(PPP LOGO)
CASH RESERVE PORTFOLIO
CLASS Y SHARES
(INSTITUTIONAL CLASS)
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 1996
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
SEMIANNUAL REPORT TO SHAREHOLDERS
August 28, 1996
Dear Shareholder:
As was reported in the 1995 Annual Report to Shareholders, Principal
Preservation established a Retail Class X and Institutional Class Y shares for
the Cash Reserve Portfolio. Therefore, the report breaks out class information
in the Statement of Assets and Liabilities and the Financial Highlights table.
Going forward, this information will be consistent in future reports.
The first six months of 1996 were marked by skepticism and nervousness. As
new economic data was released, depending on the perception of the institutional
investing public, the financial markets reacted strongly in either direction
causing wider swings in price movements. Generally, the short term markets were
not impacted by these movements. On January 31, 1996, the Federal Reserve cut
the target Fed Funds rate by 0.25% which was the third straight reduction. This
move signaled that the economy was slowing. The Fed Funds rate, a benchmark that
most commercial paper and other short term instruments are tied to, began the
year at 5.50% and ended on June 30, 1996 at 5.25%. Currently it appears that
inflation, while showing some signs of strengthening, has not increased to the
point of Fed intervention. Since the bias of the Federal Reserve has been to
keep inflation in check, we would anticipate a modest increase of 0.25% later in
the second half of this year.
Money market mutual funds began seeing asset inflows during May and June of
1996. Your fund began the year with approximately $86,500,000 in net assets and
ended the period on June 30, 1996 at $134,500,000 including the new
institutional assets of $48,000,000. The 7 day annualized yield for the
Institutional Class Y, net of absorption of fund expenses, was 5.33% on December
31, 1995 and finished with a seven day yield of 4.98% on June 30, 1996. The
average annualized seven day yield for Institutional money market funds, as
measured by IBC Donoghue, was 5.35% and 4.97% for the same periods,
respectively. We would expect to remain fairly close to the average money market
fund yield for the remainder of the year. The average maturity was 45 days at
June 30, 1996.
Finally, while I have communicated with you as Chairman of the Prime Money
Market Portfolio, I accepted a promotion to President and Chief Executive
Officer of Principal Preservation. R.D.Ziegler, past President, remains as
Chairman of the Board of Directors and I am grateful for the experience, wisdom
and guidance he has and continues to provide to not only the fund family but
also myself. On behalf of our associates at Principal Preservation, we thank you
for your continued trust in us.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
The report contained herein is meant to be information to the existing
shareholders of Principal Preservation. This does not constitute an offer to
sell and should an investor wish to receive more information about the
portfolios, they should obtain a prospectus which includes a discussion of each
investment objective and all sales charges and expenses of the fund.
<TABLE>
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
FINANCIAL HIGHLIGHTS
<CAPTION>
FOR THE PERIOD
FOR THE APRIL 5, 1993
SIX MONTHS ENDED FOR THE FOR THE (COMMENCEMENT
JUNE 30, YEAR ENDED YEAR ENDED OF OPERATIONS)
1996 DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
(UNAUDITED) 1995 1994 1993
-------------------- ------------ ------------ ---------------
CLASS X CLASS Y
------- -------
<S> <C> <C> <C> <C> <C>
(Selected data for each share of the Fund
outstanding throughout the periods)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- -------- -------- --------
Income from investment operations:
Net investment income 0.02 0.02 0.05 0.04 0.02
Less distributions:
Dividends from net investment income (0.02) (0.02) (0.05) (0.04) (0.02)
------- ------- -------- -------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- -------- -------- --------
------- ------- -------- -------- --------
Total investment return (b)<F2> 2.37% 2.57% 5.32% 3.64% 2.99% (a)<F1>
Ratios/Supplemental Data:
Net assets, end of period (nearest thousand) $87,009 $52,861 $86,590 $52,593 $47,768
Ratio of expenses to average net assets (c)<F3> 0.72% (a)<F1>0.42% (a)<F1> 0.79% 1.05% 1.03% (a)<F1>
Capital contributions (d)<F4> -- -- 0.06% -- --
Ratio of net investment income
to average net assets (c)<F3> 4.80% (a)<F1>5.12% (a)<F1> 5.23% 3.62% 2.73% (a)<F1>
Prior to 1996, the assets of the Cash Reserve Portfolio were invested in the
Prime Money Market Portfolio ("Prime"). On December 31, 1995, the assets were
liquidated and transferred to the Principal Preservation Cash Reserve Portfolio
("Fund"). At that time, Classes were established for the Cash Reserve Portfolio,
Class X (Retail) and Class Y (Institutional). The results of the first six
months ended June 30, 1996 reflect the new operating structure.
