UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-01874
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Principal Capital Value Fund, Inc.
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(Exact name of registrant as specified in charter)
711 High Street, Des Moines, IA 50392-2080
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(Address of principal executive offices) (Zip code)
Princor Financial Services Corporation, Des Moines, IA 50392-2080
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(Name and address of agent for service)
Registrant's telephone number, including area code: 515-247-5476
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Date of fiscal year end: October 31, 2004
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Date of reporting period: October 31, 2004
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ITEM 1 - REPORT TO STOCKHOLDERS
TABLE OF CONTENTS
PAGE
Portfolio Managers' Comments............................................2
Shareholder Expense Example.............................................27
Financial Statements and Highlights
Statements of Assets and Liabilities...................................31
Statements of Operations...............................................42
Statements of Changes in Net Assets....................................53
Notes to Financial Statements..........................................64
Schedules of Investments
Balanced Fund.........................................................74
Bond Fund.............................................................92
Capital Value Fund....................................................103
Cash Management Fund..................................................106
Equity Income Fund....................................................109
Government Securities Income Fund.....................................112
Growth Fund...........................................................116
International Emerging Markets Fund...................................118
International Fund....................................................122
International SmallCap Fund...........................................130
LargeCap Stock Index Fund.............................................135
Limited Term Bond Fund................................................144
MidCap Fund...........................................................153
Partners Blue Chip Fund...............................................156
Partners Equity Growth Fund...........................................160
Partners LargeCap Blend Fund..........................................162
Partners LargeCap Value Fund..........................................168
Partners MidCap Growth Fund...........................................171
Partners SmallCap Growth Fund.........................................174
Real Estate Securities Fund...........................................178
SmallCap Fund.........................................................179
Tax-Exempt Bond Fund..................................................183
Financial Highlights...................................................187
Report of Independent Registered Public Accounting Firm.................209
Fund Directors..........................................................210
Proxy Voting Policies...................................................211
Schedules of Investments................................................211
Federal Income Tax Information..........................................212
PORTFOLIO MANAGERS' COMMENTS
IMPORTANT FUND INFORMATION
The following disclosure applies to each Principal Mutual Fund:
The line graphs on the following pages represent hypothetical $10,000
investments in Class A shares and reflect the maximum sales charge for each
Fund. Growth of a $10,000 investment in Class B shares will vary from the
results illustrated due to differences in the expenses charged and the
contingent deferred sales charge (CDSC). Past performance does not guarantee
future performance.
The graphs and tables do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
Performance information may reflect historical or current expense
waivers/reimbursements without which performance would have been lower. For
information on current expense waivers/reimbursements, please see the financial
highlights or the prospectus.
The Morningstar Mutual Fund Category Averages shown in the tables are calculated
by Morningstar. The Averages do not reflect sales charges but do reflect
transaction costs and operating expenses. Each index is unmanaged and therefore
performance information does not reflect sales charges, transaction costs or
operating expenses.
The inception dates given in the tables for each share class are the dates
operations began.
Fund shares are neither deposits nor obligations of any bank or other insured
depository institution, nor are they endorsed or guaranteed by any bank or other
insured depository institution, nor are they insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. Investment in the Funds involves risks, including possible loss of the
principal amount invested. The value of Fund shares will fluctuate so that, when
redeemed, shares may be worth more or less than their original cost.
The Comments on the following pages were supplied by the Funds' portfolio
managers, except where noted. Portfolio managers commonly classify investments
by economic sector -- technology, financials, retail, and so on. These sector
classifications may differ among portfolio managers. They also may differ from
the Fund's sector classifications. Therefore, sector names and percentages
discussed in the commentaries may differ from those in the Schedule of
Investments. Specific security holdings referred to in the commentaries may have
been liquidated during the reporting period. For a listing of securities held at
the end of the reporting period, please refer to the Schedules of Investments.
Comments cover the Funds' fiscal year, which runs from November 1, 2003 through
October 31, 2004.
PRINCIPAL BALANCED FUND, INC.
PAUL A. DOW AND DIRK LASCHANZKY (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
60% S&P 500 Standard & Poor's Lehman Brothers Morningstar Moderate Balanced
Stock Index and 500 Stock Index Aggregate Allocation Fund
40% Lehman Brothers Bond Index Category Average Class A
Aggregate Bond Index*
10 10 10 10 9.425
10/95 12.208 12.644 11.565 11.816 10.762
10/96 14.23 15.69 12.242 13.617 12.387
10/97 17.446 20.728 13.33 16.364 14.354
10/98 20.49 25.286 14.574 17.799 15.933
10/99 23.598 31.777 14.651 19.96 16.706
10/00 25.259 33.712 15.721 21.742 17.107
10/01 22.571 25.318 18.01 19.494 14.898
10/02 21.063 21.492 19.071 21.089 13.268
10/03 24.117 25.962 20.007 24.436 15.062
10/04 26.027 28.405 21.113 26.242 16.192
* This index is now the benchmark against which the Fund measures its
performance. The Manager and portfolio manager believe it better represents
the universe of investment choices open to the Fund under its investment
philosophy. The index formerly used is also shown.
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 12/18/1987 7.50% -0.62% 5.56% 7.21%
A** 12/18/1987 1.29% -1.79% 4.94% 6.83%
B* 12/9/1994 6.53% -1.39% 5.52%
B*** 12/9/1994 2.53% -1.74% 5.52%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
For the one-year period ended October 31, 2004, the Fund returned 7.50% compared
to 7.92% for a blend of 60% S&P 500 Index/40% Lehman Aggregate Bond Index. The
Fund underperformed the blended index primarily due to the Fund's asset
allocation decisions. Individual security selection as well as the decision to
overweight equities had mixed results throughout the period, especially in the
third quarter when stocks underperformed bonds. The Fund's overweighted position
in value companies was generally a positive contributor to overall performance
for the year as value companies tended to outperform growth companies.
The fixed-income market continued to provide positive single-digit returns for
the year even as short-term interest rates began to rise.
The domestic equity markets continued to advance during the one-year period as
improved corporate earnings and overall economic advancement supported the
markets. Investor confidence was mixed during the first half of 2004 as the
markets maintained the increases from the last few months of 2003. International
equity markets followed the lead of the domestic equity markets during the
period.
The fixed-income markets were up during the year, even though the Federal
Reserve (Fed) raised short-term interest rates. Yields declined in
longer-maturity bonds as short-term rates increased. Based on the expanding
economic environment, which provided support for corporate expansion, the Fed
moved to tighten interest rates. The difference between corporate security
yields and Treasury security yields tended to narrow during the year as the
corporate market outlook improved.
Economic activity continued to improve during the year as business and consumer
confidence remained solid. Investors were cautious throughout much of the year
as they waited for confirmation from higher corporate earnings and forecasts.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL BOND FUND, INC.
WILLIAM C. ARMSTRONG, LARRY POST AND TIMOTHY R. WARRICK (PRINCIPAL MANAGEMENT
CORPORATION)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Lehman Morningstar
Brothers Intermediate-
Aggregate Term Bond Bond
Bond Category Fund
Index Average Class A
10 10 9.525
10/95 11.565 11.437 11.404
10/96 12.242 12.04 11.945
10/97 13.33 13.045 13.156
10/98 14.574 14.049 14.177
10/99 14.651 14.053 13.905
10/00 15.721 14.858 14.354
10/01 18.01 16.798 16.501
10/02 19.071 17.722 17.133
10/03 20.007 18.801 17.935
10/04 21.113 19.732 18.959
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 12/18/1987 5.71% 6.40% 7.13% 7.85%
A** 12/18/1987 0.67% 5.37% 6.61% 7.53%
B* 12/9/1994 4.98% 5.63% 6.54%
B*** 12/9/1994 0.98% 5.31% 6.54%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
The Principal Bond Fund, Inc. outperformed the Lehman Aggregate Bond Index for
the one-year period ended October 31, 2004, returning 5.71% compared to 5.53%
for the index.
The economy grew rapidly in late 2003 and early 2004. Corporate earnings
announcements were strong, and companies continued to improve their financial
conditions by paying down and extending debt. Short-term interest rates began to
rise during the second quarter but intermediate-term rates remained fairly
stable.
Most of the Fund's outperformance relative to the Lehman Aggregate Bond Index
came from our allocation to below-investment-grade corporate bonds, which
performed very well; such bonds are not included in the index. In addition, the
Fund benefited from our overweight position versus the index in investment-grade
corporate bonds and asset-backed securities, which were the two best-performing
fixed income sectors during the period. Furthermore, the Fund was underweight
compared to the index in sectors that did not perform well; these included U.S.
Treasuries and agencies.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL CAPITAL VALUE FUND, INC.
JOHN PIHLBLAD (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Russell Morningstar Capital
1000 Large Value Value
Value Category Fund
Index Average Class A
10 10 9.425
10/95 12.471 12.063 11.116
10/96 15.432 14.728 14.052
10/97 20.554 18.853 17.616
10/98 23.602 20.64 20.362
10/99 27.501 23.195 20.973
10/00 29.019 24.958 19.673
10/01 25.577 21.953 17.055
10/02 23.014 21.38 15.431
10/03 28.28 25.93 18.398
10/04 32.649 29.078 20.166
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 10/15/1969 9.61% -0.78% 7.90% 10.81%
A** 10/15/1969 3.30% -1.95% 7.27% 10.63%
B* 12/9/1994 8.83% -1.57% 8.06%
B*** 12/9/1994 4.83% -1.91% 8.06%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
During the year ended October 31, 2004, the Principal Capital Value Fund, Inc.
underperformed the Russell 1000 Value Index, posting a 9.61% total return
compared to 15.45% for the index.
Equity market performance was fueled by oil, dividends, earnings, and value
stocks as well as securities in emerging markets. Energy stocks led performance
as this sector rose 43.5% during the 12-month period, driven by strength in
underlying crude oil and natural gas prices. Returns for the utilities and
industrials sectors each topped 20%, as companies benefited from consistent
improvement of earnings in a fairly high-quality fashion. As economic and
consumer spending growth slowed during the summer, investors avoided technology
stocks and stocks of companies that sold retail and everyday products to
consumers.
The Fund's underperformance relative to the index was driven by poor stock
selection, particularly in the financials, information technology and consumer
staples sectors. Many of these areas were impacted by unexpected interest rate
changes.
In managing equity portfolios, our investment philosophy is based on the belief
that superior stock selection is the key to consistent and repeatable
outperformance. Further, we believe that the key to superior stock selection
lies in the identification of companies with the following attributes: 1)
improving business fundamentals, 2) sustainability of the improvement, 3) rising
investor expectations and 4) attractive relative valuation.
Our equity portfolio construction process reflects an active, bottom-up style of
management where security selection is the key driver of excess returns relative
to the designated index. This process is maintained while neutralizing
unintended risks.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL CASH MANAGEMENT FUND, INC.
Effective August 9, 2004, Tracy Reeg was added to those individuals responsible
for day-to-day Fund management.
MICHAEL R. JOHNSON, TRACY REEG AND ALICE ROBERTSON (PRINCIPAL MANAGEMENT
CORPORATION)
The average maturity of the money fund industry over the course of fiscal year
2004 was in the 41-59 day range. The industry average continually declined in
order to be better positioned for the widely-anticipated Federal Reserve rate
increases. Principal Cash Management Fund, Inc. strives to stay in line with the
money fund industry average in both yield and maturity. Fund managers choose
from a list of high-quality investments that is actively monitored by our
fixed-income analytical staff.
The Fed Funds rate started fiscal year 2004 at 1.00%. (The Fed Funds rate is the
overnight lending rate between banks.) At its May meeting, the Federal Reserve
changed its policy from accommodation to tightening. The Federal Reserve began
to remove this accommodation by raising the Fed Funds rate by 0.25% at its June
meeting. Two more rate increases of 0.25% each at the August and September
meetings brought the Fed Funds rate to 1.75%.
Investment in the Fund is neither insured nor guaranteed by the U.S. Government.
While the Fund strives to maintain a $1.00 per share net asset value, it is
possible to lose money by investing in the Fund.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL EQUITY INCOME FUND, INC. F/K/A PRINCIPAL UTILITIES FUND, INC.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Dow Jones Standard
Utilities & Morningstar Morningstar
Index Poor's Russell Specialty- Moderate Equity
with 500 1000 Utilities Allocation Income
Income Stock Value Category Category Fund
Index Index Index* Average Average Class A
10 10 10 10 10 9.425
10/95 12.622 12.644 12.471 11.642 11.816 11.721
10/96 14.124 15.69 15.432 13.137 13.617 12.674
10/97 15.882 20.728 20.554 15.569 16.364 14.481
10/98 20.515 25.286 23.602 19.066 17.799 19.129
10/99 21.66 31.777 27.501 22.814 19.96 21.949
10/00 28.916 33.712 29.019 26.049 21.742 24.603
10/01 22.352 25.318 25.577 20.099 19.494 18.27
10/02 15.72 21.492 23.014 17.832 21.089 15.109
10/03 20.963 25.962 28.28 21.266 24.436 17.203
10/04 26.975 28.405 32.649 26.161 26.242 19.431
* The Fund changed its investment strategy and reduced its investment
emphasis on securities of companies in the utilities industry as of March
1, 2004. This benchmark better represents the Fund's new investment
strategy.
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 12/16/1992 12.95% -2.41% 7.50% 6.13%
A** 12/16/1992 6.48% -3.56% 6.87% 5.60%
B* 12/9/1994 12.06% -3.22% 7.06%
B*** 12/9/1994 8.06% -3.48% 7.06%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
From the beginning of the period until March 1, 2004, the Fund was named
Principal Utilities Fund, Inc., and the Fund's investment strategy focused
primarily on common stock and preferred securities of publicly-owned utilities
companies, including electric utilities and telecom-munications companies. On
March 1, 2004, the Fund's name was changed to Principal Equity Income Fund, and
the Fund's investment strategy was re-focused more broadly on value equities
(primarily domestic but also foreign), real estate investment trusts (REITs),
preferred securities, and convertible securities in order to moderate
performance volatility and to enhance opportunities to achieve the Fund's
objective of high current income and long-term growth of income and capital.
Over the entire period, the Fund earned 12.95% compared to 15.45% for the Fund's
current benchmark, the Russell 1000 Value Index.
PRINCIPAL MANAGEMENT CORPORATION
From the beginning of the period through February 29, 2004, the Fund earned
7.70%, while the Fund's then-benchmark, the Dow-Jones Utilities with-Income
Index, earned 11.78%. Along with the rest of the stock market, utilities values
rose in the last quarter of 2003, as investor confidence in economic growth took
hold and as enthusiasm for dividend-producing securities eligible for favorable
tax treatment increased. From then through the end of February utilities
securities rose more modestly. The Fund's preferred securities generally
underperformed.
On March 1, 2004, day-to-day Fund management responsibility was transferred from
Fernando Diaz and Joseph J. Urciuoli to Rollin Woltjen. Effective October 28,
2004, day-to-day Fund management responsibility was transferred from Rollin
Woltjen, who retired, to Mark McGrew.
MARK M. MCGREW (PRINCIPAL GLOBAL INVESTORS, LLC)
Beginning March 1, 2004, the Fund's investment portfolio was transitioned from
mainly utilities securities to a combination of value-oriented domestic and
foreign stocks, preferred securities, REIT stocks, and convertible bonds. Stocks
represent the largest component of the Fund's portfolio. All the component parts
continue to provide exposure to the utilities sector of the economy, as this
sector tends to provide investments with higher dividends and interest payments
that generate a high level of income for the Fund. However, the Fund's overall
exposure to the utilities sector is considerably lower than previously.
The domestic equity market rose early in the Fund's reporting period but then
leveled off for much of 2004. The value-oriented stock component of the Fund's
portfolio benefited as investors sought securities with higher-quality earnings
and high stock-dividend yields. The REIT market was volatile during the first
half of 2004 as investors first allowed prices to fall after years of
overcapacity and then flocked back, pushing prices back up as bond interest
rates remained low. Preferred securities continued to boost the Fund's income
yield and also added to the Fund's total return from price appreciation. We
steadily increased the Fund's exposure to international investments as more
attractive-yielding securities became available.
For the eight months from March 1, 2004 through the end of the period, the Fund
earned 4.88% while the Russell 1000 Value Index, the Fund's benchmark, earned
1.61%. During the month of March the Fund's overweight position in REIT
securities significantly impaired Fund results, and the underperformance
continued in the second quarter as preferred securities weakened. Third quarter
results improved significantly as all segments of the Fund's portfolio rose
sharply.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.
MARK KARSTROM AND MARTIN J. SCHAFER (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Lehman Morningstar Government
Brothers Intermediate Securities
Government/ Government Income
Mortgage Category Fund
Index Average Class A
10 10 9.522
10/95 11.511 11.367 11.188
10/96 12.174 11.911 11.866
10/97 13.249 12.845 12.96
10/98 14.537 13.905 13.916
10/99 14.61 13.858 14.121
10/00 15.755 14.756 15.122
10/01 17.97 16.674 16.882
10/02 19.108 16.892 17.795
10/03 19.649 17.301 18.078
10/04 20.671 18.01 18.788
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 5/21/1985 3.93% 5.88% 7.03% 7.99%
A** 5/21/1985 -1.01% 4.86% 6.51% 7.72%
B* 12/9/1994 3.07% 5.08% 6.50%
B*** 12/9/1994 -0.91% 4.75% 6.50%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
Principal Government Securities Income Fund, Inc. underperformed the Lehman
Government/Mortgage Index for the one-year period ending October 31, 2004,
returning 3.93% compared to 5.20% for the index.
The pace of economic growth moderated in recent quarters, due to higher oil
prices that cut into consumer disposable incomes, and uncertainty over the
outcome of the U.S. presidential election, which postponed business investment.
While the pace of economic growth was strong, higher productivity and
cost-conscious corporations dampened the employment growth that typically occurs
early in the business cycle. As a result, interest rates stayed in a narrow
trading range over the past year even with the Federal Reserve beginning to
tighten interest rates. In light of higher mortgage rates, the consumer slowed
the pace of mortgage refinancing and utilized more adjustable rate mortgages to
finance a strong housing market.
The Fund's performance is driven mainly by its emphasis on mortgage securities,
which contributed positively to performance relative to the index. As interest
rates fell in the third quarter, Fund performance relative to the index was
negatively affected by the shorter duration of the Fund's portfolio. In general,
mortgage securities experienced good performance in the past year as risk
premiums fell while volatility of interest rates declined and risk of mortgage
refinancing fell.
Recent investigations into the accounting and oversight of the
federally-sponsored housing agencies, Federal Home Loan Mortgage Corp. (Freddie
Mac or FHLMC) and Federal National Mortgage Association (Fannie Mae or FNMA),
failed to identify significant fundamental failings of those companies, although
they put a healthy dose of scrutiny on the largest housing finance organizations
in the world. In many respects this resulted in a sounder and more stable
mortgage financing process and a fundamentally sounder mortgage market.
Government agency securities also contributed to the Fund's performance relative
to the index. In spite of many questions surrounding the financial performance
of Freddie Mac and Fannie Mae, the risk premium on those securities also fell
over the past year. The Fund invested about 20% in agencies, such as Freddie
Mac.
We believe that effectively managing duration and opportunistically investing in
government mortgage and agency securities leads to superior risk-adjusted
returns. This strategy is intended to provide a high-quality, low-volatility
portfolio with a higher yield than similar-duration Treasuries.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL GROWTH FUND, INC.
Effective October 15, 2004, day-to-day Fund management responsibility was
transferred from Mary Sunderland to Paul A. Dow.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Russell Morningstar
1000 Large Growth Growth
Growth Category Fund
Index Average Class A
10 10 9.425
10/95 12.921 12.47 11.62
10/96 15.77 14.757 12.852
10/97 20.575 18.648 16.65
10/98 25.645 21.512 19.176
10/99 34.428 29.605 22.524
10/00 37.64 34.57 25.371
10/01 22.603 21.115 14.748
10/02 18.168 20.456 12.045
10/03 22.132 24.699 13.865
10/04 22.88 25.477 14.339
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 10/15/1969 3.42% -8.63% 4.29% 8.48%
A** 10/15/1969 -2.52% -9.71% 3.67% 8.30%
B* 12/9/1994 2.57% -9.29% 4.60%
B*** 12/9/1994 -1.43% -9.52% 4.60%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
PAUL A. DOW (PRINCIPAL GLOBAL INVESTORS, LLC)
Over the past year, Principal Growth Fund, Inc. rose 3.42%, a little better than
the return of the Russell 1000 Growth Index of 3.38%.
During early 2004, we again saw a surge in low-quality stocks. Low-quality
stocks are exemplified by low price, lack of earnings, volatility and extremely
high valuations. In the early part of a market recovery, these types of stocks
often make significant moves as the threat of insolvency fades.
The Fund's performance was hindered by this trend, as our strategy is to invest
in stocks we consider to have characteristics associated with high quality.
The Fund benefited from strong stock selection in the health care, financials,
industrials and utilities sectors. However, strong stock selection results in
these sectors were offset by poor stock selection in the information technology,
telecommunications and energy sectors.
Over the past year, growth stock returns slightly lagged those of value stocks.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
MSCI EMF Morningstar International
(Emerging Diversified Emerging Markets
Markets Free) Emerging Markets Fund
Index - ID Category Average Class A
10 10 9.425
10/97 8.591 8.75 8.466
10/98 5.929 5.976 6.679
10/99 8.575 8.191 8.742
10/00 7.82 7.925 8.948
10/01 5.978 6.084 6.635
10/02 6.483 4.932 6.975
10/03 9.643 7.243 10.467
10/04 11.514 8.615 12.269
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year Inception
A* 8/29/1997 17.22% 7.02% 3.75%
A** 8/29/1997 10.48% 5.76% 2.90%
B* 8/29/1997 16.39% 6.21% 3.06%
B*** 8/29/1997 12.39% 5.89% 3.06%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
MICHAEL A. MARUSIAK AND MICHAEL L. REYNAL (PRINCIPAL GLOBAL INVESTORS, LLC)
Principal International Emerging Markets Fund, Inc. underperformed its
benchmark, the Morgan Stanley Capital International Emerging Markets Free (MSCI
EMF) Index, by 2.18%. For the one-year period ending October 31, 2004, the Fund
returned 17.22%, compared to 19.40% for the index. The Fund's underperformance
was primarily due to poor stock selection in the Czech Republic and India. Poor
performance in the utilities sector was also due to poor stock selection,
especially in Indonesia, China and Brazil. Stock selection in the financials and
telecommunication services sectors provided outperformance relative to the
benchmark. The Fund benefited from stock selection in South Africa and South
Korea.
The MSCI EMF Index outpaced the gains of most developed markets. The year was
characterized by a strong uptick in both commodity and oil prices. Commodity
prices worldwide rose strongly on optimism about growth in China. Meanwhile, oil
prices were further buoyed by very tight supplies, with the continued conflict
in Iraq and terrorism concerns keeping prices high.
Asian markets had an eventful year, with the first few months characterized by
excessive optimism on Chinese growth, followed by a period in the middle of the
year where the market was concerned about the viability of that growth. By the
end of the year the market was relatively sanguine about China's equity market
prospects, based on a belief in the soft-landing outlook for the Chinese
economy. This shifting sentiment toward the Chinese economy had implications for
the outlook on the global economy, given China's large appetite for resources,
and the Asian markets in particular. Because there was uncertainty on the main
growth driver for the Asian markets, Asia underperformed the Latin American and
Eastern Europe, Middle East and African (EEMEA) markets.
The Asian markets were also characterized by several elections and transitions
of power. In the summer, we saw the final relinquishment by Jiang Zemin of any
position of outright authority in China and the final transfer of power to his
replacement, Hu Jintao. Despite initial concerns about how Taiwanese-Chinese
relations would be affected, the market took this in stride. There was a
controversial election in Taiwan, where the incumbent, who was struggling in the
polls at the time, was shot two days before the election and managed to pull out
a victory. President Chen Shui-Ban's leanings toward independence for Taiwan
will necessitate close scrutiny due to the new leadership in China. In
Indonesia, President Megawati was removed from power and replaced by Susilo
Bambang Yudhoyono (SBY), as voters grew weary of the lack of change during
Megawati's regime.
Latin America benefited from optimism about the U.S. economy and the strong
commodities prices, as Brazil in particular is a large exporter of raw
materials. The relative strength in the U.S. economy benefited Mexico, with its
strong ties to its northern neighbor. Argentina, Brazil and Mexico all performed
extremely well. The Argentine economy is booming on strong commodity prices and
high liquidity. Continuing debt-restructuring discussions have also buoyed
sentiment. In Brazil, President Lula da Silva has implemented market friendly
reforms, which, added to strong iron ore, grain, and steel prices, have been
very positive. In Mexico, steady economic convergence with the United States,
high oil prices, and a positive employment scenario have offset a deteriorating
political outlook.
The EEMEA region was driven by several themes over the course of the year.
Within Central Europe, its continued convergence with Western Europe and its
effects on interest rates supported a strong market. The Central European
markets have continued to outperform, led by Hungary and the Czech Republic.
Turkey has also been a tremendous beneficiary of European Union (EU)
convergence, with the continuing discussions of ultimate entry into the EU
driving asset prices higher. The high oil price and strong domestic liquidity in
Russia led to a strong performance by the Russian equity market, notwithstanding
the Kremlin's attack on Russia's largest oil company, Yukos. South Africa also
performed well, as optimism on the local economy was fueled by several rate
cuts, which boosted performance of the local economy-related stocks. This,
combined with strong materials prices, led to another strong year for the South
African rand.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL INTERNATIONAL FUND, INC.
Effective August 9, 2004, Juliet Cohn was added to those individuals responsible
for day-to-day Fund management, replacing Phyllis Vance.
PAUL BLANKENHAGEN AND JULIET COHN (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
MSCI EAFE Morningstar
(Europe, Foreign
Australia, Large Blend International
Far East) Blend Fund
Index - ND Average Class A
10 10 9.425
10/95 9.963 10.046 9.522
10/96 11.006 11.248 11.27
10/97 11.516 12.483 13.576
10/98 12.627 13.042 13.838
10/99 15.535 16.339 16.077
10/00 15.084 16.715 16.566
10/01 11.299 12.302 11.821
10/02 9.806 10.677 10.41
10/03 12.457 13.078 12.785
10/04 14.804 15.186 14.924
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 8/1/1988 16.73% -1.48% 4.70% 6.83%
A** 8/1/1988 9.99% -2.63% 4.09% 6.44%
B* 12/9/1994 16.36% -2.15% 5.16%
B*** 12/9/1994 12.36% -2.46% 5.16%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
International equity markets continued higher in the last year due to strong
corporate earnings, good economic growth and continued low interest rates.
Despite worries about another possible terrorist attack, the war in Iraq and
high oil prices, the Morgan Stanley Capital International Europe, Australasia,
Far East (MSCI EAFE) Index rose 18.84% during the fiscal year ending October 31,
2004. Principal International Fund, Inc. rose 16.73%, underperforming the index.
In developed markets, small companies continued to outperform large companies.
When examining returns by region, Europe and Australia performed better than
Japan. The energy, basic materials and utility sectors were the best performers,
while consumer staples and information technology lagged. Emerging market
returns were similar to those produced by developed markets during the year,
with the Latin American and Eastern European regions producing the strongest
returns. The weak U.S. dollar continued to benefit international investors.
The primary reason for the Fund's underperformance versus the MSCI EAFE Index
was sector allocation and stock selection. Performance suffered in the
information technology sector due to an overweighted position in semiconductor
related companies. A slightly overweighted position during the year in the
information technology sector overall also hurt performance. Too much exposure
to alternative carriers hurt stock selection in the telecommunication services
sector. Underperformance in these two sectors was partially offset by strong
stock selection in the energy, financials and utilities sectors. An overweighted
position in the energy sector also helped performance. Stock selection was
strong in Europe, but weak in Japan.
As we progressed through the last year, our philosophy of investing in companies
experiencing improvements in their business and paying reasonable prices for
these investments began to gain more traction. The market began to reward these
types of companies in the latter part of the fiscal year.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
BRIAN W. PATTINSON (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Morningstar
Citigroup Foreign
Extended Small/Mid International
Market (EMI) Growth SmallCap
World ex-US Category Fund
Index Average Class A
10 10 9.425
10/97 9.678 9.793 9.472
10/98 9.592 10.512 9.5
10/99 11.359 15.574 14.679
10/00 11.235 19.298 17.792
10/01 9.106 12.54 11.917
10/02 8.592 11.143 10.536
10/03 12.518 16.39 14.879
10/04 15.376 19.284 18.724
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year Inception
A* 8/29/1997 25.84% 4.99% 10.05%
A** 8/29/1997 18.63% 3.76% 9.15%
B* 8/29/1997 24.93% 4.15% 9.31%
B*** 8/29/1997 20.93% 3.83% 9.31%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
Principal International SmallCap Fund, Inc. outperformed the Citigroup Extended
Market Index (EMI) World excluding United States by 3.01% over the last 12
months. For the one-year period ended October 31, 2004, the Fund returned
25.84%, compared to the index return of 22.83%.
Despite rising interest rates, global economic growth and profitability were
robust. In developed markets, small companies continued to out-perform large
companies. Europe and Australia performed better than Japan.
The biggest contributor to the Fund's outperformance was strong stock selection
in the industrials, financials, consumer discretionary and materials sectors.
The telecommunication services, information technology and energy sectors
detracted from performance due to poor stock selection.
Regionally, Europe and Japan were the biggest contributors to the Fund's
outperformance due to strong stock selection. Asia Pacific excluding Japan was
also a positive contributor to performance due to stock selection. Canada was
the only region that detracted from performance over the past year, due to poor
stock selection.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
DIRK LASCHANZKY (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Standard and Morningstar LargeCap
Poor's 500 Large Blend Stock Index
Stock Category Fund
Index Average Class A
10 10 9.85
10/00 10.439 9.646 10.339
10/01 7.84 7.199 7.707
10/02 6.655 7.374 6.48
10/03 8.039 8.805 7.751
10/04 8.795 9.5 8.4
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year Inception
A* 3/1/2000 8.37% -3.36%
A** 3/1/2000 6.73% -3.66%
B* 3/1/2000 7.88% -3.70%
B*** 3/1/2000 6.63% -3.80%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
Principal LargeCap Stock Index Fund, Inc. underperformed the S&P 500 Index for
the year, primarily due to the Fund's operating expenses. For the one-year
period ended October 31, 2004, the Fund returned 8.37% compared to 9.41% for the
index. The Fund maintains exposures near the index with a goal of replicating
index performance less Fund operating expenses. The index return is calculated
without regard to operating expenses. The Fund maintains positions in the
underlying securities and uses other replicating securities for short-term
investments and liquidity.
The equity market continued to advance during the period as improved corporate
earnings and overall economic advancement supported the markets. Investor
confidence was mixed during the first half of 2004 as the markets maintained the
increases from the last few months of 2003.
Economic activity continued to improve during the year as business and consumer
confidence remained solid. Investors were cautious throughout much of the year
as they waited for confirmation from higher corporate earnings and forecasts.
Investors were also waiting for the uncertainty surrounding the U.S.
presidential election and terrorist threats to subside. There is still
uncertainty over the impact military activity in Iraq and increased oil prices
will have on the economic expansion.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL LIMITED TERM BOND FUND, INC.
MARTIN J. SCHAFER (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Lehman Brothers Morningstar Limited
Mutual Fund Short-Term Term Bond
1-5 Government/ Bond Category Fund
Credit Index Average Class A
10 10 9.85
10/96 10.371 10.343 10.207
10/97 11.086 11.013 10.895
10/98 12.012 11.726 11.611
10/99 12.283 12.018 11.823
10/00 13.052 12.733 12.525
10/01 14.719 14.118 13.948
10/02 15.558 14.592 14.464
10/03 16.19 15.009 14.904
10/04 16.668 15.335 15.168
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year Inception
A* 2/29/1996 1.77% 5.11% 5.11%
A** 2/29/1996 0.22% 4.78% 4.92%
B* 2/29/1996 1.41% 4.69% 4.76%
B*** 2/29/1996 0.19% 4.61% 4.76%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
Principal Limited Term Bond Fund, Inc. underperformed the Lehman Mutual Fund 1-5
Year Government/Credit Index for the one-year period ended October 31, 2004. The
Fund returned 1.77% versus 2.95% for the index.
The duration of the Fund was shorter than the index, hindering performance as
interest rates fell. Duration is a measure of bond price sensitivity to changes
in interest rates. As interest rates fall, shorter-duration investments tend to
rise less than longer-duration investments.
Fund performance was enhanced by broad corporate diversification and
overweighted sector allocations to asset-backed securities, commercial
mortgage-backed securities, securities issued by U.S. government agencies, and
mortgage-backed securities-all of which provided positive returns relative to
the index.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL MIDCAP FUND, INC.
K. WILLIAM NOLIN (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Morningstar
Russell Mid-Cap Blend MidCap
Midcap Category Fund
Index Average Class A
10 10 9.425
10/95 12.331 11.922 11.914
10/96 14.754 14.211 13.926
10/97 18.999 18.552 18.279
10/98 19.846 18.313 16.491
10/99 23.244 21.554 17.408
10/00 28.76 25.623 22.493
10/01 23.575 21.498 20.437
10/02 21.684 20.653 19.75
10/03 29.466 27.08 25.045
10/04 33.918 30.251 28.827
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 12/18/1987 15.10% 10.61% 11.83% 13.58%
A** 12/18/1987 8.48% 9.31% 11.17% 13.18%
B* 12/9/1994 14.78% 10.10% 12.41%
B*** 12/9/1994 10.78% 9.83% 12.41%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
Principal MidCap Fund, Inc. slightly underperformed the Russell MidCap Index for
the one-year period ended October 31, 2004, returning 15.10% compared to the
index return of 15.11%.
After a period of strong equity performance in 2003, stock prices continued
upward in early 2004, then trended lower as the year progressed. Concerns about
the duration of the economic recovery as well as negative views regarding the
war in Iraq and rising oil prices weighed on investors.
The Fund's performance as a whole was relatively balanced, with no particularly
large sector outperformance or underperformance. The Fund lagged the Russell
MidCap Index primarily in the health services sector. The largest individual
negative stock in this sector was IMS Health, which was down 10%.
IMS Health is the number-one worldwide provider of health care information and
operates in more than 100 countries. We believe the prospects for IMS are bright
and have added to the Fund's position on the most recent pullback.
We continue to focus on high-quality companies we believe have sustainable
competitive advantages that can be purchased at reasonable prices. The Fund's
strategy is to hold companies with higher return on equity, return on assets and
profit margins than the index, and lower price/earnings multiple than that of
the index.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
The Fund is invested by two sub-advisors independently of each other. The Fund's
investment performance is the combined investment performance of the two
sub-advisors. For the entire 12-month period ending October 31, 2004, the Fund
earned 8.73% compared to 9.41% for the S&P 500 Index. The following are comments
from each sub-advisor regarding the portion of the Fund's portfolio they manage.
Goldman Sachs Asset Management is responsible for about 70 percent of the Fund's
assets and Wellington Management Company, LLP is responsible for about 30
percent. The graph and table apply to the Fund as a whole.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Standard and Morningstar Principal
Poor's 500 Large Blend Partners
Stock Category Blue Chip
Index Average Fund Class A
10 10 9.425
10/95 12.644 12.177 11.56
10/96 15.69 14.76 13.664
10/97 20.728 18.865 16.748
10/98 25.286 21.497 20.011
10/99 31.777 26.366 23.413
10/00 33.712 28.681 22.804
10/01 25.318 21.405 16.275
10/02 21.492 21.925 12.989
10/03 25.962 26.178 15.445
10/04 28.405 28.243 16.793
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 3/1/1991 8.73% -6.43% 5.95% 6.44%
A** 3/1/1991 2.45% -7.53% 5.32% 5.98%
B* 12/9/1994 7.88% -7.09% 5.87%
B*** 12/9/1994 3.88% -7.45% 5.87%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
MELISSA R. BROWN, GARY CHROPUVKA AND ROBERT C. JONES (GOLDMAN SACHS ASSET
MANAGEMENT, L.P.)
The S&P 500 Index gained 9.41% for the twelve months ending October 31, 2004.
All 10 sectors in the Index gained ground for the period, led by the Energy
(+54.66%) sector. The Materials (+39.09%), Utilities (+34.22%) and
Telecommunication Services (+25.11%) sectors also posted strong gains. The
Energy sector also contributed most (weight times performance) to positive Index
returns.
In managing our portion of the Fund's portfolio, we do not take size or sector
bets. We hope to add value versus the Fund's index by individual stock
selection. Our quantitative process seeks out stocks with good momentum that
also appear to be good values. We prefer stocks about which fundamental research
analysts are becoming more positive, and companies that have strong profit
margins and sustainable earnings and that use their capital to enhance
shareholder value.
Our portion of the Fund's portfolio returned 10.06%, outperforming its
benchmark, which posted 9.41% for the period. Returns to investment themes were
positive across the board for the period. Valuation was the biggest positive
contributor to relative returns as inexpensive companies outperformed their more
richly-valued industry counterparts. Earnings Quality, Momentum, and
Profitability themes also boosted relative returns, as did Management Impact and
Analyst Sentiment, albeit to a lesser extent.
Stock selection was mixed across sectors for the period, but was successful
overall. Holdings in the Consumer Staples sector outperformed their peers in the
benchmark the most. Positions in the Financials and Energy sectors also
experienced strong relative results. Meanwhile, holdings in the Consumer
Discretionary sector underperformed relative to the benchmark.
MATTHEW E. MEGARGEL (WELLINGTON MANAGEMENT COMPANY, LLP)
Our portion of the Fund's portfolio advanced 5.26% during the one-year period
ended October 31, 2004. This compared to the S&P 500 Stock Index, which returned
9.41%.
The global expansion that began in 2003 has started to moderate. In the first
half of 2004, the world economy expanded at the fastest rate since the boom in
the year 2000. To pre-empt the build-up of inflationary pressures, the U.S., UK
and China tightened monetary and fiscal policies. High commodity prices and
record oil prices also produced a dampening impact on global economic activity.
Our portion of the Fund's portfolio underperformed the S&P 500 Index primarily
due to weak stock selection in three sectors: Financials, Health Care and
Information Technology. Positive contributors to performance included our
overweights in Industrials and Energy.
Within Health Care, Eli Lilly, Wyeth, Pfizer and Cardinal Health were
disappointments during the period. In the case of Cardinal Health, the stock
fell on concerns related to the company's ongoing accounting investigation and
the emerging weakness in Cardinal Health's non-distribution businesses. Due to
these concerns, we eliminated our position in Cardinal Health during the period.
Our large overweight to Pharmaceuticals was a big detractor during 2004, as
witnessed by the poor performance turned in by Lilly, Pfizer and Wyeth.
Within Financials, Fannie Mae, Merrill Lynch, Citigroup and St. Paul Travelers
Co. all underperformed during the year. Shares of Fannie Mae fell after
regulators released a report alleging accounting missteps as well as internal
issues with accounting processes and controls. In the case of St. Paul
Travelers, the stock was negatively hit due to exposure to areas in the U.S.
affected by hurricanes Charley and Frances. In the case of Citigroup, the stock
fell after the Japanese arm of the company's private bank was sanctioned by the
Financial Services Agency of Japan for providing misleading information to
retail investors in various investment products.
Within Information Technology, our overweight to the sector detracted from
relative performance, particularly from our exposure to semiconductors as the
electronics supply chain has whip-sawed and inventories have accumulated.
Semiconductor names that lagged during the period included holdings in Applied
Materials, Intel and Texas Instruments.
In the Energy sector, overweight positions in names such as ChevronTexaco,
Schlumberger and Anadarko Petroleum added to relative performance as each
company benefited from the recent spike in oil prices. In fact, energy was the
best-performing sector this year (up 46%) because of the rise in the price of
oil. While Schlumberger and Anadarko remain holdings in the portfolio, we
eliminated ChevronTexaco during the period.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL PARTNERS EQUITY GROWTH FUND, INC.
This Fund was sub-advised by Morgan Stanley Asset Management from the beginning
of the period through August 23, 2004. Effective July 2, 2004, day-to-day Fund
management responsibility was transferred from William S. Auslander and Jeffrey
Alvino to Dennis P. Lynch, David Cohen and Sam Chainani. On August 24, 2004 the
Fund's sub-advisor was changed to T. Rowe Price, and day-to-day Fund management
responsibility was transferred to Robert Sharps. For the entire period, the Fund
gained 3.43% compared to 3.38% for the Russell 1000 Growth Index, the Fund's
benchmark.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Standard and Russell Morningstar Partners
Poor's 500 1000 Large Growth Equity Growth
Stock Growth Category Fund
Index Index* Average Class A
10 10 10 9.425
10/00 10.609 10.933 11.677 9.568
10/01 7.967 6.565 7.132 6.418
10/02 6.763 5.277 6.909 5.154
10/03 8.17 6.428 8.342 5.895
10/04 8.939 6.645 8.605 6.097
* This index is now the benchmark against which the Fund measures its
performance. The Manager and portfolio manager believe it better represents
the universe of investment choices open to the Fund under its investment
philosophy. The index formerly used is also shown.
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year Inception
A* 11/1/1999 3.43% -6.26%
A** 11/1/1999 -2.56% -7.36%
B* 11/1/1999 2.65% -6.96%
B*** 11/1/1999 -1.35% -7.34%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
MORGAN STANLEY ASSET MANAGEMENT
Equities produced mixed results for the portion of the period in which Morgan
Stanley sub-advised the Fund. Stocks made sizable gains for the first half of
the period as generally positive economic news signaled economic growth and
stimulated investment. Low interest rates also provided a favorable environment
for corporations and consumers. The market's momentum slowed thereafter as news
of terrorism in Spain and continuing violence in Iraq weighed upon investors'
confidence. Stocks were further hampered by rising oil prices, higher interest
rates, and uncertainties related to the upcoming presidential election.
Manufacturing activity remained strong for much of the period, but consumer
sentiment deteriorated in the second half as consumers' assessment of current
conditions and future expectations generally worsened. Employment improved,
however, not at the expected pace or level.
The Fund underperformed the Russell 1000 Growth Index for the portion of the
period in which Morgan Stanley sub-advised the Fund due to stock selection and
sector allocation. For the period of November 1, 2003 through August 23, 2004,
the Fund gained -2.00% compared to -0.48% for the Russell 1000 Growth Index, the
Fund's benchmark. Stock selection within the financial and consumer staples
sectors hurt the portfolio. Diversified financials stocks were a notable area of
weakness. Citigroup suffered from a number of issues including a class action
suit related to the Worldcom scandal and the ordered closure of its private
banking operation in Japan. Goldman Sachs was impacted by a slowdown in the
investment banking and equity markets. Within the consumer staples sector, soft
drink beverage companies were an area of weakness. Coca-Cola was hurt by
unfavorable volume trends in North America, the disappointing performance of
Coke's low-carbohydrate product and by strained relations with the company's
bottlers.
Within the technology sector, stock selection was particularly strong in the
semiconductor industry. Marvell Technology Group was a standout performer among
semiconductor securities, making gains as the global provider of broadband
communications and storage solutions delivered notable top- and bottom-line
growth in markets such as hard disk drives and Ethernet networking.
Stock selection of industrial conglomerates was favorable, led by General
Electric (GE). GE completed a spin-off of its financial services division,
gaining approximately $2.9 billion, which was used to reduce debt. GE also
completed its acquisition and integration of Vivendi's Universal media
properties.
ROBERT SHARPS (T. ROWE PRICE ASSOCIATES, INC.)
For the period of August 24, 2004 through October 31, 2004, the Fund
outperformed 5.54% compared to 2.82% of Russell 1000 Growth Index, the Fund's
benchmark. Stock selection and sector allocation both contributed strongly to
relative results. The health care and consumer staples sectors were the top
contributors to relative performance, followed by financials, energy, and
information technology.
Within health care, underweighting pharmaceuticals aided results as the group
continued to struggle with regulatory and competition issues. Avoiding Merck,
which removed the drug Vioxx from the market during the period, had a positive
impact. UnitedHealth Group, a service provider, was a top contributor to
absolute and relative performance. Consumer staples performed poorly, and zero
weights in beverages and household products drove relative strength in the
sector.
Stock selection was strong in financials, where our capital markets, insurance
and consumer finance positions benefited relative results. AmeriTrade was a top
contributor; the company raised its 2005 outlook on expected increases in
customer trading activity. The energy sector had the strongest performance for
the period. Overweighting the energy equipment and services industry was
helpful.
Within technology, overweighting Internet software and services and stock
selection in communications equipment aided results. Google, in the first
reporting quarter since its August IPO, reported a doubling of revenue and net
income from the same period a year earlier. The usual slow summer months were
offset by increasing demand for online advertising on the world's largest search
engine. The company sells advertising connected to key words used in searches.
Overweight positions in Juniper Networks and Corning were the top relative
contributors in the communications equipment group.
Investor enthusiasm for stocks waned during the third quarter as U.S. equity
markets provided disappointing returns. Increased uncertainty surrounding the
pace of the economic recovery, disappointing earnings results from technology
companies, record-high oil prices, and uncertainty surrounding the upcoming
Presidential election kept investors on the sidelines.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL PARTNERS LARGECAP BLEND FUND, INC.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Standard & Morningstar Partners
Poor's 500 Large Blend LargeCap Blend
Stock Category Fund
Index Average Class A
10 10 9.425
10/01 8.204 7.978 8.172
10/02 6.964 8.172 7.237
10/03 8.413 9.757 8.299
10/04 9.205 10.527 8.98
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year Inception
A* 12/22/2000 8.21% -0.29%
A** 12/22/2000 1.96% -1.81%
B* 12/22/2000 7.49% -1.00%
B*** 12/22/2000 3.49% -1.78%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
This Fund was sub-advised by Federated Equity Management Company of Pennsylvania
from the beginning of the period through March 8, 2004. For the remainder of the
period T. Rowe Price Associates, Inc. was the sub-advisor. For the entire
period, the Fund gained 8.21% compared to 9.41% for the Standard & Poor's 500
Stock Index, the Fund's benchmark.
FEDERATED EQUITY MANAGEMENT COMPANY OF PENNSYLVANIA
From November 1, 2003 through March 8, 2004 the Fund produced a total return of
8.86% versus 9.86% for the Fund's benchmark, the Standard & Poor's 500 Stock
Index.
U.S. equity markets added to their gains during the reporting period, continuing
the trend begun in the first quarter of 2003. During the period, value-based
strategies generally outperformed growth-based strategies. This positively
influenced the Fund's performance as it had a slight value tilt during the year.
The Fund's return was negatively impacted by its cash position in a rising
market. Sector allocation was a positive contributor to performance while stock
selection was a negative contributor. From a sector positioning standpoint, the
Fund's returns were aided by being overweight Energy and Telecommunication
Services and by being underweight Consumer Discretionary. The Fund's return was
negatively impacted by being overweight Materials and by being underweight
Consumer Staples. On a stock selection basis, the Fund's return was hindered by
stock performance within Information Technology, Telecommunication Services and
Financials. The Fund benefited from positive performance within Energy,
Industrials and Health Care.
Top contributors during the period were: Pfizer, American International Group,
Exxon Mobil, General Electric and Transocean, Bottom contributors during the
period were: Intel Corp., Tenet Healthcare, EMC Corp., Washington Mutual and
Dell Corp.
WILLIAM STROMBERG, RICHARD WHITNEY AND M. CHRISTINE WOJCIECHOWSK (T. ROWE PRICE
ASSOCIATES, INC.)
Principal Partners LargeCap Blend Fund, Inc. earned approximately the same
return as the S&P 500 Index over the period from March 9, 2004 through October
31, 2004. While the Fund returned -0.60% during this time, the S&P 500 Index
returned -0.42%. Stock selection was the Fund's primary contributor driving
performance relative to the benchmark, and sector weightings generated a
marginal contribution.
U.S. equities slightly dipped over the period, depressed primarily by high oil
prices, the onset of a Federal Reserve tightening cycle, and a tepid labor
market.
The materials sector was the Fund's strongest relative contributor, driven by
good stock selection and strength in commodities prices. An overweight in steel
manufacturer Nucor and holdings in fertilizer and chemical stocks aided results.
Holdings in the utilities sector also posted strong results due to a risk-averse
market environment, which favored more conservative investments. Positions in
TXU Corporation and Duke Power were strong relative contributors. TXU benefited
from a change in management and an improvement in the company's balance sheet.
In addition, management raised its 2004 earnings guidance due to the
implementation of an aggressive cost cutting program.
The financials sector was the largest relative detractor from the Fund's
performance. Poor stock selection was primarily driven by overweight positions
in insurers St. Paul Travelers and Marsh & McLennan Companies and underweight
positions in banks Wells Fargo and Bank of America. St. Paul Travelers reported
disappointing earnings and announced a significant restructuring/reserve charge
related to the merger of St. Paul Companies and Travelers. Marsh & McLennan
Companies, the nation's leading insurance brokerage firm, was sued by New York
Attorney General Eliot Spitzer alleging it steered unsuspecting clients to
insurers with whom it had lucrative payoff agreements and that the firm rigged
bids for insurance contracts.
Concerns over the sustainability of growth in consumer spending weighed on the
consumer discretionary sector, and stock selection in the sector was weak,
driven by positions in retailers Ross Stores, Panera Bread, and Multimedia
Games.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL PARTNERS LARGECAP VALUE FUND, INC.
MARILYN G. FEDAK AND JOHN PHILLIPS (ALLIANCE CAPITAL MANAGEMENT L.P.)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Russell Morningstar Partners
1000 Large Value LargeCap
Value Category Value Fund
Index Average Class A
10 10 9.425
10/01 8.978 8.751 9.097
10/02 8.078 8.523 8.197
10/03 9.926 10.337 10.124
10/04 11.46 11.592 11.305
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year Inception
A* 12/22/2000 11.67% 5.74%
A** 12/22/2000 5.23% 4.13%
B* 12/22/2000 10.85% 4.96%
B*** 12/22/2000 6.85% 4.28%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
U.S. equity markets increased for the 12 months ending October 31, 2004, as the
S&P 500 rose 9.41%. There was a large discrepancy between value and growth
returns as energy and interest-rate-sensitive sectors led the market, while the
more growth-oriented technology and healthcare stocks lagged. The Russell 1000
Value Index, the Fund's benchmark, outperformed both the broader market and its
growth counterpart, rising 15.45%, while the Russell 1000 Growth rose 3.38%.
The Fund, up 11.67%, outperformed the broader market, but underperformed its
value benchmark. Underperformance can mainly be attributed to weakness from our
consumer cyclicals and technology holdings. Stock and sector selection in
transportation and energy were positive contributors to performance.
The dramatic rise in oil prices this year has reduced real disposable income,
depressing consumer spending and leading to an inventory back-up in
consumer-related sectors. Our emphasis on consumer cyclicals-particularly
auto-parts manufacturers and retailers, Sears, American Axle and
Whirlpool-detracted from performance in a period when stocks sensitive to
consumer spending were down. In addition, investors were concerned about the
ability of auto parts and appliance companies to pass along higher material
costs.
Our tech holdings also detracted from performance versus the value index. Most
of our tech holdings are distributors and contract manufacturers that were hit
by an inventory buildup across the supply chain in technology hardware, which
resulted from increased production in anticipation of a larger rebound in
capital spending on tech than materialized. In addition, Hewlett-Packard
reported disappointing results due to poor performance in its servers and
storage division, which led to the firing of three senior executives. In our
view, this was little more than a temporary setback that management has
addressed.
We outperformed in the consumer growth sector due to our underweight in the
sector. But stock selection within the sector did reduce the outperformance. In
the consumer growth sector, media holdings Comcast and Interpublic Group
detracted, as companies continue to hold back on advertising spending in
traditional media channels. Our healthcare holdings also underperformed,
particularly exposure to Merck after the firm announced it would pull arthritis
painkiller Vioxx from the market after tests found that the drug increased the
risk of heart attacks and strokes in patients who used it for more than 18
months. Pfizer also fell, on fears that its competitive products, Celebrex and
Bextra, would have the same side effects. In our opinion, Merck's current stock
price fully reflects any negative impact on earnings. In consumer staples, our
position in Safeway detracted, as an expected recovery in supermarket sales and
earnings trends driven by improving economic fundamentals and food inflation did
not materialize. Safeway's weak earnings release reinforced ongoing concern that
competitive pressure from alternative food channels and post-Southern California
strike recovery costs would continue to impact earnings over the near- to
medium-term.
On the positive side, our stock selection in railroad stocks in the services
sector contributed to relative returns as Norfolk Southern, Burlington Northern
and CSX performed well. The rails outperformed on strong freight rates in the
U.S., which are due to strength in the economy and improving operating
efficiency.
Energy stocks also outpaced the market, led by oil companies that were propelled
by record-high oil prices. Crude oil prices soared as concerns about sufficient
inventory were made worse by hurricanes that disrupted tanker traffic in the
Caribbean and offshore production in the Gulf of Mexico. In this environment,
the sector outperformed so our overweight added to performance. Our positions in
Valero Energy, ConocoPhillips, Ashland, Occidental Petroleum and ChevronTexaco
also paid off.
Finally, our utility holdings outperformed, with strong performance coming from
both our phone and electric companies. The most meaningful contribution to
relative performance came from Sprint PCS which rallied with other telecom
companies after a February bid for AT&T Wireless by Cingular Wireless. The
acquisition was a positive for the entire wireless industry because it reduced
the number of competitive players.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL PARTNERS MIDCAP GROWTH FUND, INC.
CHRISTOPHER K. MCHUGH, WILLIAM C. MCVAIL AND ROBERT E. TURNER (TURNER INVESTMENT
PARTNERS, INC.)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Russell Morningstar Partners
Midcap Mid-Cap Growth MidCap Growth
Growth Category Fund
Index Average Class A
10 10 9.525
10/00 8.843 9.13 8.23
10/01 5.06 5.637 4.12
10/02 4.169 5.235 3.269
10/03 5.808 6.851 4.591
10/04 6.317 7.24 4.664
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year Inception
A* 3/1/2000 1.58% -13.99%
A** 3/1/2000 -4.28% -15.09%
B* 3/1/2000 0.80% -14.50%
B*** 3/1/2000 -3.20% -14.87%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
In the 12-month period ended October 31, 2004, midcap growth stocks rallied for
three months, then marked time for six months, then rallied again in the final
three months. As a result midcap growth stocks, as represented by the Russell
Midcap Growth Index, the Fund's benchmark, generated an 8.77% gain for the
period. The Principal Partners MidCap Growth Fund, Inc., however, rose only
1.58%.
The Fund was hurt by poor performance in the middle six months of the period,
when stock-market psychology turned negative, risk averse, and oblivious to
earnings fundamentals. The Fund emphasizes stocks of companies with
above-average earnings prospects, and those type of stocks were largely out of
favor during that time. Central to the Fund's lagging performance, in our view,
was a disconnect between the fundamentals of the companies owned and the
performance of the shares of those companies in the quarter. Valuations-not
fundamentals-were all-important; value stocks, which are perceived to be
relatively safe, markedly outperformed growth stocks, which are perceived to be
relatively volatile.
As an indication of the market's aversion to risk in the period, a growth
sector, technology, was the sole sector to suffer a loss.
Meanwhile, the fundamentals of the companies owned in the Fund were remarkably
strong. But as we see it, the strong prospective earnings power of our holdings
failed to translate into favorable results for much of the period.
Hurting the Fund's performance most were weak results by growth-oriented
holdings in three sectors, financial services, producer durables, and health
care, which represented a 38% weighting. Relatively weak-performing stocks
included Fair Isaac, Moody's, Legg Mason, Knight Trading Group, and Ameritrade
Holding in financial services; FormFactor, Molex, Power One, Lexmark
International, D. R. Horton, and Cymer in producer durables; and Oxford Health
Plans, Universal Health Services, Inamed, Varian Medical Systems, Watson
Pharmaceuticals, Endo Pharmaceuticals, McKesson, Anthem, and Biogen in health
care. With the exception of Lexmark International, D.R. Horton, Cymer, and
Inamed, the Fund's weak-performing stocks were sold prior to the end of the
12-month period.
The biggest detractors from performance were our financial-services holdings, an
11% weighting, which gained just 1% versus 13% for the index's
financial-services sector.
Two of the Fund's 10 sector positions outperformed their corresponding index
sectors. Providing the best relative performance were holdings in the technology
sector, which represented 19% of the portfolio. Those holdings lost 2%, compared
with a 6% decline for the index sector. Tech stocks with good relative results
included Apple Computer, Synopsys, Zebra Technologies, Network Appliance,
Research in Motion, Tibco Software, F5 Networks, Veritas Software, QLogic,
Cognizant Technology Solutions, Intuit, and Agere Systems. Also contributing to
performance were our consumer-staples stocks, a 3% weighting, led by McCormick
and Rite Aid. With the exception of Synopsys, QLogic, Intuit, Agere Systems, and
Rite Aid, the Fund held its outperforming stocks to the end of the 12-month
period.
In terms of absolute returns, our 4% weighting in the energy sector produced the
highest total return. Conversely, our producer-durables holdings produced the
biggest loss.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL PARTNERS SMALLCAP GROWTH FUND, INC.
Previously, the Fund was invested by one sub-advisor, UBS Global Asset
Management. On September 1, 2004, the Fund engaged a second sub-advisor, Emerald
Advisors, Inc. in order to increase the Fund's investment capcity. At the end of
the period UBS Global Asset Management sub-advised approximately 94% of the
Fund's assets, while Emerald Advisors, Inc. sub-advised approximately 6%. Each
sub-advisor invests a portion of the Fund independently of the other. The Fund's
investment performance is the combined investment performance of the two
sub-advisors. For the entire 12-month period ending October 31, 2004, the Fund
earned 2.03% compared to 5.53% for the Russell 2000 Growth Index, the Fund's
benchmark.
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Russell Morningstar Partners SmallCap
2000 Small Growth SmallCap Growth
Growth Category Fund
Index Average Class A
10 10 9.425
10/01 8.273 7.933 5.633
10/02 6.489 8.418 3.602
10/03 9.51 11.826 4.902
10/04 10.036 12.389 5.002
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year Inception
A* 12/22/2000 2.03% -14.20%
A** 12/22/2000 -3.82% -15.50%
B* 12/22/2000 1.32% -14.85%
B*** 12/22/2000 -2.68% -15.51%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
PAUL A. GRAHAM, JR. AND DAVID N. WABNIK (UBS GLOBAL ASSET MANAGEMENT (AMERICAS)
INC.)
The smallcap market has gone through some significant changes over the twelve
months ended October 31, 2004. In 2003, smallcap stocks in general were at the
forefront of the market's recovery, with the most speculative companies leading
the rally. These lower-quality companies continued to perform well in early
2004. However, as the reporting period progressed, investors gradually shifted
their focus back to companies with solid earnings and business prospects. During
the middle part of the fiscal year, smallcap stocks were relatively flat as
investors grew increasingly preoccupied with the looming Federal Funds rate
hike. As the fiscal year progressed, investors became convinced that the
economic recovery would continue even in the face of higher interest rates. For
the period, smallcap stocks outperformed largecap stocks.
Toward the end of 2003, our quantitative models (which incorporate relative
price strength) began to favor an increased allocation of higher volatility
names, and we chose to add some of these names to the Fund near the end of the
calendar year. In hindsight, this was not a well-timed move. Many of these
companies sold off sharply when the market rotated to lower volatility names.
Fund performance was also hurt during this time as investors grew concerned
about the rising valuations of some of the smallcap sector's best-performing
stocks, a number of which were held by the Fund.
After a difficult calendar first quarter 2004 performance, the portion of the
Fund sub-advised by UBS rebounded nicely but lagged the Russell 2000 Growth
benchmark for the fiscal year. For the year ended October 31, 2004, the UBS
portion gained 1.57% versus a 5.53% increase for the benchmark. Stock selection
was the primary reason for the underperformance. Positive stock selection in the
industrial and financial sector was offset by weak stock selection in the
healthcare sector. Sector selection, on the other hand, was essentially a
neutral factor with our overweight of the strongly-performing energy sector
helping returns and our underweight of the strongly-performing industrials and
materials sectors hurting returns.
As of October 31, 2004, the UBS portion of the Fund's portfolio remained
well-diversified, with all sectors within three percentage points of the
benchmark. The largest absolute overweights were in the energy, health care, and
consumer staples sectors while the largest absolute underweights were in the
materials, industrials, and information technology sectors.
KENNETH G. MERTZ II AND STACEY L. SEARS (EMERALD ADVISERS, INC.)
Our portion of the Fund's portfolio underperformed the benchmark Russell 2000
Growth Index for the period from September 1, 2004 through October 31, 2004,
returning 2.58% compared to the index return of 8.09%.
A majority of our relative underperformance can be attributed to an overly
optimistic viewpoint on the economy, leading to overweight positions in the
technology and producer durable sectors, and the overall risk averse nature of
the market. Over the past two months, companies with the greatest stock price
volatility and best earnings prospects performed the worst. As a fundamental,
bottom-up, research-driven growth manager who believes earnings growth drives
stock prices, it has been difficult to perform. However, there were a number of
fundamental, company-specific breakdowns as well.
Our performance was muted by higher energy costs, Sarbanes-Oxley compliance
issues, election uncertainty and lack of job growth. Exposure to Semiconductor
Capital Equipment and Flat Panel Display companies hurt our relative performance
the most- specifically, LTX Corp. in the Semiconductor area and Photon Dynamics
and Applied Films Corp. in the flat-panel display area. We also did not benefit
from equal weighting in the health care sector. Select names, especially in the
biotech area, hurt relative performance. Overall, the biotech area
underperformed because of the risk-averse nature of the market. On a positive
note, opportunities in the financial, energy and consumer discretionary sectors
helped performance.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL REAL ESTATE SECURITIES FUND, INC.
KELLY D. RUSH (PRINCIPAL MANAGEMENT CORPORATION)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Morgan Morningstar Real Estate
Stanley Specialty-Real Securities
REIT Estate Category Fund
Index Average Class A
10 10 9.425
10/98 8.329 8.61 7.969
10/99 7.808 8.255 7.62
10/00 9.229 9.899 9.286
10/01 10.452 10.785 10.074
10/02 11.151 8.782 10.994
10/03 14.936 11.776 14.732
10/04 19.342 15.186 19.239
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year Inception
A* 12/31/1997 30.59% 20.35% 11.01%
A** 12/31/1997 23.05% 18.94% 10.05%
B* 12/31/1997 29.79% 19.51% 10.28%
B*** 12/31/1997 25.79% 19.32% 10.28%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
The stock prices of commercial real estate owners provided exceptional returns
for the 12-month period that ended October 31, 2004. Principal Real Estate
Securities Fund, Inc. outperformed the Morgan Stanley REIT Index, returning
30.59%. versus 29.50% for the index.
Extraordinary gains in real estate company stocks have reflected broader
investment trends. Since the technology bubble burst late in 1999, equity
investors have favored value-oriented investments featuring a meaningful level
of current income. With interest rates at historic lows investors have
increasingly sought alternatives for their fixed income allocations. Real estate
has been a popular alternative. Investors have used low-cost debt to fund
purchases and have looked past existing weak real estate conditions to bid up
asset prices. To a large extent, the stock-price gains of real estate owners
were the result of these trends.
The Fund's outperformance was the result of favorable stock selection.
Allocation of the Fund's assets among different property types was a modest drag
on returns.
Security selection involving office owners had the greatest positive impact on
benchmark-relative returns. U.S. office markets have been very weak and have
been slow to recover with vacancy levels near all-time highs. Across the United
States there are only a select few markets displaying strength. Our strategy has
been to focus on these markets and the companies that own buildings there,
rather than companies with broader U.S. exposure. One successful example of this
strategy has been the Fund's overweighted position in SL Green Realty, an owner
of mid-town Manhattan office buildings. Comparatively, the Manhattan office
market has outperformed the U.S. averages and as a result SL Green's stock price
outperformed with a 12-month total return of 58.3%. In contrast, the Fund
benefited from having an underweighting to Equity Office Properties, a large
owner of office buildings across the United States. The company's stock returned
7.8% over the same time period.
Overweightings in the stocks of two retail property owners also helped drive
strong benchmark relative returns. Developer's Diversified, which owns shopping
centers typically anchored by discount retailers such as Wal-Mart, experienced
strong stock price performance with a 52.4% return. Developer's Diversified has
benefited from continued strong consumer buying trends, and from owning
properties with popular anchor tenants. In addition, the company's earnings
growth was boosted by acquisition activity.
Chelsea Property Group, which owns factory outlet centers, also experienced a
strong year of performance with a total return of 44.7%. Chelsea was one of the
Fund's largest overweightings and had a very favorable impact on Fund
performance. The stock was already enjoying a year of strong performance when
Simon Property Group agreed to acquire the company at a premium price that only
further advanced returns.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL SMALLCAP FUND, INC.
TODD SANDERS (PRINCIPAL GLOBAL INVESTORS, LLC)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Russell Morningstar SmallCap
2000 Small Blend Fund
Index Category Average Class A
10 10 9.425
10/98 8.72 8.736 7.922
10/99 10.017 9.997 10.657
10/00 11.761 12.56 11.711
10/01 10.267 12.235 9.443
10/02 9.08 11.145 7.74
10/03 13.016 15.362 10.287
10/04 14.543 17.437 11.393
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year Inception
A* 12/31/1997 10.75% 1.35% 2.81%
A** 12/31/1997 4.32% 0.16% 1.93%
B* 12/31/1997 9.87% 0.58% 2.07%
B*** 12/31/1997 5.87% 0.27% 2.07%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
The performance of the Principal SmallCap Fund, Inc. for the fiscal year ended
October 31, 2004 was 10.75% versus 11.73% for the Russell 2000 Index.
By far, the best-performing economic sector in the small-cap marketplace was
energy. In fact, it was not uncommon at all to find stocks in this sector up
more than 100% over the last year. In addition, the materials, industrials and
financials sectors have also been very strong performers over the last year.
Since the Fund is managed to maintain sector neutrality relative to the Russell
2000 Index, the majority of the Fund's investment performance is attributable to
selection of particular stocks. The Fund's underperformance relative to the
index was primarily due to stock selection in the industrials and materials
sectors. However, stock selection from within the financials, utilties and
telecommunication services sectors helped to temper the underperformance.
Companies such as Aeropostale, Stein Mart, Microsemi, RSA Security and Energen
were identified through our investment process and were all strong contributors
to the performance of the Fund.
Our investment process is focused on identifying companies with improving and
sustainable business fundamentals that trade at a discount to their potential
valuation and have market confirmation of these improvements. We utilize
time-tested, systematic stock selection strategies to identify small-cap stocks
with these characteristics. We then construct a risk-controlled Fund with these
stocks to maximize the return potential of the Fund.
NOTE: The above comments refer specifically to Class A shares of the Fund.
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
THOMAS V. CATUS (PRINCIPAL MANAGEMENT CORPORATION)
GROWTH OF A $10,000 INVESTMENT
IN CLASS A SHARES
Lehman Brothers Morningstar Muni Tax-Exempt Bond
Municipal National Long Bond Fund
Bond Inde Category Average Class A
10 10 9.525
10/95 11.485 11.388 11.052
10/96 12.14 11.981 11.724
10/97 13.171 12.978 12.744
10/98 14.227 13.912 13.605
10/99 13.975 13.318 13.264
10/00 15.164 14.222 14.035
10/01 16.758 15.555 15.337
10/02 17.742 16.159 16.202
10/03 18.649 16.914 16.891
10/04 19.774 17.826 17.788
Average Annual Total Returns
as of October 31, 2004
Inception Since
Class Date 1 Year 5 Year 10 Year Inception
A* 3/20/1986 5.31% 6.05% 6.45% 6.77%
A** 3/20/1986 0.34% 5.02% 5.92% 6.49%
B* 12/9/1994 4.88% 5.51% 6.31%
B*** 12/9/1994 0.88% 5.19% 6.31%
* At Net Asset Value
** With sales charge
*** Reflects a CDSC
Past performance is not predictive of future performance.
Principal Tax-Exempt Bond Fund, Inc. returned 5.31% for the one-year period
ending October 31, 2004, lagging the 6.03% return of the Lehman Municipal Bond
Index. Performance of the Fund benefited by transferring assets from AAA-rated
to lower-rated bonds (AA, A and BBB). More specifically, a reallocation out of
the insured sector and into various revenue bond sectors helped performance. An
increased exposure to California state general obligation bonds helped
performance since these bonds outperformed the general market after the credit
rating agencies upgraded California's ratings this year.
Risk premiums continued to decline over the period, resulting in strong
performance for some of the riskier sectors within municipals. Industrial
development revenue bonds and tobacco bonds returned 10.47% for the period.
Other top-performing sectors included hospital bonds and non-investment-grade or
high-yield bonds. This hurt the relative performance of the Fund versus its peer
group since the Fund is underweighted these sectors and generally maintains a
higher average credit profile relative to its peers.
As an asset class, municipals performed well for the period. The Lehman
Municipal Bond Index earned 6.03% over the past 12 months. This compared
favorably to most fixed-income asset classes. Good muni performance came in
spite of continued elevated volume of new issuance. The amount of new municipal
bonds issued in 2003 was at an all-time record of $383 billion. New issuance in
2004 ran at 90% of last year's pace and was on track to be the third largest new
issuance volume ever. In general, municipal credits continued to improve from
marginally stressed levels of the past two years as revenues in most states came
in above the previous year's levels.
NOTE: The above comments refer specifically to Class A shares of the Fund.
IMPORTANT NOTES
CITI GROUP EXTENDED MARKET INDEX (EMI) WORLD EX-US is an unmanaged index of the
stock returns of the smallest 20% of companies of each individual country
included in the index.
DOW JONES UTILITIES INDEX WITH INCOME is an unmanaged average of stock returns
plus dividends of 15 utility companies that are listed on the New York Stock
Exchange and are involved in the production of electrical energy.
LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index of domestic, taxable
fixed-income securities. The index covers the U.S. investment-grade bond market,
with components for government and corporate securities, mortgage pass-through
securities, and asset-backed securities.
LEHMAN BROTHERS GOVERNMENT/MORTGAGE INDEX is a combination of the unmanaged
Lehman Government Index and the unmanaged Lehman Mortgage Backed Securities
(MBS) Index. The Lehman Government Index includes all Government Bonds
including, but not limited to, U.S. Treasury bonds and government-sponsored
agency securities, with no maturity restrictions. The MBS Index includes all
securitized mortgage pools by GNMA, FNMA and the FHLMC.
LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged index of investment-grade,
tax-exempt bonds which have been issued within the last five years and which
have at least one year to maturity.
LEHMAN BROTHERS MUTUAL FUND 1-5 GOVERNMENT/CREDIT INDEX is an unmanaged index
composed of Treasury notes, agencies and corporate debt securities rated BBB or
better, and with maturities between one year and five years.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALIA AND FAR
EAST) INDEX is an unmanaged index that measures the stock returns of companies
in developed economies outside of North America.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALIA AND FAR
EAST) SMALLCAP INDEX is an unmanaged index that measures the stock returns of
small companies in developed economies outside of North America.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMF (EMERGING MARKETS FREE) INDEX is
an unmanaged index that measures the stock returns of companies in 26 developing
countries.
MORGAN STANLEY REIT INDEX is an unmanaged index comprised of the most
actively-traded real estate investment trusts, and is designed to be a measure
of real estate equity performance.
MORNINGSTAR DIVERSIFIED EMERGING MARKETS CATEGORY AVERAGE is an average of the
net asset value (NAV) returns of diversified emerging-markets mutual funds which
invest in companies in developing nations.
MORNINGSTAR FOREIGN LARGE BLEND CATEGORY AVERAGE is an average of the net asset
value (NAV) returns of mutual funds that seek capital appreciation by investing
in a variety of large international stocks. Large-cap foreign stocks have market
capitalizations greater than $5 billion. The blend style is assigned to funds
where neither growth nor value characteristics predominate.
MORNINGSTAR FOREIGN SMALL/MID GROWTH CATEGORY AVERAGE is an average of the net
asset value (NAV) returns of mutual funds that seek capital appreciation by
investing in small- and mid-sized international stocks that are growth-oriented.
Small-cap and mid-cap stocks have market capitalizations less than $5 billion.
Growth is defined based on high price-to-book and price-to-cash flow ratios,
relative to the MSCI EAFE index.
MORNINGSTAR INTERMEDIATE-TERM BOND CATEGORY AVERAGE is an average of net asset
value (NAV) returns of bond mutual funds that have average durations that are
greater than 3.5 years and less than 6 years.
MORNINGSTAR INTERMEDIATE GOVERNMENT CATEGORY AVERAGE is an average of net asset
value (NAV) returns of mutual funds that devote at least 90% of their bond
holdings to government issues. These mutual funds have, on average, durations
between 3.5 and 6 years.
MORNINGSTAR LARGE BLEND CATEGORY AVERAGE is an average of net asset value (NAV)
returns of mutual funds that focus on large companies that are fairly
representative of the overall stock market in terms of valuation. They tend to
invest across the spectrum of U.S. industries.
MORNINGSTAR LARGE GROWTH CATEGORY AVERAGE is an average of net asset value (NAV)
returns of mutual funds that invest in large companies that are projected to
grow faster than average. Most of these mutual funds focus on companies in
rapidly-expanding industries.
MORNINGSTAR LARGE VALUE CATEGORY AVERAGE is an average of net asset value (NAV)
returns of mutual funds that focus on large companies that are less expensive
than the market as a whole. They often come from the utilities, energy,
financial, and cyclical sectors, and many pay above-average dividends. They also
generally have more-stable stock prices.
MORNINGSTAR MID-CAP BLEND CATEGORY AVERAGE is an average of net asset value
(NAV) returns of mutual funds that focus on mid-size companies that are fairly
representative of the overall stock market in terms of valuation. They tend to
invest across the spectrum of U.S. industries.
MORNINGSTAR MID-CAP GROWTH CATEGORY AVERAGE is an average of net asset value
(NAV) returns of mutual funds that typically focus on mid-size companies that
are projected to grow faster than average. Many of these mutual funds focus on
companies in rapidly-expanding industries.
MORNINGSTAR MODERATE ALLOCATION CATEGORY AVERAGE is an average of the net asset
value (NAV) returns of mutual funds with 50-70% invested in equities and the
remainder invested in fixed income and cash.
MORNINGSTAR MUNI NATIONAL LONG CATEGORY AVERAGE is an average of net asset value
(NAV) returns of mutual funds that invest in municipal bonds with maturities of
10 years or more that are issued by various state and local governments to fund
public projects and are free from federal taxes.
MORNINGSTAR SHORT-TERM BOND CATEGORY AVERAGE is an average of net asset value
(NAV) returns of mutual funds that invest in a variety of bonds, from the most
creditworthy, such as Treasury bonds, to mortgages and corporates, and on rare
occasions, even more speculative high-yield and emerging markets debt and which
have durations between 1 and 3.5 years.
MORNINGSTAR SMALL BLEND CATEGORY AVERAGE is an average of net asset value (NAV)
returns of mutual funds that focus on small companies that are fairly
representative of the overall stock market in terms of valuations.
MORNINGSTAR SMALL GROWTH CATEGORY AVERAGE is an average of net asset value (NAV)
returns of mutual funds that invest in small companies that are projected to
grow faster than average. Most of these mutual funds focus on companies in
rapidly-expanding industries.
MORNINGSTAR SPECIALTY - REAL ESTATE CATEGORY AVERAGE is an average of net asset
value (NAV) returns of mutual funds that invest primarily in real-estate
investment trusts (REITs) of various types. The performance of these mutual
funds is less connected to the overall market than most other types of stock
funds.
MORNINGSTAR SPECIALTY - UTILITIES CATEGORY AVERAGE is an average of net asset
value (NAV) returns of mutual funds that invest in phone, power, gas, and water
companies. These types of companies have historically been conservative
investments that pay sturdy dividends. These mutual funds tend to provide
relatively little capital appreciation, and more in the way of yield. These
mutual funds are also sensitive to interest rates and industry changes.
RUSSELL 1000 GROWTH INDEX is an unmanaged index that measures the investment
returns of stocks in the Russell 1000 Index with higher price-to-book ratios and
higher forecasted growth values. Companies included are large.
RUSSELL 1000 VALUE INDEX is an unmanaged index that measures the investment
returns of stocks in the Russell 1000 Index with lower price-to-book ratios and
lower forecasted growth values. Companies included are large.
RUSSELL 2000 GROWTH INDEX is an unmanaged index that measures the investment
returns of stocks in the Russell 2000 Index with higher price-to-book ratios and
higher forecasted growth values. Companies included are medium-size to small.
RUSSELL 2000 INDEX is an unmanaged index that measures the investment returns of
the 2,000 smallest stocks in the Russell 3000 Index. Companies included are
medium-size to small.
RUSSELL 3000 INDEX is an unmanaged index that is the combination of Russell 1000
Index and the Russell 2000 Index.
RUSSELL MIDCAP INDEX is an unmanaged index that measures the investment returns
of the 800 smallest stocks in the Russell 1000 Index.
RUSSELL MIDCAP GROWTH INDEX is an unmanaged index that measures the investment
returns of stocks in the Russell MidCap Index with higher price-to-book ratios
and higher forecasted growth rates.
S&P 500 STOCK INDEX (S&P 500) is an unmanaged index of 500 widely-held stocks
often used as a proxy for the domestic stock market. Included are the stocks of
industrial, financial, utility and transportation companies.
SHAREHOLDER EXPENSE EXAMPLE
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
- -------------------------------------------------------------------------------
As a shareholder of the Principal Mutual Funds, you incur two types of costs:
(1) transaction costs, including sales charges on purchase payments; contingent
deferred sales charges; redemption fees; exchange fees; and (2) ongoing costs,
including management fees; distribution fees; and other fund expenses. This
Example is intended to help you understand your ongoing costs (in dollars) of
investing in Principal Mutual Funds and to compare these costs with the ongoing
costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (May 1, 2004 to October 31, 2004).
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period. An annual fee
of $15.00 or $30.00 may apply to IRA and 403(b) accounts, respectively. These
fees are not included in the table below. If they were, the estimate of expenses
you paid during the period would be higher, and your ending account value lower,
by this amount.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on each funds' actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in Principal Mutual Funds and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges, redemption fees or exchange fees. Therefore, the second line of the
table is useful in comparing ongoing costs only, and will not help you determine
the relative total costs of owning different funds. In addition, if these
transaction costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE ACCOUNT VALUE MAY 1, 2004 ANNUALIZED
MAY 1, 2004 OCTOBER 31, 2004 TO OCTOBER 31, 2004* EXPENSE RATIO
------------- ---------------- -------------------- ---------------
Principal Balanced
Fund, Inc. Class A
Actual $1,000.00 $1,035.60 $ 5.83 1.14%
Hypothetical 1,000.00 1,019.33 5.80 1.14
Principal Balanced
Fund, Inc. Class B
Actual 1,000.00 1,030.70 10.21 2.00
Hypothetical 1,000.00 1,014.96 10.18 2.00
Principal Bond Fund,
Inc. Class A
Actual 1,000.00 1,042.90 4.36 0.85
Hypothetical 1,000.00 1,020.81 4.33 0.85
Principal Bond Fund,
Inc. Class B
Actual 1,000.00 1,039.70 7.18 1.40
Hypothetical 1,000.00 1,018.01 7.13 1.40
Principal Capital
Value Fund, Inc. Class
A
Actual 1,000.00 1,031.50 4.75 0.93
Hypothetical 1,000.00 1,020.40 4.73 0.93
Principal Capital
Value Fund, Inc. Class
B
Actual 1,000.00 1,028.60 7.09 1.39
Hypothetical 1,000.00 1,018.06 7.08 1.39
Principal Cash
Management Fund, Inc.
Class A
Actual $1,000.00 $1,003.70 $ 3.32 0.66%
Hypothetical 1,000.00 1,021.78 3.36 0.66
Principal Cash
Management Fund, Inc.
Class B
Actual 1,000.00 1,003.90 3.32 0.66
Hypothetical 1,000.00 1,021.78 3.36 0.66
Principal Equity
Income Fund, Inc.
Class A
Actual 1,000.00 1,117.70 6.28 1.18
Hypothetical 1,000.00 1,019.13 6.01 1.18
Principal Equity
Income Fund, Inc.
Class B
Actual 1,000.00 1,112.30 10.67 2.01
Hypothetical 1,000.00 1,014.90 10.23 2.01
Principal Government
Securities Income
Fund, Inc. Class A
Actual 1,000.00 1,031.50 3.68 0.72
Hypothetical 1,000.00 1,021.47 3.67 0.72
Principal Government
Securities Income
Fund, Inc. Class B
Actual 1,000.00 1,026.90 7.74 1.52
Hypothetical 1,000.00 1,017.40 7.74 1.52
Principal Growth Fund,
Inc. Class A
Actual 1,000.00 997.00 5.27 1.05
Hypothetical 1,000.00 1,019.79 5.35 1.05
Principal Growth Fund,
Inc. Class B
Actual 1,000.00 993.30 9.12 1.82
Hypothetical 1,000.00 1,015.87 9.26 1.82
Principal
International Emerging
Markets Fund, Inc.
Class A
Actual 1,000.00 1,095.70 12.70 2.41
Hypothetical 1,000.00 1,012.87 12.27 2.41
Principal
International Emerging
Markets Fund, Inc.
Class B
Actual 1,000.00 1,092.30 15.94 3.03
Hypothetical 1,000.00 1,009.71 15.42 3.03
Principal
International Fund,
Inc. Class A
Actual 1,000.00 1,063.70 7.26 1.40
Hypothetical 1,000.00 1,018.01 7.13 1.40
Principal
International Fund,
inc. Class B
Actual 1,000.00 1,065.10 7.68 1.48
Hypothetical 1,000.00 1,017.60 7.53 1.48
Principal
International SmallCap
Fund, Inc. Class A
Actual 1,000.00 1,081.30 10.46 2.00
Hypothetical 1,000.00 1,014.96 10.18 2.00
Principal
International SmallCap
Fund, Inc. Class B
Actual 1,000.00 1,077.00 14.36 2.75
Hypothetical 1,000.00 1,011.14 14.00 2.75
Principal LargeCap
Stock Index Fund, Inc.
Class A
Actual 1,000.00 1,024.40 4.58 0.90
Hypothetical 1,000.00 1,020.56 4.58 0.90
Principal LargeCap
Stock Index Fund, Inc.
Class B
Actual 1,000.00 1,023.20 6.36 1.25
Hypothetical 1,000.00 1,018.77 6.36 1.25
Principal Limited Term
Bond Fund, Inc. Class
A
Actual 1,000.00 1,010.80 4.25 0.84
Hypothetical 1,000.00 1,020.86 4.28 0.84
Principal Limited Term
Bond Fund, Inc. Class B
Actual $1,000.00 $1,008.50 $ 5.86 1.16%
Hypothetical 1,000.00 1,019.23 5.90 1.16
Principal MidCap Fund,
Inc. Class A
Actual 1,000.00 1,052.50 5.21 1.01
Hypothetical 1,000.00 1,020.00 5.14 1.01
Principal MidCap Fund,
Inc. Class B
Actual 1,000.00 1,051.80 5.78 1.12
Hypothetical 1,000.00 1,019.44 5.70 1.12
Principal Partners
Blue Chip Fund, Inc.
Class A
Actual 1,000.00 1,019.70 5.89 1.16
Hypothetical 1,000.00 1,019.23 5.90 1.16
Principal Partners
Blue Chip Fund, Inc.
Class B
Actual 1,000.00 1,016.30 9.68 1.91
Hypothetical 1,000.00 1,015.41 9.72 1.91
Principal Partners
Equity Growth Fund,
Inc. Class A
Actual 1,000.00 1,009.80 7.88 1.56
Hypothetical 1,000.00 1,017.20 7.94 1.56
Principal Partners
Equity Growth Fund,
Inc. Class B
Actual 1,000.00 1,005.80 11.55 2.29
Hypothetical 1,000.00 1,013.48 11.66 2.29
Principal Partners
LargeCap Blend Fund,
Inc. Class A
Actual 1,000.00 1,029.10 7.40 1.45
Hypothetical 1,000.00 1,017.76 7.38 1.45
Principal Partners
LargeCap Blend Fund,
Inc. Class B
Actual 1,000.00 1,025.60 11.20 2.20
Hypothetical 1,000.00 1,013.94 11.20 2.20
Principal Partners
LargeCap Value Fund,
Inc. Class A
Actual 1,000.00 1,045.70 7.46 1.45
Hypothetical 1,000.00 1,017.76 7.38 1.45
Principal Partners
LargeCap Value Fund,
Inc. Class B
Actual 1,000.00 1,041.80 11.34 2.21
Hypothetical 1,000.00 1,013.89 11.25 2.21
Principal Partners
MidCap Growth Fund,
Inc. Class A
Actual 1,000.00 1,019.80 8.88 1.75
Hypothetical 1,000.00 1,016.23 8.91 1.75
Principal Partners
MidCap Growth Fund,
Inc. Class B
Actual 1,000.00 1,016.20 12.67 2.50
Hypothetical 1,000.00 1,012.41 12.73 2.50
Principal Partners
SmallCap Growth Fund,
Inc. Class A
Actual 1,000.00 1,049.20 10.04 1.95
Hypothetical 1,000.00 1,015.21 9.93 1.95
Principal Partners
SmallCap Growth Fund,
Inc. Class B
Actual 1,000.00 1,044.70 13.88 2.70
Hypothetical 1,000.00 1,011.39 13.74 2.70
Principal Real Estate
Securities Fund, Inc.
Class A
Actual 1,000.00 1,266.60 9.40 1.65
Hypothetical 1,000.00 1,016.74 8.40 1.65
Principal Real Estate
Securities Fund, Inc.
