(PPP LOGO)
Tax-Exempt Portfolio
Government Portfolio
S&P 100 Plus Portfolio
Dividend Achievers Portfolio
Select Value Portfolio
PSE Tech 100 Index Portfolio
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 1996
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PRESIDENT'S LETTER/MANAGEMENT DISCUSSION AND ANALYSIS
SEMIANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1996
August 28, 1996
Dear Shareholder:
We are pleased to present the semiannual report to the shareholders of the
long term portfolios of Principal Preservation. The Wisconsin Tax-Exempt
Portfolio and Cash Reserve Portfolio reports are contained in separate reports.
The Portfolios continue to grow in net assets from $236,500,000 at December 31,
1995 to $241,225,000 at June 30, 1996. During the month of June, we started a
new fund the PSE Tech 100 Index Portfolio. This fund is, as of the date of this
report, is the only mutual fund based upon a technology index. PSE is a licensed
trademark of the Pacific Stock Exchange and the index represents 100 different
technology securities in 15 different sub sectors identified by the Pacific
Stock Exchange. Since introduction, the fund has grown to over $3,600,000.
On April 30, 1996, the assets of the Balanced and Insured Tax-Exempt
Portfolios were merged with the S&P 100 Plus and Tax-Exempt Portfolios,
respectively. The funds were merged because the portfolios were not growing and
we believed the shareholders would receive greater value through the tax-free
reorganizations. The details of the shareholders votes are contained in footnote
eight in the Notes to Financial Statements on page 20.
At the April Board of Directors meeting, the Board appointed Robert J.
Tuszynski as President and CEO to replace myself. Bob has demonstrated, through
approximately 13 years of service, the leadership qualities to guide the fund
Family in the future. I remain as the Chairman of the Board of Directors of
Principal Preservation. On behalf of all of our associates at Principal
Preservation we express our gratitude for your continued trust in us.
Sincerely,
/s/ R. D. Ziegler
R. D. Ziegler
Chairman
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.
MANAGEMENT DISCUSSION AND ANALYSIS
There are different types of risks associated with any investment. While the
debate is being waged how to define and present risks associated in investing in
various type of mutual funds, an individual shareholder needs to define the
types of risk tolerance that is acceptable. A shareholder should be assessing
criteria that may include market value, credit, regulatory and volatility risks.
Market value risk involves the absolute price changes of a portfolio both in an
up and down manner. Credit risk looks to the ability of an issuer, as measured
against similar investments, to meet its financial obligations. Regulatory risk
would, for instance, involve changes to either the tax code or other government
regulations that would impact the security's valuation. Volatility risk address
how the investment performs against a measurable benchmark, group of similar
securities or versus an identifiable group of mutual funds. In future reports we
will be attempting to analyze each of the Portfolios across the risk spectrum.
We would appreciate feedback from you, our shareholders, on which of the above
areas are the most important.
FIXED INCOME ANALYSIS
The fixed income markets for the first six months traded in a narrow band.
After the third consecutive decrease in the Fed Funds rate in January of 1996,
institutional investors became nervous as the economy began to heat up and they
anticipated that the Fed would reverse course and increase the Fed Funds rate.
As a result, anytime the economic news was good, the prices on fixed income
securities fell as yields rose on inflation fears. However, enough of the
indicators were mixed allowing the Fed to take no action.
At the beginning of the year, the Fed Funds rate was 5.50% and as of June 30,
1996 was at a target of 5.25%. The 90 day Treasury Bill and 30 year Treasury
Bond were at 5.08% and 6.03%, respectively, on December 31, 1995 and finished
June 30, 1996 at 5.16% and 6.87%. Therefore, the yield curve widened due to the
uncertainty of the action of the Fed. We witnessed general obligation municipal
securities move from 5.28% on December 31, 1995 to 5.77% on June 30, 1996, while
the single A municipal revenue bonds changed from 5.71% to 6.13% during the same
period. This move indicated that investors were concerned about quality. Because
the yields rose moderately, the value of municipal securities stayed relatively
flat.
Because 1996 is an election year, we are not anticipating any large movements
in both the short and long ends of the yield curves. However, we believe that
the Fed is attempting to keep inflation in check and would look for them to
increase the Fed funds rate by 0.25% in late 1996 after the election concludes.
TAX-EXEMPT PORTFOLIO
The net asset value total return for the Tax-Exempt Portfolio for the year to
date period ended June 30, 1996 was (0.80)%. The one year total return was
6.28%. Generally, the average total return of 229 municipal bond funds, as
measured by Lipper Analytical was (1.38)% and 5.69%, respectively.
The portfolio began the year with an average maturity of 17 years. During the
period, Tom Sancomb, the portfolio manager, moved the average maturity to 17.5
years and did not drastically alter the composition of the portfolio. When the
merger of the Insured Tax-Exempt Portfolio into the Tax-Exempt Portfolio
occurred on April 30, 1996, an additional 30 securities were added. Tom, during
the second quarter, consolidated many of the positions to reduce the expense of
obtaining prices for each security. In addition, the consolidation improved the
average credit quality from 88.5% in bonds rated AA or better by Standard &
Poor's on December 31, 1995 to 91.0% on June 30, 1996. The state diversification
improved as well from 20 to 27 states. The manager focused on slightly
discounted securities for the portfolio which thereby provides better chance for
upside market movement in this current market environment.
GOVERNMENT PORTFOLIO
The net asset value total return of the Government Portfolio for the year to
date period ended June 30, 1996 was (1.45)% and the one year total return was
3.98%. This compares to the average of 298 Government funds from the Morningstar
database with an average maturity between 3 and 10 years of (1.46)% for the
period ended June 30, 1996 and the same category measuring 293 funds of 3.86%
for the one year ended June 30, 1996.
The effect of the uncertainty in the financial markets was that long term
rates moved up in anticipation of Fed interaction that never occurred. During
this period, the portfolio management team, kept a modified barbell of
securities with approximately half the portfolio in maturities between 2 and 3
years and the other half in securities between the maturities of 6 to 8 years.
