PRINCIPLED
EQUITY
MARKET
FUND
-----------------------------------------
INVESTMENT ADVISER
F.L. PUTNAM INVESTMENT
MANAGEMENT COMPANY
10 Langley Road, Suite 400
Newton Centre, Massachusetts 02459
-----------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1999
(UNAUDITED)
1
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PRINCIPLED EQUITY MARKET FUND
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The purpose of the Fund is to provide all major constituencies of investors
concerned with the application of philosophical, ethical, religious, and social
justice criteria to their investment portfolios with the opportunity to achieve
the overall unmanaged equity market returns through a strategy of passive index
replication ("indexing").
The investment objective of the Fund is long-term capital appreciation. For the
information of investors the Fund will compare its investment results to those
of the Standard and Poor's Corporation 500 Stock Index and other major market
indices which the Fund considers appropriate.
Comparison of the Change in Value of a $10,000 Investment in the Principled
Equity Market Fund, the Standard & Poors 500 Index and
the Wilshire 5000 Index
[GRAPHIC OMITTED]
----------------------------------------------
Principled Equity Market Fund
Average Annual Total Return
----------------------------------------------
From
Six Months* 1 Year 2 Years Inception
11.97% 21.29% 26.30% 28.75%
-----------------------------------------------
*Not Annualized for the period from December 31, 1998 to June 30, 1999.
2
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PRINCIPLED EQUITY MARKET FUND
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STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(Unaudited)
Assets:
Investments at quoted market value (cost $19,308,268;
see Schedule of Investments, Notes 1, 2, & 6)................. $ 30,469,438
Cash ......................................................... 305,427
Dividends and interest receivable.............................. 38,016
Investment securities sold..................................... 23,400
Organizational costs (Note 1).................................. 22,031
------------
Total assets.............................................. 30,858,312
------------
Liabilities:
Accrued expenses and other liabilities (Note 3 )............... 39,410
------------
Total liabilities......................................... 39,410
------------
Net Assets:
Capital stock (2,750,000 shares authorized at no par value,
amount paid in on 1,811,484 shares outstanding) (Note 1)...... 19,466,475
Accumulated undistributed net investment income (Note 1)....... 123,999
Accumulated realized gain from security transactions (Note 1).. 67,258
Net unrealized appreciation in value of investments (Note 2)... 11,161,170
------------
Net assets (equivalent to $17.01 per share, based on
1,811,484 capital shares outstanding).................... $ 30,818,902
============
The accompanying notes are an integral part of these financial statements.
3
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PRINCIPLED EQUITY MARKET FUND
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STATEMENT OF OPERATIONS
JUNE 30, 1999
(Unaudited)
Income:
Dividends..................................................... $ 192,742
Interest...................................................... 3,781
------------
Total income.............................................. 196,523
------------
Expenses:
Management fees, net (Note 3)................................. 25,168
Administration fees (Note 4).................................. 12,489
Legal fees.................................................... 7,458
Insurance..................................................... 7,726
Organizational expenses (Note 1).............................. 4,772
Custodian fees................................................ 4,308
Audit and accounting fees..................................... 3,728
Transfer fees (Note 4)........................................ 2,982
Trustees' fees and expenses................................... 498
Other expenses................................................ 3,395
------------
Total expenses............................................ 72,524
------------
Net investment income.......................................... 123,999
------------
Realized and unrealized gain on investments:
Realized gain on investments-net............................. 70,030
Increase in net unrealized appreciation in investments....... 3,099,468
------------
Net gain on investments................................... 3,169,498
============
Net increase in net assets resulting from operations........... $ 3,293,497
============
The accompanying notes are an integral part of these financial statements.
