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, 2000
(Unaudited)
1
<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
========================================
Six From
Months* 1 Year 2 Years Inception
1.35% 21.16% 24.64% 26.73%
========================================
*Not Annualized for the period from December 31, 1999 to June 30, 2000.
2
<PAGE>
Principled Equity Market Fund
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(Unaudited)
Assets:
Investments at quoted market value (cost $20,410,614;
see Schedule of Investments, Notes 1, 2, & 6)....... $ 33,503,977
Cash ................................................ 248,795
Dividends and interest receivable.................... 31,138
Investment securities sold........................... 126,050
Organizational costs (Note 1)........................ 0
-----------
Total assets..................................... 33,909,960
-----------
Liabilities:
Accrued expenses and other liabilities (Note 3 )..... 36,144
-----------
Total liabilities................................ 36,144
-----------
Net Assets:
Capital stock (2,750,000 shares authorized at no par
value,amount paid in on 1,876,340 shares
outstanding) (Note 1)............................... 20,609,141
Accumulated undistributed net investment income
(Note 1)............................................ 59,052
Accumulated realized gain from security transactions
(Note 1)............................................ 112,260
Net unrealized appreciation in value of investments
(Note 2)............................................ 13,093,363
------------
Net assets (equivalent to $18.05 per share, based
on 1,876,340 capital shares outstanding)........ $ 33,873,816
=============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Principled Equity Market Fund
STATEMENT OF OPERATIONS
JUNE 30, 2000
(Unaudited)
Income:
Dividends........................................... $ 179,136
Interest............................................ 3,166
-----------
Total income..................................... 182,302
-----------
Expenses:
Management fees, net (Note 3)....................... 25,091
Organizational expenses (Note 1).................... 17,202
Legal fees.......................................... 14,929
Administration fees (Note 4)........................ 14,033
Transfer fees (Note 4).............................. 6,015
Custodian fees...................................... 4,250
Audit and accounting fees........................... 3,791
Trustees' fees and expenses......................... 585
Other expenses...................................... 15,918
-----------
Total expenses................................... 101,814
-----------
Net investment income................................ 80,488
-----------
Realized and unrealized gain on investments:
Realized gain on investments-net................... 104,787
Increase in net unrealized appreciation in investments 280,422
-----------
Net gain on investments.......................... 385,209
-----------
Net increase in net assets resulting from operations. $ 465,697
===========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Principled Equity Market Fund
STATEMENTS OF CHANGES IN NET ASSETS
Six Months
Ended Year Ended
June 30, 2000 December 31,
(Unaudited) 1999
------------- -------------
From operations:
Net investment income................... $ 80,488 $ 242,226
Realized gain on investments, net....... 104,787 1,054,926
Increase in net unrealized
appreciation in investments............ 280,422 4,751,239
------------ ------------
Net increase in net assets resulting
from operations..................... 465,697 6,048,391
------------ -----------
Distributions to shareholders:
From net investment income
($0.15 per share in 1999)............... -- (270,898)
From net realized gain on investments
($0.57 per share in 1999)............... -- (1,232,566)
------------ -----------
Total distributions to shareholders.. -- (1,503,464)
------------ -----------
From capital share transactions:
Number of Shares
2000 1999
--------- ---------
Proceeds from sale of
shares.............. 2,766 12,888 48,750 197,218
Shares issued to
shareholders in
distributions
reinvested.......... -- 67,701 -- 1,179,539
Cost of shares -- -- -- --
redeemed.............. --------- ---------- ---------- ------------
Increase in net
assets resulting
from capital
share transactions.. 2,766 80,589 48,750 1,376,757
========= ========= ------------ -----------
Net increase in net assets............... 514,447 5,921,684
Net assets:
Beginning of period.................... 33,359,369 27,437,685
------------ -----------
End of period ( including undistributed
net investment income of $59,052 and
$4,312 , respectively............... $33,873,816 $33,359,369
============ ===========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Principled Equity Market Fund
SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Six Months
Ended
June 30, Year Ended Year Ended Year Ended
2000 December December December
(Unaudited) 31, 1999 31, 1998 31, 1997
------------------------------------------------
Investment income ......... $ 0.07 $ 0.24 $ 0.22 $ 0.18
Expenses, net.............. 0.04 0.10 0.07 0.04
------------------------------------------------
Net investment income ..... 0.03 0.14 0.15 0.14
Net realized and unrealized
gain on investments..... 0.21 3.19 3.49 2.96
Distributions to
shareholders:
From net investment
income................... 0.00 0.14 0.15 0.14
From net realized gain
on investments........... 0.00 0.68 1.09 0.06
------------------------------------------------
Net increase in net asset
value...................... 0.24 2.51 2.40 2.90
Net asset value:
Beginning of period...... 17.81 15.30 12.90 10.00
------------------------------------------------
End of period............ $18.05 $17.81 $15.30 $12.90
================================================
Total Return............... 1.35% 21.16% 28.22% 31.00%
Ratio of expenses
to average net assets... 0.55% 0.55% 0.48% 0.48%
Ratio of net investment
Income to average net
assets..................... 0.49% 0.82% 1.06% 1.40%
Portfolio turnover......... 0.00 0.15 0.29 0.07
Average commission rate
paid....................... 0.0173 0.0314 0.0292 0.0253
Number of shares out-
standing at end of
period.................... 1,876,340 1,873,574 1,792,985 1,706,087
Per share data and ratios
assuming no waiver of
advisory fees:
Expenses................ 0.05 0.12 0.14 0.06
Net investment income... 0.02 0.09 0.08 0.13
Ratio of expenses to
average net assets..... 0.65% 0.65% 0.73% 0.58%
Ratio of net investment
income to average net
assets................. 0.39% 0.72% 0.81% 1.30%
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
Value
Quantity (Note 1)
-------- --------
COMMON STOCKS - 98.65%
Advertising Industry -- 0.52%
1,600 Interpublic Group of Companies Incorporated..... 68,800
1,200 Omnicom Group................................... 106,875
----------
175,675
Aerospace/Defense Industry - 0.90%
6,700 Precision Castparts Corporation................. 303,175
----------
Air Transport Industry - 0.72%
800 AMR Corporation................................. 21,150
600 Fedex Corporation............................... 22,800
2,200 Gateway, Incorporated........................... 124,850
2,700 Southwest Airlines Company...................... 51,131
600 US Airways Group Incorporated................... 23,400
----------
243,331
Auto & Truck Industry - 0.12%
1,000 Paccar Incorporated............................. 39,687
----------
Auto Parts (OEM) Industry - 0.11%
600 Superior Industries International............... 15,450
1,300 Synovus Financial Corporation................... 22,912
----------
38,362
Auto Parts (Replacement) Industry - 0.99%
16,850 Genuine Parts Company........................... 337,000
----------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Bank Industry - 6.08%
1,700 BB&T Corporation................................ 40,587
2,430 Bank One Corporation............................ 64,547
2,000 Bank of New York Company Incorporated........... 93,000
11,889 BankAmerica Corporation (New)................... 511,227
900 Capital One Financial........................... 40,162
5,100 Chase Manhattan Corporation..................... 234,919
12,650 Citigroup Incorporated.......................... 762,162
2,700 First Union Corporation......................... 66,994
1,184 Fleetboston Financial Corporation............... 40,256
600 Keycorp......................................... 10,575
900 Morgan, JP and Company Incorporated............. 99,112
1,100 PNC Bank Corporation............................ 51,563
600 Wachovia Corporation............................ 32,550
436 Washington Mutual Incorporated.................. 12,590
----------
2,060,244
Bank (Midwest) Industry - 1.57%
1,100 Comerica Incorporated........................... 49,362
1,800 Fifth Third Bankcorp............................ 113,850
5,400 Mellon Bank Corporation......................... 196,762
2,200 National City Corporation....................... 37,538
6,900 US Bankcorp (New)............................... 132,825
----------
530,337
Beverage (Soft Drink) Industry - 1.52%
2,500 Coca Cola Enterprises Incorporated.............. 40,781
10,700 Pepsico Incorporated............................ 475,481
----------
516,262
Building Materials Industry - 0.01%
100 Armstrong World Industries Incorporated......... 1,531
----------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Chemical (Basic) Industry - 0.06%
1,100 Millennium Chemicals............................ 18,700
----------
Chemical (Diversified) Industry - 0.45%
1,400 Millipore Corporation........................... 105,525
2,500 Pall Corporation................................ 46,250
----------
151,775
