................................... 31,321
------------
Net Assets:
Capital stock (unlimited shares authorized at no par value,
amount paid in on 1,725,850 shares outstanding) (Note 1)...... 18,156,817
Accumulated undistributed net investment income (Note 1)....... 137,445
Accumultaed realized gain from security transactions (Note 1).. 1,053,064
Net unrealized appreciation in value of investments (Note 2)... 7,010,666
------------
Net assets (equivalent to $15.27 per share, based on
1,725,850 capital shares outstanding).................... $26,357,992
============
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PRINCIPLED EQUITY MARKET FUND
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STATEMENT OF OPERATIONS
JUNE 30, 1998
(Unaudited)
Income:
Dividends..................................................... $ 186,312
Interest...................................................... 2,414
------------
Total income.............................................. 188,726
------------
Expenses:
Management fees, net (Note 3)................................. 17,886
Custodian fees................................................ 3,226
Audit and accounting fees..................................... 4,059
Administration fees (Note 4).................................. 8,854
Transfer fees (Note 4)........................................ 2,987
Trustees' fees and expenses................................... 1,991
Legal fees.................................................... 4,170
Organizational expenses....................................... 3,306
Other expenses................................................ 4,802
------------
Total expenses............................................ 51,281
------------
Net investment income.......................................... 137,445
------------
Realized and unrealized gain on investments:
Realized gain on investments-net............................. 1,053,063
Increase in net unrealized appreciation in investments....... 2,901,739
------------
Net gain on investments................................... 3,954,802
============
Net increase in net assets resulting from operations........... $ 4,092,247
============
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PRINCIPLED EQUITY MARKET FUND
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STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31,
1997
----------------------------
From operations:
Net investment income........................... $ 137,445 $ 235,788
Realized gain on investments, net............... 1,053,063 102,865
Increase in net unrealized
appreciation in investments.................... 2,901,739 4,108,927
------------- ------------
Net increase in net assets resulting
from operations............................ 4,092,247 4,447,580
-------------- -------------
Distributions to shareholders:
From net investment income ($0.14 per share in -- (235,788)
1997)...........................................
From net realized gain on investments ($0.06 per -- (102,865)
share in 1997)..................................
-------------- ------------
Total distributions to shareholders......... -- (338,653)
-------------- ------------
-------------- ------------
From capital share transactions:
Number of Shares
1998 1997
---------- -----------
Proceeds from sale of
shares.................. 19,763 799,491 258,996 8,795,782
Shares issued to share-
holders in distributions
reinvested.............. -- 12,570 -- 161,780
Cost of shares redeemed.. -- -- -- --
--------- ----------- =========== ===========
Increase in net
assets resulting from
capital
share transactions...... 812,061 812,061 258,996 8,957,562
========== =========== -------------- ------------
Net increase in net assets....................... 4,351,243 13,066,489
Net assets:
Beginning of period............................ 22,006,749 8,940,260
============== ============
End of period ( including undistributed
net investment income of $137,445 and
$0, respectively............................ $26,357,992 22,006,749
============== ============
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PRINCIPLED EQUITY MARKET FUND
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SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Six Months Period Ended
Ended June Year Ended October 28,
30, 1998 December 31, 1996 to
(Unaudited) 1997 December 31,
1996
--------------------------- --------------
Investment income ................$ 0.11 $ 0.18 $ --
Expenses, net..................... 0.03 0.04 --
--------------------------- --------------
Net investment income ............ 0.08 0.14 --
Net realized and unrealized