Purchase and sales of U.S. Treasury securities occurred when there was either
net inflow or outflow. Otherwise, the management group did not make any changes
to the portfolio.
EQUITY MARKET OVERVIEW
The equity markets followed the reaction to the fears of inflation. Day to
day market volatility increased dramatically during 1996, as institutional
investors moved their stock portfolios rapidly in response to the conflicting
reports of economic indicators. The Dow Industrial and S&P 500 indices
registered new highs on May 22 and May 24, 1996 at 5,778.00 and 678.51,
respectively. During the latter part of June and continuing into July, 1996 the
stock market witnessed a sell off and currently, as of August 28, 1996 the
indices stood at 5,712.38 and 670.63, off from their highs earlier this year.
Corporate earnings growth slowed during the period.
S&P 100 PLUS PORTFOLIO
The S&P 100 Plus Portfolio net asset value total return was 10.33% and for
the year ended June 30, 1996 was 25.07%. The S&P 100 Index total returns were
11.67% and 27.80% for the same periods, respectively.
During the first quarter of 1996, Bill Zink, the portfolio manager, slightly
under weighted the equity exposure through the use of index options and cash
which, after the effect of expenses under performed the index by 0.22%. Most of
the under performance occurred in January of 1996.
For the final six months of this year, the Bill expects to see a continuation
of moderate corporate profits growth and the possibility of increased inflation
and therefore is maintaining a neutral position versus the underlying index. In
addition he believes that individual daily market value volatility to increase
in the last six months.
DIVIDEND ACHIEVERS PORTFOLIO
The Dividend Achievers Portfolio net asset value total return was 10.97% for
the six months ended June 30, 1996 and 28.10% for the one year period ended June
30, 1996. This compares favorably to the returns of the S&P 500 Index of 10.10%
and 26.00%, respectively, for the same periods.
While institutional investors focused their investments more on small to mid
cap securities, another area that benefitted was stocks which are thought to be
more defensive in nature. Those large common stocks which have strong balance
sheets, are well run and have a favorable record of dividend growth. Doug
Ziegler, portfolio manager, maintained 65% of the portfolio in stocks that
generated outstanding dividend and earnings growth compared to the average
growth rates of the S&P 500 Index. However, Doug also insured that the portfolio
had good sector representation compared to the index.
The top five holdings of the portfolio and the relative percentage ownership
as of June 30, 1996 were Gillette 4.93%, Pepsico Incorporated 4.81%, Federal
National Mortgage Corp. 4.41%, Diebold, Inc. 4.31% and Johnson & Johnson 3.91%.
The final six months should not bring dramatic changes to the sector composition
and the portfolio should continue to hold about 35 securities.
SELECT VALUE PORTFOLIO
The net asset value total return for the Select Value Portfolio for the year
to date and for the one year period ended June 30, 1996 was 12.34% and 27.1%,
respectively. In comparison, the Russell 2000 increased 10.36% and 23.98%,
respectively, during the same period.
In terms of overall stock market performance, small company stock funds
generally performed modestly better than large company funds during the last six
months. The Select Value Portfolio's performance was enhanced first by the
strong returns of the financial, consumer and economically sensitive stocks in
the first quarter and energy as well as a continued price appreciation of the
consumer sector stocks held in the portfolio.
Although Ken Kailin, the portfolio manager, is concerned about inflation and
the effect of a rise in long term borrowing costs of corporations, he believes
that small capitalized stocks are undervalued relative to large stocks. In
addition, the stronger dollar and weakness in European communities could cause
some drag on earnings of large multinational firms. A stronger U.S. economy
should generate better earnings growth in the future for economically sensitive
industries. Industries, Ken believes, are widely held by value type managers.
The top five holdings as of June 30, 1996 were American Standard Co. 3.4%,
Sierra Health Services, Inc. 3.1%, UCAR International Inc. 3.1%, Harman
International Industries, Inc. 3.1% and Fischer Scientific International, Inc.
3.0%.
PSE TECH 100 INDEX PORTFOLIO
The PSE Tech 100 Index Portfolio had a net asset value total return, since
its inception on June 10, 1996, of (5.30)% compared to the Pacific Stock
Exchange Technology Index performance of (4.97)%.
The technology sector, was hampered during the month of June by the
inflationary fears and disappointment with earnings announcements of Motorola
and Hewlett-Packard. These factors led to the very strong decline. The
portfolio, with an index matching objective, followed the index tightly, and
felt the effects of the downturn. From a market risk standpoint and day to day
volatility, this portfolio will exhibit the highest degree of risk and
volatility in comparison to our other funds.
However, Jay Ferrara, the portfolio manager, believes that the companies in
the index are well positioned versus their worldwide competitors and the future
will improve the short term downturn witnessed for the first 20 days of
existence. The index is price weighted and therefore is not dominated by the
market capitalization large companies such as Microsoft or Intel. Although
considered a sector fund, the portfolio is spread among 15 different sub sectors
of the technology spectrum.
Shown below are the average annualized total returns for the one, five, ten
year or since inception for each of the portfolios contained in this report:
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
JUNE 30, 1996 JUNE 30, 1996 JUNE 30, 1996
------------------ ------------------- -------------------
PORTFOLIO SALES CHARGE N.A.V. SALES CHARGE N.A.V. SALES CHARGE N.A.V.
- --------- ------------ ----- ------------ ----- ------------ ------
Tax-Exempt 2.56% 6.28% 6.72% 7.48% 6.63% 7.01%
Government 0.34% 3.98% 6.67% 7.44% 6.92% 7.31%
S&P 100 Plus 19.44% 25.07% 13.22% 14.27% 12.13% 12.65%
Dividend Achievers 22.34% 28.10% 10.34% 11.36% 10.46%*<F1>11.00%*<F1>
Select Value 21.40% 27.12% 11.93%**<F2>14.75%**<F2> N/A N/A
PSE Tech 100 Index-9.56%***<F3>-5.30%***<F3>N/A N/A N/A N/A
*<F1>The Dividend Achievers Portfolio average annualized return is for the
since inception period of January 2, 1987 through June 30, 1996.
