===============================================================================
PRINCIPLED
EQUITY
MARKET
FUND
===============================================================================
INVESTMENT ADVISER
F.L. PUTNAM INVESTMENT
MANAGEMENT COMPANY
10 Langley Road, Suite 400
Newton Centre, Massachusetts 02459
- -------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1999
===============================================================================
<PAGE>
PRINCIPLED EQUITY MARKET FUND
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
1 Year 2 Years Inception
21.16% 24.64% 26.73%
===============================================================================
2.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
Assets:
Investments at quoted market value(cost $20,515,106;
see Schedule of Investments, Notes 1, 2, & 6)....... $ 33,328,047
Cash ................................................ 198,396
Dividends and interest receivable.................... 34,579
Organizational costs (Note 1)........................ 17,202
-----------
Total assets..................................... 33,578,224
-----------
Liabilities:
Accrued expenses and other liabilities (Note 3 )..... 218,855
-----------
Total liabilities................................ 218,855
-----------
Net Assets:
Capital stock (2,750,000 shares authorized at no par
value, amount paid in on 1,873,574 shares
outstanding) (Note 1).............................. 20,560,391
Accumulated undistributed net investment income
(Note 1)........................................... 4,312
Accumulated realized gain from security transactions
(Note 1)............................................. (18,275)
Net unrealized appreciation in value of investments
(Note 2)............................................. 12,812,941
-----------
Net assets (equivalent to $17.81 per share, based
on 1,873,574 capital shares outstanding)....... $ 33,359,369
===========
The accompanying notes are an integral part of these financial statements.
3.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
STATEMENT OF OPERATIONS
DECEMBER 31, 1999
Income:
Dividends........................................... $ 393,719
Interest............................................ 10,118
-----------
Total income..................................... 403,837
-----------
Expenses:
Management fees, net (Note 3)....................... 58,745
Legal fees.......................................... 43,000
Administration fees (Note 4)........................ 24,333
Insurance........................................... 17,220
Organizational expenses (Note 1).................... 9,601
Custodian fees...................................... 8,000
Audit and accounting fees........................... 7,500
Printing............................................ 7,000
Transfer fees (Note 4).............................. 6,000
Trustees' fees and expenses......................... 1,000
Other expenses...................................... 8,840
-----------
Total expenses................................... 191,239
-----------
Less: waiver of management fee (Note 3).......... 29,628
-----------
Total expenses, net.............................. 161,611
-----------
Net investment income................................ 242,226
-----------
Realized and unrealized gain on investments:
Realized gain on investments-net................... 1,054,926
Increase in net unrealized appreciation in
investments....................................... 4,751,239
-----------
Net gain on investments.......................... 5,806,165
-----------
Net increase in net assets resulting from operations. $ 6,048,391
===========
The accompanying notes are an integral part of these financial statements.
4.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1999 1998
----------------------------
From operations:
Net investment income................... $ 242,226 $ 263,674
Realized gain on investments, net....... 1,054,926 2,070,836
Increase in net unrealized
appreciation in investments............ 4,751,239 3,952,775
--------- ----------
Net increase in net assets resulting
from operations..................... 6,048,391 6,287,285
------------ -----------
Distributions to shareholders:
From net investment income
($0.14 per share in 1999 and $0.15 per
share in 1998).......................... (270,898) (256,438)
From net realized gain on investments
($0.68 per share in 1999 and $1.09 per
share in 1998).......................... (1,232,566) (1,885,723)
------------ -----------
Total distributions to shareholders.. (1,503,464) (2,142,161)
------------ -----------
From capital share transactions:
Number of Shares
1999 1998
--------- ---------
Proceeds from sale of
shares.............. 12,888 20,766 197,218 273,995
Shares issued to
shareholders in
distributions
reinvested.......... 67,701 66,132 1,179,539 1,011,817
Cost of shares
redeemed............ -- -- -- --
------- ------ --------- ----------
Increase in net
assets resulting
from capital
share transactions.. 80,589 86,898 1,376,757 1,285,812
========= ====== ---------- ---------
Net increase in net assets............... 5,921,684 5,430,936
Net assets:
Beginning of period.................... 27,437,685 22,006,749
----------- ----------
End of period ( including undistributed
net investment income of $4,312 and
$7,236, respectively................ $33,359,369 $27,437,685
============ ===========
The accompanying notes are an integral part of these financial statements.