Class B
Actual 1,000.00 1,262.60 13.59 2.39
Hypothetical 1,000.00 1,012.97 12.17 2.39
Principal SmallCap
Fund, Inc. Class A
Actual $1,000.00 $1,055.20 $ 7.39 1.43%
Hypothetical 1,000.00 1,017.86 7.28 1.43
Principal SmallCap
Fund, Inc. Class B
Actual 1,000.00 1,050.80 11.29 2.19
Hypothetical 1,000.00 1,013.99 11.15 2.19
Principal Tax-Exempt
Bond Fund, Inc. Class
A
Actual 1,000.00 1,046.30 3.81 0.74
Hypothetical 1,000.00 1,021.37 3.77 0.74
Principal Tax-Exempt
Bond Fund, Inc. Class
B
Actual 1,000.00 1,045.10 5.29 1.03
Hypothetical 1,000.00 1,019.89 5.24 1.03
*Expenses are equal to a fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 184/366 (to reflect the
one-half year period).
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
BALANCED BOND
FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ..... $103,021,102 $221,865,574
============ ============
ASSETS
Investment in securities--at value..... $104,898,965/(c)/ $227,040,360/(c)/
Cash................................... 19,964 861,531
Receivables:
Capital Shares sold................... 14,723 54,364
Dividends and interest................ 437,140 2,179,721
Investment securities sold............ 787,211 2,112,673
Unrealized gain on swap agreements.... -- 57,560
Other assets........................... 4,818 7,164
Prepaid directors' expenses............ 51 --
------------ ------------
Total Assets 106,162,872 232,313,373
LIABILITIES
Accrued management and investment
advisory fees......................... 11,503 18,951
Accrued distribution fees.............. 5,040 2,090
Accrued directors' expenses............ -- 186
Accrued transfer and administrative
fees.................................. 62,387 94,353
Accrued other expenses................. 54,414 43,923
Payables:
Capital Shares reacquired............. 64,548 197,130
Investment securities purchased....... 4,178,275 21,213,760
Collateral obligation on securities
loaned, at value...................... 778,576 505,890
------------ ------------
Total Liabilities 5,154,743 22,076,283
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ............................... $101,008,129 $210,237,090
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital....................... $110,701,478 $215,728,303
Accumulated undistributed
(overdistributed) net investment
income (operating loss)............... 87,242 96,778
Accumulated undistributed
(overdistributed) net realized gain
(loss)................................ (11,658,454) (10,820,337)
Net unrealized appreciation
(depreciation) of investments......... 1,877,863 5,232,346
------------ ------------
Total Net Assets $101,008,129 $210,237,090
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized...................... 100,000,000 200,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets.................... $ 85,881,686 $178,911,422
Shares issued and outstanding........ 6,823,852 16,051,354
Net asset value per share............ $ 12.59 $ 11.15
Maximum offering price per share
/(a)/ ................................ $ 13.36 $ 11.71
============ ============
Class B: Net Assets.................... $ 15,126,443 $ 31,325,668
Shares issued and outstanding........ 1,208,875 2,810,736
Net asset value per share /(b)/ ..... $ 12.51 $ 11.15
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value for
Principal Balanced Fund, Inc. and 4.75% of the offering price or 4.99% of the
net asset value for Principal Bond Fund, Inc.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
31
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
CAPITAL VALUE CASH MANAGEMENT
FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ....... $326,177,289 $ 321,030,366
============ ==============
ASSETS
Investment in securities--at value....... $345,639,296/(c)/ $ 321,030,366
Cash..................................... 79,878 3,483
Receivables:
Capital Shares sold..................... 3,798 1,406,509
Dividends and interest.................. 358,335 182,459
Investment securities sold.............. 3,577,645 --
Variation margin on futures contracts... 11,625 --
Other assets............................. 28,459 26,439
Prepaid directors' expenses.............. -- 254
------------ --------------
Total Assets 349,699,036 322,649,510
LIABILITIES
Accrued management and investment
advisory fees........................... 37,708 27,280
Accrued distribution fees................ 4,870 135
Accrued directors' expenses.............. 360 --
Accrued transfer and administrative fees. 130,188 151,614
Accrued other expenses................... 39,764 53,071
Payables:
Capital Shares reacquired............... 144,466 6,286
Investment securities purchased......... 3,650,950 --
Collateral obligation on securities
loaned, at value........................ 6,895,000 --
------------ --------------
Total Liabilities 10,903,306 238,386
------------ --------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ................................. $338,795,730 $ 322,411,124
============ ==============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital......................... $321,209,498 $ 322,411,124
Accumulated undistributed
(overdistributed) net investment income
(operating loss)........................ 2,561,515 --
Accumulated undistributed
(overdistributed) net realized gain
(loss).................................. (4,401,296) --
Net unrealized appreciation
(depreciation) of investments........... 19,426,013 --
------------ --------------
Total Net Assets $338,795,730 $ 322,411,124
============ ==============
CAPITAL STOCK (PAR VALUE: $.01 A SHARE):
Shares authorized........................ 100,000,000 2,000,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets...................... $311,582,761 $ 317,339,972
Shares issued and outstanding.......... 13,198,050 317,339,972
Net asset value per share.............. $ 23.61 $ 1.000
Maximum offering price per share /(a)/ $ 25.05 $ 1.000
============ ==============
Class B: Net Assets...................... $ 27,212,969 $ 5,071,152
Shares issued and outstanding.......... 1,164,337 5,071,152
Net asset value per share /(b)/ ....... $ 23.37 $ 1.000
============ ==============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value for
Principal Capital Value Fund, Inc. No sales charge applies to Principal Cash
Management Fund, Inc.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
32
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
EQUITY INCOME GOVERNMENT SECURITIES
FUND, INC. /(D)/ INCOME FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST .. $ 75,764,675 $366,237,346
============ ============
ASSETS
Investment in securities--at value.. $ 79,488,379 $371,154,743/(c)/
Cash................................ 1,073,384 10,609
Receivables:
Capital Shares sold................ 91,826 125,406
Dividends and interest............. 247,410 1,520,045
Investment securities sold......... 137,289 --
Other assets........................ 1,569 19,084
Prepaid directors' expenses......... 112 --
------------ ------------
Total Assets 81,039,969 372,829,887
LIABILITIES
Accrued management and investment
advisory fees...................... 9,242 27,750
Accrued distribution fees........... 5,306 10,634
Accrued directors' expenses......... -- 331
Accrued transfer and administrative
fees............................... 41,744 106,117
Accrued other expenses.............. 17,509 40,409
Payables:
Capital Shares reacquired.......... 18,245 200,161
Investment securities purchased.... 51,160 32,396,406
Collateral obligation on securities
loaned, at value................... -- 11,271,000
------------ ------------
Total Liabilities 143,206 44,052,808
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ............................ $ 80,896,763 $328,777,079
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital.................... $101,164,459 $331,623,698
Accumulated undistributed
(overdistributed) net investment
income (operating loss)............ 264,678 231,304
Accumulated undistributed
(overdistributed) net realized gain
(loss)............................. (24,256,323) (7,995,320)
Net unrealized appreciation
(depreciation) of investments...... 3,723,704 4,917,397
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies......................... 245 --
------------ ------------
Total Net Assets $ 80,896,763 $328,777,079
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized................... 100,000,000 125,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets................. $ 69,482,241 $274,875,978
Shares issued and outstanding..... 6,800,003 24,173,959
Net asset value per share......... $ 10.22 $ 11.37
Maximum offering price per share
/(a)/ ............................. $ 10.84 $ 11.94
============ ============
Class B: Net Assets................. $ 11,414,522 $ 53,901,101
Shares issued and outstanding..... 1,121,344 4,768,574
Net asset value per share /(b)/ .. $ 10.18 $ 11.30
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value for
Principal Equity Income Fund, Inc. and 4.75% of the offering price or 4.99% of
the net asset value for Principal Government Securities Income Fund, Inc.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
/(d) /Effective March 1, 2004, Principal Utilities Fund, Inc. changed its name
to Principal Equity Income Fund, Inc.
See accompanying notes.
33
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
GROWTH INTERNATIONAL EMERGING
FUND, INC. MARKETS FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST $ 304,865,250 $ 37,571,539
============= ============
FOREIGN CURRENCY--AT COST ........ $ -- $ 623,552
============= ============
ASSETS
Investment in securities--at value $295,548,113/(c)/ $43,928,742/(c)/
Foreign currency--at value........ -- 626,739
Cash.............................. 10,001 17,487
Receivables:
Capital Shares sold.............. 20,672 2,422
Dividends and interest........... 98,246 80,055
Investment securities sold....... -- 601,534
Other assets...................... 12,492 215
Prepaid directors' expenses....... 116 --
------------- ------------
Total Assets 295,689,640 45,257,194
LIABILITIES
Accrued management and investment
advisory fees.................... 32,924 10,422
Accrued distribution fees......... 10,740 2,830
Accrued directors' expenses....... -- 3
Accrued transfer and
administrative fees.............. 209,047 29,458
Accrued other expenses............ 44,997 41,187
Payables:
Capital Shares reacquired........ 209,010 51,577
Indebtedness..................... -- 217,000
Investment securities purchased.. 265,425 702,923
Collateral obligation on
securities loaned, at value...... 1,754,000 250,000
------------- ------------
Total Liabilities 2,526,143 1,305,400
------------- ------------
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES............... $ 293,163,497 $ 43,951,794
============= ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital.................. $ 472,118,232 $ 34,969,354
Accumulated undistributed
(overdistributed) net realized
gain (loss)...................... (169,637,598) 2,625,527
Net unrealized appreciation
(depreciation) of investments.... (9,317,137) 6,357,203
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies....................... -- (290)
------------- ------------
Total Net Assets $ 293,163,497 $ 43,951,794
============= ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized................. 200,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets............... $ 252,693,971 $ 37,803,720
Shares issued and outstanding... 9,605,221 3,173,817
Net asset value per share....... $ 26.31 $ 11.91
Maximum offering price per share
/(a)/ ........................... $ 27.92 $ 12.64
============= ============
Class B: Net Assets............... $ 40,469,526 $ 6,148,074
Shares issued and outstanding... 1,610,993 541,202
Net asset value per share /(b)/ $ 25.12 $ 11.36
============= ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
34
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
INTERNATIONAL INTERNATIONAL
FUND, INC. SMALLCAP FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ... $239,656,951 $ 55,546,231
============ ============
FOREIGN CURRENCY--AT COST ........... $ 151,354 $ --
============ ============
ASSETS
Investment in securities--at value... $262,650,479/(c)/ $65,896,401/(c)/
Foreign currency--at value........... 151,947 --
Cash................................. 12,877 24,607
Receivables:
Capital Shares sold................. 15,924 54,806
Dividends and interest.............. 385,383 97,337
Expense reimbursement from Manager.. -- 791
Investment securities sold.......... 777,406 922,622
Other assets......................... 4,454 394
Prepaid directors' expenses.......... 75 25
------------ ------------
Total Assets 263,998,545 66,996,983
LIABILITIES
Accrued management and investment
advisory fees....................... 38,848 13,962
Accrued distribution fees............ 4,431 4,715
Accrued transfer and administrative
fees................................ 128,973 50,351
Accrued other expenses............... 122,654 36,931
Payables:
Capital Shares reacquired........... 145,893 40,503
Investment securities purchased..... 2,626,058 687,716
Collateral obligation on securities
loaned, at value.................... 21,397,848 5,088,215
------------ ------------
Total Liabilities 24,464,705 5,922,393
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ............................. $239,533,840 $ 61,074,590
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital..................... $289,721,297 $ 54,238,949
Accumulated undistributed
(overdistributed) net investment
income (operating loss)............. 1,665,403 (66,566)
Accumulated undistributed
(overdistributed) net realized gain
(loss).............................. (74,835,513) (3,447,766)
Net unrealized appreciation
(depreciation) of investments....... 22,993,528 10,350,170
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies.......................... (10,875) (197)
------------ ------------
Total Net Assets $239,533,840 $ 61,074,590
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized.................... 325,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets.................. $212,752,278 $ 47,716,565
Shares issued and outstanding...... 29,623,397 3,202,418
Net asset value per share.......... $ 7.18 $ 14.90
Maximum offering price per share
/(a)/ .............................. $ 7.62 $ 15.81
============ ============
Class B: Net Assets.................. $ 26,781,562 $ 13,358,025
Shares issued and outstanding...... 3,804,914 945,417
Net asset value per share /(b)/ ... $ 7.04 $ 14.13
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
35
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
LARGECAP STOCK LIMITED TERM
INDEX FUND, INC. BOND FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investment in affiliated securities--at
cost.................................... $ 54,798 $ --
Investment in securities--at cost........ 71,579,926 140,647,221
------------ ------------
TOTAL INVESTMENTS--AT COST .............. $ 71,634,724 $140,647,221
============ ============
ASSETS
Investment in affiliated securities--at
value................................... $ 71,140 $ --
Investment in securities--at value....... 67,148,994/(c)/ 141,368,101/(c)/
Cash..................................... 17,950 13,038
Receivables:
Capital Shares sold..................... 17,007 457,572
Dividends and interest.................. 73,921 1,191,843
Expense reimbursement from Manager...... 239 --
Investment securities sold.............. 39,542 2,751
Variation margin on futures
contracts.............................. 4,725 --
Other assets............................ 308 362
Prepaid directors' expenses............. 39 135
---------- -----------
Total Assets 67,373,865 143,033,802
LIABILITIES
Accrued management and investment
advisory fees......................... 4,374 13,015
Accrued distribution fees.............. 2,693 5,059
Accrued transfer and administrative
fees.................................. 38,162 30,530
Accrued other expenses................. 30,516 22,819
Payables:
Capital Shares reacquired............. 25,146 243,349
Investment securities purchased....... -- 25,12,542
Collateral obligation on securities
loaned, at value...................... 1,130,000 241,600
-------------- -------------
Total Liabilities 1,230,891 3,068,914
-------------- -------------
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES .................. $ 66,142,974 $139,964,888
============== ==============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital..................... $ 72,729,385 $143,773,864
Accumulated undistributed
(overdistributed) net investment
income (operating loss).............. 354,642 (1,540,809)
Accumulated undistributed
(overdistributed) net realized
gain (loss).......................... (2,533,588) (2,989,047)
Net unrealized appreciation
(depreciation) of investments......... (4,407,465) 720,880
-------------- --------------
Total Net Assets $ 66,142,974 $139,964,888
============== ==============
CAPITAL STOCK (PAR VALUE: $.01 A SHARE):
Shares authorized..................... 100,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets................... $ 53,384,398 $122,451,392
Shares issued and outstanding....... 6,363,291 12,888,188
Net asset value per share........... $ 8.39 $9.50
Maximum offering price
per share /(a)/ .................. $ 8.52 $9.64
==============
Class B: Net Assets................... $ 12,758,576 $ 17,513,496
Shares issued and outstanding....... 1,521,918 1,814,500
Net asset value per share /(b)/ .... $ 8.38 $9.65
============== ==============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 1.50% of the offering price or 1.52% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
36
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
MIDCAP PARTNERS BLUE
FUND, INC. CHIP FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ..... $443,024,233 $145,612,509
============ ============
ASSETS
Investment in securities--at value..... $542,366,018/(c)/ $150,584,126/(c)/
Cash................................... 10,000 1,033,605
Receivables:
Capital Shares sold................... 161,283 7,544
Dividends and interest................ 268,040 133,031
Investment securities sold............ 1,842,158 --
Other assets........................... 5,905 2,366
Prepaid directors' expenses............ 291 41
------------ ------------
Total Assets 544,653,695 151,760,713
LIABILITIES
Accrued management and investment
advisory fees......................... 54,810 16,991
Accrued distribution fees.............. 22,155 7,028
Accrued transfer and administrative
fees.................................. 223,349 95,844
Accrued other expenses................. 58,937 43,337
Payables:
Capital Shares reacquired............. 142,173 38,210
Investment securities purchased....... 1,584,780 129,418
Collateral obligation on securities
loaned, at value...................... 10,614,000 1,727,000
------------ ------------
Total Liabilities 12,700,204 2,057,828
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ............................... $531,953,491 $149,702,885
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital....................... $381,764,604 $171,538,033
Accumulated undistributed
(overdistributed) net investment
income (operating loss)............... 2,058,004 215,732
Accumulated undistributed
(overdistributed) net realized gain
(loss)................................ 48,789,098 (27,026,889)
Net unrealized appreciation
(depreciation) of investments......... 99,341,785 4,976,009
------------ ------------
Total Net Assets $531,953,491 $149,702,885
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized...................... 100,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets.................... $459,207,477 $123,303,668
Shares issued and outstanding........ 10,710,542 7,017,035
Net asset value per share............ $ 42.87 $ 17.57
Maximum offering price per share
/(a)/ ................................ $ 45.49 $ 18.64
============ ============
Class B: Net Assets.................... $ 72,746,014 $ 26,399,217
Shares issued and outstanding........ 1,782,062 1,568,898
Net asset value per share /(b)/ ..... $ 40.82 $ 16.83
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
37
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS EQUITY PARTNERS LARGECAP
GROWTH FUND, INC. BLEND FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ..... $ 62,392,540 $ 57,265,706
============ ============
ASSETS
Investment in securities--at value..... $60,565,785/(c)/ $ 60,364,359
Cash................................... 605,179 1,045,488
Receivables:
Capital Shares sold................... 2,516 15,513
Dividends and interest................ 18,210 56,422
Investment securities sold............ 85,315 400,005
Variation margin on futures contracts. -- 945
Other assets........................... 532 66
Prepaid directors' expenses............ 22 33
------------ ------------
Total Assets 61,277,559 61,882,831
LIABILITIES
Accrued management and investment
advisory fees......................... 8,531 8,736
Accrued distribution fees.............. 4,921 5,422
Accrued transfer and administrative
fees.................................. 57,785 35,537
Accrued other expenses................. 26,209 28,978
Payables:
Capital Shares reacquired............. 51,752 21,571
Investment securities purchased....... 31,158 135,087
Collateral obligation on securities
loaned, at value...................... 931,000 --
------------ ------------
Total Liabilities 1,111,356 235,331
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ............................... $ 60,166,203 $ 61,647,500
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital....................... $ 89,538,557 $ 56,555,777
Accumulated undistributed
(overdistributed) net realized gain
(loss)................................ (27,545,599) 1,986,970
Net unrealized appreciation
(depreciation) of investments......... (1,826,755) 3,104,753
------------ ------------
Total Net Assets $ 60,166,203 $ 61,647,500
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized...................... 100,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets.................... $ 45,099,989 $ 43,209,784
Shares issued and outstanding........ 6,230,611 4,368,684
Net asset value per share............ $ 7.24 $ 9.89
Maximum offering price per share
/(a)/ ................................ $ 7.68 $ 10.49
============ ============
Class B: Net Assets.................... $ 15,066,214 $ 18,437,716
Shares issued and outstanding........ 2,160,150 1,917,403
Net asset value per share /(b)/ ..... $ 6.97 $ 9.62
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
38
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS LARGECAP PARTNERS MIDCAP
VALUE FUND, INC. GROWTH FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ..... $ 52,028,492 $ 28,453,700
============ ============
ASSETS
Investment in securities--at value..... $ 59,595,320 $ 32,204,834
Cash................................... 898,840 419,919
Receivables:
Capital Shares sold................... 18,763 1,034
Dividends and interest................ 71,541 5,225
Expense reimbursement from Manager.... -- 545
Investment securities sold............ 190,782 679,469
Other assets........................... 69 147
Prepaid directors' expenses............ -- 6
------------ ------------
Total Assets 60,775,315 33,311,179
LIABILITIES
Accrued management and investment
advisory fees......................... 8,612 5,444
Accrued distribution fees.............. 5,105 2,833
Accrued directors' expenses............ 157 --
Accrued transfer and administrative
fees.................................. 36,153 30,872
Accrued other expenses................. 31,445 26,701
Payables:
Capital Shares reacquired............. 49,438 45,763
Investment securities purchased....... -- 1,170,817
------------ ------------
Total Liabilities 130,910 1,282,430
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ............................... $ 60,644,405 $ 32,028,749
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital....................... $ 51,959,527 $ 40,269,526
Accumulated undistributed
(overdistributed) net investment
income (operating loss)............... 261,019 --
Accumulated undistributed
(overdistributed) net realized gain
(loss)................................ 857,031 (11,991,911)
Net unrealized appreciation
(depreciation) of investments......... 7,566,828 3,751,134
------------ ------------
Total Net Assets $ 60,644,405 $ 32,028,749
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A
SHARE):
Shares authorized...................... 100,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets.................... $ 43,517,412 $ 22,677,674
Shares issued and outstanding........ 3,583,449 4,402,514
Net asset value per share............ $ 12.14 $ 5.15
Maximum offering price per share
/(a)/ ................................ $ 12.88 $ 5.46
============ ============
Class B: Net Assets.................... $ 17,126,993 $ 9,351,075
Shares issued and outstanding........ 1,433,070 1,864,930
Net asset value per share /(b)/ ..... $ 11.95 $ 5.01
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes.
39
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS SMALLCAP REAL ESTATE
GROWTH FUND, INC. SECURITIES FUND, INC. /(C)/
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT
COST ....................... $ 15,686,651 $ 62,953,462
============ ============
ASSETS
Investment in securities--at
value....................... $ 18,708,481 $ 81,449,149
Cash......................... 445,759 20,765
Receivables:
Capital Shares sold......... 14,278 130,175
Dividends and interest...... 3,442 108,707
Expense reimbursement from
Manager.................... 184 --
Investment securities sold.. 2,407 --
Other assets................. 52 199
Prepaid directors' expenses.. -- 61
------------ ------------
Total Assets 19,174,603 81,709,056
LIABILITIES
Accrued management and
investment advisory fees.... 3,242 13,909
Accrued distribution fees.... 1,733 6,509
Accrued directors' expenses.. 12 --
Accrued transfer and
administrative fees......... 17,729 36,400
Accrued other expenses....... 23,239 20,493
Payables:
Capital Shares reacquired... -- 18,281
Investment securities
purchased.................. 22,000 149,680
------------ ------------
Total Liabilities 67,955 245,272
------------ ------------
NET ASSETS APPLICABLE TO
OUTSTANDING SHARES.......... $ 19,106,648 $ 81,463,784
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital............. $ 21,032,712 $ 52,314,244
Accumulated undistributed
(overdistributed) net
investment income (operating
loss)....................... -- 64,950
Accumulated undistributed
(overdistributed) net
realized gain (loss)........ (4,947,894) 10,588,903
Net unrealized appreciation
(depreciation) of
investments................. 3,021,830 18,495,687
------------ ------------
Total Net Assets $ 19,106,648 $ 81,463,784
============ ============
CAPITAL STOCK (PAR VALUE:
$.01 A SHARE):
Shares authorized............ 100,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets.......... $ 13,056,428 $ 62,361,557
Shares issued and
outstanding................. 2,356,308 3,783,350
Net asset value per share.. $ 5.54 $ 16.48
Maximum offering price per
share /(a)/................. $ 5.88 $ 17.49
============ ============
Class B: Net Assets.......... $ 6,050,220 $ 19,102,227
Shares issued and
outstanding................. 1,124,494 1,166,474
Net asset value per share
/(b)/ ...................... $ 5.38 $ 16.38
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Effective March 1, 2004, Principal Real Estate Fund, Inc. changed its name
to Principal Real Estate Securities Fund, Inc.
See accompanying notes.
40
STATEMENTS OF ASSETS AND LIABILITIES
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
SMALLCAP TAX-EXEMPT
FUND, INC. BOND FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES--AT COST ....... $113,314,514 $168,377,741
============ ============
ASSETS
Investment in securities--at value....... $119,160,124/(c)/ $175,674,803
Cash..................................... 28,882 107,335
Receivables:
Capital Shares sold..................... 17,758 33,184
Dividends and interest.................. 28,227 2,437,039
Investment securities sold.............. 387,374 --
Other assets............................. 767 8,791
Prepaid directors' expenses.............. -- 82
------------ ------------
Total Assets 119,623,132 178,261,234
LIABILITIES
Accrued management and investment
advisory fees........................... 17,172 16,024
Accrued distribution fees................ 8,360 2,846
Accrued directors' expenses.............. 75 --
Accrued transfer and administrative fees. 79,769 25,133
Accrued other expenses................... 31,716 12,452
Payables:
Capital Shares reacquired............... 59,060 12,559
Investment securities purchased......... 2,371,890 519,905
Collateral obligation on securities
loaned, at value........................ 10,207,000 --
------------ ------------
Total Liabilities 12,775,042 588,919
------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES ................................. $106,848,090 $177,672,315
============ ============
NET ASSETS CONSIST OF:
Capital Shares and additional
paid-in-capital......................... $117,892,520 $166,908,905
Accumulated undistributed
(overdistributed) net investment income
(operating loss)........................ -- 510,810
Accumulated undistributed
(overdistributed) net realized gain
(loss).................................. (16,890,040) 2,955,538
Net unrealized appreciation
(depreciation) of investments........... 5,845,610 7,297,062
------------ ------------
Total Net Assets $106,848,090 $177,672,315
============ ============
CAPITAL STOCK (PAR VALUE: $.01 A SHARE):
Shares authorized........................ 100,000,000 100,000,000
NET ASSET VALUE PER SHARE:
Class A: Net Assets...................... $ 82,730,657 $166,929,851
Shares issued and outstanding.......... 9,018,226 13,380,399
Net asset value per share.............. $ 9.17 $ 12.48
Maximum offering price per share /(a)/ $ 9.73 $ 13.10
============ ============
Class B: Net Assets...................... $ 24,117,433 $ 10,742,464
Shares issued and outstanding.......... 2,777,782 856,296
Net asset value per share /(b)/ ....... $ 8.68 $ 12.55
============ ============
/(a) /Maximum offering price equals net asset value plus a front-end sales
charge of 5.75% of the offering price or 6.10% of the net asset value for
Principal SmallCap Fund, Inc. and 4.75% of the offering price or 4.99% of the
net asset value for Principal Tax-Exempt Bond Fund, Inc.
/(b) /Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
/(c) /Includes fair market value of securities loaned, see "Securities Lending"
in Notes to Financial Statements.
See accompanying notes.
41
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
BALANCED BOND
FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends......................................... $1,002,270 $ 4,759
Interest.......................................... 1,747,349 10,408,386
Securities lending................................ 2,889 2,442
---------- -----------
Total Income 2,752,508 10,415,587
Expenses:
Management and investment advisory fees........... 604,671 1,007,030
Distribution fees - Class A....................... 168,458 356,730
Distribution fees - Class B....................... 144,277 254,707
Registration fees - Class A....................... 8,074 8,556
Registration fees - Class B....................... 9,245 7,801
Shareholder reports - Class A..................... 15,413 18,255
Shareholder reports - Class B..................... 3,371 5,478
Transfer and administrative fees - Class A........ 89,242 122,634
Transfer and administrative fees - Class B........ 20,517 39,101
Auditing and legal fees........................... 9,538 12,781
Custodian fees.................................... 50,166 16,073
Directors' expenses............................... 3,416 7,019
Registration fees................................. 30,886 29,743
Transfer and administrative fees.................. 238,592 327,483
Other expenses.................................... 5,873 13,298
---------- -----------
Total Gross Expenses 1,401,739 2,226,689
Less: Fees paid indirectly........................ 1,225 --
---------- -----------
Total Net Expenses 1,400,514 2,226,689
---------- -----------
Net Investment Income (Operating Loss) 1,351,994 8,188,898
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions........................... 4,735,935 3,318,437
Swap agreements................................... -- 81,839
Change in unrealized appreciation/depreciation of:
Investments....................................... 947,601 (238,072)
Swap agreements................................... -- 57,560
---------- -----------
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies 5,683,536 3,219,764
---------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations $7,035,530 $11,408,662
========== ===========
See accompanying notes.
42
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
CAPITAL VALUE CASH MANAGEMENT
FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends................................... $ 6,943,010 $ --
Interest.................................... 66,613 4,215,226
Securities lending.......................... 16,596 --
------------ ----------
Total Income 7,026,219 4,215,226
Expenses:
Management and investment advisory fees..... 2,075,121 1,481,866
Distribution fees - Class A................. 469,600 --
Distribution fees - Class B................. 210,113 13,088
Registration fees - Class A................. 13,195 33,840
Registration fees - Class B................. 8,299 5,156
Shareholder reports - Class A.............. 34,315 28,787
Shareholder reports - Class B.............. 6,698 516
Transfer and administrative fees - Class A.. 183,834 317,435
Transfer and administrative fees - Class B.. 36,667 4,628
Auditing and legal fees..................... 10,231 9,597
Custodian fees.............................. 7,353 10,444
Directors' expenses......................... 12,470 10,571
Registration fees........................... 28,279 43,383
Transfer and administrative fees............ 456,262 356,740
Other expenses.............................. 21,014 18,993
------------ ----------
Total Gross Expenses 3,573,451 2,335,044
Less: Fees paid indirectly.................. 34,250 --
Less: Reimbursement from Manager - Class B.. -- 4,543
------------ ----------
Total Net Expenses 3,539,201 2,330,501
------------ ----------
Net Investment Income (Operating Loss) 3,487,018 1,884,725
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions..................... 42,415,114 --
Futures contracts........................... 207,479 --
Change in unrealized
appreciation/depreciation of:
Investments................................. (13,310,175) --
Futures contracts........................... (105,745) --
------------ ----------
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 29,206,673 --
------------ ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 32,693,691 $1,884,725
============ ==========
See accompanying notes.
43
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
EQUITY INCOME GOVERNMENT SECURITIES
FUND, INC. INCOME FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends............................. $3,059,751 $ --
Withholding tax on foreign dividends.. (35,186) --
Interest.............................. 577,767 15,917,314
Securities lending.................... -- 23,421
---------- -----------
Total Income 3,602,332 15,940,735
Expenses:
Management and investment advisory
fees................................. 446,736 1,507,744
Distribution fees - Class A........... 156,552 531,775
Distribution fees - Class B........... 95,862 530,491
Registration fees - Class A........... 11,148 16,002
Registration fees - Class B........... 9,633 9,958
Shareholder reports - Class A......... 11,562 24,077
Shareholder reports - Class B......... 3,257 7,237
Transfer and administrative fees -
Class A.............................. 62,663 137,258
Transfer and administrative fees -
Class B.............................. 17,954 42,562
Auditing and legal fees............... 6,653 13,121
Custodian fees........................ 4,638 14,743
Directors' expenses................... 2,163 10,930
Registration fees..................... 20,613 31,000
Transfer and administrative fees...... 181,482 386,509
Other expenses........................ 4,254 20,090
---------- -----------
Total Expenses 1,035,170 3,283,497
---------- -----------
Net Investment Income (Operating Loss) 2,567,162 12,657,238
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions............... 4,527,915 (1,150,972)
Foreign currency transactions......... 1,264 --
Change in unrealized
appreciation/depreciation of:
Investments........................... 2,028,723 1,182,444
Translation of assets and liabilities
in foreign currencies................ 245 --
---------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies 6,558,147 31,472
---------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $9,125,309 $12,688,710
========== ===========
See accompanying notes.
44
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
GROWTH INTERNATIONAL EMERGING
FUND, INC. MARKETS FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends............................ $ 2,563,869 $ 1,155,332
Withholding tax on foreign dividends. -- (122,573)
Interest............................. 60,401 249
Securities lending................... 5,081 12,877
------------ -----------
Total Income 2,629,351 1,045,885
Expenses:
Management and investment advisory
fees................................ 1,828,265 499,421
Distribution fees - Class A.......... 501,357 79,579
Distribution fees - Class B.......... 411,774 67,420
Registration fees - Class A.......... 11,835 8,527
Registration fees - Class B.......... 6,491 7,337
Shareholder reports - Class A........ 51,928 5,316
Shareholder reports - Class B........ 12,528 1,729
Transfer and administrative fees -
Class A............................. 303,316 29,362
Transfer and administrative fees -
Class B............................. 75,956 10,154
Auditing and legal fees.............. 10,030 9,875
Custodian fees....................... 1,515 118,392
Directors' expenses.................. 10,242 1,408
Registration fees.................... 31,327 24,377
Transfer and administrative fees..... 650,251 121,787
Other expenses....................... 16,802 3,408
------------ -----------
Total Gross Expenses 3,923,617 988,092
Less: Fees paid indirectly........... 3,477 8,423
------------ -----------
Total Net Expenses 3,920,140 979,669
------------ -----------
Net Investment Income (Operating Loss) (1,290,789) 66,216
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES
Net realized gain (loss) from:
Investment transactions.............. (14,806,416) 7,899,968
Foreign currency transactions........ -- (87,911)
Change in unrealized
appreciation/depreciation of:
Investments.......................... 26,195,529 (1,903,719)
Translation of assets and liabilities
in foreign currencies............... -- 4,688
------------ -----------
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currencies 11,389,113 5,913,026
------------ -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 10,098,324 $ 5,979,242
============ ===========
See accompanying notes.
45
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
INTERNATIONAL INTERNATIONAL
FUND, INC. SMALLCAP FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends............................... $ 5,745,636 $ 1,209,101
Withholding tax on foreign dividends.... (685,911) (116,644)
Interest................................ 29,017 4,217
Securities lending...................... 194,272 46,443
----------- -----------
Total Income 5,283,014 1,143,117
Expenses:
Management and investment advisory fees. 2,023,299 656,321
Distribution fees - Class A............. 359,610 106,391
Distribution fees - Class B............. 157,067 112,817
Registration fees - Class A............. 5,418 4,533
Registration fees - Class B............. 9,223 6,393
Shareholder reports - Class A........... 32,756 7,879
Shareholder reports - Class B........... 6,749 3,253
Transfer and administrative fees - Class
A...................................... 191,490 50,960
Transfer and administrative fees - Class
B...................................... 45,773 20,358
Auditing and legal fees................. 12,155 9,941
Custodian fees.......................... 215,650 71,517
Directors' expenses..................... 8,064 1,785
Registration fees....................... 23,986 26,671
Transfer and administrative fees........ 422,817 182,052
Other expenses.......................... 14,605 3,392
----------- -----------
Total Gross Expenses 3,528,662 1,264,263
Less: Fees paid indirectly.............. 26,557 9,566
Less: Reimbursement from Manager - Class
A...................................... -- 20,303
Less: Reimbursement from Manager - Class
B...................................... -- 8,022
----------- -----------
Total Net Expenses 3,502,105 1,226,372
----------- -----------
Net Investment Income (Operating Loss) 1,780,909 (83,255)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions................. 39,436,940 13,301,320
Foreign currency transactions........... (90,617) (12,447)
Change in unrealized
appreciation/depreciation of:
Investments............................. (4,432,625) (1,147,175)
Translation of assets and liabilities in
foreign currencies..................... (2,561) 578
----------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies 34,911,137 12,142,276
----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $36,692,046 $12,059,021
=========== ===========
See accompanying notes.
46
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
LARGECAP STOCK LIMITED TERM
INDEX FUND, INC. BOND FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends from affiliates................ $ 713 $ --
Dividends................................ 1,010,972 --
Interest................................. 24,346 4,397,705
Securities lending....................... 933 2,586
---------- -----------
Total Income 1,036,964 4,400,291
Expenses:
Management and investment advisory fees.. 216,322 604,169
Distribution fees - Class A.............. 75,010 158,247
Distribution fees - Class B.............. 54,092 80,745
Registration fees - Class A.............. 11,499 16,946
Registration fees - Class B.............. 11,750 8,497
Shareholder reports - Class A............ 8,419 5,546
Shareholder reports - Class B............ 2,468 1,556
Transfer and administrative fees - Class
A....................................... 52,281 38,970
Transfer and administrative fees - Class
B....................................... 14,758 10,378
Auditing and legal fees.................. 7,803 10,126
Custodian fees........................... 22,326 7,547
Directors' expenses...................... 1,971 4,088
Registration fees........................ 20,825 31,101
Transfer and administrative fees......... 170,697 135,714
Other expenses........................... 4,023 6,715
---------- -----------
Total Gross Expenses 674,244 1,120,345
Less: Reimbursement from Manager - Class
A....................................... 56,476 --
Less: Reimbursement from Manager - Class
B....................................... 20,337 --
---------- -----------
Total Net Expenses 597,431 1,120,345
---------- -----------
Net Investment Income (Operating Loss) 439,533 3,279,946
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions.................. 72,450 (119,536)
Investment transactions in affiliates.... 60 --
Futures contracts........................ 118,071 --
Change in unrealized
appreciation/depreciation of:
Investments.............................. 3,742,706 (1,145,154)
Investments in affiliates................ 11,205 --
Futures contracts........................ (30,450) --
---------- -----------
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies 3,914,042 (1,264,690)
---------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $4,353,575 $ 2,015,256
========== ===========
See accompanying notes.
47
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
MIDCAP PARTNERS BLUE
FUND, INC. CHIP FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends..................................... $ 9,111,960 $ 2,360,422
Interest...................................... 83,446 933
Securities lending............................ 10,465 4,383
----------- -----------
Total Income 9,205,871 2,365,738
Expenses:
Management and investment advisory fees....... 2,795,240 917,369
Distribution fees - Class A................... 883,699 230,870
Distribution fees - Class B................... 325,766 265,247
Registration fees - Class A................... 20,833 10,928
Registration fees - Class B................... 9,648 5,673
Shareholder reports - Class A................. 55,193 28,845
Shareholder reports - Class B................. 14,090 8,172
Transfer and administrative fees - Class A.... 314,251 154,721
Transfer and administrative fees - Class B.... 83,317 47,641
Auditing and legal fees....................... 9,932 9,212
Custodian fees................................ 11,083 19,790
Directors' expenses........................... 16,737 5,170
Registration fees............................. 30,530 25,485
Transfer and administrative fees.............. 832,535 411,861
Other expenses................................ 25,750 9,022
----------- -----------
Total Gross Expenses 5,428,604 2,150,006
Less: Fees paid indirectly.................... 6,734 8,538
----------- -----------
Total Net Expenses 5,421,870 2,141,468
----------- -----------
Net Investment Income (Operating Loss) 3,784,001 224,270
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions....................... 49,046,329 11,502,956
Futures contracts............................. -- 26,591
Change in unrealized appreciation/depreciation
of:
Investments................................... 17,165,463 711,594
Futures contracts............................. -- (2,880)
----------- -----------
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies 66,211,792 12,238,261
----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations $69,995,793 $12,462,531
=========== ===========
See accompanying notes.
48
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS EQUITY PARTNERS LARGECAP
GROWTH FUND, INC. BLEND FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends............................. $ 553,497 $ 882,046
Interest.............................. 1,233 1,288
Securities lending.................... 1,790 --
---------- ----------
Total Income 556,520 883,334
Expenses:
Management and investment advisory
fees................................. 454,392 417,573
Distribution fees - Class A........... 113,134 96,860
Distribution fees - Class B........... 141,981 157,652
Registration fees - Class A........... 12,262 8,084
Registration fees - Class B........... 10,555 9,374
Shareholder reports - Class A......... 12,957 6,395
Shareholder reports - Class B......... 4,569 2,909
Transfer and administrative fees -
Class A.............................. 72,697 40,192
Transfer and administrative fees -
Class B.............................. 24,481 18,438
Auditing and legal fees............... 6,743 6,616
Custodian fees........................ 14,996 16,787
Directors' expenses................... 2,021 1,879
Registration fees..................... 17,459 24,294
Transfer and administrative fees...... 221,532 161,416
Other expenses........................ 3,377 2,969
---------- ----------
Total Gross Expenses 1,113,156 971,438
Less: Fees paid indirectly............ 36,273 6,291
Less: Reimbursement from Manager -
Class A.............................. -- 14,404
Less: Reimbursement from Manager -
Class B.............................. -- 3,315
---------- ----------
Total Net Expenses 1,076,883 947,428
---------- ----------
Net Investment Income (Operating Loss) (520,363) (64,094)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions............... 978,099 4,200,025
Futures contracts..................... -- (1,520)
Change in unrealized
appreciation/depreciation of:
Investments........................... 1,337,304 40,615
Futures contracts..................... -- 6,100
---------- ----------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies 2,315,403 4,245,220
---------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $1,795,040 $4,181,126
========== ==========
See accompanying notes.
49
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS LARGECAP PARTNERS MIDCAP
VALUE FUND, INC. GROWTH FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends............................. $1,289,674 $ 93,533
Interest.............................. 1,600 537
---------- -----------
Total Income 1,291,274 94,070
Expenses:
Management and investment advisory
fees................................. 426,070 294,085
Distribution fees - Class A........... 101,896 58,322
Distribution fees - Class B........... 147,195 86,288
Registration fees - Class A........... 10,797 11,302
Registration fees - Class B........... 9,803 10,511
Shareholder reports - Class A......... 6,719 5,825
Shareholder reports - Class B......... 3,069 2,340
Transfer and administrative fees -
Class A.............................. 39,886 34,754
Transfer and administrative fees -
Class B.............................. 18,771 14,190
Auditing and legal fees............... 6,656 6,491
Custodian fees........................ 6,048 20,191
Directors' expenses................... 2,076 1,217
Registration fees..................... 26,878 20,862
Transfer and administrative fees...... 163,672 131,208
Other expenses........................ 3,007 2,180
---------- -----------
Total Gross Expenses 972,543 699,766
Less: Fees paid indirectly............ 8,388 24,151
Less: Reimbursement from Manager -
Class A.............................. 10,465 17,594
Less: Reimbursement from Manager -
Class B.............................. 1,191 7,104
---------- -----------
Total Net Expenses 952,499 650,917
---------- -----------
Net Investment Income (Operating Loss) 338,775 (556,847)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions............... 1,882,348 2,923,337
Change in unrealized
appreciation/depreciation of:
Investments........................... 3,542,087 (2,050,663)
---------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies 5,424,435 872,674
---------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $5,763,210 $ 315,827
========== ===========
See accompanying notes.
50
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS SMALLCAP REAL ESTATE
GROWTH FUND, INC. SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING
LOSS)
Income:
Dividends......................... $ 50,818 $ 2,197,747
Interest.......................... 633 14,982
--------- -----------
Total Income 51,451 2,212,729
Expenses:
Management and investment advisory
fees............................. 157,643 598,397
Distribution fees - Class A....... 30,062 127,274
Distribution fees - Class B....... 49,726 142,069
Registration fees - Class A....... 7,134 11,708
Registration fees - Class B....... 7,499 7,547
Shareholder reports - Class A..... 3,052 7,619
Shareholder reports - Class B..... 1,453 2,841
Transfer and administrative fees -
Class A.......................... 19,037 48,823
Transfer and administrative fees -
Class B.......................... 8,887 18,299
Auditing and legal fees........... 6,120 6,831
Custodian fees.................... 8,625 2,412
Directors' expenses............... 592 2,231
Registration fees................. 24,938 29,818
Transfer and administrative fees.. 89,842 194,760
Other expenses.................... 1,274 3,684
--------- -----------
Total Gross Expenses 415,884 1,204,313
Less: Fees paid indirectly........ 5,867 3,761
Less: Reimbursement from Manager -
Class A.......................... 19,301 --
Less: Reimbursement from Manager -
Class B.......................... 8,166 --
--------- -----------
Total Net Expenses 382,550 1,200,552
--------- -----------
Net Investment Income (Operating
Loss) (331,099) 1,012,177
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES
Net realized gain (loss) from:
Investment transactions........... 858,701 10,586,325
Change in unrealized
appreciation/depreciation of:
Investments....................... (285,237) 6,462,427
--------- -----------
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currencies 573,464 17,048,752
--------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations $ 242,365 $18,060,929
========= ===========
See accompanying notes.
51
STATEMENTS OF OPERATIONS
PRINCIPAL MUTUAL FUNDS
YEAR ENDED OCTOBER 31, 2004
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
SMALLCAP TAX-EXEMPT
FUND, INC. BOND FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME (OPERATING LOSS)
Income:
Dividends.................................... $ 768,499 $ --
Interest..................................... 37,816 8,289,484
Securities lending........................... 29,859 --
----------- ----------
Total Income 836,174 8,289,484
Expenses:
Management and investment advisory fees...... 879,267 863,425
Distribution fees - Class A.................. 177,732 354,337
Distribution fees - Class B.................. 219,573 64,275
Registration fees - Class A.................. 10,605 7,000
Registration fees - Class B.................. 6,354 5,974
Shareholder reports - Class A................ 18,254 3,643
Shareholder reports - Class B................ 5,893 328
Transfer and administrative fees - Class A... 108,989 22,622
Transfer and administrative fees - Class B... 35,605 2,387
Auditing and legal fees...................... 7,466 11,713
Custodian fees............................... 12,210 3,355
Directors' expenses.......................... 3,248 5,990
Registration fees............................ 26,173 22,459
Transfer and administrative fees............. 289,406 80,532
Other expenses............................... 6,255 10,659
----------- ----------
Total Gross Expenses 1,807,030 1,458,699
Less: Fees paid indirectly................... 4,709 --
----------- ----------
Total Net Expenses 1,802,321 1,458,699
----------- ----------
Net Investment Income (Operating Loss) (966,147) 6,830,785
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions...................... 19,381,225 2,705,514
Change in unrealized appreciation/depreciation
of:
Investments.................................. (8,345,060) (182,669)
----------- ----------
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currencies 11,036,165 2,522,845
----------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $10,070,018 $9,353,630
=========== ==========
See accompanying notes.
52
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
BALANCED BOND
FUND, INC. FUND, INC.
- ------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------- ---------------
- ------------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 1,351,994 $ 1,193,145 $ 8,188,898 $ 8,712,254
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 4,735,935 652,592 3,400,276 2,735,130
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 947,601 9,710,349 (180,512) (1,569,324)
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 7,035,530 11,556,086 11,408,662 9,878,060
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (1,296,154) (1,149,081) (7,470,962) (8,361,854)
Class B............... (128,004) (105,537) (1,078,662) (1,258,821)
------------ ------------ ------------ ------------
Total Dividends and
Distributions (1,424,158) (1,254,618) (8,549,624) (9,620,675)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 12,047,396 8,501,912 27,743,338 40,228,179
Class B............... 4,338,661 3,828,443 7,091,911 9,474,047
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 1,273,359 1,123,399 6,566,027 7,225,606
Class B............... 126,462 103,902 1,016,276 1,153,000
Shares redeemed:
Class A............... (14,389,404) (13,624,827) (42,763,190) (49,476,966)
Class B............... (5,603,001) (4,771,696) (11,130,444) (10,967,903)
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions (2,206,527) (4,838,867) (11,476,082) (2,364,037)
------------ ------------ ------------ ------------
Redemption fees - Class
A..................... -- -- -- 48,023
------------ ------------ ------------ ------------
Total Increase
(Decrease) 3,404,845 5,462,601 (8,617,044) (2,058,629)
NET ASSETS
Beginning of period.... 97,603,284 92,140,683 218,854,134 220,912,763
------------ ------------ ------------ ------------
End of period
(including
undistributed net
investment income as
set forth below)...... $101,008,129 $ 97,603,284 $210,237,090 $218,854,134
============ ============ ============ ============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 87,242 $ 88,660 $ 96,778 $ (470,787)
============ ============ ============ ============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 976,019 771,547 2,513,007 3,611,102
Class B............... 355,065 348,303 643,126 855,831
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 103,150 101,896 594,977 653,047
Class B............... 10,280 9,516 92,137 104,254
Shares redeemed:
Class A............... (1,166,447) (1,249,483) (3,881,109) (4,457,936)
Class B............... (457,725) (440,377) (1,010,545) (990,352)
------------ ------------ ------------ ------------
Net Increase (Decrease) (179,658) (458,598) (1,048,407) (224,054)
============ ============ ============ ============
See accompanying notes.
53
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
CAPITAL VALUE CASH MANAGEMENT
FUND, INC. FUND, INC.
- --------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- -------------- ----------------
- --------------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 3,487,018 $ 3,522,566 $ 1,884,725 $ 2,168,212
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 42,622,593 4,689,125 -- --
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... (13,415,920) 54,818,796 -- --
------------ ------------ ------------- -------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 32,693,691 63,030,487 1,884,725 2,168,212
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (3,523,805) (4,002,940) (1,863,714) (2,146,556)
Class B............... (49,273) (126,542) (21,011) (21,656)
------------ ------------ ------------- -------------
Total Dividends and
Distributions (3,573,078) (4,129,482) (1,884,725) (2,168,212)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 24,462,866 22,718,257 712,232,202 655,800,513
Class B............... 5,647,734 5,080,509 4,780,927 5,907,858
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 3,435,274 3,908,306 1,808,868 2,068,086
Class B............... 48,598 124,744 20,286 20,850
Shares redeemed:
Class A............... (69,099,334) (88,040,608) (742,992,727) (708,963,596)
Class B............... (10,321,260) (7,451,162) (7,425,708) (6,947,881)
------------ ------------ ------------- -------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions (45,826,122) (63,659,954) (31,576,152) (52,114,170)
------------ ------------ ------------- -------------
Redemption fees - Class
A..................... -- 9,452 -- --
------------ ------------ ------------- -------------
Total Increase
(Decrease) (16,705,509) (4,749,497) (31,576,152) (52,114,170)
NET ASSETS
Beginning of period.... 355,501,239 360,250,736 353,987,276 406,101,446
------------ ------------ ------------- -------------
End of period
(including
undistributed net
investment income as
set forth below)...... $338,795,730 $355,501,239 $ 322,411,124 $ 353,987,276
============ ============ ============= =============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 2,561,515 $ 2,681,825 $ -- $ --
============ ============ ============= =============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,062,154 1,165,770 712,228,299 655,800,513
Class B............... 247,673 262,471 4,780,741 5,907,858
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 153,566 211,716 1,812,770 2,068,086
Class B............... 2,182 6,783 20,473 20,850
Shares redeemed:
Class A............... (2,994,253) (4,419,653) (742,992,727) (708,963,596)
Class B............... (453,047) (389,637) (7,425,708) (6,947,881)
------------ ------------ ------------- -------------
Net Increase (Decrease) (1,981,725) (3,162,550) (31,576,152) (52,114,170)
============ ============ ============= =============
See accompanying notes.
54
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
EQUITY INCOME GOVERNMENT SECURITIES
FUND, INC. INCOME FUND, INC.
- -------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------- ----------------
- -------------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 2,567,162 $ 2,680,124 $ 12,657,238 $ 14,304,942
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 4,529,179 (3,744,053) (1,150,972) 467,983
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 2,028,968 9,889,758 1,182,444 (9,669,235)
------------ ------------ ------------ -------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 9,125,309 8,825,829 12,688,710 5,103,690
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (2,319,976) (2,352,553) (12,146,945) (14,291,737)
Class B............... (289,363) (291,326) (2,000,436) (2,267,795)
------------ ------------ ------------ -------------
Total Dividends and
Distributions (2,609,339) (2,643,879) (14,147,381) (16,559,532)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 13,472,892 7,064,406 41,666,093 94,074,528
Class B............... 3,625,442 2,224,165 10,443,968 31,134,090
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 2,182,203 2,207,321 10,559,133 12,244,953
Class B............... 281,558 281,835 1,857,571 2,050,680
Shares redeemed:
Class A............... (12,473,931) (11,783,359) (80,339,165) (103,064,902)
Class B............... (3,185,303) (3,561,430) (20,716,112) (21,564,510)
------------ ------------ ------------ -------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 3,902,861 (3,567,062) (36,528,512) 14,874,839
------------ ------------ ------------ -------------
Redemption fees - Class
A..................... -- -- -- 48
------------ ------------ ------------ -------------
Total Increase
(Decrease) 10,418,831 2,614,888 (37,987,183) 3,419,045
NET ASSETS
Beginning of period.... 70,477,932 67,863,044 366,764,262 363,345,217
------------ ------------ ------------ -------------
End of period
(including
undistributed net
investment income as
set forth below)...... $ 80,896,763 $ 70,477,932 $328,777,079 $ 366,764,262
============ ============ ============ =============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 264,678 $ 282,523 $ 231,304 $ 276,421
============ ============ ============ =============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,388,725 785,692 3,666,875 8,034,398
Class B............... 374,473 247,479 923,279 2,674,412
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 223,606 244,200 930,125 1,052,514
Class B............... 28,936 31,333 164,481 177,297
Shares redeemed:
Class A............... (1,284,887) (1,313,470) (7,080,458) (8,883,041)
Class B............... (328,406) (402,819) (1,833,157) (1,863,692)
------------ ------------ ------------ -------------
Net Increase (Decrease) 402,447 (407,585) (3,228,855) 1,191,888
============ ============ ============ =============
See accompanying notes.
55
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
GROWTH INTERNATIONAL EMERGING
FUND, INC. MARKETS FUND, INC.
- ----------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------ --------------
- ----------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ (1,290,789) $ (1,568,714) $ 66,216 $ (12,228)
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... (14,806,416) (2,284,675) 7,812,057 2,499,742
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 26,195,529 44,204,950 (1,899,031) 8,886,025
------------ ------------ ----------- -----------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 10,098,324 40,351,561 5,979,242 11,373,539
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 29,105,912 32,639,355 10,918,453 5,140,060
Class B............... 6,806,109 7,772,555 2,153,355 867,475
Shares redeemed:
Class A............... (48,461,430) (47,606,271) (5,145,045) (5,148,772)
Class B............... (14,667,494) (14,601,648) (4,572,784) (892,548)
------------ ------------ ----------- -----------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions (27,216,903) (21,796,009) 3,353,979 (33,785)
------------ ------------ ----------- -----------
Redemption fees - Class
A..................... -- 8,850 -- 8,757
------------ ------------ ----------- -----------
Total Increase
(Decrease) (17,118,579) 18,564,402 9,333,221 11,348,511
NET ASSETS
Beginning of period.... 310,282,076 291,717,674 34,618,573 23,270,062
------------ ------------ ----------- -----------
End of period
(including
undistributed net
investment income as
set forth below)...... $293,163,497 $310,282,076 $43,951,794 $34,618,573
============ ============ =========== ===========
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ -- $ -- $ -- $ --
============ ============ =========== ===========
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,107,215 1,456,180 991,275 677,583
Class B............... 269,675 359,162 199,680 113,913
Shares redeemed:
Class A............... (1,844,136) (2,133,503) (465,025) (691,258)
Class B............... (584,448) (680,888) (448,750) (123,067)
------------ ------------ ----------- -----------
Net Increase (Decrease) (1,051,694) (999,049) 277,180 (22,829)
============ ============ =========== ===========
See accompanying notes.
56
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
INTERNATIONAL INTERNATIONAL
FUND, INC. SMALLCAP FUND, INC.
- -----------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------ ---------------
- -----------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 1,780,909 $ 1,574,354 $ (83,255) $ (148,569)
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 39,346,323 (9,400,710) 13,288,873 (2,832,621)
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... (4,435,186) 52,737,956 (1,146,597) 16,404,351
------------ ------------ ----------- ------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 36,692,046 44,911,600 12,059,021 13,423,161
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (1,655,792) (64,843) -- (19,057)
------------ ------------ ----------- ------------
Total Dividends and
Distributions (1,655,792) (64,843) -- (19,057)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 23,090,830 26,417,570 10,845,939 8,564,118
Class B............... 4,787,746 4,426,535 3,476,565 1,749,352
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 1,632,465 63,916 -- 17,605
Shares redeemed:
Class A............... (42,764,282) (64,183,379) (8,168,545) (10,326,549)
Class B............... (10,751,736) (9,662,970) (2,977,179) (1,941,831)
------------ ------------ ----------- ------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions (24,004,977) (42,938,328) 3,176,780 (1,937,305)
------------ ------------ ----------- ------------
Redemption fees - Class
A..................... -- 41,470 -- 14,686
------------ ------------ ----------- ------------
Total Increase
(Decrease) 11,031,277 1,949,899 15,235,801 11,481,485
NET ASSETS
Beginning of period.... 228,502,563 226,552,664 45,838,789 34,357,304
------------ ------------ ----------- ------------
End of period
(including
undistributed net
investment income as
set forth below)...... $239,533,840 $228,502,563 $61,074,590 $ 45,838,789
============ ============ =========== ============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 1,665,403 $ 1,658,650 $ (66,566) $ (108,330)
============ ============ =========== ============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 3,413,302 4,996,858 793,793 952,739
Class B............... 721,549 856,080 268,295 196,756
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 252,313 12,732 -- 2,098
Shares redeemed:
Class A............... (6,324,517) (11,938,750) (597,976) (1,145,682)
Class B............... (1,625,001) (1,894,920) (229,169) (222,570)
------------ ------------ ----------- ------------
Net Increase (Decrease) (3,562,354) (7,968,000) 234,943 (216,659)
============ ============ =========== ============
See accompanying notes.
57
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
LARGECAP STOCK LIMITED TERM
INDEX FUND, INC. BOND FUND, INC.
- ------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------- ---------------
- ------------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 439,533 $ 358,227 $ 3,279,946 $ 3,039,997
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 190,581 189,148 (119,536) 397,486
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 3,723,461 7,570,247 (1,145,154) (595,106)
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 4,353,575 8,117,622 2,015,256 2,842,377
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (334,872) (255,049) (4,470,569) (3,682,022)
Class B............... (41,985) (24,147) (661,350) (590,061)
------------ ------------ ------------ ------------
Total Dividends and
Distributions (376,857) (279,196) (5,131,919) (4,272,083)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 20,567,942 14,093,984 84,816,328 61,128,599
Class B............... 5,504,594 4,054,312 4,798,593 8,437,473
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 332,314 243,056 4,124,292 3,358,719
Class B............... 41,269 23,508 626,279 561,209
Shares redeemed:
Class A............... (12,656,578) (12,503,465) (60,362,131) (41,413,201)
Class B............... (3,010,770) (1,584,001) (5,268,818) (4,403,641)
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 10,778,771 4,327,394 28,734,543 27,669,158
------------ ------------ ------------ ------------
Redemption fees - Class
A..................... -- -- -- 1,231
------------ ------------ ------------ ------------
Total Increase
(Decrease) 14,755,489 12,165,820 25,617,880 26,240,683
NET ASSETS
Beginning of period.... 51,387,485 39,221,665 114,347,008 88,106,325
------------ ------------ ------------ ------------
End of period
(including
undistributed net
investment income as
set forth below)...... $ 66,142,974 $ 51,387,485 $139,964,888 $114,347,008
============ ============ ============ ============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 354,642 $ 291,966 $ (1,540,809) $ (1,141,630)
============ ============ ============ ============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 2,489,095 2,031,041 8,826,572 6,193,684
Class B............... 667,600 575,460 489,915 843,804
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 41,384 37,278 429,284 340,884
Class B............... 5,127 3,600 64,149 56,149
Shares redeemed:
Class A............... (1,540,025) (1,800,547) (6,277,932) (4,200,931)
Class B............... (366,055) (229,489) (538,237) (440,246)
------------ ------------ ------------ ------------
Net Increase (Decrease) 1,297,126 617,343 2,993,751 2,793,344
============ ============ ============ ============
See accompanying notes.
58
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
MIDCAP PARTNERS BLUE
FUND, INC. CHIP FUND, INC.
- ------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------- ---------------
- ------------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 3,784,001 $ 853,615 $ 224,270 $ (213,696)
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 49,046,329 24,260,132 11,529,547 (15,814,070)
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 17,165,463 73,829,988 708,714 39,327,362
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 69,995,793 98,943,735 12,462,531 23,299,596
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (1,873,467) (1,022,374) -- --
From net realized gain
on investments:
Class A............... (18,918,527) -- -- --
Class B............... (3,509,826) -- -- --
------------ ------------ ------------ ------------
Total Dividends and
Distributions (24,301,820) (1,022,374) -- --
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 67,359,951 48,796,196 18,153,575 15,831,060
Class B............... 15,364,930 12,892,737 5,057,010 4,752,689
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 20,513,434 1,003,190 -- --
Class B............... 3,468,845 -- -- --
Shares redeemed:
Class A............... (64,127,304) (55,820,235) (23,047,215) (21,193,952)
Class B............... (23,145,674) (21,920,600) (10,086,567) (7,715,065)
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 19,434,182 (15,048,712) (9,923,197) (8,325,268)
------------ ------------ ------------ ------------
Redemption fees - Class
A..................... -- 4,532 -- 4,539
------------ ------------ ------------ ------------
Total Increase
(Decrease) 65,128,155 82,877,181 2,539,334 14,978,867
NET ASSETS
Beginning of period.... 466,825,336 383,948,155 147,163,551 132,184,684
------------ ------------ ------------ ------------
End of period
(including
undistributed net
investment income as
set forth below)...... $531,953,491 $466,825,336 $149,702,885 $147,163,551
============ ============ ============ ============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 2,058,004 $ 154,204 $ 215,732 $ --
============ ============ ============ ============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,642,290 1,447,240 1,055,448 1,115,604
Class B............... 393,308 401,921 306,000 344,136
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 524,602 32,082 -- --
Class B............... 93,299 -- -- --
Shares redeemed:
Class A............... (1,565,497) (1,671,653) (1,335,091) (1,505,480)
Class B............... (594,335) (693,193) (610,979) (565,071)
------------ ------------ ------------ ------------
Net Increase (Decrease) 493,667 (483,603) (584,622) (610,811)
============ ============ ============ ============
See accompanying notes.
59
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS EQUITY PARTNERS LARGECAP
GROWTH FUND, INC. BLEND FUND, INC.
- ---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------ ------------ ------------- --------------
- ---------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ (520,363) $ (476,341) $ (64,094) $ (49,283)
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 978,099 906,171 4,198,505 (264,532)
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 1,337,304 6,558,801 46,715 5,582,408
----------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 1,795,040 6,988,631 4,181,126 5,268,593
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 10,170,326 9,342,497 18,613,108 15,306,533
Class B............... 3,094,708 3,338,402 5,662,852 8,064,555
Shares redeemed:
Class A............... (9,552,550) (9,026,478) (11,559,665) (4,677,448)
Class B............... (3,251,534) (3,125,420) (3,106,606) (1,438,749)
----------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 460,950 529,001 9,609,689 17,254,891
----------- ----------- ------------ -----------
Redemption fees - Class
A..................... -- 2,306 -- --
----------- ----------- ------------ -----------
Total Increase
(Decrease) 2,255,990 7,519,938 13,790,815 22,523,484
NET ASSETS
Beginning of period.... 57,910,213 50,390,275 47,856,685 25,333,201
----------- ----------- ------------ -----------
End of period
(including
undistributed net
investment income as
set forth below)...... $60,166,203 $57,910,213 $ 61,647,500 $47,856,685
=========== =========== ============ ===========
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ -- $ -- $ -- $ --
=========== =========== ============ ===========
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,412,232 1,487,270 1,921,625 1,835,325
Class B............... 443,531 543,423 598,765 988,291
Shares redeemed:
Class A............... (1,333,057) (1,453,500) (1,180,990) (563,060)
Class B............... (469,293) (518,258) (324,052) (178,432)
----------- ----------- ------------ -----------
Net Increase (Decrease) 53,413 58,935 1,015,348 2,082,124
=========== =========== ============ ===========
See accompanying notes.
60
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS LARGECAP PARTNERS MIDCAP
VALUE FUND, INC. GROWTH FUND, INC.
- ---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------ ------------ --------------
- ---------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ 338,775 $ 222,723 $ (556,847) $ (401,656)
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 1,882,348 (405,669) 2,923,337 2,857,706
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... 3,542,087 8,233,852 (2,050,663) 5,293,473
------------ ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 5,763,210 8,050,906 315,827 7,749,523
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... (235,301) (83,042) -- --
------------ ----------- ----------- -----------
Total Dividends and
Distributions (235,301) (83,042) -- --
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 17,869,651 12,197,395 8,880,482 7,891,542
Class B............... 6,152,628 5,230,108 3,032,286 3,310,997
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 200,183 68,328 -- --
Shares redeemed:
Class A............... (12,840,726) (5,507,993) (8,690,656) (4,149,097)
Class B............... (3,759,732) (1,577,506) (2,243,479) (973,526)
------------ ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 7,622,004 10,410,332 978,633 6,079,916
------------ ----------- ----------- -----------
Total Increase
(Decrease) 13,149,913 18,378,196 1,294,460 13,829,439
NET ASSETS
Beginning of period.... 47,494,492 29,116,296 30,734,289 16,904,850
------------ ----------- ----------- -----------
End of period
(including
undistributed net
investment income as
set forth below)...... $ 60,644,405 $47,494,492 $32,028,749 $30,734,289
============ =========== =========== ===========
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ 261,019 $ 165,933 $ -- $ --
============ =========== =========== ===========
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,522,561 1,264,511 1,714,566 1,877,374
Class B............... 531,166 546,600 600,005 794,624
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... 17,637 7,492 -- --
Shares redeemed:
Class A............... (1,091,725) (576,138) (1,689,518) (1,028,151)
Class B............... (322,368) (168,247) (450,085) (254,458)
------------ ----------- ----------- -----------
Net Increase (Decrease) 657,271 1,074,218 174,968 1,389,389
============ =========== =========== ===========
See accompanying notes.
61
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
PARTNERS SMALLCAP REAL ESTATE
GROWTH FUND, INC. SECURITIES FUND, INC.
- ---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------ ------------ ------------- --------------
- ---------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ (331,099) $ (159,600) $ 1,012,177 $ 1,330,034
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 858,701 436,622 10,586,325 1,637,948
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... (285,237) 2,936,872 6,462,427 10,563,724
----------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 242,365 3,213,894 18,060,929 13,531,706
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... -- -- (944,526) (959,267)
Class B............... -- -- (193,072) (238,737)
From net realized gain
on investments:
Class A............... -- -- (816,595) --
Class B............... -- -- (267,798) --
----------- ----------- ------------ -----------
Total Dividends and
Distributions -- -- (2,221,991) (1,198,004)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 5,461,965 4,374,822 24,158,930 16,970,298
Class B............... 2,386,255 2,146,428 7,215,153 4,635,331
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... -- -- 1,471,107 699,548
Class B............... -- -- 365,391 167,784
Shares redeemed:
Class A............... (2,710,168) (1,453,119) (21,504,048) (9,988,865)
Class B............... (783,669) (250,166) (7,445,850) (1,639,056)
----------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 4,354,383 4,817,965 4,260,683 10,845,040
----------- ----------- ------------ -----------
Redemption fees - Class
A..................... -- -- 320 4,973
----------- ----------- ------------ -----------
Total Increase
(Decrease) 4,596,748 8,031,859 20,099,941 23,183,715
NET ASSETS
Beginning of period.... 14,509,900 6,478,041 61,363,843 38,180,128
----------- ----------- ------------ -----------
End of period
(including
undistributed net
investment income as
set forth below)...... $19,106,648 $14,509,900 $ 81,463,784 $61,363,843
=========== =========== ============ ===========
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ -- $ -- $ 64,950 $ 194,132
=========== =========== ============ ===========
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 990,773 968,585 1,674,101 1,462,514
Class B............... 444,896 487,389 501,692 403,256
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... -- -- 104,577 62,980
Class B............... -- -- 26,417 15,243
Shares redeemed:
Class A............... (497,525) (334,805) (1,527,874) (904,246)
Class B............... (149,112) (60,456) (534,738) (145,666)
----------- ----------- ------------ -----------
Net Increase (Decrease) 789,032 1,060,713 244,175 894,081
=========== =========== ============ ===========
See accompanying notes.
62
STATEMENTS OF CHANGES IN NET ASSETS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL
SMALLCAP TAX-EXEMPT
FUND, INC. BOND FUND, INC.
- ------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2004 2003
------------- ------------- ------------- ---------------
- ------------------------------------------------------------------------------------
OPERATIONS
Net investment income
(operating loss)..... $ (966,147) $ (791,063) $ 6,830,785 $ 7,208,120
Net realized gain
(loss) from
investment
transactions and
foreign currency
transactions......... 19,381,225 870,377 2,705,514 458,841
Change in unrealized
appreciation/depreciation
of investments and
translation of assets
and liabilities in
foreign currencies.... (8,345,060) 23,010,883 (182,669) 587,146
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 10,070,018 23,090,197 9,353,630 8,254,107
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment
income:
Class A............... -- -- (6,135,989) (6,588,804)
Class B............... -- -- (351,203) (401,196)
From net realized gain
on investments:
Class A............... -- -- (452,779) (706,938)
Class B............... -- -- (32,304) (53,429)
------------ ------------ ------------ ------------
Total Dividends and
Distributions -- -- (6,972,275) (7,750,367)
CAPITAL SHARE
TRANSACTIONS
Shares sold:
Class A............... 14,739,279 11,795,433 11,019,703 20,987,302
Class B............... 5,228,035 5,079,888 892,740 2,316,581
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... -- -- 4,813,510 5,359,665
Class B............... -- -- 280,350 318,557
Shares redeemed:
Class A............... (13,597,490) (12,423,923) (29,485,901) (31,545,809)
Class B............... (5,298,877) (3,792,526) (3,862,107) (3,265,865)
------------ ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets from
Capital Share
Transactions 1,070,947 658,872 (16,341,705) (5,829,569)
------------ ------------ ------------ ------------
Redemption fees - Class
A..................... -- -- -- 10,084
------------ ------------ ------------ ------------
Total Increase
(Decrease) 11,140,965 23,749,069 (13,960,350) (5,315,745)
NET ASSETS
Beginning of period.... 95,707,125 71,958,056 191,632,665 196,948,410
------------ ------------ ------------ ------------
End of period
(including
undistributed net
investment income as
set forth below)...... $106,848,090 $ 95,707,125 $177,672,315 $191,632,665
============ ============ ============ ============
Undistributed
(Overdistributed) Net
Investment Income
(Operating Loss)...... $ -- $ -- $ 510,810 $ 417,241
============ ============ ============ ============
INCREASE (DECREASE) IN
CAPITAL SHARES
Shares sold:
Class A............... 1,663,168 1,714,982 888,295 1,698,369
Class B............... 620,532 771,014 71,670 186,585
Shares issued in
reinvestment of
dividends and
distributions:
Class A............... -- -- 389,153 435,536
Class B............... -- -- 22,566 25,811
Shares redeemed:
Class A............... (1,539,055) (1,858,919) (2,385,604) (2,547,538)
Class B............... (632,723) (589,493) (310,527) (263,637)
------------ ------------ ------------ ------------
Net Increase (Decrease) 111,922 37,584 (1,324,447) (464,874)
============ ============ ============ ============
See accompanying notes.
63
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
1. ORGANIZATION
Principal Balanced Fund, Inc., Principal Bond Fund, Inc., Principal Capital
Value Fund, Inc., Principal Cash Management Fund, Inc., Principal Equity Income
Fund, Inc., Principal Government Securities Income Fund, Inc., Principal Growth
Fund, Inc., Principal International Emerging Markets Fund, Inc., Principal
International Fund, Inc., Principal International SmallCap Fund, Inc., Principal
LargeCap Stock Index Fund, Inc., Principal Limited Term Bond Fund, Inc.,
Principal MidCap Fund, Inc., Principal Partners Blue Chip Fund, Inc., Principal
Partners Equity Growth Fund, Inc., Principal Partners LargeCap Blend Fund, Inc.,
Principal Partners LargeCap Value Fund, Inc., Principal Partners MidCap Growth
Fund, Inc., Principal Partners SmallCap Growth Fund, Inc., Principal Real Estate
Securities Fund, Inc., Principal SmallCap Fund, Inc., and Principal Tax-Exempt
Bond Fund, Inc. (the "Funds") are registered under the Investment Company Act of
1940, as amended, as open-end diversified management investment companies and
operate in the mutual fund industry.
Each fund offers both Class A shares and Class B shares to the public. Class A
shares generally are sold with an initial sales charge (with the exception of
Principal Cash Management Fund, Inc. which are sold at net asset value) based on
declining rates and certain purchases may be subject to a contingent deferred
sales charge ("CDSC") if redeemed within eighteen months of purchase. Class B
shares are sold without an initial sales charge, but bear higher ongoing
distribution fees and are subject to a declining CDSC on certain redemptions
made within six years of purchase. Class B shares automatically convert into
Class A shares, based on relative net asset value (without a sales charge),
seven years after purchase. Both classes of shares for each fund represent
interests in the same portfolio of investments, and will vote together as a
single class except where otherwise required by law or as determined by each of
the Funds' respective Board of Directors. In addition, the Board of Directors of
each fund declares separate dividends on each class of shares.
Effective March 1, 2004, Principal Utilities Fund, Inc. and Principal Real
Estate Fund, Inc. changed their names to Principal Equity Income Fund, Inc. and
Principal Real Estate Securities Fund, Inc., respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. 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. The
following summarizes the significant accounting policies of the Funds:
SECURITY VALUATION . The Funds (with the exception of Principal Cash Management
Fund, Inc.) value securities for which market quotations are readily available
at market value, which is determined using the last reported sale price. If no
sales are reported, as is regularly the case for some securities traded
over-the-counter, securities are valued using the last reported bid price or an
evaluated bid price provided by a pricing service. Pricing services use
electronic modeling techniques that incorporate security characteristics, market
conditions and dealer-supplied valuations to determine an evaluated bid price.
When reliable market quotations are not considered to be readily available,
which may be the case, for example, with respect to restricted securities,
certain debt securities, preferred stocks and foreign securities, the
investments are valued at their fair value as determined in good faith by
Principal Management Corporation (the "Manager") under procedures established
and periodically reviewed by each fund's Board of Directors.
The value of foreign securities used in computing the net asset value per share
is generally determined as of the close of the foreign exchange where the
security is principally traded. Events that occur after the close of the
applicable foreign market or exchange but prior to the calculation of the fund's
net asset value are ordinarily not reflected in the fund's net asset value. If
events that occur after the close of the applicable foreign market or exchange
but prior to the calculation of the fund's net asset value are determined to
materially affect the value of a foreign security, then the security is valued
at its fair value as determined in good faith by the Manager under procedures
established and periodically reviewed by each fund's Board of Directors. Many
factors are reviewed in the course of making a good faith determination of a
security's fair value, including, but not limited to, price movements in ADRs,
futures contracts, industry indices, general indices and foreign currencies.
To the extent each fund invests in foreign securities listed on foreign
exchanges which trade on days on which the fund does not determine its net asset
value, for example weekends and other customary national U.S. holidays, each
fund's net asset value could be significantly affected on days when shareholders
cannot purchase or redeem shares.
64
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain securities issued by companies in emerging market countries may have
more than one quoted valuation at any given point in time, sometimes referred to
as a "local" price and a "premium" price. The premium price is often a
negotiated price, which may not consistently represent a price at which a
specific transaction can be effected. It is the policy of the Funds to value
such securities at prices at which it is expected those shares may be sold, and
the Manager or any sub-advisor is authorized to make such determinations subject
to such oversight by each fund's Board of Directors as may occasionally be
necessary.
Short-term securities are valued at amortized cost, which approximates market.
Principal Cash Management Fund, Inc. values its securities at amortized cost as
permitted under Rule 2a-7 of the Investment Company Act of 1940. Under the
amortized cost method, a security is valued by applying a constant yield to
maturity of the difference between the principal amount due at maturity and the
cost of the security to the fund.
CURRENCY TRANSLATION. Foreign holdings are translated to U.S. dollars using the
exchange rate at the daily close of the London Exchange. The identified cost of
the fund holdings is translated at approximate rates prevailing when acquired.
Income and expense amounts are translated at approximate rates prevailing when
received or paid, with daily accruals of such amounts reported at approximate
rates prevailing at the date of valuation. Since the carrying amount of the
foreign securities is determined based on the exchange rate and market values at
the close of the period, it is not practicable to isolate that portion of the
results of operations arising as a result of changes in the foreign exchange
rates from the fluctuations arising from changes in the market prices of
securities during the period.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between trade and settlement dates
on security transactions, and the difference between the amount of dividends and
foreign withholding taxes recorded on the books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized appreciation
(depreciation) on translation of assets and liabilities in foreign currencies
arise from changes in the exchange rate relating to assets and liabilities,
other than investments in securities, purchased and held in non-U.S. denominated
currencies.
INCOME AND INVESTMENT TRANSACTIONS. The Funds record investment transactions on
a trade date basis. The identified cost basis has been used in determining the
net realized gain or loss from investment transactions and unrealized
appreciation or depreciation of investments. The Funds record dividend income on
the ex-dividend date, except dividend income from foreign securities whereby the
ex-dividend date has passed; such dividends are recorded as soon as the funds
are informed of the ex-dividend date. Interest income is recognized on an
accrual basis. Discounts and premiums on securities are accreted/amortized over
the lives of the respective securities. The Funds allocate daily all income and
realized and unrealized gains or losses to each class of shares based upon the
relative proportion of the value of shares outstanding (number of settled shares
outstanding for Principal Cash Management Fund, Inc.) of each class.
EXPENSES. Expenses directly attributed to a fund are charged to that fund. Other
fund expenses not directly attributed to a fund are apportioned among the funds
managed by Principal Management Corporation.
The Funds allocate all expenses daily (other than class-specific expenses) to
each class of shares based upon the relative proportion of the value of shares
outstanding (number of settled shares outstanding for Principal Cash Management
Fund, Inc.) of each class. Class-specific expenses charged to each class during
the year ended October 31, 2004 are included separately in the statements of
operations.
DISTRIBUTIONS TO SHAREHOLDERS. With respect to Principal Cash Management Fund,
Inc., all net investment income and any net realized gains and losses from
investment transactions are declared as dividends daily to settled shares of
record as of that day. Dividends and distributions to shareholders of the other
Funds are recorded on the ex-dividend date. Dividends and distributions to
shareholders from net investment income and net realized gain from investments
and foreign currency transactions are determined in accordance with federal tax
regulations, which may differ from U.S. generally accepted accounting
principles. These differences are primarily due to differing treatments for
mortgage-backed securities, net operating losses, amortization of premiums and
discounts, expiring capital loss carryforwards, foreign currency transactions,
sales of Passive Foreign Investment Companies, certain defaulted securities,
losses deferred due to wash sales, commission recapture, futures contracts, swap
agreements, certain preferred securities and limitations imposed by Sections
381-384 of the Internal Revenue Code. Permanent book and tax basis differences
are reclassified within the capital accounts based on federal tax-basis
treatment; temporary differences do not require reclassification. Distributions
which exceed current and accumulated earnings and profits for federal income tax
purposes are reported as return of capital distributions.
65
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES . No provision for federal income taxes is considered
necessary because each fund is qualified as a "regulated investment company"
under the Internal Revenue Code and intends to distribute each year
substantially all of its net investment income and realized capital gains to
shareholders.
FOREIGN TAXES . Certain of the funds are subject to foreign income taxes imposed
by certain countries in which they invest. Foreign income taxes are accrued by
the funds as a reduction of income. These amounts are shown as withholding tax
on foreign dividends on the statements of operations.
Gains realized upon disposition of Indian securities held by the Funds are
subject to capital gains tax in India, payable prior to repatriation of sale
proceeds. The tax is computed on certain net realized gains. Realized losses in
excess of gains may be carried forward eight years to offset future gains. The
Funds accrue an estimated deferred tax liability for future gains on Indian
securities. At October 31, 2004, Principal International Emerging Markets Fund,
Inc. had no deferred tax liability and approximate capital loss carryforwards of
$854,000 that expire in 2009 - 2011 and Principal International Fund, Inc. had
no deferred tax liability and no capital loss carryforwards, relating to Indian
securities.
REDEMPTION FEES . The Funds, except Principal Cash Management Fund, Inc., will
impose a redemption fee on redemptions of $30,000 or more of Class A shares
redeemed within 30 days after they are purchased. The fee is equal to 1.00% of
the total redemption amount. The fee is paid to the fund and is intended to
offset the trading costs, market impact, and other costs associated with
short-term money movement in and out of the Funds. These amounts are reflected
in the statements of changes in net assets.
3. OPERATING POLICIES
FEES PAID INDIRECTLY. The Funds may direct certain portfolio transactions to
brokerage firms that, in turn, pay a portion of the Fund's operating expenses
through a commission recapture program. Certain of the Funds have also entered
into an arrangement with their custodian whereby interest earned on uninvested
cash balances is used to offset a portion of each fund's expenses. These amounts
are reflected in the statements of operations.
FUTURES CONTRACTS . The Funds may enter into futures contracts for both hedging
and non-hedging purposes. Initial margin deposits are made by cash deposits or
segregation of specific securities as may be required by the exchange on which
the transaction was conducted. Pursuant to the contracts, a fund agrees to
receive from or pay to the broker, an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the fund as a variation margin receivable
or payable on futures contracts. During the period the futures contracts are
open, daily changes in the value of the contracts are recognized as unrealized
gains or losses. These unrealized gains or losses are included as a component of
net unrealized appreciation (depreciation) of investments on the statements of
assets and liabilities. When the contracts are closed, the fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or cost
of, the closing transaction and the fund's cost basis in the contract.
INDEMNIFICATION. Under the Funds' by-laws present and past officers, directors
and employees are indemnified against certain liabilities arising out of the
performance of their duties. In addition, in the normal course of business the
Funds enter into a variety of contracts that may contain representations and
warranties which provide general indemnifications. The Funds' maximum exposure
under these arrangements is unknown, as this would involve future claims that
may be against the fund that have not yet occurred.
JOINT TRADING ACCOUNT . Certain of the Funds may, pursuant to an exemptive order
issued by the Securities and Exchange Commission, transfer uninvested funds into
a joint trading account. The order permits the Funds' cash balances to be
deposited into a single joint account along with the cash of other registered
investment companies managed by Principal Management Corporation. These balances
may be invested in one or more short-term instruments or repurchase agreements
that are collateralized by U.S. government securities.
66
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
3. OPERATING POLICIES (CONTINUED)
LINE OF CREDIT. The Funds participate with other funds managed by Principal
Management Corporation in an unsecured joint line of credit with two banks which
allow the participants to borrow up to $75 million, collectively. Borrowings are
made solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each participant, based on
its borrowings, at a rate equal to the Fed Funds Rate plus .50%. Additionally, a
commitment fee is charged at the annual rate of .09% on the amount of the line
of credit. The commitment fee is allocated among the participating funds in
proportion to their average net assets during each calendar quarter. At October
31, 2004, Principal International Emerging Markets Fund, Inc. had outstanding
borrowing of $217,000 at an annual rate of 2.38%. No other Funds had outstanding
borrowing under the line of credit.
REPURCHASE AGREEMENTS . The Funds may invest in repurchase agreements that are
fully collateralized, typically by U.S. government or U.S. government agency
securities. The value of the collateral is maintained, at a minimum, in an
amount equal to the principal amount plus accrued interest of each repurchase
agreement. In the event the seller of a repurchase agreement defaults, the fund
could experience delays in the realization of the collateral.
RESTRICTED SECURITIES. Certain funds may invest in securities that are subject
to legal or contractual restrictions on resale. These securities generally may
be resold in transactions exempt from registration or to the public if the
securities are registered. Disposal of these securities may involve
time-consuming negotiations and expense, and prompt sale at an acceptable price
may be difficult. Information regarding restricted securities is included with
footnote designations in each applicable fund's shedule of investments.
SECURITIES LENDING. Certain of the Funds may lend portfolio securities to
approved brokerage firms to earn additional income. Each applicable fund
receives collateral (in the form of U.S. government securities, U.S. government
agency securities, letters of credit, and/or cash) against the loaned securities
and maintains collateral in an amount not less than 100% of the market value of
the loaned securities during the period of the loan. Cash collateral received is
usually invested in short-term securities. The market value of loaned securities
is determined at the close of business of the funds and any additional required
collateral is delivered to the funds on the next business day. Although risk is
mitigated by the collateral, the fund could experience a delay in recovering its
securities and possible loss of income or value if the borrower fails to return
them. As of October 31, 2004, the Funds had securities on loan as follows:
VALUE OF VALUE OF
SECURITIES LOANED COLLATERAL
----------------- ----------
Principal Balanced Fund, Inc. $ 749,058 $ 778,576
Principal Bond Fund, Inc. 495,079 505,890
Principal Capital Value Fund, Inc. 6,689,869 6,895,000
Principal Government Securities Fund, Inc. 11,055,312 11,271,000
Principal Growth Fund, Inc. 1,714,836 1,754,000
Principal International Emerging Markets 231,260 250,000
Fund, Inc.
Principal International Fund, Inc. 20,280,167 21,397,848
Principal International SmallCap Fund, Inc. 4,809,120 5,088,215
Principal LargeCap Stock Index Fund, Inc. 1,101,727 1,130,000
Principal Limited Term Bond Fund, Inc. 236,494 241,600
Principal MidCap Fund, Inc. 10,401,221 10,614,000
Principal Partners Blue Chip Fund, Inc. 1,653,078 1,727,000
Principal Partners Equity Growth Fund, Inc. 899,538 931,000
Principal SmallCap Fund, Inc. 9,800,950 10,207,000
67
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
3. OPERATING POLICIES (CONTINUED)
SWAP AGREEMENTS. Certain of the Funds may invest in swaps for the purpose of
managing their exposure to interest rate, credit or market risk. Swaps are
marked-to-market daily; changes in value are recorded as unrealized gain or
loss. These unrealized gains or losses are included as a component of net
unrealized appreciation (depreciation) of investments on the statements of
assets and liabilities. Periodic payments received or made at the end of each
measurement period are recorded as realized gain or loss on the statements of
operations. Upon termination of the swap agreement, the fund recognizes a
realized gain or loss. Notional principal amounts are used to express the extent
of involvement in these contracts, but the potential amounts subject to loss are
much lower. Risks may exceed amounts shown on the statement of assets and
liabilities. These risks include changes in the returns of the underlying
instruments, unfavorable interest rate fluctuation, failure of the
counterparties to perform under the contracts' terms and the possible lack of
liquidity with respect to the swap agreements. Details of swap agreements open
at period end are included in the funds' schedules of investments.
4. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATES
MANAGEMENT SERVICES . The Funds have agreed to pay investment advisory and
management fees to Principal Management Corporation (wholly owned by Princor
Financial Services Corporation, a subsidiary of Principal Financial Services,
Inc.) computed at an annual percentage rate of each fund's average daily net
assets. The annual rates used in this calculation are as follows:
NET ASSETS OF FUNDS (IN MILLIONS)
---------------------------------------------
FIRST NEXT NEXT NEXT OVER
$100 $100 $100 $100 $400
----- ---- ---- ---- ----
Principal Balanced Fund, .60% .55% .50% .45% .40%
Inc.