**<F2>The Select Value average annualized total return is for the since
inception period of August 23, 1994 through June 30, 1996.
***<F3>The PSE Tech 100 Index Portfolio total return is for the period from
June 10, 1996 (inception date) through June 30, 1996.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of
each of six portfolios of Principal Preservation Portfolios, Inc. outstanding
for the following periods presented, which should be read in conjunction with
the financial statements and related notes:
<TABLE>
TAX-EXEMPT PORTFOLIO
--------------------------------------------------------------------------------
<CAPTION>
For the six
months ended
June 30, 1996 For the years ended December 31,
------------- -----------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987
----------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $9.39 $8.36 $9.41 $8.67 $8.46 $8.19 $8.23 $8.06 $8.14 $8.81
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .21 .45 .45 .48 .50 .53 .53 .55 .55 .60
Net realized and
unrealized gains (losses)
on investments (.29) 1.03 (1.05) .74 .21 .27 (.04) .17 (.08) (.67)
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (.08) 1.48 (.60) 1.22 .71 .80 .49 .72 .47 (.07)
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.21) (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55) (.60)
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.21) (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55) (.60)
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.10 $9.39 $8.36 $9.41 $8.67 $8.46 $8.19 $8.23 $8.06 $8.14
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F5> (0.8)% 18.1% (6.4)% 14.3% 8.6% 10.0% 6.2% 9.2% 6.0% (0.9)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $68,676 $56,443 $55,492 $68,102 $60,171 $63,932 $65,265 $73,333 $85,469 $107,471
Ratio of net expenses to
average net assets 1.1%*<F4>+<F6> 1.0%+<F6> 1.0% 0.9% 0.9% 0.9% 0.9% 1.0% 1.2% 1.1%
Ratio of net investment
income to average net assets 4.7%*<F4>+<F6> 4.9%+<F6> 5.2% 5.2% 5.9% 6.3% 6.6% 6.7% 6.9% 7.1%
Portfolio turnover rate 35.6% 105.9% 36.1% 56.3% 48.5% 38.3% 40.3% 21.5% 38.8% 18.0%
*<F4>Annualized.
**<F5>The Fund's sales charge is not reflected in total return as set forth in
the table.
+ <F6>Reflects a voluntary reimbursement of fund expenses of 0.1% through
June 30, 1996 and 0.01% for 1995, respectively.
</TABLE>
<TABLE>
GOVERNMENT PORTFOLIO
--------------------------------------------------------------------------------
<CAPTION>
For the six
months ended
June 30, 1996 For the years ended December 31,
------------ -----------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987
----------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $9.64 $8.84 $9.98 $9.64 $9.68 $9.10 $9.11 $8.88 $9.11 $9.71
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .32 .61 .61 .63 .67 .73 .76 .75 .75 .73
Net realized and
unrealized gains (losses)
on investments (.46) .80 (1.14) .35 (.04) .58 (.01) .23 (.17) (.42)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (.14) 1.41 (.53) .98 .63 1.31 .75 .98 .58 .31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.32) (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.75) (.73)
Distributions from net
realized gains
on investments -- -- -- -- -- -- -- -- (.06) (.13)
Distribution of capital -- -- -- -- -- -- -- -- -- (.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.32) (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.81) (.91)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.18 $9.64 $8.84 $9.98 $9.64 $ 9.68 $9.10 $9.11 $8.88 $9.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F8> (1.5)% 16.3% (5.4)% 10.3% 6.8% 15.1% 8.7% 11.5% 6.5% 3.4%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $45,821 $49,319 $47,324 $54,327 $37,634 $32,737 $29,351 $30,631 $32,950 $31,036
Ratio of net expenses to
average net assets 1.2%*<F7>+<F9> 1.1%+<F9> 1.1% 1.0% 1.0% 1.1% 1.2% 1.2%+<F9> 1.2%+<F9> 1.3%+<F9>
Ratio of net investment
income to average net assets 6.9%*<F7>+<F9> 6.5%+<F9> 6.6% 6.2% 7.0% 8.0% 8.5% 8.4%+<F9> 8.3%+<F9> 7.8%+<F9>
Portfolio turnover rate 6.6% 68.2% 106.1% 8.7% 10.0% 62.2% 57.1% 141.8% 36.7% 80.2%
*<F7>Annualized.
**<F8>The Fund's sales charge is not reflected in total return as set forth in
the table.
+ <F9>Reflects a voluntary reimbursement of fund expenses of 0.06% through
June 30, 1996, 0.02% in 1995, 0.1% in 1989, 0.5% in 1988 and 0.3% in 1987,
respectively.
</TABLE>
<TABLE>
S&P 100 PLUS PORTFOLIO
--------------------------------------------------------------------------
<CAPTION>
For the six
months ended
June 30, 1996 For the years ended December 31,
------------- ----------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987
------------ ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $19.53 $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62 $10.43
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .13 .25 .25 .21 .24 .27 .28 .26 .26 .33
Net realized and
unrealized gains (losses)
on investments 1.89 5.21 (.09) 1.14 .48 2.93 (.67) 2.17 1.37 .14
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 2.02 5.46 .16 1.35 .72 3.20 (.39) 2.43 1.63 .47
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.13) (.25) (.25) (.21) (.24) (.27) (.28) (.26) (.26) (.33)
Distributions from
net realized gains
on investments -- (.63) -- (.11) (.69) (.31) -- (.01) (.88) (.95)
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.13) (.88) (.25) (.32) (.93) (.58) (.28) (.27) (1.14) (1.28)
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $21.42 $19.53 $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
------ ------ ----- ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F11> 10.3% 36.7% 1.1% 9.7% 5.2% 27.8% (3.2)% 24.3% 17.1% 4.1%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $69,783 $57,062 $40,034 $38,944 $30,025 $27,420 $20,413 $20,811 $16,960 $18,752
Ratio of net expenses to
average net assets 1.1%*<F10> 1.2% 1.2% 1.2% 1.3% 1.3% 1.3%+<F12> 1.3%+<F12> 1.4%+<F12> 0.6%+<F12>
Ratio of net investment
income to average net assets 1.2%*<F10> 1.4% 1.7% 1.4% 1.7% 2.0% 2.4%+<F12> 2.3%+<F12> 2.5%+<F12> 2.7%+<F12>
Portfolio turnover rate 9.5% 3.5% 1.0% 2.2% 8.5% 3.1% 1.9% 3.0% 37.5% 54.3%
*<F10>Annualized.