5.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Year Ended Year Ended Year Ended
December December December
31, 1999 31, 1998 31, 1997
Investment income ................ $ 0.24 $ 0.22 $ 0.18
Expenses, net..................... 0.10 0.07 0.04
---------------------------------------
Net investment income ............ 0.14 0.15 0.14
Net realized and unrealized
gain on investments............ 3.19 3.49 2.96
Distributions to shareholders:
From net investment income...... 0.14 0.15 0.14
From net realized gain on
investment..................... 0.68 1.09 0.06
---------------------------------------
Net increase in net asset value... 2.51 2.40 2.90
Net asset value:
Beginning of period............. 15.30 12.90 10.00
---------------------------------------
End of period................... $17.81 $15.30 $12.90
=======================================
Total Return...................... 21.16% 28.22% 31.00%
Ratio of expenses
to average net assets.......... 0.55% 0.48% 0.48%
Ratio of net investment
income to average net assets... 0.82% 1.06% 1.40%
Portfolio turnover................ 0.15 0.29 0.07
Average commission rate paid...... 0.0314 0.0292 0.0253
Number of shares outstanding at
end of period..................... 1,873,574 1,792,985 1,706,087
Per share data and ratios assuming no waiver of advisory fees:
Expenses....................... 0.12 0.14 0.06
Net investment income.......... 0.09 0.08 0.13
Ratio of expenses to average
net assets.................... 0.65% 0.73% 0.58%
Ratio of net investment income
to average net assets......... 0.72% 0.81% 1.30%
The accompanying notes are an integral part of these financial statements.
6.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
Value
Quantity (Note 1)
- -------- --------
COMMON STOCKS - 99.69%
Advertising Industry -- 0.64%
1,600 Interpublic Group Of Companies Incorporated.... 92,300
1,200 Omnicom Group.................................. 120,000
---------
212,300
Aerospace/Defense Industry -- 0.53%
6,700 Precision Castparts Corporation................ 175,875
---------
Air Transport Industry -- 0.90%
800 Amr Corporation*............................... 53,600
600 FDX Corporation................................ 24,562
2,200 Gateway, Incorporated*......................... 158,537
2,700 Southwest Airlines Company..................... 43,538
600 US Airways Group Incorporated*................. 19,238
---------
299,475
Auto & Truck Industry -- 0.13%
1,000 Paccar Incorporated............................ 44,312
---------
Auto Parts (OEM) Industry -- 0.13%
600 Oea Incorporated............................... 2,925
600 Superior Industries International.............. 16,087
1,300 Synovus Financial Corporation.................. 25,838
---------
44,850
Auto Parts (Replacement) Industry -- 1.25%
16,850 Genuine Parts Company.......................... 418,091
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
7.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Bank Industry -- 6.51%
1,700 BB&T Corporation............................... 46,537
2,430 Bank One Corporation........................... 77,760
2,000 Bank of New York Company Incorporated.......... 80,000
11,889 BankAmerica Corporation (New) ................. 596,679
900 Capital One Financial.......................... 43,369
3,400 Chase Manhattan Corporation.................... 264,137
12,650 Citigroup Incorporated......................... 704,447
2,700 First Union Corporation........................ 88,931
1,184 Fleetboston Financial Corporation.............. 41,218
900 JP Morgan and Company Incorporated............. 113,962
600 Keycorp*....................................... 13,275
1,100 Pnc Bank Corporation........................... 48,950
600 Wachovia Corporation........................... 40,800
436 Washington Mutual Incorporated................. 11,281
---------
2,171,346
Bank (Midwest) Industry -- 1.75%
1,100 Comerica Incorporated.......................... 51,356
1,800 Fifth Third Bankcorp........................... 132,075
5,400 Mellon Bank Corporation........................ 183,937
2,200 National City Corporation...................... 52,112
6,900 US Bankcorp (New) ............................. 164,306
---------
583,786
Beverage (Soft Drink) Industry -- 1.28%
2,500 Coca Cola Enterprises Incorporated............. 50,312
10,700 Pepsico Incorporated........................... 377,175
---------
427,487
Building Materials Industry -- 0.01%
100 Armstrong World Industries Incorporated........ 3,337
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
8.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Chemical (Basic) Industry -- 0.07%
1,100 Millennium Chemicals........................... 21,725
---------
Chemical (Diversified) Industry -- 0.32%
1,400 Millipore Corporation.......................... 54,075
2,500 Pall Corporation............................... 53,906
---------
107,981
Chemical (Specialty) Industry -- 0.35%
600 International Flavors and Fragrances........... 22,575
1,300 Praxair Incorporated........................... 65,406
800 Sherwin Williams Company....................... 16,800