(a)<F1>Annualized.
(b)<F2>Prior to 1996, the advisers to Prime made capital contributions to offset
losses in securities. Had the advisers not made capital contributions, the
adjusted annualized total return would have been 5.26%, 1.91% and 2.99% for
1995, 1994 and 1993, respectively.
(c)<F3>Prior to 1996, reflects the Fund's share of Prime Money Market
Portfolio's expenses as well as a voluntary waiver of fees and an expense
reimbursement by the Portfolio's adviser. For the first six months ended
June 30, 1996, the adviser and administrator voluntarily waived their fees.
Therefore if the voluntary waivers and expense reimbursement had not been in
place, the annualized ratios of net investment income and expenses to average
net assets would have been 4.62% and 0.90% and 4.88% and 0.66%, for Class X
(Retail) and Class Y (Institutional), respectively, for the period ended
June 30, 1996, 4.86%and 1.16%, respectively, for the year ended December 31, ,
1995, 3.35% and 1.32% respectively, for the year ended December 31, 1994, and
2.44% and 1.32%, respectively, for the period ended December 31, 1993.
(d)<F4>For the year ended December 31, 1995, the manner in which capital
contributions are presented changed from the prior year as a result of a recent
Securities and Exchange Commission Division of Investment Management letter
clarifying the presentation of capital contributions. For the year ended
December 31, 1995, capital contributions were presented in the financial
statements of both the Fund and Prime Money Market Portfolio, whereas in 1994
capital contributions were presented in the Prime Money Market Portfolio's
financial statements only.
The accompanying notes are an integral part of the financial statements.
</TABLE>
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
ASSETS:
Investments in Securities, at amortized
cost and value (Note 2a):
U.S. Government and Agency Obligations $52,446,643
Short Term Investments 87,174,725
Interest Receivable 447,195
Investments Sold 38,190
Receivable from affiliate 20,004
----------
Total Assets 140,126,757
LIABILITIES:
Dividends payable (Retail Class X) $0
Dividends payable (Institutional Class Y) 109,716
Accrued expenses 146,257
-------
Total Liabilities 255,973
----------
NET ASSETS 139,870,784
----------
REPRESENTED BY:
Capital Stock $139,874,616
Undistributed net income 334
Accumulated net realized loss (4,166)
----------
Net Assets $139,870,784
----------
INSTITUTIONAL CLASS Y
Net Assets $52,861
Shares Authorized 200,000
Shares Issued and Outstanding 52,908
Net asset value and redemption price per share $1.00
RETAIL CLASS X
Net Assets $87,009
Shares Authorized 200,000
Shares Issued and Outstanding 87,110
Net asset value and redemption price per share $1.00
See notes to financial statements.
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996 (UNAUDITED)
INVESTMENT INCOME FROM PORTFOLIO (Note 2b):
Interest income $3,553,830
---------
Total Investment Income 3,553,830
---------
EXPENSES:
Investment advisory fees 129,151
Administration fees 96,864
Shareholder service fees Class X 111,102
Distribution fees Class X 66,661
Professional fees 48,870
Depository fees 30,951
Directors fees 9,955
Registration fees 15,023
Transfer agent fees Class X 724
Transfer agent fees Class Y 1,448
Printing and postage fees Class X 12,308
Printing and postage fees Class Y 2,534
Miscellaneous expenses 2,715
--------
Total expenses 528,306
Less: Waiver by the Adviser/Administrator (127,327)
--------
Net expenses 400,979
---------
NET INVESTMENT INCOME 3,152,851
Net realized loss from Portfolio (4,166)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,148,685
---------
---------
See notes to financial statements.