**<F11>The Fund's sales charge is not reflected in total return as set forth in
the table.
+ <F12>Reflects a voluntary reimbursement of fund expenses of 0.2% in 1990,
0.4% in 1989, 0.8% in 1988 and 1.7% in 1987, respectively.
</TABLE>
<TABLE>
DIVIDEND ACHIEVERS PORTFOLIO
------------------------------------------------------------------
<CAPTION>
For the six
months ended
June 30, 1996 For the years ended December 31,
------------- ---------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
------------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $16.97 $13.24 $13.40 $14.25 $14.84 $11.50
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .06 .18 .18 .14 .14 .25
Net realized and
unrealized gains (losses)
on investments 1.80 3.99 (.02) (.85) .31 4.14
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.86 4.17 .16 (.71) .45 4.39
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.06) (.18) (.18) (.14) (.14) (.25)
net realized gains
on investments -- (.26) (.14) -- (.90) (.80)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.06) (.44) (.32) (.14) (1.04) (1.05)
------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $18.77 $16.97 $13.24 $13.40 $14.25 $14.84
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN**<F14> 11.0% 31.7% 1.2% (5.0)% 3.1% 38.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $27,633 $25,393 $20,231 $24,928 $27,020 $18,202
average net assets 1.3%*<F13>+<F15> 1.3%+<F15> 1.5% 1.3%+<F15> 1.2%+<F15> 1.2%+<F15>
Ratio of net investment
income to average net assets 0.7%*<F13>+<F15> 1.2%+<F15> 1.3% 1.0%+<F15> 1.0%+<F15> 1.8%+<F15>
Portfolio turnover rate 10.8% 28.2% 36.5% 92.7% 83.0% 96.5%
* <F13>Annualized.
**<F14>The Fund's sales charge is not reflected in total return as set forth in
the table.
+ <F15>Reflects a voluntary reimbursement of fund expenses of 0.2% through
June 30, 1996, 0.2% in 1995, 0.1% in 1993, 0.1% in 1992, 0.2% in 1991, 0.5% in
1990, 0.7% in 1989, 1.7% in 1988 and 2.3% in 1987, respectively.
</TABLE>
DIVIDEND ACHIEVERS PORTFOLIO
-----------------------------
For the years ended December 31,
----------------------------------
1990 1989 1988 1987
----- ----- ----- -----
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $11.65 $10.00 $8.99 $9.55
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .25 .28 .28 .28
Net realized and
unrealized gains (losses)
on investments (.15) 1.65 1.06 (.56)
------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .10 1.93 1.34 (.28)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.25) (.28) (.27) (.28)
Distributions from
net realized gains
on investments -- -- (.06) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (.25) (.28) (.33) (.28)
------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $11.50 $11.65 $10.00 $8.99
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN**<F14> 1.0% 19.5% 15.0% (3.2)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $11,468 $12,750 $6,854 $6,796
Ratio of net expenses to
average net assets 1.2%+<F15> 1.2%+<F15> 1.2%+<F15> 0.6%+<F15>
Ratio of net investment
income to average net assets 2.3%+<F15> 2.6%+<F15> 2.9%+<F15> 2.7%+<F15>
Portfolio turnover rate 47.7% 30.9% 10.1% 10.5%
* <F13>Annualized.
**<F14>The Fund's sales charge is not reflected in total return as set forth in
the table.
+ <F15>Reflects a voluntary reimbursement of fund expenses of 0.2% through
June 30, 1996, 0.2% in 1995, 0.1% in 1993, 0.1% in 1992, 0.2% in 1991, 0.5% in
1990, 0.7% in 1989, 1.7% in 1988 and 2.3% in 1987, respectively.
SELECT VALUE PORTFOLIO
--------------------------------------
For the
period from
For the six August 23, 1994
months ended (commencement
June 30, 1996 of operations) to
(Unaudited) 1995 December 31, 1994
------------- ----- ----------------
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $10.21 $9.03 $9.55
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .10 .14 .04
Net realized and
unrealized gains (losses)
on investments 1.25 1.73 (.51)
------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.35 1.87 (.47)
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.10) (.14) (.03)
Distributions from
net realized gains
on investments -- (.43) (.01)
Distributions in excess of net
realized gains on investments -- (.12) --
Book return of capital -- -- (.01)
------ ------ ------
TOTAL DISTRIBUTIONS (.10) (.69) (.05)
------ ------ ------
NET ASSET VALUE,
END OF PERIOD $11.46 $10.21 $ 9.03
------ ------ ------
------ ------ ------
TOTAL RETURN**<F17> 12.3% 20.8% (5.0)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $4,294 $3,445 $1,935
Ratio of net expenses to
average net assets 1.0%*<F16>+<F18> 0.8%+<F18> 0.8%*<F16>+<F18>
Ratio of net investment
income to average net assets 0.4%*<F16>+<F18> 1.4%+<F18> 1.1%*<F16>+<F18>
Portfolio turnover rate 75.0% 124.3% 20.2%
*<F16>Annualized.
**<F17>The Fund's sales charge is not reflected in total return as set forth in
the table.