Chemical (Specialty) Industry - 0.28%
600 International Flavors and Fragrances............ 18,112
1,300 Praxair Incorporated............................ 48,669
800 Sherwin Williams Company........................ 16,950
400 Sigma Aldrich Corporation....................... 11,700
----------
95,431
Coal/Alternate Energy Industry - 0.11%
800 AES Corporation................................. 36,500
----------
Computer & Peripherals Industry - 4.12%
3,200 3Com Corporation................................ 184,400
2,000 Apple Computer Incorporated..................... 104,750
600 Cabletron Systems Incorporated.................. 15,150
10,400 Dell Computer Corporation....................... 512,850
125 MIPS Technologies, Inc.......................... 5,301
1,100 Seagate Technology Incorporated................. 60,500
900 Silicon Graphics Incorporated................... 3,375
5,600 Sun Microsystems Incorporated................... 509,250
----------
1,395,576
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Computer Software & Services Industry - 13.04%
7,600 America Online, Inc............................. 400,425
2,400 Automatic Data Processing Incorporated.......... 128,550
3,750 Computer Associates International............... 191,953
17,200 Microsoft Corporation...........................1,376,000
27,600 Oracle Corporation..............................2,320,125
----------
4,417,053
Diversified Company Industry - 1.69%
105 Berkshire Hathaway Class B...................... 184,800
300 Danaher Corporation............................. 14,831
1,000 Hillenbrand Industries.......................... 31,312
200 National Service Industries..................... 4,000
2,500 Service Corporation International............... 7,969
800 Thermo Electron Corporation..................... 16,850
6,634 Tyco International Limited...................... 314,286
----------
574,048
Drug Industry - 0.02%
200 Interneuron Pharmaceuticals..................... 375
400 Quintiles Transnational Corporation............. 5,650
----------
6,025
Drugstore Industry - 0.49%
800 Rite Aid Corporation............................ 5,250
5,000 Walgreen Company................................ 160,937
----------
166,187
Electric and Other Utility Services (Combined)
Industry - 1.24%
11,774 Scottish Power, Incorporated.................... 393,693
2,100 Sierra Pacific Resources, Incorporated.......... 26,381
----------
420,074
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Electric Utility (Central) Industry - 0.78%
800 Cinergy Corporation............................. 20,350
10,400 FirstEnergy Corporation......................... 243,100
----------
263,450
Electric Utility (East) Industry - 0.05%
800 PPL Corporation................................. 17,550
----------
Electric Utility (West) Industry - 0.71%
10,700 Edison International Incorporated............... 219,350
400 El Paso Energy.................................. 20,375
----------
239,725
Electrical Equipment Industry - 0.04%
400 Grainger, WW Incorporated....................... 12,325
----------
Entertainment Industry - 3.70%
6,800 Time Warner Incorporated........................ 516,800
10,812 Viacom Inc. Class B............................. 737,243
----------
1,254,043
Environmental Industry - 0.04%
1,700 AutoNation Incorporated......................... 12,006
----------
Financial Services Industry - 6.54%
11,600 AXA Financial, Inc.............................. 394,400
7,800 American Express Company........................ 406,575
2,200 Associates First Capital Corporation............ 49,087
400 Deluxe Corporation.............................. 9,425
3,400 Franklin Resources Incorporated................. 103,275
338 Gartner Group, Inc. Class B..................... 3,338
1,200 Household International Incorporated............ 49,875
100 Lehman Brothers Holdings Incorporated........... 9,456
3,600 MBNA Corporation................................ 97,650
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Financial Services Industry (Continued)
6,040 Morgan Stanley, Dean Witter..................... 502,830
17,550 Schwab (Chas) Corporation....................... 590,119
----------
2,216,030
Food Processing Industry - 1.60%
2,300 Bestfoods....................................... 159,275
4,400 General Mills Incorporated...................... 168,300
1,300 Hershey Foods Corporation....................... 63,050
1,700 Kellogg Company................................. 50,575
700 Quaker Oats Company............................. 52,587
600 Wm Wrigley Jr Company........................... 48,113
----------
541,900
Food Wholesalers Industry - 0.22%
1,800 Sysco Corporation............................... 75,825
----------
Foreign Telecommunication Industry - 2.89%
10,400 Nortel Networks Corporation..................... 709,800
6,500 Vodafone Airtouch Plc........................... 269,344
----------
979,144