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
--------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $3,152,851 $3,711,725
Net realized loss from Portfolio (4,166) (14,488)
--------- ---------
Net increase in net assets
resulting from operations 3,148,685 3,697,237
CAPITAL TRANSACTIONS:
Proceeds from sales of shares 258,070,233 92,866,961
Reinvestment of dividends 2,480,628 3,961,848
Cost of shares redeemed (207,265,781) (62,832,764)
------------ -----------
Net increase in net assets resulting
from share transactions 53,285,080 33,996,045
DISTRIBUTIONS TO CLASS X RETAIL:
Net investment income (2,109,369) (3,736,929)
DISTRIBUTIONS TO CLASS Y INSTITUTIONAL:
Net investment income (1,043,148) --
CAPITAL CONTRIBUTIONS -- 39,692
------------ -----------
Total increase in net assets 53,281,248 33,996,045
NET ASSETS:
Beginning of period 86,589,536 52,593,491
------------ ----------
End of period (including undistributed
net income of $334 and 0, respectively) $139,870,784 $86,589,536
----------- ----------
----------- ----------
See notes to financial statements.
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
NOTE 1 - ORGANIZATION
Principal Preservation Cash Reserve Portfolio (the "Fund") is a separate series
of Principal Preservation Portfolios, Inc., (the "Company"), a Maryland
corporation organized in 1984. The Company is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund commenced operations on April 5, 1993.
Through December 31, 1995, the Fund sought to achieve its investment objective
of high current income to the extent consistent with stability of principal and
the maintenance of liquidity by investing all the investable assets of the Fund
in Prime Money Market Portfolio (the "Portfolio"), which, like the Fund, is an
open-end, diversified management investment company having the same investment
objectives as the Fund.
Effective January 1, 1996, pursuant to the Agreement and Plan of Reorganization
and Liquidation dated December 8, 1995, the Fund withdrew its investment in the
Portfolio. As a result of the transactions the capitalization of the Fund was
restructured to increase from 300 million to 400 million the number of shares of
Principal Preservation's authorized common stock allocated to the Fund, and
those 400 million shares were subdivided into two separate classes of 200
million shares each: Class X Common Stock (Retail Class) and Class Y Common
Stock (Institutional Class). All outstanding shares of the Fund, prior to the
Reorganization, were redesignated (without otherwise affecting their rights and
preferences) as shares of the Retail Class.
Each class of shares has identical rights and privileges except with respect to
service organization fees and distribution fees paid by Class X Shares, voting
rights on matters affecting a single class of shares and the exchange privileges
of each class of shares.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the Fund:
a) VALUATION OF INVESTMENTS - Money market instruments are valued at amortized
cost, which the Directors have determined in good faith constitutes fair value.
The Fund's use of amortized cost is subject to the Fund's compliance with
certain conditions as specified under Rule 2a-7 of the Investment Company Act of
1940.
b) INTEREST INCOME - Interest income consists of interest accrued and discount
earned (including both original issue and market discount) on the investments of
the Fund, accrued ratably to the date of expected maturity. Premiums are
amortized on the investments of the Fund, accrued ratably to the date of
expected maturity.
c) FEDERAL INCOME TAXES - The Fund intends to distribute substantially all of
its taxable income to its shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
Accordingly, no provision for federal income or excise taxes is necessary. As of
December 31, 1995, the Fund has a Federal income tax capital loss carry forward
of $99,274 expiring in 2002. A capital loss carry forward of $23,011 was
utilized in the year ended December 31, 1995. It is management's intention to
make no distribution of any future realized capital gains until its Federal
income tax capital loss carry forward is exhausted.
d) DEFERRED ORGANIZATION EXPENSES - Expenses incurred by the Fund in
connection with its organization and the initial public offering of its shares
are being amortized by the Fund over the period of benefit, but not to exceed
five years from the commencement of operations. These expenses were advanced by
B.C. Ziegler and Company ("BCZ"), a wholly-owned subsidiary of The Ziegler
Companies, Inc., who was reimbursed by the Fund.
e) EXPENSE ALLOCATION - The Fund bears all costs of its operations other than
expenses specifically assumed by BCZ. Expenses incurred by the Company with
respect to any two or more funds in the series are allocated in proportion to
the average net assets of each fund, except where allocations of direct expenses
in each fund can otherwise be made fairly. Net investment income, including
expenses, other than class specific expenses and realized and unrealized gains
and losses are allocated daily to each class of shares based upon the relative
net asset value of outstanding shares of each class of shares at the beginning
of the day.
f) USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
g) OTHER - Investment transactions are accounted for on the date the security
is purchased or sold. The Fund has investments in repurchase agreements, which
are securities purchased from another party who agrees to repurchase the
security within a specified time period at a specified price. It is the policy
of the Fund to require the custodian bank to have legally segregated within the
Federal Reserve/Treasury book-entry system, all securities held as collateral in
support of the repurchase agreements. Procedures have been established by the
Fund to monitor the market value of the collateral to ensure the existence of a
proper level of collateral.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
a) ADMINISTRATION FEES - Pursuant to an Administrative Services Agreement,
Ziegler Asset Management, Inc. ("ZAMI"), a wholly-owned subsidiary of The
Ziegler Companies, Inc., provides the Fund general office facilities and
supervises the overall administration of the Fund. For these services, ZAMI
receives a fee computed daily and payable monthly totalling 0.15% of average
daily net assets up to $200 million, and 0.10% of such assets over $200 million.