4
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PRINCIPLED EQUITY MARKET FUND
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STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31,
1998
----------------------------
From operations:
Net investment income........................... $ 123,999 $ 263,674
Realized gain on investments, net............... 70,030 2,070,836
Increase in net unrealized
appreciation in investments.................... 3,099,468 3,952,775
-------------- -----------
Net increase in net assets resulting
from operations............................ 3,293,497 6,287,285
-------------- ------------
Distributions to shareholders:
From net investment income
($0.01 per share in 1999 and $0.15 per share in
1998)........................................... (7,236) (256,438)
From net realized gain on investments
($0.10 per share in 1999 and $1.09 per share in
1998)........................................... (187,885) (1,885,723)
-------------- ------------
Total distributions to shareholders......... (195,121) (2,142,161)
-------------- ------------
From capital share transactions:
Number of Shares
1999 1998
---------- -----------
Proceeds from sale of
shares.................. 12,261 20,766 186,892 273,995
Shares issued to share-
holders in distributions
reinvested.............. 6,238 66,132 95,949 1,011,817
Cost of shares redeemed.. -- -- -- --
--------- --------- -------------- ------------
Increase in net
assets resulting from
capital
share transactions...... 18,499 86,898 282,841 1,285,812
========== =========== -------------- ------------
Net increase in net assets....................... 3,381,217 5,430,936
Net assets:
Beginning of period............................ 27,437,685 22,006,749
============== ============
End of period ( including undistributed
net investment income of $123,999 and
$7,236 , respectively....................... $ 30,818,902 $ 27,437,685
============== ============
The accompanying notes are an integral part of these financial statements.
5
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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 Month
Ended June Year Ended Year Ended
30, 1999 December December
(Unaudited) 31, 1998 31, 1997
Investment income ................ $ 0.11 $ 0.22 $ 0.18
Expenses, net..................... 0.04 0.07 0.04
---------------------------------------
Net investment income ............ 0.07 0.15 0.14
Net realized and unrealized
gain on investments............ 1.75 3.49 2.96
Distributions to shareholders:
From net investment income...... 0.01 0.15 0.14
From net realized gain on
investments..................... 0.10 1.09 0.06
---------------------------------------
Net increase in net asset value... 1.71 2.40 2.90
Net asset value:
Beginning of period............. 15.30 12.90 10.00
=======================================
End of period................... $17.01 $15.30 $12.90
=======================================
Total Return*..................... 11.97% 28.22% 31.00%
Ratio of expenses
to average net assets.......... 0.50% 0.48% 0.48%
Ratio of net investment
income to average net assets... 0.86% 1.06% 1.40%
Portfolio turnover................ 0.00 0.29 0.07
Average commission rate paid...... 0.0300 0.0292 0.0253
Number of shares outstanding at
end of period..................... 1,811,484 1,792,985 1,706,087
Per share data and ratios assuming no waiver of advisory fees:
Expenses....................... 0.05 0.14 0.06
Net investment income.......... 0.06 0.08 0.13
Ratio of expenses to average
net assets.................... 0.60% 0.73% 0.58%
Ratio of net investment income
to average net assets......... 0.76% 0.81% 1.30%
*Not Annualized for the six months ended June 30, 1999.
The accompanying notes are an integral part of these financial statements.
6
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
Value
Quantity (Note 1)
COMMON STOCKS - 98.68%
Advertising Industry -- 0.54%
800 Interpublic Group Of Companies Incorporated.............. 69,300
1,200 Omnicom Group............................................ 96,000
-----------
165,300
Aerospace/Defense Industry -- 1.20%
6,700 Precision Castparts Corporation.......................... 284,750
1,400 Rockwell International................................... 85,050
-----------
369,800
Air Transport Industry -- 0.73%
800 Amr Corporation*......................................... 54,600
400 FDX Corporation.......................................... 21,700
1,100 Gateway, Incorporated*................................... 64,969
1,800 Southwest Airlines Company............................... 56,700
600 US Airways Group Incorporated*........................... 26,137
-----------
224,106
Auto & Truck Industry -- 0.17%
1,000 Paccar Incorporated...................................... 53,375
-----------
Auto Parts (OEM) Industry -- 0.24%
600 Dana Corporation......................................... 27,637
600 Oea Incorporated......................................... 5,325
600 Superior Industries International........................ 16,387
1,300 Synovus Financial Corporation............................ 25,837
-----------
75,186
Auto Parts (Replacement) Industry -- 2.12%
18,650 Genuine Parts Company.................................... 652,750
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
7
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Bank Industry -- 6.96%
1,700 BB&T Corporation......................................... 62,369
2,430 Bank One Corporation..................................... 144,737