Principal Bond Fund, Inc. .50 .45 .40 .35 .30
Principal Cash Management .50 .45 .40 .35 .30
Fund, Inc.
Principal Equity Income .60 .55 .50 .45 .40
Fund, Inc.
Principal Government .50 .45 .40 .35 .30
Securities Income Fund,
Inc.
Principal International 1.25 1.20 1.15 1.10 1.05
Emerging Markets Fund, Inc.
Principal International 1.20 1.15 1.10 1.05 1.00
SmallCap Fund, Inc.
Principal Limited Term Bond .50 .45 .40 .35 .30
Fund, Inc.
Principal MidCap Fund, Inc. .65 .60 .55 .50 .45
Principal Real Estate .90 .85 .80 .75 .70
Securities Fund, Inc.
Principal SmallCap Fund, .85 .80 .75 .70 .65
Inc.
Principal Tax-Exempt Bond .50 .45 .40 .35 .30
Fund, Inc.
NET ASSETS OF FUNDS (IN MILLIONS)
----------------------------------------
FIRST NEXT NEXT NEXT OVER
$250 $250 $250 $250 $1,000
----- ---- ---- ---- ------
Principal Capital Value Fund, .60% .55% .50% .45% .40%
Inc.
Principal Growth Fund, Inc. .60 .55 .50 .45 .40
Principal International Fund, .85 .80 .75 .70 .65
Inc.
Principal Partners Blue Chip .60 .55 .50 .45 .40
Fund, Inc.
Principal Partners Equity .75 .70 .65 .60 .55
Growth Fund, Inc.
Principal Partners LargeCap .75 .70 .65 .60 .55
Blend Fund, Inc.
Principal Partners LargeCap .75 .70 .65 .60 .55
Value Fund, Inc.
Principal Partners SmallCap .90 .85 .80 .75 .70
Growth Fund, Inc.
OVERALL FEE
-------------
Principal LargeCap Stock Index Fund, Inc. .35%
Principal Partners MidCap Growth Fund, Inc. .90
The Funds also reimburse the Manager for transfer and administrative services,
including the cost of accounting, data processing, supplies and other services
rendered.
68
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
4. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Manager has voluntarily agreed to limit the fund's expenses for certain of
the Funds. The limits are expressed as a percentage of average daily net assets
attributable to each class on an annualized basis during the reporting period.
The limits may be changed at any time. The operating expense limits are as
follows:
PERIOD FROM PERIOD FROM
NOVEMBER 1, 2003 MARCH 1, 2004
THROUGH FEBRUARY 29, 2004 THROUGH OCTOBER 31, 2004
-------------------------- -------------------------
CLASS A CLASS B CLASS A CLASS B
------------ ------------ ------------ --------------
Principal Capital 1.03% N/A 1.03% N/A
Value Fund, Inc.
Principal Equity N/A N/A 1.35 2.10%
Income Fund, Inc.
Principal 2.75 3.50% N/A N/A
International Emerging
Markets Fund, Inc.
Principal 1.63 N/A 1.63 N/A
International Fund,
Inc.
Principal N/A N/A 2.00 2.75
International SmallCap
Fund, Inc.
Principal LargeCap .90 1.25 .90 1.25
Stock Index Fund, Inc.
Principal Partners 1.75 2.50 1.65 2.40
Equity Growth Fund,
Inc.
Principal Partners 1.75 2.50 1.45 2.20
LargeCap Blend Fund,
Inc.
Principal Partners 1.75 2.50 1.45 2.20
LargeCap Value Fund,
Inc.
Principal Partners 1.95 2.70 1.75 2.50
MidCap Growth Fund,
Inc.
Principal Partners 1.95 2.70 1.95 2.70
SmallCap Growth Fund,
Inc.
The Manager has voluntarily agreed to limit expenses paid by Principal Cash
Management Fund, Inc. to the extent necessary to assure the net asset value of
the fund's shares does not fall to less than one dollar. The limit may be
changed at any time.
DISTRIBUTION FEES . The Funds bear distribution fees with respect to each class
computed at an annual rate of up to .25% for Class A shares and 1.00% for Class
B shares of the average daily net assets attributable to each class of each fund
with the exception of the following funds:
CLASS A CLASS B
------- -------
Principal Cash Management Fund, Inc. N/A 1.00%
Principal LargeCap Stock Index Fund, Inc. .15% .50
Principal Limited Term Bond Fund, Inc. .15 .50
Distribution fees are paid to Princor Financial Services Corporation, the
principal underwriter. A portion of the fees is subsequently remitted to retail
dealers, if applicable. Pursuant to the distribution agreements for Class A and
Class B shares, fees that are unused by the principal underwriter at the end of
the fiscal year are returned to the respective fund which generated the excess.
69
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
4. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
SALES CHARGES . Princor Financial Services Corporation, as principal
underwriter, receives proceeds of any CDSC on certain Class A and Class B share
redemptions. The charge is based on declining rates which for Class A shares
begin at .75% and Class B shares at 4.00% (0.25% and 1.25% for Principal
LargeCap Stock Index Fund, Inc. and Principal Limited Term Bond Fund, Inc. share
classes, respectively) of the lesser of current market value or the cost of
shares being redeemed. Princor Financial Services Corporation also retains sales
charges on sales of Class A shares (with the exception of Principal Cash
Management Fund, Inc.) based on declining rates which begin at 1.50% for
Principal LargeCap Stock Index Fund, Inc. and Principal Limited Term Bond Fund,
Inc., 4.75% for Principal Bond Fund, Inc., Principal Government Securities
Income Fund, Inc., and Principal Tax Exempt Bond Fund, Inc., and 5.75% for all
other Funds. The aggregate amounts of these charges retained by Princor
Financial Services Corporation for the year ended October 31, 2004, were as
follows:
CLASS A CLASS B
----------- -----------
Principal Balanced Fund, Inc. $ 235,996 $ 44,640
Principal Bond Fund, Inc. 434,413 75,991
Principal Capital Value Fund, Inc. 502,121 58,655
Principal Cash Management Fund, Inc. 2,432 33,290
Principal Equity Income Fund, Inc. 246,153 24,794
Principal Government Securities Income Fund, Inc. 606,362 226,721
Principal Growth Fund, Inc. 601,490 91,333
Principal International Emerging Markets Fund, Inc. 135,124 10,092
Principal International Fund, Inc. 399,892 44,916
Principal International SmallCap Fund, Inc. 213,573 18,475
Principal LargeCap Stock Index Fund, Inc. 105,291 12,200
Principal Limited Term Bond Fund, Inc. 177,720 28,581
Principal MidCap Fund, Inc. 1,176,014 105,232
Principal Partners Blue Chip Fund, Inc. 317,538 58,991
Principal Partners Equity Growth Fund, Inc. 253,247 31,184
Principal Partners LargeCap Blend Fund, Inc. 398,627 26,135
Principal Partners LargeCap Value Fund, Inc. 405,400 36,435
Principal Partners MidCap Growth Fund, Inc. 192,791 18,623
Principal Partners SmallCap Growth Fund, Inc. 145,545 9,888
Principal Real Estate Securities Fund, Inc. 385,812 27,210
Principal SmallCap Fund, Inc. 327,189 48,101
Principal Tax-Exempt Bond Fund, Inc. 155,623 21,065
AFFILIATED OWNERSHIP . At October 31, 2004, Principal Life Insurance Company (an
affiliate of the Manager), affiliates of Principal Life Insurance Company and
benefit plans sponsored on behalf of Principal Life Insurance Company owned
shares of the Funds as follows:
CLASS A CLASS B
----------- -----------
Principal Bond Fund, Inc. 330,782 --
Principal Capital Value Fund, Inc. 2,344,461 --
Principal Cash Management Fund, Inc. 13,423,413 --
Principal Government Securities Income Fund, Inc. 105,451 --
Principal International Emerging Markets Fund, Inc. 981,190 --
Principal International Fund, Inc. 4,357,810 --
Principal Limited Term Bond Fund, Inc. 683,099 --
Principal Partners SmallCap Growth Fund, Inc. 399,265 100,000
70
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
4. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
For the year ended October 31, 2004, information, on a federal tax basis,
regarding affiliated securities held by the funds was as follows:
OCTOBER 31, 2003 PURCHASES SALES OCTOBER 31,2004
----------------- ------------------------- -------------- ----------------
SHARES COST SHARES COST SHARES PROCEEDS SHARES COST
------- -------- ------ ------- ------ -------- ------- ----------
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
Principal Financial Group 1,584 $44,522 363 $12,491 63 $2,275 1,884 $54,798
(parent company of Principal Financial
Services, Inc.)
DIVIDENDS REALIZED GAIN/LOSS
--------- ------------------
PRINCIPAL LARGECAP STOCK INDEX FUND,
INC.
Principal Financial Group $713 $60
(parent company of Principal
Financial Services, Inc.)
AFFILIATED BROKERAGE COMMISSIONS . With respect to Principal Equity Income Fund,
Inc., $9,945 of brokerage commissions were paid to Spectrum Asset Management,
Inc., a member of the Principal Financial Group. The other Funds did not pay
brokerage commissions to any member of the Principal Financial Group. Brokerage
commissions were paid to affiliates of sub-advisors by Principal Partners
LargeCap Value Fund, Inc. in the amount $45,310.
5. INVESTMENT TRANSACTIONS
For the year ended October 31, 2004, the cost of investment securities purchased
and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Funds were as follows:
PURCHASES SALES
------------ ------------
Principal Balanced Fund, Inc. $139,802,598 $141,976,306
Principal Bond Fund, Inc. 302,425,665 322,104,570
Principal Capital Value Fund, Inc. 644,884,909 689,483,437
Principal Equity Income Fund, Inc. 99,203,195 96,376,990
Principal Government Securities Income 245,999,715 79,243,839
Fund, Inc.
Principal Growth Fund, Inc. 160,931,518 186,281,049
Principal International Emerging 61,392,238 57,985,062
Markets Fund, Inc.
Principal International Fund, Inc. 383,998,045 408,216,401
Principal International SmallCap Fund, 74,379,101 72,045,098
Inc.
Principal LargeCap Stock Index Fund, 30,062,475 19,178,772
Inc.
Principal Limited Term Bond Fund, Inc. 72,522,646 49,765,829
Principal MidCap Fund, Inc. 195,185,117 203,886,264
Principal Partners Blue Chip Fund, 101,468,764 111,192,734
Inc.
Principal Partners Equity Growth Fund, 97,552,941 95,592,074
Inc.
Principal Partners LargeCap Blend 64,861,710 54,821,674
Fund, Inc.
Principal Partners LargeCap Value 23,691,787 14,827,918
Fund, Inc.
Principal Partners MidCap Growth Fund, 57,203,349 55,597,658
Inc.
Principal Partners SmallCap Growth 14,073,181 9,880,601
Fund, Inc.
Principal Real Estate Securities Fund, 55,652,866 51,942,898
Inc.
Principal SmallCap Fund, Inc. 192,941,197 190,137,542
Principal Tax-Exempt Bond Fund, Inc. 127,678,130 145,181,583
71
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
5. INVESTMENT TRANSACTIONS (CONTINUED)
For the year ended October 31, 2004, the cost of U.S. government securities
purchased and proceeds from U.S government securities sold (not including
short-term investments) by the Funds were as follows:
PURCHASES SALES
----------- ------------
Principal Balanced Fund, Inc. $ 6,610,913 $ 4,779,584
Principal Bond Fund, Inc. 36,621,053 32,481,669
Principal Government Securities Income -- 180,077,683
Fund, Inc.
Principal Limited Term Bond Fund, Inc. 2,709,900 51,152
The Funds may trade portfolio securities on a "to-be-announced" ("TBA") basis.
In a TBA transaction, the fund commits to purchase or sell securities for which
all specific information is not known at the time of the trade. Securities
purchased on a TBA basis are not settled until they are delivered to the fund,
normally 15 to 30 days later. These transactions are subject to market
fluctuations and their current value is determined in the same manner as for
other portfolio securities. Each fund has set aside investment securities and
other assets in excess of the commitment to serve as collateral. As of October
31, 2004, the Funds had TBA purchase commitments as follows:
FACE AMOUNT COST MARKET VALUE
----------- ----------------------- --------------
Principal Balanced Fund, $ 3,425,000 $ 3,422,225 $ 3,450,781
Inc.
Principal Bond Fund, 18,250,000 18,268,863 18,396,781
Inc.
Principal Government 32,000,000 32,396,406 32,595,626
Securities Fund, Inc.
6. FEDERAL TAX INFORMATION
DISTRIBUTIONS TO SHAREHOLDERS . The federal income tax character of
distributions paid for years ended October 31, 2004 and 2003 were as follows:
ORDINARY INCOME LONG-TERM CAPITAL GAIN
------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
Principal Balanced Fund, $ 1,424,158 $ 1,254,618 $ -- $ --
Inc.
Principal Bond Fund, Inc. 8,549,624 9,620,675 -- --
Principal Capital Value 3,573,078 4,129,482 -- --
Fund, Inc.
Principal Cash Management 1,884,725 2,168,212 -- --
Fund, Inc.
Principal Equity Income 2,609,339 2,643,879 -- --
Fund, Inc.
Principal Government 14,147,381 16,559,532 -- --
Securities Income Fund,
Inc.
Principal Growth Fund, -- -- -- --
Inc.
Principal International -- -- -- --
Emerging Markets Fund,
Inc.
Principal International 1,655,792 64,843 -- --
Fund, Inc.
Principal International -- 19,057 -- --
SmallCap Fund, Inc.
Principal LargeCap Stock 376,857 279,196 -- --
Index Fund, Inc.
Principal Limited Term 5,131,919 4,272,083 -- --
Bond Fund, Inc.
Principal MidCap Fund, 4,848,215 1,022,374 19,453,605 --
Inc.
Principal Partners Blue -- -- -- --
Chip Fund, Inc.
Principal Partners Equity -- -- -- --
Growth Fund, Inc.
Principal Partners -- -- -- --
LargeCap Blend Fund, Inc.
Principal Partners 235,301 83,042 -- --
LargeCap Value Fund, Inc.
Principal Partners MidCap -- -- -- --
Growth Fund, Inc.
Principal Partners -- -- -- --
SmallCap Growth Fund,
Inc.
Principal Real Estate 1,137,598 1,198,004 1,084,393 --
Securities Fund, Inc.
Principal SmallCap Fund, -- -- -- --
Inc.
Principal Tax-Exempt Bond 6,511,831 6,990,000 460,444 760,367
Fund, Inc.
For U.S. federal income tax purposes, short-term capital gain distributions are
considered ordinary income distributions.
72
NOTES TO FINANCIAL STATEMENTS
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
6. FEDERAL TAX INFORMATION (CONTINUED)
DISTRIBUTABLE EARNINGS. . As of October 31, 2004, the components of
distributable earnings on a federal tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAINS
---------------- -----------------------
Principal Balanced Fund, Inc. $ 223,236 $ --
Principal Bond Fund, Inc. 870,444 --
Principal Capital Value Fund,
Inc. 2,561,515 --
Principal Cash Management Fund,
Inc. -- --
Principal Equity Income Fund,
Inc. 264,678 --
Principal Government Securities
Income Fund, Inc. 231,304 --
Principal Growth Fund, Inc. -- --
Principal International Emerging
Markets Fund, Inc. -- 2,657,796
Principal International Fund,
Inc. 1,688,520 --
Principal International SmallCap
Fund, Inc. 2,431 --
Principal LargeCap Stock Index
Fund, Inc. 354,642 --
Principal Limited Term Bond Fund,
Inc. 41,626 --
Principal MidCap Fund, Inc. 6,654,594 44,417,448
Principal Partners Blue Chip
Fund, Inc. 215,732 --
Principal Partners Equity Growth
Fund, Inc. -- --
Principal Partners LargeCap Blend
Fund, Inc. 423,573 1,580,599
Principal Partners LargeCap Value
Fund, Inc. 261,019 857,031
Principal Partners MidCap Growth
Fund, Inc. -- --
Principal Partners SmallCap
Growth Fund, Inc. -- --
Principal Real Estate Securities
Fund, Inc. 1,843,042 8,872,570
Principal SmallCap Fund, Inc. -- --
Principal Tax-Exempt Bond Fund,
Inc. 138,202 2,955,538
CAPITAL LOSS CARRYFORWARDS . Capital loss carryforwards are losses that can be
used to offset future capital gains of the fund. At October 31, 2004, the Funds
had approximate net capital loss carryforwards as follows:
NET CAPITAL LOSS CARRYFORWARDS EXPIRING IN ANNUAL LIMITATIONS*
------------------------------ ----------- -------------------
Principal Balanced $ --
Fund, Inc. $ 11,458,000 2010
Principal Bond Fund, 902,000
Inc. 10,820,000 2008-2010
Principal Capital --
Value Fund, Inc. 3,598,000 2010
Principal Equity --
Income Fund, Inc. 23,837,000 2009-2011
Principal Government --
Securities Income
Fund, Inc. 7,995,000 2005-2012
Principal Growth Fund, 450,000
Inc. 169,367,000 2009-2012
Principal 370,000
International Fund,
Inc. 74,691,000 2008-2012
Principal --
International SmallCap
Fund, Inc. 3,440,000 2010-2011
Principal LargeCap
Stock Index Fund, Inc. 2,505,000 2009-2010 --
Principal Limited Term
Bond Fund, Inc. 2,989,000 2005-2012 --
Principal Partners --
Blue Chip Fund, Inc. 25,542,000 2010-2011
Principal Partners
Equity Growth Fund,
Inc. 26,498,000 2008-2012 215,000
Principal Partners
MidCap Growth Fund,
Inc. 11,952,000 2009-2010 299,000
Principal Partners
SmallCap Growth Fund,
Inc. 4,945,000 2009-2010 306,000
Principal SmallCap
Fund, Inc. 16,844,000 2010 --
*In accordance with Sections 381-384 of the Internal Revenue Code, a portion of
certain fund's losses have been subjected to an annual limitation.
73
SCHEDULE OF INVESTMENTS
PRINCIPAL BALANCED FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS (63.67%)
ADVERTISING SALES (0.04%)
Lamar Advertising /1/ 1,070 $ 44,319
ADVERTISING SERVICES (0.06%)
WPP Group 1,233 61,971
AEROSPACE & DEFENSE (0.26%)
Boeing 1,050 52,395
Northrop Grumman 4,010 207,517
259,912
AEROSPACE & DEFENSE EQUIPMENT (0.80%)
General Dynamics 2,810 286,957
Moog /1/ 407 15,275
Orbital Sciences /1/ /2/ 1,020 10,557
United Defense Industries /1/ 333 13,367
United Technologies 5,200 482,664
808,820
AIRLINES (0.08%)
ExpressJet Holdings /1/ 5,647 62,795
Skywest 1,115 19,044
81,839
APPAREL MANUFACTURERS (0.40%)
Coach /1/ 6,300 293,769
Polo Ralph Lauren 2,540 93,802
Quiksilver /1/ 603 16,432
404,003
APPLICATIONS SOFTWARE (1.57%)
Citrix Systems /1/ 4,250 102,553
Microsoft 51,250 1,434,487
Serena Software /1/ 1,456 25,829
SS&C Technologies 873 20,638
1,583,507
ATHLETIC FOOTWEAR (0.46%)
Nike 5,360 435,822
Reebok International 835 30,895
466,717
AUDIO & VIDEO PRODUCTS (0.13%)
Matsushita Electric Industrial 4,650 67,471
Pioneer 1,400 25,900
Polycom /1/ 1,821 37,604
130,975
AUTO-CARS & LIGHT TRUCKS (0.31%)
Ford Motor 5,120 66,713
Nissan Motor /2/ 5,146 115,528
Toyota Motor 1,646 127,713
309,954
AUTO-MEDIUM & HEAVY DUTY TRUCKS (0.36%)
Oshkosh Truck 794 46,767
Paccar 3,370 233,575
Volvo 2,096 79,438
359,780
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.10%)
American Axle & Manufacturing Holdings 450 12,915
Dana 1,046 15,596
Magna International 620 45,229
Shares
Held Value
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (CONTINUED)
Tenneco Automotive /1/ 2,374 $ 30,245
103,985
BEVERAGES-NON-ALCOHOLIC (1.05%)
Coca-Cola 11,027 448,358
Cott /1/ 2,035 53,439
Pepsico 11,320 561,246
1,063,043
BEVERAGES-WINE & SPIRITS (0.08%)
Diageo 1,424 76,583
BREWERY (0.02%)
SABMiller 1,626 23,252
BROADCASTING SERVICES & PROGRAMMING (0.04%)
Fox Entertainment Group /1/ 1,200 35,592
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.20%)
CRH 2,959 70,743
Masco 2,150 73,659
Simpson Manufacturing 210 13,499
USG /1/ /2/ 2,056 46,034
203,935
BUILDING PRODUCTS-CEMENT & AGGREGATE (0.04%)
Eagle Materials 557 38,494
BUILDING PRODUCTS-LIGHT FIXTURES (0.02%)
Genlyte Group /1/ 281 20,670
BUILDING PRODUCTS-WOOD (0.02%)
Universal Forest Products 664 24,352
BUILDING-HEAVY CONSTRUCTION (0.02%)
Washington Group International /1/ 687 23,956
BUILDING-MAINTENANCE & SERVICE (0.02%)
Rollins 808 21,291
BUILDING-RESIDENTIAL & COMMERCIAL (0.36%)
Brookfield Homes 987 25,563
Daiwa House Industry 152 15,516
Hovnanian Enterprises /1/ 878 32,960
KB Home 1,447 119,016
M/I Schottenstein Homes 579 24,897
MDC Holdings 1,130 86,728
Pulte 1,080 59,270
363,950
CABLE TV (0.33%)
Comcast /1/ 10,630 313,585
Mediacom Communications /1/ 2,400 15,720
329,305
CASINO SERVICES (0.14%)
International Game Technology 3,280 108,371
Scientific Games /1/ 1,630 34,524
142,895
CELLULAR TELECOMMUNICATIONS (0.38%)
Boston Communications Group /1/ 1,010 9,191
mmO2 /1/ 3,747 72,092
Nextel Partners /1/ 2,720 45,805
Shares
Held Value
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CELLULAR TELECOMMUNICATIONS (CONTINUED)
Vodafone Group 6,962 $ 179,550
Western Wireless /1/ 2,640 76,930
383,568
CHEMICALS-DIVERSIFIED (0.10%)
BASF 638 40,086
FMC /1/ 1,339 58,715
98,801
CHEMICALS-SPECIALTY (0.15%)
Albemarle 537 19,251
Lubrizol 1,130 39,245
MacDermid 392 12,372
Sigma-Aldrich 1,420 79,009
149,877
CIRCUIT BOARDS (0.04%)
Benchmark Electronics /1/ 1,324 44,976
COAL (0.16%)
Peabody Energy 2,510 160,088
COATINGS & PAINT (0.10%)
Sherwin-Williams 2,290 97,829
COMMERCIAL BANKS (1.45%)
Banco Santander Central Hispano /2/ 9,918 110,883
Bank of Ireland 1,240 68,076
Bank of Nova Scotia 3,340 108,583
BB&T 760 31,244
City Holding 400 13,860
City National 2,972 204,771
Columbia Banking Systems 559 13,696
Cullen/Frost Bankers 233 11,417
CVB Financial 403 9,994
First Bancorp. 454 24,757
First Midwest Bancorp 407 14,208
Fremont General 1,500 32,250
Hibernia 2,532 73,428
Hudson United Bancorp 1,220 48,556
Kookmin Bank 857 28,821
Marshall & Ilsley 4,040 169,559
MB Financial 235 10,044
National Bank of Greece 6,934 39,524
Oriental Financial Group 336 9,519
Pacific Capital Bancorp. 958 30,493
R&G Financial 1,837 69,108
Toronto-Dominion Bank 1,974 79,315
UCBH Holdings 900 38,781
UnionBanCal 3,610 219,307
1,460,194
COMMERCIAL SERVICES (0.13%)
Alliance Data Systems /1/ 2,380 100,626
Magellan Health Services /1/ 724 27,078
127,704
COMMUNICATIONS SOFTWARE (0.03%)
Avid Technology /1/ 610 32,318
Shares
Held Value
- -------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTER AIDED DESIGN (0.21%)
ANSYS /1/ 404 $ 11,151
Autodesk 3,875 204,406
215,557
COMPUTER SERVICES (0.25%)
Cognizant Technology Solutions /1/ 3,466 117,844
Computer Sciences /1/ 1,870 92,883
Perot Systems /1/ 1,187 19,028
SRA International /1/ 387 20,805
250,560
COMPUTERS (0.73%)
Apple Computer /1/ 5,040 264,751
Hewlett-Packard 3,290 61,392
International Business Machines 4,580 411,055
737,198
COMPUTERS-INTEGRATED SYSTEMS (0.64%)
Brocade Communications Systems /1/ 8,350 56,697
Dell /1/ 16,335 572,705
RadiSys /1/ 1,193 15,843
645,245
COMPUTERS-MEMORY DEVICES (0.30%)
EMC /1/ 18,080 232,689
Storage Technology /1/ 561 15,158
TDK 790 54,779
302,626
COMPUTERS-PERIPHERAL EQUIPMENT (0.23%)
Electronics for Imaging /1/ 1,144 20,638
Lexmark International /1/ 2,530 210,268
230,906
CONSULTING SERVICES (0.08%)
Accenture /1/ 3,500 84,735
CONSUMER PRODUCTS-MISCELLANEOUS (0.04%)
Central Garden & Pet /1/ 348 12,431
Scotts /1/ 470 30,183
42,614
CONTAINERS-METAL & GLASS (0.22%)
Ball 5,300 211,205
Silgan Holdings 313 14,853
226,058
COSMETICS & TOILETRIES (1.83%)
Alberto-Culver 1,260 56,524
Avon Products 9,660 382,053
Chattem /1/ 482 16,128
Estee Lauder 4,800 206,160
Gillette 5,680 235,606
Kimberly-Clark 930 55,493
Procter & Gamble 17,430 892,067
1,844,031
DATA PROCESSING & MANAGEMENT (0.25%)
First Data 470 19,402
Global Payments 2,146 117,515
SEI Investments 3,100 111,569
248,486
Shares
Held Value
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DECISION SUPPORT SOFTWARE (0.02%)
Wind River Systems /1/ 1,519 $ 20,339
DENTAL SUPPLIES & EQUIPMENT (0.04%)
Sybron Dental Specialties /1/ 1,350 43,970
DIAGNOSTIC EQUIPMENT (0.03%)
Gen-Probe /1/ 995 34,865
DIALYSIS CENTERS (0.02%)
DaVita /1/ 819 24,259
DIRECT MARKETING (0.20%)
Catalina Marketing 843 21,589
Harte-Hanks 6,870 176,834
198,423
DISPOSABLE MEDICAL PRODUCTS (0.15%)
C.R. Bard 2,680 152,224
DISTRIBUTION-WHOLESALE (0.21%)
Aviall /1/ 758 16,411
Fastenal 1,330 73,456
Hughes Supply 1,678 47,672
Owens & Minor 1,021 26,740
United Stationers /1/ 720 32,040
Watsco 725 20,633
216,952
DIVERSIFIED MANUFACTURING OPERATIONS (2.49%)
3M 4,210 326,570
Carlisle 974 56,619
Danaher 2,870 158,223
Eaton 1,890 120,865
General Electric 38,754 1,322,286
Illinois Tool Works 1,290 119,041
ITT Industries 928 75,298
Siemens 1,305 97,536
Tyco International 7,540 234,871
2,511,309
DIVERSIFIED MINERALS (0.23%)
Anglo American 2,590 57,602
BHP Billiton 4,750 98,182
Cia Vale do Rio Doce 3,510 74,272
230,056
DIVERSIFIED OPERATIONS (0.16%)
Brascan 2,731 97,442
Tomkins /2/ 3,537 65,399
162,841
E-COMMERCE-SERVICES (0.22%)
eBay /1/ 2,285 223,039
E-MARKETING-INFORMATION (0.03%)
Digital River /1/ 226 7,526
Digitas /1/ 3,096 27,864
35,390
E-SERVICES-CONSULTING (0.03%)
Websense /1/ 843 34,201
Shares
Held Value
- ----------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC PRODUCTS-MISCELLANEOUS (0.24%)
Emerson Electric 1,430 $ 91,592
Hitachi 1,120 70,168
Littelfuse /1/ 787 25,672
Sharp 4,079 56,290
243,722
ELECTRIC-INTEGRATED (1.64%)
Constellation Energy Group 3,315 134,655
E.ON 878 71,601
Edison International 6,650 202,825
Enel 1,820 82,246
Exelon 2,098 83,123
Great Plains Energy 330 9,402
MDU Resources Group 9,269 237,750
OGE Energy 868 22,021
PPL 3,360 174,720
RWE 731 38,560
Scottish Power 3,020 97,788
TXU 8,130 497,718
1,652,409
ELECTRIC-TRANSMISSION (0.11%)
National Grid Group 2,611 115,145
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.13%)
DSP Group /1/ 1,422 28,198
Koninklijke Philips Electronics 2,376 56,597
Methode Electronics 1,263 16,962
Omron 1,531 34,674
136,431
ELECTRONIC COMPONENTS-SEMICONDUCTOR (1.07%)
Altera /1/ 4,150 94,329
Cree /1/ 1,055 36,408
Fairchild Semiconductor International /1/ 2,240 32,189
Intel 30,873 687,233
International Rectifier /1/ 1,350 53,663
Microsemi /1/ 2,349 36,503
PMC - Sierra /1/ 1,011 10,373
Silicon Laboratories /1/ 418 12,527
Texas Instruments 4,744 115,991
1,079,216
ELECTRONIC CONNECTORS (0.21%)
Amphenol /1/ 6,158 211,404
ELECTRONIC FORMS (0.29%)
Adobe Systems 5,160 289,115
ELECTRONIC MEASUREMENT INSTRUMENTS (0.07%)
Tektronix 2,270 68,849
ELECTRONIC PARTS DISTRIBUTION (0.03%)
Avnet /1/ 1,818 30,833
ELECTRONICS-MILITARY (0.05%)
Engineered Support Systems 1,036 49,769
ENGINES-INTERNAL COMBUSTION (0.33%)
Briggs & Stratton 2,286 164,158
Shares
Held Value
- ----------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ENGINES-INTERNAL COMBUSTION (CONTINUED)
Cummins Engine 2,450 $ 171,696
335,854
ENTERPRISE SOFTWARE & SERVICE (0.32%)
Hyperion Solutions /1/ 1,183 47,474
MicroStrategy /1/ 705 42,286
Oracle /1/ 14,450 182,937
SAP 1,175 50,113
322,810
FIDUCIARY BANKS (0.08%)
Mellon Financial 2,710 78,319
FILTRATION & SEPARATION PRODUCTS (0.03%)
CLARCOR 662 32,637
FINANCE-AUTO LOANS (0.05%)
Westcorp 391 15,609
WFS Financial /1/ 835 36,790
52,399
FINANCE-CONSUMER LOANS (0.06%)
Aiful 749 18,656
Collegiate Funding Services /1/ 902 11,140
Portfolio Recovery Associates /1/ 788 26,571
56,367
FINANCE-CREDIT CARD (1.11%)
American Express 2,230 118,346
Capital One Financial 7,720 569,427
MBNA 16,743 429,123
1,116,896
FINANCE-INVESTMENT BANKER & BROKER (2.52%)
Citigroup 20,465 908,032
Goldman Sachs Group 5,370 528,301
Legg Mason 3,080 196,227
Lehman Brothers Holdings 3,856 316,770
Merrill Lynch 2,925 157,774
Morgan Stanley 7,200 367,848
Nomura Holdings 5,175 62,980
Raymond James Financial 247 6,447
2,544,379
FINANCE-MORTGAGE LOAN/BANKER (0.27%)
American Home Mortgage Investment 1,192 32,935
Doral Financial 1,510 63,390
Federal Home Loan Mortgage 1,080 71,928
Federal National Mortgage Association 1,430 100,314
268,567
FINANCIAL GUARANTEE INSURANCE (0.20%)
MGIC Investment 2,930 188,428
Triad Guaranty /1/ 180 9,812
198,240
FOOD-CONFECTIONERY (0.06%)
Hershey Foods 1,200 60,828
FOOD-FLOUR & GRAIN (0.30%)
Archer Daniels Midland 15,800 306,046
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD-MISCELLANEOUS/DIVERSIFIED (0.27%)
Kellogg 2,210 $ 95,030
Nestle 2,053 121,743
Unilever 976 56,891
273,664
FOOD-RETAIL (0.10%)
Tesco 6,162 98,900
FOOTWEAR & RELATED APPAREL (0.02%)
Wolverine World Wide 557 16,955
GARDEN PRODUCTS (0.06%)
Toro 961 65,588
GAS-DISTRIBUTION (0.38%)
AGL Resources 1,072 33,446
Energen 5,547 298,318
ONEOK 1,157 31,031
UGI 551 21,285
384,080
HEALTH CARE COST CONTAINMENT (0.15%)
Caremark Rx /1/ 4,310 129,171
First Health Group /1/ 1,684 26,809
155,980
HOTELS & MOTELS (0.12%)
Choice Hotels International 274 13,672
InterContinental Hotels Group 4,987 61,739
Starwood Hotels & Resorts Worldwide 1,060 50,594
126,005
HUMAN RESOURCES (0.23%)
Korn/Ferry International /1/ 1,382 24,047
Labor Ready /1/ 2,603 37,353
Robert Half International 6,463 171,463
232,863
IMPORT & EXPORT (0.13%)
Mitsubishi 6,230 136,437
INDEX FUND (0.07%)
Regional Bank HOLDRs Trust 505 68,594
INSTRUMENTS-CONTROLS (0.07%)
Parker Hannifin 1,040 73,455
INSTRUMENTS-SCIENTIFIC (0.14%)
Applied Biosystems Group 1,830 34,916
Dionex /1/ 261 14,616
Millipore /1/ 1,950 89,681
139,213
INTERNET APPLICATION SOFTWARE (0.02%)
eResearch Technology /1/ 1,487 17,383
INTERNET BROKERS (0.17%)
Ameritrade Holding /1/ 8,260 107,545
E*trade Group /1/ 5,240 67,596
175,141
INTERNET CONNECTIVE SERVICES (0.02%)
Hanaro Telecom /1/ 5,937 17,217
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERNET FINANCIAL SERVICES (0.06%)
IndyMac Bancorp 1,951 $ 62,939
INTERNET SECURITY (0.42%)
RSA Security /1/ 1,194 24,429
Symantec /1/ 7,100 404,274
428,703
INTERNET TELEPHONY (0.03%)
j2 Global Communications /1/ 1,011 30,482
INTIMATE APPAREL (0.01%)
Warnaco Group /1/ 622 12,689
LEISURE & RECREATION PRODUCTS (0.13%)
Brunswick 2,890 135,599
LIFE & HEALTH INSURANCE (0.50%)
AmerUs Group 2,280 95,258
Jefferson-Pilot 2,040 98,512
Lincoln National 870 38,106
Nationwide Financial Services 1,680 58,128
Protective Life 770 30,261
Stancorp Financial Group 420 31,660
Universal American Financial /1/ 940 11,430
UnumProvident 10,510 143,567
506,922
MACHINERY TOOLS & RELATED PRODUCTS (0.06%)
Lincoln Electric Holdings 1,790 59,750
MACHINERY-CONSTRUCTION & MINING (0.23%)
Caterpillar 2,270 182,826
Joy Global 503 16,996
Terex /1/ 924 35,112
234,934
MACHINERY-FARM (0.26%)
Deere 4,320 258,250
MACHINERY-GENERAL INDUSTRY (0.29%)
Gardner Denver /1/ 598 17,928
Ingersoll-Rand 4,080 279,235
297,163
MACHINERY-PUMPS (0.11%)
Graco 3,115 107,156
MEDICAL INFORMATION SYSTEM (0.01%)
Dendrite International /1/ 883 12,936
MEDICAL INSTRUMENTS (0.23%)
dj Orthopedics /1/ 585 9,974
Kensey Nash /1/ 1,068 30,545
Medtronic 1,069 54,636
St. Jude Medical /1/ 1,726 132,160
Techne /1/ 195 7,024
234,339
MEDICAL LASER SYSTEMS (0.03%)
Candela /1/ 2,848 28,978
MEDICAL PRODUCTS (1.52%)
Becton Dickinson 2,410 126,525
Shares
Held Value
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL PRODUCTS (CONTINUED)
Cooper 261 $ 18,361
INAMED /1/ 377 20,038
Johnson & Johnson 17,550 1,024,569
Varian Medical Systems /1/ 3,790 152,168
Zimmer Holdings /1/ 2,510 194,751
1,536,412
MEDICAL-BIOMEDICAL/GENE (0.78%)
Affymetrix /1/ 2,349 71,645
Amgen /1/ 7,890 448,152
Celera Genomics Group /1/ 1,131 14,499
Charles River Laboratories International /1/ 1,370 64,102
deCODE genetics /1/ 1,562 10,934
Genentech /1/ 3,430 156,168
Lexicon Genetics /1/ 2,136 13,905
Maxim Pharmaceuticals /1/ 3,149 7,873
787,278
MEDICAL-DRUGS (2.41%)
Abbott Laboratories 5,440 231,907
AstraZeneca 1,045 43,054
Cephalon /1/ 1,650 78,656
Eisai 2,362 67,553
Eli Lilly 1,400 76,874
Endo Pharmaceuticals Holdings /1/ 1,102 24,024
First Horizon Pharmaceutical /1/ 842 20,696
Forest Laboratories /1/ 5,684 253,506
GlaxoSmithKline 1,556 65,974
Hi-Tech Pharmacal /1/ 500 8,105
Ligand Pharmaceuticals /1/ 928 8,273
Merck 1,720 53,853
Novartis 2,159 103,654
Novo Nordisk 705 35,215
Pfizer 39,702 1,149,373
Roche Holding 450 46,170
Salix Pharmaceuticals /1/ 548 8,784
Sanofi-Synthelabo 1,351 49,312
Teva Pharmaceutical Industries 1,880 48,880
Wyeth 1,570 62,251
2,436,114
MEDICAL-GENERIC DRUGS (0.11%)
Barr Laboratories /1/ 1,400 52,710
Eon Labs /1/ 2,530 62,263
114,973
MEDICAL-HMO (1.05%)
Aetna 2,070 196,650
Anthem /1/ 1,710 137,484
Sierra Health Services /1/ 1,034 49,343
UnitedHealth Group 7,101 514,112
WellChoice /1/ 648 27,061
Wellpoint Health Networks /1/ 1,370 133,794
1,058,444
MEDICAL-HOSPITALS (0.07%)
LifePoint Hospitals /1/ 1,700 55,114
VCA Antech /1/ 668 14,977
70,091
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL-OUTPATIENT & HOME MEDICAL CARE (0.02%)
Apria Healthcare Group /1/ 673 $ 18,413
METAL PROCESSORS & FABRICATION (0.05%)
Commercial Metals 634 22,919
Quanex 610 30,927
53,846
METAL-ALUMINUM (0.10%)
Century Aluminum /1/ 4,483 103,737
METAL-COPPER (0.06%)
Phelps Dodge 660 57,776
METAL-DIVERSIFIED (0.04%)
Inco /1/ 1,025 36,285
METAL-IRON (0.05%)
Cleveland-Cliffs /1/ 564 41,115
Gibraltar Industries 263 9,208
50,323
MISCELLANEOUS INVESTING (0.57%)
Archstone-Smith Trust 1,060 35,563
CRT Properties 705 15,623
Entertainment Properties Trust 868 34,633
Equity Residential Properties Trust 2,040 68,034
Federal Realty Investment Trust 551 26,145
Gramercy Capital /1/ 980 15,974
Healthcare Realty Trust /2/ 618 24,936
Kimco Realty 1,480 80,734
New Century Financial 425 23,439
Newcastle Investment 1,499 45,884
Prologis Trust 1,260 49,115
PS Business Parks 317 13,923
SL Green Realty 586 32,125
Thornburg Mortgage 969 27,684
Ventas 2,895 77,875
571,687
MONEY CENTER BANKS (2.38%)
ABN AMRO Holding 4,990 120,059
Bank of America 19,344 866,418
Barclays 3,628 143,161
BNP Paribas 5,500 187,825
Credit Suisse Group /1/ 3,710 127,142
HBOS 810 32,481
HSBC Holdings 427 34,600
JP Morgan Chase 18,349 708,271
Mitsubishi Tokyo Financial Group 7,655 64,991
UBS 1,621 117,506
2,402,454
MOTION PICTURES & SERVICES (0.03%)
Macrovision /1/ 1,176 31,799
Metro-Goldwyn-Mayer /1/ 253 2,991
34,790
MOTORCYCLE & MOTOR SCOOTER (0.20%)
Harley-Davidson 3,500 201,495
Shares
Held Value
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-LEVEL DIRECT SELLING (0.03%)
Nu Skin Enterprises 1,492 $ 28,855
MULTI-LINE INSURANCE (1.60%)
American International Group 11,675 708,789
AXA 3,146 68,111
Cigna 860 54,576
Hartford Financial Services Group 3,635 212,575
ING Groep 2,883 76,774
MetLife 5,830 223,580
Prudential Financial 4,440 206,327
Zurich Financial Services 4,900 69,335
1,620,067
MULTIMEDIA (1.34%)
Gannett 180 14,931
Journal Communications 512 8,254
McGraw-Hill 2,420 208,725
Media General 298 17,373
News /2/ 5,122 165,236
Time Warner /1/ 30,610 509,350
Viacom 2,080 75,899
Vivendi Universal /1/ 2,759 75,679
Walt Disney 11,180 281,960
1,357,407
NETWORKING PRODUCTS (0.90%)
Cisco Systems /1/ 41,150 790,492
Juniper Networks /1/ 1,820 48,430
Lucent Technologies /1/ 19,000 67,450
906,372
OFFICE AUTOMATION & EQUIPMENT (0.10%)
Canon 1,667 82,516
Imagistics International /1/ 630 21,685
104,201
OFFICE FURNISHINGS-ORIGINAL (0.04%)
HNI 889 35,916
OFFICE SUPPLIES & FORMS (0.03%)
John H. Harland 848 27,331
OIL COMPANY-EXPLORATION & PRODUCTION (1.12%)
Apache 7,540 382,278
Burlington Resources 5,680 235,720
Canadian Natural Resources 2,440 102,382
Devon Energy 1,780 131,667
Houston Exploration /1/ 513 30,062
KCS Energy /1/ 1,151 15,665
Meridian Resource /1/ 2,830 22,782
Noble Energy 899 52,142
PetroKazakhstan 1,228 45,313
Plains Exploration & Production /1/ 1,346 33,650
Pogo Producing 670 30,719
Talisman Energy 1,890 50,784
1,133,164
OIL COMPANY-INTEGRATED (3.21%)
Amerada Hess 550 44,390
BP Amoco 593 34,542
ChevronTexaco 10,942 580,583
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL COMPANY-INTEGRATED (CONTINUED)
ConocoPhillips 4,100 $ 345,671
ENI 1,155 132,167
Exxon Mobil 27,108 1,334,256
Marathon Oil 2,020 76,982
Occidental Petroleum 6,176 344,806
Petro-Canada 592 32,258
Petroleo Brasileiro 1,170 41,547
Repsol YPF 5,290 114,634
TotalFinaElf 1,555 162,155
3,243,991
OIL FIELD MACHINERY & EQUIPMENT (0.09%)
FMC Technologies /1/ 646 19,528
Grant Prideco /1/ 2,830 58,185
Universal Compression Holdings /1/ 431 14,904
92,617
OIL REFINING & MARKETING (0.27%)
Statoil 6,200 90,396
Tesoro Petroleum /1/ 2,305 69,795
Valero Energy 2,600 111,722
271,913
OIL-FIELD SERVICES (0.34%)
BJ Services 2,380 121,380
Cal Dive International /1/ 1,342 47,520
Schlumberger 2,705 170,253
339,153
OPTICAL SUPPLIES (0.19%)
Advanced Medical Optics /1/ 706 27,605
Bausch & Lomb 2,702 164,714
192,319
PAPER & RELATED PRODUCTS (0.54%)
Georgia-Pacific 5,700 197,163
Louisiana-Pacific 6,747 165,369
Temple-Inland 540 31,925
UPM-Kymmene Oyj 2,396 47,584
Weyerhaeuser 1,590 99,598
541,639
PIPELINES (0.41%)
National Fuel Gas 5,160 144,583
Questar 5,726 274,848
419,431
POULTRY (0.07%)
Pilgrims Pride 2,568 69,439
PRINTING-COMMERCIAL (0.05%)
Banta 670 27,256
Consolidated Graphics /1/ 479 20,453
47,709
PROPERTY & CASUALTY INSURANCE (0.45%)
Arch Capital Group /1/ 772 29,004
Chubb 2,780 200,521
First American 609 18,995
Infinity Property & Casualty 1,207 37,514
Progressive 750 70,162
Selective Insurance Group 400 15,632
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROPERTY & CASUALTY INSURANCE (CONTINUED)
State Auto Financial 1,150 $ 32,718
W.R. Berkley 1,237 52,869
457,415
PUBLICLY TRADED INVESTMENT FUND (0.38%)
iShares MSCI Japan Index Fund 12,431 123,440
iShares Russell 1000 Value Index Fund 1,430 88,016
iShares Russell 2000 Index Fund 1,475 171,587
383,043
PUBLISHING-NEWSPAPERS (0.05%)
Journal Register /1/ 2,429 45,665
RACETRACKS (0.03%)
Penn National Gaming /1/ 721 29,943
RADIO (0.05%)
Emmis Communications /1/ 2,064 38,597
Radio One /1/ 1,096 16,100
54,697
RECYCLING (0.03%)
Metal Management /1/ 1,825 33,215
REGIONAL BANKS (1.65%)
Comerica 560 34,446
Huntington Bancshares 7,480 179,146
KeyCorp 4,000 134,360
National City 2,180 84,955
PNC Financial Services Group 4,225 220,967
U.S. Bancorp 11,244 321,691
Wachovia 7,330 360,709
Wells Fargo 5,455 325,772
1,662,046
RENTAL-AUTO & EQUIPMENT (0.01%)
Rent-A-Center /1/ 368 8,828
RESPIRATORY PRODUCTS (0.03%)
Respironics /1/ 628 32,085
RETAIL-APPAREL & SHOE (0.56%)
American Eagle Outfitters 2,010 82,169
Chico's FAS /1/ 950 38,028
Claire's Stores 4,020 104,600
Foot Locker 1,767 43,115
Kenneth Cole Productions 928 24,592
Nordstrom 5,730 247,421
Stein Mart /1/ 1,280 21,274
561,199
RETAIL-AUTO PARTS (0.01%)
CSK Auto /1/ 980 14,347
RETAIL-BEDDING (0.20%)
Bed Bath & Beyond /1/ 4,935 201,299
RETAIL-BOOKSTORE (0.07%)
Barnes & Noble /1/ 1,716 57,091
Borders Group 523 11,919
69,010
Shares
Held Value
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-BUILDING PRODUCTS (0.34%)
Home Depot 8,430 $ 346,304
RETAIL-CATALOG SHOPPING (0.02%)
Coldwater Creek /1/ 1,041 23,964
RETAIL-CONSUMER ELECTRONICS (0.50%)
Best Buy 5,460 323,341
RadioShack 5,932 177,545
500,886
RETAIL-CONVENIENCE STORE (0.01%)
Pantry /1/ 297 6,828
RETAIL-DISCOUNT (0.91%)
BJ's Wholesale Club /1/ 2,360 68,511
Target 990 49,520
Wal-Mart Stores 14,775 796,668
914,699
RETAIL-DRUG STORE (0.03%)
Walgreen 840 30,148
RETAIL-HAIR SALONS (0.05%)
Regis 1,092 46,738
RETAIL-JEWELRY (0.05%)
Signet Group 1,845 35,627
Zale /1/ 454 12,948
48,575
RETAIL-MISCELLANEOUS/DIVERSIFIED (0.04%)
Ito-Yokado 1,077 38,540
RETAIL-OFFICE SUPPLIES (0.31%)
Staples 10,670 317,326
RETAIL-REGIONAL DEPARTMENT STORE (0.16%)
Neiman Marcus Group /2/ 2,660 161,808
RETAIL-RESTAURANTS (0.95%)
CBRL Group 1,277 46,304
CEC Entertainment /1/ 421 16,006
McDonald's 12,800 373,120
Ruby Tuesday 1,117 27,590
Starbucks /1/ 2,320 122,682
Yum! Brands 8,710 378,885
964,587
RUBBER-TIRES (0.05%)
Continental 862 47,022
SAVINGS & LOANS-THRIFTS (0.06%)
Independence Community Bank 555 20,885
PFF Bancorp 489 19,291
Sterling Financial /1/ 419 15,742
55,918
SCHOOLS (0.15%)
Apollo Group /1/ 2,370 156,420
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (0.48%)
Analog Devices 2,390 96,221
Exar /1/ 600 9,012
Linear Technology 3,775 142,997
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (CONTINUED)
Maxim Integrated Products 2,405 $ 105,796
Micrel /1/ 1,340 15,048
Taiwan Semiconductor Manufacturing /2/ 7,840 59,349
United Microelectronics /1/ 14,800 51,800
480,223
SEMICONDUCTOR EQUIPMENT (0.28%)
Applied Materials /1/ 7,150 115,115
Brooks Automation /1/ /2/ 343 5,104
Kla-Tencor /1/ 2,560 116,557
MKS Instruments /1/ 441 6,977
Mykrolis /1/ 610 6,411
Varian Semiconductor Equipment Associates /1/ 955 33,052
283,216
STEEL PRODUCERS (0.12%)
Arcelor 1,974 36,717
POSCO 646 24,154
Schnitzer Steel Industries 2,077 58,675
119,546
TELECOMMUNICATION EQUIPMENT (0.56%)
Comtech Telecommunications /1/ 291 7,976
Ditech Communications /1/ 1,910 43,815
Plantronics 687 29,885
Qualcomm 5,250 219,503
Scientific-Atlanta 4,100 112,299
Tekelec /1/ 1,160 25,891
Telefonaktiebolaget LM Ericsson /1/ 3,830 110,725
Westell Technologies /1/ 2,128 11,938
562,032
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (0.10%)
C-COR.net /1/ 2,357 17,725
Corning /1/ 6,680 76,486
Sycamore Networks /1/ 1,439 5,281
99,492
TELECOMMUNICATION SERVICES (0.05%)
PTEK Holdings /1/ 4,900 48,804
TELEPHONE-INTEGRATED (1.54%)
ALLTEL 1,420 78,001
AT&T 2,530 43,288
BellSouth 2,450 65,342
Nippon Telegraph & Telephone 1,630 34,638
SBC Communications 19,350 488,781
Sprint 10,350 216,832
Verizon Communications 16,085 628,923
1,555,805
THEATERS (0.01%)
Carmike Cinemas 202 7,232
THERAPEUTICS (0.29%)
Dyax /1/ 1,634 9,379
Eyetech Pharmaceuticals /1/ 614 26,058
Gilead Sciences /1/ 6,300 218,169
Medicines /1/ 1,045 27,839
Shares
Held Value
- --------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
THERAPEUTICS (CONTINUED)
NeoPharm /1/ 926 $ 6,728
288,173
TOBACCO (0.50%)
Altria Group 7,491 363,014
British American Tobacco 1,846 55,565
Imperial Tobacco Group 1,810 84,979
503,558
TOOLS-HAND HELD (0.05%)
Black & Decker 640 51,379
TRANSACTIONAL SOFTWARE (0.02%)
Transaction Systems Architects /1/ 1,141 18,707
TRANSPORT-AIR FREIGHT (0.16%)
CNF 3,680 161,110
TRANSPORT-RAIL (0.09%)
Norfolk Southern 2,770 94,042
TRANSPORT-SERVICES (0.21%)
FedEx 100 9,112
Offshore Logistics /1/ 423 15,295
United Parcel Service 2,410 190,824
215,231
TRANSPORT-TRUCK (0.04%)
J.B. Hunt Transport Services 469 19,163
Yellow Roadway /1/ 539 25,867
45,030
TRAVEL SERVICES (0.03%)
Sabre Holdings 1,600 34,416
TRUCKING & LEASING (0.01%)
Ryder System 251 12,575
VITAMINS & NUTRITION PRODUCTS (0.02%)
USANA Health Sciences /1/ /2/ 646 19,270
WATER (0.04%)
Suez 1,696 39,856
WEB PORTALS (0.18%)
United Online /1/ 1,964 18,442
Yahoo /1/ 4,392 158,946
177,388
WIRELESS EQUIPMENT (0.42%)
Motorola 24,430 421,662
TOTAL COMMON STOCKS 64,313,833
Principal
Amount Value
--------------------------------------------------------------------------------------------
BONDS (20.73%)
AEROSPACE & DEFENSE EQUIPMENT (0.04%)
K&F Industries
9.25%; 10/15/07 $ 35,000 $ 35,700
Principal
Amount Value
--------------------------------------------------------------------------------------------
BONDS (CONTINUED)
AGRICULTURAL OPERATIONS (0.15%)
Bunge Limited Finance
4.38%; 12/15/08 $ 80,000 $ 80,857
5.35%; 04/15/14 45,000 46,077
5.88%; 05/15/13 25,000 26,501
153,435
AIRLINES (0.15%)
Southwest Airlines
5.10%; 05/01/06 152,222 155,849
ASSET BACKED SECURITIES (0.57%)
Chase Funding Mortgage Loan
Asset Backed Certificates /3/
2.22%; 09/25/33 100,000 99,995
Countrywide Asset Backed Certificates /3/
2.43%; 02/25/34 196,429 196,420
3.00%; 01/25/34 180,000 180,318
Master Adjustable Rate Mortgages Trust /3/
3.03%; 03/25/34 95,000 95,659
572,392
AUTO-CARS & LIGHT TRUCKS (0.22%)
DaimlerChrysler Holding
4.05%; 06/04/08 70,000 70,472
4.75%; 01/15/08 15,000 15,454
7.25%; 01/18/06 40,000 42,046
Ford Motor
7.45%; 07/16/31 30,000 29,216
General Motors
8.25%; 07/15/23 40,000 41,668
Hyundai Motor Manufacturing /4/
5.30%; 12/19/08 25,000 26,012
224,868
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.06%)
Lear
7.96%; 05/15/05 45,000 46,188
Tenneco Automotive
11.63%; 10/15/09 15,000 15,938
62,126
AUTOMOBILE SEQUENTIAL (0.13%)
Ford Credit Auto Owner Trust
4.72%; 12/15/05 132,368 132,743
BEVERAGES-WINE & SPIRITS (0.15%)
Diageo Capital /3/
2.17%; 04/20/07 150,000 150,056
BREWERY (0.14%)
Cia Brasileira de Bebidas
10.50%; 12/15/11 40,000 49,200
Coors Brewing
6.38%; 05/15/12 50,000 55,458
SABMiller /4/
6.63%; 08/15/33 30,000 33,761
138,419
BROADCASTING SERVICES & PROGRAMMING (0.15%)
Clear Channel Communications
5.75%; 01/15/13 65,000 67,317
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
BROADCASTING SERVICES & PROGRAMMING (CONTINUED)
Grupo Televisa
8.50%; 03/11/32 $ 20,000 $ 22,850
Liberty Media
3.50%; 09/25/06 60,000 60,059
150,226
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.20%)
CRH America
5.30%; 10/15/13 25,000 25,827
6.40%; 10/15/33 25,000 26,907
6.95%; 03/15/12 35,000 40,231
Masco /3/ /4/
2.11%; 03/09/07 110,000 110,185
203,150
BUILDING PRODUCTS-AIR & HEATING (0.08%)
York International
6.63%; 08/15/06 75,000 79,224
BUILDING PRODUCTS-WOOD (0.01%)
Celulosa Arauco y Constitucion
5.13%; 07/09/13 15,000 14,840
BUILDING-RESIDENTIAL & COMMERCIAL (0.10%)
DR Horton
8.50%; 04/15/12 50,000 56,375
KB Home
7.75%; 02/01/10 45,000 49,050
105,425
CABLE TV (0.26%)
Charter Communications /4/
8.00%; 04/30/12 35,000 35,394
Comcast
5.30%; 01/15/14 5,000 5,099
5.85%; 01/15/10 5,000 5,378
7.05%; 03/15/33 35,000 39,533
Comcast Cable Communications
6.75%; 01/30/11 25,000 28,045
Cox Communications
6.75%; 03/15/11 45,000 49,432
EchoStar DBS /4/
6.63%; 10/01/14 60,000 61,350
Rogers Cablesystems
10.00%; 03/15/05 40,000 41,000
265,231
CASINO HOTELS (0.22%)
Aztar
7.88%; 06/15/14 55,000 59,675
Harrah's Operating
5.50%; 07/01/10 50,000 52,173
Mandalay Resort Group
6.45%; 02/01/06 25,000 25,781
MGM Mirage
7.25%; 10/15/06 35,000 37,275
Park Place Entertainment
8.50%; 11/15/06 45,000 49,500
224,404
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
CELLULAR TELECOMMUNICATIONS (0.49%)
AT&T Wireless Services
7.88%; 03/01/11 $ 65,000 $ 77,435
8.13%; 05/01/12 65,000 79,299
Dobson Cellular Systems /1/ /3/ /4/
0.00%; 11/01/11 55,000 56,512
PTC International Finance II
11.25%; 12/01/09 75,000 79,500
Rural Cellular /4/
8.25%; 03/15/12 20,000 21,000
Telus
7.50%; 06/01/07 40,000 43,951
8.00%; 06/01/11 10,000 11,824
US Unwired
5.79%; 06/15/10 60,000 61,650
Verizon Wireless Capital
5.38%; 12/15/06 65,000 68,129
499,300
CHEMICALS-DIVERSIFIED (0.17%)
Chevron Phillips Chemical
7.00%; 03/15/11 50,000 56,710
FMC
6.75%; 05/05/05 55,000 55,825
ICI Wilmington I
5.63%; 12/01/13 30,000 31,044
Lyondell Chemical
9.88%; 05/01/07 27,000 28,552
172,131
CHEMICALS-SPECIALTY (0.06%)
Lubrizol
4.63%; 10/01/09 45,000 45,441
6.50%; 10/01/34 20,000 20,156
65,597
COAL (0.03%)
Massey Energy
6.63%; 11/15/10 30,000 31,275
COATINGS & PAINT (0.03%)
Valspar
6.00%; 05/01/07 25,000 26,573
COMMERCIAL BANKS (0.07%)
Union Planters Bank
5.13%; 06/15/07 50,000 52,743
United Overseas Bank /4/
4.50%; 07/02/13 20,000 19,692
72,435
COMMERCIAL SERVICE-FINANCE (0.05%)
Dollar Financial Group
9.75%; 11/15/11 50,000 53,375
COMMERCIAL SERVICES (0.06%)
Iron Mountain
8.25%; 07/01/11 55,000 57,475
COMPUTER SERVICES (0.09%)
Unisys
7.25%; 01/15/05 20,000 20,200
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
COMPUTER SERVICES (CONTINUED)
Unisys (continued)
7.88%; 04/01/08 $ 35,000 $ 35,919
8.13%; 06/01/06 35,000 37,187
93,306
COMPUTERS-INTEGRATED SYSTEMS (0.02%)
NCR
7.13%; 06/15/09 15,000 16,730
COMPUTERS-MEMORY DEVICES (0.05%)
Seagate Technology HDD Holdings
8.00%; 05/15/09 45,000 48,656
CONSUMER PRODUCTS-MISCELLANEOUS (0.07%)
Fortune Brands /4/
7.13%; 11/01/04 75,000 75,000
CONTAINERS-PAPER & PLASTIC (0.04%)
Norampac
6.75%; 06/01/13 40,000 42,200
CREDIT CARD ASSET BACKED SECURITIES (0.81%)
American Express Credit Account
Master Trust
5.53%; 10/15/08 500,000 519,155
Capital One Multi-Asset Execution Trust /3/
2.09%; 12/15/09 95,000 95,059
Chase Credit Card Master Trust /3/
2.07%; 05/15/09 100,000 99,994
MBNA Credit Card Master Note Trust
3.90%; 11/15/07 100,000 100,911
815,119
DATA PROCESSING & MANAGEMENT (0.02%)
Certegy
4.75%; 09/15/08 15,000 15,447
DISTRIBUTION-WHOLESALE (0.05%)
Ingram Micro
9.88%; 08/15/08 50,000 54,875
DIVERSIFIED FINANCIAL SERVICES (0.15%)
General Electric Capital
6.75%; 03/15/32 65,000 75,804
John Deere Capital
3.13%; 12/15/05 40,000 40,145
NiSource Finance
3.20%; 11/01/06 40,000 39,946
155,895
DIVERSIFIED MANUFACTURING OPERATIONS (0.08%)
Tyco International Group
6.00%; 11/15/13 35,000 38,236
6.38%; 02/15/06 40,000 41,759
79,995
DIVERSIFIED MINERALS (0.05%)
Corp. Nacional del Cobre de Chile /4/
5.50%; 10/15/13 20,000 20,936
Principal
Amount Value
---------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
DIVERSIFIED MINERALS (CONTINUED)
Vale Overseas
9.00%; 08/15/13 $ 25,000 $ 28,125
49,061
DIVERSIFIED OPERATIONS (0.03%)
Hutchison Whampoa International /4/
6.50%; 02/13/13 25,000 26,609
E-COMMERCE-PRODUCTS (0.02%)
FTD
7.75%; 02/15/14 25,000 25,063
ELECTRIC-DISTRIBUTION (0.03%)
Detroit Edison
5.40%; 08/01/14 25,000 26,396
ELECTRIC-GENERATION (0.05%)
Korea East-West Power /4/
4.88%; 04/21/11 15,000 15,337
Tenaska Virginia Partners /4/
6.12%; 03/30/24 29,822 31,567
46,904
ELECTRIC-INTEGRATED (1.18%)
Alabama Power
5.70%; 02/15/33 10,000 10,248
Arizona Public Service
5.80%; 06/30/14 35,000 37,235
6.50%; 03/01/12 20,000 22,367
Carolina Power & Light
6.65%; 04/01/08 40,000 43,547
Centerpoint Energy
5.88%; 06/01/08 25,000 26,326
Cincinnati Gas & Electric
5.40%; 06/15/33 15,000 13,978
Consumers Energy
4.25%; 04/15/08 10,000 10,183
Dayton Power & Light /4/
5.13%; 10/01/13 30,000 30,592
Duke Energy /3/
2.42%; 01/15/05 130,000 130,027
Entergy Gulf States
3.60%; 06/01/08 25,000 24,798
Exelon
6.75%; 05/01/11 30,000 33,803
FirstEnergy
6.45%; 11/15/11 55,000 60,262
FPL Group Capital
3.25%; 04/11/06 25,000 25,170
Indianapolis Power & Light
7.38%; 08/01/07 35,000 37,877
Jersey Central Power & Light /4/
5.63%; 05/01/16 15,000 15,733
MSW Energy Holdings II
7.38%; 09/01/10 50,000 52,500
Northeast Utilities
3.30%; 06/01/08 20,000 19,576
NorthWestern /4/
5.88%; 11/01/14 55,000 56,719
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ELECTRIC-INTEGRATED (CONTINUED)
Ohio Power
4.85%; 01/15/14 $ 20,000 $ 20,103
Oncor Electric Delivery
6.38%; 05/01/12 45,000 49,928
Pacific Gas & Electric
3.60%; 03/01/09 25,000 24,821
6.05%; 03/01/34 85,000 87,544
Pepco Holdings
3.75%; 02/15/06 80,000 80,773
4.00%; 05/15/10 10,000 9,774
Power Contract Financing /4/
5.20%; 02/01/06 16,625 16,855
PPL Energy Supply
5.40%; 08/15/14 35,000 35,882
PSEG Power
6.95%; 06/01/12 50,000 56,323
Puget Energy
3.36%; 06/01/08 25,000 24,803
Southern California Edison
5.00%; 01/15/14 15,000 15,367
8.00%; 02/15/07 40,000 44,231
Southwestern Electric Power
4.50%; 07/01/05 50,000 50,620
TXU Energy
6.13%; 03/15/08 20,000 21,482
1,189,447
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.03%)
Flextronics International
6.50%; 05/15/13 25,000 26,250
ELECTRONIC COMPONENTS-SEMICONDUCTOR (0.06%)
Fairchild Semiconductor International
10.50%; 02/01/09 60,000 64,200
ELECTRONICS-MILITARY (0.08%)
L-3 Communications
8.00%; 08/01/08 80,000 82,400
EXPORT/IMPORT BANK (0.03%)
Export-Import Bank of Korea
4.50%; 08/12/09 30,000 30,684
FEDERAL & FEDERALLY SPONSORED CREDIT (0.06%)
Housing Urban Development
2.99%; 08/01/05 60,000 60,294
FILTRATION & SEPARATION PRODUCTS (0.04%)
Polypore /4/
8.75%; 05/15/12 35,000 36,575
FINANCE-AUTO LOANS (0.25%)
Ford Motor Credit
6.13%; 01/09/06 35,000 36,164
6.50%; 01/25/07 20,000 21,013
6.88%; 02/01/06 125,000 129,959
7.88%; 06/15/10 25,000 27,741
General Motors Acceptance
5.63%; 05/15/09 15,000 15,147
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
FINANCE-AUTO LOANS (CONTINUED)
General Motors Acceptance (continued)
8.00%; 11/01/31 $ 20,000 $ 20,701
250,725
FINANCE-COMMERCIAL (0.03%)
CIT Group
5.13%; 09/30/14 35,000 35,220
FINANCE-CONSUMER LOANS (0.02%)
Household Finance
4.75%; 07/15/13 20,000 19,970
FINANCE-CREDIT CARD (0.13%)
Capital One Bank
5.00%; 06/15/09 30,000 31,170
6.88%; 02/01/06 100,000 104,953
136,123
FINANCE-INVESTMENT BANKER & BROKER (0.98%)
BCP Caylux Holdings Luxembourg /4/
9.63%; 06/15/14 40,000 44,800
Bear Stearns
2.43%; 01/30/09 /3/ 130,000 130,313
2.50%; 06/25/34 /3/ 70,000 70,208
3.00%; 03/30/06 40,000 40,143
4.00%; 01/31/08 45,000 45,731
Citigroup
5.88%; 02/22/33 20,000 20,261
6.63%; 06/15/32 50,000 55,790
E*Trade Financial /4/
8.00%; 06/15/11 50,000 52,750
Goldman Sachs Group
3.88%; 01/15/09 35,000 35,238
6.60%; 01/15/12 110,000 123,583
Lehman Brothers Holdings
4.80%; 03/13/14 50,000 49,807
Merrill Lynch
1.95%; 02/06/09 /3/ 130,000 130,004
5.45%; 07/15/14 40,000 41,774
Morgan Stanley
4.75%; 04/01/14 45,000 44,083
5.30%; 03/01/13 25,000 25,958
6.75%; 04/15/11 70,000 79,454
989,897
FINANCE-MORTGAGE LOAN/BANKER (1.78%)
Countrywide Home Loan
4.25%; 12/19/07 25,000 25,464
4.62%; 12/19/33 /3/ 200,000 198,200
Federal Home Loan Mortgage
3.25%; 02/25/08 225,000 223,759
4.50%; 07/15/13 375,000 379,117
4.63%; 05/28/13 45,000 44,956
4.75%; 10/11/12 80,000 79,930
4.75%; 05/06/13 75,000 74,309
5.13%; 11/07/13 20,000 20,158
6.75%; 03/15/31 256,000 310,055
Federal National Mortgage Association
2.88%; 05/19/08 50,000 49,151
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
FINANCE-MORTGAGE LOAN/BANKER (CONTINUED)
Federal National Mortgage Association (continued)
3.70%; 11/01/07 $ 230,000 $ 231,899
4.32%; 07/26/07 90,000 91,215
4.75%; 02/21/13 75,000 74,917
1,803,130
FOOD-MISCELLANEOUS/DIVERSIFIED (0.29%)
Chiquita Brands International /4/
7.50%; 11/01/14 45,000 46,125
ConAgra Foods
7.50%; 09/15/05 75,000 77,808
Corn Products International
8.45%; 08/15/09 40,000 45,800
Kraft Foods
4.63%; 11/01/06 85,000 87,486
6.25%; 06/01/12 35,000 38,522
295,741
FOOD-RETAIL (0.10%)
Delhaize America
7.38%; 04/15/06 45,000 47,527
Kroger
6.20%; 06/15/12 25,000 27,389
7.50%; 04/01/31 20,000 23,502
98,418
GAS-DISTRIBUTION (0.09%)
Colorado Interstate Gas
10.00%; 06/15/05 50,000 52,375
Sempra Energy
4.75%; 05/15/09 35,000 35,947
88,322
HOME DECORATION PRODUCTS (0.02%)
Newell Rubbermaid
4.00%; 05/01/10 10,000 9,785
4.63%; 12/15/09 15,000 15,377
25,162
HOME EQUITY-OTHER (0.50%)
Asset Backed Funding Certificates /3/
2.12%; 02/25/30 45,000 44,998
Long Beach Mortgage Loan Trust /3/
2.46%; 06/25/34 25,000 24,978
3.01%; 06/25/34 30,000 30,036
New Century Home Equity Loan Trust /3/
2.65%; 01/25/34 115,000 115,337
Option One Mortgage Loan Trust /3/
2.46%; 05/25/34 70,000 69,911
2.98%; 05/25/34 70,000 69,997
Specialty Underwriting & Residential Finance /3/
2.44%; 02/25/35 65,000 64,997
Wells Fargo Home Equity Trust /3/
2.43%; 04/25/34 90,000 89,997
510,251
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
HOME EQUITY-SEQUENTIAL (0.09%)
Ameriquest Mortgage Securities /3/
2.13%; 04/25/34 $ 75,000 $ 74,996
Residential Asset Securities
4.59%; 10/25/26 13,531 13,541
88,537
HOTELS & MOTELS (0.02%)
Host Marriott
7.88%; 08/01/08 18,000 18,495
INVESTMENT COMPANIES (0.08%)
Canadian Oil Sands /4/
4.80%; 08/10/09 80,000 81,738
LIFE & HEALTH INSURANCE (0.01%)
Nationwide Financial Services
5.63%; 02/13/15 10,000 10,328
MACHINERY-FARM (0.12%)
Case
7.25%; 08/01/05 75,000 77,062
Case New Holland /4/
6.00%; 06/01/09 40,000 40,000
117,062
MEDICAL INFORMATION SYSTEM (0.05%)
NDCHealth
10.50%; 12/01/12 50,000 53,000
MEDICAL PRODUCTS (0.03%)
Medical Device Manufacturing /4/
10.00%; 07/15/12 25,000 26,750
MEDICAL-DRUGS (0.14%)
Biovail
7.88%; 04/01/10 45,000 46,688
Eli Lilly
5.50%; 07/15/06 60,000 62,685
Schering-Plough
5.30%; 12/01/13 30,000 31,114
140,487
MEDICAL-HMO (0.20%)
Anthem
4.88%; 08/01/05 200,000 202,327
MEDICAL-HOSPITALS (0.06%)
HCA
6.95%; 05/01/12 50,000 52,720
7.13%; 06/01/06 10,000 10,490
63,210
MEDICAL-WHOLESALE DRUG DISTRIBUTION (0.04%)
Bergen Brunswig
7.25%; 06/01/05 35,000 35,700
METAL PROCESSORS & FABRICATION (0.04%)
Mueller Group
10.00%; 05/01/12 35,000 37,800
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
METAL-DIVERSIFIED (0.03%)
Falconbridge
5.38%; 06/01/15 $ 10,000 $ 10,077
7.35%; 06/05/12 15,000 17,224
27,301
MISCELLANEOUS INVESTING (0.08%)
iStar Financial
4.88%; 01/15/09 45,000 45,938
United Dominion Realty Trust
6.50%; 06/15/09 30,000 32,810
78,748
MISCELLANEOUS MANUFACTURERS (0.06%)
Samsonite
8.88%; 06/01/11 55,000 58,575
MONEY CENTER BANKS (0.21%)
Bank of America
4.88%; 09/15/12 60,000 61,619
7.40%; 01/15/11 60,000 70,295
JP Morgan Chase
5.13%; 09/15/14 75,000 76,206
208,120
MORTGAGE BACKED SECURITIES (2.01%)
Bear Stearns Adjustable Rate Mortgage Trust /3/ /4/
3.52%; 06/25/34 50,000 49,365
Bear Stearns Commercial
Mortgage Securities
0.65%; 05/11/39 /3/ /4/ 448,646 12,707
5.47%; 06/11/41 110,000 116,289
Credit Suisse First Boston
Mortgage Securities /3/
2.53%; 05/25/34 50,000 49,712
CS First Boston Mortgage Securities /3/
0.57%; 05/15/36 /4/ 827,328 18,427
0.68%; 07/15/36 /4/ 737,859 24,197
2.53%; 06/25/34 /4/ 30,000 29,913
7.68%; 09/15/41 25,000 28,970
DLJ Commercial Mortgage
6.59%; 02/18/31 700,000 764,236
DLJ Mortgage Acceptance /4/
6.99%; 10/15/30 100,000 106,976
First Union National Bank
Commercial Mortgage
8.09%; 05/17/32 40,000 47,266
Greenwich Capital Commercial Funding /3/ /4/
0.39%; 06/10/36 1,483,000 27,422
JP Morgan Chase Commercial
Mortgage Securities
1.22%; 01/12/39 /3/ /4/ 650,000 34,041
6.04%; 11/15/35 150,000 161,353
LB-UBS Commercial Mortgage Trust
0.14%; 03/15/36 /3/ /4/ 357,668 10,060
0.63%; 03/15/34 /3/ /4/ 708,201 15,399
0.75%; 08/15/36 /4/ 565,325 19,621
1.23%; 03/15/36 /3/ /4/ 422,905 22,050
5.97%; 03/15/26 325,000 347,656
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
MORTGAGE BACKED SECURITIES (CONTINUED)
Merrill Lynch Mortgage Investors /3/
2.49%; 01/25/35 $ 90,000 $ 89,996
Merrill Lynch Mortgage Trust /3/
0.60%; 02/12/42 1,471,015 36,134
Morgan Stanley Capital I /3/ /4/
1.12%; 01/13/41 425,000 22,336
2,034,126
MOTION PICTURES & SERVICES (0.02%)
Alliance Atlantis Communications
13.00%; 12/15/09 20,000 21,500
MULTI-LINE INSURANCE (0.13%)
Metropolitan Life Global Funding I /3/ /4/
2.04%; 03/17/09 130,000 129,811
MULTIMEDIA (0.34%)
AOL Time Warner
5.63%; 05/01/05 20,000 20,302
6.15%; 05/01/07 70,000 74,878
7.63%; 04/15/31 60,000 71,089
Gannett
4.95%; 04/01/05 75,000 75,740
News America
4.75%; 03/15/10 15,000 15,435
6.55%; 03/15/33 30,000 32,276
6.63%; 01/09/08 35,000 38,303
Viacom
6.63%; 05/15/11 15,000 16,912
344,935
MUTUAL INSURANCE (0.06%)
Liberty Mutual Group /4/
5.75%; 03/15/14 35,000 34,304
7.00%; 03/15/34 25,000 25,184
59,488
NON-HAZARDOUS WASTE DISPOSAL (0.04%)
Allied Waste North America
5.75%; 02/15/11 20,000 18,450
Waste Management
5.00%; 03/15/14 20,000 20,223
38,673
OFFICE AUTOMATION & EQUIPMENT (0.06%)
Xerox
6.88%; 08/15/11 55,000 58,713
OIL & GAS DRILLING (0.11%)
Consolidated Natural Gas
5.00%; 03/01/14 25,000 25,260
Nabors Holdings
4.88%; 08/15/09 45,000 46,657
Precision Drilling
5.63%; 06/01/14 40,000 42,228
114,145
OIL COMPANY-EXPLORATION & PRODUCTION (0.50%)
Canadian Natural Resources
7.20%; 01/15/32 25,000 29,545
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
OIL COMPANY-EXPLORATION & PRODUCTION (CONTINUED)
Chesapeake Energy
8.38%; 11/01/08 $ 40,000 $ 43,600
Devon Financing
7.88%; 09/30/31 40,000 50,457
EnCana
4.75%; 10/15/13 20,000 19,972
Husky Energy
6.15%; 06/15/19 35,000 37,705
Nexen
5.05%; 11/20/13 15,000 15,055
7.88%; 03/15/32 25,000 31,161
Pemex Project Funding Master Trust
7.88%; 02/01/09 185,000 208,125
Swift Energy
7.63%; 07/15/11 60,000 65,100
500,720
OIL COMPANY-INTEGRATED (0.16%)
Occidental Petroleum
4.00%; 11/30/07 25,000 25,474
PanCanadian Energy
7.20%; 11/01/31 35,000 41,027
Petrobras International Finance
8.38%; 12/10/18 40,000 40,200
9.13%; 07/02/13 30,000 32,700
Petronas Capital /4/
7.88%; 05/22/22 20,000 24,645
164,046
OIL FIELD MACHINERY & EQUIPMENT (0.09%)
Cooper Cameron
2.65%; 04/15/07 50,000 49,135
Grant Prideco
9.00%; 12/15/09 40,000 44,900
94,035
OIL REFINING & MARKETING (0.33%)
CITGO Petroleum /4/
6.00%; 10/15/11 40,000 40,700
Enterprise Products Operating /4/
4.00%; 10/15/07 50,000 50,394
Enterprise Products Partners
6.38%; 02/01/13 15,000 16,220
Frontier Oil
11.75%; 11/15/09 75,000 79,687
Tesoro Petroleum
8.00%; 04/15/08 40,000 43,500
9.63%; 11/01/08 35,000 38,588
Valero Energy
6.88%; 04/15/12 55,000 62,600
331,689
PAPER & RELATED PRODUCTS (0.37%)
Boise Cascade /4/
5.01%; 10/15/12 45,000 46,012
International Paper
3.80%; 04/01/08 80,000 80,145
6.75%; 09/01/11 25,000 28,100
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
PAPER & RELATED PRODUCTS (CONTINUED)
Norske Skog /4/
7.63%; 10/15/11 $ 50,000 $ 56,967
Sappi Papier Holding /4/
6.75%; 06/15/12 20,000 22,154
Smurfit Capital Funding
6.75%; 11/20/05 40,000 41,300
Weyerhaeuser
6.13%; 03/15/07 60,000 63,978
6.75%; 03/15/12 30,000 33,953
372,609
PETROCHEMICALS (0.05%)
Braskem /4/
11.75%; 01/22/14 45,000 50,175
PHYSICAL THERAPY & REHABILITATION CENTERS (0.08%)
HealthSouth
6.88%; 06/15/05 80,000 80,400
PHYSICIAN PRACTICE MANAGEMENT (0.06%)
US Oncology /4/
9.00%; 08/15/12 55,000 59,400
PIPELINES (0.25%)
Buckeye Partners
4.63%; 07/15/13 35,000 34,250
Duke Capital
4.37%; 03/01/09 25,000 25,349
Duke Energy Field Services
7.88%; 08/16/10 20,000 23,654
Enbridge Energy Partners
4.00%; 01/15/09 15,000 14,919
Equitable Resources
5.15%; 11/15/12 25,000 26,121
National Fuel Gas
5.25%; 03/01/13 25,000 25,752
TEPPCO Partners
6.13%; 02/01/13 45,000 48,445
Texas Eastern Transmission
5.25%; 07/15/07 50,000 52,353
250,843
PROPERTY & CASUALTY INSURANCE (0.63%)
ACE
6.00%; 04/01/07 70,000 73,478
ACE INA Holdings
5.88%; 06/15/14 15,000 15,591
Arch Capital Group
7.35%; 05/01/34 60,000 63,266
Infinity Property & Casualty
5.50%; 02/18/14 55,000 54,876
Markel
6.80%; 02/15/13 55,000 59,400
St. Paul
5.75%; 03/15/07 80,000 83,839
W.R. Berkley
5.13%; 09/30/10 90,000 91,642
5.88%; 02/15/13 20,000 20,590
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
PROPERTY & CASUALTY INSURANCE (CONTINUED)
XL Capital
5.25%; 09/15/14 $ 100,000 $ 99,835
6.50%; 01/15/12 70,000 76,417
638,934
PUBLISHING-BOOKS (0.06%)
Reed Elsevier Capital
6.13%; 08/01/06 55,000 57,797
RECREATIONAL CENTERS (0.05%)
AMF Bowling Worldwide /4/
10.00%; 03/01/10 45,000 48,150
REGIONAL BANKS (0.60%)
Bank One
7.63%; 08/01/05 80,000 83,078
KeyCorp
4.63%; 05/16/05 100,000 101,067
PNC Funding
5.75%; 08/01/06 100,000 104,728
SunTrust Banks
5.05%; 07/01/07 35,000 36,631
Wachovia
5.25%; 08/01/14 40,000 41,321
5.63%; 12/15/08 100,000 107,744
Wells Fargo
3.12%; 08/15/08 30,000 29,442
5.13%; 02/15/07 100,000 104,344
608,355
REINSURANCE (0.12%)
Berkshire Hathaway Finance
4.63%; 10/15/13 55,000 55,220
Endurance Specialty Holdings
7.00%; 07/15/34 70,000 71,215
126,435
RENTAL-AUTO & EQUIPMENT (0.02%)
United Rentals
6.50%; 02/15/12 20,000 19,800
RETAIL-ARTS & CRAFTS (0.05%)
Michaels Stores
9.25%; 07/01/09 50,000 53,938
RETAIL-DRUG STORE (0.06%)
Rite Aid
12.50%; 09/15/06 50,000 56,750
RETAIL-MAJOR DEPARTMENT STORE (0.05%)
J.C. Penney
8.13%; 04/01/27 45,000 49,613
RETAIL-PROPANE DISTRIBUTION (0.04%)
Ferrellgas
6.75%; 05/01/14 35,000 36,225
RETAIL-VISION SERVICE CENTER (0.01%)
Cole National Group
8.63%; 08/15/07 15,000 15,216
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
SAVINGS & LOANS-THRIFTS (0.16%)
Washington Mutual
3.81%; 06/25/34 $ 70,000 $ 69,328
3.97%; 03/25/33 72,000 71,760
5.50%; 01/15/13 15,000 15,683
156,771
SOVEREIGN (0.30%)
Mexico Government
2.75%; 01/13/09 /3/ 50,000 50,350
8.30%; 08/15/31 35,000 40,460
8.38%; 01/14/11 140,000 165,200
South Africa Government
6.50%; 06/02/14 40,000 43,450
299,460
SPECIAL PURPOSE ENTITY (0.14%)
Borden US Finance/Nova Scotia Finance /4/
9.00%; 07/15/14 40,000 43,750
Fondo Latinoamericano de Reservas /4/
3.00%; 08/01/06 45,000 45,132
Jostens /4/
7.63%; 10/01/12 50,000 51,750
140,632
STEEL PRODUCERS (0.08%)
International Steel Group
6.50%; 04/15/14 75,000 80,250
STEEL-SPECIALTY (0.06%)
CSN Islands VIII /4/
9.75%; 12/16/13 60,000 60,900
SUPRANATIONAL BANK (0.12%)
Corp Andina de Fomento
6.75%; 03/15/05 65,000 65,938
6.88%; 03/15/12 45,000 50,470
116,408
TELEPHONE-INTEGRATED (1.14%)
British Telecommunications /3/
7.88%; 12/15/05 230,000 242,959
Deutsche Telekom International Finance
5.25%; 07/22/13 35,000 36,187
8.50%; 06/15/10 /3/ 30,000 36,143
France Telecom /3/
8.50%; 03/01/11 70,000 84,072
MCI
5.91%; 05/01/07 70,000 69,825
Qwest /4/
7.88%; 09/01/11 50,000 53,250
SBC Communications
4.13%; 09/15/09 35,000 35,175
6.15%; 09/15/34 20,000 20,204
Sprint Capital
6.00%; 01/15/07 40,000 42,298
6.13%; 11/15/08 35,000 37,921
6.88%; 11/15/28 75,000 80,544
6.90%; 05/01/19 30,000 33,585
Telecom Italia Capital
4.00%; 01/15/10 /4/ 190,000 188,232
Principal
Amount Value
-------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
TELEPHONE-INTEGRATED (CONTINUED)
Telecom Italia Capital (continued)
5.25%; 11/15/13 $ 50,000 $ 51,194
6.38%; 11/15/33 20,000 20,757
Telefonos de Mexico
4.50%; 11/19/08 10,000 10,088
8.25%; 01/26/06 100,000 106,325
1,148,759
TEXTILE-HOME FURNISHINGS (0.03%)
Mohawk Industries
6.50%; 04/15/07 30,000 32,079
THEATERS (0.03%)
Cinemark /1/ /3/
0.00%; 03/15/14 50,000 35,375
TRANSPORT-RAIL (0.05%)
Canadian National Railway
4.25%; 08/01/09 40,000 40,703
Union Pacific
4.70%; 01/02/24 15,000 14,601
55,304
TRANSPORT-SERVICES (0.05%)
FedEx
1.88%; 04/01/05 30,000 30,017
3.50%; 04/01/09 20,000 19,742
49,759
VENTURE CAPITAL (0.04%)
Arch Western Finance
6.75%; 07/01/13 35,000 37,188
VITAMINS & NUTRITION PRODUCTS (0.06%)
NBTY
8.63%; 09/15/07 30,000 30,300
WH Holdings/WH Capital
9.50%; 04/01/11 25,000 27,375
57,675
WIRE & CABLE PRODUCTS (0.04%)
Superior Essex Communications
9.00%; 04/15/12 40,000 40,600
TOTAL BONDS 20,936,173
Principal
Amount Value
----------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES (4.93%)
5.00%; 12/01/17 119,400 121,909
5.00%; 03/01/18 150,292 153,463
5.00%; 05/01/18 897,309 916,244
5.00%; 06/01/34 20,338 20,301
5.00%; 06/01/34 925,001 923,329
5.00%; 11/01/34 /5/ 900,000 897,187
5.50%; 03/01/33 187,720 191,537
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (CONTINUED)
5.50%; 05/01/33 $ 613,028 $ 625,492
5.50%; 10/01/33 172,911 176,426
5.50%; 11/01/34 /5/ 250,000 254,610
6.00%; 01/01/29 127,799 132,650
6.50%; 12/01/20 40,361 42,647
6.50%; 05/01/31 71,838 75,627
6.50%; 06/01/31 95,977 101,039
7.00%; 12/01/27 106,339 113,206
7.00%; 09/01/31 38,401 40,797
7.50%; 11/01/30 26,048 27,975
7.50%; 11/01/30 21,612 23,211
7.50%; 01/01/31 24,499 26,312
8.00%; 12/01/30 107,648 116,909
TOTAL FHLMC CERTIFICATES 4,980,871
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES (4.65%)
4.50%; 05/01/10 233,540 236,843
4.50%; 11/01/34 /5/ 225,000 218,390
5.00%; 03/01/18 98,193 100,349
5.00%; 11/01/34 /5/ 300,000 298,875
5.50%; 01/01/33 398,313 406,752
5.50%; 07/01/33 467,885 477,328
5.50%; 09/01/33 446,216 455,222
5.50%; 11/01/34 /5/ 1,750,000 1,781,719
6.00%; 06/01/06 9,458 9,654
6.00%; 04/01/08 77,576 81,512
6.00%; 03/01/09 1,454 1,535
6.00%; 05/01/09 61,943 65,412
6.00%; 05/01/09 31,956 33,745
6.00%; 11/01/09 2,058 2,174
6.00%; 11/01/09 45,074 47,598
6.00%; 12/01/09 8,791 9,246
6.00%; 05/01/10 31,038 32,775
6.00%; 12/01/33 257,514 267,369
6.50%; 05/01/06 98,877 101,510
6.50%; 03/01/08 64,083 67,709
TOTAL FNMA CERTIFICATES 4,695,717
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES (1.30%)
6.00%; 06/20/26 145,532 151,920
6.00%; 09/20/26 98,453 102,741
6.00%; 06/20/27 52,325 54,621
6.00%; 06/15/32 53,601 55,867
6.00%; 12/15/33 155,752 162,183
6.50%; 10/20/31 230,600 243,544
6.50%; 05/15/32 326,431 345,777
7.00%; 05/15/31 62,963 67,237
7.00%; 02/15/32 121,291 129,493
TOTAL GNMA CERTIFICATES 1,313,383
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------
TREASURY BONDS (5.23%)
U.S. Treasury
3.63%; 07/15/09 $ 300,000 $ 304,793
3.88%; 02/15/13 200,000 200,062
4.00%; 02/15/14 175,000 175,007
4.75%; 05/15/14 325,000 343,637
5.00%; 02/15/11 450,000 485,930
5.38%; 02/15/31 275,000 298,687
6.25%; 05/15/30 225,000 270,562
7.13%; 02/15/23 240,000 309,234
7.25%; 05/15/16 50,000 63,430
7.50%; 11/15/16 135,000 174,841
8.00%; 11/15/21 285,000 395,493
U.S. Treasury Inflation-Indexed Obligations
2.00%; 01/15/14 179,477 186,046
3.38%; 01/15/07 598,035 640,879
3.63%; 01/15/08 439,868 485,195
3.88%; 01/15/09 433,309 491,619
4.25%; 01/15/10 225,266 264,036
U.S. Treasury Strip /1/
0.00%; 02/15/15 300,000 193,065
TOTAL TREASURY BONDS 5,282,516
Principal
Amount Value
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.57%)
FINANCE-CONSUMER LOANS (2.57%)
Investment in Joint Trading Account; Household Finance
1.84%; 11/01/04 2,597,896 2,597,896
TOTAL COMMERCIAL PAPER 2,597,896
Maturity
Amount Value
---------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.77%)
Bear Stearns; 1.85%; dated 10/29/04 maturing 11/01/04
(collateralized by FNMA; $794,148; 11/17/11) /6/ $ 778,696 $ 778,576
TOTAL REPURCHASE AGREEMENTS 778,576
------------
TOTAL PORTFOLIO INVESTMENTS (103.85%) 104,898,965
LIABILITIES, NET OF CASH, RECEIVABLES, AND OTHER ASSETS (-3.85%) (3,890,836)
TOTAL NET ASSETS (100.00%) $101,008,129
---------------
SCHEDULE OF INVESTMENTS
PRINCIPAL BALANCED FUND, INC.