gain on investments............... 2.29 2.96 --
Distributions to shareholders:
From net investment income...... -- 0.14 --
From net realized gain on
investments.................... -- 0.06 --
------------------------------------------
Net increase in net asset value... 2.37 2.90 --
Net asset value:
Beginning of period............. 12.90 10.00 10.00
==========================================
End of period................... $15.27 $12.90 $ 10.00
==========================================
Ratio of expenses
to average net assets............. 0.42% 0.48% --
Ratio of net investment
income to average net assets...... 1.12% 1.40% --
Portfolio turnover................ 0.19 0.07 --
Average commission rate paid...... 0.0322 0.0253 --
Number of shares out-standing at
end of period..................... 1,725,850 1,706,087 894,026
Per share data and ratios
assuming no waiver of advisory
fees:
Expenses....................... 0.04 0.06 --
Net investment income.......... 0.07 0.13 --
Ratio of expenses to average
net assets.................... 0.52% 0.58% --
Ratio of net investment income
to average net assets......... 1.02% 1.30% --
6
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
COMMON STOCKS -- 99.37%
Aerospace/Defense Industry -- 1.67%
1,800 Gulfstream Aerospace $ 83,700
6,700 Precision Castparts Corporation 357,613
-----------
441,313
-----------
Agricultural Products Industry -- 0.01%
60 Agribrands International Incorporated 1,815
-----------
Air Transport Industry -- 0.44%
800 Amr Corporation 66,600
200 FDX Corporation 12,550
1,200 Southwest Airlines Company 35,475
-----------
114,625
-----------
Auto & Truck Industry -- 0.20%
1,000 Paccar Incorporated 52,250
-----------
Auto Parts (OEM) Industry -- 0.22%
600 Dana Corporation 32,100
600 Oea Incorporated 9,600
600 Superior Industries International 16,913
-----------
58,613
-----------
Auto Parts (Replacement) Industry -- 2.45%
18,650 Genuine Parts Company 644,591
-----------
Bank Industry -- 6.62%
1,000 Bank of New York Company Incorporated.................... 60,875
2,500 Bankamerica Corporation.................................. 216,250
1,000 Bankboston Corporation................................... 55,625
1,400 Citicorp................................................. 208,950
2,700 First Union Corporation.................................. 157,275
900 JP Morgan and Company Incorporated....................... 105,356
600 Keycorp.................................................. 21,375
9,060 Nationsbank Corporation.................................. 694,789
1,100 Pnc Bank Corporation..................................... 59,263
600 Wachovia Corporation..................................... 50,700
100 Washington Mutual Incorporated........................... 4,344
300 Wells Fargo and Company.................................. 110,700
-----------
1,745,502
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Bank (Midwest) Industry -- 3.04%
100 Fifth Third Bankcorp..................................... 6,300
1,500 First Chicago Nbd Corporation............................ 132,938
2,700 Mellon Bank Corporation.................................. 188,156
1,100 National City Corporation................................ 78,100
2,600 Norwest Corporation...................................... 97,500
6,900 US Bankcorp (New) ....................................... 296,700
-----------
799,694
-----------
Beverage (Soft Drink) Industry -- 7.62%
17,200 Coca Cola Company........................................ 1,470,600
2,500 Coca Cola Enterprises Incorporated....................... 97,813
10,700 Pepsico Incorporated..................................... 440,706
-----------
2,009,119
-----------
Building Materials Industry -- 0.03%
100 Armstrong World Industries Incorporated.................. 6,738
-----------
Chemical (Basic) Industry -- 1.85%
8,500 Arco Chemical Company.................................... 487,688
-----------
Chemical (Diversified) Industry -- 0.34%
1,400 Millipore Corporation.................................... 38,150
2,500 Pall Corporation......................................... 51,250
-----------
89,400
-----------
Chemical (Specialty) Industry -- 0.49%
600 International Flavors and Fragrances..................... 26,063
1,300 Praxair Incorporated..................................... 60,856
800 Sherwin Williams Company................................. 26,500
400 Sigma Aldrich Corporation................................ 14,050
-----------
127,469
-----------
Coal/Alternate Energy Industry -- 0.08%
400 Aes Corporation.......................................... 21,025
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Computer & Peripherals Industry -- 3.93%