+ <F18>Reflects a voluntary reimbursement of fund expenses of 1.3% through
June 30, 1996, 2.5% in 1995 and 0.4% for 1994, respectively.
PSE TECH 100 INDEX PORTFOLIO
----------------------------
For the period from
June 10, 1996
(commencement
of operations) to
June 30, 1996
(Unaudited)
------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .00
Net realized and unrealized gains (losses)
on investments (.53)
------
TOTAL FROM INVESTMENT OPERATIONS (.53)
------
LESS DISTRIBUTIONS:
Dividends from net investment income --
Distributions from net realized gains
on investments --
Book return of capital --
------
TOTAL DISTRIBUTIONS --
------
NET ASSET VALUE, END OF PERIOD $9.47
------
------
TOTAL RETURN**<F20> (5.3)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $2,128
Ratio of net expenses to average net assets 0.0%*<F19>+<F21>
Ratio of net investment income to average
net assets 0.7%*<F19>
Portfolio turnover rate 0.0%
*<F19>Annualized.
**<F20>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F21>Reflects a voluntary reimbursement of fund expenses of 8.1% in 1996.
<TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
BALANCE SHEETS
JUNE 30, 1996 (UNAUDITED)
<CAPTION>
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Long-term investments
in securities, (See
Schedule of Investments) $67,781,649 $45,024,525 $70,143,943 $27,303,744 $3,941,460 $2,203,892
Short-term investments 916,107 39,612 4,280,050 437,359 356,959 146,000
----------- ----------- ----------- ----------- ----------- -----------
Total investments 68,697,756 45,064,137 74,423,993 27,741,103 4,298,419 2,349,892
Cash 706 837 939 981 896 630
Receivables:
Capital shares sold 9,796 17,149 140,015 6,253 4,223 267,360
Dividends and interest 1,212,667 929,972 126,377 48,145 5,701 635
Investments sold -- -- 1,695,756 -- 184,038 --
Margin variation -- -- 26,250 -- -- 3,825
----------- ----------- ----------- ----------- ----------- -----------
Total receivables 1,222,463 947,121 1,988,398 54,398 193,962 271,820
Other assets 1,782 1,571 1,471 663 8,635 --
----------- ----------- ----------- ----------- ----------- -----------
Total assets $69,922,707 $46,013,666 $76,414,801 $27,797,145 $ 4,501,912 $ 2,622,342
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payables:
Capital shares redeemed $20,919 $8,054 $61,749 $74,083 $-- $--
Distributions to shareholders 107,948 98,498 16,224 3,367 34 --
Expenses 119,260 85,839 98,572 86,234 24,728 --
Investments purchased 998,521 -- 1,717,437 -- 182,973 179,129
Payable for Futures -- -- 4,737,600 -- -- 315,075
Other liabilities -- 2 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 1,246,648 192,393 6,631,582 163,684 207,735 494,204
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Capital stock 70,097,421 48,750,477 42,824,674 17,321,741 3,564,853 2,212,136
Undistributed (overdistributed)
net investment income (19,739) 2,433 2,170 162 454 892
Undistributed net realized gains
(losses) on investments (2,295,129) (2,764,407) 3,240,230 627,833 276,638 --
Net unrealized appreciation
on investments 893,506 (167,230) 23,716,145 9,683,725 452,232 (84,890)
----------- ----------- ----------- ----------- ----------- -----------
Total net assets 68,676,059 45,821,273 69,783,219 27,633,461 4,294,177 2,128,138
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities
and net assets $69,922,707 $46,013,666 $76,414,801 $27,797,145 $ 4,501,912 $ 2,622,342
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $9.10 $9.18 $21.42 $18.77 $11.46 $9.47
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
MAXIMUM OFFERING PRICE
PER SHARE $9.43 $9.51 $22.43 $19.65 $12.00$ 9.92
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<CAPTION>
FOR THE
PERIOD FROM
JUNE 10, 1996
(COMMENCEMENT
OF OPERATIONS) TO
JUNE 30, 1996
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
---------- ----------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $-- $-- $627,252 $246,753 $16,923 $357
Interest 1,739,037 1,883,453 108,658 16,552 10,809 535
---------- ---------- ---------- ---------- ---------- ----------
Total investment
income 1,739,037 1,883,453 735,910 263,305 27,732 892
---------- ---------- ---------- ---------- ---------- ----------
EXPENSES:
Investment advisory fees 172,378 140,799 165,860 99,825 14,582 495
Custodian fees 12,695 10,010 10,457 6,370 1,820 840
Transfer agent fees 29,025 30,576 36,601 23,842 1,456 1,050
Broker service fees 73,983 58,668 78,937 33,273 4,863 207
Professional fees 27,122 23,838 24,635 16,016 12,376 3,045
Registration 6,006 7,280 8,008 8,008 6,006 1,575
Communication 4,004 2,184 7,280 4,914 364 1,638
Director fees 7,296 6,519 5,808 2,679 182 252
Pricing of investments 4,766 1,092 2,730 1,092 1,092 420
Deferred organization expense -- -- -- -- 1,358 --
Other 5,071 2,279 2,298 1,583 975 210
---------- ---------- ---------- ---------- ---------- ----------
Total expenses 342,346 283,245 342,614 197,602 45,074 9,732
Less expenses absorbed
by advisor (3,529) (13,450) -- (24,641) (25,665) (9,732)
---------- ---------- ---------- ---------- ---------- ----------
Net expenses 338,817 269,795 342,614 172,961 19,409 0
---------- ---------- ---------- ---------- ---------- ----------
NET INVESTMENT INCOME 1,400,220 1,613,658 393,296 90,344 8,323 892
---------- ---------- ---------- ---------- ---------- ----------
NET REALIZED GAINS
ON INVESTMENTS 351,207 21,453 3,234,532 627,645 315,544 --
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS (1,934,282) (2,356,624) 3,255,394 2,058,548 124,448 (84,890)
---------- ---------- ---------- ---------- ---------- ----------
Net gains
on investments (1,583,075) (2,335,171) 6,489,926 2,686,193 439,992 (84,890)
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE
IN NET ASSETS RESULTING
FROM OPERATIONS $(182,855) $(721,513) $6,883,222 $2,776,537 $448,315 $(83,998)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<CAPTION>
FOR THE
PERIOD FROM
JUNE 10, 1996
(COMMENCEMENT
OF OPERATIONS) TO
JUNE 30, 1996