OCTOBER 31, 2004
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Variable rate.
/4 /Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the end of the period, the
value of these securities totaled $ 2,405,416 or 2.38% of net assets.
/5 /Security or a portion of the security was purchased in a "to-be-announced"
("TBA") transaction. See Notes to Financial Statements.
/6 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 7,219,777
Unrealized Depreciation (5,678,514)
------------
Net Unrealized Appreciation (Depreciation) 1,541,263
Cost for federal income tax purposes $103,357,702
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
$
Financial 20,411,458 19.46%
Consumer, Non-cyclical 14,094,373 13.44
Mortgage Securities 13,298,167 12.68
Communications 9,597,830 9.15
Consumer, Cyclical 8,904,199 8.49
Industrial 7,973,721 7.60
Government 7,541,070 7.19
Technology 7,235,416 6.90
Energy 7,100,454 6.77
Utilities 3,582,505 3.41
Basic Materials 2,405,304 2.29
Asset Backed Securities 2,113,380 2.01
Funds 451,637 0.43
Diversified 189,451 0.18
TOTAL $104,898,965 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL BOND FUND, INC.
OCTOBER 31, 2004
Principal Amount
Value
- ------------------------------------------------------------------------------------------------------
BONDS (55.15%)
ADVANCED MATERIALS & PRODUCTS (0.13%)
Hexcel
9.75%; 01/15/09 $ 250,000 $ 263,125
AEROSPACE & DEFENSE EQUIPMENT (0.11%)
K&F Industries
9.25%; 10/15/07 225,000 229,500
AGRICULTURAL OPERATIONS (0.42%)
Bunge Limited Finance
4.38%; 12/15/08 430,000 434,610
5.35%; 04/15/14 270,000 276,461
5.88%; 05/15/13 160,000 169,606
880,677
AIRLINES (0.09%)
Southwest Airlines
5.10%; 05/01/06 194,844 199,486
APPAREL MANUFACTURERS (0.06%)
Phillips Van-Heusen
7.75%; 11/15/23 125,000 125,625
ASSET BACKED SECURITIES (1.13%)
Bear Stearns Asset Backed Securities /1/
2.53%; 03/25/34 515,000 514,976
Chase Funding Mortgage Loan
Asset Backed Certificates /1/
2.22%; 09/25/33 400,000 399,982
2.43%; 09/25/33 420,000 419,981
Countrywide Asset Backed Certificates
3.61%; 04/25/30 490,000 492,107
Master Adjustable Rate Mortgages Trust /1/
3.03%; 03/25/34 545,000 548,778
2,375,824
AUTO-CARS & LIGHT TRUCKS (0.85%)
DaimlerChrysler Holding
2.71%; 08/08/06 /1/ 650,000 657,833
4.05%; 06/04/08 400,000 402,697
4.75%; 01/15/08 75,000 77,270
7.25%; 01/18/06 225,000 236,509
General Motors
8.25%; 07/15/23 275,000 286,467
Hyundai Motor Manufacturing /2/
5.30%; 12/19/08 130,000 135,261
1,796,037
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.83%)
Collins & Aikman Products
10.75%; 12/31/11 125,000 124,688
Delco Remy International
8.63%; 12/15/07 250,000 255,000
Delphi /1/ /2/
2.44%; 12/01/04 325,000 325,000
Lear
7.96%; 05/15/05 320,000 328,450
Stanadyne /2/
10.00%; 08/15/14 150,000 157,500
Principal
Amount Value
- -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (CONTINUED)
Tenneco Automotive
11.63%; 10/15/09 $ 515,000 $ 547,187
1,737,825
AUTOMOBILE SEQUENTIAL (0.72%)
Capital Auto Receivables Asset Trust
4.50%; 10/15/07 950,000 959,334
Toyota Auto Receivables Owner Trust
2.65%; 11/15/06 555,614 556,204
1,515,538
BREWERY (0.39%)
Cia Brasileira de Bebidas
10.50%; 12/15/11 300,000 369,000
Coors Brewing
6.38%; 05/15/12 245,000 271,747
SABMiller /2/
6.63%; 08/15/33 150,000 168,804
809,551
BROADCASTING SERVICES & PROGRAMMING (0.44%)
Clear Channel Communications
5.75%; 01/15/13 415,000 429,792
Grupo Televisa
8.50%; 03/11/32 100,000 114,250
Liberty Media
3.50%; 09/25/06 385,000 385,383
929,425
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.53%)
CRH America
6.40%; 10/15/33 155,000 166,821
6.95%; 03/15/12 229,000 263,227
Masco /1/ /2/
2.11%; 03/09/07 675,000 676,138
1,106,186
BUILDING PRODUCTS-AIR & HEATING (0.10%)
York International
6.63%; 08/15/06 200,000 211,265
BUILDING PRODUCTS-WOOD (0.04%)
Celulosa Arauco y Constitucion
5.13%; 07/09/13 90,000 89,038
BUILDING-RESIDENTIAL & COMMERCIAL (0.12%)
DR Horton
5.63%; 09/15/14 250,000 247,812
CABLE TV (0.81%)
Comcast
5.30%; 01/15/14 50,000 50,984
5.85%; 01/15/10 30,000 32,266
7.05%; 03/15/33 230,000 259,790
Comcast Cable Communications
6.75%; 01/30/11 220,000 246,797
Cox Communications
6.75%; 03/15/11 305,000 335,042
EchoStar DBS /2/
6.63%; 10/01/14 350,000 357,875
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
CABLE TV (CONTINUED)
Kabel Deutschland /2/
10.63%; 07/01/14 $ 150,000 $ 168,000
Rogers Cablesystems
10.00%; 03/15/05 250,000 256,250
1,707,004
CASINO HOTELS (0.22%)
Aztar
7.88%; 06/15/14 150,000 162,750
Harrah's Operating
5.50%; 07/01/10 290,000 302,603
465,353
CELLULAR TELECOMMUNICATIONS (1.49%)
America Movil /2/
5.50%; 03/01/14 435,000 427,502
AT&T Wireless Services
7.88%; 03/01/11 295,000 351,435
8.13%; 05/01/12 480,000 585,589
Nextel Communications
6.88%; 10/31/13 150,000 162,750
PTC International Finance II
11.25%; 12/01/09 420,000 445,200
Rural Cellular /2/
8.25%; 03/15/12 120,000 126,000
Telus
7.50%; 06/01/07 445,000 488,955
8.00%; 06/01/11 40,000 47,296
Verizon Wireless Capital
5.38%; 12/15/06 480,000 503,104
3,137,831
CHEMICALS-DIVERSIFIED (0.65%)
Chevron Phillips Chemical
5.38%; 06/15/07 240,000 251,532
7.00%; 03/15/11 265,000 300,562
FMC
6.75%; 05/05/05 315,000 319,725
ICI Wilmington I
5.63%; 12/01/13 220,000 227,653
Lyondell Chemical
9.88%; 05/01/07 156,000 164,970
Phibro Animal Health
9.88%; 06/01/08 125,000 112,500
1,376,942
CHEMICALS-SPECIALTY (0.42%)
Hercules
6.75%; 10/15/29 200,000 204,000
Lubrizol
4.63%; 10/01/09 265,000 267,596
6.50%; 10/01/34 125,000 125,979
Rhodia
10.25%; 06/01/10 175,000 189,875
Westlake Chemical
8.75%; 07/15/11 88,000 99,220
886,670
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
COAL (0.06%)
Massey Energy
6.63%; 11/15/10 $ 120,000 $ 125,100
COATINGS & PAINT (0.15%)
Resolution Performance Products
8.00%; 12/15/09 150,000 155,250
Valspar
6.00%; 05/01/07 160,000 170,064
325,314
COMMERCIAL BANKS (0.19%)
Union Planters Bank
5.13%; 06/15/07 240,000 253,168
United Overseas Bank /2/
4.50%; 07/02/13 150,000 147,688
400,856
COMMERCIAL SERVICES (0.23%)
Iron Mountain
6.63%; 01/01/16 150,000 149,250
8.25%; 07/01/11 315,000 329,175
478,425
COMPUTER SERVICES (0.17%)
Unisys
7.25%; 01/15/05 125,000 126,250
7.88%; 04/01/08 220,000 225,775
352,025
COMPUTERS-INTEGRATED SYSTEMS (0.04%)
NCR
7.13%; 06/15/09 75,000 83,649
CONTAINERS-METAL & GLASS (0.32%)
Crown European Holdings
10.88%; 03/01/13 250,000 296,875
Owens-Brockway
8.75%; 11/15/12 200,000 225,500
Silgan Holdings
6.75%; 11/15/13 150,000 154,500
676,875
CONTAINERS-PAPER & PLASTIC (0.23%)
Intertape Polymer Group /2/
8.50%; 08/01/14 200,000 198,750
Norampac
6.75%; 06/01/13 275,000 290,125
488,875
CREDIT CARD ASSET BACKED SECURITIES (1.45%)
American Express Credit Account Master Trust /1/
2.12%; 09/15/11 200,000 200,403
Capital One Multi-Asset Execution Trust /1/
2.09%; 12/15/09 550,000 550,340
Chase Credit Card Master Trust /1/
2.07%; 05/15/09 750,000 749,954
MBNA Master Credit Card Trust
6.90%; 01/15/08 1,500,000 1,551,911
3,052,608
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
DATA PROCESSING & MANAGEMENT (0.07%)
Certegy
4.75%; 09/15/08 $ 135,000 $ 139,026
DISTRIBUTION-WHOLESALE (0.12%)
Ingram Micro
9.88%; 08/15/08 225,000 246,937
DIVERSIFIED FINANCIAL SERVICES (0.78%)
General Electric Capital
0.70%; 03/10/40 /1/ /2/ 7,521,673 230,697
1.84%; 02/02/09 /1/ 775,000 776,632
6.75%; 03/15/32 300,000 349,866
John Deere Capital
3.13%; 12/15/05 160,000 160,581
NiSource Finance
3.20%; 11/01/06 120,000 119,837
1,637,613
DIVERSIFIED MANUFACTURING OPERATIONS (0.54%)
General Electric
5.00%; 02/01/13 125,000 129,572
Invensys /2/
9.88%; 03/15/11 250,000 261,250
J.B. Poindexter /2/
8.75%; 03/15/14 200,000 214,000
Tyco International Group
6.00%; 11/15/13 200,000 218,493
6.38%; 02/15/06 300,000 313,191
1,136,506
DIVERSIFIED MINERALS (0.16%)
Corp. Nacional del Cobre de Chile /2/
5.50%; 10/15/13 125,000 130,848
Vale Overseas
9.00%; 08/15/13 185,000 208,125
338,973
DIVERSIFIED OPERATIONS (0.08%)
Hutchison Whampoa International /2/
6.50%; 02/13/13 150,000 159,657
E-COMMERCE-PRODUCTS (0.06%)
FTD
7.75%; 02/15/14 130,000 130,325
ELECTRIC-DISTRIBUTION (0.07%)
Detroit Edison
5.40%; 08/01/14 145,000 153,095
ELECTRIC-GENERATION (0.18%)
CE Casecnan Water & Energy
11.45%; 11/15/05 123,125 124,356
Korea East-West Power /2/
4.88%; 04/21/11 85,000 86,914
Tenaska Virginia Partners /2/
6.12%; 03/30/24 159,048 168,356
379,626
ELECTRIC-INTEGRATED (3.60%)
Arizona Public Service
5.80%; 06/30/14 130,000 138,300
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ELECTRIC-INTEGRATED (CONTINUED)
Arizona Public Service (continued)
6.50%; 03/01/12 $ 205,000 $ 229,265
Centerpoint Energy
5.88%; 06/01/08 180,000 189,546
Consumers Energy
4.25%; 04/15/08 70,000 71,281
Dayton Power & Light /2/
5.13%; 10/01/13 200,000 203,947
Dominion Resources /1/
2.01%; 05/15/06 550,000 551,184
Entergy Gulf States
3.60%; 06/01/08 180,000 178,548
Exelon
6.75%; 05/01/11 200,000 225,350
FirstEnergy
6.45%; 11/15/11 325,000 356,095
FPL Energy Wind Funding /2/
6.88%; 06/27/17 245,960 253,954
FPL Group Capital
3.25%; 04/11/06 170,000 171,156
Georgia Power /1/
1.90%; 02/17/09 900,000 899,766
Indianapolis Power & Light
7.38%; 08/01/07 230,000 248,909
Jersey Central Power & Light /2/
5.63%; 05/01/16 80,000 83,910
MidAmerican Energy Holdings
4.63%; 10/01/07 200,000 204,939
MSW Energy Holdings II
7.38%; 09/01/10 225,000 236,250
Northeast Utilities
3.30%; 06/01/08 145,000 141,928
Ohio Power
4.85%; 01/15/14 185,000 185,956
Oncor Electric Delivery
6.38%; 05/01/12 275,000 305,114
Pacific Gas & Electric
3.60%; 03/01/09 150,000 148,926
6.05%; 03/01/34 265,000 272,931
Pepco Holdings
3.75%; 02/15/06 565,000 570,461
4.00%; 05/15/10 70,000 68,415
Power Contract Financing /2/
5.20%; 02/01/06 116,373 117,988
PPL Energy Supply
5.40%; 08/15/14 200,000 205,040
PSEG Power
6.95%; 06/01/12 300,000 337,938
Puget Energy
3.36%; 06/01/08 175,000 173,624
Southern California Edison
5.00%; 01/15/14 85,000 87,079
8.00%; 02/15/07 290,000 320,671
Southwestern Electric Power
4.50%; 07/01/05 240,000 242,978
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ELECTRIC-INTEGRATED (CONTINUED)
TXU Energy
6.13%; 03/15/08 $ 140,000 $ 150,371
7,571,820
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.07%)
Flextronics International
6.50%; 05/15/13 150,000 157,500
ELECTRONIC COMPONENTS-SEMICONDUCTOR (0.27%)
Fairchild Semiconductor International
10.50%; 02/01/09 325,000 347,750
Freescale Semiconductor /2/
6.88%; 07/15/11 200,000 212,000
559,750
ELECTRONICS-MILITARY (0.24%)
L-3 Communications
8.00%; 08/01/08 480,000 494,400
EXPORT/IMPORT BANK (0.12%)
Export-Import Bank of Korea
4.50%; 08/12/09 240,000 245,470
FEDERAL & FEDERALLY SPONSORED CREDIT (0.16%)
Housing Urban Development
2.99%; 08/01/05 325,000 326,594
FIDUCIARY BANKS (0.35%)
State Street Capital Trust II /1/
2.21%; 02/15/08 725,000 728,840
FILTRATION & SEPARATION PRODUCTS (0.06%)
Polypore /2/
8.75%; 05/15/12 125,000 130,625
FINANCE-AUTO LOANS (1.28%)
American Honda Finance /1/ /2/
1.86%; 02/20/07 900,000 900,326
Ford Motor Credit
6.13%; 01/09/06 225,000 232,480
6.88%; 02/01/06 160,000 166,348
7.25%; 10/25/11 450,000 484,967
7.88%; 06/15/10 160,000 177,545
General Motors Acceptance
3.33%; 10/20/05 /1/ 550,000 552,261
6.88%; 08/28/12 175,000 182,183
2,696,110
FINANCE-COMMERCIAL (0.30%)
CIT Group
1.91%; 02/15/07 /1/ 450,000 449,935
5.13%; 09/30/14 190,000 191,193
641,128
FINANCE-CONSUMER LOANS (0.65%)
Household Finance
1.86%; 02/09/07 /1/ 775,000 775,924
3.38%; 02/21/06 95,000 95,752
4.13%; 12/15/08 200,000 203,030
4.75%; 07/15/13 155,000 154,769
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
FINANCE-CONSUMER LOANS (CONTINUED)
Household Finance (continued)
7.00%; 05/15/12 $ 125,000 $ 144,412
1,373,887
FINANCE-CREDIT CARD (0.34%)
Capital One Bank
5.00%; 06/15/09 240,000 249,358
6.88%; 02/01/06 435,000 456,546
705,904
FINANCE-INVESTMENT BANKER & BROKER (2.90%)
Bear Stearns
2.43%; 01/30/09 /1/ 575,000 576,383
2.50%; 06/25/34 /1/ 425,000 426,262
3.00%; 03/30/06 165,000 165,590
4.00%; 01/31/08 210,000 213,410
Citigroup
5.75%; 05/10/06 750,000 783,476
6.63%; 06/15/32 215,000 239,898
Goldman Sachs Group
3.88%; 01/15/09 100,000 100,679
5.15%; 01/15/14 130,000 131,901
6.60%; 01/15/12 615,000 690,944
Lehman Brothers Holdings
4.80%; 03/13/14 315,000 313,783
Merrill Lynch
1.95%; 02/06/09 /1/ 775,000 775,026
5.45%; 07/15/14 215,000 224,534
Morgan Stanley
0.91%; 04/15/34 /1/ /2/ 4,670,060 109,391
1.84%; 02/15/07 /1/ 500,000 500,194
4.75%; 04/01/14 270,000 264,501
5.30%; 03/01/13 165,000 171,321
6.75%; 04/15/11 225,000 255,389
Refco Finance Holdings /2/
9.00%; 08/01/12 150,000 162,000
6,104,682
FINANCE-MORTGAGE LOAN/BANKER (5.45%)
Countrywide Home Loan
1.87%; 02/17/06 /1/ 125,000 124,964
2.28%; 06/02/06 /1/ 775,000 778,267
4.25%; 12/19/07 120,000 122,227
4.62%; 12/19/33 /1/ 1,000,000 991,000
Federal Home Loan Mortgage
2.65%; 05/30/08 275,000 269,680
3.25%; 02/25/08 1,675,000 1,665,762
4.50%; 07/15/13 1,400,000 1,415,371
4.63%; 05/28/13 250,000 249,757
4.75%; 10/11/12 550,000 549,522
4.75%; 05/06/13 575,000 569,699
6.25%; 07/15/32 125,000 143,275
6.75%; 03/15/31 541,000 655,233
Federal National Mortgage Association
2.88%; 05/19/08 275,000 270,331
3.70%; 11/01/07 1,430,000 1,441,809
4.32%; 07/26/07 530,000 537,153
4.75%; 02/21/13 550,000 549,388
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
FINANCE-MORTGAGE LOAN/BANKER (CONTINUED)
Federal National Mortgage Association (continued)
6.25%; 05/15/29 $ 1,000,000 $ 1,134,042
11,467,480
FINANCE-OTHER SERVICES (0.50%)
Verizon Global Funding /3/
6.75%; 12/01/05 1,000,000 1,044,409
FOOD-MISCELLANEOUS/DIVERSIFIED (0.40%)
Corn Products International
8.45%; 08/15/09 265,000 303,425
Kraft Foods
4.63%; 11/01/06 325,000 334,505
5.63%; 11/01/11 65,000 69,257
6.50%; 11/01/31 125,000 136,681
843,868
FOOD-RETAIL (0.29%)
Delhaize America
7.38%; 04/15/06 360,000 380,217
Kroger
6.20%; 06/15/12 200,000 219,114
599,331
GAS-DISTRIBUTION (0.22%)
Colorado Interstate Gas
10.00%; 06/15/05 250,000 261,875
Sempra Energy
4.75%; 05/15/09 200,000 205,409
467,284
HOME DECORATION PRODUCTS (0.09%)
Newell Rubbermaid
4.00%; 05/01/10 100,000 97,848
4.63%; 12/15/09 85,000 87,139
184,987
HOME EQUITY-OTHER (1.22%)
Argent Securities /1/
2.15%; 02/25/34 400,000 399,187
Long Beach Mortgage Loan Trust /1/
2.46%; 06/25/34 140,000 139,874
3.01%; 06/25/34 165,000 165,199
Option One Mortgage Loan Trust /1/
2.46%; 05/25/34 400,000 399,493
2.98%; 05/25/34 400,000 399,981
Saxon Asset Securities Trust /1/
3.06%; 03/25/35 675,000 674,752
Specialty Underwriting & Residential Finance /1/
2.44%; 02/25/35 385,000 384,982
2,563,468
HOME EQUITY-SEQUENTIAL (0.51%)
Ameriquest Mortgage Securities /1/
2.13%; 04/25/34 460,000 459,979
Residential Asset Securities
3.28%; 08/25/29 550,000 548,612
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
HOME EQUITY-SEQUENTIAL (CONTINUED)
Residential Asset Securities (continued)
4.59%; 10/25/26 $ 64,274 $ 64,319
1,072,910
HOTELS & MOTELS (0.06%)
Host Marriott
7.88%; 08/01/08 116,000 119,190
INDUSTRIAL AUTOMATION & ROBOTS (0.07%)
UNOVA
6.88%; 03/15/05 150,000 151,875
INVESTMENT COMPANIES (0.22%)
Canadian Oil Sands /2/
4.80%; 08/10/09 450,000 459,776
LIFE & HEALTH INSURANCE (0.41%)
John Hancock Global Funding II /1/ /2/
2.19%; 04/03/09 800,000 799,392
Nationwide Financial Services
5.63%; 02/13/15 60,000 61,969
861,361
MACHINERY-CONSTRUCTION & MINING (0.11%)
Terex
9.25%; 07/15/11 200,000 224,000
MEDICAL INFORMATION SYSTEM (0.06%)
NDCHealth
10.50%; 12/01/12 125,000 132,500
MEDICAL PRODUCTS (0.08%)
Medical Device Manufacturing /2/
10.00%; 07/15/12 150,000 160,500
MEDICAL-DRUGS (0.09%)
Schering-Plough
5.30%; 12/01/13 185,000 191,872
MEDICAL-GENERIC DRUGS (0.07%)
Alpharma /2/
8.63%; 05/01/11 150,000 156,000
MEDICAL-HMO (0.24%)
Anthem
4.88%; 08/01/05 500,000 505,817
MEDICAL-HOSPITALS (0.27%)
HCA
5.25%; 11/06/08 210,000 211,582
6.95%; 05/01/12 120,000 126,529
7.13%; 06/01/06 225,000 236,013
574,124
MEDICAL-WHOLESALE DRUG DISTRIBUTION (0.10%)
Bergen Brunswig
7.25%; 06/01/05 210,000 214,200
METAL PROCESSORS & FABRICATION (0.18%)
Mueller Group
10.00%; 05/01/12 225,000 243,000
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
METAL PROCESSORS & FABRICATION (CONTINUED)
Trimas
9.88%; 06/15/12 $ 125,000 $ 128,125
371,125
METAL-DIVERSIFIED (0.09%)
Falconbridge
5.38%; 06/01/15 115,000 115,881
7.35%; 06/05/12 65,000 74,637
190,518
MISCELLANEOUS INVESTING (0.26%)
iStar Financial
4.88%; 01/15/09 280,000 285,840
United Dominion Realty Trust
6.50%; 06/15/09 240,000 262,479
548,319
MONEY CENTER BANKS (0.54%)
Bank of America
4.88%; 09/15/12 685,000 703,487
JP Morgan Chase
5.13%; 09/15/14 425,000 431,833
1,135,320
MORTGAGE BACKED SECURITIES (1.45%)
Banc of America Commercial Mortgage /1/ /2/
0.04%; 11/10/38 3,113,716 58,410
Bear Stearns Adjustable Rate
Mortgage Trust /1/ /2/
3.52%; 06/25/34 245,000 241,887
Bear Stearns Commercial
Mortgage Securities/1/ /2/
0.65%; 05/11/39 2,550,199 72,232
CS First Boston Mortgage Securities /1/
0.57%; 05/15/36 /2/ 4,136,639 92,135
0.68%; 07/15/36 /2/ 4,099,216 134,430
2.53%; 06/25/34 /2/ 180,000 179,480
7.68%; 09/15/41 125,000 144,850
First Union National Bank
Commercial Mortgage
8.09%; 05/17/32 200,000 236,328
GMAC Commercial Mortgage Securities /1/ /2/
0.97%; 03/10/38 3,769,474 158,179
Greenwich Capital Commercial Funding /1/ /2/
0.39%; 06/10/36 8,700,000 160,872
JP Morgan Chase Commercial
Mortgage Securities /1/ /2/
1.22%; 01/12/39 3,700,000 193,769
LB-UBS Commercial Mortgage Trust /2/
0.14%; 03/15/36 /1/ 2,323,729 65,357
0.63%; 03/15/34 /1/ 3,257,726 70,836
0.75%; 08/15/36 3,140,695 109,004
1.23%; 03/15/36 /1/ 2,283,684 119,071
Merrill Lynch Mortgage Investors /1/
2.49%; 01/25/35 540,000 539,975
Merrill Lynch Mortgage Trust /1/
0.60%; 02/12/42 9,193,847 225,838
Morgan Stanley Capital I /1/ /2/
1.12%; 01/13/41 2,500,000 131,390
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
MORTGAGE BACKED SECURITIES (CONTINUED)
Morgan Stanley Capital I (continued)
7.11%; 04/15/33 $ 100,000 $ 113,034
3,047,077
MOTION PICTURES & SERVICES (0.04%)
Alliance Atlantis Communications
13.00%; 12/15/09 75,000 80,625
MULTIMEDIA (0.63%)
AOL Time Warner
7.63%; 04/15/31 445,000 527,240
News America
4.75%; 03/15/10 90,000 92,609
6.55%; 03/15/33 225,000 242,070
6.63%; 01/09/08 250,000 273,597
Walt Disney
5.38%; 06/01/07 175,000 183,556
1,319,072
MUSIC (0.07%)
Warner Music Group /2/
7.38%; 04/15/14 150,000 154,125
MUTUAL INSURANCE (0.15%)
Liberty Mutual Group /2/
5.75%; 03/15/14 195,000 191,120
7.00%; 03/15/34 130,000 130,957
322,077
NON-HAZARDOUS WASTE DISPOSAL (0.20%)
Allied Waste
8.50%; 12/01/08 150,000 157,500
Casella Waste Systems
9.75%; 02/01/13 125,000 137,500
Waste Management
5.00%; 03/15/14 125,000 126,391
421,391
OFFICE AUTOMATION & EQUIPMENT (0.07%)
Xerox
7.63%; 06/15/13 125,000 137,500
OIL & GAS DRILLING (0.25%)
Nabors Holdings
4.88%; 08/15/09 270,000 279,939
Precision Drilling
5.63%; 06/01/14 225,000 237,535
517,474
OIL COMPANY-EXPLORATION & PRODUCTION (1.29%)
Anadarko Finance
6.75%; 05/01/11 275,000 312,985
Callon Petroleum
9.75%; 12/08/10 150,000 157,500
Devon Financing
7.88%; 09/30/31 165,000 208,137
Energy Partners
8.75%; 08/01/10 150,000 162,750
Husky Energy
6.15%; 06/15/19 200,000 215,457
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
OIL COMPANY-EXPLORATION & PRODUCTION (CONTINUED)
Nexen
5.05%; 11/20/13 $ 105,000 $ 105,383
7.88%; 03/15/32 125,000 155,806
Pemex Project Funding Master Trust
6.13%; 08/15/08 315,000 333,900
7.88%; 02/01/09 350,000 393,750
Petroleos Mexicanos
6.50%; 02/01/05 600,000 606,000
XTO Energy
6.25%; 04/15/13 50,000 55,242
2,706,910
OIL COMPANY-INTEGRATED (0.38%)
Occidental Petroleum
4.00%; 11/30/07 175,000 178,315
Petrobras International Finance
8.38%; 12/10/18 225,000 226,125
9.13%; 02/01/07 225,000 246,937
Petronas Capital /2/
7.88%; 05/22/22 125,000 154,031
805,408
OIL FIELD MACHINERY & EQUIPMENT (0.14%)
Cooper Cameron
2.65%; 04/15/07 290,000 284,981
OIL REFINING & MARKETING (0.83%)
Enterprise Products Operating /2/
4.00%; 10/15/07 280,000 282,205
Enterprise Products Partners
6.38%; 02/01/13 110,000 118,949
Frontier Oil
11.75%; 11/15/09 570,000 605,625
Tesoro Petroleum
9.63%; 11/01/08 440,000 485,100
Valero Energy
6.88%; 04/15/12 225,000 256,089
1,747,968
OIL-FIELD SERVICES (0.37%)
Halliburton /1/
3.57%; 10/17/05 775,000 781,302
PAPER & RELATED PRODUCTS (0.92%)
International Paper
3.80%; 04/01/08 550,000 550,998
5.85%; 10/30/12 55,000 58,720
6.75%; 09/01/11 50,000 56,199
Norske Skog /2/
7.63%; 10/15/11 500,000 569,666
Sappi Papier Holding /2/
6.75%; 06/15/12 140,000 155,080
Smurfit Capital Funding
6.75%; 11/20/05 330,000 340,725
Weyerhaeuser
6.75%; 03/15/12 100,000 113,177
7.38%; 03/15/32 75,000 87,487
1,932,052
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
PETROCHEMICALS (0.14%)
Braskem /2/
11.75%; 01/22/14 $ 265,000 $ 295,475
PHYSICAL THERAPY & REHABILITATION CENTERS (0.07%)
HealthSouth
7.63%; 06/01/12 150,000 145,500
PHYSICIAN PRACTICE MANAGEMENT (0.06%)
US Oncology /2/
9.00%; 08/15/12 125,000 135,000
PIPELINES (0.86%)
Buckeye Partners
4.63%; 07/15/13 275,000 269,106
Duke Capital
4.37%; 03/01/09 140,000 141,957
Duke Energy Field Services
7.88%; 08/16/10 260,000 307,507
Enbridge Energy Partners
4.00%; 01/15/09 90,000 89,514
Equitable Resources
5.15%; 11/15/12 130,000 135,829
Kinder Morgan Energy Partners
5.35%; 08/15/07 170,000 178,212
National Fuel Gas
5.25%; 03/01/13 175,000 180,261
PG&E Gas Transmission
7.10%; 06/01/05 200,000 204,750
TEPPCO Partners
6.13%; 02/01/13 45,000 48,445
Texas Eastern Transmission
5.25%; 07/15/07 245,000 256,527
1,812,108
PROPERTY & CASUALTY INSURANCE (1.79%)
ACE
6.00%; 04/01/07 150,000 157,453
ACE INA Holdings
5.88%; 06/15/14 145,000 150,709
Arch Capital Group
7.35%; 05/01/34 365,000 384,867
Infinity Property & Casualty
5.50%; 02/18/14 335,000 334,247
Markel
6.80%; 02/15/13 330,000 356,400
St. Paul
5.75%; 03/15/07 475,000 497,793
W.R. Berkley
5.13%; 09/30/10 575,000 585,493
5.88%; 02/15/13 155,000 159,572
XL Capital
5.25%; 09/15/14 655,000 653,919
6.50%; 01/15/12 450,000 491,254
3,771,707
PUBLISHING-BOOKS (0.17%)
Reed Elsevier Capital
6.13%; 08/01/06 350,000 367,799
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
PUBLISHING-PERIODICALS (0.07%)
Dex Media West
9.88%; 08/15/13 $ 123,000 $ 145,447
QUARRYING (0.08%)
Compass Minerals International /1/ /4/
0.00%; 06/01/13 200,000 158,000
RACETRACKS (0.13%)
Penn National Gaming
11.13%; 03/01/08 250,000 270,312
RECREATIONAL CENTERS (0.18%)
AMF Bowling Worldwide /2/
10.00%; 03/01/10 200,000 214,000
Town Sports International
9.63%; 04/15/11 150,000 158,250
372,250
REGIONAL BANKS (1.36%)
Bank One
7.63%; 08/01/05 725,000 752,891
KeyCorp
4.63%; 05/16/05 475,000 480,066
PNC Funding
5.75%; 08/01/06 650,000 680,731
Wachovia
5.63%; 12/15/08 600,000 646,467
6.38%; 02/01/09 100,000 109,384
Wells Fargo
3.12%; 08/15/08 200,000 196,282
2,865,821
REINSURANCE (0.10%)
Endurance Specialty Holdings
7.00%; 07/15/34 210,000 213,644
RENTAL-AUTO & EQUIPMENT (0.22%)
NationsRent
9.50%; 10/15/10 315,000 348,075
United Rentals
6.50%; 02/15/12 125,000 123,750
471,825
RESORTS & THEME PARKS (0.08%)
Intrawest /2/
7.50%; 10/15/13 150,000 160,500
RETAIL-APPAREL & SHOE (0.09%)
Mothers Work
11.25%; 08/01/10 200,000 192,000
RETAIL-ARTS & CRAFTS (0.13%)
Michaels Stores
9.25%; 07/01/09 250,000 269,687
RETAIL-AUTOMOBILE (0.05%)
Asbury Automotive Group
9.00%; 06/15/12 100,000 105,500
RETAIL-DRUG STORE (0.15%)
Duane Reade /2/
9.75%; 08/01/11 150,000 144,000
Principal
Amount Value
- ----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
RETAIL-DRUG STORE (CONTINUED)
Rite Aid
12.50%; 09/15/06 $ 150,000 $ 170,250
314,250
RETAIL-JEWELRY (0.06%)
Finlay Fine Jewelry
8.38%; 06/01/12 125,000 136,563
RETAIL-PROPANE DISTRIBUTION (0.16%)
AmeriGas Partners
8.88%; 05/20/11 150,000 164,250
Star Gas Partners /2/
10.25%; 02/15/13 170,000 163,625
327,875
RETAIL-RESTAURANTS (0.10%)
VICORP Restaurants
10.50%; 04/15/11 200,000 200,000
RETAIL-TOY STORE (0.10%)
Toys R Us
8.75%; 09/01/21 200,000 200,000
RETAIL-VIDEO RENTAL (0.06%)
Blockbuster /2/
9.00%; 09/01/12 125,000 128,125
RETAIL-VISION SERVICE CENTER (0.04%)
Cole National Group
8.63%; 08/15/07 75,000 76,078
SATELLITE TELECOM (0.07%)
Intelsat
5.25%; 11/01/08 150,000 141,256
SAVINGS & LOANS-THRIFTS (0.49%)
Washington Mutual
3.81%; 06/25/34 410,000 406,062
3.97%; 03/25/33 528,000 526,242
5.50%; 01/15/13 100,000 104,554
1,036,858
SEMICONDUCTOR EQUIPMENT (0.08%)
Amkor Technology
7.75%; 05/15/13 200,000 172,500
SOVEREIGN (0.79%)
Mexico Government
2.75%; 01/13/09 /1/ 300,000 302,100
8.30%; 08/15/31 260,000 300,560
8.38%; 01/14/11 690,000 814,200
South Africa Government
6.50%; 06/02/14 220,000 238,975
1,655,835
SPECIAL PURPOSE ENTITY (0.36%)
Borden US Finance/Nova Scotia Finance /2/
9.00%; 07/15/14 100,000 109,375
Da-Lite Screen
9.50%; 05/15/11 150,000 159,000
Farmers Exchange Capital /2/
7.05%; 07/15/28 225,000 227,863
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
SPECIAL PURPOSE ENTITY (CONTINUED)
Fondo Latinoamericano de Reservas /2/
3.00%; 08/01/06 $ 270,000 $ 270,792
767,030
STEEL PRODUCERS (0.10%)
International Steel Group
6.50%; 04/15/14 200,000 214,000
STEEL-SPECIALTY (0.18%)
CSN Islands VIII /2/
9.75%; 12/16/13 375,000 380,625
SUPRANATIONAL BANK (0.21%)
Corp Andina de Fomento
6.75%; 03/15/05 190,000 192,742
6.88%; 03/15/12 230,000 257,955
450,697
TELEPHONE-INTEGRATED (2.69%)
British Telecommunications /1/
7.88%; 12/15/05 940,000 992,962
Deutsche Telekom International Finance /1/
8.50%; 06/15/10 440,000 530,094
France Telecom /1/
8.50%; 03/01/11 505,000 606,517
Northwestern Bell Telephone
6.25%; 01/01/07 250,000 250,000
SBC Communications
4.13%; 09/15/09 215,000 216,075
6.15%; 09/15/34 100,000 101,019
Sprint Capital
6.13%; 11/15/08 100,000 108,345
6.88%; 11/15/28 325,000 349,026
6.90%; 05/01/19 100,000 111,951
8.75%; 03/15/32 230,000 301,372
Telecom Italia Capital
4.00%; 01/15/10 /2/ 1,025,000 1,015,461
5.25%; 11/15/13 280,000 286,689
6.38%; 11/15/33 130,000 134,923
Telefonos de Mexico
4.50%; 11/19/08 135,000 136,189
8.25%; 01/26/06 385,000 409,351
Verizon Florida
6.13%; 01/15/13 90,000 97,181
5,647,155
TEXTILE-HOME FURNISHINGS (0.07%)
Mohawk Industries
6.50%; 04/15/07 145,000 155,048
THEATERS (0.09%)
Cinemark
0.00%; 03/15/14 /1/ /4/ 270,000 191,025
TRANSPORT-RAIL (0.15%)
Canadian National Railway
4.25%; 08/01/09 215,000 218,779
Union Pacific
4.70%; 01/02/24 100,000 97,341
316,120
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
TRANSPORT-SERVICES (0.17%)
CHC Helicopter
7.38%; 05/01/14 $ 150,000 $ 159,750
FedEx
1.88%; 04/01/05 190,000 190,106
349,856
VITAMINS & NUTRITION PRODUCTS (0.16%)
NBTY
8.63%; 09/15/07 200,000 202,000
WH Holdings/WH Capital
9.50%; 04/01/11 125,000 136,875
338,875
WIRE & CABLE PRODUCTS (0.10%)
Superior Essex Communications
9.00%; 04/15/12 200,000 203,000
WIRELESS EQUIPMENT (0.08%)
SBA Telecom/SBA Communications /1 4/
0.00%; 12/15/11 200,000 168,500
TOTAL BONDS 115,954,951
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES (16.58%)
4.50%; 12/01/09 1,441,258 1,462,637
4.50%; 11/01/18 2,288,581 2,300,701
5.00%; 01/01/18 3,609,898 3,685,774
5.00%; 05/01/18 1,898,958 1,939,029
5.00%; 06/01/34 6,766,626 6,754,399
5.50%; 05/01/17 1,416,005 1,467,859
5.50%; 06/01/24 4,890,622 5,023,921
5.50%; 04/01/33 1,577,788 1,609,870
5.50%; 11/01/34 /6/ 2,000,000 2,036,876
6.00%; 03/01/22 1,020,832 1,063,743
6.00%; 03/01/31 230,746 239,218
6.00%; 04/01/31 52,740 54,676
6.00%; 12/01/31 1,054,807 1,093,537
6.00%; 11/01/34 /6/ 2,800,000 2,898,874
6.50%; 06/01/17 1,096,368 1,161,764
6.50%; 03/01/19 606,895 641,441
6.50%; 03/01/29 132,369 139,456
6.50%; 05/01/29 198,686 209,265
6.50%; 04/01/31 126,329 132,992
7.00%; 12/01/29 125,827 133,787
7.00%; 06/01/30 90,931 96,634
7.00%; 12/01/30 89,627 95,248
7.50%; 11/01/29 39,768 42,734
7.50%; 09/01/30 31,745 34,093
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (CONTINUED)
7.50%; 09/01/30 $ 45,544 $ 48,912
7.50%; 01/01/31 165,038 177,245
7.50%; 03/01/31 47,591 51,111
8.00%; 09/01/30 248,291 269,652
TOTAL FHLMC CERTIFICATES 34,865,448
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES (11.68%)
4.50%; 11/01/34 /6/ 3,150,000 3,057,469
5.00%; 03/01/18 2,356,642 2,408,365
5.00%; 06/01/18 1,377,311 1,407,540
5.00%; 11/01/34 /6/ 3,800,000 3,785,750
5.50%; 07/01/33 2,339,422 2,386,638
5.50%; 09/01/33 1,460,345 1,489,819
5.50%; 11/01/34 /6/ 6,500,000 6,617,812
6.00%; 05/01/09 265,249 278,705
6.00%; 07/01/09 447,793 472,870
6.00%; 07/01/09 318,712 334,881
6.00%; 05/01/32 268,795 279,136
6.50%; 01/01/11 161,992 171,156
6.50%; 02/01/11 195,592 207,810
6.50%; 02/01/11 213,404 226,718
6.50%; 03/01/11 399,042 423,938
6.50%; 09/01/32 741,481 780,960
7.00%; 08/01/29 30,779 32,736
7.00%; 02/01/32 182,277 193,642
TOTAL FNMA CERTIFICATES 24,555,945
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES (3.20%)
6.00%; 07/20/28 550,293 573,977
6.00%; 11/20/28 539,055 562,254
6.00%; 01/20/29 572,153 596,362
6.00%; 07/20/29 147,167 153,393
6.00%; 12/15/33 545,131 567,641
6.50%; 03/20/28 114,294 120,860
6.50%; 05/20/29 98,058 103,642
6.50%; 12/15/32 2,778,195 2,942,840
7.00%; 06/15/32 756,616 807,778
7.50%; 10/15/31 267,876 288,513
TOTAL GNMA CERTIFICATES 6,717,260
Principal
Amount Value
------------------------------------------------------------------------------------------------------------
TREASURY BONDS (13.30%)
U.S. Treasury
3.63%; 07/15/09 $ 2,100,000 $ 2,133,552
4.00%; 02/15/14 1,100,000 1,100,043
4.75%; 05/15/14 1,000,000 1,057,344
5.00%; 02/15/11 1,500,000 1,619,766
5.38%; 02/15/31 2,505,000 2,720,763
6.13%; 08/15/29 25,000 29,520
6.25%; 08/15/23 1,850,000 2,185,313
6.25%; 05/15/30 1,310,000 1,575,275
6.75%; 08/15/26 1,000,000 1,256,797
7.50%; 11/15/16 1,770,000 2,292,357
8.00%; 11/15/21 760,000 1,054,648
U.S. Treasury Inflation-Indexed Obligations
2.00%; 01/15/14 1,128,138 1,169,430
3.38%; 01/15/07 3,827,424 4,101,624
3.88%; 01/15/09 2,542,078 2,884,165
4.25%; 01/15/10 2,365,293 2,772,381
27,952,978
TOTAL TREASURY BONDS 27,952,978
Shares
Held Value
----------------------------------------------------------------------------------------------------------------
COMMON STOCKS (0.00%)
COMPUTER SERVICES (0.00%)
Decisionone /4/ /7/ 3,500 $ -
Decisionone /4/ /7/ 2,054 -
Decisionone /4/ /7/ 3,540 -
Decisionone /4/ /7/ 2,100 -
-
TOTAL COMMON STOCKS -
Principal
Amount Value
---------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (7.84%)
AEROSPACE & DEFENSE EQUIPMENT (2.61%)
United Technologies
1.85%; 11/01/04 $ 5,500,000 $ 5,500,000
FINANCE-CONSUMER LOANS (5.23%)
Investment in Joint Trading Account; Household
Finance
1.84%; 11/01/04 10,987,888 10,987,888
TOTAL COMMERCIAL PAPER 16,487,888
Maturity
Amount Value
----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.24%)
Bear Stearns; 1.85%; dated 10/29/04 maturing
11/01/04 (collateralized by FNMA; $516,008;
11/17/11) /5/ $ 505,968 $ 505,890
TOTAL REPURCHASE AGREEMENTS 505,890
TOTAL PORTFOLIO INVESTMENTS (107.99%) 227,040,360
LIABILITIES, NET OF CASH,
RECEIVABLES AND OTHER ASSETS
(-7.99%) (16,803,270)
TOTAL NET ASSETS (100.00%) $210,237,090
---------------
/1 /Variable rate.
/2 /Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the end of the period, the
value of these securities totaled $14,559,126 or 6.93% of net assets.
/3 /Security or a portion of the security was on loan at the end of the period.
/4 /Non-income producing security.
/5 /Security was purchased with the cash proceeds from securities loans.
/6 /Security or a portion of the security was purchased in a "to-be-announced"
("TBA") transaction. See Notes to Financial Statements.
/7 /Market value is determined in accordance with procedures established in good
faith by the Board of Directors. At the end of the period, these securities
had no value.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 5,271,484
Unrealized Depreciation (817,370)
------------
Net Unrealized Appreciation (Depreciation) 4,454,114
Cost for federal income tax purposes $222,586,246
Notional Unrealized
Description Amount Gain (Loss)
- ------------------------------------------------------------------------
SWAP AGREEMENTS
TOTAL RETURN SWAPS
Receive monthly a return equal to the Lehman $9,000,000 $57,560
ERISA Eligible CMBS Index and pay monthly a
floating rate based on 1-month LIBOR less 45
basis points with Morgan Stanley. Expires
November 2004.
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
$
Mortgage Securities 70,611,795 31.09%
Government 40,082,597 17.65
Financial 38,643,197 17.02
Communications 14,738,224 6.49
Industrial 12,432,224 5.47
Asset Backed Securities 10,571,543 4.66
Utilities 8,691,662 3.83
Energy 8,501,312 3.74
Consumer, Cyclical 8,338,028 3.67
Consumer, Non-cyclical 6,505,565 2.87
Basic Materials 6,187,607 2.72
Technology 1,576,949 0.69
Diversified 159,657 0.07
Swap Agreements 57,560 0.03
TOTAL $227,097,920 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
102
SCHEDULE OF INVESTMENTS
PRINCIPAL CAPITAL VALUE FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (96.84%)
AEROSPACE & DEFENSE (0.67%)
$
Northrop Grumman 43,970 2,275,447
AEROSPACE & DEFENSE EQUIPMENT (2.26%)
General Dynamics 39,730 4,057,228
United Technologies 38,750 3,596,775
7,654,003
AIRLINES (0.38%)
ExpressJet Holdings /1/ /2/ 116,600 1,296,592
APPAREL MANUFACTURERS (0.29%)
Polo Ralph Lauren 26,380 974,213
APPLICATIONS SOFTWARE (0.70%)
Microsoft 84,800 2,373,552
ATHLETIC FOOTWEAR (0.52%)
Nike 21,800 1,772,558
AUTO-CARS & LIGHT TRUCKS (0.57%)
Ford Motor 149,040 1,941,991
AUTO-MEDIUM & HEAVY DUTY TRUCKS (0.81%)
Paccar 39,621 2,746,132
BEVERAGES-NON-ALCOHOLIC (0.48%)
Coca-Cola 40,170 1,633,312
BROADCASTING SERVICES & PROGRAMMING (0.32%)
Fox Entertainment Group /1/ 36,600 1,085,556
BUILDING-RESIDENTIAL & COMMERCIAL (1.26%)
MDC Holdings 33,170 2,545,798
Pulte 31,480 1,727,622
4,273,420
CABLE TV (0.83%)
Comcast /1/ 85,660 2,526,970
Mediacom Communications /1/ 42,700 279,685
2,806,655
CELLULAR TELECOMMUNICATIONS (1.08%)
Nextel Partners /1/ /2/ 82,300 1,385,932
Western Wireless /1/ 77,800 2,267,092
3,653,024
CHEMICALS-SPECIALTY (1.06%)
Lubrizol 34,300 1,191,239
Sigma-Aldrich 43,000 2,392,520
3,583,759
COAL (0.43%)
Peabody Energy 22,900 1,460,562
COMMERCIAL BANKS (3.15%)
City National 33,980 2,341,222
Fremont General 43,650 938,475
Marshall & Ilsley 75,650 3,175,030
R&G Financial 25,330 952,915
UnionBanCal 53,580 3,254,985
10,662,627
COMPUTER AIDED DESIGN (0.67%)
Autodesk 42,850 2,260,338
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTERS (0.69%)
$
International Business Machines 26,200 2,351,450
COMPUTERS-INTEGRATED SYSTEMS (0.49%)
Brocade Communications Systems /1/ 242,900 1,649,291
CONTAINERS-METAL & GLASS (0.62%)
Ball 52,860 2,106,471
COSMETICS & TOILETRIES (1.69%)
Avon Products 56,760 2,244,858
Procter & Gamble 67,880 3,474,098
5,718,956
DIRECT MARKETING (0.71%)
Harte-Hanks 92,890 2,390,989
DIVERSIFIED MANUFACTURING OPERATIONS (3.74%)
General Electric 371,288 12,668,347
ELECTRIC-INTEGRATED (4.33%)
Constellation Energy Group 39,930 1,621,957
Edison International 102,200 3,117,100
Exelon 60,560 2,399,387
MDU Resources Group 97,370 2,497,541
PPL 27,600 1,435,200
TXU 58,720 3,594,838
14,666,023
ELECTRONIC CONNECTORS (0.61%)
Amphenol /1/ 60,630 2,081,428
ELECTRONIC MEASUREMENT INSTRUMENTS (0.44%)
Tektronix 48,670 1,476,161
ENGINES-INTERNAL COMBUSTION (1.12%)
Briggs & Stratton 32,830 2,357,522
Cummins Engine 20,700 1,450,656
3,808,178
ENTERPRISE SOFTWARE & SERVICE (0.54%)
Oracle /1/ 144,700 1,831,902
FINANCE-AUTO LOANS (0.27%)
WFS Financial /1/ 20,400 898,824
FINANCE-CREDIT CARD (2.05%)
Capital One Financial 49,380 3,642,269
MBNA 129,090 3,308,576
6,950,845
FINANCE-INVESTMENT BANKER & BROKER (6.90%)
Citigroup /3/ 213,680 9,480,982
Goldman Sachs Group 40,620 3,996,196
Lehman Brothers Holdings 48,017 3,944,596
Merrill Lynch 42,120 2,271,953
Morgan Stanley 71,990 3,677,969
23,371,696
FINANCIAL GUARANTEE INSURANCE (0.85%)
MGIC Investment 44,800 2,881,088
FOOD-FLOUR & GRAIN (1.09%)
Archer Daniels Midland 191,340 3,706,256
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
GARDEN PRODUCTS (0.38%)
$
Toro 18,650 1,272,863
GAS-DISTRIBUTION (0.77%)
Energen 48,670 2,617,473
HOTELS & MOTELS (0.45%)
Starwood Hotels & Resorts Worldwide 32,100 1,532,133
HUMAN RESOURCES (0.31%)
Robert Half International 40,212 1,066,824
INSTRUMENTS-SCIENTIFIC (0.30%)
Applied Biosystems Group 53,130 1,013,720
INTERNET FINANCIAL SERVICES (0.45%)
IndyMac Bancorp 47,300 1,525,898
LIFE & HEALTH INSURANCE (1.92%)
AmerUs Group /2/ 23,910 998,960
Jefferson-Pilot 59,250 2,861,182
Lincoln National 22,310 977,178
UnumProvident 121,700 1,662,422
6,499,742
MACHINERY TOOLS & RELATED PRODUCTS (0.51%)
Lincoln Electric Holdings /2/ 52,160 1,741,101
MACHINERY-FARM (1.04%)
Deere 59,210 3,539,574
MEDICAL PRODUCTS (0.67%)
Zimmer Holdings /1/ 29,320 2,274,939
MEDICAL-BIOMEDICAL/GENE (0.30%)
Affymetrix /1/ /2/ 33,820 1,031,510
MEDICAL-GENERIC DRUGS (0.54%)
Eon Labs /1/ /2/ 74,200 1,826,062
MEDICAL-HMO (0.48%)
Aetna 17,010 1,615,950
METAL-ALUMINUM (0.65%)
Century Aluminum /1/ /2/ 94,870 2,195,292
MISCELLANEOUS INVESTING (2.58%)
Archstone-Smith Trust 30,910 1,037,031
Equity Residential Properties Trust 61,870 2,063,364
Kimco Realty 44,800 2,443,840
Prologis Trust 38,000 1,481,240
Ventas 63,310 1,703,039
8,728,514
MONEY CENTER BANKS (4.46%)
Bank of America 169,122 7,574,974
JP Morgan Chase 195,020 7,527,772
15,102,746
MULTI-LINE INSURANCE (1.94%)
American International Group 51,600 3,132,636
Hartford Financial Services Group 36,300 2,122,824
MetLife 34,740 1,332,279
6,587,739
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTIMEDIA (2.66%)
$
McGraw-Hill 21,060 1,816,425
Time Warner /1/ 280,970 4,675,341
Walt Disney 100,300 2,529,566
9,021,332
NETWORKING PRODUCTS (0.41%)
Juniper Networks /1/ 52,760 1,403,944
OIL COMPANY-EXPLORATION & PRODUCTION (2.51%)
Apache 66,730 3,383,211
Burlington Resources 70,500 2,925,750
Devon Energy 29,520 2,183,594
8,492,555
OIL COMPANY-INTEGRATED (9.72%)
Amerada Hess 16,600 1,339,786
ChevronTexaco 107,440 5,700,766
ConocoPhillips 51,750 4,363,042
Exxon Mobil /3/ 290,203 14,283,792
Marathon Oil 58,860 2,243,155
Occidental Petroleum 89,549 4,999,521
32,930,062
OPTICAL SUPPLIES (0.63%)
Bausch & Lomb 34,910 2,128,114
PAPER & RELATED PRODUCTS (1.41%)
Georgia-Pacific 66,470 2,299,197
Louisiana-Pacific 100,900 2,473,059
4,772,256
PIPELINES (1.48%)
National Fuel Gas 87,860 2,461,837
Questar 52,975 2,542,800
5,004,637
POULTRY (0.28%)
Pilgrims Pride /2/ 34,920 944,237
PROPERTY & CASUALTY INSURANCE (0.88%)
Chubb 28,300 2,041,279
State Auto Financial 33,300 947,385
2,988,664
PUBLISHING-NEWSPAPERS (0.30%)
Journal Register /1/ 53,800 1,011,440
RECYCLING (0.30%)
Metal Management /1/ /2/ 55,426 1,008,753
REGIONAL BANKS (6.68%)
Comerica 16,160 994,002
Huntington Bancshares 110,440 2,645,038
KeyCorp 120,140 4,035,502
National City 65,900 2,568,123
PNC Financial Services Group 30,450 1,592,535
U.S. Bancorp 130,120 3,722,733
Wachovia 57,020 2,805,954
Wells Fargo 71,490 4,269,383
22,633,270
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-CONSUMER ELECTRONICS (0.37%)
$
RadioShack 41,566 1,244,070
RETAIL-REGIONAL DEPARTMENT STORE (0.61%)
Neiman Marcus Group 33,780 2,054,837
RETAIL-RESTAURANTS (1.86%)
McDonald's 143,560 4,184,774
Yum! Brands 48,670 2,117,145
6,301,919
STEEL PRODUCERS (0.27%)
Schnitzer Steel Industries 32,540 919,255
TELECOMMUNICATION SERVICES (0.44%)
PTEK Holdings /1/ 148,500 1,479,060
TELEPHONE-INTEGRATED (3.80%)
AT&T 76,700 1,312,337
SBC Communications 207,430 5,239,682
Verizon Communications 161,392 6,310,427
12,862,446
TOBACCO (1.07%)
Altria Group 75,150 3,641,769
TRANSPORT-AIR FREIGHT (0.98%)
CNF 75,780 3,317,648
WIRELESS EQUIPMENT (0.81%)
Motorola 158,750 2,740,025
TOTAL COMMON STOCKS 328,084,019
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (3.15%)
FINANCE-CONSUMER LOANS (3.15%)
Investment in Joint Trading Account; Household Finance
$ $
1.84%; 11/01/04 10,660,277 10,660,277
TOTAL COMMERCIAL PAPER 10,660,277
Maturity
Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (2.03%)
Goldman Sachs; 1.75%, 11/01/04 (collateralized by U.S. Treasuries;
$6,954,716; 11/18/04 - 01/15/12) /4/ $ 6,896,006 $ 6,895,000
TOTAL REPURCHASE AGREEMENTS 6,895,000
------------
TOTAL PORTFOLIO INVESTMENTS (102.02%) 345,639,296
LIABILITIES, NET OF CASH, RECEIVABLES AND OTHER ASSETS (-2.02%) (6,843,566)
TOTAL NET ASSETS (100.00%) $338,795,730
---------------
Contract Opening Current Unrealized
Type Commitment Market Value Market Value Gain (Loss)
- ----------------------------------------------------------------------
FUTURES CONTRACTS
31 Russell 1000 Buy $9,408,844 $9,372,850 $(35,994)
December, 2004
Futures
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security or a portion of the security was pledged to cover margin
requirements for futures contracts.
/4 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 24,737,789
Unrealized Depreciation (6,115,573)
------------
Net Unrealized Appreciation (Depreciation) 18,622,216
Cost for federal income tax purposes $327,017,080
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- ------------------------------------------------------------------------------
Financial $126,386,931 35.60%
Energy 47,887,816 13.49
Industrial 42,690,832 12.02
Communications 38,454,470 10.83
Consumer, Non-cyclical 25,587,929 7.21
Consumer, Cyclical 25,410,728 7.16
Utilities 17,283,495 4.87
Basic Materials 11,470,562 3.23
Technology 10,466,533 2.95
Futures Contracts 9,372,850 2.64
TOTAL $355,012,146 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL CASH MANAGEMENT FUND, INC.
OCTOBER 31, 2004
Principal
Amount Value
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER (95.27%)
ASSET BACKED SECURITIES (10.32%)
CAFCO
$ $
1.89%; 12/16/04 2,600,000 2,593,857
1.90%; 12/17/04 1,045,000 1,042,463
2.02%; 01/07/05 3,500,000 3,486,842
CXC
1.45%; 11/15/04 2,600,000 2,598,534
1.85%; 12/16/04 2,000,000 1,995,375
1.90%; 02/25/05 2,300,000 2,285,919
FCAR Owner Trust I
1.63%; 11/02/04 2,700,000 2,699,878
1.73%; 12/03/04 2,000,000 1,996,924
1.83%; 12/10/04 2,600,000 2,594,845
1.89%; 01/06/05 2,400,000 2,391,684
2.05%; 01/19/05 960,000 955,681
Windmill Funding
1.71%; 11/24/04 2,000,000 1,997,815
1.78%; 12/01/04 2,200,000 2,196,737
1.87%; 12/15/04 1,945,000 1,940,555
2.00%; 01/12/05 2,500,000 2,490,000
33,267,109
BREWERY (0.78%)
Anheuser-Busch
1.77%; 11/22/04 2,500,000 2,497,419
CHEMICALS-DIVERSIFIED (1.70%)
E. I. Du Pont de Nemours
1.87%; 12/27/04 2,700,000 2,692,146
1.90%; 12/28/04 2,800,000 2,791,577
5,483,723
COMMERCIAL BANKS (8.02%)
Calyon North America
1.78%; 12/08/04 2,100,000 2,096,169
Nordea North America
1.63%; 11/12/04 2,000,000 1,999,004
1.72%; 11/29/04 3,130,000 3,125,667
1.74%; 11/18/04 2,205,000 2,203,188
1.80%; 11/30/04 1,445,000 1,442,858
1.97%; 01/31/05 2,000,000 1,990,041
Svenska Handelsbanken
1.60%; 11/04/04 2,000,000 1,999,733
1.60%; 11/10/04 2,200,000 2,199,021
1.62%; 11/04/04 2,200,000 2,199,703
1.65%; 11/22/04 2,000,000 1,998,081
1.69%; 11/10/04 1,100,000 1,099,535
1.85%; 12/08/04 2,525,000 2,520,199
2.04%; 01/31/05 995,000 989,869
25,863,068
CONSUMER PRODUCTS-MISCELLANEOUS (0.74%)
Fortune Brands
1.87%; 11/17/04 2,390,000 2,388,088
DIVERSIFIED FINANCIAL SERVICES (4.91%)
Amstel Funding
1.92%; 12/29/04 3,000,000 2,990,720
2.11%; 02/22/05 1,700,000 1,688,741
Principal
Amount Value
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
General Electric Capital
$ $
1.60%; 11/01/04 2,055,000 2,055,000
1.65%; 11/17/04 2,100,000 2,098,460
1.72%; 11/09/04 1,400,000 1,399,465
1.73%; 12/07/04 1,915,000 1,911,687
1.73%; 12/20/04 2,200,000 2,194,819
1.75%; 12/06/04 1,500,000 1,497,448
15,836,340
FINANCE-AUTO LOANS (3.25%)
Paccar Financial
1.63%; 11/18/04 2,600,000 2,597,999
Toyota Motor Credit
1.77%; 11/03/04 1,550,000 1,549,848
1.77%; 11/08/04 1,655,000 1,654,430
1.77%; 11/19/04 2,800,000 2,797,438
2.08%; 01/28/05 1,900,000 1,890,339
10,490,054
FINANCE-COMMERCIAL (3.53%)
CIT Group
1.62%; 11/10/04 2,000,000 1,999,190
1.67%; 11/12/04 2,000,000 1,998,980
2.00%; 01/04/05 2,100,000 2,092,533
2.04%; 01/13/05 2,700,000 2,688,831
2.10%; 03/02/05 2,600,000 2,581,648
11,361,182
FINANCE-CONSUMER LOANS (3.02%)
American General Finance
1.76%; 11/09/04 2,540,000 2,539,007
Household Finance
1.65%; 11/04/04 2,000,000 1,999,725
1.73%; 11/16/04 3,000,000 2,997,837
1.81%; 11/22/04 2,200,000 2,197,677
9,734,246
FINANCE-INVESTMENT BANKER & BROKER (10.49%)
Bear Stearns
1.80%; 12/07/04 3,000,000 2,994,600
1.81%; 11/30/04 2,000,000 1,997,084
1.83%; 12/03/04 2,500,000 2,495,933
2.04%; 01/21/05 2,200,000 2,189,902
2.07%; 02/03/05 1,700,000 1,690,812
Citigroup Global Markets Holdings
1.69%; 11/23/04 2,000,000 1,997,935
1.72%; 11/08/04 1,790,000 1,789,401
1.76%; 11/15/04 4,500,000 4,496,920
1.79%; 11/17/04 2,335,000 2,333,142
2.05%; 01/11/05 1,500,000 1,493,935
Goldman Sachs Group
1.62%; 11/16/04 2,600,000 2,598,245
1.62%; 11/19/04 2,500,000 2,497,975
1.64%; 11/23/04 1,000,000 998,998
ING U.S. Funding
1.80%; 12/14/04 1,900,000 1,895,926
1.83%; 11/24/04 2,350,000 2,347,253
33,818,061
Principal
Amount Value
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
FINANCE-LEASING COMPANY (2.26%)
International Lease Finance
$ $
1.71%; 11/05/04 2,770,000 2,769,474
1.89%; 12/09/04 2,200,000 2,195,611
1.91%; 12/14/04 2,335,000 2,329,673
7,294,758
FINANCE-MORTGAGE LOAN/BANKER (5.76%)
Federal Home Loan Mortgage
1.51%; 11/01/04 3,000,000 3,000,000
1.63%; 12/06/04 475,000 474,247
1.87%; 12/21/04 2,645,000 2,638,130
Federal National Mortgage Association
1.52%; 11/03/04 2,045,000 2,044,827
1.58%; 11/03/04 1,100,000 1,099,904
1.68%; 12/13/04 2,600,000 2,594,904
1.81%; 11/24/04 2,600,000 2,596,994
1.90%; 12/31/04 2,035,000 2,028,556
1.98%; 01/24/05 2,090,000 2,080,344
18,557,906
FINANCE-OTHER SERVICES (9.57%)
ABN-AMRO North America Finance
2.00%; 01/31/05 2,000,000 1,989,383
Caterpillar Financial Services
1.46%; 11/08/04 2,310,000 2,309,344
Commoloco
1.83%; 12/07/04 1,815,000 1,811,570
1.90%; 12/10/04 2,200,000 2,195,472
1.90%; 12/20/04 2,665,000 2,658,108
CRC Funding
1.97%; 01/10/05 2,300,000 2,291,190
2.00%; 01/19/05 2,400,000 2,389,467
2.03%; 01/06/05 3,000,000 2,988,835
2.05%; 01/20/05 2,700,000 2,687,700
2.08%; 01/06/05 1,340,000 1,334,890
Private Export Funding
1.70%; 12/09/04 1,825,000 1,821,725
1.88%; 12/28/04 2,500,000 2,492,558
2.10%; 03/09/05 2,320,000 2,302,677
2.10%; 04/05/05 1,590,000 1,575,624
30,848,543
INSURANCE BROKERS (1.62%)
Marsh & McLennan
1.81%; 11/23/04 2,830,000 2,826,870
1.89%; 12/21/04 2,400,000 2,393,700
5,220,570
MONEY CENTER BANKS (9.56%)
Bank of America
1.71%; 12/01/04 2,000,000 1,997,150
1.75%; 12/22/04 2,400,000 2,393,642
1.83%; 12/15/04 1,700,000 1,696,198
1.85%; 12/10/04 2,200,000 2,195,591
2.04%; 02/04/05 2,500,000 2,486,542
BNP Paribas Finance
1.80%; 12/02/04 2,000,000 1,996,891
1.90%; 12/30/04 2,200,000 2,193,164
Principal
Amount Value
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
MONEY CENTER BANKS (CONTINUED)
Citicorp
$ $
2.04%; 01/25/05 2,900,000 2,886,032
HBOS Treasury Services
1.60%; 11/05/04 2,350,000 2,349,582
1.70%; 12/09/04 1,400,000 1,397,488
1.75%; 12/02/04 2,000,000 1,996,986
1.83%; 11/30/04 1,965,000 1,962,040
1.84%; 12/03/04 1,905,000 1,901,884
2.00%; 02/02/05 680,000 676,486
2.05%; 02/02/05 2,700,000 2,685,701
30,815,377
OIL COMPANY-INTEGRATED (1.52%)
Shell Finance
1.77%; 12/06/04 1,590,000 1,587,264
1.78%; 12/08/04 2,000,000 1,996,300
1.97%; 01/28/05 1,335,000 1,328,571
4,912,135
RETAIL-DISCOUNT (1.33%)
Wal-Mart Stores
1.59%; 11/02/04 4,300,000 4,299,810
SPECIAL PURPOSE BANKS (1.64%)
KFW International Finance
1.66%; 12/02/04 2,600,000 2,596,283
1.97%; 01/24/05 2,700,000 2,687,589
5,283,872
SPECIAL PURPOSE ENTITY (10.40%)
Barclays U.S. Funding
1.95%; 01/27/05 1,600,000 1,592,460
1.96%; 12/27/04 2,000,000 1,993,918
Compass Securitization
1.82%; 11/26/04 2,555,000 2,551,771
Grampian Funding
1.71%; 11/29/04 2,000,000 1,997,340
1.84%; 12/21/04 1,900,000 1,895,144
1.85%; 12/06/04 5,175,000 5,165,692
1.89%; 12/23/04 2,000,000 1,994,540
Ranger Funding
1.72%; 12/01/04 2,100,000 2,096,990
1.81%; 11/18/04 2,400,000 2,397,949
1.99%; 01/12/05 2,800,000 2,788,856
Tulip Funding
1.81%; 11/19/04 2,700,000 2,697,557
Yorktown Capital
1.85%; 01/18/05 2,000,000 1,991,333
2.00%; 12/17/04 4,380,000 4,369,646
33,533,196
SUPRANATIONAL BANK (2.69%)
Corp Andina de Fomento
1.77%; 11/09/04 2,000,000 1,999,214
1.78%; 11/12/04 2,000,000 1,998,912
1.80%; 11/03/04 1,800,000 1,799,820
1.80%; 11/05/04 2,880,000 2,879,424
8,677,370
Principal
Amount Value
- --------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
TELEPHONE COMMUNICATION (0.80%)
Telstra
$ $
1.95%; 12/30/04 2,600,000 2,591,691
TELEPHONE-INTEGRATED (1.36%)
BellSouth
1.95%; 12/23/04 2,000,000 1,994,367
SBC Communications
2.04%; 01/10/05 2,400,000 2,390,480
4,384,847
TOTAL COMMERCIAL PAPER 307,159,365
Principal
Amount Value
- --------------------------------------------------------------------------------------
BONDS (4.30%)
AEROSPACE & DEFENSE EQUIPMENT (0.62%)
United Technologies
6.63%; 11/15/04 2,000,000 2,003,844
FINANCE-INVESTMENT BANKER & BROKER (1.03%)
Bear Stearns
6.65%; 12/01/04 1,292,000 1,297,644
Lehman Brothers Holdings
7.75%; 01/15/05 2,000,000 2,026,140
3,323,784
FINANCE-MORTGAGE LOAN/BANKER (0.40%)
Federal Home Loan Bank
1.66%; 05/16/05 1,300,000 1,300,000
FINANCE-OTHER SERVICES (1.65%)
Newcourt Credit Group
6.88%; 02/16/05 1,300,000 1,320,737
Verizon Global Funding
1.98%; 12/15/04 4,000,000 4,000,000
5,320,737
Principal
Amount Value
- --------------------------------------------------------------------------------
BONDS (CONTINUED)
MULTIMEDIA (0.60%)
Gannett
4.95%; 04/01/05 $1,900,000 $ 1,922,636
TOTAL BONDS 13,871,001
------------
TOTAL PORTFOLIO INVESTMENTS (99.57%) 321,030,366
CASH, RECEIVABLES AND
OTHER ASSETS, NET OF
LIABILITIES (0.43%) 1,380,758
TOTAL NET ASSETS (100.00%) $322,411,124
--------------
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
Financial $228,743,789 71.25%
Asset Backed Securities 33,267,109 10.36
Government 28,535,275 8.89
Communications 8,899,174 2.77
Basic Materials 5,483,723 1.71
Energy 4,912,135 1.53
Consumer, Non-cyclical 4,885,507 1.52
Consumer, Cyclical 4,299,810 1.34
Industrial 2,003,844 0.63
TOTAL $321,030,366 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
108
SCHEDULE OF INVESTMENTS
PRINCIPAL EQUITY INCOME FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (72.33%)
AEROSPACE & DEFENSE (1.23%)
$
Northrop Grumman 19,300 998,775
AEROSPACE & DEFENSE EQUIPMENT (0.63%)
Goodrich 16,400 505,612
APPLIANCES (1.10%)
Whirlpool 15,100 887,125
AUTO-CARS & LIGHT TRUCKS (0.87%)
Ford Motor 54,300 707,529
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.96%)
Dana 52,260 779,197
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.74%)
Masco 17,400 596,124
CASINO HOTELS (1.07%)
Harrah's Entertainment 14,780 864,925
CELLULAR TELECOMMUNICATIONS (1.43%)
Cosmote Mobile Communications 24,200 435,896
Telecom Italia Mobile 122,200 718,153
1,154,049
COATINGS & PAINT (0.78%)
RPM 35,660 628,686
COMMERCIAL BANKS (1.74%)
Banco Santander Central Hispano 83,500 929,391
Nordea 55,510 477,986
1,407,377
COMMERCIAL SERVICE-FINANCE (1.38%)
Deluxe 29,300 1,116,037
DIVERSIFIED FINANCIAL SERVICES (0.57%)
RMB Holdings 152,300 465,000
DIVERSIFIED MANUFACTURING OPERATIONS (0.68%)
Eaton 8,620 551,249
ELECTRIC-INTEGRATED (3.09%)
Constellation Energy Group 25,000 1,015,500
Edison International 30,500 930,250
PPL 10,700 556,400
2,502,150
ENGINES-INTERNAL COMBUSTION (0.76%)
Cummins Engine 8,750 613,200
FINANCE-CREDIT CARD (0.62%)
MBNA 19,500 499,785
FINANCE-INVESTMENT BANKER & BROKER (0.65%)
Goldman Sachs Group 5,370 528,301
FINANCE-MORTGAGE LOAN/BANKER (2.95%)
American Home Mortgage Investment 70,500 1,947,915
Charter Mac 19,100 442,356
2,390,271
FOOD-MISCELLANEOUS/DIVERSIFIED (0.67%)
Sara Lee 23,300 542,424
Shares
Held Value
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD-WHOLESALE & DISTRIBUTION (0.68%)
$
Kesko 24,600 549,182
GAS-DISTRIBUTION (1.14%)
Sempra Energy 27,500 922,350
INSURANCE BROKERS (0.63%)
Arthur J. Gallagher 18,000 505,800
MACHINERY-CONSTRUCTION & MINING (0.60%)
Caterpillar 5,990 482,435
MACHINERY-FARM (0.57%)
Deere 7,720 461,502
MEDICAL-DRUGS (0.80%)
Orion OYJ 45,600 650,821
MEDICAL-HOSPITALS (0.66%)
Parkway Holdings 621,000 533,271
MISCELLANEOUS INVESTING (13.99%)
AMB Property 6,200 232,500
Archstone-Smith Trust 7,300 244,915
Arden Realty 14,100 480,528
Boston Properties 10,400 621,088
CBL & Associates Properties 7,600 498,180
Developers Diversified Realty 12,000 501,600
Eastgroup Properties 6,000 212,580
Equity Office Properties Trust 8,400 236,208
Equity Residential Properties Trust 7,400 246,790
Federal Realty Investment Trust 2,500 118,625
Health Care 8,500 306,000
Health Care Property Investors 10,800 300,564
Healthcare Realty Trust 7,400 298,590
Hospitality Properties Trust 10,600 454,210
iStar Financial 34,800 1,441,416
Kimco Realty 9,000 490,950
Lexington Corporate Properties Trust 26,400 592,416
Mack-Cali Realty 5,100 225,267
Mid-America Apartment Communities 17,300 680,409
Mills 4,500 249,525
Simon Property Group 11,500 670,680
Sovran Self Storage 6,300 246,141
Tanger Factory Outlet Centers 15,300 722,925
Thornburg Mortgage 26,600 759,962
Vornado Realty Trust 4,700 315,840
Weingarten Realty Investors 4,600 166,336
11,314,245
MONEY CENTER BANKS (2.24%)
Bank of America 28,700 1,285,473
JP Morgan Chase 13,560 523,416
1,808,889
NON-HOTEL GAMBLING (0.85%)
Greek Organisation of Football Prognostics 34,000 691,130
OIL COMPANY-EXPLORATION & PRODUCTION (3.01%)
Enerplus Resources Fund 56,700 1,854,090
Kerr-McGee 9,800 580,356
2,434,446
Shares
Held Value
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL COMPANY-INTEGRATED (5.20%)
$
ChevronTexaco 15,400 817,124
ENI 42,000 950,984
Exxon Mobil 17,000 836,740
Occidental Petroleum 10,400 580,632
Royal Dutch Petroleum 11,400 617,613
Shell Transport & Trading 51,520 404,977
4,208,070
OIL REFINING & MARKETING (0.60%)
Sunoco 6,550 487,058
PAPER & RELATED PRODUCTS (1.98%)
Billerud 45,100 687,930
MeadWestvaco 13,700 431,961
Weyerhaeuser 7,700 482,328
1,602,219
PIPELINES (0.62%)
National Fuel Gas 17,900 501,558
PROPERTY & CASUALTY INSURANCE (3.09%)
Admiral Group /1/ 54,507 292,878
Chubb 10,400 750,152
EMC Insurance Group 74,000 1,460,760
2,503,790
REAL ESTATE MANAGEMENT & SERVICES (2.40%)
Castellum 23,500 673,963
Corio 25,400 1,265,585
1,939,548
REAL ESTATE OPERATOR & DEVELOPER (1.12%)
Land Securities Group 41,390 904,758
REGIONAL BANKS (0.99%)
PNC Financial Services Group 15,270 798,621
RETAIL-APPAREL & SHOE (0.61%)
Edgars Consolidated Stores 14,200 493,512
SEMICONDUCTOR EQUIPMENT (0.72%)
ASM Pacific Technology 179,500 582,313
TELEPHONE-INTEGRATED (3.72%)
Citizens Communications 39,200 525,280
SBC Communications 19,700 497,622
Sprint 26,290 550,776
TDC 14,300 527,562
Verizon Communications 23,214 907,667
3,008,907
TOBACCO (2.58%)
Altria Group 18,200 881,972
Imperial Tobacco Group 16,800 391,247
Reynolds American 11,800 812,548
2,085,767
TRANSPORT-MARINE (1.61%)
Frontline 12,900 633,713
Orient Overseas International 184,000 669,014
1,302,727
TOTAL COMMON STOCKS 58,510,735
Shares
Held Value
-----------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (15.89%)
CELLULAR TELECOMMUNICATIONS (1.68%)
$
U.S. Cellular 8.75% 48,000 1,356,480
COMMERCIAL BANKS (2.31%)
CoBank /2/ 35,300 1,871,959
ELECTRIC-INTEGRATED (2.87%)
Consolidated Edison 7.50% 7,556 201,594
DTE Energy Trust I 9,140 246,963
Energy East Capital Trust I 2,185 58,121
Entergy Louisiana 39,580 1,074,993
Public Service Enterprise Group 12,670 738,661
2,320,332
FINANCE-INVESTMENT BANKER & BROKER (0.07%)
St. Paul Capital Trust I 2,300 60,145
FOOD-DAIRY PRODUCTS (0.45%)
Dairy Farmers of America /2/ 3,500 361,922
GAS-DISTRIBUTION (2.38%)
AGL Capital Trust II 25,385 667,879
KeySpan 23,500 1,259,600
1,927,479
MISCELLANEOUS INVESTING (0.95%)
HRPT Properties Trust Series B 28,000 768,600
MONEY CENTER BANKS (0.07%)
ABN AMRO Capital Funding Trust V 2,300 55,476
OIL COMPANY-INTEGRATED (0.45%)
Unocal Capital Trust 6,866 359,607
PIPELINES (1.06%)
TransCanada PipeLines 33,457 858,507
PROPERTY & CASUALTY INSURANCE (0.64%)
XL Capital 19,000 517,750
TELECOMMUNICATION SERVICES (0.64%)
Citizens Utilities Trust 8,900 520,205
TELEPHONE-INTEGRATED (2.32%)
ALLTEL 29,800 1,510,860
Telephone & Data Systems 13,700 362,776
1,873,636
TOTAL PREFERRED STOCKS 12,852,098
Principal
Amount Value
-----------------------------------------------------------------------------------------------------------------------------------
BONDS (7.36%)
CELLULAR TELECOMMUNICATIONS (0.60%)
Nextel Communications
$ $
5.25%; 01/15/10 480,000 489,000
ELECTRIC-INTEGRATED (0.25%)
Georgia Power Capital Trust VI
4.88%; 11/01/42 200,000 206,368
Principal
Amount Value
-----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
MULTI-LINE INSURANCE (0.43%)
Allstate Financing II
7.83%; 12/01/45 $ 312,000 $ 347,006
OIL COMPANY-INTEGRATED (2.10%)
Phillips 66 Capital Trust II
8.00%; 01/15/37 1,475,000 1,695,151
PIPELINES (3.98%)
KN Capital Trust III
7.63%; 04/15/28 2,900,000 3,218,385
TOTAL BONDS 5,955,910
Principal
Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.68%)
FINANCE-MORTGAGE LOAN/BANKER (2.68%)
Investment in Joint Trading Account;
Federal Home Loan
Bank
1.69%; 11/01/04 $2,169,636 $ 2,169,636
TOTAL COMMERCIAL PAPER 2,169,636
-----------
TOTAL PORTFOLIO INVESTMENTS (98.26%) 79,488,379
CASH, RECEIVABLES AND OTHER ASSETS, NET OF
LIABILITIES (1.74%) 1,408,384
TOTAL NET ASSETS (100.00%) $80,896,763
--------------
/1 /Non-income producing security.
/2 /Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the end of the period, the
value of these securities totaled $ 2,233,881or 2.76% of net assets.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 4,964,364
Unrealized Depreciation (1,660,009)
-----------
Net Unrealized Appreciation (Depreciation) 3,304,355
Cost for federal income tax purposes $76,184,024
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
Financial $28,687,321 36.09%
Energy 13,762,782 17.31
Communications 8,402,277 10.57
Utilities 7,878,679 9.91
Consumer,
Non-cyclical 5,839,425 7.35
Industrial 5,511,623 6.93
Consumer, Cyclical 4,423,418 5.57
Basic Materials 2,230,905 2.81
Government 2,169,636 2.73
Technology 582,313 0.73
TOTAL $79,488,379 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL GOVERNMENT SECURITIES INCOME FUND, INC.