For the period ended June 30, 1996, the Fund incurred administration fees of
$96,864.
b) INVESTMENT ADVISORY FEES - ZAMI is also the Investment Adviser to the Fund.
For its services under the Investment Advisory Agreement, the advisor receives
from the Fund a fee accrued daily and paid monthly at an annual rate equal to
0.20% of the Portfolio's average daily net assets. For the period ended June 30,
1996, the Fund incurred total Advisory fees of $129,151.
c) DISTRIBUTION FEES - The Retail Class X of the Fund has adopted a
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The Plan authorizes the fund to make payments to BCZ to
reimburse BCZ for expenditures incurred in connection with the distribution of
shares to investors. Under the Plan, payments made by the Fund may not exceed
0.15% of average daily net assets of Class X shares. For the period ended June
30, 1996, the Fund incurred distribution fees aggregating $66,661.
d) SHAREHOLDER SERVICING FEES - BCZ and certain other brokers and financial
institutions serve as shareholder servicing agents for shareholder accounts
opened and maintained through them by their customers in the Retail Class X
Shares. Under this agreement, BCZ receives a fee of up to 0.25% of the Retail
Class X average daily net assets representing shares owned by BCZ's customers
and held in accounts serviced by BCZ. BCZ also serves as transfer and dividend
disbursing agent for all other shareholder accounts not serviced separately by a
shareholder servicing agent. Fees currently charged by BCZ to each class of
shares for this service are $16 per shareholder account. For the period ended
June 30, 1996, the Fund incurred shareholder servicing fees aggregating
$111,102.
e) DEPOSITORY FEES - The Fund has entered into an agreement with BCZ to
provide the Fund with depository services. For these services, the Fund
currently pays BCZ a fee based on average daily net assets, computed monthly, at
an annual rate of 0.055% on the first $50 million of net assets, 0.035% on the
next $150 million of such assets, 0.030% on the next $300 million and 0.025% on
amounts over $500 million of such assets. For the period ended June 30, 1996,
the Fund incurred total Depository fees of $30,951.
f) FUND ACCOUNTING FEES - The Fund has entered into an agreement with BCZ to
provide the Fund with Accounting/Pricing services. For these services, the Fund
currently pays BCZ a base fee base of $15,000 and a fee based on average daily
net assets, computed monthly at an annual rate of 0.04% on net assets between
$50 million and $100 million, 0.03% on the next $100 million of such assets, and
0.01% on amounts over $200 million of such assets. For the period ended June 30,
1996, the Fund incurred total Fund Accounting fees of $22,625.
g) DIRECTOR FEES - Independent Directors of the Company receive an annual fee
of $12,000 and an additional $450 for each Board or Committee meeting attended.
The Fund pays a pro rata portion of these fees. In addition, unaffiliated
Directors are reimbursed for reasonable expenses incurred in relation to
attendance at the meetings.
h) WAIVER OF EXPENSES - During the period ended June 30, 1996, ZAMI waived
fees of $127,327 for certain expenses. These voluntary waivers may be
discontinued at any time by ZAMI.
NOTE 4 - INVESTMENT TRANSACTIONS
Purchases and sales (including maturities) of U.S. Government securities
aggregated $3,611,628,257 and $3,601,261,281, respectively.
NOTE 5 - CAPITAL CONTRIBUTION
During the year ended December 31, 1995, BCZ contributed capital to the Cash
Reserve Portfolio to offset current year realized losses of $14,488 and prior
year realized losses of $25,204. Neither BCZ nor any of its affiliates received
any shares of common stock or any other consideration in exchange for this
contribution which further increased the assets of Portfolio.