200 3Com Corporation......................................... 6,138
200 Apple Computer Incorporated.............................. 5,738
600 Cabletron Systems Incorporated........................... 8,063
3,750 Cisco Systems Incorporated............................... 345,234
5,934 Compaq Computer Corporation.............................. 168,748
2,600 Dell Computer Corporation................................ 241,313
3,600 EMC Corporation.......................................... 161,325
1,100 Seagate Technology Incorporated.......................... 26,263
900 Silicon Graphics Incorporated............................ 10,912
1,400 Sun Microsystems Incorporated............................ 60,813
-----------
1,034,547
-----------
Computer Software & Services Industry -- 5.80%
1,200 Automatic Data Processing Incorporated................... 87,450
3,750 Computer Associates International Incorporation.......... 208,359
400 Electronic Data Systems Corporation...................... 15,975
1,800 First Data Corporation................................... 59,962
8,600 Microsoft Corporation.................................... 932,025
9,200 Oracle Corporation....................................... 225,975
-----------
1,529,746
-----------
Diversified Company Industry -- 0.78%
100 Crane Company............................................ 4,856
200 National Service Industries Incorporated................. 10,175
400 Raychem Corporation...................................... 11,825
800 Thermo Electron Corporation.............................. 27,350
2,400 Tyco International Limited............................... 151,200
-----------
205,406
-----------
Drug Industry -- 2.25%
8,000 Amgen Incorporated....................................... 523,000
300 Biogen Incorporated...................................... 14,700
200 Interneuron Pharmaceuticals Incorporated................. 725
400 Quintiles Transnational Corporation...................... 19,675
400 RP Scherer Corporation................................... 35,450
-----------
593,550
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Drugstore Industry -- 0.51%
800 Rite Aid Corporation..................................... 30,050
2,500 Walgreen Company......................................... 103,281
-----------
133,331
-----------
Electric Utility (Central) Industry -- 0.86%
800 Cinergy Corporation...................................... 28,000
3,200 Dte Energy Holding Company............................... 129,200
2,000 Unicom Corporation....................................... 70,125
-----------
227,325
-----------
Electric Utility (East) Industry -- 0.62%
800 Northeast Utilities...................................... 13,550
800 P P and L Resources Holding Company...................... 18,150
4,500 Peco Energy Company...................................... 131,344
-----------
163,044
-----------
Electric Utility (West) Industry -- 5.26%
10,700 Edison International Incorporated........................ 316,319
2,100 Nevada Power Company..................................... 54,075
15,900 PG & E Corporation (Holding Company) .................... 501,844
20,300 Pacificorp............................................... 459,287
1,955 Sempra Energy............................................ 54,372
-----------
1,385,897
-----------
Electrical Equipment Industry -- 0.25%
1,300 Corning Incorporated..................................... 45,175
400 W W Grainger Incorporated................................ 19,925
-----------
65,100
-----------
Electronics Industry -- 0.14%
1,100 Amp Incorporated......................................... 37,813
-----------
Entertainment Industry -- 1.97%
7,200 CBS Corporation.......................................... 228,600
3,400 Time Warner Incorporated Holding Company................. 290,488
-----------
519,088
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Environmental Industry -- 0.31%
2,800 Laidlaw Environmental Services Incorporated.............. 10,150
1,700 Republic Industries Incorporated......................... 42,606
600 USA Waste Services Incorporated.......................... 29,625
-----------
82,381
-----------
Financial Services Industry -- 5.21%
2,600 American Express Company................................. 295,750
1,100 Associates First Capital Corporation..................... 84,631
2,000 Cendant Corporation...................................... 41,000
400 Deluxe Corporation....................................... 14,300
3,400 Franklin Resources Incorporated.......................... 183,600
700 Green Tree Financial Corporation......................... 29,969