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $1,400,220 $1,613,658 $393,296 $90,344 $8,323 $892
Net realized gains
on investments 351,207 21,453 3,234,532 627,645 315,544 --
Change in unrealized
appreciation (depreciation) on
investments for the year (1,934,282) (2,356,624) 3,255,394 2,058,548 124,448 (84,890)
----------- ------------ ----------- ----------- ------------ ------------
Net increase (decrease)
in net assets resulting
from operations (182,855) (721,513) 6,883,222 2,776,537 448,315 (83,998)
----------- ------------ ----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
($0.21, $0.32, $0.13,
$0.06 and $0.10 per share,
respectively) (1,395,544) (1,613,750) (392,759) (88,805) (7,266) --
----------- ------------ ----------- ----------- ------------ ------------
Total distributions (1,395,544) (1,613,750) (392,759) (88,805) (7,266) 0
----------- ------------ ----------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 17,520,738 637,320 9,515,005 737,970 572,900 2,212,136
Net asset value of shares
issued in distributions 824,068 1,013,830 360,089 82,585 7,237 --
Cost of shares redeemed (4,532,918) (2,813,991) (3,643,953) (1,267,550) (171,877) --
----------- ------------ ----------- ----------- ------------ ------------
Net increase (decrease)
in net assets from
capital share
transactions 13,811,888 (1,162,841) 6,231,141 (446,995) 408,260 2,212,136
----------- ------------ ----------- ----------- ------------ ------------
Total increase
(decrease) 12,233,489 (3,498,104) 12,721,604 2,240,737 849,309 2,128,138
NET ASSETS:
Balance at beginning of year 56,442,570 49,319,377 57,061,615 25,392,724 3,444,868 --
----------- ------------ ----------- ----------- ------------ ------------
Balance at end of year $68,676,059 $45,821,273 $69,783,219 $27,633,461 $4,294,177 $2,128,138
----------- ------------ ----------- ----------- ------------ ------------
----------- ------------ ----------- ----------- ------------ ------------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
S&P 100 DIVIDEND SELECT
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE
----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $2,795,206 $3,204,056 $700,020 $266,215 $38,708
Net realized gains
on investments 1,105,058 1,836,450 1,785,019 382,791 136,222
Change in unrealized
appreciation on
investments for the year 5,538,312 2,379,924 12,487,128 5,573,287 371,571
----------- ----------- ----------- ------------ -----------
Net increase
in net assets resulting
from operations 9,438,576 7,420,430 14,972,167 6,222,293 546,501
----------- ----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
($0.45, $0.48, $0.61, $0.25,
$0.18, $0.36 and $0.14 per share,
respectively) (2,808,860) (3,204,316) (702,285) (267,608) (39,348)
Distribution in excess of
net investment income
($0.0043 per share, respectively) (24,414) -- -- -- --
Net realized gains on
investments ($0.06, $0.63, $0.26
and $0.43, per share, respectively) -- -- (1,775,849) (384,753) (135,963)
Distributions in excess of net
realized gains on investments
($0.12 per share) -- -- -- -- (39,165)
----------- ----------- ----------- ------------ -----------
Total distributions (2,833,274) (3,204,316) (2,478,134) (652,361) (214,476)
----------- ----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 1,111,492 2,072,873 6,000,304 1,607,602 1,242,252
Net asset value of shares
issued in distributions 1,671,982 2,001,656 2,263,855 610,544 212,883
Cost of shares redeemed (8,437,841) (6,295,288) (3,730,220) (2,626,317) (277,053)
----------- ----------- ----------- ------------ -----------
Net increase (decrease)
in net assets from
capital share
transactions (5,654,367) (2,220,759) 4,533,939 (408,171) 1,178,082
----------- ----------- ----------- ------------ -----------
Total increase 950,935 1,995,355 17,027,972 5,161,761 1,510,107
NET ASSETS:
Balance at beginning of year 55,491,635 47,324,023 40,033,643 20,230,963 1,934,762
----------- ----------- ----------- ------------ -----------
Balance at end of year $56,442,570 $49,319,378 $57,061,615 $25,392,724 $ 3,444,869
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
1.SIGNIFICANT ACCOUNTING POLICIES --
Principal Preservation Portfolios, Inc. (the "Fund"), registered under the
Investment Company Act of 1940 as an open-end management investment company, is
a series company with eight portfolios: Tax-Exempt Portfolio, Government
Portfolio, S&P100 Plus Portfolio, Dividend Achievers Portfolio, Select Value
Portfolio, PSE Tech 100 Index Portfolio, Wisconsin Tax-Exempt Portfolio and the
Cash Reserve Portfolio. This report contains the information of all portfolios,
except for each of the Cash Reserve Portfolio Retail Class X and Institutional
Class Y reports and the Wisconsin Tax-Exempt Portfolio report which are
contained separately. The assets and liabilities of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which the
shareholder owns shares.
The following is a summary of the significant accounting policies of the Fund.
(a)Long-Term Securities and Short-Term Investments
The long-term tax-exempt securities are valued at market or fair value using
quotations by an independent pricing service (the "Service"). When in the
judgment of the Service, quoted bid prices for securities are readily available
and are representative of the bid side of the market, these investments are
valued at the mean between quoted bid prices (as obtained by the Service from
dealers in such securities) and ask prices (as calculated by the Service based
upon its evaluation of the market for such securities). Securities for which, in
the judgment of the Service, there are no readily obtainable market quotations
(which may constitute a majority of the portfolio's securities) are carried at
fair value as determined by the Service, based on methods which include
consideration of yields or prices of municipal securities of comparable quality,
coupon, maturity, type, indications as to values from dealers, and general
market conditions.
