DRIP PORTFOLIO
Intro to SEC Forms
Back to Basics, Part 1

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Back to Basics Series

By Vince Hanks (TMFElwood)

NORTHVILLE, MI (Jan. 6, 2000) -- Keeping with Jeff's theme from last night (was anyone else humming the "59th Street Bridge Song" while they read that column?), I'm going to slow things down and even back up a few steps tonight, beginning a series of columns that I'm calling "Back to Basics." The basics, in this case, are the nuts and bolts of researching the fundamentals of a company. We'll address some of the very basic definitions and progress into the nitty-gritty as the weeks roll on. We'll also be looking again at some accounting issues regarding Drip investing once most of us have received all of the year-end statements and forms.

Let's start with all these forms that we see mentioned around the financial watercooler: 10-K, 8-K, 10-Q, WD-40. What exactly do all these numbers and letters mean?

Well, WD-40 is a fine company that produces "Lava" soap and "3-in-one oil," but seeing how it has little to do with financial forms, we'll move on to the 10-K.

Like an annual report, the 10-K explains the company's business activities for the most recent twelve-month operating period. The 10-K, which is required to be filed with the Securities and Exchange Commission (SEC) within 90 days of the company's fiscal year end, typically contains more detail than an annual report, such as more thorough operating and financial statistics, information on legal proceedings, and management compensation. It is also presented in a less aesthetically pleasing manner. Less pretty, more useful. The final pages of a 10-K contain an index of exhibits that are required listings but are not included in the actual report. These exhibits include form 8-K.

The 8-K is used to explain significant events or changes that affect the company's financial condition. These events might include changes in executive compensation, company bylaws, acquisitions, mergers, financing agreements, and bankruptcy proceedings. The 8-K form is required to be filed within 15 days of most material changes and is released to the public.

Finally, we have the 10-Q. Form 10-Q is a quarterly version of the 10-K; however, it is less detailed and generally unaudited. The SEC requires publicly traded companies to file form 10-Q within 45 days of the end of each quarter, except the final quarter, in which the 10-K is filed.

Contained within these three filings and the annual report is practically everything you need to investigate and dissect any publicly traded company in the U.S. Furthermore, each is easily obtainable by contacting the company's shareholder services department, or more conveniently, right here online at the Fool.

Next week we'll strap on our mining hats, swing a few picks, and begin to break these reports up into manageable chunks. Nuggets of gold are contained in those pages, they just need to be liberated.

Drip on, Fools, and don't forget to heed the words of Paul Simon:

Slow down, you move too fast
You got to make the morning last
Just kicking down the cobble stones
Looking for fun and feelin' groovy.

Drip Portfolio

1/6/00 Closing Numbers
Ticker Company Dly Pr Chg Price
CPBCAMPBELL SOUP3/4$36.31
INTCINTEL CORP-4 7/8$78.75
JNJJOHNSON & JOHNSON13/16$92.56
MELMELLON FINANCIAL CORP2$31.88

  Day Week Month Year
To Date
Since
7/28/97
Annualized
Drip -.36% -4.02% -4.02% -4.02% 24.69% 9.45%
S&P 500 .10% -4.48% -4.48% -4.48% 49.50% 17.88%
S&P 500(DA) .10% -4.48% -4.48% -4.48% 52.12% 18.72%
S&P 500(DCA) n/a n/a n/a n/a 25.73% 9.82%
NASDAQ -3.88% -8.41% -8.41% -8.41% 137.46% 42.44%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/9722.3909INTC44.603$78.7576.56%
11/14/9711.292JNJ80.007$92.5615.69%
11/5/9828.3741MEL34.416$31.88-7.38%
4/13/988.174CPB54.586$36.31-33.48%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/9722.3909INTC$998.70$1,763.28$764.58
11/14/9711.292JNJ$903.44$1,045.22$141.78
11/5/9828.3741MEL$976.51$904.42($72.09)
4/13/988.174CPB$446.18$296.82($149.36)
  Cash: $24.32  
  Total: $4,034.06  


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.