1,200 Household International Incorporated..................... 59,700
100 Lehman Brothers Holdings Incorporated.................... 7,756
2,400 Mbna Corporation......................................... 79,350
3,020 Morgan Stanley, Dean Witter & Company.................... 275,953
8,900 Schwab (Chas) Corporation................................ 290,363
100 Transamerica Corporation................................. 11,513
-----------
1,373,885
-----------
Food Processing Industry -- 2.34%
500 Bestfoods................................................ 29,031
2,200 General Mills Incorporated............................... 150,150
200 Hershey Foods Corporation................................ 13,800
3,800 Hj Heinz Company......................................... 213,275
1,700 Kellogg Company.......................................... 64,069
1,200 Pioneer Hi Bred International Incorporated............... 49,650
700 Quaker Oats Company...................................... 38,456
600 Wm Wrigley Jr Company.................................... 58,800
-----------
617,231
-----------
Food Services Industry -- 0.02%
150 Sodexho Marriott Services incorporated................... 4,350
-----------
Food Wholesalers Industry -- 0.17%
1,800 Sysco Corporation........................................ 46,125
-----------
Foreign Telecommunication Industry -- 0.56%
2,600 Northern Telecom Limited................................. 147,550
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Gold/Silver Mining Industry -- 0.30%
3,200 Barrick Gold Corporation................................. 61,600
700 Newmont Mining Corporation............................... 16,538
-----------
78,138
-----------
Grocery Industry -- 0.69%
1,400 Albertsons Incorporated.................................. 72,538
400 American Stores Company.................................. 9,675
1,000 Kroger Company........................................... 42,875
400 Safeway Incorporated..................................... 16,275
800 Winn Dixie Stores Incorporated........................... 40,800
-----------
182,163
-----------
Healthcare Info Systems Industry -- 0.40%
3,000 HBO & Company............................................ 105,750
-----------
Home Appliance Industry -- 0.10%
400 Whirlpool Corporation.................................... 27,500
-----------
Hotel/Gaming Industry -- 0.15%
1,200 Marriott International Incorporated Cl A................. 38,850
-----------
Household Products Industry -- 0.60%
800 Newell Company........................................... 39,850
600 Ralston Ralston Purina Group............................. 70,088
1,500 Rubbermaid Incorporated.................................. 49,500
-----------
159,438
-----------
Industrial Services Industry -- 0.08%
1,700 Laidlaw Incorporated..................................... 20,719
-----------
Insurance (Diversified) Industry -- 3.09%
1,100 American General Corporation............................. 78,306
5,900 Equitable Companies, Incorporated........................ 442,131
600 Lincoln National Corporation Ind......................... 54,825
2,000 Lowe's Companies Incorporated............................ 81,125
1,200 Marsh and Mclennan Companies Incorporated................ 72,525
1,500 Mgic Investment Corporation.............................. 85,594
-----------
814,506
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Insurance (Life) Industry -- 0.29%
900 Conseco Incorporated..................................... 42,188
600 Jefferson Pilot Corporation.............................. 34,763
-----------
76,951
-----------
Insurance (Property/Casualty Industry -- 2.53%
2,200 Allstate Corporation..................................... 201,438
900 Chubb Corporation........................................ 72,338
1,000 General Re Corporation................................... 253,500
700 Safeco Corporation....................................... 31,763
2,594 St Paul Companies Incorporated........................... 109,110
-----------
668,149
-----------
Machinery Industry -- 0.63%
1,100 Aeroquip Vickers Incorporated............................ 64,213
1,400 Donaldson Company Incorporated........................... 33,075
200 Snap On Incorporated..................................... 7,250
1,500 Stanley Works............................................ 62,344
-----------
166,882
-----------
Machinery (Construction & Mining) Industry -- 0.81%
200 Case Corporation......................................... 9,650
2,300 Caterpillar Incorporated................................. 121,684
800 Deere and Company........................................ 42,275
900 Ingersoll Rand Company................................... 39,656