2,000 Bank of New York Company Incorporated.................... 73,375
11,889 BankAmerica Corporation (New) ........................... 871,612
1,000 Bankboston Corporation................................... 51,125
900 Capital One Financial.................................... 50,119
5,250 Citigroup Incorporated................................... 249,375
2,700 First Union Corporation.................................. 127,237
900 JP Morgan and Company Incorporated....................... 126,450
600 Keycorp.................................................. 19,275
1,100 Pnc Bank Corporation*.................................... 63,387
600 Wachovia Corporation..................................... 51,337
436 Washington Mutual Incorporated........................... 15,505
5,600 Wells Fargo and Company.................................. 239,400
-----------
2,145,303
Bank (Midwest) Industry -- 2.38%
1,100 Comerica Incorporated.................................... 65,381
1,800 Fifth Third Bankcorp..................................... 119,812
5,400 Mellon Bank Corporation.................................. 196,425
1,100 National City Corporation................................ 72,050
500 Northern Trust........................................... 48,500
6,900 US Bankcorp (New) ....................................... 230,287
-----------
732,455
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
8
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Beverage (Soft Drink) Industry -- 5.05%
17,200 Coca Cola Company........................................ 1,066,400
2,500 Coca Cola Enterprises Incorporated....................... 75,000
10,700 Pepsico Incorporated..................................... 413,956
---------
1,555,356
Building Materials Industry -- 0.02%
100 Armstrong World Industries Incorporated.................. 5,781
-----------
Chemical (Basic) Industry -- 0.08%
1,100 Millennium Chemicals..................................... 25,919
-----------
Chemical (Diversified) Industry - 0.36%
1,400 Millipore Corporation.................................... 56,787
2,500 Pall Corporation......................................... 55,469
-----------
112,256
Chemical (Specialty) Industry -- 0.41%
600 International Flavors and Fragrances..................... 26,400
1,300 Praxair Incorporated..................................... 63,619
800 Sherwin Williams Company................................. 22,200
400 Sigma Aldrich Corporation................................ 13,775
-----------
125,994
Coal/Alternate Energy Industry -- 0.08%
400 Aes Corporation*......................................... 23,250
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
9
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Computer & Peripherals Industry -- 6.18%
200 3Com Corporation*........................................ 5,338
200 Apple Computer Incorporated.............................. 9,263
600 Cabletron Systems Incorporated*.......................... 7,800
11,250 Cisco Systems Incorporated*.............................. 725,625
5,934 Compaq Computer Corporation.............................. 140,191
10,400 Dell Computer Corporation*............................... 384,800
7,200 EMC Corporation*......................................... 396,000
1,100 Seagate Technology Incorporated*......................... 28,188
900 Silicon Graphics Incorporated*........................... 14,738
2,800 Sun Microsystems Incorporated*........................... 192,850
-----------
1,904,793
Computer Software & Services Industry -- 7.99%
2,400 Automatic Data Processing Incorporated................... 105,600
3,750 Computer Associates International........................ 205,313
1,800 First Data Corporation................................... 88,088
17,200 Microsoft Corporation.................................... 1,551,225
13,800 Oracle Corporation....................................... 512,325
-----------
2,462,551
Diversified Company Industry -- 2.19%
105 Berkshire Hathaway Class B*.............................. 235,200
150 Crane Company............................................ 4,716
1,000 Hillenbrand Industries................................... 43,250
200 National Service Industries.............................. 7,200
400 Raychem Corporation...................................... 14,800
2,500 Service Corporation International........................ 48,125
800 Thermo Electron Corporation.............................. 16,050
3,225 Tyco International Limited............................... 305,569
-----------
674,910
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
10
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Drug Industry -- 0.06%
200 Interneuron Pharmaceuticals*............................. 550
400 Quintiles Transnational Corporation*..................... 16,800
-----------
17,350
Drugstore Industry -- 0.54%
800 Rite Aid Corporation..................................... 19,700
5,000 Walgreen Company......................................... 146,875
-----------
166,575
Electric Utility (Central) Industry -- 0.90%
800 Cinergy Corporation...................................... 25,600
3,200 Dte Energy Holding Company............................... 130,400
1,400 FirstEnergy Corporation.................................. 43,400
2,000 Unicom Corporation....................................... 77,125
-----------
276,525
Electric Utility (East) Industry -- 0.69%
800 P P and L Resources Holding.............................. 24,600