Long-term taxable fixed income securities are valued at market using
quotations provided by an independent pricing service.
Common and preferred stocks are valued at the last sales price reported by
the New York Stock Exchange, other appropriate exchanges, or NASDAQ, on the date
of valuation. Common and preferred stocks not traded on that date are valued at
the last bid price.
Short-term investments are valued at amortized cost, which approximates
market value.
Investment transactions are recorded on the trade date.
Premiums on long-term tax-exempt securities are amortized to the shorter of
call date or maturity. The fund does not amortize premiums on taxable long-term
securities. The fund amortizes all discounts on taxable securities and on
original issue discount tax-exempt securities.
(b)Option Transactions
For hedging purposes, the S&P 100 Plus Portfolio and the PSE Tech 100 Index
Portfolio may buy and sell put and call options, write covered call options on
portfolio securities, write cash-secured puts, and write call options that are
not covered for cross-hedging purposes. The risk in writing a call option is
that a fund gives up the opportunity for profit if the market price of the
security increases. The risk in writing a put option is that a fund may incur a
loss if the market price of the security decreases and the option is exercised.
The risk in buying an option is that a fund pays a premium whether or not the
option is exercised. A fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not exist.
The S&P 100 Plus Portfolio also may write over-the-counter options where the
completion of the obligation is dependent upon the credit standing of another
party.
Option contracts are valued daily, and unrealized appreciation or
depreciation is recorded. A fund will realize a gain or loss upon expiration or
closing of the option transaction. When an option is exercised, the proceeds on
sales for a written call option, the purchase cost for a written put option, or
the cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid.
(c)Futures Contracts
The S&P 100 Plus and PSE Tech 100 Index Portfolios may utilize futures
contracts to a limited extent. The primary risks associated with the use of
futures contracts include an imperfect correlation between the change in market
value of the securities held by the Fund and the prices of futures contracts and
the possibility of an illiquid market. Futures contracts are based upon their
quoted daily settlement prices. Changes in initial settlement value are
accounted for as unrealized appreciation (depreciation) until the contracts are
terminated at which time realized gains and losses are recognized.
(d)Net Realized Gains and Losses and Investment Income
Net realized gains and losses on securities sales (including options) are
computed on the identified cost basis. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on an accrual basis. Total net
realized gains (losses) on investments for the six months ended June 30, 1996,
were comprised of the following:
<TABLE>
<CAPTION>
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
---------- ----------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net realized gains (losses)
on investments $351,207 $21,453 $3,020,813 $627,645 $315,544 $--
Net realized gains on options -- -- 213,719 -- -- --
--------- --------- ---------- ---------- ---------- ----------
Total net realized gains
(losses) on investments $351,207 $21,453 $3,234,532 $627,645 $315,544 $--
--------- --------- ---------- ---------- ---------- ----------
--------- --------- ---------- ---------- ---------- ----------
</TABLE>
(e)Federal Income Taxes
Provision has not been made for Federal income taxes since each portfolio
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies. As of December 31, 1995, the Tax-Exempt Portfolio has
Federal income tax capital loss carry forwards of $2,597,000 expiring in 1996
and $47,000 expiring in 2001; the Government Portfolio has capital loss carry
forwards of $29,000 expiring in 1999 and $2,757,000 expiring in 2001. It is
management's intention to make no distribution of any future realized capital
gains until the Federal income tax capital loss carry forwards are exhausted.
Distributions in excess of net investment income in the Tax-Exempt Portfolio
of $24,414 for the year ended December 31, 1995, are the result of different
accounting treatment of market discount on investments for book and tax
purposes. This distribution does not represent a tax return of capital.
Distributions in excess of net realized gains on investments in the Select
Value Portfolio of $39,165 for the year ended December 31, 1995, are the result
of losses on wash sales which are recognized for book purposes but not for tax
purposes. This distribution does not represent a tax return of capital.
(f)Expenses
Fund expenses associated with a specific portfolio are charged to that
portfolio as they are incurred. Common expenses incurred by the Fund are
allocated, as incurred, between the portfolios based upon the ratio of the net
assets of each portfolio to the combined net assets of the Fund.
(g)Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
(h)Insurance
Insurance guaranteeing the scheduled payment of the principal and interest
on the bonds in the Insured Tax-Exempt Portfolio ("Portfolio") has been obtained
by the issuer of the bonds or by the Portfolio. Such insurance does not
guarantee the market value of the bonds or the net asset value of the Portfolio.
(i)Deferred Organization Costs
Costs incurred with the organization, initial registration and public
offering of shares aggregating $13,627 for the Select Value Portfolio have been
paid by the Fund and are being amortized over a five year period.
2.INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH RELATED PARTIES --
On January 31, 1996, the Fund assigned its Investment Advisory Agreements (the
"Agreements") with B.C. Ziegler and Company ("Ziegler"), (with whom certain
officers and directors of the Fund are affiliated) to Ziegler Asset Management,
Inc., ("ZAMI") to serve as Investment Advisor (the "Advisor"). Both Ziegler and
ZAMI are wholly owned subsidiaries of The Ziegler Companies, Inc. and therefore
the Assignment did not constitute a change in control. Pursuant to the
Agreement, ZAMI manages the Tax-Exempt Portfolio, Government Portfolio, Dividend
Achievers Portfolio and PSE Tech 100 Index Portfolio. Under the Agreement, the
Tax-Exempt, Insured Tax-Exempt and Government Portfolios pay ZAMI a monthly fee
based upon the average daily net assets of each portfolio at the rate of .60% of
the first $50,000,000 of each portfolio's average daily net assets, reducing to
.50% on the next $200,000,000 of each portfolio's average daily net assets and
.40% of each portfolio's average daily net assets in excess of $250,000,000.