-----------
213,265
-----------
Medical Services Industry -- 0.12%
700 Health Care and Retirement Corporation................... 27,606
200 Idexx Laboratories Incorporated.......................... 4,975
-----------
32,581
-----------
Medical Supplies Industry -- 2.30%
1,700 Becton Dickinson and Company............................. 131,962
2,100 Boston Scientific Corporation............................ 150,412
100 Centocor Incorporated.................................... 3,625
1,100 Guidant Corporation...................................... 78,444
3,800 Medtronic Incorporated................................... 242,250
-----------
606,693
-----------
Metals & Mining (Div.) Industry -- 0.41%
7,900 Inco Limited............................................. 107,638
-----------
Natural Gas (Distribution) Industry -- 0.08%
800 Washington Gas Light Company............................. 21,400
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Natural Gas (Diversified) Industry -- 1.57%
852 Burlington Resources Incorporated........................ 36,689
300 Columbia Energy Group.................................... 16,687
600 Consolidated Natural Gas Company......................... 35,325
5,000 Enron Corporation........................................ 270,312
400 Sonat Incorporated....................................... 15,450
1,200 Williams Companies Incorporated.......................... 40,500
-----------
414,963
-----------
Newspaper Industry -- 0.15%
200 Times Mirror Company..................................... 12,575
400 Tribune Company.......................................... 27,525
-----------
40,100
-----------
Office Equipment & Supplies Industry -- 0.95%
700 Ikon Office Solutions Incorporated....................... 10,194
5,000 Pitney Bowes Incorporated................................ 240,625
-----------
250,819
-----------
Oilfield Services/Equipment Industry -- 1.22%
1,400 Baker Hughes Incorporated................................ 48,387
200 Cooper Cameron Corporation............................... 10,200
1,700 Diamond Offshore Drilling Incorporated................... 68,531
1,400 Dresser Industries Incorporated.......................... 61,687
400 Ensco International Incorporated......................... 7,000
400 Global Marine Incorporated............................... 7,525
400 Helmerich and Payne Incorporated......................... 8,975
200 Noble Drilling Corporation............................... 4,812
472 R&B Falcon Corporation................................... 10,679
700 Rowan Companies Incorporated............................. 13,606
200 Smith International Incorporated......................... 6,962
800 Transocean Offshore Incorporated......................... 35,600
1,000 Varco International Incorporated......................... 19,812
200 Western Atlas Incorporated............................... 16,975
-----------
320,751
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Packaging & Container Industry -- 0.16%
600 Bemis Company Incorporated............................... 24,525
550 Sonoco Products Company.................................. 16,637
-----------
41,162
-----------
Paper & Forest Products Industry -- 0.41%
200 Chesapeake Corporation................................... 7,787
300 Fort James Corporation................................... 13,387
1,900 Rayonier Incorporated.................................... 87,400
-----------
108,574
-----------
Petroleum (Integrated) Industry -- 1.23%
3,200 Fina Incorporated........................................ 208,000
600 Murphy Oil Corporation................................... 30,412
800 Pennzoil Company......................................... 40,650
800 Quaker State Corporation................................. 13,100
400 Sun Company Incorporated................................. 15,525
600 Tosco Corporation........................................ 17,700
-----------
325,387
-----------
Petroleum (Producing) Industry -- 0.15%
200 Pogo Producing Company................................... 5,025
1,900 Union Pacific Resources Group Incorporated............... 33,369
-----------
38,394
-----------
Publishing Industry -- 0.23%
900 Harcourt General Incorporated............................ 53,550
100 Mcgraw Hill Company Incorporated......................... 8,150
-----------
61,700
-----------
Railroad Industry -- 2.64%
5,800 Burlington Northern Santa Fe Corporation................. 569,487
4,200 Norfolk Southern Corporation............................. 125,212
-----------
694,699
-----------
Restaurant Industry -- 1.91%
7,300 McDonalds Corporation.................................... 503,700