NOTE 6 - CAPITAL SHARE TRANSACTIONS
On January 1, 1996 all previous existing shares of Cash Reserve Portfolio were
reclassified as Retail Class X Shares. On the same day, shares of Prospect Hill
Trust, an institutional money market fund registered under the Investment
Company Act of 1940, were exchanged for Institutional Class Y Shares of Cash
Reserve Portfolio. Transactions in capital shares for the Fund, in thousands,
were as follows:
CLASS X CLASS Y
------- -------
SHARES OUTSTANDING
AT DECEMBER 31, 1995... 86,688 0
Shares sold............ 37,664 219,971
Shares reinvested ..... 2,510 451
Shares redeemed........ (39,752) (167,514)
-------- ---------
SHARES OUTSTANDING
AT JUNE 30, 1996 ...... 87,110 52,908
-------- --------
-------- --------
<TABLE>
CASH RESERVE PORTFOLIO -- CLASS Y SHARES (INSTITUTIONAL CLASS)
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<CAPTION>
PRINCIPAL MATURITY INTEREST VALUE
AMOUNT DATE RATE (NOTE 2A)
- ------- -------- ------ ---------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 37.5%
U.S. TREASURY BILLS
$3,000,000 U.S. Treasury Bill 7/25/96 5.35% $2,989,234
2,000,000 U.S. Treasury Bill 8/22/96 5.47 1,984,198
2,000,000 U.S. Treasury Bill 2/28/97 6.88 2,021,686
----------
Total Treasury Bills and Notes 6,995,118
----------
AGENCY FOR INTERNATIONAL DEVELOPMENT
2,247,551 Agency for International Development (Israel) (b)<F6> 1/1/06 5.66 2,247,551
455,000 Agency for International Development (Panama) (a)<F5> 8/1/11 6.25 455,000
----------
Total Agency for International Development 2,702,551
----------
FARMERS HOME ADMINISTRATION ("FMHA")
111,810 FmHA (c)<F7> 7/26/96 9.75 111,810
53,939 FmHA (c)<F7> 7/8/99 8.25 54,077
72,901 FmHA (c)<F7> 6/15/00 6.75 72,901
73,645 FmHA (c)<F7> 11/1/00 7.00 73,645
164,397 FmHA (c)<F7> 12/12/11 7.25 164,938
71,598 FmHA (c)<F7> 3/4/14 7.00 71,832
7,902 FmHA (c)<F7> 7/1/22 6.88 7,909
90,867 FmHA (c)<F7> 6/15/23 6.60 90,867
225,951 FmHA (c)<F7> 8/24/23 6.60 225,951
----------
Total Farmers Home Administration 873,930
----------
FEDERAL FARM CREDIT BANK ("FFCB")
3,000,000 FFCB Discount Note 3/3/97 4.95 2,997,802
----------
Total Federal Farm Credit Bank 2,997,802
----------
FEDERAL HOME LOAN BANK ("FHLB")
3,000,000 FHLB Discount Note 7/10/96 5.20 2,996,062
3,000,000 FHLB Discount Note 8/5/96 5.24 2,984,717
2,000,000 FHLB Note 10/25/96 6.69 2,008,454
1,000,000 FHLB Note 11/15/96 6.17 1,004,528
2,000,000 FHLB Note 3/4/97 4.94 1,997,771
----------
Total Federal Home Loan Bank 10,991,532
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC")
5,000,000 FHLMC Discount Note 7/1/96 5.27 5,000,000
5,000,000 FHLMC Discount Note 7/2/96 5.26 4,999,269
----------
Total Federal Home Mortgage Association 9,999,269
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")
$3,000,000 FNMA Discount Note 7/3/96 5.23% 2,999,128
1,095,000 FNMA Discount Note 7/10/96 5.29 1,093,874
3,000,000 FNMA 9/20/96 5.60 2,998,764
2,000,000 FNMA 9/23/96 5.50 1,998,432
2,000,000 FNMA 12/10/96 7.70 2,018,840
----------
Total Federal National Mortgage Association 11,109,038
----------
STUDENT LOAN MARKETING ASSOCIATION ("SLMA")
2,000,000 SLMA (a)<F5> 12/20/96 5.45 2,000,000
----------
Total Student Loan Marketing Association 2,000,000
----------
SMALL BUSINESS ADMINISTRATION ("SBA")
591,042 SBAPool #500981 (c)<F7> 7/25/05 7.00 596,165
113,396 SBAPool #501140 (c)<F7> 9/25/06 6.63 113,782
469,811 SBAPool #501934 (c)<F7> 7/25/09 6.38 472,243
19,982 SBAPool #501471 (c)<F7> 2/25/11 9.88 22,000
165,077 SBAPool #500263 (c)<F7> 4/25/12 7.50 169,127
1,123,795 SBAPool #502348 (c)<F7> 9/25/13 6.13 1,123,795
434,276 SBAPool #501218 (c)<F7> 7/25/15 6.75 441,319