OCTOBER 31, 2004
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
BONDS (18.22%)
FEDERAL & FEDERALLY SPONSORED CREDIT (0.93%)
Federal Farm Credit Bank
4.48%; 08/24/12 $ 3,000,000 $ 3,047,637
FINANCE-MORTGAGE LOAN/BANKER (16.38%)
Federal Home Loan Bank System
1.88%; 06/15/06 4,000,000 3,950,080
2.45%; 03/23/07 6,000,000 5,932,086
2.50%; 03/15/06 6,000,000 5,994,096
3.75%; 08/15/08 6,000,000 6,070,674
Federal Home Loan Mortgage
4.50%; 01/15/13 8,000,000 8,113,592
4.63%; 05/28/13 3,000,000 2,997,078
6.63%; 09/15/09 6,000,000 6,792,348
Federal National Mortgage Association
2.13%; 04/15/06 /1/ 6,000,000 5,963,376
2.63%; 11/15/06 4,000,000 3,986,700
4.13%; 02/17/09 /2/ 4,000,000 4,075,760
53,875,790
FINANCE-OTHER SERVICES (0.91%)
Private Export Funding
3.38%; 02/15/09 3,000,000 2,988,453
TOTAL BONDS 59,911,880
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES (25.63%)
3.50%; 09/15/07 /1/ 5,000,000 5,065,350
4.50%; 06/01/11 2,926,089 2,968,383
4.50%; 04/01/19 3,500,000 3,513,342
4.50%; 11/01/19 /3/ 10,000,000 10,025,000
5.00%; 10/01/10 13,405,932 13,713,692
5.00%; 05/01/11 9,422,105 9,636,844
5.00%; 05/01/18 7,962,949 8,130,983
5.00%; 09/01/34 9,990,299 9,972,247
5.50%; 12/01/33 8,863,852 9,044,081
5.50%; 11/01/34 /3/ 5,500,000 5,601,409
5.50%; 12/01/34 /3/ 6,500,000 6,603,597
TOTAL FHLMC CERTIFICATES 84,274,928
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES (7.25%)
5.00%; 12/01/10 6,348,369 6,486,142
5.50%; 06/01/34 6,855,292 6,989,587
6.00%; 11/01/34 /3/ 10,000,000 10,365,620
TOTAL FNMA CERTIFICATES 23,841,349
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES (51.00%)
2.88%; 10/20/30 /2/ $ 7,611,865 $ 7,619,439
5.00%; 05/20/33 17,276,047 17,332,885
5.00%; 08/15/33 4,789,465 4,817,197
5.00%; 08/15/33 8,133,506 8,180,599
5.50%; 12/15/13 87,449 91,536
5.50%; 01/15/14 399,429 417,860
5.50%; 01/15/14 329,218 344,408
5.50%; 02/15/14 227,056 237,533
5.50%; 03/15/14 388,388 406,309
5.50%; 07/20/14 285,631 297,922
5.50%; 03/15/33 3,570,542 3,660,649
5.50%; 04/15/33 3,321,474 3,405,294
5.50%; 04/15/33 5,832,800 5,983,193
5.50%; 05/15/33 23,749,590 24,348,934
5.50%; 07/20/33 21,068,045 21,560,110
6.00%; 03/15/17 2,025,453 2,136,091
6.00%; 10/15/23 895,845 939,004
6.00%; 10/15/23 7,421,983 7,779,552
6.00%; 11/15/23 414,482 434,450
6.00%; 11/15/23 196,660 206,134
6.00%; 12/15/23 178,754 187,366
6.00%; 12/15/23 164,876 172,819
6.00%; 12/15/23 15,660 16,415
6.00%; 01/15/24 301,921 316,144
6.00%; 01/15/24 186,837 195,639
6.00%; 01/15/24 300,196 314,338
6.00%; 01/20/24 115,321 120,610
6.00%; 02/15/24 153,379 160,605
6.00%; 02/15/24 220,381 230,763
6.00%; 02/15/24 208,289 218,102
6.00%; 03/15/24 166,699 174,552
6.00%; 04/15/24 104,617 109,545
6.00%; 04/20/24 185,641 194,154
6.00%; 05/20/24 222,865 233,085
6.00%; 05/20/24 116,166 121,493
6.00%; 10/20/24 97,949 102,441
6.00%; 09/20/25 165,547 173,001
6.00%; 11/20/25 89,898 93,945
6.00%; 03/20/26 215,727 225,196
6.00%; 04/20/26 1,746,732 1,823,397
6.00%; 05/20/26 131,944 137,735
6.00%; 06/20/26 186,053 194,220
6.00%; 12/15/31 3,400,006 3,545,401
6.00%; 07/15/32 5,070,640 5,284,950
6.00%; 08/15/32 815,639 850,112
6.00%; 09/15/32 759,942 792,061
6.00%; 10/15/32 2,707,077 2,821,491
6.50%; 07/15/08 81,989 86,856
6.50%; 07/15/08 55,986 59,310
6.50%; 07/15/08 72,939 77,269
6.50%; 10/15/08 121,620 128,841
6.50%; 01/15/09 66,786 71,037
6.50%; 03/15/09 99,759 105,681
6.50%; 07/15/16 1,208,583 1,289,062
6.50%; 07/15/16 500,397 533,718
6.50%; 09/15/23 91,400 97,358
6.50%; 09/15/23 129,809 138,271
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
6.50%; 09/15/23 $ 108,550 $ 115,626
6.50%; 09/15/23 127,262 135,558
6.50%; 10/15/23 134,135 142,878
6.50%; 10/15/23 166,157 176,988
6.50%; 10/15/23 215,263 229,296
6.50%; 10/15/23 84,731 90,254
6.50%; 10/15/23 104,807 111,639
6.50%; 10/15/23 89,849 95,706
6.50%; 11/15/23 88,627 94,405
6.50%; 11/15/23 105,157 112,011
6.50%; 12/15/23 315,691 336,271
6.50%; 12/15/23 330,428 351,968
6.50%; 12/15/23 174,408 185,777
6.50%; 12/15/23 101,891 108,533
6.50%; 12/15/23 18,137 19,320
6.50%; 12/15/23 99,280 105,752
6.50%; 01/15/24 158,270 168,439
6.50%; 01/15/24 82,726 88,041
6.50%; 01/15/24 197,181 209,850
6.50%; 01/15/24 98,576 104,909
6.50%; 01/15/24 155,115 165,082
6.50%; 01/15/24 142,048 151,174
6.50%; 01/15/24 93,168 99,154
6.50%; 01/15/24 381,951 406,492
6.50%; 01/15/24 87,944 93,595
6.50%; 01/15/24 148,958 158,529
6.50%; 01/15/24 117,265 124,800
6.50%; 03/15/24 116,471 123,954
6.50%; 04/15/24 181,190 192,832
6.50%; 04/15/24 90,393 96,201
6.50%; 04/20/24 113,195 120,115
6.50%; 07/15/24 471,742 502,494
6.50%; 09/20/25 77,684 82,355
6.50%; 10/15/25 157,681 167,654
6.50%; 12/20/25 462,501 490,308
6.50%; 01/15/26 103,153 109,583
6.50%; 02/20/26 170,798 180,912
6.50%; 03/15/26 109,235 116,044
6.50%; 03/15/26 113,217 120,274
6.50%; 03/20/26 175,719 186,124
6.50%; 07/20/26 87,341 92,513
6.50%; 08/20/26 141,300 149,667
6.50%; 03/20/27 64,642 68,423
6.50%; 02/15/28 144,673 153,435
6.50%; 02/15/28 295,071 312,942
6.50%; 07/15/31 525,787 556,941
6.50%; 04/15/32 1,619,557 1,715,537
6.50%; 08/20/33 1,322,114 1,395,126
7.00%; 10/15/22 270,592 290,530
7.00%; 10/15/22 50,397 54,110
7.00%; 11/15/22 117,157 125,790
7.00%; 11/15/22 75,036 80,565
7.00%; 11/15/22 281,248 301,971
7.00%; 11/15/22 170,196 182,736
7.00%; 11/15/22 227,221 243,963
7.00%; 12/15/22 101,321 108,786
7.00%; 12/15/22 308,611 331,351
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
7.00%; 12/15/22 $ 153,973 $ 165,319
7.00%; 01/15/23 62,443 67,024
7.00%; 01/15/23 111,561 119,746
7.00%; 01/15/23 54,494 58,493
7.00%; 01/15/23 127,608 136,971
7.00%; 01/15/23 77,790 83,497
7.00%; 01/15/23 102,523 110,046
7.00%; 01/15/23 75,908 81,478
7.00%; 02/15/23 620,907 666,465
7.00%; 03/15/23 108,269 116,213
7.00%; 04/15/23 60,255 64,676
7.00%; 07/15/23 49,726 53,375
7.00%; 07/15/23 79,808 85,664
7.00%; 07/15/23 54,932 58,962
7.00%; 07/15/23 208,375 223,665
7.00%; 07/15/23 130,691 140,280
7.00%; 08/15/23 37,857 40,635
7.00%; 08/15/23 123,301 132,348
7.00%; 08/15/23 71,115 76,333
7.00%; 09/15/23 83,625 89,761
7.00%; 10/15/23 99,122 106,395
7.00%; 12/15/23 100,569 107,948
7.00%; 12/15/23 118,129 126,796
7.00%; 01/15/26 88,882 95,208
7.00%; 04/15/26 67,901 72,734
7.00%; 05/15/26 97,328 104,255
7.00%; 12/15/26 173,512 185,943
7.00%; 01/15/27 85,528 91,503
7.00%; 03/15/27 43,421 46,455
7.00%; 11/15/27 250,184 267,663
7.00%; 12/15/27 240,345 257,137
7.00%; 12/15/27 196,938 210,697
7.00%; 12/15/27 195,918 209,606
7.00%; 03/15/28 77,365 82,685
7.00%; 04/15/28 103,351 110,459
7.00%; 04/15/28 138,041 147,535
7.00%; 04/15/28 249,774 266,952
7.00%; 05/15/28 279,467 298,687
7.00%; 02/15/29 433,902 463,454
7.00%; 04/15/29 499,981 534,034
7.00%; 05/15/31 759,129 810,550
7.00%; 05/15/31 378,248 403,869
7.00%; 05/15/31 922,043 984,632
7.00%; 06/15/31 1,676,912 1,790,671
7.00%; 09/15/31 1,352,444 1,444,279
7.25%; 09/15/25 290,770 312,726
7.25%; 09/15/25 39,480 42,461
7.25%; 09/15/25 25,969 27,930
7.25%; 10/15/25 96,554 103,845
7.50%; 04/15/17 21,200 22,938
7.50%; 04/15/17 156,160 168,961
7.50%; 04/15/17 103,325 111,795
7.50%; 05/15/17 35,807 38,743
7.50%; 05/15/17 19,424 21,017
7.50%; 07/15/18 47,142 51,030
7.50%; 12/15/21 40,390 43,780
7.50%; 12/15/21 46,397 50,290
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
7.50%; 12/15/21 $ 51,314 $ 55,621
7.50%; 02/15/22 79,652 86,413
7.50%; 03/15/22 27,071 29,369
7.50%; 03/15/22 25,455 27,615
7.50%; 03/15/22 38,618 41,896
7.50%; 04/15/22 27,908 30,277
7.50%; 04/15/22 41,597 45,127
7.50%; 04/15/22 45,307 49,152
7.50%; 04/15/22 44,718 48,514
7.50%; 04/15/22 44,589 48,374
7.50%; 04/15/22 16,516 17,917
7.50%; 05/15/22 115,958 125,800
7.50%; 07/15/22 28,457 30,872
7.50%; 07/15/22 144,480 156,743
7.50%; 08/15/22 13,619 14,775
7.50%; 08/15/22 27,259 29,573
7.50%; 08/15/22 40,860 44,328
7.50%; 08/15/22 76,586 83,087
7.50%; 08/15/22 41,323 44,830
7.50%; 08/15/22 59,761 64,834
7.50%; 08/15/22 40,742 44,200
7.50%; 08/15/22 39,037 42,350
7.50%; 08/15/22 181,142 196,517
7.50%; 08/15/22 78,652 85,328
7.50%; 08/15/22 120,366 130,582
7.50%; 08/15/22 10,192 11,058
7.50%; 11/15/22 86,415 93,749
7.50%; 02/15/23 46,613 50,548
7.50%; 02/15/23 62,386 67,653
7.50%; 02/15/23 21,012 22,786
7.50%; 05/15/23 65,353 70,870
7.50%; 05/15/23 72,746 78,888
7.50%; 05/15/23 23,409 25,385
7.50%; 05/15/23 10,952 11,876
7.50%; 05/15/23 93,153 101,018
7.50%; 06/15/23 49,720 53,918
7.50%; 08/15/23 46,221 50,123
7.50%; 09/15/23 39,385 42,710
7.50%; 10/15/23 47,257 51,246
7.50%; 11/15/23 212,549 230,493
7.50%; 01/15/24 57,071 61,746
7.50%; 06/15/24 12,734 13,777
7.50%; 08/15/24 29,552 31,973
7.50%; 12/15/25 122,423 132,286
7.50%; 02/15/27 29,407 31,742
7.50%; 03/15/27 171,351 184,957
7.50%; 04/15/27 69,456 74,971
7.50%; 05/15/27 176,221 190,214
7.50%; 05/15/27 60,081 64,851
7.50%; 06/15/27 41,447 44,738
7.50%; 06/15/27 80,482 86,873
7.50%; 08/15/29 574,575 618,890
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
7.50%; 09/15/29 $ 391,887 $ 422,112
7.50%; 08/15/30 1,229,908 1,324,710
7.50%; 10/15/30 335,210 361,018
7.50%; 12/15/30 763,811 822,619
7.50%; 12/15/30 365,894 394,065
7.50%; 05/15/31 384,114 413,705
8.00%; 08/15/16 124,174 136,122
8.00%; 09/15/16 12,172 13,344
8.00%; 11/15/16 34,639 37,973
8.00%; 12/15/16 36,654 40,181
8.00%; 04/15/17 95,717 105,448
8.00%; 04/15/17 203,457 224,140
8.00%; 04/15/17 19,200 21,152
8.00%; 04/15/17 32,106 35,370
8.00%; 04/15/17 56,069 61,770
8.00%; 04/15/17 78,483 86,462
8.00%; 05/15/17 45,890 50,556
8.00%; 05/15/17 25,738 28,354
8.00%; 06/15/17 32,792 36,126
8.00%; 06/15/17 38,632 42,559
8.00%; 06/15/17 63,832 70,322
8.00%; 06/15/17 59,830 65,913
8.00%; 07/15/17 31,137 34,303
8.00%; 04/15/21 31,761 34,979
8.00%; 11/15/21 7,078 7,795
8.00%; 02/15/22 131,127 144,381
8.00%; 12/15/29 351,651 383,558
8.00%; 10/15/30 243,060 265,070
8.00%; 12/15/30 579,408 631,876
8.00%; 04/15/31 59,971 65,389
TOTAL GNMA CERTIFICATES 167,652,784
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (7.36%)
FINANCE-MORTGAGE LOAN/BANKER (7.36%)
Federal Home Loan Mortgage
1.53%; 11/08/04 10,000,000 9,997,025
Federal National Mortgage Association
1.75%; 11/15/04 5,000,000 4,996,597
1.79%; 11/19/04 5,000,000 4,995,525
Investment in Joint Trading Account; Federal
Home Loan Bank
1.69%; 11/01/04 4,213,655 4,213,655
24,202,802
TOTAL COMMERCIAL PAPER 24,202,802
Maturity
Amount Value
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (3.43%)
Goldman Sachs; 1.75%; dated 10/29/04 maturing
11/01/04 (collateralized by U.S. Treasuries;
$11,368,615; 11/18/04 - 01/15/12) /4/ $11,272,644 $ 11,271,000
TOTAL REPURCHASE AGREEMENTS 11,271,000
------------
TOTAL PORTFOLIO INVESTMENTS (112.89%) 371,154,743
LIABILITIES, NET OF CASH, RECEIVABLES AND OTHER ASSETS (-12.89%) (42,377,664)
TOTAL NET ASSETS (100.00%) $328,777,079
---------------
/1 /Security or a portion of the security was on loan at the end of the period.
/2 /Variable rate.
/3 /Security or a portion of the security was purchased in a "to-be-announced"
("TBA") transaction. See Notes to Financial Statements.
/4 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 5,653,756
Unrealized Depreciation (736,359)
------------
Net Unrealized Appreciation (Depreciation) 4,917,397
Cost for federal income tax purposes $366,237,346
COUPON DISTRIBUTION (UNAUDITED)
Coupon Range Value Percentage of
Total Value
- ---------------------------------------------------------------------------
Less than 4.00% $ 83,044,057 22.37%
4.00 - 4.99% 34,740,792 9.36
5.00 - 5.99% 167,263,010 45.07
6.00 - 6.99% 61,165,666 16.48
7.00 - 7.99% 22,318,078 6.01
8.00% and over 2,623,140 0.71
TOTAL $371,154,743 100.00%
------------------------- ---------
115
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL GROWTH FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (100.11%)
AEROSPACE & DEFENSE EQUIPMENT (1.48%)
$
United Technologies 46,630 4,328,197
APPAREL MANUFACTURERS (1.98%)
Coach /1/ 124,600 5,810,098
APPLICATIONS SOFTWARE (5.26%)
Microsoft 551,280 15,430,327
ATHLETIC FOOTWEAR (2.02%)
Nike 72,730 5,913,676
BEVERAGES-NON-ALCOHOLIC (2.09%)
Pepsico 123,830 6,139,491
CASINO SERVICES (1.09%)
International Game Technology 96,920 3,202,237
COMPUTER SERVICES (0.90%)
Cognizant Technology Solutions /1/ 77,950 2,650,300
COMPUTERS (1.63%)
Apple Computer /1/ 90,970 4,778,654
COMPUTERS-INTEGRATED SYSTEMS (2.64%)
Dell /1/ 220,808 7,741,528
COMPUTERS-MEMORY DEVICES (1.37%)
EMC /1/ 311,030 4,002,956
COMPUTERS-PERIPHERAL EQUIPMENT (1.23%)
Lexmark International /1/ 43,260 3,595,339
COSMETICS & TOILETRIES (6.14%)
Avon Products 129,140 5,107,487
Estee Lauder 85,140 3,656,763
Procter & Gamble 180,630 9,244,643
18,008,893
DATA PROCESSING & MANAGEMENT (1.31%)
First Data 13,720 566,361
SEI Investments 91,120 3,279,409
3,845,770
DISPOSABLE MEDICAL PRODUCTS (1.06%)
C.R. Bard 54,870 3,116,616
DISTRIBUTION-WHOLESALE (0.74%)
Fastenal /2/ 39,300 2,170,539
DIVERSIFIED MANUFACTURING OPERATIONS (4.97%)
3M 83,436 6,472,130
Danaher 83,860 4,623,202
Illinois Tool Works 37,770 3,485,416
14,580,748
E-COMMERCE-SERVICES (1.04%)
eBay /1/ 31,170 3,042,504
ELECTRIC-INTEGRATED (1.50%)
TXU 71,690 4,388,862
ELECTRONIC COMPONENTS-SEMICONDUCTOR (3.94%)
Altera /1/ 54,230 1,232,648
Intel 337,522 7,513,240
Shares
Held Value
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC COMPONENTS-SEMICONDUCTOR (CONTINUED)
$
Texas Instruments 114,163 2,791,285
11,537,173
ELECTRONIC FORMS (0.94%)
Adobe Systems 49,030 2,747,151
FINANCE-CREDIT CARD (3.73%)
Capital One Financial 106,540 7,858,391
MBNA 119,510 3,063,041
10,921,432
FINANCE-INVESTMENT BANKER & BROKER (1.89%)
Goldman Sachs Group 27,580 2,713,320
Legg Mason 44,340 2,824,902
5,538,222
FINANCE-MORTGAGE LOAN/BANKER (0.47%)
Federal National Mortgage Association 19,580 1,373,537
INTERNET BROKERS (1.08%)
Ameritrade Holding /1/ 242,280 3,154,486
INTERNET SECURITY (2.10%)
Symantec /1/ 108,310 6,167,171
MACHINERY-GENERAL INDUSTRY (1.23%)
Ingersoll-Rand 52,850 3,617,054
MACHINERY-PUMPS (1.07%)
Graco 91,035 3,131,604
MEDICAL INSTRUMENTS (1.32%)
St. Jude Medical /1/ 50,731 3,884,473
MEDICAL PRODUCTS (6.19%)
Becton Dickinson 64,250 3,373,125
Johnson & Johnson 222,300 12,977,874
Varian Medical Systems /1/ 44,520 1,787,478
18,138,477
MEDICAL-BIOMEDICAL/GENE (2.78%)
Amgen /1/ 84,480 4,798,464
Genentech /1/ 73,410 3,342,357
8,140,821
MEDICAL-DRUGS (5.60%)
Forest Laboratories /1/ 66,430 2,962,778
Pfizer 464,595 13,450,025
16,412,803
MEDICAL-HMO (2.65%)
UnitedHealth Group 107,290 7,767,796
MOTORCYCLE & MOTOR SCOOTER (1.82%)
Harley-Davidson 92,690 5,336,163
MULTI-LINE INSURANCE (1.78%)
American International Group 86,070 5,225,310
NETWORKING PRODUCTS (3.80%)
Cisco Systems /1/ 579,890 11,139,687
OIL COMPANY-EXPLORATION & PRODUCTION (1.19%)
Apache 68,530 3,474,471
Shares
Held Value
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL-FIELD SERVICES (0.96%)
$
BJ Services 55,320 2,821,320
RETAIL-APPAREL & SHOE (1.96%)
Chico's FAS /1/ 27,790 1,112,434
Nordstrom 107,480 4,640,986
5,753,420
RETAIL-BEDDING (1.38%)
Bed Bath & Beyond /1/ 99,148 4,044,247
RETAIL-CONSUMER ELECTRONICS (1.82%)
Best Buy 90,110 5,336,314
RETAIL-DISCOUNT (2.12%)
Wal-Mart Stores 115,100 6,206,192
RETAIL-OFFICE SUPPLIES (1.93%)
Staples 190,000 5,650,600
RETAIL-RESTAURANTS (1.33%)
Yum! Brands 89,850 3,908,475
SCHOOLS (1.02%)
Apollo Group /1/ 45,460 3,000,360
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (2.51%)
Linear Technology 112,399 4,257,674
Maxim Integrated Products 70,721 3,111,017
7,368,691
THERAPEUTICS (1.55%)
Gilead Sciences /1/ 131,640 4,558,693
WIRELESS EQUIPMENT (1.50%)
Motorola 254,030 4,384,558
TOTAL COMMON STOCKS 293,487,436
Principal
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (0.10%)
FINANCE-CONSUMER LOANS (0.10%)
Investment in Joint Trading Account; Household
Finance
$ $
1.84%; 11/01/04 306,677 306,677
TOTAL COMMERCIAL PAPER 306,677
Maturity
Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.60%)
Goldman Sachs; 1.75%; dated 10/29/04 maturing 11/01/04 (collateralized by
U.S. Treasuries; $1,769,191; 11/18/04 - 01/15/12) /3/ $1,754,256 $ 1,754,000
TOTAL REPURCHASE AGREEMENTS 1,754,000
------------
TOTAL PORTFOLIO INVESTMENTS (100.81%) 295,548,113
LIABILITIES, NET OF CASH, RECEIVABLES AND OTHER ASSETS (-0.81%) (2,384,616)
TOTAL NET ASSETS (100.00%) $293,163,497
---------------
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 32,569,555
Unrealized Depreciation (42,157,428)
------------
Net Unrealized Appreciation (Depreciation) (9,587,873)
Cost for federal income tax purposes $305,135,986
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- ------------------------------------------------------------------------------
Consumer, Non-cyclical $ 89,168,424 30.17%
Technology 63,697,890 21.55
Consumer, Cyclical 53,331,961 18.05
Financial 26,900,126 9.10
Industrial 25,657,602 8.68
Communications 24,733,920 8.37
Energy 6,295,791 2.13
Utilities 4,388,862 1.49
Government 1,373,537 0.46
TOTAL $295,548,113 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL INTERNATIONAL EMERGING MARKETS FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
----------------------------------------------------------------------------------------
COMMON STOCKS (92.69%)
AGRICULTURAL OPERATIONS (0.94%)
$
IOI Berhad 165,677 414,192
APPLICATIONS SOFTWARE (0.63%)
Infosys Technologies 6,624 278,364
APPLICATIONS SOFTWAREN (0.29%)
TATA Consultancy Services /1/ 5,085 129,392
AUTO-CARS & LIGHT TRUCKS (0.79%)
Hyundai Motor 7,180 348,257
BICYCLE MANUFACTURING (0.02%)
Giant Manufacturing 7,000 10,184
BREWERY (0.52%)
Efes Breweries International /1/ 6,240 173,160
Quilmes Industrial 3,346 54,741
227,901
BUILDING PRODUCTS-CEMENT & AGGREGATE (0.73%)
Gujarat Ambuja Cements Ltd. /1/ 42,469 320,121
BUILDING-HEAVY CONSTRUCTION (0.45%)
IJM 159,956 197,840
BUILDING-RESIDENTIAL & COMMERCIAL (1.80%)
Corporacion GEO /1/ 192,743 300,828
Hyundai Development 36,680 491,469
792,297
CELLULAR TELECOMMUNICATIONS (5.81%)
Advanced Info Service Public /2/
/3/ 90,174 205,315
America Telecom /1/ 351,695 853,869
Far EasTone Telecommunications 458,700 490,214
Maxis Communications 222,196 502,865
Vimpel Communications /1/ 4,416 503,424
2,555,687
CIRCUIT BOARDS (0.55%)
Unimicron Technology 373,000 241,185
COAL (0.43%)
Yanzhou Coal Mining 144,132 189,808
COMMERCIAL BANKS (14.22%)
ABSA Group 68,519 745,558
Banco do Brasil 52,137 522,100
Bank Leumi Le-Israel 260,609 543,600
Bank Rakyat 2,362,542 506,259
BBVA Banco Frances 19,027 123,676
Chinatrust Financial Holding 291,390 332,344
CorpBanca /2/ /3/ 8,194 216,772
Credicorp 16,162 232,733
Daegu Bank 73,610 440,542
E.Sun Financial Holding /1/ /2/ 3,811 65,028
E.Sun Financial Holding 419,000 285,981
EON Capital 178,196 281,362
Hana Bank 15,670 391,225
Hansabank 24,308 244,276
OTP Bank 12,687 319,763
Turkiye Garanti Bankasi /1/ 154,646,091 413,229
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMERCIAL BANKS (CONTINUED)
$
Turkiye Is Bankasi 141,594,083 585,774
6,250,222
COMPUTERS (0.89%)
High Tech Computer 94,000 391,139
COMPUTERS-PERIPHERAL EQUIPMENT (0.83%)
Lite-On Technology 407,000 363,077
COSMETICS & TOILETRIES (0.22%)
Pacific 490 95,855
DIVERSIFIED FINANCIAL SERVICES (1.30%)
RMB Holdings 127,013 387,794
Shinhan Financial Group 9,214 181,482
569,276
DIVERSIFIED MANUFACTURING OPERATIONS (0.85%)
Cheil Industries 26,520 374,289
DIVERSIFIED MINERALS (3.17%)
Anglo American 45,498 989,392
Antofagasta 22,003 402,355
1,391,747
DIVERSIFIED OPERATIONS (3.88%)
Alfa 116,705 453,857
Barloworld 27,942 388,216
China Merchants Holdings
International /4/ 174,266 257,478
Citic Pacific 79,980 204,487
Imperial Holdings /1/ 26,868 399,475
1,703,513
ELECTRIC PRODUCTS-MISCELLANEOUS (0.39%)
LG Electronics 3,022 170,603
ELECTRIC-GENERATION (0.71%)
Electricity Generating 121,800 195,758
National Thermal Power /1/ /3/ 83,500 114,119
309,877
ELECTRONIC COMPONENTS-MISCELLANEOUS (5.26%)
Samsung Electronics 5,400 2,119,964
Samsung SDI 2,150 193,971
2,313,935
ELECTRONIC COMPONENTS-SEMICONDUCTOR (1.16%)
Hynix Semiconductor /1/ 44,750 507,660
FINANCE-OTHER SERVICES (0.98%)
Fubon Financial Holding 455,000 429,053
FOOD-MISCELLANEOUS/DIVERSIFIED (0.46%)
Global Bio-Chem Technology Group
- warrants /1/ 44,296 3,073
Tiger Brands 14,070 198,111
201,184
FOOD-RETAIL (0.50%)
Cencosud /1/ /2/ 7,832 174,044
SPAR Group /1/ 14,070 47,300
221,344
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOTWEAR & RELATED APPAREL (0.57%)
$
Grendene /1/ 20,628 249,977
GAS-DISTRIBUTION (1.75%)
Korea Gas 7,360 224,186
OAO Gazprom /2/ 14,626 545,988
770,174
HOME FURNISHINGS (0.90%)
Lewis Group /1/ 76,100 394,867
HOUSEWARES (0.78%)
Turk Sise ve Cam Fabrikalari 140,614,000 343,310
IMPORT & EXPORT (0.64%)
Testrite International 507,257 282,442
INTERNET SECURITY (1.03%)
Check Point Software Technologies
/1/ 19,930 450,837
LIFE & HEALTH INSURANCE (0.65%)
New Africa Capital 200,095 287,591
NON-FERROUS METALS (1.15%)
Grupo Mexico /1/ 122,358 503,957
OIL COMPANY-EXPLORATION & PRODUCTION (1.72%)
Oil & Natural Gas 15,217 264,373
PTT Public /2/ /3/ 118,316 489,802
754,175
OIL COMPANY-INTEGRATED (9.93%)
China Petroleum & Chemical 1,738,058 658,744
LUKOIL 7,250 906,250
MOL Magyar Olaj-es Gazipari 5,997 334,575
PetroChina 1,134,992 594,225
Petroleo Brasileiro 30,932 1,098,395
Sasol 23,220 458,178
Surgutneftegaz 7,900 312,050
4,362,417
OIL REFINING & MARKETING (1.60%)
Polski Koncern Naftowy Orlen 52,520 565,570
Thai Oil Public /1/ /3/ 141,000 139,060
704,630
OIL-FIELD SERVICES (0.96%)
Tenaris 9,396 420,659
PAPER & RELATED PRODUCTS (0.51%)
Kimberly-Clark de Mexico 75,115 224,770
PETROCHEMICALS (1.96%)
Honam Petrochemical 14,610 571,611
SINOPEC Shanghai Petrochemical 831,210 291,010
862,621
REAL ESTATE OPERATOR & DEVELOPER (1.08%)
IRSA Inversiones y
Representaciones /1/ 10,280 97,763
Kerry Properties 196,242 378,193
475,956
RETAIL-APPAREL & SHOE (1.83%)
Edgars Consolidated Stores 23,158 804,842
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-AUTOMOBILE (0.61%)
$
Astra International 311,427 268,649
RETAIL-DISCOUNT (0.49%)
Siam Makro /3/ 199,560 216,253
RETAIL-HYPERMARKETS (0.75%)
Organizacion Soriana 102,922 330,289
RETAIL-MISCELLANEOUS/DIVERSIFIED (0.58%)
Massmart Holdings 36,856 256,181
RUBBER & PLASTIC PRODUCTS (0.23%)
Taiwan Green Point Enterprises 36,000 99,147
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (1.43%)
Realtek Semiconductor 152,000 151,522
Taiwan Semiconductor
Manufacturing 364,097 477,397
628,919
SHIP BUILDING (0.81%)
Samsung Heavy Industries 65,950 356,996
STEEL PRODUCERS (3.66%)
Cherepovets MK Severstal /1/ /3/ 5,325 213,370
China Steel 219,000 220,278
Iscor 55,465 486,417
POSCO 12,679 474,068
Tata Iron & Steel 34,103 216,240
1,610,373
TELECOMMUNICATION SERVICES (3.88%)
China Telecom 698,204 224,261
Mahanagar Telephone Nigam 87,829 266,982
SK Telecom 32,096 633,254
Telekom Malaysia 74,100 224,250
Telekomunikasi Indonesia 742,000 354,692
1,703,439
TELEPHONE-INTEGRATED (2.19%)
Carso Global Telecom /1/ 185,497 285,498
Philippine Long Distance
Telephone /1/ 27,143 677,009
962,507
TOBACCO (0.18%)
Korea Tobacco & Ginseng 2,850 78,919
TRANSPORT-MARINE (1.87%)
China Shipping Development /4/ 228,983 191,226
Evergreen Marine 657 566
Malaysia International Shipping 61,442 215,047
Wan Hai Lines 429,950 413,154
819,993
WIRELESS EQUIPMENT (1.17%)
Gemtek Technology 218,827 514,232
TOTAL COMMON STOCKS 40,737,124
Shares
Held Value
- ----------------------------------------------------------------------------------------
PREFERRED STOCKS (6.69%)
AIRLINES (0.78%)
Gol Linhas Aereas Inteligentes $
/1/ 33,195 342,876
COMMERCIAL BANKS (1.04%)
Banco Bradesco 7,562 457,268
DIVERSIFIED MINERALS (1.74%)
Caemi Mineracao e Metalurgica /1/ 1,276,434 764,251
FOOD-MEAT PRODUCTS (0.96%)
Sadia 232,667 421,179
MACHINERY-GENERAL INDUSTRY (0.73%)
WEG 123,028 319,632
PETROCHEMICALS (0.44%)
Braskem 5,325,790 195,801
STEEL PRODUCERS (1.00%)
Cia Siderurgica de Tubarao 5,283,248 213,291
Usinas Siderurgicas de Minas
Gerais 15,011 227,320
440,611
TOTAL PREFERRED STOCKS 2,941,618
Maturity
Amount Value
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.57%)
Washington Mutual Capital; 1.95%;
dated 10/29/04 maturing 11/01/04
(collateralized by U.S.
Government Agency Securities;
$255,000; 08/01/19 - 11/01/34)
/5/ $ 250,041 $ 250,000
TOTAL REPURCHASE AGREEMENTS 250,000
-----------
TOTAL PORTFOLIO INVESTMENTS (99.95%) 43,928,742
CASH, RECEIVABLES AND
OTHER ASSETS, NET OF
LIABILITIES (0.05%) 23,052
TOTAL NET ASSETS (100.00%) $43,951,794
-------------
/1 /Non-income producing security.
/2 /Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the end of the period, the
value of these securities totaled $1,696,949 or 3.86% of net assets.
/3 /Market value is determined in accordance with procedures established in good
faith by the Board of Directors. At the end of the period, the value of these
securities totaled $1,594,691 or 3.63% of net assets.
/4 /Security or a portion of the security was on loan at the end of the period.
/5 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 6,784,451
Unrealized Depreciation (459,519)
-----------
Net Unrealized Appreciation (Depreciation) 6,324,932
Cost for federal income tax purposes $37,603,810
INVESTMENTS BY COUNTRY (UNAUDITED)
Country Value Percentage of
Total Value
- ---------------------------------------------------------------
Argentina $ 599,075 1.36%
Brazil 4,812,090 10.95
Chile 390,817 0.89
China 1,735,206 3.95
Hong Kong 1,257,301 2.86
Hungary 654,337 1.49
India 1,589,590 3.62
Indonesia 1,129,600 2.57
Israel 994,437 2.26
Korea 7,654,350 17.42
Malaysia 1,835,556 4.18
Mexico 2,953,068 6.72
Netherlands 173,160 0.39
Peru 232,733 0.53
Philippines 677,009 1.54
Poland 565,570 1.29
Russia 1,574,833 3.59
South Africa 4,854,529 11.05
Spain 244,276 0.56
Taiwan 4,766,944 10.85
Thailand 1,246,188 2.84
Turkey 1,342,313 3.06
United Kingdom 1,391,747 3.17
United States 1,254,013 2.86
TOTAL $43,928,742 100.00%
------------- ---------
121
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL INTERNATIONAL FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
----------------------------------------------------------------------------------------
COMMON STOCKS (98.45%)
ADVERTISING AGENCIES (0.04%)
$
Asatsu-DK 3,787 107,344
ADVERTISING SALES (0.08%)
Telefonica Publicidad e
Informacion 25,014 183,596
AEROSPACE & DEFENSE-EQUIPMENT (0.52%)
European Aeronautic Defense &
Space /1/ 43,553 1,238,225
AGRICULTURAL OPERATIONS (0.12%)
Chaoda Modern Agriculture /1/ 284,751 96,949
IOI Berhad 80,000 200,000
296,949
AIRLINES (0.03%)
Austrian Airlines /2/ 5,496 74,526
AIRPORT DEVELOPMENT & MAINTENANCE (0.06%)
Kobenhavns Lufthavne 805 134,642
APPLICATIONS SOFTWARE (0.06%)
Infosys Technologies 3,235 135,946
APPLICATIONS SOFTWAREN (0.03%)
TATA Consultancy Services /2/ 2,576 65,548
ATHLETIC FOOTWEAR (0.11%)
Puma 1,060 264,632
AUDIO & VIDEO PRODUCTS (0.07%)
Bang & Olufsen 1,209 71,613
Sansui Electric /2/ 23,000 6,931
Skyworth Digital Holdings 232,779 80,002
158,546
AUTO-CARS & LIGHT TRUCKS (2.41%)
Hyundai Motor 3,555 172,431
Renault 21,810 1,819,967
Toyota Motor 97,207 3,780,628
5,773,026
AUTO-MEDIUM & HEAVY DUTY TRUCKS (0.54%)
Volvo /1/ 34,318 1,295,401
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.08%)
Exedy 4,998 84,202
Keihin 7,103 117,257
201,459
BEVERAGES-NON-ALCOHOLIC (0.34%)
Asahi Soft Drinks 3,275 27,880
Calpis 5,548 34,221
Coca-Cola Hellenic Bottling 33,375 740,409
802,510
BICYCLE MANUFACTURING (0.00%)
Giant Manufacturing 8,000 11,639
BREWERY (0.56%)
Efes Breweries International /2/ 3,044 84,471
Quilmes Industrial 1,735 28,385
SABMiller 78,145 1,125,435
Wolverhampton & Dudley Breweries 6,018 100,674
1,338,965
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.32%)
$
Geberit 658 427,184
Kingspan Group 26,244 205,309
Sika 235 144,155
776,648
BUILDING & CONSTRUCTION-MISCELLANEOUS (0.06%)
Abengoa 4,957 45,905
Carillion 21,798 86,371
132,276
BUILDING PRODUCTS-CEMENT & AGGREGATE (0.86%)
Adelaide Brighton 167,603 206,565
BPB 104,735 805,526
Cementir 17,152 76,146
Gujarat Ambuja Cements Ltd. /2/ 18,842 142,026
Italcementi 34,048 521,461
Italcementi 29,818 307,991
2,059,715
BUILDING PRODUCTS-DOORS & WINDOWS (0.29%)
Asahi Glass 76,091 697,925
BUILDING-HEAVY CONSTRUCTION (1.50%)
Actividades de Construccion y
Servicios /1/ 65,430 1,264,267
Daelim Industrial 4,180 179,223
IJM 77,194 95,477
Vinci /1/ 17,347 2,059,883
3,598,850
BUILDING-RESIDENTIAL & COMMERCIAL (1.40%)
Corporacion GEO /2/ 94,565 147,594
Daiwa House Industry 82,027 837,341
Hyundai Development 16,590 222,287
McCarthy & Stone 17,653 187,766
Persimmon 163,193 1,844,945
Token /2/ 2,651 118,333
3,358,266
CASINO SERVICES (0.08%)
Aristocrat Leisure 29,840 191,462
CELLULAR TELECOMMUNICATIONS (2.65%)
Advanced Info Service Public 43,696 99,490
America Telecom /2/ 172,246 418,191
Far EasTone Telecommunications 225,700 241,206
Maxis Communications 108,197 244,867
mm02 /2/ 1,117,271 2,154,653
Mobistar /2/ 2,447 183,027
Vimpel Communications /2/ 2,207 251,598
Vodafone Group 1,076,751 2,757,172
6,350,204
CHEMICALS-DIVERSIFIED (2.05%)
BASF 25,424 1,586,306
Mitsubishi Gas Chemical 343,296 1,467,713
NOF 3,517 12,122
Sumitomo Chemical /1/ 204,378 989,267
Tosoh 201,167 850,588
4,905,996
CHEMICALS-SPECIALTY (0.81%)
Clariant 76,241 1,028,011
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CHEMICALS-SPECIALTY (CONTINUED)
$
Methanex 58,421 917,206
1,945,217
CIRCUIT BOARDS (0.05%)
Unimicron Technology 182,000 117,683
COAL (0.05%)
Yanzhou Coal Mining 93,779 123,498
COATINGS & PAINT (0.09%)
Kansai Paint /1/ 35,419 203,128
COMMERCIAL BANKS (7.16%)
ABSA Group 35,979 391,489
Amagerbanken 511 63,073
Anglo Irish Bank 122,628 2,324,234
Banca Popolare di Lodi 77,293 832,775
Banco do Brasil 25,715 257,510
Bank Austria Creditanstalt 16,012 1,181,551
Bank Leumi Le-Israel 127,850 266,680
Bank of Kyoto /1/ 30,463 223,761
Bank of Piraeus 8,472 109,492
Bank Rakyat 1,077,500 230,893
BBVA Banco Frances 9,303 60,469
Chiba Bank 124,000 795,216
Chinatrust Financial Holding 142,887 162,969
CorpBanca /3/ /4/ 4,000 105,820
Credicorp 8,240 118,656
Daegu Bank 36,200 216,650
Dah Sing Financial 14,164 101,907
DnB Holding /1/ 201,660 1,703,676
E.Sun Financial Holding /2/ /4/ 1,883 32,130
E.Sun Financial Holding 207,000 141,284
EON Capital 88,190 139,247
Hana Bank 7,640 190,744
Hansabank 14,243 143,131
IntesaBci 369,562 1,509,025
Jyske Bank /2/ 16,059 516,853
Natexis Banques Populaires 528 63,034
National Bank of Greece 51,465 1,432,396
Nordea 219,376 1,889,006
OTP Bank 6,254 157,626
Sapporo Hokuyo Holdings 11 71,890
Shinsei Bank /1/ 126,218 820,138
Shizuoka Bank 94,803 789,207
Wing Hang Bank 17,222 117,824
17,160,356
COMMUNICATIONS SOFTWARE (0.03%)
Telelogic /2/ 38,475 81,676
COMPUTER SERVICES (0.03%)
ALTEN /1/ /2/ 2,116 45,758
EDB Business Partner /1/ /2/ 5,066 33,764
79,522
COMPUTERS (0.08%)
High Tech Computer 46,000 191,408
COMPUTERS-INTEGRATED SYSTEMS (0.48%)
Itochu Techno-Science 22,500 906,865
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTERS-INTEGRATED SYSTEMS (CONTINUED)
$
NIWS 92 233,054
1,139,919
COMPUTERS-PERIPHERAL EQUIPMENT (0.66%)
Lite-On Technology 198,000 176,632
Logitech International /2/ 25,675 1,328,146
Roland /1/ 1,684 83,257
1,588,035
CONSULTING SERVICES (0.13%)
Savills 8,384 63,099
WS Atkins 20,593 249,224
312,323
CONTAINERS-METAL & GLASS (0.32%)
Rexam 98,231 776,201
COSMETICS & TOILETRIES (0.43%)
Body Shop International 23,985 73,283
Pacific 240 46,950
Uni-Charm /1/ 18,251 921,229
1,041,462
CRUISE LINES (0.67%)
Carnival 30,577 1,615,237
DISTRIBUTION-WHOLESALE (0.73%)
Doshisha /1/ 2,900 96,130
Inchcape 4,207 113,931
Wolseley 88,399 1,527,410
1,737,471
DIVERSIFIED FINANCIAL SERVICES (0.59%)
RMB Holdings 62,271 190,125
Sampo Ojy /1/ 94,836 1,126,741
Shinhan Financial Group 4,500 88,633
1,405,499
DIVERSIFIED MANUFACTURING OPERATIONS (0.14%)
Charter /2/ 22,611 81,410
Cheil Industries 12,940 182,628
NKT Holding 3,249 76,201
340,239
DIVERSIFIED MINERALS (1.84%)
Anglo American 23,206 504,634
Antofagasta 10,745 196,487
BHP Billiton 190,251 1,929,484
Inmet Mining /2/ 11,225 173,471
Teck Cominco 34,273 818,787
Xstrata 50,848 784,947
4,407,810
DIVERSIFIED OPERATIONS (1.39%)
Alfa 57,285 222,777
Barloworld 13,693 190,245
Brascan /1/ 47,661 1,695,047
China Merchants Holdings
International 85,882 126,891
Citic Pacific 30,000 76,702
Imperial Holdings /2/ 13,220 196,556
Ordina 3,879 45,297
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED OPERATIONS (CONTINUED)
$
Wharf Holdings 233,000 766,349
3,319,864
ELECTRIC PRODUCTS-MISCELLANEOUS (1.31%)
Casio Computer /1/ 92,528 1,097,022
Hitachi 308,856 1,939,984
LG Electronics 1,580 89,197
3,126,203
ELECTRIC-GENERATION (0.46%)
China Power International Holding
/2/ 101,000 39,578
Electric Power Development /2/ 36,351 948,227
Electricity Generating Public 63,553 102,143
1,089,948
ELECTRIC-INTEGRATED (4.32%)
ASM Brescia 32,636 99,220
E.ON 29,773 2,423,855
Enel /1/ 133,269 1,201,930
Fortum 127,177 1,941,305
International Power /2/ 71,275 210,915
RWE 48,339 2,551,818
Scottish Power 238,762 1,922,741
10,351,784
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.60%)
Funkwerk 1,048 45,059
LG Micron 2,192 100,642
Nihon Dempa Kogyo 4,090 86,468
Samsung Electronics 2,640 1,036,427
Samsung SDI 1,090 98,339
Star Micronics 7,182 58,773
1,425,708
ELECTRONIC COMPONENTS-SEMICONDUCTOR (0.12%)
Hynix Semiconductor /2/ 21,980 249,349
Kontron /2/ 5,324 48,558
297,907
ELECTRONIC MEASUREMENT INSTRUMENTS (0.04%)
Techem /2/ 3,277 103,796
ENERGY-ALTERNATE SOURCES (0.02%)
SolarWorld 764 46,649
ENTERPRISE SOFTWARE & SERVICE (0.01%)
Unit 4 Agresso /2/ 2,380 34,816
EXTENDED SERVICE CONTRACTS (0.04%)
Accord Customer Care Solutions
/1/ /2/ 202,335 93,558
FINANCE-CONSUMER LOANS (0.84%)
Aiful 14,321 1,426,841
Lopro /1/ 13,755 88,859
Sanyo Shinpan Finance 8,919 498,906
2,014,606
FINANCE-CREDIT CARD (0.30%)
Credit Saison /1/ 22,757 726,492
FINANCE-INVESTMENT BANKER & BROKER (0.88%)
Daiwa Securities Group 196,833 1,204,835
Ichiyoshi Securities 13,561 101,653
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FINANCE-INVESTMENT BANKER & BROKER (CONTINUED)
$
Mediobanca 57,733 797,550
2,104,038
FINANCE-LEASING COMPANY (0.10%)
Ricoh Leasing 3,938 96,420
Sumisho Lease 3,987 153,938
250,358
FINANCE-OTHER SERVICES (0.20%)
Aktiv Kapital 7,806 130,673
Fubon Financial Holding 224,000 211,226
SFE /1/ 21,664 133,986
475,885
FINANCIAL GUARANTEE INSURANCE (0.07%)
Euler Hermes /2/ 2,691 165,369
FOOD-CONFECTIONERY (0.03%)
Lindt & Spruengli 5 64,505
FOOD-DAIRY PRODUCTS (0.03%)
Morinaga Milk Industry 16,889 67,276
FOOD-FLOUR & GRAIN (0.39%)
Nisshin Seifun Group 92,651 923,980
FOOD-MISCELLANEOUS/DIVERSIFIED (1.22%)
Global Bio-Chem Technology
Group - warrants /2/ 89,048 6,178
IAWS Group 6,440 85,279
J-Oil Mills 17,104 64,267
Kikkoman /1/ 64,441 565,581
Orkla 37,090 1,053,190
Royal Numico /2/ 31,116 1,045,732
Tiger Brands 6,861 96,606
2,916,833
FOOD-RETAIL (1.06%)
Cencosud /2/ /4/ 5,100 113,333
Colruyt 2,119 306,206
Groupe Bourbon 987 48,337
SPAR Group /2/ 6,861 23,065
Tesco 391,006 2,057,975
2,548,916
FOOTWEAR & RELATED APPAREL (0.05%)
Grendene /2/ 10,041 121,680
FORESTRY (0.08%)
Great Southern Plantations /1/ 33,082 83,522
West Fraser Timber 2,597 102,198
185,720
GAS-DISTRIBUTION (0.16%)
Korea Gas 3,600 109,656
OAO Gazprom 7,153 267,022
376,678
HOME FURNISHINGS (0.08%)
Lewis Group /2/ 37,200 193,023
HOTELS & MOTELS (0.75%)
InterContinental Hotels Group 146,191 1,786,665
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HUMAN RESOURCES (0.22%)
$
Capita Group 37,711 243,224
Michael Page International 38,704 122,155
Ranstad Holding 4,821 161,961
527,340
IMPORT & EXPORT (0.58%)
Mitsubishi /1/ 113,042 1,246,560
Testrite International 247,722 137,932
1,384,492
INDUSTRIAL AUTOMATION & ROBOTS (0.06%)
CKD 23,615 136,544
INSTRUMENTS-SCIENTIFIC (0.02%)
As One 1,277 36,919
INTERNET SECURITY (0.09%)
Check Point Software Technologies
/2/ 9,654 218,383
INVESTMENT COMPANIES (0.05%)
Macquarie Airports 58,848 124,397
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.06%)
Muenchmeyer Petersen Capital 2,151 149,943
LEISURE & RECREATION PRODUCTS (0.05%)
Mars Engineering 3,218 120,611
LIFE & HEALTH INSURANCE (0.06%)
New Africa Capital 97,742 140,482
MACHINERY-ELECTRICAL (0.65%)
Nidec 5,500 594,595
Schneider Electric 14,424 952,263
1,546,858
MACHINERY-FARM (0.53%)
Kubota 278,351 1,266,066
MACHINERY-GENERAL INDUSTRY (0.81%)
Harmonic Drive Systems 6 39,552
MAN 48,818 1,690,332
Okuma /2/ 33,358 126,282
Saurer /2/ 1,429 75,527
1,931,693
MEDICAL INSTRUMENTS (0.08%)
Sysmex 3,331 129,865
Topcon /2/ 5,249 66,088
195,953
MEDICAL PRODUCTS (0.90%)
Phonak Holding /1/ 26,646 831,683
Straumann Holding 3,421 706,153
Terumo /1/ 25,134 624,859
2,162,695
MEDICAL-BIOMEDICAL/GENE (0.08%)
Crucell /2/ 6,703 65,910
Genmab /2/ 3,758 53,076
GPC Biotech /2/ 5,744 71,971
190,957
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL-DRUGS (4.62%)
$
AstraZeneca 20,606 842,345
Axcan Pharmaceuticals 5,109 76,860
Eisai 21,030 604,026
Fujirebio 4,201 53,091
GlaxoSmithKline 31,403 660,556
Merck 21,224 1,179,812
Novartis 31,507 1,497,399
Ono Pharmaceutical 17,957 840,440
Orion OYJ 12,807 182,786
Roche Holding 23,370 2,380,863
Sankyo 31,500 652,604
Sanofi-Synthelabo /1/ 28,733 2,094,303
11,065,085
MEDICAL-NURSING HOMES (0.04%)
Extendicare /2/ 7,571 104,029
MEDICAL-WHOLESALE DRUG DISTRIBUTION (0.38%)
Alliance Unichem 75,503 920,681
METAL PROCESSORS & FABRICATION (0.09%)
KITZ 36,156 207,355
METAL-IRON (0.04%)
Portman 49,654 90,126
MISCELLANEOUS MANUFACTURERS (0.03%)
Balda 4,098 42,120
IDT International 167,730 39,436
81,556
MONEY CENTER BANKS (7.97%)
Banco Bilbao Vizcaya Argentaria
/1/ 190,126 2,974,751
Barclays 161,670 1,580,377
BNP Paribas /1/ 54,314 3,685,956
DBS Group Holdings 139,816 1,309,791
HSBC Holdings 127,631 2,056,784
KBC Bancassurance Holding 16,788 1,226,854
Mitsubishi Tokyo Financial Group 257 2,178,171
Standard Chartered 83,437 1,491,361
UBS 35,920 2,580,129
19,084,174
MORTGAGE BANKS (1.05%)
Home Capital Group /2/ 5,254 115,224
Hypo Real Estate Holding /2/ 59,565 2,223,838
Northern Rock 13,237 179,845
2,518,907
MULTI-LINE INSURANCE (2.01%)
AXA 44,441 953,681
Fondiaria-SAI 33,874 776,902
ING Groep 46,096 1,216,705
Storebrand 148,214 1,124,616
Topdanmark /2/ 10,681 750,612
4,822,516
MULTIMEDIA (1.48%)
NRJ Group 2,561 52,905
Publishing & Broadcasting 183,673 2,007,156
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTIMEDIA (CONTINUED)
$
Vivendi Universal /2/ 54,250 1,477,476
3,537,537
NON-FERROUS METALS (0.10%)
Grupo Mexico /2/ 59,911 246,756
NON-HOTEL GAMBLING (0.52%)
Greek Organisation of Football
Prognostics 40,270 818,582
Paddy Power 11,095 146,638
William Hill 31,398 281,037
1,246,257
OFFICE AUTOMATION & EQUIPMENT (1.21%)
Canon 56,521 2,783,735
Neopost /1/ 1,795 124,213
2,907,948
OIL COMPANY-EXPLORATION & PRODUCTION (2.29%)
Acclaim Energy Trust /2/ 1,954 22,828
Canadian Natural Resources 62,837 2,641,756
Oil & Natural Gas 6,049 105,093
Paladin Resources 67,809 204,385
Petrokazakhstan 27,666 1,020,676
PTT Public 57,799 239,275
TAP OIL /2/ 49,789 62,851
Tullow Oil 458,338 1,182,037
5,478,901
OIL COMPANY-INTEGRATED (6.87%)
BP Amoco 304,130 2,939,534
China Petroleum & Chemical 859,937 325,926
ENI 109,956 2,489,676
LUKOIL 3,627 453,375
MOL Magyar Olaj-es Gazipari 2,958 165,028
Petro-Canada 19,277 1,050,654
PetroChina 499,982 261,766
Petroleo Brasileiro 15,186 539,255
Repsol YPF /1/ 91,634 1,980,405
Sasol 11,445 225,833
Shell Transport & Trading 132,152 1,038,790
Surgutneftegaz 3,891 153,694
TotalFinaElf 23,343 4,840,032
16,463,968
OIL REFINING & MARKETING (0.89%)
Polski Koncern Naftowy Orlen 25,595 275,624
Statoil 129,252 1,865,422
2,141,046
OIL-FIELD SERVICES (0.16%)
Stolt Offshore /2/ 35,687 176,429
Tenaris 4,445 199,003
375,432
OPTICAL SUPPLIES (0.51%)
HOYA 12,000 1,229,494
PAPER & RELATED PRODUCTS (0.05%)
Kimberly-Clark de Mexico 36,684 109,771
PETROCHEMICALS (0.20%)
Honam Petrochemical 7,600 297,347
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PETROCHEMICALS (CONTINUED)
$
SINOPEC Shanghai Petrochemical 500,060 175,073
472,420
PHOTOGRAPHIC EQUIPMENT & SUPPLIES (0.03%)
Tamron 2,119 74,232
PROPERTY & CASUALTY INSURANCE (1.02%)
Admiral Group /2/ 7,537 40,498
Amlin 47,339 126,856
Dongbu Insurance 8,750 50,022
Northbridge Financial 1,823 36,468
Promina Group 46,661 158,235
QBE Insurance Group /1/ 132,901 1,362,982
Sompo Japan Insurance 76,708 667,466
2,442,527
PROPERTY TRUST (0.08%)
Commonwealth Property Office Fund 207,196 201,195
PUBLIC THOROUGHFARES (0.07%)
Autostrada Torino 7,615 173,875
PUBLISHING-BOOKS (0.02%)
Bloomsbury Publishing 10,127 47,688
PUBLISHING-NEWSPAPERS (0.12%)
Gruppo Editoriale L'Espresso /1/ 22,866 122,164
Spir Communication 234 41,762
Trinity Mirror 10,010 118,118
282,044
PUBLISHING-PERIODICALS (0.85%)
United Business Media 233,144 2,038,764
QUARRYING (0.05%)
Eramet 1,619 124,597
REAL ESTATE MANAGEMENT & SERVICES (0.30%)
Corio 6,839 340,761
Goldcrest 1,907 118,705
Iida Home Max 2,677 65,041
Midland Realty Holdings 418,283 185,404
709,911
REAL ESTATE OPERATOR & DEVELOPER (2.46%)
Inmobiliaria Colonial /1/ 25,468 880,862
Inmobiliaria Urbis 10,990 129,873
IRSA Inversiones y
Representaciones /2/ 1,499 14,255
Kerry Properties 154,619 297,978
Land Securities Group 55,179 1,206,177
Liberty International 52,093 821,347
Mitsui Fudosan 120,230 1,273,743
NHP 34,866 154,123
Sino Land /1/ 1,308,999 1,118,386
5,896,744
REINSURANCE (0.43%)
Swiss Reinsurance 16,740 1,024,088
RENTAL-AUTO & EQUIPMENT (0.04%)
Northgate 7,214 98,344
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-APPAREL & SHOE (1.35%)
$
Aoki International 4,056 45,453
Edgars Consolidated Stores 11,228 390,222
Next 89,654 2,743,360
Right On 1,992 59,841
3,238,876
RETAIL-AUTOMOBILE (0.06%)
Astra International 152,460 131,518
RETAIL-BUILDING PRODUCTS (0.09%)
Grafton Group /2/ 24,580 222,777
RETAIL-CONSUMER ELECTRONICS (0.14%)
Carphone Warehouse 87,920 269,030
JB Hi-Fi 22,820 61,023
330,053
RETAIL-DISCOUNT (0.04%)
Siam Makro /3/ 94,700 102,621
RETAIL-DRUG STORE (0.02%)
Tsuruha 1,987 49,025
RETAIL-HYPERMARKETS (0.07%)
Organizacion Soriana 50,068 160,674
RETAIL-MAJOR DEPARTMENT STORE (0.43%)
Metro 21,812 1,036,311
RETAIL-MISCELLANEOUS/DIVERSIFIED (0.62%)
Coles Myer 114,015 812,460
Massmart Holdings 18,050 125,463
Ryohin Keikaku 12,400 553,498
1,491,421
RETAIL-MUSIC STORE (0.34%)
HMV Group 185,146 815,032
RETAIL-PUBS (0.55%)
Punch Taverns 129,106 1,308,774
RETAIL-SPORTING GOODS (0.01%)
Blacks Leisure Group 2,909 23,453
RUBBER & PLASTIC PRODUCTS (0.02%)
Taiwan Green Point Enterprises 18,000 49,573
RUBBER-TIRES (1.16%)
Continental 48,047 2,615,857
Sumitomo Rubber Industries 20,323 172,819
2,788,676
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (0.13%)
Realtek Semiconductor 75,000 74,764
Taiwan Semiconductor
Manufacturing 179,000 234,702
309,466
SHIP BUILDING (0.07%)
Samsung Heavy Industries 32,120 173,870
SOAP & CLEANING PRODUCTS (0.39%)
McBride 64,775 182,185
Reckitt Benckiser 27,292 746,607
928,792
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
STEEL PRODUCERS (1.75%)
$
Arcelor /1/ 68,133 1,268,828
Cherepovets MK Severstal /2/ /3/ 2,601 104,221
China Steel 108,265 108,897
Dongkuk Steel Mill 8,410 101,040
Gerdau AmeriSteel /2/ 13,260 64,031
INI Steel 8,470 89,656
IPSCO 6,717 179,304
Iscor 27,097 237,635
JFE Holdings 29,500 790,352
Nippon Steel 301,426 703,961
OneSteel 26,658 52,369
POSCO 7,524 281,322
Russel Metals 9,706 103,923
Tata Iron & Steel 16,741 106,151
4,191,690
STORAGE & WAREHOUSING (0.02%)
Westshore Terminals 6,855 53,952
TELECOMMUNICATION EQUIPMENT (0.72%)
GN Store Nord 17,845 180,243
Option /2/ 1,423 38,646
Telefonaktiebolaget LM Ericsson
/2/ 517,015 1,497,299
1,716,188
TELECOMMUNICATION SERVICES (1.32%)
China Telecom 323,789 104,000
Mahanagar Telephone 17,084 134,963
SK Telecom 15,689 309,544
Telekom Malaysia 35,995 108,932
Telekomunikasi Indonesia 366,966 175,418
Telenor 292,373 2,321,383
3,154,240
TELEPHONE-INTEGRATED (0.20%)
Carso Global Telecom /2/ 91,500 140,827
Philippine Long Distance
Telephone /2/ 13,877 348,313
489,140
TELEVISION (0.91%)
Antena 3 Television /2/ 2,758 176,644
Mediaset 176,553 2,007,782
2,184,426
TOBACCO (1.30%)
Imperial Tobacco Group 86,637 2,017,649
Korea Tobacco & Ginseng 39,253 1,086,952
3,104,601
TRANSPORT-MARINE (1.28%)
China Shipping Development /1/ 155,699 130,026
Dampskibsselskabet Torm 5,473 174,741
Kawasaki Kisen Kaisha 26,197 174,416
Malaysia International Shipping 31,890 111,615
Mitsui O.S.K. Lines 211,542 1,251,044
Nippon Yusen Kabushiki Kaisha 170,366 855,119
Orient Overseas International 32,710 118,932
Wan Hai Lines 252,500 242,636
3,058,529
Shares
Held Value
- -----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRANSPORT-RAIL (0.57%)
$
East Japan Railway 261 1,369,027
TRANSPORT-SERVICES (0.08%)
Toll Holdings 21,661 191,244
VENTURE CAPITAL (0.02%)
Japan Asia Investment 10,887 40,804
WATER (0.77%)
Kelda Group 179,944 1,841,439
WEB PORTALS (0.07%)
eAccess /2/ 97 85,956
Iliad 2,559 72,786
158,742
WIRELESS EQUIPMENT (0.63%)
Gemtek Technology 107,000 251,444
Hitachi Kokusai Electric 7,500 51,912
Nokia 63,564 977,555
Uniden 10,795 233,304
1,514,215
TOTAL COMMON STOCKS 235,813,687
Shares
Held Value
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS (0.69%)
AIRLINES (0.07%)
Gol Linhas Aereas Inteligentes
/2/ 16,206 167,394
COMMERCIAL BANKS (0.09%)
Banco Bradesco 3,694 223,373
DIVERSIFIED MINERALS (0.17%)
Caemi Mineracao e Metalurgica /2/ 671,724 402,188
FOOD-MEAT PRODUCTS (0.08%)
Sadia 113,879 206,146
MACHINERY-GENERAL INDUSTRY (0.07%)
WEG 60,872 158,148
PETROCHEMICALS (0.04%)
Braskem /2/ 2,603,684 95,724
STEEL PRODUCERS (0.09%)
Cia Siderurgica de Tubarao 2,636,255 106,429
Usinas Siderurgicas de Minas
Gerais 7,400 112,062
218,491
TELEVISION (0.08%)
ProSiebenSat.1 Media 10,490 187,480
TOTAL PREFERRED STOCKS 1,658,944
Principal
Amount Value
- -----------------------------------------------------------------------------------------
COMMERCIAL PAPER (1.58%)
AEROSPACE & DEFENSE EQUIPMENT (1.58%)
United Technologies
$ $
1.85%; 11/01/04 3,780,000 3,780,000
TOTAL COMMERCIAL PAPER 3,780,000
Maturity
Amount Value
- -----------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (8.93%)
Washington Mutual Capital; 1.95%;
dated 10/29/04 maturing 11/01/04
(collateralized by U.S.
Government Agency Securities;
$21,825,805; 08/01/19 -
11/01/34) /5/ 21,401,325 21,397,848
TOTAL REPURCHASE AGREEMENTS 21,397,848
------------
TOTAL PORTFOLIO INVESTMENTS (109.65%) 262,650,479
LIABILITIES, NET OF
CASH, RECEIVABLES
AND OTHER ASSETS
(-9.65%) (23,116,639)
TOTAL NET ASSETS (100.00%) $239,533,840
---------------
/1 /Security or a portion of the security was on loan at the end of the period.
/2 /Non-income producing security.
/3 /Market value is determined in accordance with procedures established in good
faith by the Board of Directors. At the end of the period, the value of these
securities totaled $312,662 or 0.13% of net assets.
/4 /Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the end of the period, the
value of these securities totaled $251,283 or 0.10% of net assets.
/5 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 27,311,096
Unrealized Depreciation (4,485,129)
------------
Net Unrealized Appreciation (Depreciation) 22,825,967
Cost for federal income tax purposes $239,824,512
INVESTMENTS BY COUNTRY (UNAUDITED)
Country Value Percentage of
Total Value
- ----------------------------------------------------------------
$
Argentina 287,857 0.11%
Australia 5,739,572 2.19
Austria 1,256,077 0.48
Belgium 1,754,733 0.67
Bermuda 185,404 0.07
Brazil 2,389,909 0.91
Canada 9,176,414 3.49
Cayman Islands 96,949 0.04
Chile 219,153 0.08
China 892,791 0.34
Denmark 2,021,055 0.77
Finland 4,228,388 1.61
France 18,622,322 7.09
Germany 16,268,335 6.19
Greece 3,100,880 1.18
Hong Kong 3,117,660 1.19
Hungary 322,653 0.12
India 689,728 0.26
Indonesia 537,828 0.21
Ireland 2,984,238 1.14
Israel 485,064 0.18
Italy 10,916,498 4.16
Japan 45,897,723 17.48
Korea 5,372,909 2.05
Luxembourg 1,445,257 0.55
Malaysia 900,138 0.34
Mexico 1,446,591 0.55
Netherlands 4,233,878 1.61
Norway 8,232,724 3.13
Peru 118,656 0.05
Philippines 348,313 0.13
Poland 275,624 0.11
Russia 776,535 0.30
Singapore 1,403,349 0.53
South Africa 2,400,744 0.91
Spain 7,779,432 2.96
Sweden 4,763,381 1.81
Switzerland 12,872,790 4.90
Taiwan 2,386,127 0.91
Thailand 543,530 0.21
United Kingdom 50,513,792 19.23
United States 25,645,478 9.76
TOTAL $262,650,479 100.00%
-------------- ---------
129
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (97.11%)
ADVERTISING AGENCIES (0.45%)
$
Asatsu-DK 9,653 273,618
ADVERTISING SALES (0.60%)
Telefonica Publicidad e
Informacion 50,302 369,203
AGRICULTURAL OPERATIONS (0.39%)
Chaoda Modern Agriculture 708,054 241,070
AIRLINES (0.31%)
Austrian Airlines /1/ 13,785 186,925
AIRPORT DEVELOPMENT & MAINTENANCE (0.56%)
Kobenhavns Lufthavne 2,027 339,031
ATHLETIC FOOTWEAR (1.09%)
Puma /2/ 2,678 668,569
AUDIO & VIDEO PRODUCTS (0.66%)
Bang & Olufsen 3,059 181,195
Sansui Electric /1/ 66,333 19,989
Skyworth Digital Holdings 586,597 201,602
402,786
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.84%)
Exedy 12,658 213,252
Keihin 18,145 299,540
512,792
BEVERAGES-NON-ALCOHOLIC (0.26%)
Asahi Soft Drinks 8,230 70,062
Calpis 14,052 86,676
156,738
BREWERY (0.42%)
Wolverhampton & Dudley Breweries 15,158 253,577
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (2.17%)
Geberit 680 441,466
Kingspan Group 66,903 523,389
Sika 589 361,308
1,326,163
BUILDING & CONSTRUCTION-MISCELLANEOUS (0.55%)
Abengoa 12,834 118,849
Carillion 54,902 217,541
336,390
BUILDING PRODUCTS-CEMENT & AGGREGATE (2.10%)
Adelaide Brighton 429,415 529,240
Cementir 43,337 192,393
Italcementi 36,499 558,999
1,280,632
BUILDING-HEAVY CONSTRUCTION (2.21%)
Daelim Industrial 10,492 449,858
Vinci /2/ 7,573 899,262
1,349,120
BUILDING-RESIDENTIAL & COMMERCIAL (2.44%)
McCarthy & Stone 44,601 474,398
Persimmon 63,394 716,688
Token /1/ 6,675 297,952
1,489,038
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CASINO SERVICES (0.80%)
$
Aristocrat Leisure /2/ 75,949 487,312
CELLULAR TELECOMMUNICATIONS (0.75%)
Mobistar /1/ 6,109 456,932
CHEMICALS-DIVERSIFIED (1.27%)
Mitsubishi Gas Chemical 173,859 743,309
NOF 8,883 30,617
773,926
CHEMICALS-SPECIALTY (2.39%)
Clariant 57,868 780,275
Methanex 43,418 681,660
1,461,935
COATINGS & PAINT (0.85%)
Kansai Paint /2/ 90,938 521,530
COMMERCIAL BANKS (4.56%)
Amagerbanken 1,287 158,856
Banca Popolare di Lodi 53,069 571,779
Bank of Kyoto /1/ 78,618 577,475
Bank of Piraeus 20,710 267,656
Dah Sing Financial 35,845 257,898
Jyske Bank /1/ 9,434 303,630
Natexis Banques Populaires 1,331 158,897
Sapporo Hokuyo Holdings 29 189,528
Wing Hang Bank 43,376 296,756
2,782,475
COMMUNICATIONS SOFTWARE (0.34%)
Telelogic /1/ 96,905 205,713
COMPUTER SERVICES (0.33%)
ALTEN /1/ /2/ 5,395 116,666
EDB Business Partner /1/ /2/ 13,018 86,762
203,428
COMPUTERS-INTEGRATED SYSTEMS (0.97%)
NIWS 233 590,235
COMPUTERS-PERIPHERAL EQUIPMENT (1.11%)
Logitech International /1/ 9,069 469,132
Roland /2/ 4,222 208,734
677,866
CONSULTING SERVICES (1.30%)
Savills 21,053 158,448
WS Atkins 52,721 638,048
796,496
COSMETICS & TOILETRIES (0.31%)
Body Shop International 61,089 186,649
DISTRIBUTION-WHOLESALE (0.86%)
Doshisha /2/ 7,250 240,324
Inchcape 10,602 287,117
527,441
DIVERSIFIED MANUFACTURING OPERATIONS (0.66%)
Charter /1/ 57,734 207,869
NKT Holding 8,342 195,651
403,520
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED MINERALS (0.72%)
$
Inmet Mining /1/ 28,376 438,522
DIVERSIFIED OPERATIONS (0.19%)
Ordina 9,798 114,415
ELECTRIC-INTEGRATED (1.28%)
ASM Brescia 82,408 250,536
International Power /1/ 180,222 533,307
783,843
ELECTRONIC COMPONENTS-MISCELLANEOUS (1.20%)
Funkwerk 2,640 113,507
LG Micron 5,521 253,488
Nihon Dempa Kogyo 10,377 219,384
Star Micronics /2/ 18,088 148,022
734,401
ELECTRONIC COMPONENTS-SEMICONDUCTOR (0.21%)
Kontron /1/ 13,992 127,615
ELECTRONIC MEASUREMENT INSTRUMENTS (0.44%)
Techem /1/ 8,396 265,935
ENERGY-ALTERNATE SOURCES (0.19%)
SolarWorl 1,930 117,843
ENTERPRISE SOFTWARE & SERVICE (0.15%)
Unit 4 Agresso /1/ 6,160 90,112
EXTENDED SERVICE CONTRACTS (0.39%)
Accord Customer Care Solutions
/1/ /2/ 509,901 235,775
FINANCE-CONSUMER LOANS (0.36%)
Lopro 34,074 220,122
FINANCE-INVESTMENT BANKER & BROKER (0.41%)
Ichiyoshi Securities 33,045 247,705
FINANCE-LEASING COMPANY (1.05%)
Ricoh Leasing /2/ 9,930 243,130
Sumisho Lease 10,246 395,599
638,729
FINANCE-OTHER SERVICES (1.08%)
Aktiv Kapital /2/ 19,093 319,618
SFE /1/ /2/ 55,436 342,858
662,476
FINANCIAL GUARANTEE INSURANCE (0.69%)
Euler Hermes /1/ 6,830 419,722
FOOD-CONFECTIONERY (0.25%)
Lindt & Spruengli 12 154,813
FOOD-DAIRY PRODUCTS (0.28%)
Morinaga Milk Industry 42,495 169,276
FOOD-FLOUR & GRAIN (1.10%)
Nisshin Seifun Group 67,318 671,342
FOOD-MISCELLANEOUS/DIVERSIFIED (0.63%)
IAWS Group 16,603 219,857
J-Oil Mills 43,203 162,332
382,189
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD-RETAIL (1.45%)
$
Colruyt 5,290 764,430
Groupe Bourbon 2,493 122,092
886,522
FORESTRY (0.77%)
Great Southern Plantations /2/ 84,267 212,748
West Fraser Timber 6,558 258,073
470,821
HUMAN RESOURCES (2.18%)
Capita Group 95,356 615,017
Michael Page International 97,865 308,875
Ranstad Holding 12,181 409,219
1,333,111
INDUSTRIAL AUTOMATION & ROBOTS (0.56%)
CKD 59,648 344,890
INSTRUMENTS-SCIENTIFIC (0.15%)
As One /2/ 3,226 93,265
INVESTMENT COMPANIES (0.51%)
Macquarie Airports 148,688 314,307
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.62%)
Muenchmeyer Petersen Capital 5,402 376,564
LEISURE & RECREATION PRODUCTS (0.50%)
Mars Engineering 8,128 304,637
MACHINERY-GENERAL INDUSTRY (2.22%)
Harmonic Drive Systems 15 98,880
MAN 21,658 749,912
Okuma /1/ 84,010 318,034
Saurer /1/ 3,600 190,270
1,357,096
MEDICAL INSTRUMENTS (0.81%)
Sysmex 8,426 328,502
Topcon /1/ 13,211 166,335
494,837
MEDICAL PRODUCTS (1.40%)
Phonak Holding 12,979 405,104
Straumann Holding 2,171 448,132
853,236
MEDICAL-BIOMEDICAL/GENE (0.78%)
Crucell /1/ /2/ 17,115 168,291
Genmab /1/ 8,993 127,013
GPC Biotech /1/ 14,654 183,610
478,914
MEDICAL-DRUGS (1.29%)
Axcan Pharmaceuticals 12,890 193,918
Fujirebio 10,689 135,085
Orion OYJ 32,255 460,356
789,359
MEDICAL-NURSING HOMES (0.43%)
Extendicare /1/ 19,090 262,307
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
METAL PROCESSORS & FABRICATION (0.85%)
$
KITZ 91,064 522,252
METAL-IRON (0.38%)
Portman 126,612 229,812
MISCELLANEOUS MANUFACTURERS (0.34%)
Balda 10,452 107,427
IDT International 424,080 99,708
207,135
MORTGAGE BANKS (2.47%)
Home Capital Group /1/ 13,363 293,060
Hypo Real Estate Holding /1/ 20,398 761,552
Northern Rock 33,470 454,741
1,509,353
MULTI-LINE INSURANCE (0.79%)
Topdanmark /1/ 6,906 485,322
MULTIMEDIA (0.23%)
NRJ Group 6,676 137,913
NON-HOTEL GAMBLING (1.77%)
Paddy Power 28,353 374,730
William Hill 79,102 708,025
1,082,755
OFFICE AUTOMATION & EQUIPMENT (0.51%)
Neopost /2/ 4,526 313,197
OIL COMPANY-EXPLORATION & PRODUCTION (2.04%)
Acclaim Energy Trust /1/ 4,937 57,678
Paladin Resources 171,329 516,409
TAP OIL /1/ 125,967 159,014
Tullow Oil 198,820 512,749
1,245,850
OIL-FIELD SERVICES (0.73%)
Stolt Offshore /1/ 90,185 445,856
PHOTOGRAPHIC EQUIPMENT & SUPPLIES (0.31%)
Tamron /2/ 5,360 187,769
PROPERTY & CASUALTY INSURANCE (1.71%)
Admiral Group /1/ 18,980 101,984
Amlin 120,996 324,238
Dongbu Insurance 22,600 129,200
Northbridge Financial 4,608 92,179
Promina Group 116,564 395,286
1,042,887
PROPERTY TRUST (0.84%)
Commonwealth Property Office Fund 528,731 513,416
PUBLIC THOROUGHFARES (0.72%)
Autostrada Torino 19,369 442,258
PUBLISHING-BOOKS (0.19%)
Bloomsbury Publishing 25,148 118,422
PUBLISHING-NEWSPAPERS (1.16%)
Gruppo Editoriale L'Espresso 57,756 308,568
Spir Communication 589 105,118
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PUBLISHING-NEWSPAPERS (CONTINUED)
$
Trinity Mirror 25,211 297,490
711,176
PUBLISHING-PERIODICALS (0.87%)
United Business Media 60,794 531,623
QUARRYING (0.52%)
Eramet 4,093 314,993
REAL ESTATE MANAGEMENT & SERVICES (2.94%)
Corio 17,275 860,747
Goldcrest 4,802 298,910
Iida Home Max 6,862 166,719
Midland Realty Holdings 1,056,536 468,311
1,794,687
REAL ESTATE OPERATOR & DEVELOPER (2.55%)
Inmobiliaria Colonial /2/ 16,151 558,615
Inmobiliaria Urbis /2/ 27,223 321,703
Kerry Properties 148,279 285,760
NHP 88,093 389,409
1,555,487
RENTAL-AUTO & EQUIPMENT (0.41%)
Northgate 18,398 250,807
RETAIL-APPAREL & SHOE (1.96%)
Aoki International 10,407 116,624
Next 30,364 929,121
Right On 5,037 151,307
1,197,052
RETAIL-BUILDING PRODUCTS (0.93%)
Grafton Group /1/ 62,475 566,233
RETAIL-CONSUMER ELECTRONICS (1.37%)
Carphone Warehouse 222,561 681,024
JB Hi-Fi 57,735 154,388
835,412
RETAIL-DRUG STORE (0.20%)
Tsuruha 5,038 124,301
RETAIL-MISCELLANEOUS/DIVERSIFIED (0.69%)
Ryohin Keikaku 9,475 422,935
RETAIL-PUBS (0.52%)
Punch Taverns 31,477 319,089
RETAIL-SPORTING GOODS (0.09%)
Blacks Leisure Group 7,180 57,886
RUBBER-TIRES (1.96%)
Continental 14,026 763,627
Sumitomo Rubber Industries /2/ 51,008 433,753
1,197,380
SOAP & CLEANING PRODUCTS (0.76%)
McBride 164,501 462,672
STEEL PRODUCERS (2.44%)
Dongkuk Steel Mill 21,258 255,400
Gerdau AmeriSteel /1/ 33,566 162,085
INI Steel 21,420 226,733
Shares
Held Value
- ----------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
STEEL PRODUCERS (CONTINUED)
$
IPSCO 16,981 453,291
OneSteel 67,388 132,382
Russel Metals 24,559 262,956
1,492,847
STORAGE & WAREHOUSING (0.22%)
Westshore Terminals 17,267 135,899
TELECOMMUNICATION EQUIPMENT (0.85%)
GN Store Nord 44,941 453,926
Option /1/ 2,481 67,380
521,306
TELEVISION (0.73%)
Antena 3 Television /1/ 6,969 446,348
TRANSPORT-MARINE (1.92%)
Dampskibsselskabet Torm 13,458 429,685
Kawasaki Kisen Kaisha 66,189 440,678
Orient Overseas International 82,647 300,500
1,170,863
TRANSPORT-SERVICES (0.78%)
Toll Holdings 54,090 477,558
VENTURE CAPITAL (0.18%)
Japan Asia Investment 28,550 107,005
WATER (1.49%)
Kelda Group 88,685 907,549
WEB PORTALS (0.66%)
eAccess /1/ /2/ 245 217,106
Iliad 6,520 185,449
402,555
WIRELESS EQUIPMENT (1.19%)
Hitachi Kokusai Electric 19,519 135,102
Uniden 27,333 590,726
725,828
TOTAL COMMON STOCKS 59,309,499
Shares
Held Value
- ----------------------------------------------------------------------------------------
PREFERRED STOCKS (0.78%)
TELEVISION (0.78%)
ProSiebenSat.1 Media /2/ 26,504 473,687
TOTAL PREFERRED STOCKS 473,687
Principal
Amount Value
- ----------------------------------------------------------------------------------------
COMMERCIAL PAPER (1.68%)
AEROSPACE & DEFENSE EQUIPMENT (1.68%)
United Technologies
$ $
1.85%; 11/01/04 1,025,000 1,025,000
TOTAL COMMERCIAL PAPER 1,025,000
Maturity
Amount Value
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (8.33%)
Washington Mutual Capital; 1.95%;
dated 10/29/04 maturing 11/01/04
(collateralized by U.S.