-----------
Retail (Special Lines) Industry -- 0.60%
2,250 Gap Incorporated......................................... 138,234
800 Tjx Companies Incorporated............................... 19,300
-----------
157,534
-----------
Retail Building Supply Industry -- 1.20%
3,800 Home Depot Incorporated.................................. 315,638
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Retail Store Industry -- 2.13%
4,300 Borders Group, Incorporated.............................. 159,100
1,600 CVS Corporation.......................................... 62,300
300 Clear Channel Communications Incorporated................ 32,737
400 Costco Companies Incorporated............................ 25,225
1,600 Dayton Hudson Corporation................................ 77,600
500 Federated Department Stores Incorporated................. 26,906
1,300 JC Penney Company Incorporated........................... 94,006
300 May Department Stores Company............................ 19,650
1,000 Sears Roebuck and Company................................ 61,062
100 Venator Group Incorporated............................... 1,912
-----------
560,498
-----------
Securities Brokerage Industry -- 0.73%
2,100 Merrill Lynch and Company Incorporated................... 193,725
-----------
Semiconductor Industry -- 0.04%
300 Advanced Micro Devices Incorporated...................... 5,119
200 Micron Technology Incorporated........................... 5,000
-----------
10,119
-----------
Semiconductor Capital Equipment Industry -- 0.35%
3,100 Applied Materials Incorporated........................... 91,450
-----------
Steel (General) Industry -- 0.09%
400 Nucor Corporation........................................ 18,400
400 Worthington Industries Incorporated...................... 6,025
-----------
24,425
-----------
Telecom. Equipment Industry -- 2.58%
300 Andrew Corporation....................................... 5,419
700 General Instrument Corporation........................... 19,031
5,700 Lucent Technologies Incorporated......................... 474,525
3,000 MediaOne Group........................................... 131,812
700 Tellabs Incorporated..................................... 50,138
-----------
680,925
-----------
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SCHEDULE OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
Telecommunication Services Industry -- 9.08%
2,600 Airtouch Communications.................................. 151,937
900 Alltel Corporation....................................... 41,062
5,600 Ameritech Corporation.................................... 251,300
5,300 Bellsouth Corporation.................................... 355,762
800 Comcast Corporation Class A Special...................... 32,475
7,378 SBC Communications Incorporated.......................... 295,120
4,000 Sprint Corporation....................................... 282,000
1,310 TCI Ventures A........................................... 26,282
1,145 Tele Communications Inc New.............................. 44,011
15,682 US West Incorporated..................................... 734,110
3,700 Worldcom Incorporated.................................... 179,219
-----------
2,393,278
-----------
Thrift Industry -- 3.09%
2,500 Federal Home Loan Mortgage Association................... 117,812
11,100 Federal National Mortgage Association.................... 682,650
200 HF Ahmanson and Company.................................. 14,200
-----------
814,662
-----------
Tire & Rubber Industry -- 0.03%
400 Cooper Tire and Rubber Company........................... 8,300
-----------
Toiletries/Cosmetics Industry -- 0.21%
700 Avon Products Incorporated............................... 54,206
-----------
Total common stocks (cost $19,181,177)...................26,191,843
-----------
Total investments (cost $19,181,177).....................26,191,843
-----------
CASH & OTHER ASSETS, LESS LIABILITIES -- 0.63%...................... 166,149
-----------
Total Net Assets.........................................$26,357,992
===========
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 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, 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 Fund intends to
qualify for and elect the special tax treatment afforded a "regulated
investment company" under subchapter M of the Internal Revenue Code. Income
and capital gains distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts
based on their federal tax basis treatment; temporary differences do not
require such reclassification.
C. Capital Stock-- The Trust records the sales and redemptions of its
capital stock on trade date.