Furniture/Home Furnishings Industry - 0.07%
1,400 Leggett & Platt................................. 23,100
----------
Gold/Silver Mining Industry - 0.29%
4,600 Barrick Gold Corporation........................ 83,662
700 Newmont Mining Corporation...................... 15,138
----------
98,800
Grocery Industry - 0.61%
1,652 Albertsons Incorporated......................... 54,929
3,100 Safeway Incorporated............................ 139,500
800 Winn Dixie Stores Incorporated.................. 11,450
----------
205,879
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Home Appliance Industry - 0.11%
500 Maytag Corporation.............................. 18,437
400 Whirlpool Corporation........................... 18,650
----------
37,087
Hotel/Gaming Industry - 0.13%
1,200 Marriott International Incorporated............. 43,275
----------
Household Products Industry - 0.15%
1,982 Newell Rubbermaid Incorporated.................. 51,036
----------
Industrial Services Industry - 0.00%
1,700 Laidlaw Incorporated............................ 637
----------
Insurance Carriers - 0.03%
288 Aegon N.V....................................... 10,260
----------
Insurance (Diversified) Industry - 3.98%
1,100 American General Corporation.................... 67,100
7,000 American International Group.................... 822,500
1,500 CIGNA Corporation............................... 140,250
1,200 Lincoln National Corporation.................... 43,350
2,000 Lowe's Companies Incorporated................... 82,125
1,500 MGIC Investment Corporation..................... 68,250
1,200 Marsh and Mclennan Companies.................... 125,325
----------
1,348,900
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Insurance (Life) Industry - 0.30%
200 AFLAC Incorporated.............................. 9,188
1,541 Conseco Incorporated............................ 15,025
600 Jefferson Pilot Corporation..................... 33,862
500 Providian Corporation........................... 45,000
----------
103,075
Insurance (Property/Casualty) Industry - 1.10%
4,400 Allstate Corporation............................ 97,900
900 Chubb Corporation............................... 55,350
600 Cincinnati Financial............................ 18,862
1,100 Hartford Financial Services Group............... 61,531
500 Progressive Corp., Ohio......................... 37,000
700 Safeco Corporation.............................. 13,913
2,594 Saint Paul Companies Incorporated............... 88,520
----------
373,076
Management Services Industry - 0.17%
1,000 KLA-Tencorp Corporation......................... 58,563
----------
Manufacturing - Electronics (General) Industry -0.70%
2,100 American Power Conversion....................... 85,706
3,125 Molex........................................... 150,391
----------
236,097
Manufacturing - Electronics, Not Elsewhere Classified - 0.84%
4,950 Symbol Technical................................ 267,300
900 Thomas and Betts Corporation.................... 17,213
----------
284,513
Manufacturing (General) Industry - 0.33%
1,800 Diebold......................................... 50,175
900 Lexmark International........................... 60,525
----------
110,700
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Machinery Industry - 0.20%
1,400 Donaldson Company Incorporated.................. 27,650
200 Snap On Incorporated............................ 5,325
1,500 Stanley Works................................... 35,625
----------
68,600
Machinery (Construction & Mining) Industry - 0.19%
800 Deere and Company............................... 29,600
900 Ingersoll Rand Company.......................... 36,225
----------
65,825
Medical Services Industry - 0.28%
2,600 IMS Health...................................... 46,800
200 Idexx Laboratories Incorporated................. 4,575
500 United Healthcare Corporation................... 42,875
----------
94,250
Medical Supplies Industry - 2.91%
700 Biomet, Incorporated............................ 26,906
4,200 Boston Scientific Corporation................... 92,138
4,600 Cardinal Health Incorporated.................... 340,400
7,600 Medtronic Incorporated.......................... 378,575
3,400 Stryker Corporation............................. 148,750
----------
986,769
Metals & Mining (Diversified) Industry - 0.36%
7,900 Inco Limited.................................... 121,463
----------
Natural Gas (Distribution) Industry - 0.06%
800 Washington Gas Light Company.................... 19,250
----------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Natural Gas (Diversified) Industry - 2.33%
1,952 Burlington Resources Incorporated............... 74,664
300 Columbia Energy Group........................... 19,688
10,000 Enron Corporation............................... 645,000
1,200 Williams Companies Incorporated................. 50,025
----------
789,377
Newspaper Industry - 0.25%