Government Agency Securities;
$5,189,979; 08/01/19 - 11/01/34) $
/3/ $5,089,042 5,088,215
TOTAL REPURCHASE AGREEMENTS 5,088,215
-----------
TOTAL PORTFOLIO INVESTMENTS (107.90%) 65,896,401
LIABILITIES, NET OF
CASH, RECEIVABLES
AND OTHER ASSETS
(-7.90%) (4,821,811)
TOTAL NET ASSETS (100.00%) $61,074,590
--------------
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $11,100,458
Unrealized Depreciation (827,212)
-----------
Net Unrealized Appreciation (Depreciation) 10,273,246
Cost for federal income tax purposes $55,623,155
INVESTMENTS BY COUNTRY (UNAUDITED)
Country Value Percentage of
Total Value
- ---------------------------------------------------------------
Australia $ 3,948,320 5.99%
Austria 186,925 0.28
Belgium 1,288,742 1.95
Bermuda 468,311 0.71
Canada 3,291,628 4.99
Cayman Islands 241,070 0.37
Denmark 2,674,308 4.06
Finland 460,356 0.70
France 2,773,309 4.21
Germany 4,709,851 7.15
Greece 267,656 0.41
Hong Kong 1,442,223 2.19
Ireland 1,684,210 2.56
Italy 2,324,533 3.53
Japan 12,544,567 19.04
Korea 1,314,678 1.99
Luxembourg 445,856 0.68
Netherlands 1,642,784 2.49
Norway 406,380 0.62
Singapore 235,775 0.36
Spain 1,814,719 2.75
Sweden 205,713 0.31
Switzerland 3,250,500 4.93
United Kingdom 12,160,772 18.45
United States 6,113,215 9.28
TOTAL $65,896,401 100.00%
------------- ---------
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (97.01%)
ADVERTISING AGENCIES (0.18%)
$
Interpublic Group /1/ 2,539 31,128
Omnicom Group 1,125 88,763
119,891
AEROSPACE & DEFENSE (0.76%)
Boeing 5,047 251,845
Northrop Grumman 2,156 111,573
Raytheon 2,712 98,934
Rockwell Collins 1,065 37,776
500,128
AEROSPACE & DEFENSE EQUIPMENT (0.87%)
General Dynamics 1,203 122,850
Goodrich 717 22,105
Lockheed Martin 2,674 147,311
United Technologies 3,076 285,514
577,780
AGRICULTURAL OPERATIONS (0.10%)
Monsanto 1,606 68,657
AIRLINES (0.12%)
Delta Air Lines /1/ /2/ 758 4,131
Southwest Airlines 4,751 74,923
79,054
APPAREL MANUFACTURERS (0.21%)
Coach /1/ 1,132 52,785
Jones Apparel Group 749 26,440
Liz Claiborne 647 26,449
VF 664 35,743
141,417
APPLIANCES (0.05%)
Maytag /2/ 475 8,265
Whirlpool 399 23,441
31,706
APPLICATIONS SOFTWARE (3.00%)
Citrix Systems /1/ 1,018 24,564
Compuware /1/ 2,322 13,444
Intuit /1/ 1,152 52,255
Mercury Interactive /1/ 562 24,408
Microsoft 65,364 1,829,538
Parametric Technology /1/ 1,634 8,480
Siebel Systems /1/ 3,039 28,871
1,981,560
ATHLETIC FOOTWEAR (0.21%)
Nike 1,584 128,795
Reebok International 355 13,135
141,930
AUTO-CARS & LIGHT TRUCKS (0.41%)
Ford Motor 11,001 143,343
General Motors 3,395 130,877
274,220
AUTO-MEDIUM & HEAVY DUTY TRUCKS (0.13%)
Navistar International /1/ 420 14,511
Paccar 1,043 72,290
86,801
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.07%)
$
Dana 899 13,404
Delphi Automotive Systems 3,374 28,375
Visteon 790 5,617
47,396
BEVERAGES-NON-ALCOHOLIC (1.81%)
Coca-Cola 14,587 593,108
Coca-Cola Enterprises 2,820 58,966
Pepsi Bottling Group 1,528 42,845
Pepsico 10,183 504,873
1,199,792
BEVERAGES-WINE & SPIRITS (0.05%)
Brown-Forman 731 32,822
BREWERY (0.39%)
Adolph Coors 227 15,141
Anheuser-Busch 4,816 240,559
255,700
BROADCASTING SERVICES & PROGRAMMING (0.18%)
Clear Channel Communications 3,547 118,470
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.18%)
Masco 2,605 89,247
Vulcan Materials 616 30,665
119,912
BUILDING PRODUCTS-AIR & HEATING (0.07%)
American Standard /1/ 1,286 47,029
BUILDING-MAINTENANCE & SERVICE (0.08%)
Ecolab 1,548 52,400
BUILDING-RESIDENTIAL & COMMERCIAL (0.16%)
Centex 743 38,591
KB Home 278 22,866
Pulte 763 41,873
103,330
CABLE TV (0.60%)
Comcast /1/ 13,435 396,332
CASINO HOTELS (0.06%)
Harrah's Entertainment 672 39,325
CASINO SERVICES (0.10%)
International Game Technology 2,071 68,426
CELLULAR TELECOMMUNICATIONS (0.27%)
Nextel Communications /1/ 6,694 177,324
CHEMICALS-DIVERSIFIED (0.96%)
Dow Chemical 5,648 253,821
E. I. Du Pont de Nemours 6,000 257,220
PPG Industries 1,033 65,854
Rohm & Haas 1,350 57,226
634,121
CHEMICALS-SPECIALTY (0.13%)
Eastman Chemical 472 22,406
Engelhard 748 21,168
Great Lakes Chemical 309 7,917
Hercules /1/ 670 9,568
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CHEMICALS-SPECIALTY (CONTINUED)
$
Sigma-Aldrich 416 23,146
84,205
CIRCUIT BOARDS (0.04%)
Jabil Circuit /1/ 1,209 29,391
COATINGS & PAINT (0.06%)
Sherwin-Williams 856 36,568
COMMERCIAL BANKS (1.07%)
AmSouth Bancorp 2,127 56,131
BB&T 3,333 137,020
First Horizon National 743 32,157
M&T Bank 704 72,512
Marshall & Ilsley 1,340 56,240
North Fork Bancorp 1,873 82,599
Regions Financial 2,778 97,452
SouthTrust 2,001 87,184
Synovus Financial 1,858 50,519
Zions Bancorp 539 35,666
707,480
COMMERCIAL SERVICE-FINANCE (0.34%)
Deluxe 304 11,579
Equifax 819 21,417
H&R Block 991 47,122
Moody's 889 69,173
Paychex 2,274 74,574
223,865
COMMERCIAL SERVICES (0.02%)
Convergys /1/ 857 11,150
COMPUTER AIDED DESIGN (0.05%)
Autodesk 683 36,028
COMPUTER SERVICES (0.35%)
Affiliated Computer Services /1/ 769 41,949
Computer Sciences /1/ 1,135 56,375
Electronic Data Systems 3,081 65,533
Sungard Data Systems /1/ 1,734 45,934
Unisys /1/ 2,014 21,389
231,180
COMPUTERS (2.22%)
Apple Computer /1/ 2,331 122,447
Gateway /1/ 2,241 13,110
Hewlett-Packard 18,154 338,754
International Business Machines 10,071 903,872
Sun Microsystems /1/ 19,996 90,582
1,468,765
COMPUTERS-INTEGRATED SYSTEMS (0.84%)
Dell /1/ 15,008 526,181
NCR /1/ 567 31,950
558,131
COMPUTERS-MEMORY DEVICES (0.37%)
EMC /1/ 14,455 186,036
Veritas Software /1/ 2,603 56,953
242,989
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTERS-PERIPHERAL EQUIPMENT (0.10%)
$
Lexmark International /1/ 779 64,743
CONSUMER PRODUCTS-MISCELLANEOUS (0.20%)
Clorox 1,282 69,997
Fortune Brands 865 62,990
132,987
CONTAINERS-METAL & GLASS (0.04%)
Ball 676 26,939
CONTAINERS-PAPER & PLASTIC (0.10%)
Bemis 643 17,020
Pactiv /1/ 903 21,392
Sealed Air /1/ 505 25,018
63,430
COSMETICS & TOILETRIES (2.28%)
Alberto-Culver 546 24,494
Avon Products 2,844 112,480
Colgate-Palmolive 3,193 142,472
Gillette 6,024 249,875
International Flavors & Fragrances 567 22,141
Kimberly-Clark 2,972 177,339
Procter & Gamble 15,282 782,133
1,510,934
CRUISE LINES (0.29%)
Carnival 3,806 192,431
DATA PROCESSING & MANAGEMENT (0.62%)
Automatic Data Processing 3,511 152,342
First Data 5,154 212,757
Fiserv /1/ 1,174 41,724
406,823
DISPOSABLE MEDICAL PRODUCTS (0.05%)
C.R. Bard 631 35,841
DISTRIBUTION-WHOLESALE (0.11%)
Genuine Parts 1,052 41,964
W.W. Grainger 547 32,049
74,013
DIVERSIFIED MANUFACTURING OPERATIONS (5.45%)
3M 4,706 365,044
Cooper Industries 569 36,359
Crane 355 9,894
Danaher 1,853 102,156
Dover 1,223 48,027
Eaton 911 58,258
General Electric /3/ 63,473 2,165,699
Honeywell International 5,168 174,058
Illinois Tool Works 1,817 167,673
ITT Industries 555 45,033
Textron 833 56,769
Tyco International 12,077 376,199
3,605,169
DIVERSIFIED OPERATORS-COMMERCIAL SERVICES (0.20%)
Cendant 6,346 130,664
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
DRUG DELIVERY SYSTEMS (0.05%)
$
Hospira /1/ 939 29,963
E-COMMERCE-SERVICES (0.62%)
eBay /1/ 3,974 387,902
Monster Worldwide /1/ 714 20,028
407,930
ELECTRIC PRODUCTS-MISCELLANEOUS (0.30%)
Emerson Electric 2,526 161,790
Molex 1,140 33,710
195,500
ELECTRIC-GENERATION (0.06%)
AES /1/ 3,884 42,336
ELECTRIC-INTEGRATED (2.61%)
Allegheny Energy /1/ /2/ 824 15,087
Ameren 1,168 56,064
American Electric Power 2,379 78,340
CenterPoint Energy /2/ 1,850 19,444
Cinergy 1,086 42,919
CMS Energy /1/ 1,141 10,680
Consolidated Edison 1,452 63,089
Constellation Energy Group 1,054 42,814
Dominion Resources 1,986 127,740
DTE Energy 1,044 44,589
Duke Energy 5,637 138,276
Edison International 1,959 59,750
Entergy 1,364 89,151
Exelon 3,969 157,252
FirstEnergy 1,983 81,957
FPL Group 1,115 76,824
NiSource 1,585 33,998
PG&E /1/ 2,410 77,216
Pinnacle West Capital 549 23,398
PPL 1,137 59,124
Progress Energy 1,484 61,289
Public Service Enterprise Group 1,426 60,733
Southern 4,438 140,196
TECO Energy 1,195 16,730
TXU 1,784 109,217
XCEL Energy 2,404 41,108
1,726,985
ELECTRICAL COMPONENTS & EQUIPMENT (0.01%)
Power-One /1/ 510 3,580
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.08%)
Sanmina /1/ 3,133 25,064
Solectron /1/ 5,782 30,182
55,246
ELECTRONIC COMPONENTS-SEMICONDUCTOR (2.20%)
Advanced Micro Devices /1/ 2,135 35,911
Altera /1/ 2,234 50,779
Applied Micro Circuits /1/ 1,901 6,920
Broadcom /1/ 1,936 52,369
Intel 38,564 858,435
LSI Logic /1/ 2,330 10,601
Micron Technology /1/ /2/ 3,677 44,786
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC COMPONENTS-SEMICONDUCTOR (CONTINUED)
$
National Semiconductor /1/ 2,154 35,972
Nvidia /1/ 1,001 14,484
PMC - Sierra /1/ 1,065 10,927
QLogic /1/ 555 18,037
Texas Instruments 10,407 254,451
Xilinx 2,087 63,862
1,457,534
ELECTRONIC FORMS (0.12%)
Adobe Systems 1,442 80,795
ELECTRONIC MEASUREMENT INSTRUMENTS (0.14%)
Agilent Technologies /1/ 2,919 73,150
Tektronix 551 16,712
89,862
ENGINEERING-RESEARCH & DEVELOPMENT SERVICES (0.04%)
Fluor 502 23,313
ENGINES-INTERNAL COMBUSTION (0.03%)
Cummins Engine 266 18,641
ENTERPRISE SOFTWARE & SERVICE (0.88%)
BMC Software /1/ 1,342 25,391
Computer Associates International 3,519 97,512
Novell /1/ 2,326 16,724
Oracle /1/ 31,085 393,536
Peoplesoft /1/ 2,207 45,839
579,002
ENTERTAINMENT SOFTWARE (0.12%)
Electronic Arts /1/ 1,827 82,069
FIDUCIARY BANKS (0.56%)
Bank of New York 4,677 151,815
Mellon Financial 2,549 73,666
Northern Trust 1,322 56,238
State Street 2,022 91,091
372,810
FILTRATION & SEPARATION PRODUCTS (0.03%)
Pall 753 19,473
FINANCE-COMMERCIAL (0.08%)
CIT Group 1,271 51,348
FINANCE-CONSUMER LOANS (0.18%)
SLM 2,620 118,581
FINANCE-CREDIT CARD (1.11%)
American Express 7,621 404,446
Capital One Financial 1,452 107,100
MBNA 7,682 196,890
Providian Financial /1/ 1,760 27,368
735,804
FINANCE-INVESTMENT BANKER & BROKER (3.90%)
Bear Stearns 619 58,650
Charles Schwab 8,215 75,167
Citigroup 31,142 1,381,771
Goldman Sachs Group 2,922 287,466
Lehman Brothers Holdings 1,631 133,987
Merrill Lynch 5,647 304,599
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FINANCE-INVESTMENT BANKER & BROKER (CONTINUED)
$
Morgan Stanley 6,604 337,399
2,579,039
FINANCE-MORTGAGE LOAN/BANKER (1.20%)
Countrywide Credit Industries 3,386 108,115
Federal Home Loan Mortgage 4,130 275,058
Federal National Mortgage Association 5,819 408,203
791,376
FINANCIAL GUARANTEE INSURANCE (0.21%)
Ambac Financial Group 652 50,895
MBIA 860 49,760
MGIC Investment 593 38,136
138,791
FOOD-CONFECTIONERY (0.25%)
Hershey Foods 1,480 75,021
Wm. Wrigley Jr. 1,352 88,421
163,442
FOOD-FLOUR & GRAIN (0.11%)
Archer Daniels Midland 3,914 75,814
FOOD-MISCELLANEOUS/DIVERSIFIED (0.87%)
Campbell Soup 2,468 66,241
ConAgra Foods 3,178 83,899
General Mills 2,286 101,155
H.J. Heinz 2,100 76,335
Kellogg 2,486 106,898
McCormick 825 29,230
Sara Lee 4,770 111,046
574,804
FOOD-RETAIL (0.26%)
Albertson's 2,211 50,433
Kroger /1/ 4,444 67,149
Safeway /1/ 2,687 49,011
Winn-Dixie Stores /2/ 866 2,979
169,572
FOOD-WHOLESALE & DISTRIBUTION (0.22%)
Supervalu 822 24,241
Sysco 3,844 124,046
148,287
FORESTRY (0.06%)
Plum Creek Timber 1,103 40,028
GAS-DISTRIBUTION (0.16%)
KeySpan 964 38,512
Nicor /2/ 265 9,943
Peoples Energy /2/ 229 9,796
Sempra Energy 1,394 46,755
105,006
GOLD MINING (0.19%)
Newmont Mining 2,666 126,688
HEALTH CARE COST CONTAINMENT (0.20%)
Caremark Rx /1/ 2,800 83,916
McKesson 1,765 47,055
130,971
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOME DECORATION PRODUCTS (0.05%)
$
Newell Rubbermaid 1,653 35,639
HOME FURNISHINGS (0.05%)
Leggett & Platt 1,153 32,434
HOTELS & MOTELS (0.27%)
Hilton Hotels 2,315 46,069
Marriott International 1,378 75,087
Starwood Hotels & Resorts Worldwide 1,252 59,758
180,914
HUMAN RESOURCES (0.04%)
Robert Half International 1,036 27,485
IDENTIFICATION SYSTEM-DEVELOPMENT (0.03%)
Symbol Technologies 1,439 21,139
INDEPENDENT POWER PRODUCER (0.01%)
Calpine /1/ 3,203 7,975
INDUSTRIAL AUTOMATION & ROBOTS (0.07%)
Rockwell International 1,108 46,193
INDUSTRIAL GASES (0.23%)
Air Products & Chemicals 1,367 72,697
Praxair 1,954 82,459
155,156
INSTRUMENTS-CONTROLS (0.22%)
Johnson Controls 1,144 65,609
Parker Hannifin 718 50,712
Thermo Electron /1/ 981 28,449
144,770
INSTRUMENTS-SCIENTIFIC (0.18%)
Applied Biosystems Group 1,214 23,163
Fisher Scientific International /1/ 691 39,636
Millipore /1/ 301 13,843
PerkinElmer 771 15,836
Waters /1/ 711 29,357
121,835
INSURANCE BROKERS (0.19%)
Aon 1,899 38,759
Marsh & McLennan 3,131 86,603
125,362
INTERNET BROKERS (0.04%)
E*trade Group /1/ 2,244 28,948
INTERNET SECURITY (0.16%)
Symantec /1/ 1,895 107,901
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.26%)
Federated Investors 652 18,902
Franklin Resources 1,499 90,869
Janus Capital Group 1,440 21,960
T. Rowe Price Group 765 42,664
174,395
LEISURE & RECREATION PRODUCTS (0.04%)
Brunswick 577 27,073
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
LIFE & HEALTH INSURANCE (0.49%)
$
Aflac 3,049 109,398
Jefferson-Pilot 820 39,598
Lincoln National 1,058 46,340
Principal Financial Group /4/ 1,884 71,140
Torchmark 659 35,599
UnumProvident 1,782 24,342
326,417
LINEN SUPPLY & RELATED ITEMS (0.07%)
Cintas 1,029 44,391
MACHINERY-CONSTRUCTION & MINING (0.25%)
Caterpillar 2,061 165,993
MACHINERY-FARM (0.14%)
Deere 1,493 89,252
MACHINERY-GENERAL INDUSTRY (0.11%)
Ingersoll-Rand 1,043 71,383
MEDICAL INFORMATION SYSTEM (0.05%)
IMS Health 1,406 29,779
MEDICAL INSTRUMENTS (1.25%)
Biomet 1,527 71,280
Boston Scientific /1/ 5,063 178,724
Guidant 1,892 126,045
Medtronic 7,271 371,621
St. Jude Medical /1/ 1,065 81,547
829,217
MEDICAL LABORATORY & TESTING SERVICE (0.08%)
Quest Diagnostics 612 53,574
MEDICAL PRODUCTS (2.20%)
Baxter International 3,697 113,720
Becton Dickinson 1,506 79,065
Johnson & Johnson 17,843 1,041,674
Stryker 2,413 103,976
Zimmer Holdings /1/ 1,473 114,290
1,452,725
MEDICAL-BIOMEDICAL/GENE (1.00%)
Amgen /1/ 7,612 432,362
Biogen Idec /1/ 2,035 118,356
Chiron /1/ 1,129 36,602
Genzyme /1/ 1,371 71,936
659,256
MEDICAL-DRUGS (5.25%)
Abbott Laboratories 9,386 400,125
Allergan 792 56,676
Bristol-Myers Squibb 11,695 274,014
Eli Lilly 6,797 373,223
Forest Laboratories /1/ 2,227 99,324
King Pharmaceuticals /1/ 1,452 15,841
Medimmune /1/ 1,499 42,602
Merck 13,338 417,613
Pfizer 45,392 1,314,098
Schering-Plough 8,851 160,292
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL-DRUGS (CONTINUED)
$
Wyeth 8,019 317,953
3,471,761
MEDICAL-GENERIC DRUGS (0.07%)
Mylan Laboratories /2/ 1,616 27,827
Watson Pharmaceutical /1/ 659 18,472
46,299
MEDICAL-HMO (0.84%)
Aetna 924 87,780
Anthem /1/ 840 67,536
Humana /1/ 958 18,346
UnitedHealth Group 3,996 289,310
Wellpoint Health Networks /1/ 945 92,289
555,261
MEDICAL-HOSPITALS (0.25%)
HCA 2,902 106,591
Health Management Associates 1,464 30,246
Tenet Healthcare /1/ 2,802 30,037
166,874
MEDICAL-NURSING HOMES (0.03%)
Manor Care 525 17,189
MEDICAL-WHOLESALE DRUG DISTRIBUTION (0.24%)
AmerisourceBergen 676 37,207
Cardinal Health 2,587 120,942
158,149
METAL PROCESSORS & FABRICATION (0.02%)
Worthington Industries 529 10,501
METAL-ALUMINUM (0.26%)
Alcoa 5,230 169,975
METAL-COPPER (0.07%)
Phelps Dodge 566 49,548
METAL-DIVERSIFIED (0.06%)
Freeport-McMoran Copper & Gold 1,065 38,574
MISCELLANEOUS INVESTING (0.40%)
Apartment Investment & Management 573 21,023
Equity Office Properties Trust 2,422 68,107
Equity Residential Properties Trust 1,687 56,262
Prologis Trust 1,093 42,605
Simon Property Group 1,329 77,507
265,504
MONEY CENTER BANKS (2.91%)
Bank of America 24,454 1,095,295
JP Morgan Chase 21,414 826,580
1,921,875
MOTORCYCLE & MOTOR SCOOTER (0.15%)
Harley-Davidson 1,775 102,187
MULTI-LINE INSURANCE (2.67%)
Allstate 4,166 200,343
American International Group 15,663 950,901
Cigna 827 52,482
Cincinnati Financial 1,012 42,251
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-LINE INSURANCE (CONTINUED)
$
Hartford Financial Services Group 1,763 103,100
Loews 1,116 66,848
MetLife 4,509 172,920
Prudential Financial 3,120 144,986
Safeco 757 35,004
1,768,835
MULTIMEDIA (2.11%)
Gannett 1,599 132,637
McGraw-Hill 1,142 98,498
Meredith 303 14,847
Time Warner /1/ 27,489 457,417
Viacom 10,430 380,591
Walt Disney 12,352 311,517
1,395,507
NETWORKING PRODUCTS (1.40%)
Cisco Systems /1/ 40,648 780,848
Lucent Technologies /1/ /2/ 25,908 91,973
Network Appliance /1/ 2,150 52,611
925,432
NON-HAZARDOUS WASTE DISPOSAL (0.17%)
Allied Waste Industries /1/ 1,914 15,618
Waste Management 3,487 99,310
114,928
OFFICE AUTOMATION & EQUIPMENT (0.20%)
Pitney Bowes 1,390 60,812
Xerox /1/ 5,044 74,500
135,312
OFFICE SUPPLIES & FORMS (0.06%)
Avery Dennison 665 40,459
OIL & GAS DRILLING (0.25%)
Nabors Industries /1/ 895 43,963
Noble /1/ 806 36,818
Rowan /1/ 645 16,467
Transocean Sedco Forex /1/ 1,929 67,997
165,245
OIL COMPANY-EXPLORATION & PRODUCTION (0.77%)
Anadarko Petroleum 1,505 101,512
Apache 1,960 99,372
Burlington Resources 2,373 98,479
Devon Energy 1,454 107,552
EOG Resources 710 47,258
Kerr-McGee 908 53,772
507,945
OIL COMPANY-INTEGRATED (4.95%)
Amerada Hess 549 44,310
ChevronTexaco 12,806 679,486
ConocoPhillips 4,141 349,128
Exxon Mobil 39,109 1,924,945
Marathon Oil 2,081 79,307
Occidental Petroleum 2,355 131,479
Unocal 1,592 66,466
3,275,121
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OIL REFINING & MARKETING (0.19%)
$
Ashland 429 24,719
Sunoco 453 33,685
Valero Energy 1,536 66,002
124,406
OIL-FIELD SERVICES (0.69%)
Baker Hughes 2,007 85,960
BJ Services 972 49,572
Halliburton 2,655 98,341
Schlumberger 3,551 223,500
457,373
OPTICAL SUPPLIES (0.03%)
Bausch & Lomb 320 19,507
PAPER & RELATED PRODUCTS (0.52%)
Boise Cascade 530 15,646
Georgia-Pacific 1,554 53,753
International Paper 2,924 112,603
Louisiana-Pacific 658 16,127
MeadWestvaco 1,213 38,246
Temple-Inland 338 19,982
Weyerhaeuser 1,440 90,202
346,559
PHARMACY SERVICES (0.13%)
Express Scripts /1/ 467 29,888
Medco Health Solutions /1/ 1,638 55,545
85,433
PHOTO EQUIPMENT & SUPPLIES (0.08%)
Eastman Kodak 1,724 52,203
PIPELINES (0.20%)
Dynegy /1/ 2,282 11,250
El Paso 3,854 34,455
Kinder Morgan 743 47,827
Williams 3,340 41,783
135,315
POWER CONVERTER & SUPPLY EQUIPMENT (0.04%)
American Power Conversion 1,205 23,232
PRINTING-COMMERCIAL (0.06%)
R.R. Donnelley & Sons 1,318 41,451
PROPERTY & CASUALTY INSURANCE (0.69%)
ACE 1,708 65,007
Chubb 1,149 82,877
Progressive 1,203 112,541
St. Paul 4,021 136,553
XL Capital 832 60,320
457,298
PUBLICLY TRADED INVESTMENT FUND (1.36%)
iShares S&P 500 Index Fund /2/ 7,940 899,761
PUBLISHING-NEWSPAPERS (0.26%)
Dow Jones 493 21,815
Knight Ridder 465 31,866
New York Times 882 35,324
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PUBLISHING-NEWSPAPERS (CONTINUED)
$
Tribune 1,913 82,642
171,647
REGIONAL BANKS (3.11%)
Comerica 1,030 63,355
Fifth Third Bancorp 3,427 168,574
Huntington Bancshares 1,381 33,075
KeyCorp 2,445 82,128
National City 3,984 155,257
PNC Financial Services Group 1,698 88,805
SunTrust Banks 2,151 151,387
U.S. Bancorp 11,297 323,207
Wachovia 7,872 387,381
Wells Fargo 10,152 606,278
2,059,447
RETAIL-APPAREL & SHOE (0.33%)
Gap 5,434 108,571
Limited 2,842 70,425
Nordstrom 848 36,617
215,613
RETAIL-AUTO PARTS (0.06%)
Autozone /1/ 500 40,905
RETAIL-AUTOMOBILE (0.04%)
AutoNation /1/ 1,603 27,620
RETAIL-BEDDING (0.11%)
Bed Bath & Beyond /1/ 1,807 73,708
RETAIL-BUILDING PRODUCTS (1.22%)
Home Depot 13,198 542,174
Lowe's 4,686 263,728
805,902
RETAIL-CONSUMER ELECTRONICS (0.25%)
Best Buy 1,954 115,716
Circuit City Stores 1,195 19,418
RadioShack 959 28,703
163,837
RETAIL-DISCOUNT (2.91%)
Big Lots /1/ 693 8,586
Costco Wholesale 2,773 132,938
Dollar General 1,974 37,999
Family Dollar Stores 1,011 29,875
Target 5,430 271,609
TJX 2,938 70,453
Wal-Mart Stores 25,504 1,375,176
1,926,636
RETAIL-DRUG STORE (0.49%)
CVS 2,401 104,348
Walgreen 6,160 221,082
325,430
RETAIL-JEWELRY (0.04%)
Tiffany 878 25,752
RETAIL-MAJOR DEPARTMENT STORE (0.23%)
J.C. Penney 1,732 59,910
May Department Stores 1,753 45,683
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-MAJOR DEPARTMENT STORE (CONTINUED)
$
Sears Roebuck 1,275 44,625
150,218
RETAIL-OFFICE SUPPLIES (0.18%)
Office Depot /1/ 1,884 30,502
Staples 2,991 88,952
119,454
RETAIL-REGIONAL DEPARTMENT STORE (0.26%)
Dillards 502 10,286
Federated Department Stores 1,081 54,536
Kohl's /1/ 2,055 104,312
169,134
RETAIL-RESTAURANTS (0.71%)
Darden Restaurants 949 23,251
McDonald's 7,552 220,141
Starbucks /1/ 2,390 126,383
Wendy's International 684 22,825
Yum! Brands 1,747 75,994
468,594
RETAIL-TOY STORE (0.04%)
Toys R Us /1/ 1,287 23,179
RUBBER-TIRES (0.03%)
Cooper Tire & Rubber 452 8,805
Goodyear Tire & Rubber /1/ /2/ 1,055 10,634
19,439
SAVINGS & LOANS-THRIFTS (0.54%)
Golden West Financial 919 107,449
Sovereign Bancorp 2,064 44,686
Washington Mutual 5,246 203,073
355,208
SCHOOLS (0.12%)
Apollo Group /1/ 1,159 76,494
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (0.37%)
Analog Devices 2,276 91,632
Linear Technology 1,850 70,078
Maxim Integrated Products 1,953 85,912
247,622
SEMICONDUCTOR EQUIPMENT (0.39%)
Applied Materials /1/ 10,209 164,365
Kla-Tencor /1/ 1,181 53,771
Novellus Systems /1/ 857 22,205
Teradyne /1/ 1,167 19,325
259,666
STEEL PRODUCERS (0.10%)
Nucor 954 40,287
United States Steel 682 25,043
65,330
STEEL-SPECIALTY (0.01%)
Allegheny Technologies 572 9,615
TELECOMMUNICATION EQUIPMENT (0.76%)
ADC Telecommunications /1/ 4,864 10,749
Andrew /1/ 967 13,519
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATION EQUIPMENT (CONTINUED)
$
Comverse Technology /1/ 1,177 24,293
Qualcomm 9,786 409,153
Scientific-Atlanta 922 25,254
Tellabs /1/ 2,503 20,024
502,992
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (0.20%)
CIENA /1/ 3,461 8,549
Corning /1/ 8,377 95,916
JDS Uniphase /1/ 8,659 27,449
131,914
TELECOMMUNICATION SERVICES (0.06%)
Avaya /1/ 2,721 39,182
TELEPHONE-INTEGRATED (2.88%)
ALLTEL 1,853 101,785
AT&T 4,778 81,752
BellSouth 11,007 293,557
CenturyTel 811 26,025
Citizens Communications 1,998 26,773
Qwest Communications International /1/ 10,912 37,319
SBC Communications 19,921 503,205
Sprint 8,732 182,935
Verizon Communications 16,644 650,780
1,904,131
TELEVISION (0.09%)
Univision Communications /1/ 1,940 60,062
THERAPEUTICS (0.14%)
Gilead Sciences /1/ 2,589 89,657
TOBACCO (1.06%)
Altria Group 12,335 597,754
Reynolds American 889 61,217
UST 994 40,913
699,884
TOOLS-HAND HELD (0.11%)
Black & Decker 482 38,695
Snap-On 348 10,224
Stanley Works 493 21,949
70,868
TOYS (0.09%)
Hasbro 1,064 18,822
Mattel 2,489 43,583
62,405
TRANSPORT-RAIL (0.48%)
Burlington Northern Santa Fe 2,239 93,612
CSX 1,292 47,158
Norfolk Southern 2,367 80,360
Union Pacific 1,559 98,170
319,300
TRANSPORT-SERVICES (1.06%)
FedEx 1,806 164,563
United Parcel Service 6,760 535,257
699,820
Shares
Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRAVEL SERVICES (0.03%)
$
Sabre Holdings 825 17,746
TRUCKING & LEASING (0.03%)
Ryder System 386 19,339
WEB PORTALS (0.45%)
Yahoo /1/ 8,180 296,034
WIRELESS EQUIPMENT (0.37%)
Motorola 14,203 245,144
TOTAL COMMON STOCKS 64,166,992
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.91%)
FINANCE-MORTGAGE LOAN/BANKER (2.91%)
Investment in Joint Trading Account;
Federal Home Loan Bank
$ $
1.69%; 11/01/04 1,923,142 1,923,142
TOTAL COMMERCIAL PAPER 1,923,142
Maturity
Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.71%)
Goldman Sachs; 1.75%; dated 10/29/04 maturing 11/01/04 (collateralized by
U.S. Treasuries; $1,139,787; 11/18/04 - 01/15/12) /5/ $1,130,165 $ 1,130,000
TOTAL REPURCHASE AGREEMENTS 1,130,000
-----------
TOTAL PORTFOLIO INVESTMENTS (101.63%) 67,220,134
LIABILITIES, NET OF CASH, RECEIVABLES AND OTHER ASSETS (-1.63%) (1,077,160)
TOTAL NET ASSETS (100.00%) $66,142,974
--------------
Contract Opening Current Unrealized
Type Commitment Market Value Market Value Gain (Loss)
- ---------------------------------------------------------------------
FUTURES CONTRACTS
7 S&P 500 Buy $1,970,900 $1,978,025 $7,125
December, 2004
Futures
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security or a portion of the security was pledged to cover margin
requirements for futures contracts.
/4 /Affiliated security.
/5 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 9,484,094
Unrealized Depreciation (13,920,231)
------------
Net Unrealized Appreciation (Depreciation) (4,436,137)
Cost for federal income tax purposes $ 71,656,271
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
Financial $13,425,256 19.40%
Consumer,
Non-cyclical 13,368,691 19.32
Technology 7,914,610 11.44
Industrial 7,266,695 10.50
Communications 6,947,283 10.04
Consumer, Cyclical 6,412,818 9.27
Energy 4,640,687 6.70
Government 2,606,402 3.77
Futures Contracts 1,978,025 2.86
Utilities 1,882,302 2.72
Basic Materials 1,855,629 2.68
Funds 899,761 1.30
TOTAL $69,198,159 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
143
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL LIMITED TERM BOND FUND, INC.
OCTOBER 31, 2004
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (89.71%)
AEROSPACE & DEFENSE (0.19%)
Northrop Grumman
$ $
4.08%; 11/16/06 130,000 132,304
Raytheon
6.75%; 08/15/07 125,000 136,535
268,839
AEROSPACE & DEFENSE EQUIPMENT (0.22%)
General Dynamics
3.00%; 05/15/08 155,000 152,883
United Technologies
4.88%; 11/01/06 150,000 155,929
308,812
AGRICULTURAL OPERATIONS (0.12%)
Bunge Limited Finance
4.38%; 12/15/08 160,000 161,716
AIRLINES (0.09%)
Southwest Airlines
5.50%; 11/01/06 125,000 130,217
ASSET BACKED SECURITIES (0.71%)
Bear Stearns Asset Backed Securities /1/
2.53%; 03/25/34 400,000 399,981
Countrywide Asset Backed Certificates
3.61%; 04/25/30 590,000 592,538
992,519
AUTO-CARS & LIGHT TRUCKS (0.36%)
DaimlerChrysler Holding
2.34%; 05/24/06 /1/ 370,000 371,914
7.25%; 01/18/06 125,000 131,394
503,308
AUTOMOBILE SEQUENTIAL (7.38%)
BMW Vehicle Owner Trust
1.88%; 10/25/06 125,000 124,666
Capital Auto Receivables Asset Trust
2.64%; 03/17/08 850,000 850,218
3.05%; 09/15/05 22,136 22,157
3.58%; 10/16/06 1,125,000 1,133,742
3.82%; 07/15/05 5,134 5,138
4.16%; 07/16/07 639,709 643,774
Chase Manhattan Auto Owner Trust
2.06%; 12/15/09 725,000 711,400
4.21%; 01/15/09 1,050,000 1,063,537
4.24%; 09/15/08 167,869 169,505
DaimlerChrysler Auto Trust
2.88%; 10/08/09 200,000 199,963
3.09%; 01/08/08 100,000 100,498
6.70%; 03/08/06 460,431 460,972
Ford Credit Auto Owner Trust
2.70%; 06/15/07 450,000 450,278
4.01%; 03/15/06 334,645 335,972
4.72%; 12/15/05 850,466 852,874
Honda Auto Receivables Owner Trust
2.70%; 03/17/08 475,000 474,870
4.49%; 09/17/07 500,000 506,337
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
AUTOMOBILE SEQUENTIAL (CONTINUED)
M&I Auto Loan Trust
$ $
3.04%; 10/20/08 500,000 502,318
Nissan Auto Receivables Owner Trust
1.89%; 12/15/06 109,274 109,032
2.70%; 12/17/07 1,000,000 998,348
3.33%; 01/15/08 200,000 201,527
Toyota Auto Receivables Owner Trust
4.72%; 09/15/08 408,361 409,700
10,326,826
BEVERAGES-NON-ALCOHOLIC (0.11%)
Coca-Cola Enterprises
5.25%; 05/15/07 150,000 157,776
BEVERAGES-WINE & SPIRITS (0.15%)
Diageo Capital
3.38%; 03/20/08 100,000 99,945
Diageo Finance
3.00%; 12/15/06 115,000 114,995
214,940
BROADCASTING SERVICES & PROGRAMMING (0.11%)
Liberty Media
3.50%; 09/25/06 160,000 160,159
BUILDING PRODUCTS-CEMENT & AGGREGATE (0.18%)
Hanson Overseas
6.75%; 09/15/05 250,000 258,517
CABLE TV (0.38%)
Comcast Cable Communications
6.38%; 01/30/06 295,000 307,714
Cox Communications
6.88%; 06/15/05 120,000 122,866
TCI Communications
7.61%; 10/04/05 100,000 103,615
534,195
CELLULAR TELECOMMUNICATIONS (0.84%)
360 Communications
7.50%; 03/01/06 140,000 148,729
AT&T Wireless Services
6.88%; 04/18/05 25,000 25,494
7.35%; 03/01/06 180,000 190,655
Cingular Wireless
5.63%; 12/15/06 125,000 131,425
Telus
7.50%; 06/01/07 210,000 230,743
Verizon Wireless Capital
5.38%; 12/15/06 325,000 340,643
Vodafone Group
7.63%; 02/15/05 105,000 106,551
1,174,240
CHEMICALS-DIVERSIFIED (0.29%)
Chevron Phillips Chemical
5.38%; 06/15/07 110,000 115,285
Dow Chemical
7.00%; 08/15/05 140,000 144,626
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
CHEMICALS-DIVERSIFIED (CONTINUED)
E. I. Du Pont de Nemours
$ $
3.38%; 11/15/07 150,000 151,245
411,156
COATINGS & PAINT (0.13%)
Valspar
6.00%; 05/01/07 175,000 186,008
COMMERCIAL BANKS (0.28%)
AmSouth Bank
2.82%; 11/03/06 115,000 114,571
Marshall & Ilsley Bank
4.13%; 09/04/07 150,000 153,347
Union Planters Bank
5.13%; 06/15/07 120,000 126,584
394,502
COMMERCIAL SERVICE-FINANCE (0.05%)
Equifax
4.95%; 11/01/07 65,000 68,101
COMPUTER SERVICES (0.10%)
Computer Sciences
7.50%; 08/08/05 130,000 134,324
COMPUTERS (0.24%)
Hewlett-Packard
5.50%; 07/01/07 185,000 195,745
International Business Machines
4.25%; 09/15/09 135,000 138,516
334,261
COSMETICS & TOILETRIES (0.21%)
Gillette
2.50%; 06/01/08 55,000 53,927
4.00%; 06/30/05 110,000 111,031
Procter & Gamble
4.75%; 06/15/07 125,000 130,406
295,364
CREDIT CARD ASSET BACKED SECURITIES (7.91%)
Bank One Issuance Trust
2.94%; 06/16/08 1,350,000 1,354,736
3.35%; 03/15/11 1,100,000 1,097,789
3.86%; 06/15/11 100,000 101,375
Capital One Master Trust
5.30%; 06/15/09 700,000 729,311
5.45%; 03/16/09 750,000 775,468
Capital One Multi-Asset Execution Trust
/1/
2.09%; 12/15/09 255,000 255,158
Chase Credit Card Master Trust
2.07%; 05/15/09 /1/ 300,000 299,981
5.50%; 11/17/08 100,000 104,384
Citibank Credit Card Issuance Trust
2.70%; 01/15/08 400,000 400,214
6.90%; 10/15/07 1,550,000 1,613,383
Citibank Credit Card Master Trust I
5.88%; 03/10/11 500,000 545,145
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
CREDIT CARD ASSET BACKED SECURITIES (CONTINUED)
Discover Card Master Trust I
$ $
5.15%; 10/15/09 923,000 968,574
6.05%; 08/18/08 855,000 891,419
MBNA Credit Card Master Note Trust
3.65%; 03/15/11 1,200,000 1,206,976
MBNA Master Credit Card Trust
6.90%; 01/15/08 700,000 724,225
11,068,138
DATA PROCESSING & MANAGEMENT (0.11%)
First Data
3.38%; 08/01/08 155,000 154,179
DIVERSIFIED FINANCIAL SERVICES (1.37%)
General Electric Capital
0.70%; 03/10/40 /1/ /2/ 3,300,140 101,218
1.84%; 02/02/09 /1/ 120,000 120,253
3.75%; 12/15/09 150,000 149,320
4.25%; 01/15/08 950,000 976,685
5.00%; 06/15/07 130,000 136,107
John Deere Capital
3.63%; 05/25/07 50,000 50,512
4.50%; 08/22/07 95,000 98,234
NiSource Finance
3.20%; 11/01/06 135,000 134,817
7.63%; 11/15/05 150,000 157,221
1,924,367
DIVERSIFIED MANUFACTURING OPERATIONS (0.36%)
Cooper Industries
5.25%; 07/01/07 80,000 83,994
Dover
6.45%; 11/15/05 100,000 103,595
Honeywell International
6.13%; 07/01/05 175,000 178,880
Tyco International Group /3/
6.13%; 01/15/09 125,000 136,378
502,847
ELECTRIC-DISTRIBUTION (0.05%)
Detroit Edison
5.05%; 10/01/05 75,000 76,640
ELECTRIC-INTEGRATED (2.13%)
Alabama Power
2.80%; 12/01/06 60,000 59,790
Appalachian Power
4.80%; 06/15/05 140,000 141,970
Commonwealth Edison
6.40%; 10/15/05 230,000 237,918
Conectiv
5.30%; 06/01/05 45,000 45,589
Consolidated Edison
3.63%; 08/01/08 110,000 109,824
Dominion Resources
2.01%; 05/15/06 /1/ 120,000 120,258
7.63%; 07/15/05 105,000 108,638
Duke Energy
3.75%; 03/05/08 85,000 85,661
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ELECTRIC-INTEGRATED (CONTINUED)
FPL Group Capital
$ $
1.88%; 03/30/05 75,000 74,851
3.25%; 04/11/06 125,000 125,850
Georgia Power /1/
1.90%; 02/17/09 130,000 129,966
MidAmerican Energy Holdings
4.63%; 10/01/07 245,000 251,050
Niagara Mohawk Power
7.75%; 05/15/06 160,000 171,469
Oncor Electric Delivery
5.00%; 09/01/07 95,000 99,009
Pacific Gas & Electric
3.60%; 03/01/09 185,000 183,675
Pepco Holdings
5.50%; 08/15/07 105,000 110,318
Potomac Electric Power
6.50%; 09/15/05 150,000 155,015
Progress Energy
6.75%; 03/01/06 290,000 304,098
Public Service Company of Colorado
4.38%; 10/01/08 155,000 158,830
SCANA /1/
2.16%; 11/15/06 125,000 125,265
Tennessee Valley Authority
6.38%; 06/15/05 175,000 179,539
2,978,583
FEDERAL & FEDERALLY SPONSORED CREDIT (1.97%)
Federal Farm Credit Bank
3.00%; 04/15/08 2,775,000 2,759,599
FIDUCIARY BANKS (0.13%)
Bank of New York
4.14%; 08/02/07 100,000 101,349
5.20%; 07/01/07 70,000 73,612
174,961
FINANCE-AUTO LOANS (2.16%)
American Honda Finance /1/ /2/
1.86%; 02/20/07 120,000 120,043
Ford Motor Credit
6.13%; 01/09/06 340,000 351,303
6.50%; 01/25/07 550,000 577,860
7.50%; 03/15/05 500,000 508,861
General Motors Acceptance
3.33%; 10/20/05 /1/ 220,000 220,904
4.38%; 12/10/07 95,000 95,060
5.13%; 05/09/08 /3/ 135,000 137,085
6.13%; 08/28/07 160,000 166,889
6.75%; 01/15/06 670,000 693,404
Toyota Motor Credit
2.80%; 01/18/06 150,000 150,339
3,021,748
FINANCE-COMMERCIAL (0.56%)
CIT Group
1.91%; 02/15/07 /1/ 130,000 129,981
7.38%; 04/02/07 470,000 514,776
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
FINANCE-COMMERCIAL (CONTINUED)
Textron Financial
$ $
5.88%; 06/01/07 125,000 133,164
777,921
FINANCE-CONSUMER LOANS (1.42%)
American General Finance
5.88%; 07/14/06 495,000 518,934
Household Finance
1.86%; 02/09/07 /1/ 170,000 170,203
3.38%; 02/21/06 210,000 211,662
6.50%; 01/24/06 695,000 726,453
SLM /1/
4.19%; 03/02/09 350,000 356,104
1,983,356
FINANCE-CREDIT CARD (0.24%)
American Express
3.75%; 11/20/07 150,000 152,103
Capital One Bank
6.88%; 02/01/06 175,000 183,668
335,771
FINANCE-INVESTMENT BANKER & BROKER (3.49%)
Banque Paribas
8.35%; 06/15/07 140,000 157,922
Bear Stearns
3.00%; 03/30/06 130,000 130,465
6.50%; 05/01/06 325,000 342,665
Citigroup
6.75%; 12/01/05 1,315,000 1,372,425
Credit Suisse First Boston
5.75%; 04/15/07 365,000 387,370
Goldman Sachs Group
1.98%; 07/23/09 /1/ 125,000 125,198
7.63%; 08/17/05 400,000 416,164
Lehman Brothers Holdings
6.25%; 05/15/06 530,000 556,801
Merrill Lynch
1.95%; 02/06/09 /1/ 120,000 120,004
4.15%; 03/02/09 /1/ 130,000 131,201
6.00%; 11/15/04 400,000 400,512
Morgan Stanley
1.84%; 02/15/07 /1/ 130,000 130,050
7.75%; 06/15/05 595,000 614,380
4,885,157
FINANCE-LEASING COMPANY (0.41%)
Boeing Capital
5.75%; 02/15/07 260,000 275,261
International Lease Finance
2.41%; 01/15/10 /1/ 150,000 149,462
5.80%; 08/15/07 140,000 149,059
573,782
FINANCE-MORTGAGE LOAN/BANKER (24.37%)
Countrywide Home Loan
1.87%; 02/17/06 /1/ 320,000 319,906
2.88%; 02/15/07 120,000 118,782
4.50%; 01/25/33 140,790 140,858
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
FINANCE-MORTGAGE LOAN/BANKER (CONTINUED)
Federal Home Loan Bank
$ $
2.88%; 09/15/06 8,300,000 8,323,755
Federal Home Loan Mortgage
1.50%; 08/15/05 2,850,000 2,831,341
5.25%; 01/15/06 5,225,000 5,393,705
5.75%; 03/15/09 2,600,000 2,838,446
Federal National Mortgage Association
4.13%; 02/17/09 /1/ 400,000 407,576
4.25%; 05/15/09 2,700,000 2,779,399
5.25%; 04/15/07 5,200,000 5,481,528
7.00%; 07/15/05 5,300,000 5,472,891
34,108,187
FINANCE-OTHER SERVICES (0.72%)
Caterpillar Financial Services
3.00%; 02/15/07 170,000 169,656
4.69%; 04/25/05 80,000 80,967
Mellon Funding
4.88%; 06/15/07 120,000 125,133
National Rural Utilities
6.00%; 05/15/06 255,000 267,106
Verizon Global Funding
6.75%; 12/01/05 355,000 370,765
1,013,627
FOOD-MEAT PRODUCTS (0.19%)
Tyson Foods
6.75%; 06/01/05 150,000 152,627
7.25%; 10/01/06 100,000 107,326
259,953
FOOD-MISCELLANEOUS/DIVERSIFIED (0.79%)
Campbell Soup
5.50%; 03/15/07 265,000 278,436
General Mills
5.13%; 02/15/07 85,000 88,496
Kellogg
6.00%; 04/01/06 165,000 172,274
Kraft Foods
4.63%; 11/01/06 220,000 226,434
Sara Lee
2.75%; 06/15/08 60,000 59,049
5.95%; 01/20/05 125,000 125,828
Unilever Capital
6.88%; 11/01/05 155,000 161,482
1,111,999
FOOD-RETAIL (0.18%)
Safeway
2.50%; 11/01/05 105,000 104,665
3.80%; 08/15/05 150,000 151,172
255,837
GAS-DISTRIBUTION (0.10%)
Sempra Energy
4.75%; 05/15/09 135,000 138,651
HOME EQUITY-OTHER (0.14%)
Argent Securities /1/
2.15%; 02/25/34 130,000 129,736
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
HOME EQUITY-OTHER (CONTINUED)
Specialty Underwriting & Residential
Finance /1/
$ $
2.44%; 02/25/35 60,000 59,997
189,733
HOME EQUITY-SEQUENTIAL (1.09%)
Ameriquest Mortgage Securities
2.13%; 04/25/34 /1/ 300,000 299,987
3.02%; 10/25/33 75,000 74,642
3.64%; 01/25/34 750,000 754,769
New Century Home Equity Loan Trust
3.56%; 11/25/33 400,000 401,094
1,530,492
INDUSTRIAL GASES (0.12%)
Praxair
4.75%; 07/15/07 115,000 119,271
6.85%; 06/15/05 50,000 51,265
170,536
INSURANCE BROKERS (0.29%)
Aon
6.70%; 01/15/07 /1/ 110,000 115,492
8.65%; 05/15/05 140,000 143,042
Marsh & McLennan
3.63%; 02/15/08 145,000 140,347
398,881
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.08%)
AMVESCAP
6.60%; 05/15/05 105,000 107,082
LIFE & HEALTH INSURANCE (0.29%)
Lincoln National
5.25%; 06/15/07 110,000 115,246
ReliaStar Financial
8.63%; 02/15/05 115,000 116,909
Torchmark
6.25%; 12/15/06 160,000 170,443
402,598
MEDICAL PRODUCTS (0.10%)
Baxter International
5.25%; 05/01/07 130,000 136,021
MEDICAL-DRUGS (0.18%)
Eli Lilly
5.50%; 07/15/06 116,000 121,192
GlaxoSmithKline Capital
2.38%; 04/16/07 130,000 128,206
249,398
MEDICAL-HMO (0.44%)
Anthem
3.50%; 09/01/07 150,000 148,977
4.88%; 08/01/05 165,000 166,920
UnitedHealth Group
3.30%; 01/30/08 175,000 173,660
3.38%; 08/15/07 130,000 129,531
619,088
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
METAL-ALUMINUM (0.22%)
Alcan
$ $
6.25%; 11/01/08 95,000 103,440
Alcoa
4.25%; 08/15/07 195,000 200,503
303,943
METAL-DIVERSIFIED (0.10%)
Rio Tinto Finance
2.63%; 09/30/08 150,000 144,869
MISCELLANEOUS INVESTING (0.68%)
Archstone-Smith Operating Trust
3.00%; 06/15/08 150,000 146,271
Camden Property Trust
5.88%; 06/01/07 120,000 127,203
Developers Diversified Realty
3.88%; 01/30/09 120,000 118,204
Duke Realty
3.35%; 01/15/08 115,000 113,868
HRPT Properties Trust
6.70%; 02/23/05 150,000 151,853
New Plan Excel Realty Trust
5.88%; 06/15/07 125,000 131,892
Simon Property Group
3.75%; 01/30/09 165,000 162,929
952,220
MONEY CENTER BANKS (1.10%)
Bank of America
4.75%; 10/15/06 640,000 662,485
JP Morgan Chase
3.13%; 12/11/06 130,000 130,393
5.25%; 05/30/07 385,000 403,779
5.35%; 03/01/07 180,000 188,934
6.50%; 08/01/05 150,000 154,308
1,539,899
MORTGAGE BACKED SECURITIES (9.95%)
Bear Stearns Commercial Mortgage
Securities
0.65%; 05/11/39 /1/ /2/ 2,550,199 72,232
3.97%; 11/11/35 422,502 425,740
6.08%; 02/15/35 426,554 452,321
7.64%; 02/15/32 526,592 567,447
Chase Commercial Mortgage Securities
7.03%; 01/15/32 301,552 324,282
7.56%; 10/15/32 500,000 581,390
Chase Manhattan Bank-First Union
National Bank Commercial Mortgage
Trust
7.13%; 08/15/31 1,126,135 1,201,259
Commercial Mortgage Acceptance
6.79%; 06/15/31 48,964 52,158
Commercial Mortgage Pass-Through
Certificate /2/
3.25%; 06/10/38 93,594 91,018
CS First Boston Mortgage Securities
4.39%; 07/15/06 24,826 24,849
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
MORTGAGE BACKED SECURITIES (CONTINUED)
CS First Boston Mortgage Securities
(continued)
$ $
6.25%; 12/16/35 400,000 432,110
6.38%; 12/16/35 100,000 111,378
DLJ Commercial Mortgage
6.14%; 02/18/31 111,111 111,776
First Union Commercial Mortgage
Securities
7.38%; 04/18/29 493,204 531,407
GE Capital Commercial Mortgage
3.35%; 08/11/36 275,765 276,789
5.99%; 12/10/35 130,000 141,052
6.32%; 01/15/33 93,219 97,953
GMAC Commercial Mortgage Securities
4.32%; 10/15/38 113,675 115,712
6.57%; 09/15/33 149,941 153,352
JP Morgan Chase Commercial Mortgage
Securities
3.48%; 06/12/41 765,610 765,065
4.37%; 10/12/37 461,505 471,182
4.47%; 11/15/35 197,802 200,550
4.55%; 05/12/34 405,112 413,003
LB-UBS Commercial Mortgage Trust
1.23%; 03/15/36 /1/ /2/ 1,691,618 88,201
3.63%; 10/15/29 1,200,000 1,205,906
4.19%; 08/15/29 220,000 223,363
4.90%; 06/15/26 /2/ 1,235,000 1,284,425
5.40%; 03/15/26 385,139 397,330
6.06%; 06/15/20 595,318 635,451
Merrill Lynch Mortgage Investors
7.12%; 06/18/29 289,432 309,430
7.80%; 12/26/25 /1/ 200,000 206,440
Morgan Stanley Capital I
4.57%; 12/18/32 /2/ 505,339 513,068
5.33%; 12/18/32 500,000 522,552
6.54%; 02/15/31 /2/ 185,000 202,038
NationsLink Funding
7.03%; 06/20/31 45,329 48,310
7.23%; 06/20/31 100,000 111,654
PNC Mortgage Acceptance
7.11%; 12/10/32 241,518 260,390
Wachovia Bank Commercial Mortgage Trust
/1/ /2/
0.33%; 01/15/41 23,363,978 308,007
13,930,590
MULTI-LINE INSURANCE (0.50%)
Allstate
5.38%; 12/01/06 135,000 141,316
7.88%; 05/01/05 90,000 92,366
Hartford Financial Services Group
4.70%; 09/01/07 155,000 158,877
MetLife
3.91%; 05/15/05 150,000 151,197
5.25%; 12/01/06 150,000 156,272
700,028
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
MULTIMEDIA (0.85%)
AOL Time Warner
$ $
6.13%; 04/15/06 305,000 318,845
Gannett
5.50%; 04/01/07 120,000 126,827
Thomson
5.75%; 02/01/08 145,000 154,823
Viacom
7.15%; 05/20/05 80,000 82,059
7.75%; 06/01/05 260,000 268,225
Walt Disney
7.30%; 02/08/05 235,000 238,080
1,188,859
OIL COMPANY-EXPLORATION & PRODUCTION (0.44%)
Kerr-McGee
5.38%; 04/15/05 170,000 172,035
PennzEnergy
10.25%; 11/01/05 175,000 186,255
Petroleos Mexicanos
6.50%; 02/01/05 260,000 262,600
620,890
OIL COMPANY-INTEGRATED (0.40%)
BP Canada Finance
3.63%; 01/15/09 145,000 144,910
ChevronTexaco Capital
3.38%; 02/15/08 125,000 125,611
Marathon Oil
5.38%; 06/01/07 125,000 131,471
Occidental Petroleum
4.00%; 11/30/07 150,000 152,841
554,833
OIL FIELD MACHINERY & EQUIPMENT (0.12%)
Cooper Cameron
2.65%; 04/15/07 165,000 162,144
OIL REFINING & MARKETING (0.09%)
Valero Energy
6.13%; 04/15/07 120,000 128,164
OIL-FIELD SERVICES (0.09%)
Halliburton /1/
3.57%; 10/17/05 120,000 120,976
PAPER & RELATED PRODUCTS (0.35%)
Champion International
7.10%; 09/01/05 125,000 128,888
Union Camp
7.00%; 08/15/06 179,000 190,876
Weyerhaeuser
5.50%; 03/15/05 31,000 31,324
6.13%; 03/15/07 125,000 133,288
484,376
PHOTO EQUIPMENT & SUPPLIES (0.11%)
Eastman Kodak
3.63%; 05/15/08 160,000 157,040
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
PIPELINES (0.65%)
Duke Energy Field Services
$ $
7.50%; 08/16/05 240,000 248,886
Enbridge Energy Partners
4.00%; 01/15/09 150,000 149,191
Kinder Morgan
6.65%; 03/01/05 375,000 379,888
Kinder Morgan Energy Partners
5.35%; 08/15/07 100,000 104,831
8.00%; 03/15/05 25,000 25,472
908,268
PROPERTY & CASUALTY INSURANCE (0.37%)
ACE
6.00%; 04/01/07 150,000 157,454
Chubb
6.15%; 08/15/05 50,000 51,219
St. Paul
7.88%; 04/15/05 200,000 204,613
Travelers Property Casualty
3.75%; 03/15/08 105,000 104,510
517,796
PUBLISHING-BOOKS (0.20%)
Reed Elsevier Capital
6.13%; 08/01/06 115,000 120,848
7.00%; 05/15/05 150,000 153,580
274,428
REAL ESTATE OPERATOR & DEVELOPER (0.20%)
EOP Operating
7.75%; 11/15/07 175,000 195,664
ERP Operating
4.75%; 06/15/09 80,000 82,408
278,072
REGIONAL AUTHORITY (0.69%)
New Brunswick
3.50%; 10/23/07 40,000 40,461
Province of Manitoba
2.75%; 01/17/06 155,000 155,707
Province of Ontario
3.50%; 09/17/07 435,000 438,662
Province of Quebec
5.50%; 04/11/06 315,000 327,582
962,412
REGIONAL BANKS (2.51%)
Bank One
7.63%; 08/01/05 625,000 649,044
Fifth Third Bancorp
3.38%; 08/15/08 130,000 129,270
First Union
7.55%; 08/18/05 565,000 587,373
FleetBoston Financial
7.25%; 09/15/05 350,000 363,758
KeyCorp
4.63%; 05/16/05 160,000 161,706
Korea Development Bank
3.88%; 03/02/09 120,000 120,019
7.25%; 05/15/06 160,000 170,731
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
REGIONAL BANKS (CONTINUED)
PNC Funding
$ $
5.75%; 08/01/06 220,000 230,401
SunTrust Banks
2.50%; 11/01/06 55,000 54,543
5.05%; 07/01/07 70,000 73,261
U.S. Bancorp
6.75%; 10/15/05 202,000 209,364
Wells Fargo
5.90%; 05/21/06 730,000 766,498
3,515,968
REINSURANCE (0.07%)
Berkshire Hathaway
3.38%; 10/15/08 100,000 99,656
RENTAL-AUTO & EQUIPMENT (0.07%)
Hertz
4.70%; 10/02/06 100,000 101,641
RETAIL-DISCOUNT (0.41%)
Costco Wholesale
5.50%; 03/15/07 140,000 147,524
Target
5.40%; 10/01/08 150,000 159,979
Wal-Mart Stores
4.38%; 07/12/07 260,000 268,774
576,277
RETAIL-DRUG STORE (0.11%)
CVS
3.88%; 11/01/07 150,000 152,516
RETAIL-MAJOR DEPARTMENT STORE (0.09%)
May Department Stores /2/
3.95%; 07/15/07 130,000 131,342
RETAIL-RESTAURANTS (0.09%)
McDonald's
5.38%; 04/30/07 113,000 118,952
SAVINGS & LOANS-THRIFTS (0.31%)
Golden West Financial
4.13%; 08/15/07 150,000 153,712
Washington Mutual
1.97%; 11/03/05 /1/ 140,000 140,246
4.00%; 01/15/09 140,000 140,766
434,724
SOVEREIGN (1.32%)
Finland Government
4.75%; 03/06/07 150,000 156,272
Italy Government
4.38%; 10/25/06 1,195,000 1,228,774
Mexico Government
8.50%; 02/01/06 435,000 464,580
1,849,626
SPECIAL PURPOSE BANKS (0.18%)
Kreditanstalt fuer Wiederaufbau
2.38%; 09/25/06 250,000 249,495
Principal
Amount Value
- ------------------------------------------------------------------------------------------
BONDS (CONTINUED)
SPECIAL PURPOSE ENTITY (0.08%)
Fondo Latinoamericano de Reservas /2/
$ $
3.00%; 08/01/06 115,000 115,337
SUPRANATIONAL BANK (1.45%)
Asian Development Bank
2.38%; 03/15/06 345,000 344,806
Corp Andina de Fomento
6.75%; 03/15/05 180,000 182,598
8.88%; 06/01/05 75,000 77,669
European Investment Bank
4.63%; 03/01/07 1,370,000 1,422,752
2,027,825
TELEPHONE-INTEGRATED (1.48%)
ALLTEL
6.75%; 09/15/05 130,000 134,725
BellSouth
5.00%; 10/15/06 225,000 233,714
British Telecommunications /1/
7.88%; 12/15/05 345,000 364,439
Deutsche Telekom International Finance
/1/
8.25%; 06/15/05 170,000 175,828
France Telecom /1/
7.95%; 03/01/06 175,000 186,173
NYNEX Capital Funding
8.75%; 12/01/04 25,000 25,118
SBC Communications
5.75%; 05/02/06 325,000 339,186
Sprint Capital
7.13%; 01/30/06 335,000 352,354
Telecom Italia Capital
4.00%; 11/15/08 260,000 261,731
2,073,268
TEXTILE-HOME FURNISHINGS (0.10%)
Mohawk Industries
6.50%; 04/15/07 125,000 133,663
TOOLS-HAND HELD (0.11%)
Stanley Works
3.50%; 11/01/07 150,000 151,052
TRANSPORT-RAIL (0.63%)
Burlington Northern Santa Fe
6.38%; 12/15/05 230,000 238,295
CSX
6.25%; 10/15/08 120,000 130,640
Norfolk Southern
8.38%; 05/15/05 325,000 334,781
Union Pacific
7.60%; 05/01/05 175,000 179,251
882,967
TRANSPORT-SERVICES (0.06%)
FedEx
1.88%; 04/01/05 85,000 85,047
TOTAL BONDS 125,554,075
Principal
Amount Value
- ------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES (4.01%)
$ $
4.50%; 10/01/09 250,127 253,837
4.50%; 12/01/09 388,031 393,787
4.50%; 01/01/10 145,325 147,514
4.50%; 02/01/10 774,915 786,588
4.50%; 04/01/10 321,921 326,770
4.50%; 09/01/10 285,531 289,832
4.50%; 10/01/10 664,883 674,898
4.50%; 11/01/10 333,468 338,491
4.50%; 04/01/11 232,468 236,023
4.50%; 06/01/11 682,754 692,623
4.50%; 07/01/11 246,039 249,801
4.50%; 10/01/11 300,000 304,587
5.00%; 09/01/09 151,580 155,047
5.50%; 12/01/08 44,793 46,069
5.50%; 02/01/09 93,662 96,332
5.50%; 03/01/09 52,992 54,502
5.50%; 04/01/09 118,762 122,148
6.50%; 04/01/09 33,170 35,183
6.50%; 04/01/15 13,775 14,687
7.00%; 12/01/22 178,559 190,805
7.25%; 12/01/07 39,157 40,563
7.50%; 12/01/29 5,905 6,345
8.00%; 12/01/11 18,142 19,079
8.00%; 10/01/22 73,468 80,716
8.25%; 01/01/12 7,293 7,889
9.00%; 09/01/09 50,430 52,566
TOTAL FHLMC CERTIFICATES 5,616,682
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES (2.52%)
4.00%; 05/01/10 554,043 553,323
4.00%; 06/01/10 254,882 254,551
4.00%; 07/01/10 359,637 359,169
4.00%; 08/01/10 245,385 245,066
4.50%; 03/01/10 352,523 357,510
4.50%; 08/01/11 631,450 640,513
4.50%; 09/01/11 297,932 302,208
5.50%; 02/01/09 291,622 299,542
5.50%; 10/01/09 189,501 194,648
6.00%; 07/01/28 115,936 120,523
7.50%; 10/01/29 48,298 51,831
8.00%; 10/01/06 6,204 6,361
8.00%; 05/01/27 21,311 23,240
8.50%; 05/01/22 96,410 106,770
9.00%; 02/01/25 14,105 15,828
TOTAL FNMA CERTIFICATES 3,531,083
Principal
Amount Value
- ------------------------------------------------------------------------------------------
TREASURY BONDS (1.95%)
U.S. Treasury Inflation-Indexed
Obligations
$ $
3.38%; 01/15/07 1,315,677 1,409,933
U.S. Treasury Strip
0.00%; 08/15/09 /4/ 1,550,000 1,323,260
2,733,193
TOTAL TREASURY BONDS 2,733,193
Principal
Amount Value
- ------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.64%)
FINANCE-CONSUMER LOANS (2.64%)
Investment in Joint Trading Account;
Household Finance
1.84%; 11/01/04 3,691,468 3,691,468
TOTAL COMMERCIAL PAPER 3,691,468
Maturity
Amount Value
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (0.17%)
Bear Stearns; 1.85%; dated 10/29/04
maturing 11/01/04 (collateralized by $
FNMA; $246,432; 11/17/11) /5/ $ 241,637 241,600
TOTAL REPURCHASE AGREEMENTS 241,600
------------
TOTAL PORTFOLIO INVESTMENTS (101.00%) 141,368,101
LIABILITIES, NET OF CASH, RECEIVABLES AND OTHER ASSETS
(-1.00%) (1,403,213)
TOTAL NET ASSETS (100.00%) $139,964,888
---------------
/1 /Variable rate.
/2 /Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At the end of the period, the
value of these securities totaled $3,026,929 or 2.16% of net assets.
/3 /Security or a portion of the security was on loan at the end of the period.
/4 /Non-income producing security.
/5 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 794,090
Unrealized Depreciation (1,655,645)
------------
Net Unrealized Appreciation (Depreciation) (861,555)
Cost for federal income tax purposes $142,229,656
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
$
Government 44,331,585 31.36%
Financial 27,960,020 19.78
Asset Backed Securities 24,107,708 17.05
Mortgage Securities 23,219,213 16.42
Communications 5,775,915 4.09
Consumer, Non-cyclical 3,631,833 2.57
Utilities 3,306,372 2.34
Industrial 2,615,122 1.85
Energy 2,495,275 1.76
Consumer, Cyclical 1,746,275 1.24
Basic Materials 1,556,018 1.10
Technology 622,765 0.44
TOTAL $141,368,101 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
152
SCHEDULE OF INVESTMENTS
PRINCIPAL MIDCAP FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ------------------------------------------------------------------------------------------
COMMON STOCKS (97.21%)
ADVERTISING AGENCIES (0.79%)
$
Interpublic Group /1/ 343,760 4,214,498
AEROSPACE & DEFENSE (1.22%)
Raytheon 110,702 4,038,409
Rockwell Collins 69,243 2,456,049
6,494,458
AEROSPACE & DEFENSE EQUIPMENT (1.25%)
Alliant Techsystems /1/ 115,553 6,643,142
AGRICULTURAL OPERATIONS (0.64%)
Delta & Pine Land 129,633 3,411,941
APPAREL MANUFACTURERS (0.85%)
Polo Ralph Lauren 122,100 4,509,153
APPLICATIONS SOFTWARE (0.97%)
Intuit /1/ 113,698 5,157,341
AUDIO & VIDEO PRODUCTS (0.36%)
Polycom /1/ 92,444 1,908,969
BEVERAGES-NON-ALCOHOLIC (0.44%)
Coca-Cola Enterprises 111,453 2,330,482
BROADCASTING SERVICES & PROGRAMMING (1.44%)
Liberty Media /1/ 858,634 7,659,015
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.95%)
Vulcan Materials 101,265 5,040,972
BUILDING PRODUCTS-WOOD (0.54%)
Rayonier 60,836 2,883,626
CABLE TV (0.24%)
Liberty Media International /1/ 35,956 1,296,214
CASINO HOTELS (1.45%)
Harrah's Entertainment 132,020 7,725,810
CASINO SERVICES (0.64%)
International Game Technology 102,992 3,402,856
COMMERCIAL BANKS (5.69%)
M&T Bank 65,181 6,713,643
Marshall & Ilsley 77,127 3,237,020
North Fork Bancorp 140,894 6,213,426
TCF Financial 446,985 14,088,967
30,253,056
COMMERCIAL SERVICE-FINANCE (2.22%)
Dun & Bradstreet /1/ 89,913 5,085,479
MoneyGram International 131,096 2,438,386
Paychex 130,526 4,280,470
11,804,335
COMMERCIAL SERVICES (3.84%)
Arbitron /1/ 188,085 6,803,035
Magellan Health Services /1/ /2/ 85,126 3,183,712
ServiceMaster 306,513 3,935,627
Weight Watchers International /1/
/2/ 180,508 6,483,847
20,406,221
Shares
Held Value
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTER SERVICES (3.02%)
$
Ceridian /1/ 260,136 4,487,346
DST Systems /1/ 146,815 6,584,653
Sungard Data Systems /1/ 88,618 2,347,491
Unisys /1/ 251,144 2,667,149
16,086,639
COMPUTERS-INTEGRATED SYSTEMS (2.68%)
Diebold 148,594 7,110,223
NCR /1/ 127,087 7,161,352
14,271,575
COMPUTERS-MEMORY DEVICES (1.71%)
Storage Technology /1/ 337,341 9,114,954
COMPUTERS-PERIPHERAL EQUIPMENT (0.97%)
Lexmark International /1/ 62,275 5,175,675
COSMETICS & TOILETRIES (0.36%)
International Flavors &
Fragrances 48,969 1,912,239
DATA PROCESSING & MANAGEMENT (1.32%)
Certegy 57,180 2,021,313
Reynolds & Reynolds 138,191 3,400,881
SEI Investments 44,182 1,590,110
7,012,304
DENTAL SUPPLIES & EQUIPMENT (0.90%)
Dentsply International 91,599 4,764,064
DIVERSIFIED MANUFACTURING OPERATIONS (1.01%)
Dover 72,226 2,836,315
Lancaster Colony 58,418 2,510,806
5,347,121
ELECTRIC-INTEGRATED (1.98%)
Ameren 130,218 6,250,464
Duquesne Light Holdings 67,955 1,166,108
Scana 84,097 3,119,998
10,536,570
ELECTRONIC COMPONENTS-MISCELLANEOUS (2.10%)
Gentex 338,169 11,162,959
FOOD-CANNED (0.95%)
Del Monte Foods /1/ 472,362 5,044,826
FOOD-DAIRY PRODUCTS (0.43%)
Dean Foods /1/ 76,978 2,297,793
FOOD-MISCELLANEOUS/DIVERSIFIED (0.84%)
McCormick 126,359 4,476,899
HEALTH CARE COST CONTAINMENT (0.73%)
First Health Group /1/ 242,840 3,866,013
HOME FURNISHINGS (0.75%)
Ethan Allen Interiors /2/ 104,056 3,963,493
HOSPITAL BEDS & EQUIPMENT (0.93%)
Hillenbrand Industries 99,750 4,965,555
INSURANCE BROKERS (1.58%)
Aon 246,094 5,022,778
Shares
Held Value
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INSURANCE BROKERS (CONTINUED)
$
Arthur J. Gallagher /2/ 120,989 3,399,791
8,422,569
INVESTMENT MANAGEMENT & ADVISORY SERVICES (1.70%)
Eaton Vance 73,217 3,193,725
Federated Investors 115,022 3,334,488
Nuveen Investments 79,826 2,522,502
9,050,715
LIFE & HEALTH INSURANCE (1.54%)
Aflac 99,916 3,584,986
Torchmark 85,231 4,604,179
8,189,165
LINEN SUPPLY & RELATED ITEMS (0.93%)
Cintas 114,562 4,942,205
LOTTERY SERVICES (0.94%)
GTECH Holdings /2/ 212,258 5,024,147
MEDICAL INFORMATION SYSTEM (1.55%)
IMS Health 390,323 8,267,041
MEDICAL INSTRUMENTS (3.55%)
Beckman Coulter 92,458 5,501,251
Biomet 92,117 4,300,022
Edwards Lifesciences /1/ 73,264 2,504,163
Guidant 98,839 6,584,654
18,890,090
MEDICAL LABORATORY & TESTING SERVICE (1.39%)
Laboratory Corp. of America
Holdings /1/ 161,357 7,390,151
MEDICAL PRODUCTS (1.47%)
Becton Dickinson 92,892 4,876,830
Varian Medical Systems /1/ 72,629 2,916,054
7,792,884
MEDICAL-DRUGS (1.39%)
Medimmune /1/ 260,333 7,398,664
MEDICAL-HMO (0.33%)
Anthem /1/ 21,990 1,767,996
MEDICAL-HOSPITALS (0.44%)
Health Management Associates 114,300 2,361,438
METAL-DIVERSIFIED (0.93%)
Freeport-McMoran Copper & Gold 136,755 4,953,266
MISCELLANEOUS INVESTING (3.05%)
AMB Property 99,708 3,739,050
Federal Realty Investment Trust 74,917 3,554,811
Kimco Realty 102,234 5,576,865
Prologis Trust 85,710 3,340,976
16,211,702
MULTI-LINE INSURANCE (0.89%)
Loews 79,186 4,743,241
MULTIMEDIA (1.13%)
Belo 141,098 3,280,528
E.W. Scripps 57,012 2,720,613
6,001,141
Shares
Held Value
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
NETWORKING PRODUCTS (0.36%)
$
3Com /1/ 459,889 1,903,940
NON-HAZARDOUS WASTE DISPOSAL (2.81%)
Republic Services 337,825 10,405,010
Waste Management 159,491 4,542,304
14,947,314
OFFICE AUTOMATION & EQUIPMENT (0.62%)
Pitney Bowes 74,769 3,271,144
OIL COMPANY-EXPLORATION & PRODUCTION (2.88%)
Apache 93,023 4,716,266
Burlington Resources 19,553 811,450
Pioneer Natural Resources 124,642 4,038,401
XTO Energy 172,767 5,766,962
15,333,079
OIL COMPANY-INTEGRATED (0.94%)
Marathon Oil 131,259 5,002,280
OIL-FIELD SERVICES (1.61%)
BJ Services 105,072 5,358,672
Weatherford International /1/ 61,247 3,200,768
8,559,440
PHOTO EQUIPMENT & SUPPLIES (0.74%)
Eastman Kodak 130,844 3,961,956
PIPELINES (2.05%)
Equitable Resources 75,703 4,186,376
Questar 139,549 6,698,352
10,884,728
POWER CONVERTER & SUPPLY EQUIPMENT (0.84%)
American Power Conversion 231,775 4,468,622
PROPERTY & CASUALTY INSURANCE (3.49%)
Fidelity National Financial 212,641 8,025,071
Leucadia National 86,923 5,141,496
Mercury General 104,707 5,385,081
18,551,648
PUBLISHING-NEWSPAPERS (0.09%)
Knight Ridder 6,766 463,674
REAL ESTATE OPERATOR & DEVELOPER (0.95%)
Catellus Development 126,776 3,656,220
Forest City Enterprises 25,534 1,403,093
5,059,313
REINSURANCE (1.61%)
Everest Re Group 107,807 8,556,642
RETAIL-APPAREL & SHOE (0.70%)
Ross Stores 141,969 3,729,526
RETAIL-DISCOUNT (1.20%)
TJX 266,423 6,388,824
RETAIL-JEWELRY (0.60%)
Tiffany 109,218 3,203,364
RETAIL-REGIONAL DEPARTMENT STORE (0.81%)
Neiman Marcus Group 70,927 4,314,489
Shares
Held Value
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-RESTAURANTS (1.48%)
$
Yum! Brands 180,613 7,856,666
TELEPHONE-INTEGRATED (2.29%)
Citizens Communications 673,658 9,027,017
IDT /1/ /2/ 90,441 1,249,895
Telephone & Data Systems 25,500 1,909,950
12,186,862
TEXTILE-HOME FURNISHINGS (1.25%)
Mohawk Industries /1/ 77,973 6,633,943
TOBACCO (1.50%)
UST 193,252 7,954,252
TOYS (0.71%)
Mattel 215,596 3,775,086
TRANSPORT-TRUCK (0.66%)
Heartland Express 172,842 3,536,347
TOTAL COMMON STOCKS 517,090,322
Principal
Amount Value
- ------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.76%)
FINANCE-CONSUMER LOANS (2.76%)
Investment in Joint Trading
Account; Household Finance
$ $
1.84%; 11/01/04 14,661,696 14,661,696
TOTAL COMMERCIAL PAPER 14,661,696
Maturity
Amount Value
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.99%)
Goldman Sachs; 1.75%; dated
10/29/04 maturing 11/01/04
(collateralized by U.S.
Treasuries; $10,705,925;
11/18/04 - 01/15/12) /3/ $10,615,548 $ 10,614,000
TOTAL REPURCHASE AGREEMENTS 10,614,000
------------
TOTAL PORTFOLIO INVESTMENTS (101.96%) 542,366,018
LIABILITIES, NET OF
CASH, RECEIVABLES
AND OTHER ASSETS
(-1.96%) (10,412,527)
TOTAL NET ASSETS (100.00%) $531,953,491
---------------
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $108,932,692
Unrealized Depreciation (9,815,847)
------------
Net Unrealized Appreciation (Depreciation) 99,116,845
Cost for federal income tax purposes $443,249,173
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- ------------------------------------------------------------------------------
$
Financial 129,172,251 23.82%
Consumer, Non-cyclical 111,838,125 20.62
Technology 73,442,152 13.54
Consumer, Cyclical 65,469,561 12.07
Industrial 61,602,891 11.36
Energy 39,779,527 7.33
Communications 35,634,313 6.57
Utilities 10,536,571 1.94
Basic Materials 9,749,132 1.80
Diversified 5,141,495 0.95
TOTAL $542,366,018 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (99.44%)
AEROSPACE & DEFENSE (1.81%)
$
Boeing 25,200 1,257,480
Northrop Grumman 11,200 579,600
Raytheon 23,800 868,224
2,705,304
AEROSPACE & DEFENSE EQUIPMENT (0.81%)
General Dynamics 3,800 388,056
United Technologies 8,800 816,816
1,204,872
AGRICULTURAL OPERATIONS (0.39%)
Monsanto 13,600 581,400
APPLICATIONS SOFTWARE (3.97%)
Microsoft 212,244 5,940,710
ATHLETIC FOOTWEAR (0.23%)
Nike 4,244 345,080
AUDIO & VIDEO PRODUCTS (0.63%)
Harman International Industries 7,800 937,404
AUTO-CARS & LIGHT TRUCKS (0.72%)
Ford Motor 82,400 1,073,672
BEVERAGES-NON-ALCOHOLIC (1.13%)
Coca-Cola 5,250 927,048
Pepsico 15,472 767,102
1,694,150
BEVERAGES-WINE & SPIRITS (0.07%)
Brown-Forman 2,200 98,780
BREWERY (0.13%)
Anheuser-Busch 4,000 199,800
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.12%)
Masco 5,400 185,004
CABLE TV (0.54%)
Comcast /1/ 22,500 663,750
Liberty Media International /1/ 4,200 151,410
815,160
CELLULAR TELECOMMUNICATIONS (0.46%)
Nextel Communications /1/ 18,500 490,065
U.S. Cellular /1/ 4,600 191,590
681,655
CHEMICALS-DIVERSIFIED (0.37%)
E. I. Du Pont de Nemours 12,900 553,023
CHEMICALS-SPECIALTY (0.32%)
Lubrizol 13,800 479,274
COMMERCIAL BANKS (0.58%)
Bank of Hawaii 12,700 606,425
UnionBanCal 4,200 255,150
861,575
COMMERCIAL SERVICE-FINANCE (0.74%)
Deluxe 2,700 102,843
Moody's 12,900 1,003,749
1,106,592
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTER AIDED DESIGN (0.63%)
$
Autodesk 17,800 938,950
COMPUTER SERVICES (0.30%)
Computer Sciences /1/ 9,100 451,997
COMPUTERS (2.12%)
Hewlett-Packard 42,900 800,514
International Business Machines 26,400 2,369,400
3,169,914
COMPUTERS-INTEGRATED SYSTEMS (1.03%)
Dell /1/ 38,600 1,353,316
NCR /1/ 3,300 185,955
1,539,271
CONSULTING SERVICES (0.30%)
Accenture /1/ 18,606 450,451
CONSUMER PRODUCTS-MISCELLANEOUS (0.16%)
American Greetings /1/ 9,000 238,050
COSMETICS & TOILETRIES (3.49%)
Avon Products 8,400 332,220
Gillette 48,127 1,996,308
Procter & Gamble 56,690 2,901,394
5,229,922
CRUISE LINES (0.28%)
Carnival 5,900 298,304
Royal Caribbean Cruises 2,500 116,500
414,804
DATA PROCESSING & MANAGEMENT (0.51%)
First Data 18,600 767,808
DISTRIBUTION-WHOLESALE (0.25%)
Tech Data /1/ 9,400 379,666
DIVERSIFIED MANUFACTURING OPERATIONS (5.79%)
3M 11,500 892,055
General Electric 142,283 4,854,696
ITT Industries 6,900 559,866
Tyco International 75,900 2,364,285
8,670,902
DIVERSIFIED OPERATORS-COMMERCIAL SERVICES (0.72%)
Cendant 52,500 1,080,975
E-COMMERCE-SERVICES (0.72%)
eBay /1/ 11,100 1,083,471
ELECTRIC-INTEGRATED (1.40%)
Dominion Resources 3,200 205,824
Edison International 28,900 881,450
Northeast Utilities 14,800 286,084
PG&E /1/ 19,100 611,964
Sierra Pacific Resources /1/ 11,400 109,440
2,094,762
ELECTRONIC COMPONENTS-SEMICONDUCTOR (2.25%)
Freescale Semiconductor /1/ /2/ 28,500 442,890
Intel 97,668 2,174,090
Micron Technology /1/ 19,900 242,382
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC COMPONENTS-SEMICONDUCTOR (CONTINUED)
$
Texas Instruments 20,500 501,225
3,360,587
ENTERPRISE SOFTWARE & SERVICE (0.17%)
BMC Software /1/ 13,200 249,744
FINANCE-AUTO LOANS (0.34%)
AmeriCredit /1/ 26,500 514,100
FINANCE-COMMERCIAL (0.55%)
CIT Group 20,300 820,120
FINANCE-CREDIT CARD (0.20%)
American Express 5,600 297,192
FINANCE-INVESTMENT BANKER & BROKER (4.38%)
Citigroup 75,690 3,358,365
Lehman Brothers Holdings 13,300 1,092,595
Merrill Lynch 39,098 2,108,946
6,559,906
FINANCE-MORTGAGE LOAN/BANKER (1.91%)
Countrywide Credit Industries 28,200 900,426
Federal Home Loan Mortgage 19,700 1,312,020
Federal National Mortgage Association 9,311 653,167
2,865,613
FINANCIAL GUARANTEE INSURANCE (0.63%)
MBIA 16,400 948,904
FOOD-FLOUR & GRAIN (0.63%)
Archer Daniels Midland 48,700 943,319
FOOD-MEAT PRODUCTS (0.44%)
Tyson Foods 45,400 658,300
FOOD-MISCELLANEOUS/DIVERSIFIED (0.57%)
Kraft Foods 25,500 849,405
FOOD-RETAIL (0.58%)
Albertson's 38,300 873,623
FOOD-WHOLESALE & DISTRIBUTION (0.37%)
Supervalu 19,000 560,310
GOLD MINING (0.07%)
Newmont Mining 2,200 104,544
HEALTH CARE COST CONTAINMENT (0.46%)
Caremark Rx /1/ 22,900 686,313
INDEPENDENT POWER PRODUCER (0.30%)
NRG Energy /1/ 16,400 454,936
INDUSTRIAL GASES (0.33%)
Air Products & Chemicals 9,400 499,892
INTERNET SECURITY (0.66%)
Symantec /1/ 17,300 985,062
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.31%)
Franklin Resources 7,700 466,774
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
LOTTERY SERVICES (0.14%)
$
GTECH Holdings 9,100 215,397
MACHINERY-CONSTRUCTION & MINING (0.28%)
Caterpillar 5,260 423,640
MACHINERY-GENERAL INDUSTRY (0.23%)
Ingersoll-Rand 5,000 342,200
MACHINERY-PUMPS (0.12%)
Graco 5,200 178,880
MEDICAL INSTRUMENTS (0.62%)
Guidant 6,451 429,766
Medtronic 9,800 500,878
930,644
MEDICAL PRODUCTS (2.71%)
Becton Dickinson 8,900 467,250
Johnson & Johnson 44,500 2,597,910
Zimmer Holdings /1/ 12,700 985,393
4,050,553
MEDICAL-BIOMEDICAL/GENE (1.96%)
Amgen /1/ 11,626 660,357
Biogen Idec /1/ 18,000 1,046,880
Genentech /1/ 16,700 760,351
Genzyme /1/ 8,900 466,983
2,934,571
MEDICAL-DRUGS (6.49%)
Abbott Laboratories 17,333 738,906
Allergan 11,000 787,160
Elan /1/ 1,500 38,700
Eli Lilly 12,233 2,006,027
Merck 14,200 444,602
Pfizer 157,850 4,569,757
Schering-Plough 32,200 583,142
Wyeth 13,732 544,474
9,712,768
MEDICAL-HMO (1.01%)
Aetna 7,400 703,000
UnitedHealth Group 11,200 810,880
1,513,880
METAL-ALUMINUM (0.44%)
Alcoa 20,281 659,133
METAL-DIVERSIFIED (0.52%)
Rio Tinto 7,300 775,990
MISCELLANEOUS INVESTING (0.41%)
Equity Office Properties Trust 21,800 613,016
MONEY CENTER BANKS (3.48%)
Bank of America 101,418 4,542,512
JP Morgan Chase 17,160 662,376
5,204,888
MULTI-LINE INSURANCE (3.56%)
American International Group 34,587 2,099,777
Loews 16,500 988,350
MetLife 29,500 1,131,325
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-LINE INSURANCE (CONTINUED)
$
Prudential Financial 24,000 1,115,280
5,334,732
MULTIMEDIA (3.71%)
Time Warner /1/ 172,219 2,865,724
Viacom 61,090 2,229,174
Walt Disney 17,900 451,438
5,546,336
NETWORKING PRODUCTS (1.20%)
Cisco Systems /1/ 93,219 1,790,737
NON-HAZARDOUS WASTE DISPOSAL (0.49%)
Republic Services 9,700 298,760
Waste Management 15,200 432,896
731,656
OIL & GAS DRILLING (0.27%)
GlobalSantaFe 13,900 410,050
OIL COMPANY-EXPLORATION & PRODUCTION (1.49%)
Anadarko Petroleum 27,800 1,875,110
Apache 4,800 243,360
Devon Energy 1,500 110,955
2,229,425
OIL COMPANY-INTEGRATED (4.86%)
ChevronTexaco 14,600 774,676
ConocoPhillips 23,300 1,964,423
Exxon Mobil 73,291 3,607,383
Occidental Petroleum 16,600 926,778
7,273,260
OIL FIELD MACHINERY & EQUIPMENT (0.06%)
FMC Technologies /1/ 3,100 93,713
OIL REFINING & MARKETING (0.60%)
Sunoco 2,800 208,208
Valero Energy 16,000 687,520
895,728
OIL-FIELD SERVICES (0.36%)
Schlumberger 8,619 542,480
PAPER & RELATED PRODUCTS (0.64%)
International Paper 10,146 390,722
Louisiana-Pacific 23,100 566,181
956,903
PHOTO EQUIPMENT & SUPPLIES (0.58%)
Eastman Kodak 28,900 875,092
PROPERTY & CASUALTY INSURANCE (0.34%)
St. Paul 15,003 509,502
REGIONAL BANKS (2.90%)
Comerica 2,200 135,322
National City 3,200 124,704
U.S. Bancorp 40,200 1,150,122
Wachovia 30,900 1,520,589
Wells Fargo 23,500 1,403,420
4,334,157
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-APPAREL & SHOE (0.15%)
$
Gap 11,400 227,772
RETAIL-AUTOMOBILE (0.37%)
AutoNation /1/ 31,800 547,914
RETAIL-BUILDING PRODUCTS (0.62%)
Home Depot 2,700 110,916
Lowe's 14,600 821,688
932,604
RETAIL-CONSUMER ELECTRONICS (0.14%)
Circuit City Stores 13,300 216,125
RETAIL-DISCOUNT (2.47%)
Costco Wholesale 9,100 436,254
Kmart Holding /1/ /2/ 9,300 855,972
Target 6,400 320,128
Wal-Mart Stores 38,570 2,079,694
3,692,048
RETAIL-OFFICE SUPPLIES (0.09%)
Staples 4,300 127,882
RETAIL-REGIONAL DEPARTMENT STORE (0.61%)
Federated Department Stores 18,100 913,145
RETAIL-TOY STORE (0.40%)
Toys R Us /1/ 33,500 603,335
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (0.17%)
Analog Devices 6,200 249,612
SEMICONDUCTOR EQUIPMENT (0.31%)
Applied Materials /1/ 29,100 468,510
STEEL PRODUCERS (0.47%)
Nucor 16,800 709,464
TELECOMMUNICATION EQUIPMENT (1.01%)
Qualcomm 36,200 1,513,522
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (0.17%)
Corning /1/ 21,600 247,320
TELEPHONE-INTEGRATED (3.01%)
BellSouth 49,000 1,306,830
CenturyTel 26,100 837,549
SBC Communications 12,700 320,802
Sprint 74,600 1,562,870
Telephone & Data Systems 1,300 97,370
Verizon Communications 9,800 383,180
4,508,601
TELEVISION (0.13%)
Hearst-Argyle Television 7,700 200,662
THERAPEUTICS (0.24%)
ImClone Systems /1/ /2/ 8,300 363,540
TOBACCO (0.81%)
Altria Group 5,700 276,222
Reynolds American 13,500 929,610
1,205,832
Shares
Held Value
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRANSPORT-RAIL (0.81%)
$
Burlington Northern Santa Fe 13,300 556,073
CSX 18,000 657,000
1,213,073
TRANSPORT-SERVICES (0.50%)
FedEx 6,945 632,828
United Parcel Service 1,400 110,852
743,680
TRANSPORT-TRUCK (0.09%)
J.B. Hunt Transport Services 3,300 134,838
WEB PORTALS (0.43%)
Yahoo /1/ 17,600 636,944
WIRELESS EQUIPMENT (1.10%)
Motorola 95,500 1,648,330
TOTAL COMMON STOCKS 148,857,126
Maturity
Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.15%)
Goldman Sachs; 1.75%; dated 10/29/04 maturing 11/01/04 (collateralized by
U.S. Treasuries; $1,741,957; 11/18/04 - 01/15/12) /3/ $1,727,252 $ 1,727,000
TOTAL REPURCHASE AGREEMENTS 1,727,000
------------
TOTAL PORTFOLIO INVESTMENTS (100.59%) 150,584,126
LIABILITIES, NET OF CASH, RECEIVABLES, AND OTHER ASSETS
(-0.59%) (881,241)
TOTAL NET ASSETS (100.00%) $149,702,885
---------------
Contract Opening Current Unrealized
Type Commitment Market Value Market Value Gain (Loss)
- -----------------------------------------------------------------------
FUTURES CONTRACTS
10 S&P 500 eMini Buy $560,758 $565,150 $4,392
December, 2004
Futures
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 17,860,096
Unrealized Depreciation (14,368,644)
------------
Net Unrealized Appreciation (Depreciation) 3,491,452
Cost for federal income tax purposes $147,092,674
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- ------------------------------------------------------------------------------
Consumer, Non-cyclical $ 35,963,178 23.79%
Financial 29,092,292 19.25
Communications 19,657,800 13.01
Industrial 17,409,142 11.52
Technology 17,137,102 11.34
Energy 11,444,656 7.57
Consumer, Cyclical 10,626,848 7.03
Basic Materials 4,738,223 3.13
Utilities 2,549,698 1.69
Government 1,965,187 1.30
Futures Contracts 565,150 0.37
TOTAL $151,149,276 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
159
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL PARTNERS EQUITY GROWTH FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- -----------------------------------------------------------------------------------
COMMON STOCKS (99.11%)
AIRLINES (0.78%)
$
Southwest Airlines 29,600 466,792
APPLICATIONS SOFTWARE (6.75%)
Mercury Interactive /1/ 16,400 712,252
Microsoft 98,400 2,754,216
Red Hat /1/ 46,500 597,060
4,063,528
BROADCASTING SERVICES & PROGRAMMING (1.35%)
Fox Entertainment Group /1/ 27,400 812,684
CASINO SERVICES (2.55%)
International Game Technology 46,400 1,533,056
CELLULAR TELECOMMUNICATIONS (2.42%)
Nextel Communications /1/ 55,000 1,456,950
COMPUTER SERVICES (1.23%)
Affiliated Computer Services
/1/ 13,600 741,880
COMPUTERS-INTEGRATED SYSTEMS (2.72%)
Dell /1/ 46,700 1,637,302
CONSULTING SERVICES (1.61%)
Accenture /1/ 40,000 968,400
CRUISE LINES (1.46%)
Carnival 17,400 879,744
DIVERSIFIED MANUFACTURING OPERATIONS (7.68%)
Danaher 21,900 1,207,347
General Electric 77,200 2,634,064
Tyco International 25,100 781,865
4,623,276
E-COMMERCE-SERVICES (3.02%)
eBay /1/ 10,500 1,024,905
InterActiveCorp /1/ 36,700 793,454
1,818,359
ELECTRONIC COMPONENTS-SEMICONDUCTOR (4.96%)
Intel 63,800 1,420,188
QLogic /1/ 9,300 302,250
Xilinx 41,200 1,260,720
2,983,158
ENTERPRISE SOFTWARE & SERVICE (1.41%)
Oracle /1/ 67,000 848,220
FIDUCIARY BANKS (2.70%)
State Street 36,100 1,626,305
FINANCE-CONSUMER LOANS (1.32%)
SLM 17,500 792,050
FINANCE-CREDIT CARD (1.54%)
American Express 17,500 928,725
FINANCE-INVESTMENT BANKER & BROKER (4.15%)
Citigroup 39,400 1,748,178
Morgan Stanley 14,700 751,023
2,499,201
Shares
Held Value
- -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD-WHOLESALE & DISTRIBUTION (1.61%)
$
Sysco 30,100 971,327
INTERNET BROKERS (1.95%)
Ameritrade Holding /1/ 90,000 1,171,800
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.97%)
Franklin Resources 9,600 581,952
MEDICAL INSTRUMENTS (2.47%)
Boston Scientific /1/ 17,000 600,100
Medtronic 17,300 884,203
1,484,303
MEDICAL-BIOMEDICAL/GENE (2.72%)
Amgen /1/ 17,000 965,600
Biogen Idec /1/ 11,500 668,840
1,634,440
MEDICAL-DRUGS (2.39%)
Elan /1/ /2/ 22,300 575,340
Forest Laboratories /1/ 19,400 865,240
1,440,580
MEDICAL-HMO (5.41%)
Anthem /1/ 16,800 1,350,720
UnitedHealth Group 26,300 1,904,120
3,254,840
MOTORCYCLE & MOTOR SCOOTER (0.88%)
Harley-Davidson 9,200 529,644
MULTI-LINE INSURANCE (2.05%)
American International Group 20,300 1,232,413
MULTIMEDIA (1.19%)
E.W. Scripps 15,000 715,800
NETWORKING PRODUCTS (4.03%)
Cisco Systems /1/ 58,500 1,123,785
Juniper Networks /1/ 48,900 1,301,229
2,425,014
OIL & GAS DRILLING (2.26%)
Transocean Sedco Forex /1/ 38,600 1,360,650
OIL-FIELD SERVICES (0.93%)
Schlumberger 8,900 560,166
RETAIL-BUILDING PRODUCTS (1.50%)
Home Depot 21,900 899,652
RETAIL-CONSUMER ELECTRONICS (1.45%)
Best Buy 14,700 870,534
RETAIL-DISCOUNT (4.00%)
Target 20,100 1,005,402
Wal-Mart Stores 26,000 1,401,920
2,407,322
RETAIL-DRUG STORE (1.32%)
Walgreen 22,200 796,758
RETAIL-REGIONAL DEPARTMENT STORE (0.59%)
Kohl's /1/ 7,000 355,320
Shares
Held Value
- -----------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SATELLITE TELECOM (2.02%)
$
EchoStar Communications /1/ 38,400 1,214,208
SCHOOLS (1.16%)
Apollo Group /1/ 10,600 699,600
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (2.33%)
Analog Devices 18,700 752,862
Maxim Integrated Products 14,800 651,052
1,403,914
SEMICONDUCTOR EQUIPMENT (0.96%)
Applied Materials /1/ 35,700 574,770
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (1.45%)
Corning /1/ 76,100 871,345
THERAPEUTICS (1.83%)
Gilead Sciences /1/ 31,700 1,097,771
TRANSPORT-SERVICES (1.88%)
United Parcel Service 14,300 1,132,275
WEB PORTALS (2.11%)
Google /1/ /2/ 1,700 324,199
Yahoo /1/ 26,100 944,558
1,268,757
TOTAL COMMON STOCKS 59,634,785
Maturity
Amount Value
- -----------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (1.55%)
Goldman Sachs; 1.75%; dated
10/29/04 maturing 11/01/04
(collateralized by U.S.