4,500 Peco Energy Company...................................... 188,438
-----------
213,038
Electric Utility (West) Industry -- 4.13%
10,700 Edison International Incorporated........................ 286,225
2,100 Nevada Power Company..................................... 52,500
15,900 PG & E Corporation (Holding) ............................ 515,756
20,300 Pacificorp............................................... 373,013
1,954 Sempra Energy............................................ 44,209
-----------
1,271,703
Electrical Equipment Industry -- 0.07%
400 W W Grainger Incorporated................................ 21,525
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
11
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Entertainment Industry -- 3.09%
7,200 CBS Corporation.......................................... 313,650
700 Safety Kleen Corporation................................. 12,688
6,800 Time Warner Incorporated................................. 493,850
3,000 Viacom Inc. Class B*..................................... 132,000
-----------
952,188
Environmental Industry -- 0.10%
1,700 AutoNation Incorporated*................................. 30,281
-----------
Financial Services Industry -- 5.73%
2,600 American Express Company................................. 338,325
2,200 Associates First Capital Corporation..................... 97,075
2,000 Cendant Corporation*..................................... 41,000
400 Deluxe Corporation....................................... 15,525
3,400 Franklin Resources Incorporated.......................... 138,125
1,200 Household International Incorporated..................... 56,850
100 Lehman Brothers Holdings Incorporated.................... 6,213
3,600 Mbna Corporation......................................... 110,250
3,020 Morgan Stanley, Dean Witter.............................. 309,928
5,850 Schwab (Chas) Corporation................................ 637,650
200 Transamerica Corporation................................. 15,000
-----------
1,765,941
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
12
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Food Processing Industry -- 1.85%
2,300 Bestfoods................................................ 113,850
2,200 General Mills Incorporated............................... 176,825
1,300 Hershey Foods Corporation................................ 77,188
1,700 Kellogg Company.......................................... 56,100
1,200 Pioneer Hi Bred International............................ 46,725
700 Quaker Oats Company...................................... 46,463
600 Wm Wrigley Jr Company.................................... 53,513
-----------
570,664
Food Wholesalers Industry -- 0.17%
1,800 Sysco Corporation........................................ 53,663
-----------
Foreign Telecommunication Industry -- 1.56%
2,600 Nortel Networks Corporation.............................. 225,713
1,300 Vodafone Airtouch Plc.................................... 256,100
-----------
481,813
Furniture/Home Furnishings Industry -- 0.13%
1,400 Leggett & Platt.......................................... 38,938
-----------
Gold/Silver Mining Industry -- 0.25%
3,200 Barrick Gold Corporation................................. 62,000
700 Newmont Mining Corporation............................... 13,913
-----------
75,913
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
13
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Grocery Industry -- 0.62%
1,652 Albertsons Incorporated.................................. 85,181
2,000 Kroger Company........................................... 55,875
400 Safeway Incorporated*.................................... 19,800
800 Winn Dixie Stores Incorporated........................... 29,550
-----------
190,406
Healthcare Information Systems Industry -- 0.12%
1,110 McKesson HBOC Incorporated............................... 35,728
-----------
Home Appliance Industry -- 0.21%
500 Maytag Corporation....................................... 34,906
400 Whirlpool Corporation.................................... 29,600
-----------
64,506
Hotel/Gaming Industry -- 0.15%
1,200 Marriott International Incorporated...................... 44,850
-----------
Household Products Industry -- 0.30%
1,982 Newell Rubermaid Incorporated............................ 91,915
-----------
Industrial Services Industry -- 0.04%
1,700 Laidlaw Incorporated..................................... 12,538
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
14
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Insurance (Diversified) Industry -- 3.07%
1,100 American General Corporation............................. 82,913
1,500 Cigna Corporation........................................ 133,500
5,800 Equitable Companies, Incorporated 388,600
1,200 Lincoln National Corporation............................. 62,775
2,000 Lowe's Companies Incorporated............................ 113,375
1,200 Marsh and Mclennan Companies............................. 90,825
1,500 Mgic Investment Corporation.............................. 72,938
-----------
944,926
Insurance (Life) Industry -- 0.28%
1,541 Conseco Incorporated..................................... 46,904
600 Jefferson Pilot Corporation.............................. 39,713
-----------
86,617
Insurance (Property/Casualty) Industry -- 1.60%
4,400 Allstate Corporation..................................... 158,400
900 Chubb Corporation........................................ 62,550