691,612 SBAPool #502122 (c)<F7> 1/25/18 6.25 697,767
411,463 SBALoan (c)<F7> 1/15/04 7.73 420,920
85,941 SBALoan (c)<F7> 6/15/05 7.13 87,442
347,539 SBALoan (c)<F7> 7/15/05 7.13 353,799
272,855 SBALoan (c)<F7> 12/15/06 7.22 279,044
----------
Total Small Business Administration 4,777,403
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 52,446,643
----------
SHORT TERM -- 62.3%
COMMERCIAL PAPER
$3,000,000 American General Corporation 7/22/96 5.27% $2,990,777
3,000,000 American General Corporation 8/1/96 5.38 2,986,102
3,000,000 American Express Credit Corporation 7/18/96 4.98 2,992,945
1,000,000 American Express Credit Corporation 8/1/96 5.34 995,402
2,000,000 American Express Credit Corporation 8/6/96 5.34 1,989,320
1,000,000 Associates Corporation 8/8/96 5.29 994,416
3,000,000 Associates Corporation 8/29/96 5.31 2,973,892
2,000,000 Associates Corporation 9/12/96 5.38 1,978,181
2,000,000 The CITGroup Holdings Corporation 7/8/96 5.31 1,997,935
2,000,000 The CITGroup Holdings Corporation 7/22/96 5.27 1,993,852
2,000,000 The CITGroup Holdings Corporation 8/1/96 5.31 1,990,855
6,000,000 Commercial Credit Corporation 7/29/96 5.37 5,974,940
2,000,000 Ford Motor Credit Corporation 9/5/96 5.30 1,980,566
4,000,000 Ford Motor Credit Corporation 9/12/96 5.38 3,956,362
3,000,000 General Electric Capital Corporation 8/26/96 5.39 2,974,847
3,000,000 General Electric Capital Corporation 10/16/96 5.30 2,952,742
3,000,000 Household Finance Corporation 7/18/96 5.28 2,992,520
3,000,000 Household Finance Corporation 9/25/96 5.27 2,962,232
3,000,000 Marshall &Illsley Corporation 7/25/96 5.29 2,989,420
3,000,000 Marshall &Illsley Corporation 8/15/96 5.34 2,979,975
3,000,000 Norwest Financial 7/11/96 5.29 2,995,594
3,000,000 Norwest Financial 9/9/96 5.34 2,968,850
----------
Total Commercial Paper 59,611,725
----------
REPURCHASE AGREEMENTS
27,563,000 First Boston Corp 7/1/96 5.35 27,563,000
----------
(Agreement dated 6/28/96, collateralized by
$27,665,000 par value in U.S. Treasury Notes
due 9/30/96, $28,183,331.72 market value)
Total Repurchase Agreements 27,563,000
----------
TOTAL SHORT TERM 87,174,725
----------
Total Investments, at Amortized Cost -- 99.8% 139,621,368
Other Assets, less Liabilities -- 0.2% 193,449
----------
Net Assets -- 100% $139,814,817
----------
----------
Notes to Schedule of Investments
- --------------------------------
(a)<F5>The security has a floating/variable rate coupon payment tied to the
Treasury Bill lending rate. The coupon payment adjusts weekly or quarterly
thereby reducing the effective maturity to one year or less.
(b)<F6>The security has a floating/variable rate coupon payment tied to the six
month Liborlending rate. The coupon payment adjusts weekly thereby reducing the
effective maturity to one year or less.
(c)<F7>The security has a floating/variable rate coupon payment tied to the
Prime lending rate. The coupon payment adjusts daily, monthly, quarterly, semi-
annually or annually thereby reducing the effective maturity to one year or
less.
See notes to schedule of investments.
</TABLE>
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISOR AND ADMINISTRATOR
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, TRANSFER AND
DIVIDEND DISBURSING AGENT,
SHAREHOLDER SERVICING AGENT AND
DEPOSITORY AND ACCOUNTING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, Wisconsin 53202
This report has been prepared for the information of shareholders of Principal
Preservation Portfolios, Inc. Cash Reserve Portfolio, and may not be used in
connection with the offering of securities unless preceded or accompanied by a
current Prospectus.