400 Sigma Aldrich Corporation...................... 12,025
---------
116,806
Coal/Alternate Energy Industry -- 0.09%
400 Aes Corporation*............................... 29,900
---------
Computer & Peripherals Industry -- 3.88%
3,200 3Com Corporation*.............................. 150,400
1,000 Apple Computer Incorporated.................... 102,812
600 Cabletron Systems Incorporated................. 15,600
10,400 Dell Computer Corporation*..................... 530,400
1,100 Seagate Technology Incorporated*............... 51,219
900 Silicon Graphics Incorporated*................. 8,719
5,600 Sun Microsystems Incorporated*................. 433,650
---------
1,292,800
Computer Software & Services Industry -- 13.56%
7,600 America Online, Incorporated*.................. 576,650
2,400 Automatic Data Processing Incorporated......... 129,300
3,750 Computer Associates International.............. 262,266
17,200 Microsoft Corporation*......................... 2,008,100
13,800 Oracle Corporation*............................ 1,546,463
---------
4,522,779
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
9.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Diversified Company Industry -- 1.60%
105 Berkshire Hathaway Class B*.................... 192,150
300 Danaher Corporation............................ 14,475
1,000 Hillenbrand Industries......................... 31,687
200 National Service Industries.................... 5,900
2,500 Service Corporation International.............. 17,344
800 Thermo Electron Corporation.................... 12,000
6,634 Tyco International Limited..................... 258,726
---------
532,282
Drug Industry -- 0.03%
200 Interneuron Pharmaceuticals*................... 1,144
400 Quintiles Transnational Corporation*........... 7,475
---------
8,619
Drugstore Industry -- 0.47%
800 Rite Aid Corporation........................... 8,900
5,000 Walgreen Company............................... 146,250
---------
155,150
Electric Utility (Central) Industry -- 0.76%
800 Cinergy Corporation............................ 19,150
10,400 FirstEnergy Corporation........................ 235,950
---------
255,100
Electric Utility (East) Industry -- 0.05%
800 P P and L Resources Holding.................... 18,300
---------
Electric Utility (West) Industry -- 0.89%
10,700 Edison International Incorporated.............. 280,206
400 El Paso Energy................................. 15,525
---------
295,731
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
10.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Electric and Other Utility Services Combined -- 1.10%
11,774 Scottish Power, Incorporated................... 329,672
2,100 Sierra Pacific Resources, Incorporated......... 36,487
---------
366,159
Electrical Equipment Industry -- 0.06%
400 W W Grainger Incorporated...................... 19,125
---------
Electronic Manufacturing -- 0.71%
3,300 Symbol Technical*.............................. 209,756
900 Thomas and Betts Corporation................... 28,688
---------
238,444
Entertainment Industry -- 3.42%
7,200 CBS Corporation................................ 460,350
700 Safety Kleen Corporation....................... 7,919
6,800 Time Warner Incorporated....................... 491,725
3,000 Viacom Inc. Class B............................ 181,312
---------
1,141,306
Environmental Industry -- 0.05%
1,700 AutoNation Incorporated*....................... 15,725
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
11.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Financial Services Industry -- 6.12%
11,600 AXA Financial, Incorporated. .................. 394,400
2,600 American Express Company....................... 432,250
2,200 Associates First Capital Corporation........... 60,363
400 Deluxe Corporation............................. 10,975
3,400 Franklin Resources Incorporated................ 109,013
338 Gartner Group, Incorporated Class B*........... 4,669
1,200 Household International Incorporated........... 44,700
100 Lehman Brothers Holdings Incorporated.......... 8,469
3,600 Mbna Corporation............................... 98,100
3,020 Morgan Stanley, Dean Witter.................... 431,105
11,700 Schwab (Chas) Corporation...................... 447,525
---------
2,041,569
Food Processing Industry -- 1.46%
2,300 Bestfoods...................................... 120,894
4,400 General Mills Incorporated..................... 157,300
1,300 Hershey Foods Corporation...................... 61,669
1,700 Kellogg Company................................ 52,381
700 Quaker Oats Company............................ 45,937
600 Wm Wrigley Jr Company.......................... 49,762
---------
487,943
Food Wholesalers Industry -- 0.21%
1,800 Sysco Corporation.............................. 71,213
---------
Foreign Telecommunication Industry -- 2.54%
5,200 Nortel Networks Corporation.................... 525,200
6,500 Vodafone Airtouch Plc.......................... 321,750
---------
846,950
Furniture/Home Furnishings Industry -- 0.09%
1,400 Leggett & Platt................................ 30,013
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