600 Cincinnati Financial..................................... 22,538
1,100 Hartford Financial Services Group........................ 64,075
500 Progressive Corp., Ohio.................................. 72,500
700 Safeco Corporation....................................... 30,888
2,594 St Paul Companies Incorporated........................... 82,522
-----------
493,473
Machinery Industry -- 0.29%
1,400 Donaldson Company Incorporated........................... 34,300
200 Snap On Incorporated..................................... 7,238
1,500 Stanley Works............................................ 48,281
-----------
89,819
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
15
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PRINCIPLED EQUITY MARKET FUND
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SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Machinery (Construction & Mining) Industry -- 0.77%
200 Case Corporation......................................... 9,625
2,300 Caterpillar Incorporated................................. 138,000
800 Deere and Company........................................ 31,350
900 Ingersoll Rand Company................................... 58,163
-----------
237,138
Medical Services Industry -- 0.33%
700 HCR Manor Care, Incorporated............................. 16,931
2,600 IMS Health............................................... 81,250
200 Idexx Laboratories Incorporated*......................... 4,662
-----------
102,843
Medical Supplies Industry -- 2.00%
700 Biomet, Incorporated..................................... 27,825
4,200 Boston Scientific Corporation*........................... 184,537
100 Centocor Incorporated*................................... 4,662
3,800 Medtronic Incorporated................................... 295,925
1,700 Stryker Corporation...................................... 102,213
-----------
615,162
Metals & Mining (Diversified) Industry -- 0.46%
7,900 Inco Limited............................................. 142,200
-----------
Natural Gas (Distribution) Industry -- 0.07%
800 Washington Gas Light Company............................. 20,800
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
16
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PRINCIPLED EQUITY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Natural Gas (Diversified) Industry -- 1.83%
852 Burlington Resources Incorporated........................ 36,849
300 Columbia Energy Group.................................... 18,806
600 Consolidated Natural Gas Company......................... 36,450
5,000 Enron Corporation........................................ 408,750
400 Sonat Incorporated....................................... 13,250
1,200 Williams Companies Incorporated.......................... 50,100
-----------
564,205
Newspaper Industry - 0.15%
200 Times Mirror Company..................................... 11,850
400 Tribune Company.......................................... 34,850
-----------
46,700
Office Equipment & Supplies Industry -- 1.08%
700 Ikon Office Solutions Incorporated....................... 10,500
5,000 Pitney Bowes Incorporated................................ 321,250
-----------
331,750
Oil Exploration Industry -- 0.22%
1,300 Vastar Resources......................................... 68,169
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
17
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PRINCIPLED EQUITY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Oilfield Services/Equipment Industry -- 0.74%
1,940 Baker Hughes Incorporated................................ 64,990
200 Cooper Cameron Corporation*.............................. 7,412
1,700 Diamond Offshore Drilling Incorporated................... 48,237
400 Ensco International Incorporated......................... 7,975
400 Global Marine Incorporated*.............................. 6,200
400 Helmerich and Payne Incorporated......................... 9,450
800 McDermott International.................................. 22,600
200 Noble Drilling Corporation............................... 3,938
472 R&B Falcon Corporation*.................................. 4,425
700 Rowan Companies Incorporated*............................ 12,775
200 Smith International Incorporated*........................ 8,687
800 Transocean Offshore Incorporated......................... 21,000
1,000 Varco International Incorporated*........................ 10,813
-----------
228,502
Packaging & Container Industry -- 0.28%
600 Bemis Company Incorporated............................... 23,850
1,600 Crown Cork & Seal........................................ 45,600
550 Sonoco Products Company.................................. 16,466
-----------
85,916
Paper & Forest Products Industry -- 1.06%
200 Chesapeake Corporation................................... 7,487
300 Fort James Corporation................................... 11,362
1,900 Rayonier Incorporated.................................... 94,644
3,100 Weyerhaeuser Company..................................... 213,125
-----------
326,618
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
18
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PRINCIPLED EQUITY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Petroleum (Integrated) Industry -- 0.30%
600 Murphy Oil Corporation................................... 29,287
800 PennzEnergy Company...................................... 13,300
1,456 Pennzoil-Quaker State.................................... 21,840