800 Gannett Incorporated............................ 47,850
1,050 Tribune Company................................. 36,750
----------
84,600
Office Equipment & Supplies Industry - 0.60%
700 Ikon Office Solutions Incorporated.............. 2,713
5000 Pitney Bowes Incorporated....................... 200,000
----------
202,713
Oil Exploration Industry - 0.32%
1,300 Vastar Resources................................ 106,763
----------
Oilfield Services/Equipment Industry - 0.66%
1,940 Baker Hughes Incorporated....................... 62,080
200 Cooper Cameron Corporation...................... 13,200
400 Ensco International Incorporated................ 14,325
400 Global Marine Incorporated...................... 11,275
400 Helmerich and Payne Incorporated................ 14,950
800 McDermott International......................... 7,050
200 Noble Drilling Corporation...................... 8,238
472 R&B Falcon Corporation.......................... 11,122
700 Rowan Companies Incorporated.................... 21,262
800 Transocean Sedco Forex.......................... 42,750
712 Varco International Incorporated................ 16,554
----------
222,806
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Other Business Services - 0.45%
3,600 Solectron....................................... 150,750
----------
Packaging & Container Industry - 0.12%
900 Bemis Company Incorporated...................... 30,263
550 Sonoco Products Company......................... 11,309
----------
41,572
Paper & Forest Products Industry - 0.24%
200 Chesapeake Corporation.......................... 5,925
300 Fort James Corporation.......................... 6,938
1,900 Rayonier Incorporated........................... 68,162
----------
81,025
Petroleum (Integrated) Industry - 2.16%
358 Devon Energy Corporation........................ 20,115
600 Murphy Oil Corporation.......................... 35,662
10,700 Royal Dutch Petroleum........................... 658,719
600 Tosco Corporation............................... 16,988
----------
731,484
Petroleum (Producing) Industry - 0.38%
1,700 Anadarko Petroleum Corporation.................. 83,831
200 Pogo Producing Company.......................... 4,425
1,900 Union Pacific Resources Group................... 41,800
----------
130,056
Publishing Industry - 0.18%
900 Harcourt General Incorporated................... 48,938
200 Mcgraw Hill Company Incorporated................ 10,800
----------
59,738
Railroad Industry - 1.36%
17,400 Burlington Northern Santa Fe.................... 399,113
4,200 Norfolk Southern Corporation.................... 62,475
----------
461,588
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Real Estate (Other) Industry - 0.67%
10,000 AMB Property.................................... 228,125
----------
Restaurant Industry - 1.42%
14,600 McDonalds Corporation........................... 480,888
----------
Retail Building Supply Industry - 1.77%
726 Dominion Resources, Incorporated................ 31,127
11,400 Home Depot, Incorporated........................ 569,288
----------
600,415
Retail (Special Lines) Industry - 0.51%
5,062 Gap Incorporated................................ 158,187
800 TJX Companies Incorporated...................... 15,000
----------
173,187
Retail Store Industry - 0.90%
4,300 Borders Group, Incorporated..................... 66,919
1,600 CVS Corporation................................. 64,000
600 Clear Channel Communications.................... 45,000
800 Costco Companies Incorporated................... 26,400
976 Dollar General.................................. 19,032
500 Federated Department Stores..................... 16,875
271 Neiman Marcus, Class B.......................... 7,520
1,300 Penney, JC Company Incorporated................. 23,969
1,000 Sears Roebuck and Company....................... 32,625
100 Venator Group Incorporated...................... 1,025
----------
303,365
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Retail - Televisions, Radios, and Electronics Industry - 0.16%
700 Best Buy........................................ 44,275
200 RadioShack Corporation.......................... 9,475
----------
53,750
Securities Brokerage Industry - 0.71%
2,100 Merrill Lynch and Company Incorporated.......... 241,500
----------
Semiconductor Industry - 1.28%
300 Advanced Micro Devices Incorporated............. 23,175
1,400 Conexant Systems, Incorporated.................. 68,075
1,800 LSI Logic....................................... 97,425
2,200 Micron Technology Incorporated.................. 193,738
900 National Semiconductor Company.................. 51,075
----------
433,488
Steel (General) Industry - 0.05%
400 Nucor Corporation............................... 13,275
400 Worthington Industries Incorporated............. 4,200
----------
17,475
Telecom. Equipment Industry - 4.53%
300 Andrew Corporation.............................. 10,069