12.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Gold/Silver Mining Industry -- 0.30%
4,600 Barrick Gold Corporation....................... 81,363
700 Newmont Mining Corporation..................... 17,150
---------
98,513
Grocery Industry -- 0.55%
1,652 Albertsons Incorporated........................ 53,277
3,100 Safeway Incorporated*.......................... 110,825
800 Winn Dixie Stores Incorporated................. 19,150
---------
183,252
Home Appliance Industry -- 0.15%
500 Maytag Corporation............................. 24,000
400 Whirlpool Corporation.......................... 26,025
---------
50,025
Hotel/Gaming Industry -- 0.11%
1,200 Marriott International Incorporated............ 37,875
---------
Household Products Industry -- 0.17%
1,982 Newell Rubbermaid Incorporated................. 57,478
---------
Industrial Services Industry -- 0.03%
1,700 Laidlaw Incorporated........................... 8,925
---------
Insurance Carriers -- 0.04%
143 Aegon N.V. .................................... 13,656
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
13.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Insurance (Diversified) Industry -- 4.00%
1,100 American General Corporation................... 83,463
7,000 American International Group................... 756,875
1,500 Cigna Corporation.............................. 120,844
1,200 Lincoln National Corporation................... 48,000
2,000 Lowe's Companies Incorporated.................. 119,500
1,200 Marsh and Mclennan Companies................... 114,825
1,500 Mgic Investment Corporation.................... 90,281
---------
1,333,788
Insurance (Life) Industry -- 0.37%
200 Aflac Incorporated............................. 9,438
1,541 Conseco Incorporated........................... 27,449
600 Jefferson Pilot Corporation.................... 40,950
500 Providian Corporation.......................... 45,531
---------
123,368
Insurance (Property/Casualty Industry -- 1.11%
4,400 Allstate Corporation........................... 105,875
900 Chubb Corporation.............................. 50,681
600 Cincinnati Financial........................... 18,713
1,100 Hartford Financial Services Group.............. 52,113
500 Progressive Corp., Ohio........................ 36,563
700 Safeco Corporation............................. 17,413
2,594 St Paul Companies Incorporated................. 87,385
---------
368,743
Manufacturing, Electronics, General -- 0.59%
2,100 American Power Conversion*..................... 55,388
2,500 Molex.......................................... 141,719
---------
197,107
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
14.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Machinery Industry -- 0.25%
1,400 Donaldson Company Incorporated................. 33,688
200 Snap On Incorporated........................... 5,313
1,500 Stanley Works.................................. 45,188
---------
84,189
Machinery (Construction & Mining) Industry -- 0.25%
800 Deere and Company.............................. 34,700
900 Ingersoll Rand Company......................... 49,556
---------
84,256
Medical Services Industry -- 0.30%
2,600 IMS Health..................................... 70,688
200 Idexx Laboratories Incorporated*............... 3,225
500 United Healthcare Corporation*................. 26,563
---------
100,476
Management Services -- 0.16%
500 KLA-Tencorp Corporation*....................... 55,687
---------
Manufacturing, General -- 0.37%
1,800 Diebold........................................ 42,300
900 Lexmark International*......................... 81,450
---------
123,750
Medical Supplies Industry -- 2.20%
700 Biomet, Incorporated........................... 28,000
4,200 Boston Scientific Corporation*................. 91,875
4,600 Cardinal Health Incorporated................... 220,225
7,600 Medtronic Incorporated......................... 276,925
1,700 Stryker Corporation............................ 118,363
---------
735,388
Metals & Mining (Div.) Industry -- 0.56%
7,900 Inco Limited................................... 185,650
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
15.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Natural Gas (Distribution) Industry -- 0.07%
800 Washington Gas Light Company................... 22,000
---------
Natural Gas (Diversified) Industry -- 1.81%
1,952 Burlington Resources Incorporated.............. 64,538
300 Columbia Energy Group.......................... 18,975
600 Consolidated Natural Gas Company............... 38,963
10,000 Enron Corporation.............................. 443,750
1,200 Williams Companies Incorporated................ 36,675
---------
602,901
Newspaper Industry -- 0.37%
800 Gannett Incorporated........................... 65,250
200 Times Mirror Company........................... 13,400
800 Tribune Company................................ 44,050
---------
122,700
Office Equipment & Supplies Industry -- 0.74%
700 Ikon Office Solutions Incorporated............. 4,769
5,000 Pitney Bowes Incorporated...................... 241,563
---------
246,332