400 Sunoco Incorporated...................................... 12,075
600 Tosco Corporation........................................ 15,562
-----------
92,064
Petroleum (Producing) Industry -- 0.32%
1,700 Anadarko Petroleum Corporation........................... 62,581
200 Pogo Producing Company................................... 3,725
1,900 Union Pacific Resources Group............................ 30,994
-----------
97,300
Publishing Industry -- 0.18%
900 Harcourt General Incorporated............................ 46,406
200 Mcgraw Hill Company Incorporated......................... 10,787
-----------
57,193
Railroad Industry -- 2.16%
17,400 Burlington Northern Santa Fe............................. 539,400
4,200 Norfolk Southern Corporation............................. 126,525
-----------
665,925
Restaurant Industry -- 1.95%
14,600 McDonalds Corporation.................................... 600,425
-----------
Retail (Special Lines) Industry -- 0.91%
5,062 Gap Incorporated......................................... 255,023
800 Tjx Companies Incorporated............................... 26,650
-----------
281,673
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
19
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PRINCIPLED EQUITY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Retail Building Supply Industry -- 1.59%
7,600 Home Depot Incorporated.................................. 489,725
-----------
Retail Store Industry -- 1.93%
4,300 Borders Group, Incorporated*............................. 67,994
1,600 CVS Corporation.......................................... 81,200
600 Clear Channel Communications*............................ 41,362
400 Costco Companies Incorporated* 32,025
1,600 Dayton Hudson Corporation................................ 104,000
781 Dollar General........................................... 22,649
500 Federated Department Stores.............................. 26,469
1,300 JC Penney Company Incorporated........................... 63,131
2,700 May Department Stores Company............................ 110,362
1,000 Sears Roebuck and Company................................ 44,562
100 Venator Group Incorporated*.............................. 1,044
-----------
594,798
Securities Brokerage Industry -- 0.54%
2,100 Merrill Lynch and Company Incorporated................... 166,950
-----------
Semiconductor Industry - 0.29%
300 Advanced Micro Devices Incorporated*..................... 5,419
700 Conexant Systems, Incorporated*.......................... 40,644
1,100 Micron Technology Incorporated........................... 44,550
-----------
90,613
Semiconductor Capital Equipment Industry -- 0.74%
3,100 Applied Materials Incorporated*.......................... 229,012
-----------
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
20
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PRINCIPLED EQUITY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Steel (General) Industry -- 0.08%
400 Nucor Corporation........................................ 18,975
400 Worthington Industries Incorporated...................... 6,575
-----------
25,550
Telecommunication Equipment Industry -- 1.54%
300 Andrew Corporation*...................................... 5,681
700 General Instrument Corporation*.......................... 29,750
1,815 Lucent Technologies Incorporated*........................ 122,399
3,000 MediaOne Group*.......................................... 223,125
1,400 Tellabs Incorporated*.................................... 94,587
-----------
475,542
Telecommunication Services Industry -- 11.30%
2,379 A T & T Corporation...................................... 132,778
1,362 A T & T Corporation - Liberty Media Group A.............. 50,053
900 Alltel Corporation....................................... 64,350
5,600 Ameritech Corporation.................................... 411,600
10,600 Bellsouth Corporation.................................... 488,262
3,400 Comcast Corporation Class A.............................. 130,687
3,700 MCI Worldcom Incorporated*............................... 318,431
7,378 SBC Communications Incorporated.......................... 427,924
8,000 Sprint Corporation (FON Group) .......................... 424,000
2,000 Sprint PCS............................................... 114,000
15,681 US West Incorporated..................................... 921,259
-----------
3,483,344
Thrift Industry -- 2.93%
2,500 Federal Home Loan Mortgage Association................... 145,000
11,100 Federal National Mortgage Association.................... 757,575
-----------
902,575
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
21
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PRINCIPLED EQUITY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
(Continued)
Value
Quantity (Note 1)
Tire & Rubber Industry -- 0.03%
400 Cooper Tire and Rubber Company........................ 9,450
-----------
Toiletries/Cosmetics Industry -- 0.25%
1,400 Avon Products Incorporated............................ 77,700
-----------
Total common stocks (cost $19,292,261)................ 30,409,822
-----------
RIGHTS & WARRANTS -- 0.19%
2,592 PetroFina S.A. Warrants* (cost 16,007) ............... 59,616
-----------
Total investments (cost $19,426,830).................. 30,469,438
-----------
CASH & OTHER ASSETS, LESS LIABILITIES -- 1.13%................... 349,464
-----------
Total Net Assets...................................... $30,818,902
===========
* Non income producing security.