D.Organizational Costs - Costs incurred in connection with organization and
registration are deferred and amortized over a period of 60 months from the
date upon which the Trust commenced operations.
2. Tax basis of investments:
At June 30, 1998, the total cost of investments for federal income tax
purposes was identical to the total cost on a financial reporting basis.
Aggregate gross unrealized appreciation in investments in which there was an
excess of market value over tax cost was $7,523,869. Aggregate gross
unrealized depreciation in investments in which there was an excess of tax
cost over market value was $513,203. Net unrealized appreciation in
investments at June 30, 1998 was $7,010,666.
18
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PRINCIPLED EQUITY MARKET FUND
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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
3. Investment advisory and sub-advisory agreements:
The Trust has entered into an Investment Advisory Agreement with F.L. Putnam
Investment Management Company ("F.L. Putnam" or the "Adviser") and a
Sub-Advisory Agreement with PanAgora Asset Management, Inc. ("PanAgora" or
the "Sub-Advisor"). The Advisory Agreement provides that F.L. Putnam will be
responsible for overall management of the Trust's activities, will supervise
the provision of administrative and professional services to the Trust, will
provide all necessary facilities, equipment, personnel and office space to
the Trust, and will provide the Sub-Advisor with a list of acceptable
securities from which to select and effect investments for the Trust's
portfolio. The Sub-Advisory Agreement provides that PanAgora will be
responsible for investment and management of the Trust's securities portfolio
using the list of securities provided by F.L. Putnam. The agreements provide
that the Trust will pay F.L. Putnam 1/4 of 1 percent (0.25%) of the Trust's
average monthly net assets per year, of which F.L. Putnam will pay 60 percent
or 15/100 of 1 percent (0.15%) to PanAgora, leaving F.L. Putnam with a net
fee of 1/10 of 1 percent (0.10%). F.L. Putnam elected to waive its total
management fee of $12,239 for the six months ended June 30, 1998, and is
receiving no compensation for its services. PanAgora has received its portion
of the fee, in an amount equal to $17,886 of which $17,886 is included in
"Accrued expenses and other liabilities" in the accompanying Statement of
Assets and Liabilities.
4. 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 for these services are $30,000. At June 30, 1998,
administrative, transfer agent and dividend disbursing agent fees of $8,854
were due which were included in "Accrued expenses and other liabilities" in
the accompanying Statement of Assets and Liabilities.
5. Related parties:
The President and Secretary of the Trust is also a director and principal
stockholder of the Trust's investment adviser.
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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
(Continued)
6. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for six months ended June 30, 1998 were:
Cost of securities acquired:
U.S. Government and investments backed by such
securities......................................... $ --
Other investments................................ 4,970,838
===============
$ 4,970,838
===============
Proceeds from sales and maturities:
U.S. Government and investments backed by such
securities......................................... $ --
Other investments................................ 4,530,009
===============
$ 4,530,009
===============
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OFFICERS & TRUSTEES
DAVID W.C. PUTNAM President, Secretary
President and Director and Trustee
F.L. Putnam Securities Company, Incorporated and
subsidiaries
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
SISTER JOAN GIBBINS Trustee
Treasurer, Mercy Health System of Southeastern
Pennsylvania
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
Chief Financial Officer, Eastern Mercy Health
System
DANIEL F. RUSSELL Trustee
President and Chief Executive Officer, Eastern
Mercy Health System
EDWARD T. SULLIVAN, JR Trustee
Chief Executive Officer and Chief Financial
Officer, Local 254 Service Employees
International Union
GOERGE A. VIOLIN, M.D., F.A.C.S. Trustee
Physician; Principal, Medical Eye Care Associates
JOEL M. ZIFF Trustee
Director, Eastern Mercy Health System
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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.
579 Pleasant St., Suite 4, Paxton, MA 01612
(508) 831-1171
LEGAL COUNSEL
Sullivan & Worcester
One Post Office Square, Boston, Massachusetts 02109
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