22,500 Cisco Systems Incorporated......................1,430,156
1,400 Tellabs Incorporated............................ 95,813
----------
1,536,038
Telecommunication Services Industry - 11.93%
2,850 A T & T Corporation............................. 90,131
900 Alltel Corporation.............................. 55,744
10,600 Bellsouth Corporation........................... 451,825
3,400 Comcast Corporation Class A..................... 137,700
8,700 MCI Worldcom Incorporated....................... 399,112
1,800 Nextel Communication............................ 110,138
2,800 Qualcomm........................................ 168,000
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Principled Equity Market Fund
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(Unaudited)
(Continued)
Value
Quantity (Note 1)
-------- --------
Telecommunication Services Industry (Continued)
14,747 SBC Communications Incorporated................. 637,808
8,000 Sprint Corporation (FON Group).................. 408,000
4,000 Sprint PCS...................................... 238,000
15,681 US West Incorporated............................1,344,646
----------
4,041,104
Thrift Industry - 2.01%
2,500 Federal Home Loan Mortgage Association.......... 101,250
11,100 Federal National Mortgage Association........... 579,281
----------
680,531
Tire & Rubber Industry - 0.01%
400 Cooper Tire and Rubber Company.................. 4,450
----------
Toiletries/Cosmetics Industry - 0.18%
1,400 Avon Products Incorporated...................... 62,300
----------
Transportation Services (Not Elsewhere Classified) - 0.05%
578 Sabre Holdings Corporation...................... 16,473
----------
Total common stocks (cost $20,393,264)..........33,415,687
RIGHTS & WARRANTS - 0.26%
2,592 PetroFina S.A. Warrants* (cost 16,007) ......... 88,290
----------
Total investments (cost $20,410,614)............33,503,977
----------
CASH & OTHER ASSETS, LESS LIABILITIES - 1.09%............ 369,839
----------
Total Net Assets................................$33,873,816
=============
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Principled Equity Market Fund
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(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 - Prior to the adoption of Statement of Position 98-5
issued by the AICPA, costs incurred in connection with the organization and
registration of the Trust were deferred and amortized over a period of 60
months from the date upon which the Trust commenced operations. Statement of
Position 98-5 directed that all remaining unamortized organizational costs
be expensed.
2. Tax basis of investments:
At June 30, 2000, 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 $15,266,065. Aggregate gross
unrealized depreciation in investments in which there was an excess of tax
cost over market value was $2,172,702. Net unrealized appreciation in
investments at June 30, 2000 was $13,093,363.
22
<PAGE>
Principled Equity Market Fund
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(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 $16,569 for the six months ended June 30,
2000, and $29,628 for the year ended December 31, 1999; 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 $40,000.
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.
6. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for the six months ended June 30, 2000 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....................... 209,280
-------------
$ 209,280
=============
23
<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
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 and Secretary-Treasurer,
Local 254 - Service Employees' International
Union
Rev. Msgr. Vincent Tatarczuk Trustee
Chancellor (Retired), Diocese of Portland
George A. Violin, M.d., F.A.C.S. Trustee
Physician; Principal, Medical Eye Care
Associates
Rev. Mr. Joel M. Ziff Trustee
Director of Finance, Sisters of Mercy
Regional Community of Merion
24
<PAGE>
Principled Equity Market Fund
Dear Shareholder,
The purpose of this letter is to notify you, as the holder of common stock of
the Principled Equity Market Fund (the "Fund"), of the Fund's intention, as
authorized by the Board of the Trustees of the Fund, to repurchase on the
Chicago Stock Exchange shares of such common stock of the Fund from time to time
and at a price which is the higher of the highest current independent bid
quotation or the last sale price on such exchange on the date of purchase, but
in no event higher than the then current net asset value of such shares.
It is the intention of the Fund that such repurchases will be funded from the
Fund's short-term cash investments, and thus will not result in the incurrence
of any additional debt by the Fund.
25
<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-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
26
<PAGE>