The accompanying notes are an integral part of these financial statements.
22
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PRINCIPLED EQUITY MARKET FUND
================================================================================
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
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, 1999, 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 $12,061,745. Aggregate gross
unrealized depreciation in investments in which there was an excess of tax
cost over market value was $900,575. Net unrealized appreciation in
investments at June 30, 1999 was $11,161,170.
23
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PRINCIPLED EQUITY MARKET FUND
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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(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 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, which provided the necessary capital to
establish the Trust, waived its total management fees of $14,562 for the six
months ended June 30, 1999, and $24,990 for the year ended December 31, 1998;
it has received no compensation for its services since the inception of the
Trust.
4. Administration and transfer agent services:
The Trust has entered into an agreement with Cardinal Investment Services
Inc. for administrative, transfer agent and dividend disbursing agent
services. Annual fees for these services are $34,000.
5. Related parties:
The President and Secretary of the Trust is also a director and an indirect
beneficial owner of the parent company of the Trust's investment adviser.
6. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for six months ended June 30, 1999 were:
Cost of securities acquired:
U.S. Government and investments backed by such
securities....................................... $ --
Other investments................................ --
===============
$ --
===============
Proceeds from sales and maturities:
U.S. Government and investments backed by such
securities......................................... $ --
Other investments................................ 188,592
===============
$ 188,592
===============
24
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PRINCIPLED EQUITY MARKET FUND
================================================================================
OFFICERS & TRUSTEES
HOWARD R. BUCKLEY Trustee
President, Chief Executive Officer and Director,
Mercy Health System of Maine
SISTER ANNE MARY DONOVAN Trustee
Treasurer, Emmanuel College
SISTER JOAN GIBBONS, RSM Trustee
Treasurer, Mercy Health System of Southeastern
Pennsylvania
DR. LORING E. HART Trustee
President (Retired), St. Joseph's College
SISTER MARY LABOURE MORIN Trustee
Former President, Regional Community of
Portland, Sisters of Mercy of the
Americas
DAVID W.C. PUTNAM President, Secretary
President and Director and Trustee
F.L. Putnam Investment Management Company
C. KENT RUSSELL Treasurer
Chief Financial Officer, Catholic Health East
DANIEL F. RUSSELL Trustee
President and Chief Executive Officer, Catholic
Health East
EDWARD T. SULLIVAN, JR Trustee
Business Manager, Secretary and Treasurer, Service
Employees' International Union - Local 254
MONSEIGNOR VINCENT TATARCZUK Trustee
Chancellor (Retired), Diocese of Maine
GEORGE A. VIOLIN, M.D., F.A.C.S. Trustee
Physician; Principal, Medical Eye Care Associates
REVEREND JOEL M. ZIFF Trustee
Director of Finance, Sisters of Mercy Regional
Community of Merion
25
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PRINCIPLED EQUITY MARKET FUND
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INVESTMENT ADVISER
F.L. Putnam Investment Management Company
10 Langley Road, Suite 400, Newton Centre, Massachusetts 02459
(617) 964-7600
SUB-ADVISOR
PanAgora Asset Management, Inc.
260 Franklin St., 22nd Floor, Boston, Massachusetts 02110
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street, Boston, Massachusetts 02116
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02482
ADMINISTRATOR AND TRANSFER AGENT
Cardinal Investment Services Inc.
579 Pleasant St., Suite 4, Paxton, MA 01612
(508) 831-1171
LEGAL COUNSEL
Sullivan & Worcester
One Post Office Square, Boston, Massachusetts 02109
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus which includes
information concerning the Trust's record or other pertinent information.
26
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