Oil Exploration Industry -- 0.23%
1,300 Vastar Resources............................... 76,700
---------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
16.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Oilfield Services/Equipment Industry -- 0.44%
1,940 Baker Hughes Incorporated...................... 40,861
200 Cooper Cameron Corporation*.................... 9,788
400 Ensco International Incorporated............... 9,150
400 Global Marine Incorporated*.................... 6,650
400 Helmerich and Payne Incorporated............... 8,700
800 McDermott International........................ 7,250
200 Noble Drilling Corporation..................... 6,550
472 R&B Falcon Corporation*........................ 6,254
700 Rowan Companies Incorporated*.................. 15,181
800 Transocean Offshore Incorporated............... 26,950
1,000 Varco International Incorporated*.............. 10,188
---------
147,522
Other Business Services -- 0.51%
1,800 Solectron*..................................... 171,225
---------
Packaging & Container Industry -- 0.13%
900 Bemis Company Incorporated..................... 31,388
550 Sonoco Products Company........................ 12,512
---------
43,900
Paper & Forest Products Industry -- 0.32%
200 Chesapeake Corporation......................... 6,100
300 Fort James Corporation......................... 8,212
1,900 Rayonier Incorporated.......................... 91,794
---------
106,106
Petroleum (Integrated) Industry -- 2.13%
358 Devon Energy Corporation....................... 11,769
600 Murphy Oil Corporation......................... 34,425
10,700 Royal Dutch Petroleum.......................... 648,019
600 Tosco Corporation.............................. 16,312
---------
710,525
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
17.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Petroleum (Producing) Industry -- 0.26%
1,700 Anadarko Petroleum Corporation................. 58,013
200 Pogo Producing Company......................... 4,075
1,900 Union Pacific Resources Group.................. 24,225
---------
86,313
Publishing Industry -- 0.15%
900 Harcourt General Incorporated.................. 36,225
200 Mcgraw Hill Company Incorporated............... 12,325
---------
48,550
Railroad Industry -- 1.52%
17,400 Burlington Northern Santa Fe................... 421,950
4,200 Norfolk Southern Corporation................... 86,100
---------
508,050
Real Estate, Other -- 0.60%
10,000 AMB Property................................... 199,375
---------
Restaurant Industry -- 1.76%
14,600 McDonalds Corporation.......................... 588,563
---------
Retail (Special Lines) Industry -- 0.75%
5,062 Gap Incorporated............................... 232,852
800 Tjx Companies Incorporated..................... 16,350
---------
249,202
Retail Building Supply Industry -- 2.35%
11,400 Home Depot Incorporated........................ 783,750
---------
Retail Sales - Televisions, Radios, and
Electronics -- 0.13%
700 Best Buy*...................................... 35,175
200 Tandy Corporation.............................. 9,837
---------
45,012
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
18.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Retail Store Industry - 0.99%
4,300 Borders Group, Incorporated*................... 69,875
1,600 CVS Corporation................................ 63,800
600 Clear Channel Communications*.................. 53,550
400 Costco Companies Incorporated*................. 36,500
781 Dollar General................................. 17,768
500 Federated Department Stores.................... 25,281
1,300 JC Penney Company Incorporated................. 25,919
271 Nieman Marcus Class B*......................... 7,300
1,000 Sears Roebuck and Company...................... 30,375
100 Venator Group Incorporated..................... 700
---------
331,068
Securities Brokerage Industry -- 0.52%
2,100 Merrill Lynch and Company Incorporated......... 174,956
---------
Semiconductor Industry -- 0.86%
300 Advanced Micro Devices Incorporated*........... 8,681
1,400 Conexant Systems, Incorporated*................ 92,925
900 LSI Logic*..................................... 60,750
1,100 Micron Technology Incorporated*................ 85,937
900 National Semiconductor Company*................ 38,531
---------
286,824
Steel (General) Industry -- 0.09%
400 Nucor Corporation.............................. 21,925
400 Worthington Industries Incorporated............ 6,625
---------
28,550
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
19.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
Telecommunication Equipment Industry -- 4.77%
300 Andrew Corporation*............................ 5,681
11,250 Cisco Systems Incorporated*.................... 1,205,156
700 General Instrument Corporation*................ 59,500
3,000 MediaOne Group*................................ 230,438
1,400 Tellabs Incorporated*.......................... 89,862
---------
1,590,637
Telecommunication Services Industry -- 13.13%
900 Alltel Corporation............................. 74,419