Treasuries; $939,063; 11/18/04
-
01/15/12) /3/ $931,136 $ 931,000
TOTAL REPURCHASE AGREEMENTS 931,000
-----------
TOTAL PORTFOLIO INVESTMENTS (100.66%) 60,565,785
LIABILITIES, NET OF
CASH, RECEIVABLES
AND OTHER ASSETS
(-0.66%) (399,582)
TOTAL NET ASSETS (100.00%) $60,166,203
--------------
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 4,346,326
Unrealized Depreciation (7,220,553)
-----------
Net Unrealized Appreciation (Depreciation) (2,874,227)
Cost for federal income tax purposes $63,440,012
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
$
Technology 12,252,772 20.23%
Consumer,
Non-cyclical 11,551,261 19.07
Communications 10,583,117 17.48
Financial 9,763,446 16.12
Consumer, Cyclical 8,738,822 14.43
Industrial 5,755,550 9.50
Energy 1,920,817 3.17
TOTAL $60,565,785 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL PARTNERS LARGECAP BLEND FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (97.61%)
AEROSPACE & DEFENSE (0.56%)
$
Boeing 3,000 149,700
Raytheon 1,900 69,312
Rockwell Collins 3,600 127,692
346,704
AEROSPACE & DEFENSE EQUIPMENT (1.09%)
General Dynamics 1,500 153,180
Lockheed Martin 5,400 297,486
United Technologies 2,400 222,768
673,434
AGRICULTURAL CHEMICALS (0.48%)
Agrium 5,200 86,268
Mosaic /1/ 3,700 55,648
Potash Corp. of Saskatchewan 2,300 153,617
295,533
AIRLINES (0.12%)
Southwest Airlines 4,500 70,965
APPLIANCES (0.18%)
Maytag 1,600 27,840
Whirlpool 1,400 82,250
110,090
APPLICATIONS SOFTWARE (3.44%)
Intuit /1/ 2,500 113,400
Mercury Interactive /1/ 900 39,087
Microsoft 66,100 1,850,139
Red Hat /1/ 7,800 100,152
Siebel Systems /1/ 2,100 19,950
2,122,728
AUDIO & VIDEO PRODUCTS (0.06%)
Digital Theater Systems /1/ 2,000 34,020
AUTO-CARS & LIGHT TRUCKS (0.29%)
General Motors 4,700 181,185
AUTO-MEDIUM & HEAVY DUTY TRUCKS (0.15%)
Paccar 1,300 90,103
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.28%)
Lear 1,200 64,704
TRW Automotive Holdings /1/ 6,000 110,160
174,864
BEVERAGES-NON-ALCOHOLIC (2.11%)
Coca-Cola 15,700 638,362
Cott /1/ 4,000 105,040
Pepsico 11,300 560,254
1,303,656
BREWERY (0.26%)
Anheuser-Busch 3,200 159,840
BROADCASTING SERVICES & PROGRAMMING (0.24%)
Liberty Media /1/ 16,800 149,856
CABLE TV (0.10%)
Rogers Communications 2,700 62,208
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CASINO HOTELS (0.07%)
$
Station Casinos 900 45,855
CASINO SERVICES (0.25%)
International Game Technology 4,700 155,288
CELLULAR TELECOMMUNICATIONS (0.47%)
Nextel Communications /1/ 8,100 214,569
Nextel Partners /1/ 4,600 77,464
292,033
CHEMICALS-DIVERSIFIED (0.64%)
Dow Chemical 7,200 323,568
E. I. Du Pont de Nemours 1,600 68,592
392,160
CHEMICALS-SPECIALTY (0.35%)
Cabot 1,600 54,528
Ferro 1,500 31,605
Great Lakes Chemical 600 15,372
Millennium Chemicals /1/ 4,100 88,068
Minerals Technologies 400 24,040
213,613
CIRCUIT BOARDS (0.16%)
Jabil Circuit /1/ 4,000 97,240
COMMERCIAL BANKS (0.39%)
First Horizon National 2,800 121,184
Synovus Financial 4,400 119,636
240,820
COMMERCIAL SERVICE-FINANCE (0.11%)
Moody's 900 70,029
COMPUTERS (1.48%)
Gateway /1/ 4,000 23,400
Hewlett-Packard 11,900 222,054
International Business Machines 7,400 664,150
909,604
COMPUTERS-INTEGRATED SYSTEMS (1.48%)
Dell /1/ 26,000 911,560
COMPUTERS-MEMORY DEVICES (0.07%)
Veritas Software /1/ 2,000 43,760
COMPUTERS-PERIPHERAL EQUIPMENT (0.16%)
Lexmark International /1/ 1,200 99,732
CONSULTING SERVICES (0.32%)
Accenture /1/ 2,700 65,367
Advisory Board /1/ 4,100 133,578
198,945
CONSUMER PRODUCTS-MISCELLANEOUS (0.26%)
Clorox 1,700 92,820
Fortune Brands 900 65,538
158,358
COSMETICS & TOILETRIES (2.37%)
Colgate-Palmolive 3,000 133,860
Gillette 5,700 236,436
Kimberly-Clark 2,500 149,175
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COSMETICS & TOILETRIES (CONTINUED)
$
Procter & Gamble 18,400 941,712
1,461,183
CRUISE LINES (0.46%)
Carnival 4,300 217,408
Royal Caribbean Cruises 1,400 65,240
282,648
DATA PROCESSING & MANAGEMENT (0.84%)
Automatic Data Processing 6,100 264,679
First Data 4,800 198,144
Fiserv /1/ 1,600 56,864
519,687
DECISION SUPPORT SOFTWARE (0.12%)
NetIQ /1/ 5,900 74,812
DISPOSABLE MEDICAL PRODUCTS (0.11%)
C.R. Bard 1,200 68,160
DISTRIBUTION-WHOLESALE (0.23%)
CDW 2,300 142,669
DIVERSIFIED MANUFACTURING OPERATIONS (6.38%)
Danaher 3,000 165,390
General Electric 75,500 2,576,060
Honeywell International 9,700 326,696
Illinois Tool Works 500 46,140
ITT Industries 500 40,570
Roper Industries 1,000 61,660
Tyco International 23,100 719,565
3,936,081
DIVERSIFIED MINERALS (0.19%)
BHP Billiton 5,700 117,819
DIVERSIFIED OPERATORS-COMMERCIAL SERVICES (0.19%)
Cendant 5,700 117,363
E-COMMERCE-SERVICES (0.97%)
eBay /1/ 4,200 409,962
InterActiveCorp /1/ 7,000 151,340
Monster Worldwide /1/ 1,300 36,465
597,767
ELECTRIC-INTEGRATED (3.04%)
American Electric Power 3,200 105,376
CMS Energy /1/ 2,000 18,720
Constellation Energy Group 1,200 48,744
Duke Energy 10,700 262,471
Edison International 3,200 97,600
El Paso Electric /1/ 2,800 46,620
Entergy 1,600 104,576
Exelon 4,200 166,404
FirstEnergy 5,000 206,650
NiSource 4,000 85,800
PG&E /1/ 3,400 108,936
Pinnacle West Capital 2,700 115,074
PPL 3,100 161,200
Southern 2,100 66,339
TECO Energy 3,700 51,800
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRIC-INTEGRATED (CONTINUED)
$
TXU 3,700 226,514
1,872,824
ELECTRONIC COMPONENTS-SEMICONDUCTOR (2.18%)
Intel 38,200 850,332
QLogic /1/ 4,500 146,250
Texas Instruments 8,100 198,045
Xilinx 4,800 146,880
1,341,507
ENTERPRISE SOFTWARE & SERVICE (0.70%)
Oracle /1/ 34,000 430,440
FIDUCIARY BANKS (0.83%)
Investors Financial Services 3,700 142,413
State Street 8,200 369,410
511,823
FILTRATION & SEPARATION PRODUCTS (0.10%)
Pall 2,400 62,064
FINANCE-COMMERCIAL (0.17%)
CapitalSource /1/ 4,700 105,280
FINANCE-CONSUMER LOANS (0.24%)
SLM 3,300 149,358
FINANCE-CREDIT CARD (0.83%)
American Express 7,500 398,025
MBNA 4,400 112,772
510,797
FINANCE-INVESTMENT BANKER & BROKER (4.14%)
Charles Schwab 8,600 78,690
Citigroup 29,300 1,300,041
Goldman Sachs Group 3,000 295,140
Legg Mason 750 47,782
Lehman Brothers Holdings 1,900 156,085
Merrill Lynch 6,300 339,822
Morgan Stanley 6,600 337,194
2,554,754
FINANCE-MORTGAGE LOAN/BANKER (1.07%)
Countrywide Credit Industries 2,100 67,053
Federal Home Loan Mortgage 4,100 273,060
Federal National Mortgage
Association 4,600 322,690
662,803
FINANCIAL GUARANTEE INSURANCE (0.34%)
MGIC Investment 1,500 96,465
Radian Group 2,400 115,032
211,497
FOOD-CONFECTIONERY (0.11%)
Hershey Foods 1,400 70,966
FOOD-MISCELLANEOUS/DIVERSIFIED (0.61%)
Campbell Soup 3,900 104,676
General Mills 3,500 154,875
H.J. Heinz 800 29,080
Kellogg 2,100 90,300
378,931
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FOOD-WHOLESALE & DISTRIBUTION (0.22%)
$
Sysco 4,300 138,761
GAS-DISTRIBUTION (0.04%)
Sempra Energy 700 23,478
GOLD MINING (0.55%)
Newmont Mining 7,100 337,392
HEALTH CARE COST CONTAINMENT (0.14%)
Caremark Rx /1/ 2,800 83,916
HOME DECORATION PRODUCTS (0.16%)
Newell Rubbermaid 4,600 99,176
HOTELS & MOTELS (0.18%)
Fairmont Hotels & Resorts 800 22,704
Marriott International 1,600 87,184
109,888
HUMAN RESOURCES (0.15%)
Manpower 1,100 49,775
Robert Half International 1,500 39,795
89,570
INSURANCE BROKERS (0.44%)
Marsh & McLennan 9,800 271,068
INTERNET APPLICATION SOFTWARE (0.18%)
MatrixOne /1/ 7,500 42,750
Verity /1/ 5,400 69,768
112,518
INTERNET BROKERS (0.47%)
Ameritrade Holding /1/ 22,400 291,648
INTERNET CONTENT-INFORMATION & NEWS (0.10%)
CNET Networks /1/ 7,200 58,824
INVESTMENT MANAGEMENT & ADVISORY SERVICES (0.20%)
Franklin Resources 2,000 121,240
LEISURE & RECREATION PRODUCTS (0.28%)
Brunswick 2,200 103,224
WMS Industries /1/ 2,300 67,275
170,499
LIFE & HEALTH INSURANCE (0.14%)
Genworth Financial 3,500 83,510
MACHINERY-FARM (0.33%)
Deere 3,400 203,252
MEDICAL INSTRUMENTS (1.47%)
Biomet 1,800 84,024
Boston Scientific /1/ 5,200 183,560
Guidant 2,200 146,564
Medtronic 7,700 393,547
St. Jude Medical /1/ 1,300 99,541
907,236
MEDICAL LABORATORY & TESTING SERVICE (0.13%)
Laboratory Corp. of America
Holdings /1/ 1,700 77,860
MEDICAL PRODUCTS (2.33%)
Baxter International 3,600 110,736
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL PRODUCTS (CONTINUED)
$
Becton Dickinson 1,300 68,250
Johnson & Johnson 17,600 1,027,488
Stryker 2,700 116,343
Zimmer Holdings /1/ 1,500 116,385
1,439,202
MEDICAL-BIOMEDICAL/GENE (1.22%)
Amgen /1/ 8,700 494,160
Biogen Idec /1/ 2,800 162,848
Chiron /1/ 1,300 42,146
Genentech /1/ 1,200 54,636
753,790
MEDICAL-DRUGS (4.79%)
Abbott Laboratories 8,000 341,040
Cephalon /1/ 600 28,602
Eli Lilly 7,200 395,352
Forest Laboratories /1/ 2,800 124,880
Medimmune /1/ 1,300 36,946
Merck 12,000 375,720
Pfizer 42,800 1,239,060
Schering-Plough 3,300 59,763
Wyeth 8,800 348,920
2,950,283
MEDICAL-GENERIC DRUGS (0.05%)
Watson Pharmaceutical /1/ 1,100 30,833
MEDICAL-HMO (0.89%)
Anthem /1/ 1,300 104,520
UnitedHealth Group 6,100 441,640
546,160
MEDICAL-HOSPITALS (0.17%)
HCA 2,800 102,844
MEDICAL-WHOLESALE DRUG DISTRIBUTION (0.30%)
AmerisourceBergen 900 49,536
Cardinal Health 2,900 135,575
185,111
METAL-ALUMINUM (0.26%)
Alcoa 5,000 162,500
METAL-DIVERSIFIED (0.06%)
Freeport-McMoran Copper & Gold 1,100 39,842
MISCELLANEOUS INVESTING (0.35%)
Duke-Weeks Realty 2,600 88,660
Simon Property Group 1,000 58,320
United Dominion Realty Trust 3,400 71,672
218,652
MONEY CENTER BANKS (3.05%)
Bank of America 18,242 817,059
JP Morgan Chase 27,588 1,064,897
1,881,956
MOTORCYCLE & MOTOR SCOOTER (0.06%)
Harley-Davidson 600 34,542
MULTI-LINE INSURANCE (2.46%)
American International Group 16,400 995,644
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MULTI-LINE INSURANCE (CONTINUED)
Hartford Financial Services $
Group 3,400 198,832
Prudential Financial 4,300 199,821
Safeco 2,600 120,224
1,514,521
MULTIMEDIA (2.26%)
E.W. Scripps 800 38,176
Gannett 1,900 157,605
McGraw-Hill 1,100 94,875
Meredith 400 19,600
Time Warner /1/ 37,100 617,344
Viacom 11,900 434,231
Walt Disney 1,300 32,786
1,394,617
NETWORKING PRODUCTS (1.48%)
Cisco Systems /1/ 39,400 756,874
Emulex /1/ 3,300 34,683
Juniper Networks /1/ 2,100 55,881
Lucent Technologies /1/ 18,000 63,900
911,338
NON-HAZARDOUS WASTE DISPOSAL (0.11%)
Republic Services 100 3,080
Waste Management 2,200 62,656
65,736
OFFICE AUTOMATION & EQUIPMENT (0.09%)
Pitney Bowes 1,300 56,875
OIL & GAS DRILLING (0.26%)
Nabors Industries /1/ 500 24,560
Transocean Sedco Forex /1/ 3,800 133,950
158,510
OIL COMPANY-EXPLORATION & PRODUCTION (0.53%)
Anadarko Petroleum 1,500 101,175
Devon Energy 500 36,985
EOG Resources 700 46,592
Murphy Oil 1,800 144,036
328,788
OIL COMPANY-INTEGRATED (5.37%)
ChevronTexaco 14,000 742,840
ConocoPhillips 4,900 413,119
Exxon Mobil 39,800 1,958,956
Occidental Petroleum 1,100 61,413
TotalFinaElf 1,300 135,564
3,311,892
OIL FIELD MACHINERY & EQUIPMENT (0.19%)
FMC Technologies /1/ 1,700 51,391
Grant Prideco /1/ 3,200 65,792
117,183
OIL-FIELD SERVICES (0.76%)
Baker Hughes 2,600 111,358
BJ Services 900 45,900
Schlumberger 4,900 308,406
465,664
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
OPTICAL SUPPLIES (0.03%)
$
Bausch & Lomb 300 18,288
PAPER & RELATED PRODUCTS (0.62%)
Bowater 700 25,788
International Paper 3,800 146,338
MeadWestvaco 2,200 69,366
Potlatch 1,900 89,471
Weyerhaeuser 800 50,112
381,075
PHARMACY SERVICES (0.04%)
Medco Health Solutions /1/ 800 27,128
PIPELINES (0.08%)
Dynegy /1/ 6,800 33,524
Williams 1,100 13,761
47,285
PROPERTY & CASUALTY INSURANCE (1.30%)
Progressive 1,200 112,260
St. Paul 15,302 519,656
XL Capital 2,300 166,750
798,666
PUBLISHING-NEWSPAPERS (0.26%)
New York Times 1,700 68,085
Washington Post 100 91,500
159,585
REGIONAL BANKS (3.73%)
Comerica 10,100 621,251
SunTrust Banks 1,700 119,646
U.S. Bancorp 30,300 866,883
Wachovia 6,800 334,628
Wells Fargo 6,000 358,320
2,300,728
REINSURANCE (0.15%)
AXIS Capital Holdings 3,700 92,722
RETAIL-APPAREL & SHOE (0.67%)
Abercrombie & Fitch 3,200 125,376
Christopher & Banks 3,100 50,375
Hot Topic /1/ 5,400 111,024
Ross Stores 4,700 123,469
410,244
RETAIL-AUTO PARTS (0.10%)
O'Reilly Automotive /1/ 1,500 64,590
RETAIL-BUILDING PRODUCTS (1.31%)
Home Depot 12,900 529,932
Lowe's 4,900 275,772
805,704
RETAIL-CONSUMER ELECTRONICS (0.21%)
Best Buy 2,200 130,284
RETAIL-DISCOUNT (3.24%)
Dollar Tree Stores /1/ 2,100 60,690
Family Dollar Stores 5,300 156,615
Target 9,900 495,198
TJX 3,700 88,726
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-DISCOUNT (CONTINUED)
$
Wal-Mart Stores 22,200 1,197,024
1,998,253
RETAIL-DRUG STORE (0.61%)
CVS 2,600 112,996
Walgreen 7,300 261,997
374,993
RETAIL-OFFICE SUPPLIES (0.12%)
Staples 2,500 74,350
RETAIL-PET FOOD & SUPPLIES (0.04%)
PETsMART 800 25,584
RETAIL-REGIONAL DEPARTMENT STORE (0.42%)
Kohl's /1/ 5,100 258,876
RETAIL-RESTAURANTS (0.89%)
McDonald's 5,100 148,665
Panera Bread /1/ 3,500 122,255
RARE Hospitality International
/1/ 3,400 94,214
Starbucks /1/ 2,100 111,048
Yum! Brands 1,600 69,600
545,782
SATELLITE TELECOM (0.23%)
EchoStar Communications /1/ 4,400 139,128
SCHOOLS (0.11%)
Apollo Group /1/ 1,000 66,000
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (0.67%)
Analog Devices 3,800 152,988
Linear Technology 3,200 121,216
Maxim Integrated Products 3,200 140,768
414,972
SEMICONDUCTOR EQUIPMENT (0.49%)
Applied Materials /1/ 9,900 159,390
Kla-Tencor /1/ 2,100 95,613
Novellus Systems /1/ 1,900 49,229
304,232
STEEL PRODUCERS (0.40%)
Nucor 5,800 244,934
TELECOMMUNICATION EQUIPMENT (0.71%)
Andrew /1/ 900 12,582
Comverse Technology /1/ 1,100 22,704
Qualcomm 9,600 401,376
436,662
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (0.19%)
Corning /1/ 10,000 114,500
TELEPHONE-INTEGRATED (2.73%)
SBC Communications 21,900 553,194
Sprint 16,800 351,960
Verizon Communications 19,900 778,090
1,683,244
THERAPEUTICS (0.21%)
Gilead Sciences /1/ 3,800 131,594
Shares
Held Value
- ---------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TOBACCO (1.27%)
$
Altria Group 16,200 785,052
TOYS (0.15%)
Hasbro 4,200 74,298
Mattel 1,000 17,510
91,808
TRANSPORT-RAIL (0.49%)
CSX 4,600 167,900
Union Pacific 2,100 132,237
300,137
TRANSPORT-SERVICES (0.95%)
United Parcel Service 7,400 585,932
WEB PORTALS (0.69%)
Google /1/ 700 133,494
Yahoo /1/ 8,000 289,520
423,014
WIRELESS EQUIPMENT (0.49%)
Motorola 14,500 250,270
Spectrasite /1/ 1,000 51,300
301,570
TOTAL COMMON STOCKS 60,173,007
Shares
Held Value
- ---------------------------------------------------------------------------------
PREFERRED STOCKS (0.23%)
MULTIMEDIA (0.23%)
News 4,500 141,480
TOTAL PREFERRED STOCKS 141,480
Principal
Amount Value
- ---------------------------------------------------------------------------------
TREASURY BONDS (0.08%)
U.S. Treasury /2/
$ $
1.67%; 12/23/04 50,000 49,872
TOTAL TREASURY BONDS 49,872
-----------
TOTAL PORTFOLIO INVESTMENTS (97.92%) 60,364,359
CASH, RECEIVABLES AND
OTHER ASSETS, NET OF
LIABILITIES (2.08%) 1,283,141
TOTAL NET ASSETS (100.00%) $61,647,500
-------------
Contract Opening Current Unrealized
Type Commitment Market Value Market Value Gain(Loss)
- ---------------------------------------------------------------------
FUTURES CONTRACTS
7 S&P 500 eMini Buy $389,505 $395,605 $6,100
December, 2004
Futures
/1 /Non-income producing security.
/2 /Security or a portion of the security was pledged to cover margin
requirements for futures contracts.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 5,718,091
Unrealized Depreciation (2,630,539)
-----------
Net Unrealized Appreciation (Depreciation) 3,087,552
Cost for federal income tax purposes $57,276,807
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
Consumer, $
Non-cyclical 12,321,059 20.28%
Financial 11,926,093 19.63
Technology 7,264,592 11.96
Communications 6,943,661 11.43
Consumer, Cyclical 6,482,260 10.67
Industrial 6,270,580 10.32
Energy 4,429,322 7.29
Basic Materials 2,184,868 3.59
Utilities 1,896,302 3.12
Government 645,622 1.06
Futures Contracts 395,605 0.65
TOTAL $60,759,964 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
167
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL PARTNERS LARGECAP VALUE FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (98.27%)
ADVERTISING AGENCIES (0.42%)
$
Interpublic Group /1/ 20,900 256,234
AEROSPACE & DEFENSE (0.60%)
Boeing 7,300 364,270
AEROSPACE & DEFENSE EQUIPMENT (0.78%)
General Dynamics 1,700 173,604
Goodrich 9,775 301,363
474,967
APPAREL MANUFACTURERS (1.29%)
Jones Apparel Group 9,050 319,465
Liz Claiborne 3,200 130,816
VF 6,200 333,746
784,027
APPLIANCES (0.36%)
Whirlpool 3,675 215,906
APPLICATIONS SOFTWARE (0.42%)
Microsoft 9,000 251,910
ATHLETIC FOOTWEAR (0.12%)
Reebok International 2,000 74,000
AUTO-CARS & LIGHT TRUCKS (0.32%)
General Motors 5,000 192,750
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (2.14%)
American Axle & Manufacturing Holdings 4,600 132,020
Autoliv 7,500 320,625
BorgWarner 4,800 222,624
Dana 9,900 147,609
Lear 3,700 199,504
Magna International 3,800 277,210
1,299,592
BEVERAGES-NON-ALCOHOLIC (0.14%)
Pepsico 1,700 84,286
BREWERY (0.14%)
Adolph Coors 1,300 86,710
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS (0.53%)
Vulcan Materials 6,400 318,592
BUILDING PRODUCTS-CEMENT & AGGREGATE (0.27%)
Martin Marietta Materials 3,600 163,908
CABLE TV (0.92%)
Comcast /1/ 18,900 557,550
CHEMICALS-DIVERSIFIED (0.62%)
Dow Chemical 1,500 67,410
E. I. Du Pont de Nemours 2,500 107,175
PPG Industries 3,200 204,000
378,585
CHEMICALS-SPECIALTY (0.56%)
Eastman Chemical 7,100 337,037
COMMERCIAL BANKS (0.70%)
Regions Financial 7,592 266,327
Shares
Held Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMMERCIAL BANKS (CONTINUED)
$
SouthTrust 3,600 156,852
423,179
COMPUTER SERVICES (0.44%)
Electronic Data Systems 12,500 265,875
COMPUTERS (1.89%)
Hewlett-Packard 49,000 914,340
International Business Machines 2,600 233,350
1,147,690
CONSUMER PRODUCTS-MISCELLANEOUS (0.17%)
Fortune Brands 1,400 101,948
CONTAINERS-METAL & GLASS (0.06%)
Owens-Illinois /1/ 2,000 37,060
CONTAINERS-PAPER & PLASTIC (0.37%)
Smurfit-Stone Container /1/ 12,900 223,944
DISTRIBUTION-WHOLESALE (0.47%)
Ingram Micro /1/ 8,700 150,075
Tech Data /1/ 3,300 133,287
283,362
DIVERSIFIED MANUFACTURING OPERATIONS (9.16%)
Cooper Industries 3,800 242,820
Eaton 6,200 396,490
General Electric 97,200 3,316,464
Honeywell International 16,200 545,616
SPX 7,600 291,460
Textron 6,300 429,345
Tyco International 10,600 330,190
5,552,385
ELECTRIC-INTEGRATED (4.33%)
Alliant Energy 9,300 245,334
American Electric Power 12,750 419,857
CMS Energy /1/ 10,400 97,344
Constellation Energy Group 6,100 247,782
Edison International 2,600 79,300
Entergy 6,100 398,696
FirstEnergy 9,900 409,167
Northeast Utilities 10,900 210,697
PPL 5,300 275,600
XCEL Energy 14,000 239,400
2,623,177
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.99%)
Flextronics International /1/ 18,200 219,310
Solectron /1/ 40,200 209,844
Vishay Intertechnology /1/ 13,200 170,676
599,830
ELECTRONIC COMPONENTS-SEMICONDUCTOR (0.14%)
Agere Systems /1/ 71,000 85,910
ELECTRONIC PARTS DISTRIBUTION (0.76%)
Arrow Electronics /1/ 11,100 265,956
Avnet /1/ 11,600 196,736
462,692
Shares
Held Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FINANCE-CREDIT CARD (0.11%)
$
Capital One Financial 900 66,384
FINANCE-INVESTMENT BANKER & BROKER (6.59%)
Citigroup 59,000 2,617,830
Lehman Brothers Holdings 6,250 513,437
Merrill Lynch 9,500 512,430
Morgan Stanley 6,900 352,521
3,996,218
FINANCE-MORTGAGE LOAN/BANKER (1.65%)
Federal Home Loan Mortgage 10,700 712,620
Federal National Mortgage Association 4,125 289,369
1,001,989
FINANCIAL GUARANTEE INSURANCE (0.99%)
MBIA 5,100 295,086
MGIC Investment 4,700 302,257
597,343
FOOD-FLOUR & GRAIN (0.37%)
Archer Daniels Midland 11,625 225,176
FOOD-MISCELLANEOUS/DIVERSIFIED (1.15%)
Sara Lee 18,000 419,040
Unilever 4,800 279,792
698,832
FOOD-RETAIL (0.69%)
Kroger /1/ 16,200 244,782
Safeway /1/ 9,600 175,104
419,886
FOOD-WHOLESALE & DISTRIBUTION (0.15%)
Supervalu 3,000 88,470
GAS-DISTRIBUTION (0.61%)
Sempra Energy 11,000 368,940
LIFE & HEALTH INSURANCE (1.47%)
Genworth Financial 12,500 298,250
Manulife Financial 11,260 524,378
Torchmark 1,225 66,175
888,803
MACHINERY-GENERAL INDUSTRY (0.18%)
Ingersoll-Rand 1,600 109,504
MEDICAL-DRUGS (2.55%)
AstraZeneca 6,600 271,920
Bristol-Myers Squibb 7,200 168,696
GlaxoSmithKline 7,000 296,800
Merck 13,950 436,775
Pfizer 1,600 46,320
Sanofi-Synthelabo 9,000 328,500
1,549,011
METAL PROCESSORS & FABRICATION (0.22%)
Worthington Industries 6,700 132,995
METAL-ALUMINUM (0.72%)
Alcan 5,600 259,392
Alcoa 5,400 175,500
434,892
Shares
Held Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MONEY CENTER BANKS (6.68%)
$
Bank of America 51,866 2,323,078
JP Morgan Chase 44,736 1,726,810
4,049,888
MULTI-LINE INSURANCE (2.77%)
Allstate 12,500 601,125
American International Group 3,800 230,698
Hartford Financial Services Group 7,400 432,752
MetLife 10,850 416,098
1,680,673
MULTIMEDIA (0.95%)
Time Warner /1/ 24,500 407,680
Viacom 2,500 91,225
Walt Disney 3,100 78,182
577,087
NETWORKING PRODUCTS (0.26%)
Lucent Technologies /1/ 45,200 160,460
OIL COMPANY-INTEGRATED (11.39%)
BP Amoco 5,300 308,725
ChevronTexaco 29,256 1,552,323
ConocoPhillips 10,897 918,726
Exxon Mobil 62,600 3,081,172
Marathon Oil 12,300 468,753
Occidental Petroleum 10,300 575,049
6,904,748
OIL REFINING & MARKETING (0.56%)
Ashland 5,900 339,958
PAPER & RELATED PRODUCTS (1.87%)
Georgia-Pacific 12,550 434,105
MeadWestvaco 12,900 406,737
Temple-Inland 5,000 295,600
1,136,442
PHARMACY SERVICES (0.64%)
Medco Health Solutions /1/ 11,400 386,574
POWER CONVERTER & SUPPLY EQUIPMENT (0.22%)
Hubbell 2,900 132,588
PRINTING-COMMERCIAL (0.61%)
R.R. Donnelley & Sons 11,700 367,965
PROPERTY & CASUALTY INSURANCE (2.22%)
ACE 2,800 106,568
Chubb 5,550 400,321
St. Paul 15,836 537,791
XL Capital 4,200 304,500
1,349,180
REGIONAL BANKS (7.67%)
Comerica 6,500 399,815
Huntington Bancshares 14,600 349,670
KeyCorp 11,550 387,965
National City 13,850 539,734
PNC Financial Services Group 7,300 381,790
SunTrust Banks 7,800 548,964
U.S. Bancorp 20,597 589,280
Shares
Held Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
REGIONAL BANKS (CONTINUED)
$
Wachovia 17,300 851,333
Wells Fargo 10,050 600,186
4,648,737
RETAIL-APPAREL & SHOE (0.93%)
Foot Locker 900 21,960
Limited 15,700 389,046
Nordstrom 3,600 155,448
566,454
RETAIL-MAJOR DEPARTMENT STORE (0.44%)
May Department Stores 8,700 226,722
Saks /1/ 3,200 39,104
265,826
RETAIL-OFFICE SUPPLIES (0.52%)
Office Depot /1/ 19,600 317,324
RETAIL-REGIONAL DEPARTMENT STORE (0.57%)
Federated Department Stores 6,900 348,105
RETAIL-RESTAURANTS (1.01%)
McDonald's 21,100 615,065
RUBBER-TIRES (0.11%)
Cooper Tire & Rubber 3,500 68,180
SAVINGS & LOANS-THRIFTS (1.61%)
Astoria Financial 6,500 254,085
Golden West Financial 700 81,844
Washington Mutual 16,487 638,212
974,141
STEEL PRODUCERS (0.67%)
United States Steel 11,100 407,592
TELECOMMUNICATION EQUIPMENT (1.17%)
ADC Telecommunications /1/ 79,300 175,253
Nortel Networks /1/ 72,100 244,419
Tellabs /1/ 36,500 292,000
711,672
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (0.27%)
Corning /1/ 14,400 164,880
TELEPHONE-INTEGRATED (3.66%)
BellSouth 8,700 232,029
SBC Communications 21,800 550,668
Sprint 39,000 817,050
Verizon Communications 15,800 617,780
2,217,527
TOBACCO (2.86%)
Altria Group 27,350 1,325,381
UST 9,900 407,484
1,732,865
TOOLS-HAND HELD (0.16%)
Stanley Works 2,200 97,944
TRANSPORT-RAIL (1.89%)
Burlington Northern Santa Fe 9,050 378,381
CSX 6,100 222,650
Shares
Held Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRANSPORT-RAIL (CONTINUED)
$
Norfolk Southern 16,100 546,595
1,147,626
TOTAL COMMON STOCKS 59,595,320
-----------
TOTAL PORTFOLIO INVESTMENTS (98.27%) 59,595,320
CASH, RECEIVABLES AND OTHER ASSETS, NET OF
LIABILITIES (1.73%) 1,049,085
TOTAL NET ASSETS (100.00%) $60,644,405
-------------
/1 /Non-income producing security.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 9,731,812
Unrealized Depreciation (2,164,984)
-----------
Net Unrealized Appreciation (Depreciation) 7,566,828
Cost for federal income tax purposes $52,028,492
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of Total
Value
- -------------------------------------------------------------------------------
Financial $18,674,546 31.34%
Industrial 9,818,305 16.48
Energy 6,904,748 11.59
Consumer,
Non-cyclical 5,741,723 9.63
Consumer, Cyclical 5,030,591 8.44
Communications 4,645,410 7.79
Basic Materials 3,034,505 5.09
Utilities 2,992,118 5.02
Technology 1,751,385 2.94
Government 1,001,989 1.68
TOTAL $59,595,320 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL PARTNERS MIDCAP GROWTH FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- --------------------------------------------------------------------------------------
COMMON STOCKS (100.55%)
AIRLINES (1.19%)
$
Southwest Airlines 24,210 381,792
APPAREL MANUFACTURERS (1.49%)
Coach /1/ 10,250 477,958
APPLICATIONS SOFTWARE (0.98%)
Citrix Systems /1/ 13,070 315,379
AUDIO & VIDEO PRODUCTS (2.12%)
Harman International Industries 2,410 289,634
Polycom /1/ 18,810 388,426
678,060
BEVERAGES-WINE & SPIRITS (0.66%)
Constellation Brands /1/ 5,360 210,273
BUILDING PRODUCTS-AIR & HEATING (0.91%)
American Standard /1/ 7,980 291,829
BUILDING-RESIDENTIAL & COMMERCIAL (0.83%)
DR Horton 5,070 152,100
Ryland Group 1,180 112,560
264,660
CASINO HOTELS (3.07%)
MGM Mirage /1/ 5,240 281,912
Station Casinos 7,700 392,315
Wynn Resorts /1/ 5,300 308,195
982,422
CASINO SERVICES (0.62%)
Scientific Games /1/ 9,370 198,457
CELLULAR TELECOMMUNICATIONS (1.65%)
NII Holdings /1/ 4,960 219,579
Western Wireless /1/ 10,640 310,050
529,629
CHEMICALS-DIVERSIFIED (0.80%)
Lyondell Chemical 11,220 257,836
CHEMICALS-SPECIALTY (0.44%)
Eastman Chemical 2,940 139,562
CIRCUIT BOARDS (0.39%)
Benchmark Electronics /1/ 3,690 125,349
COAL (0.51%)
Peabody Energy 2,540 162,001
COMMERCIAL BANKS (1.90%)
City National 2,830 194,987
Silicon Valley Bancshares /1/ 4,260 170,443
UCBH Holdings 5,670 244,320
609,750
COMMERCIAL SERVICES (0.85%)
Alliance Data Systems /1/ 6,460 273,129
COMMUNICATIONS SOFTWARE (0.67%)
Avid Technology /1/ 4,080 216,158
COMPUTER SERVICES (1.07%)
Cognizant Technology Solutions /1/ 10,050 341,700
Shares
Held Value
- --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTERS (2.58%)
$
Apple Computer /1/ 8,230 432,322
Research In Motion /1/ 4,450 392,490
824,812
COMPUTERS-PERIPHERAL EQUIPMENT (0.41%)
Lexmark International /1/ 1,590 132,145
CONSUMER PRODUCTS-MISCELLANEOUS (0.88%)
Clorox 5,170 282,282
CONTAINERS-METAL & GLASS (0.59%)
Ball 4,720 188,092
DATA PROCESSING & MANAGEMENT (2.53%)
Choicepoint /1/ 7,260 302,234
Fiserv /1/ 3,610 128,299
Global Payments 4,510 246,968
SEI Investments 3,650 131,363
808,864
DENTAL SUPPLIES & EQUIPMENT (0.72%)
Patterson /1/ 6,180 231,750
DIAGNOSTIC KITS (0.59%)
Dade Behring Holdings /1/ 3,360 189,134
DISPOSABLE MEDICAL PRODUCTS (1.58%)
C.R. Bard 8,910 506,088
DISTRIBUTION-WHOLESALE (1.00%)
CDW 5,180 321,315
DIVERSIFIED MANUFACTURING OPERATIONS (1.59%)
Eaton 4,000 255,800
Pentair 6,780 253,436
509,236
E-COMMERCE-SERVICES (1.65%)
Monster Worldwide /1/ 18,790 527,059
ELECTRONIC COMPONENTS-MISCELLANEOUS (0.88%)
Sanmina /1/ 35,340 282,720
ELECTRONIC COMPONENTS-SEMICONDUCTOR (2.95%)
Advanced Micro Devices /1/ 10,880 183,002
Micron Technology /1/ 11,500 140,070
National Semiconductor /1/ 10,850 181,195
PMC - Sierra /1/ 42,840 439,538
943,805
ENTERPRISE SOFTWARE & SERVICE (0.64%)
BEA Systems /1/ 25,360 205,923
MicroStrategy /1/ 32 4
205,927
ENTERTAINMENT SOFTWARE (0.59%)
Take-Two Interactive Software /1/ 5,740 189,190
FINANCE-INVESTMENT BANKER & BROKER (0.76%)
Bear Stearns 2,580 244,455
FINANCE-MORTGAGE LOAN/BANKER (0.72%)
Doral Financial 5,480 230,050
Shares
Held Value
- --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
FINANCIAL GUARANTEE INSURANCE (0.72%)
$
MGIC Investment 3,600 231,516
FOOD-MISCELLANEOUS/DIVERSIFIED (0.74%)
McCormick 6,660 235,964
FOOD-RETAIL (0.69%)
Whole Foods Market 2,710 220,675
HOTELS & MOTELS (2.53%)
Marriott International 10,500 572,145
Starwood Hotels & Resorts Worldwide 4,960 236,741
808,886
HUMAN RESOURCES (0.73%)
Robert Half International 8,840 234,525
INDUSTRIAL AUTOMATION & ROBOTS (1.33%)
Rockwell International 10,190 424,821
INSTRUMENTS-SCIENTIFIC (2.37%)
Fisher Scientific International /1/ 8,330 477,809
Waters /1/ 6,800 280,772
758,581
INTERNET BROKERS (1.17%)
E*trade Group /1/ 29,150 376,035
INTERNET CONTENT-INFORMATION & NEWS (1.24%)
Ask Jeeves /1/ 4,430 114,205
CNET Networks /1/ 34,570 282,437
396,642
INTERNET INFRASTRUCTURE SOFTWARE (2.45%)
Akamai Technologies /1/ 14,140 195,839
F5 Networks /1/ 8,540 341,173
TIBCO Software /1/ 25,550 248,346
785,358
INTERNET SECURITY (2.64%)
CheckFree /1/ 10,070 312,170
VeriSign /1/ 19,830 532,039
844,209
INVESTMENT MANAGEMENT & ADVISORY SERVICES (2.32%)
Affiliated Managers Group /1/ 4,965 277,246
T. Rowe Price Group 8,350 465,679
742,925
LASERS-SYSTEMS & COMPONENTS (0.75%)
Cymer /1/ 8,410 239,853
LEISURE & RECREATION PRODUCTS (1.36%)
Brunswick 4,450 208,794
WMS Industries /1/ 7,810 228,443
437,237
MACHINERY-PRINT TRADE (0.59%)
Zebra Technologies /1/ 3,570 189,174
MEDICAL INSTRUMENTS (1.16%)
Biomet 7,930 370,172
MEDICAL LABORATORY & TESTING SERVICE (0.74%)
Laboratory Corp. of America Holdings /1/ 5,170 236,786
Shares
Held Value
- --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL PRODUCTS (2.73%)
$
Cooper 3,240 227,934
Henry Schein /1/ 4,020 254,185
INAMED /1/ 7,380 392,247
874,366
MEDICAL-BIOMEDICAL/GENE (1.03%)
Charles River Laboratories International
/1/ 7,020 328,466
MEDICAL-DRUGS (2.87%)
Elan /1/ 6,250 161,250
Medimmune /1/ 8,590 244,128
OSI Pharmaceuticals /1/ 5,370 348,942
Sepracor /1/ 3,600 165,348
919,668
MEDICAL-HMO (0.99%)
AMERIGROUP /1/ 2,090 125,400
Pacificare Health Systems /1/ 5,360 190,923
316,323
MEDICAL-NURSING HOMES (0.53%)
Manor Care 5,190 169,921
METAL-COPPER (0.48%)
Phelps Dodge 1,760 154,070
MISCELLANEOUS INVESTING (0.55%)
Host Marriott /1/ 12,170 177,074
MOTION PICTURES & SERVICES (0.73%)
DreamWorks Animation /1/ 5,980 233,519
NETWORKING PRODUCTS (3.21%)
Juniper Networks /1/ 28,290 752,797
Network Appliance /1/ 11,230 274,798
1,027,595
OIL COMPANY-EXPLORATION & PRODUCTION (1.84%)
Range Resources 11,620 182,434
Ultra Petroleum /1/ 1,990 96,714
XTO Energy 9,335 311,602
590,750
OIL FIELD MACHINERY & EQUIPMENT (0.68%)
Smith International /1/ 3,770 218,962
OIL REFINING & MARKETING (0.66%)
Ashland 3,680 212,042
OIL-FIELD SERVICES (0.93%)
Baker Hughes 6,970 298,525
OPTICAL SUPPLIES (1.12%)
Bausch & Lomb 5,860 357,226
PIPELINES (0.35%)
Western Gas Resources 3,800 111,302
RADIO (0.38%)
Sirius Satellite Radio /1/ 31,070 121,173
RETAIL-APPAREL & SHOE (2.55%)
American Eagle Outfitters 5,060 206,853
Chico's FAS /1/ 9,260 370,678
Shares
Held Value
- --------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-APPAREL & SHOE (CONTINUED)
$
Urban Outfitters /1/ 5,850 239,850
817,381
RETAIL-BEDDING (1.54%)
Bed Bath & Beyond /1/ 12,110 493,967
RETAIL-MAIL ORDER (1.33%)
Williams-Sonoma /1/ 11,160 425,977
RETAIL-RESTAURANTS (2.10%)
P.F. Chang's China Bistro /1/ 4,010 203,868
Yum! Brands 10,780 468,930
672,798
SAVINGS & LOANS-THRIFTS (0.66%)
Sovereign Bancorp 9,760 211,304
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (1.11%)
Marvell Technology Group /1/ 12,390 353,982
SEMICONDUCTOR EQUIPMENT (1.81%)
Kla-Tencor /1/ 3,270 148,883
Lam Research /1/ 16,530 430,276
579,159
STEEL-SPECIALTY (0.66%)
Allegheny Technologies 12,520 210,461
TELECOMMUNICATION EQUIPMENT (1.00%)
Comverse Technology /1/ 15,590 321,778
TELECOMMUNICATION SERVICES (0.45%)
Amdocs /1/ 5,760 144,864
THERAPEUTICS (1.62%)
Eyetech Pharmaceuticals /1/ 1,800 76,392
MGI Pharma /1/ 7,780 207,493
Neurocrine Biosciences /1/ 5,080 236,474
520,359
TRANSPORT-MARINE (0.78%)
Teekay Shipping 5,430 250,866
TRANSPORT-SERVICES (0.68%)
Expeditors International of Washington 3,790 216,409
TRANSPORT-TRUCK (0.53%)
Yellow Roadway /1/ 3,510 168,445
Shares
Held Value
- ------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
WEB HOSTING & DESIGN (0.31%)
Macromedia /1/ 3,680 $ 99,875
TOTAL COMMON STOCKS 32,204,834
-----------
TOTAL PORTFOLIO INVESTMENTS (100.55%) 32,204,834
LIABILITIES, NET OF CASH,
RECEIVABLES AND OTHER
ASSETS (-0.55%) (176,085)
TOTAL NET ASSETS (100.00%) $32,028,749
--------------
/1 /Non-income producing security.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 4,385,140
Unrealized Depreciation (674,095)
-----------
Net Unrealized Appreciation (Depreciation) 3,711,045
Cost for federal income tax purposes $28,493,789
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of Total
Value
- -------------------------------------------------------------------------------
Consumer, Cyclical $ 6,806,001 21.13%
Consumer,
Non-cyclical 6,779,340 21.05
Communications 4,911,811 15.25
Technology 4,883,686 15.17
Industrial 3,645,376 11.32
Financial 2,823,109 8.77
Energy 1,381,540 4.29
Basic Materials 973,971 3.02
TOTAL $32,204,834 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
173
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL PARTNERS SMALLCAP GROWTH FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (97.92%)
AIRLINES (0.39%)
$
Pinnacle Airlines /1/ 6,900 74,796
APPLICATIONS SOFTWARE (0.04%)
Progress Software /1/ 400 7,944
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.95%)
American Axle & Manufacturing Holdings 6,300 180,810
BEVERAGES-NON-ALCOHOLIC (1.03%)
Cott /1/ 7,300 191,698
Hansen Natural /1/ 200 5,300
196,998
BEVERAGES-WINE & SPIRITS (1.11%)
Constellation Brands /1/ 5,400 211,842
BUILDING & CONSTRUCTION-MISCELLANEOUS (1.62%)
Dycom Industries /1/ 9,500 310,175
BUILDING PRODUCTS-LIGHT FIXTURES (0.77%)
Genlyte Group /1/ 2,000 147,120
BUILDING-RESIDENTIAL & COMMERCIAL (1.87%)
Hovnanian Enterprises /1/ 4,500 168,930
NVR /1/ 300 188,100
357,030
CIRCUIT BOARDS (2.62%)
Benchmark Electronics /1/ 10,550 358,383
TTM Technologies /1/ 15,100 141,412
499,795
COMMERCIAL BANKS (2.65%)
Harleysville National 300 7,671
Main Street Banks 400 11,744
MB Financial 300 12,822
Prosperity Bancshares 700 19,075
Sun Bancorp. /1/ 100 2,315
Texas Capital Bancshares /1/ 400 7,908
UCBH Holdings 10,020 431,762
Yardville National Bancorp. 400 13,272
506,569
COMMUNICATIONS SOFTWARE (0.25%)
Avid Technology /1/ 400 21,192
SeaChange International /1/ 1,600 27,264
48,456
COMPUTER SERVICES (6.37%)
CACI International /1/ 6,690 407,889
Cognizant Technology Solutions /1/ 19,360 658,240
FactSet Research Systems 3,040 151,514
1,217,643
COMPUTERS-INTEGRATED SYSTEMS (0.66%)
Micros Systems /1/ 500 29,560
RadiSys /1/ 7,300 96,944
126,504
COMPUTERS-MEMORY DEVICES (0.42%)
Dot Hill Systems /1/ 12,500 78,125
M-Systems Flash Disk Pioneers /1/ 100 1,406
79,531
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTERS-PERIPHERAL EQUIPMENT (0.04%)
$
Mobility Electronics /1/ 1,000 7,020
CONSULTING SERVICES (0.23%)
DiamondCluster International /1/ 2,000 24,370
Navigant Consulting /1/ 800 19,896
44,266
DATA PROCESSING & MANAGEMENT (1.81%)
Fair, Isaac 5,950 179,690
NAVTEQ /1/ 4,100 165,271
344,961
DENTAL SUPPLIES & EQUIPMENT (1.63%)
Align Technology /1/ 425 4,409
Patterson /1/ 8,200 307,500
311,909
DIAGNOSTIC EQUIPMENT (0.02%)
Gen-Probe /1/ 100 3,504
DISTRIBUTION-WHOLESALE (0.47%)
Beacon Roofing Supply /1/ 3,500 65,625
WESCO International /1/ 1,000 25,080
90,705
DIVERSIFIED MANUFACTURING OPERATIONS (1.35%)
ESCO Technologies /1/ 3,700 258,260
DRUG DELIVERY SYSTEMS (0.50%)
Alkermes /1/ 300 3,711
Noven Pharmaceuticals /1/ 600 13,530
Penwest Pharmaceuticals /1/ 7,200 78,336
95,577
E-COMMERCE-PRODUCTS (0.05%)
1-800-flowers.com /1/ 1,200 9,690
E-MARKETING-INFORMATION (1.58%)
24/7 Real Media /1/ 1,500 5,250
Digital River /1/ 8,900 296,370
301,620
EDUCATIONAL SOFTWARE (0.13%)
Blackboard /1/ 1,400 24,934
ELECTRIC PRODUCTS-MISCELLANEOUS (0.07%)
GrafTech International /1/ 1,400 12,964
ELECTRONIC COMPONENTS-SEMICONDUCTOR (3.41%)
Cree /1/ 3,900 134,589
Microsemi /1/ 16,200 251,748
Silicon Image /1/ 18,000 246,600
Siliconix /1/ 200 8,282
Virage Logic /1/ 600 9,270
Zoran /1/ 200 2,018
652,507
ELECTRONIC DESIGN AUTOMATION (0.83%)
Magma Design Automation /1/ 7,450 102,463
Verisity /1/ 7,900 55,300
157,763
ELECTRONIC MEASUREMENT INSTRUMENTS (0.12%)
Flir Systems /1/ 100 5,321
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ELECTRONIC MEASUREMENT INSTRUMENTS (CONTINUED)
$
Keithley Instruments 500 8,745
RAE Systems /1/ 1,400 9,758
23,824
ELECTRONIC SECURITY DEVICES (0.04%)
American Science & Engineering /1/ 200 7,372
ELECTRONICS-MILITARY (1.29%)
Engineered Support Systems 5,130 246,445
ENGINEERING-RESEARCH & DEVELOPMENT SERVICES (0.43%)
EMCOR Group /1/ 2,100 83,097
ENTERPRISE SOFTWARE & SERVICE (0.01%)
Ultimate Software Group /1/ 200 2,573
ENTERTAINMENT SOFTWARE (0.58%)
THQ /1/ 5,880 111,132
FIDUCIARY BANKS (1.65%)
Investors Financial Services 8,200 315,618
FOOD-WHOLESALE & DISTRIBUTION (0.57%)
Performance Food Group /1/ 4,700 109,322
HOME FURNISHINGS (0.07%)
Tempur-Pedic International /1/ 800 12,992
HOSPITAL BEDS & EQUIPMENT (0.23%)
Kinetic Concepts /1/ 900 44,847
HOTELS & MOTELS (0.20%)
Highland Hospitality 3,300 37,620
HUMAN RESOURCES (0.94%)
Gevity HR 1,000 17,810
Korn/Ferry International /1/ 4,600 80,040
Labor Ready /1/ 5,700 81,795
179,645
INDUSTRIAL AUTOMATION & ROBOTS (1.13%)
Cognex 8,400 215,040
INDUSTRIAL GASES (0.14%)
Airgas 1,100 27,060
INSTRUMENTS-SCIENTIFIC (1.02%)
Fisher Scientific International /1/ 3,400 195,024
INSURANCE (0.02%)
HCC Insurance Holdings 100 2,970
INTERNET CONNECTIVE SERVICES (0.03%)
Redback Networks /1/ 1,100 4,961
INTERNET FINANCIAL SERVICES (0.10%)
China Finance Online /1/ 2,200 19,030
INTERNET INFRASTRUCTURE EQUIPMENT (0.50%)
Avocent /1/ 2,700 96,120
INTERNET INFRASTRUCTURE SOFTWARE (0.05%)
Opsware /1/ 1,600 8,656
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
INTERNET SECURITY (1.49%)
$
RSA Security /1/ 10,100 206,646
Secure Computing /1/ 9,900 77,666
284,312
INVESTMENT COMPANIES (0.03%)
Prospect Energy /1/ 400 5,652
LASERS-SYSTEMS & COMPONENTS (0.12%)
Excel Technology /1/ 100 2,522
Ii-Vi /1/ 600 20,544
23,066
MACHINERY TOOLS & RELATED PRODUCTS (0.13%)
Kennametal 400 18,612
Lincoln Electric Holdings 200 6,676
25,288
MACHINERY-CONSTRUCTION & MINING (0.08%)
JLG Industries 875 14,595
MACHINERY-GENERAL INDUSTRY (0.67%)
Middleby 2,600 127,475
MACHINERY-MATERIAL HANDLING (0.03%)
Paragon Technologies /1/ 600 5,760
MEDICAL INSTRUMENTS (2.38%)
Advanced Neuromodulation Systems /1/ 4,700 149,601
ArthroCare /1/ 9,900 305,019
454,620
MEDICAL LABORATORY & TESTING SERVICE (0.09%)
LabOne /1/ 550 16,500
MEDICAL LASER SYSTEMS (0.09%)
VISX /1/ 1,000 16,680
MEDICAL PRODUCTS (1.72%)
EPIX Pharmaceuticals /1/ 900 14,067
INAMED /1/ 5,800 308,270
ThermoGenesis /1/ 1,000 5,585
327,922
MEDICAL-BIOMEDICAL/GENE (2.83%)
Affymetrix /1/ 2,600 79,300
Charles River Laboratories International /1/ 2,160 101,067
Corgentech /1/ 4,300 82,001
Diversa /1/ 300 2,586
Incyte Genomics /1/ 11,900 123,760
Martek Biosciences /1/ 400 18,822
Regeneration Technologies /1/ 800 6,200
Telik /1/ 6,900 127,305
541,041
MEDICAL-DRUGS (1.63%)
DUSA Pharmaceuticals /1/ 200 2,332
First Horizon Pharmaceutical /1/ 10,700 263,006
KV Pharmaceutical /1/ 750 14,940
Pharmion /1/ 100 4,595
Salix Pharmaceuticals /1/ 800 12,824
Vaxgen /1/ 1,300 14,690
312,387
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL-GENERIC DRUGS (0.47%)
$
Taro Pharmaceuticals Industries /1/ 3,400 90,338
MEDICAL-HMO (0.22%)
WellCare Health Plans /1/ 1,800 41,220
MEDICAL-HOSPITALS (3.37%)
United Surgical Partners International /1/ 5,600 196,056
VCA Antech /1/ 20,000 448,400
644,456
MEDICAL-OUTPATIENT & HOME MEDICAL CARE (0.43%)
Odyssey HealthCare /1/ 10,550 81,446
MISCELLANEOUS INVESTING (3.59%)
American Financial Realty Trust 2,500 36,750
BioMed Realty Trust 5,400 98,172
Government Properties Trust 2,600 26,078
La Quinta /1/ 1,500 12,075
Mills 4,400 243,980
Ventas 10,000 269,000
686,055
MISCELLANEOUS MANUFACTURERS (0.02%)
Applied Films /1/ 200 4,638
MOTION PICTURES & SERVICES (0.04%)
Lions Gate Entertainment /1/ 850 8,339
NETWORKING PRODUCTS (0.73%)
Foundry Networks /1/ 9,900 120,087
Ixia /1/ 1,500 19,155
139,242
NON-FERROUS METALS (0.04%)
Brush Engineered Materials /1/ 500 7,800
OFFICE AUTOMATION & EQUIPMENT (0.05%)
Global Imaging Systems /1/ 300 10,560
OIL & GAS DRILLING (0.99%)
Grey Wolf /1/ 2,800 14,504
Patterson-UTI Energy 8,800 169,224
Pioneer Drilling /1/ 600 4,854
188,582
OIL COMPANY-EXPLORATION & PRODUCTION (3.68%)
Patina Oil & Gas 10,850 310,310
Quicksilver Resources /1/ 12,400 392,212
702,522
OIL-FIELD SERVICES (1.68%)
Cal Dive International /1/ 450 15,934
Superior Energy Services /1/ 1,000 12,890
Tetra Technologies /1/ 9,750 291,915
320,739
PHYSICAL THERAPY & REHABILITATION CENTERS (0.06%)
Psychiatric Solutions /1/ 450 11,453
PHYSICIAN PRACTICE MANAGEMENT (1.94%)
Pediatrix Medical Group /1/ 6,580 370,125
PROPERTY & CASUALTY INSURANCE (0.10%)
Philadelphia Consolidated Holding /1/ 200 11,596
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
PROPERTY & CASUALTY INSURANCE (CONTINUED)
$
Selective Insurance Group 200 7,816
19,412
PUBLICLY TRADED INVESTMENT FUND (1.89%)
iShares Russell 2000 Index Fund 3,100 360,623
RACETRACKS (0.03%)
Speedway Motorsports 200 6,620
RADIO (1.18%)
Cumulus Media /1/ 10,100 164,125
Salem Communications /1/ 2,100 52,500
XM Satellite Radio Holdings /1/ 300 9,696
226,321
RENTAL-AUTO & EQUIPMENT (0.05%)
Aaron Rents 400 8,680
RESPIRATORY PRODUCTS (0.48%)
ResMed /1/ 1,935 90,945
RETAIL-APPAREL & SHOE (3.40%)
Aeropostale /1/ 9,350 294,992
American Eagle Outfitters 500 20,440
Chico's FAS /1/ 7,500 300,225
New York & Co. /1/ 1,300 26,910
Stage Stores /1/ 200 7,202
649,769
RETAIL-BEDDING (0.05%)
Linens 'N Things /1/ 400 9,632
RETAIL-COMPUTER EQUIPMENT (1.04%)
Electronics Boutique Holdings /1/ 5,837 199,275
RETAIL-HOME FURNISHINGS (0.07%)
Cost Plus /1/ 400 12,920
RETAIL-MUSIC STORE (1.28%)
Guitar Center /1/ 5,500 245,465
RETAIL-PAWN SHOPS (0.02%)
First Cash Financial Services /1/ 200 4,716
RETAIL-PET FOOD & SUPPLIES (1.50%)
PETCO Animal Supplies /1/ 8,000 286,160
RETAIL-RESTAURANTS (3.15%)
CKE Restaurants /1/ 16,700 201,569
Panera Bread /1/ 4,450 155,438
RARE Hospitality International /1/ 600 16,626
Ruby Tuesday 8,800 217,360
Sonic /1/ 400 10,892
601,885
RETAIL-SPORTING GOODS (0.07%)
Hibbett Sporting Goods /1/ 600 13,416
RETAIL-TOY STORE (0.14%)
Build-A-Bear Workshop /1/ 1,100 26,851
SAVINGS & LOANS-THRIFTS (1.35%)
BankUnited Financial 5,400 160,650
Commercial Capital Bancorp. 800 17,944
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SAVINGS & LOANS-THRIFTS (CONTINUED)
$
Harbor Florida Bancshares 2,500 80,100
258,694
SCHOOLS (0.03%)
Education Management /1/ 200 5,364
SEISMIC DATA COLLECTION (0.01%)
Input/Output /1/ 400 2,796
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (1.83%)
Exar /1/ 8,550 128,421
Power Integrations /1/ 6,700 143,380
Standard Microsystems /1/ 3,500 77,070
348,871
SEMICONDUCTOR EQUIPMENT (0.80%)
August Technology /1/ 6,300 49,109
Brooks Automation /1/ 400 5,952
Helix Technology 100 1,404
Rudolph Technologies /1/ 5,400 81,432
Semitool /1/ 1,400 10,829
Varian Semiconductor Equipment Associates /1/ 100 3,461
152,187
SEMICONDUCTORS (0.88%)
Artisan Components /1/ 5,200 168,168
SOFTWARE (0.03%)
Opnet Technologies /1/ 700 5,352
STEEL PRODUCERS (0.89%)
Steel Dynamics 5,100 169,320
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (0.29%)
C-COR.net /1/ 5,900 44,368
Harmonic /1/ 1,300 10,816
55,184
THERAPEUTICS (2.44%)
Amylin Pharmaceuticals /1/ 3,500 74,550
Bioenvision /1/ 500 3,912
Isis Pharmaceuticals /1/ 9,600 44,688
Medicines /1/ 4,900 130,536
Neurocrine Biosciences /1/ 2,861 133,180
NPS Pharmaceuticals /1/ 4,700 80,276
467,142
TOYS (0.03%)
Marvel Enterprises /1/ 400 6,160
TRANSPORT-AIR FREIGHT (1.44%)
EGL /1/ 8,600 275,028
TRANSPORT-RAIL (0.05%)
Genesee & Wyoming /1/ 350 8,862
TRANSPORT-SERVICES (0.99%)
UTI Worldwide 2,900 188,500
TRANSPORT-TRUCK (1.74%)
Celadon Group /1/ 800 15,560
Landstar System /1/ 4,500 305,730
Shares
Held Value
- ---------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRANSPORT-TRUCK (CONTINUED)
$
Old Dominion Freight Line /1/ 400 11,210
332,500
WIRELESS EQUIPMENT (0.08%)
InterDigital Communications /1/ 800 12,720
Viasat /1/ 100 1,889
14,609
TOTAL COMMON STOCKS 18,708,481
-----------
TOTAL PORTFOLIO INVESTMENTS (97.92%) 18,708,481
CASH, RECEIVABLES AND OTHER ASSETS, NET OF
LIABILITIES (2.08%) 398,167
TOTAL NET ASSETS (100.00%) $19,106,648
--------------
/1 /Non-income producing security.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 4,440,964
Unrealized Depreciation (1,422,514)
-----------
Net Unrealized Appreciation (Depreciation) 3,018,450
Cost for federal income tax purposes $15,690,031
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
Consumer,
Non-cyclical $ 4,678,229 25.01%
Technology 3,471,066 18.55
Industrial 3,004,829 16.06
Consumer, Cyclical 2,799,617 14.97
Financial 1,820,515 9.73
Energy 1,214,639 6.49
Communications 1,154,783 6.17
Funds 360,623 1.93
Basic Materials 204,180 1.09
TOTAL $18,708,481 100.00%
---------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL REAL ESTATE SECURITIES FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (97.20%)
PUBLICLY TRADED INVESTMENT FUND (3.89%)
$
iShares Cohen & Steers Realty Majors Index Fund 15,835 1,997,585
iShares Dow Jones US Real Estate Index Fund 10,300 1,169,153
3,166,738
REAL ESTATE INVESTMENT TRUSTS (93.31)
Acadia Realty Trust 37,603 579,086
AMB Property 41,509 1,556,588
Archstone-Smith Trust 64,300 2,157,265
Arden Realty 9,900 337,392
AvalonBay Communities 35,900 2,350,373
BioMed Realty Trust 46,841 851,569
Boston Properties 85,276 5,092,683
BRE Properties 11,700 466,830
Brookfield Properties 93,300 3,169,401
Camden Property Trust 20,985 952,719
Capital Automotive 29,540 952,960
Catellus Development 19,652 566,764
CBL & Associates Properties 39,390 2,582,014
CenterPoint Properties Trust 59,436 2,751,887
Corporate Office Properties Trust 54,395 1,491,511
Developers Diversified Realty 75,219 3,144,154
Entertainment Properties Trust 14,514 579,109
Equity Office Properties Trust 75,801 2,131,524
Equity Residential Properties Trust 65,400 2,181,090
Essex Property Trust 17,100 1,341,666
Extra Space Storage 29,673 411,268
Federal Realty Investment Trust 7,314 347,049
General Growth Properties 45,196 1,491,016
Highland Hospitality 36,949 421,219
Host Marriott /1/ 86,400 1,257,120
Kilroy Realty 3,800 151,050
Kimco Realty 66,400 3,622,120
LaSalle Hotel Properties 46,596 1,338,237
Macerich 27,600 1,649,100
Mid-America Apartment Communities 18,400 723,672
Mills 39,242 2,175,969
Pan Pacific Retail Properties 40,870 2,315,285
Prologis Trust 78,150 3,046,287
Public Storage 42,300 2,210,175
Regency Centers 11,115 543,079
Simon Property Group 86,460 5,042,347
SL Green Realty 48,938 2,682,781
Starwood Hotels & Resorts Worldwide 66,200 3,159,726
Summit Properties 10,948 332,053
Tanger Factory Outlet Centers 14,224 672,084
Taubman Centers 32,695 938,347
United Dominion Realty Trust 47,007 990,908
Ventas 92,176 2,479,534
Vornado Realty Trust 41,400 2,782,080
76,019,091
TOTAL COMMON STOCKS 79,185,829
Shares
Held Value
- ------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (0.63%)
REAL ESTATE INVESTMENT TRUSTS (0.63%)
$
Simon Property Group /1/ 9,360 508,903
TOTAL PREFERRED STOCKS 508,903
Principal
Amount Value
-----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (2.15%)
FINANCE-CONSUMER LOANS (2.15%)
Investment in Joint Trading Account; Household Finance
$ $
1.84%; 11/01/04 1,754,417 1,754,417
TOTAL COMMERCIAL PAPER 1,754,417
-----------
TOTAL PORTFOLIO INVESTMENTS (99.98%) 81,449,149
CASH, RECEIVABLES AND OTHER ASSETS,
NET OF LIABILITIES (0.02%) 14,635
TOTAL NET ASSETS (100.00%) $81,463,784
-------------
/1 /Non-income producing security.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $18,526,520
Unrealized Depreciation (92,592)
-----------
Net Unrealized Appreciation (Depreciation) 18,433,928
Cost for federal income tax purposes $63,015,221
INVESTMENTS BY REIT TYPE (UNAUDITED)
REIT Type Value Percentage of
Total Value
- --------------------------------------------------------------------------------
Office & Industrial REITs $20,093,272 24.67%
Mall REITs 15,059,780 18.49
Apartment REITs 11,496,576 14.12
Shopping Center REITs 10,550,774 12.95
Diversified REITs 8,050,314 9.88
Hotel REITs 6,176,302 7.58
Other Investments 4,921,154 6.04
Self Storage REITs 2,621,443 3.22
Healthcare REITs 2,479,534 3.05
TOTAL $81,449,149 100.00%
--------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
178
SCHEDULE OF INVESTMENTS
PRINCIPAL SMALLCAP FUND, INC.
OCTOBER 31, 2004
Shares
Held Value
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (98.73%)
AEROSPACE & DEFENSE EQUIPMENT (1.39%)
$
Moog /1/ 12,810 480,759
Orbital Sciences /1/ /2/ 97,180 1,005,813
1,486,572
AIRLINES (0.66%)
ExpressJet Holdings /1/ 63,532 706,476
APPAREL MANUFACTURERS (2.08%)
Guess? /1/ 48,350 807,445
Kellwood 22,832 718,295
Oxford Industries 18,722 694,399
2,220,139
APPLICATIONS SOFTWARE (0.44%)
Embarcadero Technologies /1/ 58,107 472,410
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL (0.38%)
Tenneco Automotive /1/ 31,601 402,597
BATTERIES & BATTERY SYSTEMS (1.30%)
Rayovac /1/ 55,829 1,390,700
BUILDING PRODUCTS-CEMENT & AGGREGATE (1.41%)
Eagle Materials 21,840 1,509,362
BUILDING PRODUCTS-WOOD (0.83%)
Universal Forest Products 24,317 891,826
CHEMICALS-DIVERSIFIED (0.72%)
FMC /1/ 17,464 765,796
CHEMICALS-SPECIALTY (1.13%)
MacDermid 38,221 1,206,255
CIRCUIT BOARDS (1.83%)
Benchmark Electronics /1/ 24,174 821,191
SBS Technologies /1/ 55,763 743,321
TTM Technologies /1/ 42,181 395,025
1,959,537
COMMERCIAL BANKS (7.95%)
Capital Corp of the West 19,109 879,970
City Holding 34,614 1,199,375
Columbia Banking Systems 46,408 1,136,996
Commerce Bancshares 16,829 826,304
Community Trust Bancorp 8,732 288,156
Frontier Financial 15,116 581,890
IBERIABANK 8,732 532,827
Pacific Capital Bancorp. 27,705 881,850
Signature Bank /1/ 18,889 556,659
Vineyard National Bancorp /1/ /3/ /4/ 4,738 19,994
Vineyard National Bancorp. 23,686 692,105
Virginia Commerce Bancorp. /1/ /2/ 30,453 895,318
8,491,444
COMMERCIAL SERVICE-FINANCE (1.41%)
iPayment /1/ /2/ 19,104 856,050
NCO Group /1/ 24,459 654,278
1,510,328
COMPUTER AIDED DESIGN (0.99%)
ANSYS /1/ 38,286 1,056,694
Shares
Held Value
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
COMPUTER SERVICES (1.30%)
$
CACI International /1/ 12,296 749,687
Perot Systems /1/ 39,696 636,327
1,386,014
COMPUTERS (0.43%)
palmOne /1/ /2/ 15,912 460,971
CONTAINERS-METAL & GLASS (1.85%)
Greif Brothers 26,887 1,117,155
Silgan Holdings 18,109 859,362
1,976,517
DATA PROCESSING & MANAGEMENT (0.57%)
Global Payments 11,171 611,724
DENTAL SUPPLIES & EQUIPMENT (0.81%)
Sybron Dental Specialties /1/ 26,559 865,027
DISTRIBUTION-WHOLESALE (1.42%)
United Stationers /1/ 12,491 555,850
Watsco 33,924 965,477
1,521,327
E-MARKETING-INFORMATION (1.20%)
Digital River /1/ 16,553 551,215
Digitas /1/ 81,141 730,269
1,281,484
ELECTRIC-INTEGRATED (0.64%)
Sierra Pacific Resources /1/ /2/ 70,988 681,485
ELECTRONIC COMPONENTS-SEMICONDUCTOR (1.84%)
Microsemi /1/ 71,380 1,109,245
Semtech /1/ 23,246 485,377
SiRF Technology Holdings /1/ 31,180 369,171
1,963,793
ELECTRONICS-MILITARY (1.08%)
Engineered Support Systems 23,988 1,152,384
ENGINES-INTERNAL COMBUSTION (0.62%)
Briggs & Stratton 9,232 662,950
ENTERPRISE SOFTWARE & SERVICE (0.69%)
MicroStrategy /1/ /2/ 12,319 738,894
ENTERTAINMENT SOFTWARE (0.58%)
Activision /1/ 42,861 620,627
FINANCE-CONSUMER LOANS (0.36%)
Collegiate Funding Services /1/ 30,810 380,504
FOOD-WHOLESALE & DISTRIBUTION (1.03%)
Nash Finch 35,783 1,104,263
FOOTWEAR & RELATED APPAREL (1.01%)
Wolverine World Wide 35,295 1,074,380
GAS-DISTRIBUTION (1.90%)
Energen 22,049 1,185,795
UGI 21,844 843,834
2,029,629
Shares
Held Value
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOME FURNISHINGS (0.56%)
$
Hooker Furniture 27,127 601,134
HUMAN RESOURCES (2.26%)
Heidrick & Struggles /1/ 39,660 1,135,664
Labor Ready /1/ 89,225 1,280,379
2,416,043
INSTRUMENTS-SCIENTIFIC (0.47%)
Dionex /1/ 8,934 500,304
INTERNET APPLICATION SOFTWARE (1.03%)
Motive /1/ 72,006 1,098,091
INTERNET SECURITY (0.79%)
RSA Security /1/ 41,222 843,402
INVESTMENT COMPANIES (1.29%)
Apollo Investment /1/ 101,365 1,378,564
INVESTMENT MANAGEMENT & ADVISORY SERVICES (2.10%)
Calamos Asset Management /1/ 115,300 2,248,350
MACHINERY TOOLS & RELATED PRODUCTS (0.76%)
Kennametal 17,464 812,600
MACHINERY-CONSTRUCTION & MINING (0.81%)
Terex /1/ 22,691 862,258
MACHINERY-GENERAL INDUSTRY (1.32%)
Gardner Denver /1/ 47,137 1,413,167
MEDICAL INFORMATION SYSTEM (0.75%)
Dendrite International /1/ 54,728 801,765
MEDICAL INSTRUMENTS (2.01%)
dj Orthopedics /1/ 57,380 978,329
Kensey Nash /1/ /2/ 41,059 1,174,287
2,152,616
MEDICAL LASER SYSTEMS (0.28%)
IntraLase /1/ 15,454 297,180
MEDICAL PRODUCTS (1.20%)
Cooper 5,458 383,971
INAMED /1/ 15,108 802,990
VNUS Medical Technologies /1/ 6,404 96,252
1,283,213
MEDICAL-BIOMEDICAL/GENE (2.01%)
Cell Genesys /1/ /2/ 61,577 403,945
deCODE genetics /1/ /2/ 68,236 477,652
Lexicon Genetics /1/ /2/ 75,536 491,740
Maxim Pharmaceuticals /1/ /2/ 62,146 155,365
Regeneron Pharmaceutical /1/ /2/ 85,189 619,324
2,148,026
MEDICAL-DRUGS (1.04%)
Array BioPharma /1/ /2/ 55,890 390,671
Santarus /1/ /2/ 72,883 715,711
1,106,382
MEDICAL-HMO (1.05%)
Sierra Health Services /1/ 23,618 1,127,051
Shares
Held Value
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
MEDICAL-OUTPATIENT & HOME MEDICAL CARE (1.42%)
$
Apria Healthcare Group /1/ 29,053 794,890
Select Medical 41,760 717,854
1,512,744
METAL PROCESSORS & FABRICATION (1.91%)
Commercial Metals 34,344 1,241,536
Metals USA /1/ 46,571 794,501
2,036,037
MISCELLANEOUS INVESTING (6.71%)
Brandywine Realty Trust 22,081 649,623
CRT Properties 59,942 1,328,315
Entertainment Properties Trust 21,105 842,089
Gramercy Capital /1/ 41,694 679,612
Newcastle Investment /2/ 48,014 1,469,708
PS Business Parks 21,092 926,361
Redwood Trust 21,135 1,271,482
7,167,190
MULTIMEDIA (0.54%)
Journal Communications 35,950 579,514
OIL COMPANY-EXPLORATION & PRODUCTION (1.95%)
Houston Exploration /1/ 20,617 1,208,156
KCS Energy /1/ 18,964 258,100
Meridian Resource /1/ 76,841 618,570
2,084,826
PRIVATE CORRECTIONS (0.60%)
GEO Group /1/ 31,989 640,100
PROPERTY & CASUALTY INSURANCE (2.48%)
Arch Capital Group /1/ 18,132 681,219
Infinity Property & Casualty 43,087 1,339,144
Stewart Information Services 14,871 630,828
2,651,191
RACETRACKS (0.96%)
Penn National Gaming /1/ 24,677 1,024,836
RADIO (0.41%)
Emmis Communications /1/ 23,562 440,609
RECREATIONAL VEHICLES (0.61%)
Thor Industries 23,270 647,139
REINSURANCE (1.37%)
Max Re Capital 32,330 610,067
PXRE Group 34,654 850,409
1,460,476
RENTAL-AUTO & EQUIPMENT (0.49%)
Aaron Rents 24,084 522,623
RESORTS & THEME PARKS (0.68%)
Vail Resorts /1/ 36,438 730,946
RESPIRATORY PRODUCTS (0.90%)
Respironics /1/ 18,814 961,207
RETAIL-APPAREL & SHOE (1.22%)
Genesco /1/ 23,798 609,229
Shares
Held Value
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
RETAIL-APPAREL & SHOE (CONTINUED)
$
Stein Mart /1/ 42,024 698,439
1,307,668
RETAIL-COMPUTER EQUIPMENT (0.49%)
Insight Enterprises /1/ 28,214 523,511
RETAIL-MUSIC STORE (0.73%)
Guitar Center /1/ 17,432 777,990
RETAIL-RESTAURANTS (1.15%)
McCormick & Schmick's Seafood Restaurants
/1/ 42,011 584,373
Ruby Tuesday 26,177 646,572
1,230,945
RETAIL-SPORTING GOODS (0.80%)
Big 5 Sporting Goods /1/ 33,777 857,598
SAVINGS & LOANS-THRIFTS (1.68%)
Hudson River Bancorp. 39,228 769,261
Independence Community Bank 27,254 1,025,568
1,794,829
SEISMIC DATA COLLECTION (1.03%)
Veritas DGC /1/ /2/ 52,363 1,104,859
SEMICONDUCTOR COMPONENT-INTEGRATED CIRCUITS (0.42%)
Micrel /1/ 39,838 447,381
SEMICONDUCTOR EQUIPMENT (1.04%)
Mykrolis /1/ 56,373 592,480
Varian Semiconductor Equipment Associates
/1/ 14,967 518,008
1,110,488
STEEL PIPE & TUBE (0.80%)
Maverick Tube /1/ 32,291 851,514
STEEL PRODUCERS (0.59%)
Schnitzer Steel Industries 22,212 627,489
TELECOMMUNICATION EQUIPMENT (1.00%)
Comtech Telecommunications /1/ /2/ 39,012 1,069,319
TELECOMMUNICATION EQUIPMENT-FIBER OPTICS (1.17%)
C-COR.net /1/ 166,437 1,251,606
THEATERS (0.77%)
Carmike Cinemas 22,951 821,646
THERAPEUTICS (1.87%)
Dyax /1/ 73,135 419,795
Eyetech Pharmaceuticals /1/ /2/ 15,902 674,881
NeoPharm /1/ /2/ 63,376 460,427
Onyx Pharmaceuticals /1/ /2/ 15,719 441,075
1,996,178
TRANSACTIONAL SOFTWARE (0.71%)
Transaction Systems Architects /1/ 46,015 754,416
TRANSPORT-SERVICES (1.46%)
Laidlaw International /1/ 43,683 728,195
Offshore Logistics /1/ 22,974 830,740
1,558,935
Shares
Held Value
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRANSPORT-TRUCK (0.59%)
$
USF 17,473 626,232
WIRE & CABLE PRODUCTS (0.60%)
Encore Wire /1/ 52,393 644,958
TOTAL COMMON STOCKS 105,489,255
Principal
Amount Value
- ------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (3.24%)
FINANCE-CONSUMER LOANS (3.24%)
Investment in Joint Trading Account;
Household Finance
$ $
1.84%; 11/01/04 3,463,869 3,463,869
TOTAL COMMERCIAL PAPER 3,463,869
Maturity
Value
Amount
- ---------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (9.55%)
Goldman Sachs; 1.75%; dated
10/29/04 maturing 11/01/04
(collateralized by U.S.
Treasuries; $10,295,400;
11/18/04 - 01/15/12) /5/ $10,208,489 $ 10,207,000
TOTAL REPURCHASE AGREEMENTS 10,207,000
------------
TOTAL PORTFOLIO INVESTMENTS (111.52%) 119,160,124
LIABILITIES, NET OF
CASH, RECEIVABLES,
AND OTHER ASSETS
(-11.52%) (12,312,034)
TOTAL NET ASSETS (100.00%) $106,848,090
---------------
/1 /Non-income producing security.
/2 /Security or a portion of the security was on loan at the end of the period.
/3 /Restricted Security - The fund held securities, which were purchased in
private placement transactions and may require registration, or an exemption
therefrom, in order to effect their sale in the ordinary course of business.
At the end of the period, restricted securities totaled $19,994 or 0.02% of
net assets.
/4 /Market value is determined in accordance with procedures established in good
faith by the Board of Directors. At the end of the period, the value of these
securities totaled $19,994 or 0.02% of net assets.
/5 /Security was purchased with the cash proceeds from securities loans.
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 10,932,247
Unrealized Depreciation (5,132,921)
------------
Net Unrealized Appreciation (Depreciation) 5,799,326
Cost for federal income tax purposes $113,360,798
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- ------------------------------------------------------------------------------
$
Financial 39,243,417 32.93%
Consumer, Non-cyclical 19,642,982 16.48
Industrial 19,484,340 16.35
Consumer, Cyclical 14,448,330 12.13
Technology 10,425,176 8.75
Communications 6,564,026 5.51
Energy 4,041,199 3.39
Utilities 2,711,114 2.28
Basic Materials 2,599,540 2.18
TOTAL $119,160,124 100.00%
---------------- -----------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
SCHEDULE OF INVESTMENTS
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
OCTOBER 31, 2004
Principal
Amount Value
- ----------------------------------------------------------------------------------------
TAX-EXEMPT BONDS (97.86%)
ALABAMA (1.14%)
Courtland, Alabama
International Paper
4.75%; 05/01/17 $2,000,000 $ 2,023,040
ARIZONA (1.54%)
Arizona State University
AMBAC
5.25%; 09/01/24 1,500,000 1,620,750
Arizona State University
FGIC
5.50%; 07/01/21 1,000,000 1,122,610
2,743,360
ARKANSAS (1.25%)
Arkansas
5.25%; 08/01/12 2,000,000 2,221,080
CALIFORNIA (7.97%)
California
5.25%; 02/01/17 2,190,000 2,414,212
5.25%; 11/01/25 2,000,000 2,122,220
5.50%; 04/01/28 2,000,000 2,161,400
California Department of Water
Resources
MBIA
5.25%; 05/01/09 1,500,000 1,667,295
California Educational Facilities
Authority
Santa Clara University
5.75%; 09/01/21 2,000,000 2,172,480
California Pollution Control Financing
Authority
Waste Management
3.13%; 01/01/22 1,750,000 1,750,560
San Diego Redevelopment Agency
XLCA
5.00%; 09/01/23 1,775,000 1,871,827
14,159,994
COLORADO (2.67%)
Fort Collins, Colorado Lease
Certificate
AMBAC
5.38%; 06/01/23 2,275,000 2,486,006
Platte River Power Authority
5.38%; 06/01/17 2,000,000 2,249,380
4,735,386
FLORIDA (8.66%)
Dade County, Florida
FGIC
5.25%; 10/01/11 1,040,000 1,142,232
Florida Municipal Power
AMBAC
5.50%; 10/01/16 2,930,000 3,325,784
Florida State Board of Education
5.00%; 06/01/10 2,000,000 2,214,120
5.00%; 07/01/14 2,000,000 2,238,240
Principal
Amount Value
- ----------------------------------------------------------------------------------------
TAX-EXEMPT BONDS (CONTINUED)
FLORIDA (CONTINUED)
Orange County, Florida
AMBAC
5.50%; 10/01/32 $3,000,000 $ 3,243,330
Orange County, Florida
MBIA
5.38%; 08/01/22 3,000,000 3,228,000
15,391,706
GEORGIA (1.86%)
Atlanta, Georgia
5.50%; 01/05/26 2,000,000 2,275,580
Richmond County, Georgia
ASU Jaguar Student Housing
5.00%; 02/01/20 1,000,000 1,028,280
3,303,860
ILLINOIS (7.90%)
Chicago Midway Airport
MBIA
5.50%; 01/01/11 1,500,000 1,608,060
Chicago, Illinois Gas Supply
Peoples Gas Light
4.75%; 03/01/30 2,000,000 2,074,280
Cook County, Illinois
5.25%; 11/15/28 2,000,000 2,124,580
Illinois
MBIA
5.25%; 04/01/08 2,000,000 2,191,000
Illinois Finance Authority
OSF Healthcare System
5.25%; 11/15/23 1,500,000 1,545,480
Illinois Health Facility
Advocate Health
5.25%; 08/15/08 320,000 356,045
6.00%; 07/01/17 2,700,000 2,989,629
7.00%; 02/15/09 230,000 254,014
7.00%; 02/15/18 720,000 900,735
14,043,823
INDIANA (7.27%)
Hendricks County, Indiana
5.50%; 07/15/20 2,500,000 2,799,175
Indiana Bond Bank
Water & Sewer
5.38%; 02/01/17 3,000,000 3,338,130
5.88%; 08/01/13 1,060,000 1,221,279
Indiana Health Facility
Clarion Health Partners
5.38%; 02/15/09 2,020,000 2,163,703
Indianapolis Public Improvement
MBIA
5.50%; 01/01/16 3,000,000 3,396,180
12,918,467
IOWA (2.43%)
Ankeny, Iowa
Community School District
3.00%; 07/01/08 1,190,000 1,188,322
Principal
Amount Value
- ----------------------------------------------------------------------------------------
TAX-EXEMPT BONDS (CONTINUED)
IOWA (CONTINUED)
Chillicothe, Iowa
IES Utilities
3.60%; 11/01/23 $1,100,000 $ 1,102,156
Eddyville, Iowa
Cargill
5.63%; 12/01/13 1,000,000 1,020,380
Lansing, Iowa
Interstate Power
3.60%; 11/01/08 1,000,000 1,001,220
4,312,078
KANSAS (1.12%)
Burlington, Kansas
Kansas City Power & Light
2.38%; 10/01/17 2,000,000 1,996,300
KENTUCKY (2.33%)
Adair County, Kentucky
5.10%; 09/01/20 2,820,000 3,006,289
Kentucky Property & Buildings
Commission
FSA
5.38%; 02/01/18 1,000,000 1,141,380
4,147,669
MAINE (1.61%)
Jay, Maine
International Paper
6.20%; 09/01/19 1,000,000 1,079,690
Maine Governmental Facilities Authority
MBIA
5.38%; 10/01/17 1,600,000 1,785,040
2,864,730
MASSACHUSETTS (1.93%)
Massachusetts
5.50%; 03/01/12 3,000,000 3,420,000
MICHIGAN (4.02%)
Michigan State Building Authority
FSA
5.00%; 10/15/10 2,000,000 2,222,720
Michigan State Trunk Line
FSA
5.25%; 10/01/21 1,000,000 1,081,300
Michigan Strategic Fund
Detroit Edison
5.45%; 09/01/29 2,000,000 2,069,700
Walled Lake, Michigan
MBIA
5.25%; 05/01/22 1,625,000 1,769,560
7,143,280
MISSISSIPPI (1.28%)
Mississippi
5.50%; 09/01/10 2,000,000 2,274,280
Principal
Amount Value
- ----------------------------------------------------------------------------------------
TAX-EXEMPT BONDS (CONTINUED)
NEVADA (1.18%)
Nevada
5.25%; 09/15/27 $2,000,000 $ 2,104,420
NEW HAMPSHIRE (1.23%)
New Hampshire Health & Education
Facilities Authority
FSA
5.50%; 08/01/27 2,000,000 2,180,700
NEW JERSEY (0.62%)
New Jersey Economic Development
Authority
5.00%; 06/15/11 525,000 578,183
5.63%; 06/15/19 500,000 527,385
1,105,568
NEW YORK (7.16%)
City of New York
XLCA
6.25%; 08/01/08 750,000 809,385
6.25%; 04/15/17 185,000 204,275
New York State Dormitory Authority
AMBAC
6.13%; 07/01/12 2,000,000 2,329,180
New York State Dormitory Authority
FSA
5.00%; 08/15/25 500,000 520,800
New York State Dormitory Authority
MBIA
5.25%; 10/01/23 1,500,000 1,612,485
New York State Thruway Authority
5.40%; 01/01/11 1,500,000 1,627,815
Tobacco Settlement Financing Authority
5.25%; 06/01/21 2,200,000 2,373,272
5.50%; 06/01/14 2,000,000 2,183,220
United Nations Development
5.25%; 07/01/14 1,000,000 1,067,870
12,728,302
OKLAHOMA (3.56%)
Grand River Dam Authority
FSA
5.00%; 06/01/12 3,500,000 3,911,390
Tulsa Industrial Authority
St. John Medical Center
6.25%; 02/15/06 1,280,000 1,350,566
6.25%; 02/15/06 1,000,000 1,055,130
6,317,086
OREGON (0.65%)
Oregon State Housing & Community
Services Department
5.65%; 07/01/28 1,130,000 1,161,030
PENNSYLVANIA (1.95%)
Pennsylvania
FSA
5.50%; 05/01/17 3,000,000 3,460,830
Principal
Amount Value
- ----------------------------------------------------------------------------------------
TAX-EXEMPT BONDS (CONTINUED)
PUERTO RICO (1.20%)
Puerto Rico
5.25%; 07/01/22 $2,000,000 $ 2,137,500
RHODE ISLAND (0.64%)
Rhode Island
FGIC
5.50%; 08/01/11 1,000,000 1,144,690
SOUTH CAROLINA (3.81%)
South Carolina
5.75%; 01/01/13 3,000,000 3,404,220
South Carolina Public Service
FSA
5.38%; 01/01/16 3,000,000 3,355,920
6,760,140
TEXAS (12.17%)
Brazos River Authority
Houston Industries
5.13%; 05/01/19 2,000,000 2,154,260
Guadalupe-Blanco River Authority
E.I. Dupont De Nemours
6.35%; 07/01/22 2,500,000 2,571,425
Harris County, Texas
5.50%; 08/15/20 2,000,000 2,309,040
Lower Colorado River Authority
FSA
6.00%; 05/15/13 2,500,000 2,852,525
Lower Colorado River Authority
MBIA
5.38%; 05/15/20 3,000,000 3,319,590
Red River Authority
MBIA
6.00%; 06/01/20 1,000,000 1,080,860
San Antonio, Texas
FSA
5.50%; 05/15/17 2,090,000 2,360,592
Texas State Department Of Housing &
Community Affairs
5.70%; 01/01/33 2,780,000 2,852,086
University of Texas
5.25%; 07/01/17 1,905,000 2,121,141
21,621,519
UTAH (1.92%)
Utah
5.38%; 07/01/11 3,000,000 3,416,130
WASHINGTON (2.41%)
Seattle, Washington
5.00%; 07/01/33 2,000,000 2,043,640
Washington
5.50%; 01/01/11 2,000,000 2,230,700
4,274,340
WEST VIRGINIA (3.78%)
Braxton County, West Virginia
Weyerhaeuser
6.13%; 04/01/26 2,000,000 2,116,400
Principal
Amount Value
- ----------------------------------------------------------------------------------------
TAX-EXEMPT BONDS (CONTINUED)
WEST VIRGINIA (CONTINUED)
Marshall County, West Virginia
Ohio Power
5.90%; 04/01/22 $2,500,000 $ 2,508,775
Pleasants County, West Virginia
Potomac Edison
6.15%; 05/01/15 2,000,000 2,081,600
6,706,775
WISCONSIN (0.60%)
Wisconsin Health & Educational
Facilities
Franciscan Skemp Medical Center
6.13%; 11/15/15 1,000,000 1,056,720
TOTAL TAX-EXEMPT BONDS 173,874,803
Principal Amount
Value
- ----------------------------------------------------------------------------------------
OTHER (1.02%)
Merrill Lynch Institutional Tax-Exempt
Munifund $ 700,000 $ 700,000
Blackrock Institutional Fund 1,100,000 1,100,000
TOTAL OTHER 1,800,000
------------
TOTAL PORTFOLIO INVESTMENTS (98.88%) 175,674,803
CASH, RECEIVABLES AND OTHER ASSETS, NET OF LIABILITIES
(1.12%) 1,997,512
TOTAL NET ASSETS (100.00%) $177,672,315
--------------
UNREALIZED APPRECIATION (DEPRECIATION)
The net federal income tax unrealized appreciation (depreciation) and federal
tax cost of investments held by the fund as of the period end were as follows:
Unrealized Appreciation $ 7,775,519
Unrealized Depreciation (105,849)
------------
Net Unrealized Appreciation (Depreciation) 7,669,670
Cost for federal income tax purposes $168,005,133
INVESTMENTS BY SECTOR (UNAUDITED)
Sector Value Percentage of
Total Value
- -------------------------------------------------------------------------------
$
Insured 80,897,946 46.05%
Revenue 49,605,525 28.24
General Obligation 30,308,842 17.25
Prerefunded 13,062,490 7.44
Other 1,800,000 1.02
TOTAL $175,674,803 100.00%
----------------- ------------
Percentages are adjusted to reflect the impact of currency contracts,
futures contracts, and swap agreements, if applicable.
See accompanying notes.
186
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL BALANCED FUND, INC.
- -----------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $11.89 $10.63 $12.17 $14.50 $15.13
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.18 0.16 0.20/(d)/ 0.29 0.32
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.71 1.26 (1.51)/(d)/ (2.13) 0.02
---- ---- ----- ----- ----
Total From Investment
Operations 0.89 1.42 (1.31) (1.84) 0.34
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.19) (0.16) (0.23) (0.28) (0.33)
Distributions from
Realized Gains...... -- -- -- (0.21) (0.64)
---- ----- -----
Total Dividends and
Distributions (0.19) (0.16) (0.23) (0.49) (0.97)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $12.59 $11.89 $10.63 $12.17 $14.50
====== ====== ====== ====== ======
Total Return /(b)/ ... 7.50% 13.52% (10.94)% (12.91)% 2.40%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $85,882 $82,198 $77,483 $80,547 $94,763
Ratio of Expenses to
Average Net Assets.. 1.26% 1.46% 1.42% 1.35% 1.32%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.26% 1.47% 1.43% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 1.46% 1.42% 1.71%/(d)/ 2.14% 2.26%
Portfolio Turnover
Rate................ 144.6% 117.0% 88.1% 107.5% 54.4%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL BALANCED FUND, INC.
- -----------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $11.84 $10.59 $12.12 $14.43 $15.06
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.08 0.07 0.12/(e)/ 0.19 0.21
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.69 1.26 (1.51)/(e)/ (2.11) 0.02
---- ---- ----- ----- ----
Total From Investment
Operations 0.77 1.33 (1.39) (1.92) 0.23
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.10) (0.08) (0.14) (0.18) (0.22)
Distributions from
Realized Gains...... -- -- -- (0.21) (0.64)
---- ----- -----
Total Dividends and
Distributions (0.10) (0.08) (0.14) (0.39) (0.86)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $12.51 $11.84 $10.59 $12.12 $14.43
====== ====== ====== ====== ======
Total Return /(b)/ ... 6.53% 12.63% (11.55)% (13.53)% 1.61%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $15,126 $15,405 $14,658 $17,900 $20,680
Ratio of Expenses to
Average Net Assets.. 2.07% 2.25% 2.12% 2.05% 2.12%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.07% 2.25% 2.13% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.66% 0.64% 1.02%/(e)/ 1.44% 1.46%
Portfolio Turnover
Rate................ 144.6% 117.0% 88.1% 107.5% 54.4%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly.
/(d) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. The effect of this change
for the year ended October 31, 2002 for Class A was to decrease net investment
income by $.01 per share, increase net realized and unrealized gain (loss) on
investments by $.01 per share, and decrease the ratio of net investment income
to average net assets by .09%. Prior periods have not been restated to reflect
this change in presentation.
/(e) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. The effect of this change
for the year ended October 31, 2002 for Class B was to decrease net investment
income by $.01 per share, increase net realized and unrealized gain (loss) on
investments by $.01 per share, and decrease the ratio of net investment income
to average net assets by .08%. Prior periods have not been restated to reflect
this change in presentation.
See accompanying notes.
187
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL BOND FUND, INC.
- -------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $10.99 $10.97 $11.11 $10.25 $10.66
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.43 0.45 0.51/(c)/ 0.61 0.72
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.18 0.06 (0.11)/(c)/ 0.88 (0.40)
---- ---- ----- ---- -----
Total From Investment
Operations 0.61 0.51 0.40 1.49 0.32
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.45) (0.49) (0.54) (0.63) (0.73)
----
Total Dividends and
Distributions (0.45) (0.49) (0.54) (0.63) (0.73)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $11.15 $10.99 $10.97 $11.11 $10.25
====== ====== ====== ====== ======
Total Return /(b)/ ... 5.71% 4.68% 3.83% 14.96% 3.23%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $178,911 $184,971 $186,723 $143,818 $124,630
Ratio of Expenses to
Average Net Assets.. 0.94% 1.03% 1.06% 1.05% 1.06%
Ratio of Net
Investment Income to
Average Net Assets.. 3.91% 4.00% 4.73%/(c)/ 5.67% 6.96%
Portfolio Turnover
Rate................ 154.9% 79.7% 78.9% 152.0% 60.7%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL BOND FUND, INC.
- -------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $10.98 $10.97 $11.11 $10.24 $10.65
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.36 0.35 0.43/(d)/ 0.54 0.64
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.18 0.07 (0.11)/(d)/ 0.88 (0.39)
---- ---- ----- ---- -----
Total From Investment
Operations 0.54 0.42 0.32 1.42 0.25
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.37) (0.41) (0.46) (0.55) (0.66)
----
Total Dividends and
Distributions (0.37) (0.41) (0.46) (0.55) (0.66)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $11.15 $10.98 $10.97 $11.11 $10.24
====== ====== ====== ====== ======
Total Return /(b)/ ... 4.98% 3.86% 3.07% 14.23% 2.45%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $31,326 $33,883 $34,190 $26,348 $22,577
Ratio of Expenses to
Average Net Assets.. 1.60% 1.84% 1.83% 1.68% 1.85%
Ratio of Net
Investment Income to
Average Net Assets.. 3.25% 3.20% 3.95%/(d)/ 5.04% 6.16%
Portfolio Turnover
Rate................ 154.9% 79.7% 78.9% 152.0% 60.7%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. The effect of this change
for the year ended October 31, 2002 for Class A was to decrease net investment
income by $.03 per share, increase net realized and unrealized gain (loss) on
investments by $.03 per share, and decrease the ratio of net investment income
to average net assets by .30%. Prior periods have not been restated to reflect
this change in presentation.
/(d) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. The effect of this change
for the year ended October 31, 2002 for Class B was to decrease net investment
income by $.03 per share, increase net realized and unrealized gain (loss) on
investments by $.03 per share, and decrease the ratio of net investment income
to average net assets by .30%. Prior periods have not been restated to reflect
this change in presentation.
See accompanying notes.
188
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL CAPITAL VALUE FUND, INC.
- ----------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $21.77 $18.48 $20.61 $25.04 $29.58
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.24 0.21 0.22 0.20 0.34
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.84 3.30 (2.16) (3.40) (2.10)
---- ---- ----- ----- -----
Total From Investment
Operations 2.08 3.51 (1.94) (3.20) (1.76)
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.24) (0.22) (0.19) (0.30) (0.25)
Distributions from
Realized Gains...... -- -- -- (0.93) (2.53)
---- ----- -----
Total Dividends and
Distributions (0.24) (0.22) (0.19) (1.23) (2.78)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $23.61 $21.77 $18.48 $20.61 $25.04
====== ====== ====== ====== ======
Total Return /(b)/ ... 9.61% 19.23% (9.52)% (13.31)% (6.20)%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $311,583 $326,089 $333,016 $386,827 $452,251
Ratio of Expenses to
Average Net Assets.. 0.94% 1.00% 1.01% 0.95% 0.94%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 0.95% 1.01% 1.01% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 1.04% 1.05% 1.00% 0.90% 1.38%
Portfolio Turnover
Rate................ 183.8% 132.1% 128.8% 126.2% 107.8%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL CAPITAL VALUE FUND, INC.
- ----------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $21.51 $18.30 $20.38 $24.76 $29.41
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.08 0.02 0.06 0.03 0.11
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.82 3.28 (2.12) (3.37) (2.09)
---- ---- ----- ----- -----
Total From Investment
Operations 1.90 3.30 (2.06) (3.34) (1.98)
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.04) (0.09) (0.02) (0.11) (0.14)
Distributions from
Realized Gains...... -- -- -- (0.93) (2.53)
---- ----- -----
Total Dividends and
Distributions (0.04) (0.09) (0.02) (1.04) (2.67)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $23.37 $21.51 $18.30 $20.38 $24.76
====== ====== ====== ====== ======
Total Return /(b)/ ... 8.83% 18.09% (10.13)% (13.96)% (7.03)%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $27,213 $29,412 $27,235 $32,975 $39,017
Ratio of Expenses to
Average Net Assets.. 1.63% 1.97% 1.72% 1.71% 1.82%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 1.64% 1.98% 1.72% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.35% 0.08% 0.29% 0.15% 0.51%
Portfolio Turnover
Rate................ 183.8% 132.1% 128.8% 126.2% 107.8%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The voluntary expense limit began on March 1, 2003.
/(d) /Expense ratio without fees paid indirectly.
See accompanying notes.
189
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL CASH MANAGEMENT FUND, INC.
- ------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.006 0.006 0.013 0.043 0.056
----- ----- ----- ----- -----
Total From Investment
Operations 0.006 0.006 0.013 0.043 0.056
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.006) (0.006) (0.013) (0.043) (0.056)
------ ------ ------ ------ ------
Total Dividends and
Distributions (0.006) (0.006) (0.013) (0.043) (0.056)
------ ------ ------ ------ ------
Net Asset Value, End
of Period............ $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return /(b)/ ... 0.57% 0.59% 1.36% 4.44% 5.71%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $317,340 $346,292 $397,386 $412,409 $390,154
Ratio of Expenses to
Average Net Assets.. 0.68% 0.75% 0.72% 0.70% 0.70%
Ratio of Net
Investment Income to
Average Net Assets.. 0.56% 0.59% 1.35% 4.33% 5.54%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL CASH MANAGEMENT FUND, INC.
- ------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.004 0.003 0.009 0.037 0.049
----- ----- ----- ----- -----
Total From Investment
Operations 0.004 0.003 0.009 0.037 0.049
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.004) (0.003) (0.009) (0.037) (0.049)
------ ------ ------ ------ ------
Total Dividends and
Distributions (0.004) (0.003) (0.009) (0.037) (0.049)
------ ------ ------ ------ ------
Net Asset Value, End
of Period............ $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total Return /(b)/ ... 0.39% 0.25% 0.88% 3.71% 5.01%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $5,071 $7,695 $8,715 $6,655 $5,318
Ratio of Expenses to
Average Net Assets.. 0.89% 1.09% 1.27% 1.40% 1.33%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 0.96% 1.10% -- -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.35% 0.25% 0.87% 3.59% 4.87%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without the Manager's voluntary expense limit.
See accompanying notes.
190
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL EQUITY INCOME FUND, INC.
- ----------------------------------
CLASS A SHARES /(A)/
- --------------------
Net Asset Value,
Beginning of Period.. $9.38 $8.57 $10.69 $18.40 $17.86
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(b)/ .............. 0.35 0.36 0.31 0.20 0.27
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.84 0.81 (2.14) (4.05) 1.68
---- ---- ----- ----- ----
Total From Investment
Operations 1.19 1.17 (1.83) (3.85) 1.95
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.35) (0.36) (0.29) (0.20) (0.27)
Distributions from
Realized Gains...... -- -- -- (3.66) (1.14)
---- ----- -----
Total Dividends and
Distributions (0.35) (0.36) (0.29) (3.86) (1.41)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $10.22 $9.38 $8.57 $10.69 $18.40
====== ===== ===== ====== ======
Total Return /(c)/ ... 12.95% 13.86% (17.30)% (25.74)% 12.09%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $69,482 $60,703 $57,881 $72,581 $101,352
Ratio of Expenses to
Average Net Assets.. 1.27% 1.46% 1.48% 1.31% 1.23%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 1.27% -- -- -- --
Ratio of Net
Investment Income to
Average Net Assets.. 3.56% 4.02% 3.15% 1.51% 1.59%
Portfolio Turnover
Rate................ 134.7% 19.1% 79.4% 106.2% 150.8%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL EQUITY INCOME FUND, INC.
- ----------------------------------
CLASS B SHARES /(A)/
- --------------------
Net Asset Value,
Beginning of Period.. $9.34 $8.53 $10.64 $18.37 $17.83
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(b)/ .............. 0.26 0.28 0.21 0.10 0.14
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.85 0.80 (2.11) (4.07) 1.69
---- ---- ----- ----- ----
Total From Investment
Operations 1.11 1.08 (1.90) (3.97) 1.83
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.27) (0.27) (0.21) (0.10) (0.15)
Distributions from
Realized Gains...... -- -- -- (3.66) (1.14)
---- ----- -----
Total Dividends and
Distributions (0.27) (0.27) (0.21) (3.76) (1.29)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $10.18 $9.34 $8.53 $10.64 $18.37
====== ===== ===== ====== ======
Total Return /(c)/ ... 12.06% 12.85% (18.02)% (26.41)% 11.30%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $11,415 $9,775 $9,982 $15,152 $19,624
Ratio of Expenses to
Average Net Assets.. 2.10% 2.34% 2.37% 2.15% 2.00%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 2.10% -- -- -- --
Ratio of Net
Investment Income to
Average Net Assets.. 2.72% 3.14% 2.19% 0.66% 0.82%
Portfolio Turnover
Rate................ 134.7% 19.1% 79.4% 106.2% 150.8%
/(a) /Effective March 1, 2004, the Principal Utilities Fund, Inc. changed its
name to Principal Equity Income Fund, Inc.
/(b) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(c) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(d) /Expense ratio without the Manager's voluntary expense limit. The expense
limit began on March 1, 2004.
See accompanying notes.
191
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL GOVERNMENT SECURITIES
- -------------------------------
INCOME FUND, INC.
- -----------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $11.41 $11.74 $11.77 $11.18 $11.10
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.43 0.45 0.60 0.65 0.68
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.01 (0.26) 0.01 0.61 0.07
---- ----- ---- ---- ----
Total From Investment
Operations 0.44 0.19 0.61 1.26 0.75
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.48) (0.52) (0.64) (0.67) (0.67)
----- ----- ----- ----- -----
Total Dividends and
Distributions (0.48) (0.52) (0.64) (0.67) (0.67)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $11.37 $11.41 $11.74 $11.77 $11.18
====== ====== ====== ====== ======
Total Return /(b)/ ... 3.93% 1.59% 5.41% 11.64% 7.09%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $274,876 $304,191 $310,506 $243,876 $213,114
Ratio of Expenses to
Average Net Assets.. 0.82% 0.93% 0.90% 0.90% 0.94%
Ratio of Net
Investment Income to
Average Net Assets.. 3.79% 3.82% 5.11% 5.68% 6.14%
Portfolio Turnover
Rate................ 72.7% 181.1% 36.5% 51.9% 6.9%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL GOVERNMENT SECURITIES
- -------------------------------
INCOME FUND, INC.
- -----------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $11.35 $11.67 $11.71 $11.13 $11.05
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.34 0.35 0.52 0.58 0.58
Net Realized and
Unrealized Gain
(Loss) on
Investments......... -- (0.24) (0.01) 0.59 0.09
-- ----- ----- ---- ----
Total From Investment
Operations 0.34 0.11 0.51 1.17 0.67
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.39) (0.43) (0.55) (0.59) (0.59)
----- ----- ----- ----- -----
Total Dividends and
Distributions (0.39) (0.43) (0.55) (0.59) (0.59)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $11.30 $11.35 $11.67 $11.71 $11.13
====== ====== ====== ====== ======
Total Return /(b)/ ... 3.07% 0.91% 4.54% 10.82% 6.32%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $53,901 $62,573 $52,839 $36,303 $27,395
Ratio of Expenses to
Average Net Assets.. 1.60% 1.70% 1.71% 1.59% 1.75%
Ratio of Net
Investment Income to
Average Net Assets.. 3.01% 3.06% 4.30% 4.98% 5.33%
Portfolio Turnover
Rate................ 72.7% 181.1% 36.5% 51.9% 6.9%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
See accompanying notes.
192
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL GROWTH FUND, INC.
- ---------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $25.44 $22.10 $27.06 $71.22 $65.57
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.08) (0.09) (0.18) (0.30) (0.37)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.95 3.43 (4.78) (21.79) 8.43
---- ---- ----- ------ ----
Total From Investment
Operations 0.87 3.34 (4.96) (22.09) 8.06
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- -- (22.07) (2.41)
---- ------ -----
Total Dividends and
Distributions -- -- -- (22.07) (2.41)
---- ------ -----
Net Asset Value, End
of Period............ $26.31 $25.44 $22.10 $27.06 $71.22
====== ====== ====== ====== ======
Total Return /(b)/ ... 3.42% 15.11% (18.33)% (41.87)% 12.64%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $252,694 $263,119 $243,504 $291,541 $525,175
Ratio of Expenses to
Average Net Assets.. 1.15% 1.37% 1.41% 1.30% 1.08%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.15% 1.37% -- -- --
Ratio of Net
Investment Income to
Average Net Assets.. (0.30)% (0.42)% (0.66)% (0.71)% (0.52)%
Portfolio Turnover
Rate................ 52.7% 46.6%/(d)/ 22.4% 33.4% 121.5%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL GROWTH FUND, INC.
- ---------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $24.49 $21.45 $26.43 $70.41 $65.33
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.28) (0.28) (0.41) (0.24) (0.89)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.91 3.32 (4.57) (21.67) 8.38
---- ---- ----- ------ ----
Total From Investment
Operations 0.63 3.04 (4.98) (21.91) 7.49
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- -- (22.07) (2.41)
---- ------ -----
Total Dividends and
Distributions -- -- -- (22.07) (2.41)
---- ------ -----
Net Asset Value, End
of Period............ $25.12 $24.49 $21.45 $26.43 $70.41
====== ====== ====== ====== ======
Total Return /(b)/ ... 2.57% 14.17% (18.84)% (42.21)% 11.79%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $40,469 $47,163 $48,214 $64,111 $110,001
Ratio of Expenses to
Average Net Assets.. 1.95% 2.22% 2.05% 1.88% 1.85%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.96% 2.22% -- -- --
Ratio of Net
Investment Income to
Average Net Assets.. (1.11)% (1.27)% (1.30)% (1.29)% (1.30)%
Portfolio Turnover
Rate................ 52.7% 46.6%/(d)/ 22.4% 33.4% 121.5%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly.
/(d) /Portfolio turnover rate excludes portfolio realignment of approximately
$7,623,000 from the acquisition of Principal Partners LargeCap Growth Fund,
Inc.
See accompanying notes.
193
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL INTERNATIONAL EMERGING
- --------------------------------
MARKETS FUND, INC.
- ------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $10.16 $6.77 $6.44 $8.75 $8.56
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.03 0.01 (0.05) (0.03) (0.10)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.72 3.38 0.38 (2.22) 0.31
---- ---- ---- ----- ----
Total From Investment
Operations 1.75 3.39 0.33 (2.25) 0.21
Less Dividends and
Distributions:
Dividends from Net
Investment Income... -- -- -- -- (0.02)
Distributions from
Realized Gains...... -- -- -- (0.06) --
---- -----
Total Dividends and
Distributions -- -- -- (0.06) (0.02)
---- ----- -----
Net Asset Value, End
of Period............ $11.91 $10.16 $6.77 $6.44 $8.75
====== ====== ===== ===== =====
Total Return /(b)/ ... 17.22% 50.07% 5.12% (25.85)% 2.36%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $37,804 $26,909 $18,029 $15,335 $17,890
Ratio of Expenses to
Average Net Assets.. 2.32% 2.57% 2.48% 2.50% 2.49%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.34% 2.70% 2.77% 2.71% 2.59%
Ratio of Net
Investment Income to
Average Net Assets.. 0.29% 0.12% (0.36)% (0.06)% (1.05)%
Portfolio Turnover
Rate................ 147.5% 117.3% 165.4% 120.5% 112.9%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL INTERNATIONAL EMERGING
- --------------------------------
MARKETS FUND, INC.
- ------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $9.76 $6.56 $6.28 $8.60 $8.47
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.03) (0.05) (0.06) (0.05) (0.16)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.63 3.25 0.34 (2.21) 0.29
---- ---- ---- ----- ----
Total From Investment
Operations 1.60 3.20 0.28 (2.26) 0.13
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- -- (0.06) --
---- -----
Total Dividends and
Distributions -- -- -- (0.06) --
---- -----
Net Asset Value, End
of Period............ $11.36 $9.76 $6.56 $6.28 $8.60
====== ===== ===== ===== =====
Total Return /(b)/ ... 16.39% 48.78% 4.46% (26.42)% 1.53%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $6,148 $7,710 $5,241 $4,728 $6,198
Ratio of Expenses to
Average Net Assets.. 2.96% 3.29% 3.23% 3.25% 3.22%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.98% 3.42% 3.50% 3.39% 3.22%
Ratio of Net
Investment Income to
Average Net Assets.. (0.31)% (0.61)% (1.13)% (0.84)% (1.78)%
Portfolio Turnover
Rate................ 147.5% 117.3% 165.4% 120.5% 112.9%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit began on the first day of the period ended
October 31, 2000. Expense limits were increased on March 1, 2003 and ceased
on March 1, 2004.
See accompanying notes.
194
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL INTERNATIONAL FUND, INC.
- ----------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $6.20 $5.05 $5.75 $8.85 $10.04
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.05 0.04 0.02 0.02 0.16
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.98 1.11 (0.71) (2.34) 0.20
---- ---- ----- ----- ----
Total From Investment
Operations 1.03 1.15 (0.69) (2.32) 0.36
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.05) -- (0.01) (0.05) (0.23)
Distributions from
Realized Gains...... -- -- -- (0.73) (1.32)
---- ----- -----
Total Dividends and
Distributions (0.05) -- (0.01) (0.78) (1.55)
---- ----- ----- ----- -----
Net Asset Value, End
of Period............ $7.18 $6.20 $5.05 $5.75 $8.85
===== ===== ===== ===== =====
Total Return /(b)/ ... 16.73% 22.81% (11.94)% (28.64)% 3.04%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $212,752 $200,005 $197,946 $224,177 $325,369
Ratio of Expenses to
Average Net Assets.. 1.41% 1.55% 1.57% 1.42% 1.27%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.42% 1.55% 1.57% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.81% 0.84% 0.32% 0.27% 1.76%
Portfolio Turnover
Rate................ 163.8% 100.8%/(e)/ 73.5% 93.9% 92.7%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL INTERNATIONAL FUND, INC.
- ----------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $6.05 $4.98 $5.71 $8.78 $9.96
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.02 (0.01) (0.03) (0.03) 0.11
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.97 1.08 (0.70) (2.31) 0.20
---- ---- ----- ----- ----
Total From Investment
Operations 0.99 1.07 (0.73) (2.34) 0.31
Less Dividends and
Distributions:
Dividends from Net
Investment Income... -- -- -- -- (0.17)
Distributions from
Realized Gains...... -- -- -- (0.73) (1.32)
---- ----- -----
Total Dividends and
Distributions -- -- -- (0.73) (1.49)
---- ----- -----
Net Asset Value, End
of Period............ $7.04 $6.05 $4.98 $5.71 $8.78
===== ===== ===== ===== =====
Total Return /(b)/ ... 16.36% 21.49% (12.78)% (28.97)% 2.43%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $26,782 $28,498 $28,607 $33,277 $48,692
Ratio of Expenses to
Average Net Assets.. 1.91% 2.47% 2.39% 2.08% 1.88%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 1.92% 2.47% 2.40% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.29% (0.13)% (0.50)% (0.41)% 1.13%
Portfolio Turnover
Rate................ 163.8% 100.8%/(e)/ 73.5% 93.9% 92.7%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The voluntary expense limit began on March 1, 2003.
/(d) /Expense ratio without fees paid indirectly.
/(e) /Portfolio turnover rate excludes portfolio realignment of approximately
$4,997,000 from the acquisition of Principal European Equity Fund, Inc. and
Principal Pacific Basin Fund, Inc.
See accompanying notes.
195
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
- -------------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $11.84 $8.39 $9.49 $17.00 $15.32
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. -- (0.02) (0.05) (0.23) (0.32)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 3.06 3.47 (1.05) (4.62) 3.51
---- ---- ----- ----- ----
Total From Investment
Operations 3.06 3.45 (1.10) (4.85) 3.19
Less Dividends and
Distributions:
Dividends from Net
Investment Income... -- (0.01) -- -- --
Distributions from
Realized Gains...... -- -- -- (2.66) (1.51)
---- ----- -----
Total Dividends and
Distributions -- (0.01) -- (2.66) (1.51)
---- ----- ----- -----
Redemption Fees /(a)/ -- 0.01 -- -- --
---- ----
Net Asset Value, End
of Period............ $14.90 $11.84 $8.39 $9.49 $17.00
====== ====== ===== ===== ======
Total Return /(b)/ ... 25.84% 41.22% (11.59)% (33.02)% 21.21%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $47,717 $35,588 $26,821 $28,977 $36,322
Ratio of Expenses to
Average Net Assets.. 2.07% 2.62% 2.49% 2.74% 2.46%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.13% 2.63% 2.49% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.02% (0.22)% (0.35)% (1.08)% (1.41)%
Portfolio Turnover
Rate................ 134.0% 144.5% 80.3% 151.6% 329.8%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL INTERNATIONAL SMALLCAP FUND, INC.
- -------------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $11.31 $8.08 $9.23 $16.72 $15.18
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.10) (0.09) (0.13) (0.05) (0.41)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 2.92 3.32 (1.02) (4.78) 3.46
---- ---- ----- ----- ----
Total From Investment
Operations 2.82 3.23 (1.15) (4.83) 3.05
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- -- (2.66) (1.51)
---- ----- -----
Total Dividends and
Distributions -- -- -- (2.66) (1.51)
---- ----- -----
Net Asset Value, End
of Period............ $14.13 $11.31 $8.08 $9.23 $16.72
====== ====== ===== ===== ======
Total Return /(b)/ ... 24.93% 39.98% (12.46)% (33.52)% 20.43%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $13,358 $10,251 $7,536 $8,641 $12,539
Ratio of Expenses to
Average Net Assets.. 2.83% 3.44% 3.40% 3.46% 3.04%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.91% 3.46% 3.41% -- --
Ratio of Net
Investment Income to
Average Net Assets.. (0.74)% (1.05)% (1.27)% (1.83)% (1.99)%
Portfolio Turnover
Rate................ 134.0% 144.5% 80.3% 151.6% 329.8%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit began on March 1, 2004.
See accompanying notes.
196
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000/(D)/
---- ---- ---- ---- ----
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
- -----------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $7.80 $6.57 $7.85 $10.59 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.06 0.06 0.05 0.05 0.03
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.59 1.22 (1.29) (2.74) 0.56
---- ---- ----- ----- ----
Total From Investment
Operations 0.65 1.28 (1.24) (2.69) 0.59
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.06) (0.05) (0.04) (0.05) --
---- ----- ----- ----- -----
Total Dividends and
Distributions (0.06) (0.05) (0.04) (0.05) --
---- ----- ----- ----- -----
Net Asset Value, End
of Period............ $8.39 $7.80 $6.57 $7.85 $10.59
===== ===== ===== ===== ======
Total Return /(b)/ ... 8.37% 19.62% (15.92)% (25.46)% 4.96%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $53,384 $41,913 $33,538 $15,886 $9,855
Ratio of Expenses to
Average Net Assets.. 0.90% 0.90% 0.90% 0.90% 0.79%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.01% 1.25% 1.20% 1.44% 1.82%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. 0.78% 0.89% 0.65% 0.59% 0.76%/(f)/
Portfolio Turnover
Rate................ 32.3% 20.1% 19.3% 39.3% 189.7%/(f)/
2004 2003 2002 2001 2000/(D)/
---- ---- ---- ---- ----
PRINCIPAL LARGECAP STOCK INDEX FUND, INC.
- -----------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $7.80 $6.57 $7.84 $10.56 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.04 0.04 0.01 0.01 0.02
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.57 1.22 (1.28) (2.72) 0.54
---- ---- ----- ----- ----
Total From Investment
Operations 0.61 1.26 (1.27) (2.71) 0.56
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.03) (0.03) -- (0.01) --
----- ----- ----- -----
Total Dividends and
Distributions (0.03) (0.03) -- (0.01) --
----- ----- ----- -----
Net Asset Value, End
of Period............ $8.38 $7.80 $6.57 $7.84 $10.56
===== ===== ===== ===== ======
Total Return /(b)/ ... 7.88% 19.20% (16.18)% (25.65)% 4.66%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $12,759 $9,474 $5,684 $4,731 $2,838
Ratio of Expenses to
Average Net Assets.. 1.25% 1.25% 1.25% 1.25% 1.14%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.42% 1.71% 1.74% 1.87% 2.44%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. 0.43% 0.53% 0.33% 0.23% 0.45%/(f)/
Portfolio Turnover
Rate................ 32.3% 20.1% 19.3% 39.3% 189.7%/(f)/
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without the Manager's voluntary expense limit. The expense
limit began on the first day of the period ended October 31, 2000. The expense
limits for each class were increased on November 1, 2000.
/(d) /Period from March 1, 2000, date shares first offered, through October 31,
2000.
/(e) /Total return amounts have not been annualized.
/(f) /Computed on an annualized basis.
See accompanying notes.
197
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL LIMITED TERM BOND FUND, INC.
- --------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $9.74 $9.86 $9.98 $9.50 $9.54
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.26 0.29 0.43/(d)/ 0.56 0.59
Net Realized and
Unrealized Gain
(Loss) on
Investments......... (0.09) 0.01 (0.08)/(d)/ 0.49 (0.05)
----- ---- ----- ---- -----
Total From Investment
Operations 0.17 0.30 0.35 1.05 0.54
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.41) (0.42) (0.47) (0.57) (0.58)
----- ----- ----- ----- -----
Total Dividends and
Distributions (0.41) (0.42) (0.47) (0.57) (0.58)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $9.50 $9.74 $9.86 $9.98 $9.50
===== ===== ===== ===== =====
Total Return /(b)/ ... 1.77% 3.04% 3.70% 11.36% 5.94%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $122,451 $96,568 $74,719 $37,942 $25,183
Ratio of Expenses to
Average Net Assets.. 0.86% 0.93% 0.94% 1.01% 0.99%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... -- -- -- -- 1.20%
Ratio of Net
Investment Income to
Average Net Assets.. 2.71% 3.02% 4.07%/(d)/ 5.69% 6.16%
Portfolio Turnover
Rate................ 42.0% 26.2% 97.6% 65.7% 31.5%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL LIMITED TERM BOND FUND, INC.
- --------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $9.88 $10.00 $10.11 $9.60 $9.60
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.23 0.26 0.37/(e)/ 0.49 0.55
Net Realized and
Unrealized Gain
(Loss) on
Investments......... (0.09) (0.01) (0.06)/(e)/ 0.53 (0.02)
----- ----- ----- ---- -----
Total From Investment
Operations 0.14 0.25 0.31 1.02 0.53
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.37) (0.37) (0.42) (0.51) (0.53)
----- ----- ----- ----- -----
Total Dividends and
Distributions (0.37) (0.37) (0.42) (0.51) (0.53)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $9.65 $9.88 $10.00 $10.11 $9.60
===== ===== ====== ====== =====
Total Return /(b)/ ... 1.41% 2.54% 3.25% 10.84% 5.69%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $17,514 $17,779 $13,387 $6,970 $3,291
Ratio of Expenses to
Average Net Assets.. 1.22% 1.35% 1.39% 1.50% 1.34%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... -- -- -- -- 1.93%
Ratio of Net
Investment Income to
Average Net Assets.. 2.36% 2.60% 3.61%/(e)/ 5.17% 5.81%
Portfolio Turnover
Rate................ 42.0% 26.2% 97.6% 65.7% 31.5%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without the Manager's voluntary expense limit. The expense
limit ceased on November 1, 2000.
/(d) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. The effect of this change
for the year ended October 31, 2002 for Class A was to decrease net investment
income by $.07 per share, increase net realized and unrealized gain (loss) on
investments by $.07 per share, and decrease the ratio of net investment income
to average net assets by 1.81%. Prior periods have not been restated to
reflect this change in presentation.
/(e) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. The effect of this change
for the year ended October 31, 2002 for Class B was to decrease net investment
income by $.07 per share, increase net realized and unrealized gain (loss) on
investments by $.07 per share, and decrease the ratio of net investment income
to average net assets by 1.86%. Prior periods have not been restated to
reflect this change in presentation.
See accompanying notes.
198
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL MIDCAP FUND, INC.
- ---------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $39.20 $31.01 $33.08 $52.01 $42.12
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.32 0.09 0.08 (0.02) (0.16)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 5.40 8.20 (1.09) (3.75) 12.08
---- ---- ----- ----- -----
Total From Investment
Operations 5.72 8.29 (1.01) (3.77) 11.92
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.18) (0.10) (0.07) -- --
Distributions from
Realized Gains...... (1.87) -- (0.99) (15.16) (2.03)
---- ----- ----- ------ -----
Total Dividends and
Distributions (2.05) (0.10) (1.06) (15.16) (2.03)
----- ----- ----- ------ -----
Net Asset Value, End
of Period............ $42.87 $39.20 $31.01 $33.08 $52.01
====== ====== ====== ====== ======
Total Return /(b)/ ... 15.10% 26.81% (3.36)% (9.14)% 29.21%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $459,207 $396,239 $319,410 $319,523 $364,639
Ratio of Expenses to
Average Net Assets.. 1.02% 1.19% 1.24% 1.16% 1.17%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.02% 1.19% 1.25% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.78% 0.28% 0.27% 0.20% (0.36)%
Portfolio Turnover
Rate................ 38.8% 50.4% 76.2% 66.6% 161.8%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL MIDCAP FUND, INC.
- ---------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $37.35 $29.59 $31.75 $50.71 $41.29
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.19 (0.05) (0.15) 0.22 (0.42)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 5.15 7.81 (1.02) (4.02) 11.87
---- ---- ----- ----- -----
Total From Investment
Operations 5.34 7.76 (1.17) (3.80) 11.45
Less Dividends and
Distributions:
Distributions from
Realized Gains...... (1.87) -- (0.99) (15.16) (2.03)
---- ----- ----- ------ -----
Total Dividends and
Distributions (1.87) -- (0.99) (15.16) (2.03)
---- ----- ----- ------ -----
Net Asset Value, End
of Period............ $40.82 $37.35 $29.59 $31.75 $50.71
====== ====== ====== ====== ======
Total Return /(b)/ ... 14.78% 26.23% (4.00)% (9.55)% 28.63%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $72,746 $70,586 $64,538 $71,330 $80,721
Ratio of Expenses to
Average Net Assets.. 1.32% 1.64% 1.90% 1.61% 1.62%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.32% 1.64% 1.90% -- --
Ratio of Net
Investment Income to
Average Net Assets.. 0.49% (0.16)% (0.39)% (0.25)% (0.80)%
Portfolio Turnover
Rate................ 38.8% 50.4% 76.2% 66.6% 161.8%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly.
See accompanying notes.
199
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
- ---------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $16.16 $13.59 $17.04 $24.26 $25.25
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.05 -- (0.02) (0.02) 0.04
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.36 2.57 (3.42) (6.84) (0.69)
---- ---- ----- ----- -----
Total From Investment
Operations 1.41 2.57 (3.44) (6.86) (0.65)
Less Dividends and
Distributions:
Dividends from Net
Investment Income... -- -- -- -- (0.05)
Distributions from
Realized Gains...... -- -- -- (0.33) (0.29)
Tax Return of Capital
Distributions /(b)/. -- -- (0.01) (0.03) --
---- ----- -----
Total Dividends and
Distributions -- -- (0.01) (0.36) (0.34)
---- ----- ----- -----
Net Asset Value, End
of Period............ $17.57 $16.16 $13.59 $17.04 $24.26
====== ====== ====== ====== ======
Total Return /(c)/ ... 8.73% 18.91% (20.19)% (28.63)% (2.60)%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $123,304 $117,931 $104,481 $120,173 $170,462
Ratio of Expenses to
Average Net Assets.. 1.25% 1.68% 1.54% 1.50% 1.19%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 1.25% 1.69% 1.54% -- 1.33%
Ratio of Net
Investment Income to
Average Net Assets.. 0.29% 0.00% (0.08)% (0.10)% 0.19%
Portfolio Turnover
Rate................ 66.7% 87.6% 79.8% 74.4% 73.6%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL PARTNERS BLUE CHIP FUND, INC.
- ---------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $15.60 $13.22 $16.65 $23.89 $25.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.08) (0.11) (0.13) (0.16) (0.14)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.31 2.49 (3.30) (6.72) (0.67)
---- ---- ----- ----- -----
Total From Investment
Operations 1.23 2.38 (3.43) (6.88) (0.81)
Less Dividends and
Distributions:
Dividends from Net
Investment Income... -- -- -- -- (0.01)
Distributions from
Realized Gains...... -- -- -- (0.33) (0.29)
Tax Return of Capital
Distributions /(b)/. -- -- -- (0.03) --
---- -----
Total Dividends and
Distributions -- -- -- (0.36) (0.30)
---- ----- -----
Net Asset Value, End
of Period............ $16.83 $15.60 $13.22 $16.65 $23.89
====== ====== ====== ====== ======
Total Return /(c)/ ... 7.88% 18.00% (20.60)% (29.16)% (3.30)%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $26,399 $29,233 $27,704 $38,531 $54,550
Ratio of Expenses to
Average Net Assets.. 2.05% 2.46% 2.10% 2.21% 1.94%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 2.05% 2.47% 2.10% -- 2.05%
Ratio of Net
Investment Income to
Average Net Assets.. (0.50)% (0.78)% (0.64)% (0.81)% (0.56)%
Portfolio Turnover
Rate................ 66.7% 87.6% 79.8% 74.4% 73.6%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /See "Distributions to Shareholders" in the Notes to Financial Statements.
/(c) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(d) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit was effective for the year ended October 31,
2000.
See accompanying notes.
200
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL PARTNERS EQUITY GROWTH FUND, INC.
- -------------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $7.00 $6.12 $7.62 $11.36 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.05) (0.05) (0.10) (0.10) (0.05)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.29 0.93 (1.40) (3.64) 1.41
---- ---- ----- ----- ----
Total From Investment
Operations 0.24 0.88 (1.50) (3.74) 1.36
---- ---- ----- ----- ----
Net Asset Value, End
of Period............ $7.24 $7.00 $6.12 $7.62 $11.36
===== ===== ===== ===== ======
Total Return /(b)/ ... 3.43% 14.38% (19.69)% (32.92)% 13.60%/(d)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $45,100 $43,061 $37,451 $38,303 $49,794
Ratio of Expenses to
Average Net Assets.. 1.59% 1.89% 1.98% 1.90% 1.57%/(e)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.65% 1.99% -- -- 1.99%/(e)/
Ratio of Net
Investment Income to
Average Net Assets.. (0.68)% (0.74)% (1.07)% (1.10)% (0.68)%/(e)/
Portfolio Turnover
Rate................ 160.3% 124.7% 138.9% 86.4% 62.0%/(e)/
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL PARTNERS EQUITY GROWTH FUND, INC.
- -------------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $6.79 $5.99 $7.52 $11.28 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.10) (0.09) (0.11) (0.13) (0.10)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.28 0.89 (1.42) (3.63) 1.38
---- ---- ----- ----- ----
Total From Investment
Operations 0.18 0.80 (1.53) (3.76) 1.28
---- ---- ----- ----- ----
Net Asset Value, End
of Period............ $6.97 $6.79 $5.99 $7.52 $11.28
===== ===== ===== ===== ======
Total Return /(b)/ ... 2.65% 13.36% (20.35)% (33.33)% 12.80%/(d)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $15,066 $14,849 $12,939 $15,419 $19,430
Ratio of Expenses to
Average Net Assets.. 2.31% 2.65% 2.76% 2.63% 2.31%/(e)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.37% 2.72% -- -- 2.61%/(e)/
Ratio of Net
Investment Income to
Average Net Assets.. (1.39)% (1.50)% (1.85)% (1.82)% (1.41)%/(e)/
Portfolio Turnover
Rate................ 160.3% 124.7% 138.9% 86.4% 62.0%/(e)/
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit was effective for the year ended October 31,
2000. The expense limit began again on March 1, 2003 and decreased on March
1, 2004.
/(d) /Total return amounts have not been annualized.
/(e) /Computed on an annualized basis.
See accompanying notes.
201
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001/(D)/
---- ---- ---- ----
PRINCIPAL PARTNERS LARGECAP BLEND FUND, INC.
- --------------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $9.14 $7.97 $9.00 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.01 -- (0.01) --
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.74 1.17 (1.02) (1.00)
---- ---- ----- -----
Total From Investment
Operations 0.75 1.17 (1.03) (1.00)
---- ---- ----- -----
Net Asset Value, End
of Period............ $9.89 $9.14 $7.97 $9.00
===== ===== ===== =====
Total Return /(b)/ ... 8.21% 14.68% (11.44)% (10.00)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $43,210 $33,155 $18,781 $7,694
Ratio of Expenses to
Average Net Assets.. 1.47% 1.79% 1.95% 1.95%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.52% 1.82% 1.98% 2.25%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. 0.11% 0.06% (0.02)% (0.09)%/(f)/
Portfolio Turnover
Rate................ 100.0% 33.0% 67.5% 56.9%/(f)/
2004 2003 2002 2001/(D)/
---- ---- ---- ----
PRINCIPAL PARTNERS LARGECAP BLEND FUND, INC.
- --------------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $8.95 $7.87 $8.94 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.06) (0.05) (0.03) (0.04)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.73 1.13 (1.04) (1.02)
---- ---- ----- -----
Total From Investment
Operations 0.67 1.08 (1.07) (1.06)
---- ---- ----- -----
Net Asset Value, End
of Period............ $9.62 $8.95 $7.87 $8.94
===== ===== ===== =====
Total Return /(b)/ ... 7.49% 13.72% (11.97)% (10.60)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $18,438 $14,702 $6,552 $2,670
Ratio of Expenses to
Average Net Assets.. 2.21% 2.49% 2.70% 2.70%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.24% 2.55% 2.78% 3.01%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. (0.63)% (0.64)% (0.77)% (0.84)%/(f)/
Portfolio Turnover
Rate................ 100.0% 33.0% 67.5% 56.9%/(f)/
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. Expense limits for each class were decreased on March 1, 2003
and March 1, 2004.
/(d) /Period from December 22, 2000, date shares first offered, through October
31, 2001.
/(e) /Total return amounts have not been annualized.
/(f) /Computed on an annualized basis.
See accompanying notes.
202
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001/(D)/
---- ---- ---- ----
PRINCIPAL PARTNERS LARGECAP VALUE FUND, INC.
- --------------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $10.94 $8.89 $9.98 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.09 0.08 0.03 0.02
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.18 2.00 (1.00) (0.04)
---- ---- ----- -----
Total From Investment
Operations 1.27 2.08 (0.97) (0.02)
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.07) (0.03) (0.03) --
Distributions from
Realized Gains...... -- -- (0.09) --
----- -----
Total Dividends and
Distributions (0.07) (0.03) (0.12) --
---- ----- ----- -----
Net Asset Value, End
of Period............ $12.14 $10.94 $8.89 $9.98
====== ====== ===== =====
Total Return /(b)/ ... 11.67% 23.51% (9.89)% (0.20)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $43,517 $34,298 $21,677 $8,146
Ratio of Expenses to
Average Net Assets.. 1.46% 1.73% 1.90% 1.95%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.50% 1.76% 1.90% 2.04%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. 0.80% 0.81% 0.45% 0.43%/(f)/
Portfolio Turnover
Rate................ 27.0% 18.5% 10.5% 35.1%/(f)/
2004 2003 2002 2001/(D)/
---- ---- ---- ----
PRINCIPAL PARTNERS LARGECAP VALUE FUND, INC.
- --------------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $10.78 $8.79 $9.92 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.01 0.01 (0.01) (0.02)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 1.16 1.98 (1.03) (0.06)
---- ---- ----- -----
Total From Investment
Operations 1.17 1.99 (1.04) (0.08)
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- (0.09) --
----- -----
Total Dividends and
Distributions -- -- (0.09) --
----- -----
Net Asset Value, End
of Period............ $11.95 $10.78 $8.79 $9.92
====== ====== ===== =====
Total Return /(b)/ ... 10.85% 22.64% (10.62)% (0.80)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $17,127 $13,196 $7,439 $2,786
Ratio of Expenses to
Average Net Assets.. 2.20% 2.48% 2.70% 2.70%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.23% 2.51% 2.71% 2.82%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. 0.06% 0.06% (0.35)% (0.33)%/(f)/
Portfolio Turnover
Rate................ 27.0% 18.5% 10.5% 35.1%/(f)/
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. Expense limits for each class were decreased on March 1, 2003
and March 1, 2004.
/(d) /Period from December 22, 2000, date shares first offered, through October
31, 2001.
/(e) /Total return amounts have not been annualized.
/(f) /Computed on an annualized basis.
See accompanying notes.
203
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000/(D)/
---- ---- ---- ---- ----
PRINCIPAL PARTNERS MIDCAP GROWTH FUND, INC.
- -------------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $5.07 $3.61 $4.55 $9.09 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.08) (0.07) (0.08) (0.10) (0.04)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.16 1.53 (0.86) (4.44) (0.87)
---- ---- ----- ----- -----
Total From Investment
Operations 0.08 1.46 (0.94) (4.54) (0.91)
---- ---- ----- ----- -----
Net Asset Value, End
of Period............ $5.15 $5.07 $3.61 $4.55 $9.09
===== ===== ===== ===== =====
Total Return /(b)/ ... 1.58% 40.44% (20.66)% (49.94)% (12.68)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $22,678 $22,206 $12,745 $11,207 $11,875
Ratio of Expenses to
Average Net Assets.. 1.78% 1.95% 1.95% 1.95% 1.79%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.91% 2.39% 2.40% 2.67% 2.50%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. (1.49)% (1.72)% (1.74)% (1.64)% (1.40)%/(f)/
Portfolio Turnover
Rate................ 173.3% 175.6% 234.9% 334.0% 265.5%/(f)/
2004 2003 2002 2001 2000/(D)/
---- ---- ---- ---- ----
PRINCIPAL PARTNERS MIDCAP GROWTH FUND, INC.
- -------------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $4.97 $3.54 $4.49 $9.04 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.11) (0.10) (0.08) (0.08) (0.07)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.15 1.53 (0.87) (4.47) (0.89)
---- ---- ----- ----- -----
Total From Investment
Operations 0.04 1.43 (0.95) (4.55) (0.96)
---- ---- ----- ----- -----
Net Asset Value, End
of Period............ $5.01 $4.97 $3.54 $4.49 $9.04
===== ===== ===== ===== =====
Total Return /(b)/ ... 0.80% 40.40% (21.16)% (50.33)% (13.16)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $9,351 $8,528 $4,160 $3,967 $4,093
Ratio of Expenses to
Average Net Assets.. 2.52% 2.70% 2.70% 2.70% 2.54%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.66% 3.17% 3.32% 3.45% 3.22%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. (2.23)% (2.47)% (2.49)% (2.40)% (2.18)%/(f)/
Portfolio Turnover
Rate................ 173.3% 175.6% 234.9% 334.0% 265.5%/(f)/
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit began on the first day of the period ended
October 31, 2000. The expense limits for each class were increased on
November 1, 2000 and deceased on March 1, 2004.
/(d) /Period from March 1, 2000, date shares first offered, through October 31,
2000.
/(e) /Total return amounts have not been annualized.
/(f) /Computed on an annualized basis.
See accompanying notes.
204
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001/(D)/
---- ---- ---- ----
PRINCIPAL PARTNERS SMALLCAP
- ---------------------------
GROWTH FUND, INC.
- -----------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $5.43 $3.99 $6.24 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.09) (0.07) (0.08) (0.07)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.20 1.51 (2.17) (3.69)
---- ---- ----- -----
Total From Investment
Operations 0.11 1.44 (2.25) (3.76)
---- ---- ----- -----
Net Asset Value, End
of Period............ $5.54 $5.43 $3.99 $6.24
===== ===== ===== =====
Total Return /(b)/ ... 2.03% 36.09% (36.06)% (37.60)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $13,057 $10,108 $4,899 $4,107
Ratio of Expenses to
Average Net Assets.. 1.95% 1.95% 1.95% 1.95%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.14% 2.88% 2.95% 2.94%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. (1.65)% (1.59)% (1.69)% (1.55)%/(f)/
Portfolio Turnover
Rate................ 58.1% 72.2% 303.3% 144.5%/(f)/
2004 2003 2002 2001/(D)/
---- ---- ---- ----
PRINCIPAL PARTNERS SMALLCAP
- ---------------------------
GROWTH FUND, INC.
- -----------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $5.31 $3.93 $6.20 $10.00
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.13) (0.10) (0.08) (0.11)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.20 1.48 (2.19) (3.69)
---- ---- ----- -----
Total From Investment
Operations 0.07 1.38 (2.27) (3.80)
---- ---- ----- -----
Net Asset Value, End
of Period............ $5.38 $5.31 $3.93 $6.20
===== ===== ===== =====
Total Return /(b)/ ... 1.32% 35.11% (36.61)% (38.00)%/(e)/
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $6,050 $4,402 $1,579 $1,230
Ratio of Expenses to
Average Net Assets.. 2.69% 2.70% 2.70% 2.70%/(f)/
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.88% 3.76% 3.98% 3.82%/(f)/
Ratio of Net
Investment Income to
Average Net Assets.. (2.40)% (2.34)% (2.43)% (2.29)%/(f)/
Portfolio Turnover
Rate................ 58.1% 72.2% 303.3% 144.5%/(f)/
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit.
/(d) /Period from December 22, 2000, date shares first offered, through October
31, 2001.
/(e) /Total return amounts have not been annualized.
/(f) /Computed on an annualized basis.
See accompanying notes.
205
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL REAL ESTATE SECURITIES FUND, INC.
- -------------------------------------------
CLASS A SHARES /(A)/
- --------------------
Net Asset Value,
Beginning of Period.. $13.06 $10.03 $9.45 $9.03 $7.73
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(b)/ .............. 0.24 0.34 0.30 0.34 0.35
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 3.66 3.01 0.57 0.42 1.30
---- ---- ---- ---- ----
Total From Investment
Operations 3.90 3.35 0.87 0.76 1.65
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.26) (0.32) (0.29) (0.34) (0.35)
Distributions from
Realized Gains...... (0.22) -- -- -- --
---- ----- --
Total Dividends and
Distributions (0.48) (0.32) (0.29) (0.34) (0.35)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $16.48 $13.06 $10.03 $9.45 $9.03
====== ====== ====== ===== =====
Total Return /(c)/ ... 30.59% 34.00% 9.13% 8.49% 21.86%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $62,362 $46,131 $29,198 $12,700 $9,439
Ratio of Expenses to
Average Net Assets.. 1.64% 1.82% 1.76% 1.97% 1.88%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 1.64% -- -- -- 2.17%
Ratio of Net
Investment Income to
Average Net Assets.. 1.68% 3.05% 2.87% 3.57% 4.28%
Portfolio Turnover
Rate................ 79.3% 58.4% 65.4% 69.5% 79.8%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL REAL ESTATE SECURITIES FUND, INC.
- -------------------------------------------
CLASS B SHARES /(A)/
- --------------------
Net Asset Value,
Beginning of Period.. $12.98 $9.98 $9.41 $9.00 $7.71
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(b)/ .............. 0.14 0.26 0.23 0.28 0.30
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 3.65 2.98 0.57 0.42 1.29
---- ---- ---- ---- ----
Total From Investment
Operations 3.79 3.24 0.80 0.70 1.59
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.17) (0.24) (0.23) (0.29) (0.30)
Distributions from
Realized Gains...... (0.22) -- -- -- --
----- -----
Total Dividends and
Distributions (0.39) (0.24) (0.23) (0.29) (0.30)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $16.38 $12.98 $9.98 $9.41 $9.00
====== ====== ===== ===== =====
Total Return /(c)/ ... 29.79% 32.95% 8.38% 7.76% 21.00%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $19,102 $15,232 $8,982 $5,663 $4,488
Ratio of Expenses to
Average Net Assets.. 2.34% 2.51% 2.47% 2.58% 2.62%
Ratio of Gross
Expenses to Average
Net Assets /(d)/ ... 2.35% -- -- -- 2.75%
Ratio of Net
Investment Income to
Average Net Assets.. 0.99% 2.34% 2.26% 2.97% 3.53%
Portfolio Turnover
Rate................ 79.3% 58.4% 65.4% 69.5% 79.8%
/(a) /Effective March 1, 2004, Principal Real Estate Fund, Inc. changed its name
to Principal Real Estate Securities Fund, Inc.
/(b) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(c) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(d) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit was effective for the year ended October 31,
2000.
See accompanying notes.
206
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL SMALLCAP FUND, INC.
- -----------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $8.28 $6.23 $7.60 $11.24 $11.34
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.07) (0.06) (0.12) (0.11) (0.11)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.96 2.11 (1.25) (1.91) 1.27
---- ---- ----- ----- ----
Total From Investment
Operations 0.89 2.05 (1.37) (2.02) 1.16
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- -- (1.62) (1.26)
---- ----- -----
Total Dividends and
Distributions -- -- -- (1.62) (1.26)
---- ----- -----
Net Asset Value, End
of Period............ $9.17 $8.28 $6.23 $7.60 $11.24
===== ===== ===== ===== ======
Total Return /(b)/ ... 10.75% 32.91% (18.03)% (19.37)% 9.89%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $82,731 $73,671 $56,334 $53,763 $60,660
Ratio of Expenses to
Average Net Assets.. 1.57% 1.98% 1.94% 1.87% 1.75%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 1.57% 1.98% 1.95% -- 1.76%
Ratio of Net
Investment Income to
Average Net Assets.. (0.76)% (0.85)% (0.93)% (0.80)% (0.61)%
Portfolio Turnover
Rate................ 188.8% 165.6% 218.2% 154.9% 138.4%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL SMALLCAP FUND, INC.
- -----------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $7.90 $5.99 $7.36 $11.02 $11.21
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. (0.13) (0.10) (0.09) (0.06) (0.10)
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.91 2.01 (1.28) (1.98) 1.17
---- ---- ----- ----- ----
Total From Investment
Operations 0.78 1.91 (1.37) (2.04) 1.07
Less Dividends and
Distributions:
Distributions from
Realized Gains...... -- -- -- (1.62) (1.26)
---- ----- -----
Total Dividends and
Distributions -- -- -- (1.62) (1.26)
---- ----- -----
Net Asset Value, End
of Period............ $8.68 $7.90 $5.99 $7.36 $11.02
===== ===== ===== ===== ======
Total Return /(b)/ ... 9.87% 31.89% (18.61)% (20.05)% 9.14%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $24,117 $22,036 $15,624 $17,342 $19,022
Ratio of Expenses to
Average Net Assets.. 2.30% 2.70% 2.75% 2.74% 2.41%
Ratio of Gross
Expenses to Average
Net Assets /(c)/ ... 2.31% 2.70% 2.75% -- 2.41%
Ratio of Net
Investment Income to
Average Net Assets.. (1.50)% (1.58)% (1.73)% (1.67)% (1.27)%
Portfolio Turnover
Rate................ 188.8% 165.6% 218.2% 154.9% 138.4%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Expense ratio without fees paid indirectly and the Manager's voluntary
expense limit. The expense limit was effective for the year ended October 31,
2000.
See accompanying notes.
207
FINANCIAL HIGHLIGHTS
PRINCIPAL MUTUAL FUNDS
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31 (EXCEPT AS NOTED):
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
- ------------------------------------
CLASS A SHARES
- --------------
Net Asset Value,
Beginning of Period.. $12.31 $12.29 $12.10 $11.65 $11.69
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.46 0.47 0.48/(c)/ 0.54 0.59
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.18 0.05 0.18/(c)/ 0.51 0.06
---- ---- ---- ---- ----
Total From Investment
Operations 0.64 0.52 0.66 1.05 0.65
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.44) (0.45) (0.47) (0.55) (0.58)
Distributions from
Realized Gains...... (0.03) (0.05) -- (0.05) (0.11)
---- ----- ----- ----- -----
Total Dividends and
Distributions (0.47) (0.50) (0.47) (0.60) (0.69)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $12.48 $12.31 $12.29 $12.10 $11.65
====== ====== ====== ====== ======
Total Return /(b)/ ... 5.31% 4.25% 5.64% 9.28% 5.81%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $166,930 $178,379 $183,100 $167,016 $163,846
Ratio of Expenses to
Average Net Assets.. 0.76% 0.81% 0.77% 0.82% 0.88%
Ratio of Net
Investment Income to
Average Net Assets.. 3.72% 3.71% 4.02%/(c)/ 4.59% 5.12%
Portfolio Turnover
Rate................ 70.3% 31.2% 60.0% 51.8% 7.6%
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
- ------------------------------------
CLASS B SHARES
- --------------
Net Asset Value,
Beginning of Period.. $12.36 $12.32 $12.16 $11.71 $11.70
Income from Investment
Operations:
Net Investment Income
(Operating Loss)
/(a)/ .............. 0.41 0.38 0.38/(d)/ 0.48 0.57
Net Realized and
Unrealized Gain
(Loss) on
Investments......... 0.15 0.07 0.17/(d)/ 0.51 0.07
---- ---- ---- ---- ----
Total From Investment
Operations 0.56 0.45 0.55 0.99 0.64
Less Dividends and
Distributions:
Dividends from Net
Investment Income... (0.34) (0.36) (0.39) (0.49) (0.52)
Distributions from
Realized Gains...... (0.03) (0.05) -- (0.05) (0.11)
---- ----- ----- ----- -----
Total Dividends and
Distributions (0.37) (0.41) (0.39) (0.54) (0.63)
----- ----- ----- ----- -----
Net Asset Value, End
of Period............ $12.55 $12.36 $12.32 $12.16 $11.71
====== ====== ====== ====== ======
Total Return /(b)/ ... 4.88% 3.68% 4.67% 8.70% 5.69%
Ratio/Supplemental
Data:
Net Assets, End of
Period (in
thousands).......... $10,742 $13,254 $13,848 $12,122 $10,744
Ratio of Expenses to
Average Net Assets.. 1.15% 1.44% 1.60% 1.33% 1.37%
Ratio of Net
Investment Income to
Average Net Assets.. 3.32% 3.07% 3.19%/(d)/ 4.07% 4.60%
Portfolio Turnover
Rate................ 70.3% 31.2% 60.0% 51.8% 7.6%
/(a) /Effective November 1, 2002, calculated based on average shares outstanding
during the period.
/(b) /Total return is calculated without the front-end sales charge or
contingent deferred sales charge.
/(c) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. There was no effect to
the Class A per share net investment income or net realized and unrealized
gain (loss) on investments for the year ended October 31, 2002. The ratio of
net investment income to average net assets increased by .06%. Prior periods
have not been restated to reflect this change in presentation.
/(d) /Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies. There was no effect to
the Class B per share net investment income or net realized and unrealized
gain (loss) on investments for the year ended October 31, 2002. The ratio of
net investment income to average net assets increased by .06%. Prior periods
have not been restated to reflect this change in presentation.
See accompanying notes.
208
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Boards of Directors and
Shareholders
Principal Balanced Fund, Principal Limited Term Bond Fund, Inc.
Inc.
Principal Bond Fund, Inc. Principal MidCap Fund, Inc.
Principal Capital Value Principal Partners Blue Chip Fund, Inc.
Fund, Inc.
Principal Cash Management Principal Partners Equity Growth Fund, Inc.
Fund, Inc.
Principal Equity Income Principal Partners LargeCap Blend Fund, Inc.
Fund, Inc. Principal Partners LargeCap Value Fund, Inc.
(previously Principal
Utilities Fund, Inc.)
Principal Government Principal Partners MidCap Growth Fund, Inc.
Securities Income Fund, Inc.
Principal Growth Fund, Inc. Principal Partners SmallCap Growth Fund, Inc.
Principal International Principal Real Estate Securities Fund, Inc.
Emerging Markets Fund, Inc.
Principal International (previously Principal Real Estate Fund, Inc.)
Fund, Inc.
Principal International Principal SmallCap Fund, Inc.
SmallCap Fund, Inc.
Principal LargeCap Stock Principal Tax-Exempt Bond Fund, Inc.
Index Fund, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Principal Balanced Fund, Inc., Principal Bond
Fund, Inc., Principal Capital Value Fund, Inc., Principal Cash Management Fund,
Inc., Principal Equity Income Fund, Inc. (previously Principal Utilities Fund,
Inc.), Principal Government Securities Income Fund, Inc., Principal Growth Fund,
Inc., Principal International Emerging Markets Fund, Inc., Principal
International Fund, Inc., Principal International SmallCap Fund, Inc., Principal
LargeCap Stock Index Fund, Inc., Principal Limited Term Bond Fund, Inc.,
Principal MidCap Fund, Inc., Principal Partners Blue Chip Fund, Inc., Principal
Partners Equity Growth Fund, Inc., Principal Partners LargeCap Blend Fund, Inc.,
Principal Partners LargeCap Value Fund, Inc., Principal Partners MidCap Growth
Fund, Inc., Principal Partners SmallCap Growth Fund, Inc., Principal Real Estate
Securities Fund, Inc. (previously Principal Real Estate Fund, Inc.), Principal
SmallCap Fund, Inc., and Principal Tax-Exempt Bond Fund, Inc. as of October 31,
2004, and the related statements of operations, statements of changes in net
assets and financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights 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 October 31, 2004, by correspondence with the custodians
and brokers. As to certain securities relating to uncompleted transactions, we
performed other audit procedures. 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 financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting Principal Domestic Growth Funds, Principal
International Growth Funds, Principal Income Funds and Principal Money Market
Fund at October 31, 2004, and the results of their operations, the changes in
their net assets and their financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
November 24, 2004
209
FUND DIRECTORS
Under Maryland law, a Board of Directors oversees the Funds. The Directors have
financial or other relevant experience and meet several times during the year to
review contracts, Fund activities and the quality of services provided to the
Funds. Each director also has the same position with Principal Variable
Contracts Fund, Inc. and Principal Investors Fund, Inc. which are also sponsored
by Principal Life Insurance Company. Each director holds office for an
indefinite term. Directors considered to be "interested persons" as defined in
the Investment Company Act of 1940, as amended, as shown below are considered to
be interested because of an affiliation with the Manager and Principal Life
Insurance Company.
THE FOLLOWING DIRECTORS ARE CONSIDERED NOT TO BE "INTERESTED PERSONS" AS DEFINED
IN THE 1940 ACT .
NUMBER OF
PORTFOLIOS IN
FUND OTHER
COMPLEX DIRECTORSHIPS
NAME, POSITION HELD WITH THE FUND, PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY
ADDRESS, AND DATE OF BIRTH DURING PAST 5 YEARS DIRECTOR DIRECTOR*
- ---------------------------------- ----------------------- ------------- -------------
102 None
James D. Davis
Director since 1974 Attorney. Vice
Member Audit and President, Deere and
Nominating Committee Company, Retired.
4940 Center Court,
Bettendorf, Iowa
03/22/34
102 None
Richard W. Gilbert
Director since 1985
Member Audit and President, Gilbert
Nominating Committee Communications, Inc.
5040 Arbor Lane, since 1993.
#302, Northfield,
Illinois.
05/08/40
102 None
Executive Vice
Mark A. Grimmett President and CFO,
Director since 2004 Merle Norman
Member Audit and Cosmetics, Inc.,
Nominating Committee since 2000. Prior
6310 Deerfield Avenue thereto, Vice
San Gabriel, President and CFO.
California
04/03/60
102
Casey's General
Stores, Inc.
William C. Kimball
Director since 1999 Chairman and CEO,
Member Audit and Medicap Pharmacies,
Nominating Committee Inc. Retired.
4350 Westown Parkway,
Suite 400
West Des Moines, Iowa
11/28/47
102 None
Barbara A. Lukavsky
Director since 1987
Member Audit and
Nominating Committee President and CEO,
Member Executive Barbican Enterprises,
Committee Inc. since 1997.
100 Market Street,
#314, Des Moines,
Iowa
09/10/40
* Directorships of any company registered pursuant to Section 12 of the
Securities Exchange Act or subject to the requirements of Section 15(d) of
the Securities Exchange Act or any other mutual fund.
THE FOLLOWING DIRECTORS ARE CONSIDERED TO BE "INTERESTED PERSONS" AS DEFINED IN
THE 1940 ACT, AS AMENDED, BECAUSE OF AN AFFILIATION WITH THE MANAGER AND
PRINCIPAL LIFE. .
Director, Principal
Management
Corporation and
Princor Financial
Services Corporation
("Princor") since 102 None
John E. Aschenbrenner 1998. President,
Director since 1998 Insurance and
08/16/49 Financial Services,
Principal Life since
2003. Executive Vice
President, 2000-2003.
Prior thereto, Senior
Vice President.
Director and
President, Princor
Ralph C. Eucher and Principal
Director and Management
President since 1999 Corporation, since 102 None
Member Executive 1999. Senior Vice
Committee President, Principal
06/14/52 Life, since 2002.
Prior thereto, Vice
President.
Chairman and
Director, Princor and 102 None
Larry D. Zimpleman Principal Management
Director and Chairman Corporation since
of the Board since 2002. President,
December 2001 Retirement and
Member Executive Investor Services,
Committee Principal Life since
09/07/51 2003. Executive Vice
President, 2001-2003.
Prior thereto, Senior
Vice President.
The Audit and Nominating Committee selects the independent auditors for the
Funds and oversees the activities of the independent auditors as well as the
internal auditors. The committee also receives reports about accounting and
financial matters affecting the Funds. In addition, the committee selects and
nominates all candidates who are not "interested persons" of the Funds for
election to the Board.
The Executive Committee is selected by the Board. It may exercise all the powers
of the Board, with certain exceptions, when the Board is not in session. The
Committee must report its actions to the Board.
Additional information about the Funds is available in the Prospectus and
Statement of Additional Information both dated March 1, 2004. These documents
may be obtained free of charge by writing or telephoning Princor Financial
Services Corporation, P.O. Box 10423, Des Moines, IA 50306. Telephone
1-800-247-4123.
PROXY VOTING POLICIES
A description of the policies and procedures the Funds use to determine how to
vote proxies relating to portfolio securities and the results of the proxy votes
for the most recent period ended June 30 may be obtained free of charge by
telephoning Princor Financial Services Corporation at 1-800-247-4123 or at
www.sec.gov.
SCHEDULES OF INVESTMENTS
The Funds file complete schedules of investments with the Securities and
Exchange Commission as of January 31 and July 31 of each year on Form N-Q. The
Funds' Form N-Q can be reviewed and copied at the Commission's Public Reference
Room in Washington, D.C. or on the Commission's website at www.sec.gov.
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330.
FEDERAL INCOME TAX INFORMATION
PRINCIPAL MUTUAL FUNDS
OCTOBER 31, 2004
-------------------------------------------------------------------------------
Information for federal income tax purposes is presented as an aid to
shareholders in reporting the dividend distributions shown below. Shareholders
should consult a tax advisor on how to report these distributions for state and
local purposes.
DIVIDEND RECEIVED DEDUCTION . For corporate shareholders, the percentage of
ordinary income distributions (dividend income and short-term gains, if any) for
the year ended October 31, 2004 that qualifies for the dividend received
deduction is as follows:
DEDUCTIBLE
PERCENTAGE
------------
Principal Balanced Fund, Inc. 52%
Principal Capital Value Fund, Inc. 100
Principal Equity Income Fund, Inc. 80
Principal LargeCap Stock Index Fund, Inc. 100
Principal MidCap Fund, Inc. 99
Principal Partners LargeCap Value Fund, Inc. 100
QUALIFIED DIVIDEND INCOME . For the fiscal year ended October 31, 2004, certain
dividends paid by the Funds may be subject to a maximum tax rate of 15%, as
provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The
percentage of ordinary income distributions for the fiscal year ended October
31, 2004, taxed at the maximum rate of 15% is as follows:
PERCENTAGE
------------
Principal Balanced Fund, Inc. 59%
Principal Capital Value Fund, Inc. 100
Principal Equity Income Fund, Inc. 80
Principal International Fund, Inc. 100
Principal LargeCap Stock Index Fund, Inc. 100
Principal MidCap Fund, Inc. 88
Principal Partners LargeCap Value Fund, Inc. 100
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the information
supplied with the 1099-DIV form you receive from the Fund's transfer agent.
TAX-EXEMPT DIVIDENDS . Dividends from the Principal Tax-Exempt Bond Fund, Inc.
were exempt from federal income taxation for non-corporate shareholders.
LONG TERM CAPITAL GAIN DIVIDENDS . For federal income tax purposes, the Funds
designate long term capital gain dividends for all share classes for the year
ended October 31, 2004 as follows:
PER SHARE
LONG TERM
CAPITAL GAIN
DISTRIBUTIONS
-------------
Principal MidCap Fund, Inc. $ 1.6192
Principal Real Estate Securities Fund, Inc. .2227
Principal Tax Exempt Bond Fund, Inc. .0299
ITEM 2 - CODE OF ETHICS
(a) The Registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) Not applicable.
(c) The Registrant has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The Registrant has not granted a waiver or an implicit waiver from a
provision of its Code of Ethics during the period covered by the shareholder
report presented in Item 1 hereto.
(e) Not applicable.
(f) The Registrant's Code of Ethics is attached as an Exhibit hereto.
ITEM 3 - AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board has determined that Richard Gilbert, a member of the
Registrant's Audit and Nominating Committee, is an "audit committee financial
expert" and "independent," as such terms are defined in this Item.
ITEM 4 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees. Ernst & Young is the principal accountant for the registrant. As
such, Ernst & Young has audited the financial statements of the registrant and
reviewed regulatory filings that include those financial statements. During the
last two fiscal years, Ernst & Young has billed the following amounts for their
professional services.
October 31, 2003 - $7000
October 31, 2004 - $7,900
(b) Audit-Related Fees. Ernst & Young has not provided any audit-related
services to the registrant during the last two fiscal years that are not
included in response to item 4(a).
Ernst and Young billed no fees that registrant's audit committee was required to
pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(c) Tax Fees. Ernst & Young reviews the federal income tax returns and federal
excise tax returns of the registrant. In connection with this review, Ernst &
Young reviews the calculation of the registrant's dividend distributions that
are included as deductions on the tax returns. During the last two fiscal years,
Ernst & Young has billed the following amounts for their professional tax
services.
October 31, 2003 - $975
October 31, 2004 - $1070
Ernst and Young billed no fees that registrant's audit committee was required to
pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(d) All Other Fees. Ernst & Young has not billed the registrant for other
products or services during the last two fiscal years.
Ernst and Young billed no fees that registrant's audit committee was required to
pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(e) (1) Audit Committee Pre-Approval Policy. The audit committee of the
registrant has adopted the following pre-approval policy:
Policy on Auditor Independence
The purpose of this policy is to ensure the independence of the Funds' primary
independent auditor. This policy is established by the Audit Committee of the
Principal Investors Fund, Inc., Principal Variable Contracts Fund, Inc. and
Principal Mutual Funds (the "Funds") Board of Directors effective for all
engagements of the primary independent auditor entered into on and after March
8th, 2004.
1. Prohibited Services shall not be provided by the primary independent
auditor, its subsidiaries and affiliates to the Funds. . For the
purposes of this policy, Prohibited Services are:
|X| Services that are subject to audit procedure during a financial
statement audit;
|X| Services where the auditor would act on behalf of management;
|X| Services where the auditor is an advocate to the client's position in an
adversarial proceeding;
|X| Bookkeeping or other services related to the
accounting records or financial statements of the Company,
its subsidiaries and affiliates;
|X| Financial information systems design and implementation;
|X| Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;
|X| Actuarial services;
|X| Internal audit functions or human resources;
|X| Broker or dealer, investment advisor, or investment banking services;
|X| Legal services and expert services unrelated to the audit;
|X| Any other service that the Public Company Accounting Oversight
Board determines, by regulation, is impermissible.
2. (A) All services provided by the primary independent auditor, its
subsidiaries and affiliates to the Funds, and (B) Audit services,
including audits of annual financial statements, audits of acquired or
divested businesses or review of regulatory filings, by any independent
auditor, shall be approved by the Audit Committee in advance in
accordance with the following procedure:
Each quarter, Management will present to the Audit Committee
for pre-approval, a detailed description as to each particular
service for which pre-approval is sought and a range of fees
for such service. The Audit Committee may delegate
pre-approval authority to one or more of its members provided
a report of any services approved by such delegated member(s)
shall be presented to the full Audit Committee at its next
regularly scheduled meeting. The Audit Committee Chairperson
shall have pre-approval authority for changes to any range of
fees applicable to services previously approved by the Audit
Committee and for services and the range of fees for such
services that arise between regularly scheduled Audit
Committee meetings.
In considering whether to pre-approve the provision of
non-audit services by the primary independent auditor, the
Audit Committee will consider whether the services are
compatible with the maintenance of such auditor's
independence. The Audit Committee will also consider whether
the primary independent auditor is best positioned to provide
the most effective and efficient service, for reasons such as
its familiarity with the Funds' business, people, culture,
accounting systems, risk profile and other factors, and
whether the service might enhance the Funds' ability to manage
or control risk or improve audit quality.
3. The provisions of this policy shall apply to all audit and non-audit
services provided directly to the Funds. Additionally, the provisions
of this policy shall apply to non-audit services provided to Principal
Management Corporation or an affiliate of Principal Management
Corporation that provides ongoing services to the Funds if the
engagement relates directly to the operations and financial reporting
of the Funds.
4. Not less than annually, the primary independent auditor shall report to
the Audit Committee its independence policies, as well as all
relationships that may bear on independence between the auditor and the
Funds with respect to any services provided by the auditor, its
subsidiaries or affiliates.
5. The Audit Committee shall ensure that the lead and concurring partners
of the Funds' primary independent auditor are rotated at least every
five years and subject upon rotation to a five year "time out" period.
All other partners of the primary independent auditor, excluding
partners who simply consult with others on the audit engagement
regarding technical issues, shall rotate after seven years and be
subject upon rotation to a two year "time out" period.
The Funds or Principal Management Corporation may not hire any former partner,
principal, shareholder or professional employee ("Former Employee") of the
primary independent auditor into an accounting or financial reporting oversight
role unless the Former Employee has severed his/her economic interest in the
independent audit firm. In addition, employment of a Former Employee into an
accounting or financial reporting oversight role will not be allowed unless the
Former Employee was not a member of the audit engagement team of the Company
during the one year period preceding the date that the audit procedures began
for the fiscal period in which the Company proposes to hire the Former Employee.
An accounting or financial reporting oversight role is presumed to mean CEO,
CFO, or Controller.
(end of policy)
(e) (2) Pre-Approval Waivers. There were no services provided to the registrant
by Ernst & Young that were approved pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X.
(f) All work in connection with the audit of the registrant's financial
statements was performed by full-time employees of Ernst & Young.
(g) The aggregate non-audit fees Ernst and Young billed to the registrant, the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by or under common
control with the adviser that provides ongoing services to the registrant for
each of registrant's last two fiscal years were as follows.
October 31, 2003 - $3675
October 31, 2004 - $1070
(h) The registrant's audit committee of the board of directors has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence
ITEM 5 - AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6 - SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the Report to Shareholders filed
under Item 1 of this form.
ITEM 7 - DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8 - PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 10 - CONTROLS AND PROCEDURES
a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended)
are effective (such disclosure controls and procedures having been evaluated
within 90 days of the date of this filing).
(b) There have been no changes in the registrant's internal controls over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 11 - EXHIBITS
(a)(1) Code of Ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.CERT.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Principal Capital Value Fund, Inc.
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By /s/ Ralph C. Eucher
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Ralph C. Eucher, President
Date 12/16/2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Ralph C. Eucher
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Ralph C. Eucher, President
Date 12/16/2004
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By /s/ Jill R. Brown
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Jill R. Brown, Vice President and Chief Financial Officer
Date 12/16/2004
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