10,600 Bellsouth Corporation.......................... 496,212
3,400 Comcast Corporation Class A.................... 171,912
8,700 MCI Worldcom Incorporated*..................... 461,644
900 Nextel Communication*.......................... 92,812
2,800 Qualcomm*...................................... 493,150
14,747 SBC Communications Incorporated................ 718,916
8,000 Sprint Corporation (FON Group) ................ 538,500
2,000 Sprint PCS..................................... 205,000
15,681 US West Incorporated........................... 1,129,032
---------
4,381,597
Thrift Industry -- 2.43%
2,500 Federal Home Loan Mortgage Association......... 117,656
11,100 Federal National Mortgage Association.......... 693,056
---------
810,712
Tire & Rubber Industry -- 0.02%
400 Cooper Tire and Rubber Company................. 6,300
---------
Toiletries/Cosmetics Industry -- 0.14%
1,400 Avon Products Incorporated..................... 46,200
---------
Total common stocks (cost $20,499,099)..........33,254,175
----------
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
20.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
- -------- --------
RIGHTS & WARRANTS -- 0.22%
2,592 PetroFina S.A. Warrants* (cost 16,007) ......... 73,872
----------
Total investments (cost $20,515,106)............ 33,328,047
----------
CASH & OTHER ASSETS, LESS LIABILITIES - 0.09%............ 31,322
----------
Total Net Assets................................$33,359,369
==========
*Non income producing security.
The accompanying notes are an integral part of these financial statements.
21.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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. During the current fiscal year, permanent
differences, primarily due to short term capital gains offset by net
investment income, resulted in an increase in undistributed net investment
income and a decrease in accumulated realized gain from security
transactions. This reclassification had no effect on net assets.
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 December 31, 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 $14,776,778. Aggregate gross
unrealized depreciation in investments in which there was an excess of tax
cost over market value was $1,963,837. Net unrealized appreciation in
investments at December 31, 999 was $12,812,941.
22.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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%). Pursuant to
a change in ownership of PanAgora Asset Management, Inc. the Sub-Advisory
Agreement with PanAgora was terminated as of February 12, 1998. The Trust
entered into a consulting services agreement with PanAgora Asset Management,
Inc. for the period February 12, 1998 to June 10, 1999. PanAgora received no
compensation for its services under the consulting services agreement.
F.L. Putnam, which provided the necessary capital to establish the Trust,
waived its total management fees of $29,628 for the year ended December 31,
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:
On March 1, 1999, the Trust entered into an agreement with Cardinal
Investment Services Inc. for administrative, transfer agent and dividend
disbursing agent services replacing Anchor Investment Management Corporation.
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 of the Trust's investment adviser.
23.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Continued)
6. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for year ended December 31, 1999 were:
Cost of securities acquired:
U.S. Government and investments backed by
such securities........................ $ --
Other investments....................... 4,558,278
-------------
$ 4,558,278
=============
Proceeds from sales and maturities:
U.S. Government and investments backed by
such securities........................ $ --
Other investments....................... 4,524,928
-------------
$ 4,524,928
=============
24.
<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, 1999, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the selected per share data
and ratios for each of the three years in the period then ended. These financial
statements and per share data and ratios are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and per share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Principled Equity Market Fund as of December 31, 1999, the results
of its operations for the year then ended, and the changes in its net assets for
each of the two years in the period then ended and the selected per share data
and ratios for each of the three years in the period then ended in conformity
with generally accepted accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 7, 2000
25.
<PAGE>
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
26.
<PAGE>
PRINCIPLED EQUITY MARKET FUND
INVESTMENT ADVISER
F.L. Putnam Investment Management Company
10 Langley Road, Suite 400, Newton Centre, Massachusetts 02459
(617) 964-7600
SUB-ADVISER
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 ACCOUNTANTS
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.
27.
<PAGE>