Under its Agreement, the Dividend Achievers Portfolio pays ZAMI a monthly fee
based upon the Dividend Achievers average daily net assets at the rate of .75%
of the first $250,000,000 of average daily net assets, reducing to .70% on the
next $250,000,000, to .65% on the average daily net assets of over $500,000,000.
Under its Agreement, the PSETech 100 Index Portfolio pays ZAMI a monthly fee
based upon the PSE Tech 100 average daily net assets at the rate of 0.50% of the
first $50,000,000 of average daily net assets, 0.30% of the next $200,000,000 of
average daily net assets and 0.25% of the next $250,000,000 of average daily net
assets and 0.20% of average daily net assets in excess of $500 million.
Pursuant to the Agreement, ZAMI has retained Skyline Asset Management, Inc.
("Skyline") to manage the Select Value Portfolio. Under the Agreement, the
Select Value Portfolio pays ZAMI a monthly fee based on the average daily net
assets of the Portfolio at the rate of .75% of the first $250,000,000 of the
Portfolio's average daily net assets, and .65% on average daily net assets
exceeding $250,000,000. ZAMI pays Skyline 50% of the fee paid by the Select
Value Portfolio.
Pursuant to the Agreement, ZAMI has retained PanAgora Asset Management, Inc.
("PanAgora") to manage the S&P 100 Plus Portfolio. Under the Agreement, the S&P
100 Plus Portfolio pays Ziegler a monthly fee based on the average daily net
assets of the Portfolio at the rate of .575% of the first $20,000,000 of the
Portfolio's average daily net assets, .45% on the next $30,000,000, .40% on the
next $50,000,000 in assets, .35% on the next $400,000,000 in assets, down to
.30% on average daily net assets over $500,000,000. ZAMI pays PanAgora 0.20% on
the first $100,000,000 in assets and 50% of the fee paid by the S&P 100 Plus
Portfolio, net of a pro rata amount of expenses, if any, paid by ZAMI in the
operation of the Portfolio.
The Agreements provide that the Advisor's fee will be reduced or the Advisor
will reimburse each Portfolio, by an amount necessary to prevent the total
expenses of each Portfolio from exceeding limits applicable to each Portfolio in
any state in which its shares are qualified for sale.
For the six months ended June 30, 1996, none of the Portfolios exceeded the
statutory expense limitation. However, the Advisor voluntarily reimbursed the
Tax-Exempt Portfolio $3,529, the Government Portfolio $13,450, the Dividend
Achievers Portfolio $24,641, the Select Value Portfolio $25,665 and the PSE Tech
100 Index Portfolio $9,732. The Advisor is not obligated to continue the
voluntary reimbursement in the future.
On May 17, 1991, the Fund's shareholders approved a Distribution Agreement
under Rule 12b-1. According to this agreement the Fund pays a distribution fee
of up to 0.25% to the distributor which is passed through to the broker/dealer
as a service fee. This fee is calculated on the average daily net assets of
accounts opened on or after March 1, 1991, and is shown as broker service fees
in the Statements of Operations.
Ziegler has an Accounting and Pricing Agreement with the Fund to perform
accounting and pricing services, a Depository Agreement with the Fund to be the
depository for all investment securities and cash, and a Transfer and Dividend
Disbursing and Shareholder Services Agency Agreement with the Fund to provide
Transfer Agent Services. In addition, each Portfolio pays Ziegler commissions on
sales of Portfolio shares. The transfer agent fees, commissions, accounting and
pricing fees and depository fees paid to Ziegler for the six months ended June
30, 1996, were as follows for each Portfolio:
<TABLE>
<CAPTION>
ACCOUNTING
TRANSFER COMMISSIONS AND PRICING DEPOSITORY
AGENT FEES ON PORTFOLIO SHARES FEES FEES
----------- ------------------- ------------ ----------
<S> <C> <C> <C> <C>
Tax-Exempt Portfolio $20,337 $10,677 $13,624 $10,392
Government Portfolio 24,297 12,812 12,166 9,796
S&P100 Plus Portfolio 31,159 120,424 14,222 10,321
Dividend Achievers Portfolio 15,980 15,779 9,500 5,589
Select Value Portfolio 2,168 7,781 9,500 1,505
PSE Tech 100 Index Portfolio -- 100 -- --
--------- --------- --------- ----------
TOTAL $93,941 $167,573 $59,012 $37,603
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
3. INVESTMENT TRANSACTIONS --
Purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended June 30, 1996 aggregated:
PURCHASES PROCEEDS FROM SALES
----------- -------------------
Tax-Exempt Portfolio $20,651,952 $23,164,463
Government Portfolio 3,060,734 4,128,063
S&P100 Plus Portfolio 9,658,789 5,585,364
Dividend Achievers Portfolio 2,818,889 2,855,058
Select Value Portfolio 3,800,750 2,641,410
PSE Tech 100 Index Portfolio 1,913,202 0
Net unrealized appreciation on investments as of June 30, 1996, included:
<TABLE>
<CAPTION>
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized appreciation $1,346,477 $518,095 $24,574,649 $9,742,367 $516,127 $15,693
Gross unrealized (depreciation) (452,971) (685,325) (858,504) (58,642) (63,895) (100,583)
---------- ---------- ------------ ----------- --------- ----------
Net unrealized appreciation $893,506 $(167,230) $23,716,145 $9,683,725 $452,232 $(84,890)
---------- ---------- ------------ ----------- --------- ----------
---------- ---------- ------------ ----------- --------- ----------
</TABLE>
4. LINE OF CREDIT --
The Fund has an available line of credit of $3,000,000. However, each
Portfolio's borrowings, by investment restriction, cannot exceed 10% of the
total net assets not including the borrowings. Interest expense incurred in
connection with such borrowings was not material during the year. Borrowings
under this arrangement bear interest approximating the then current Prime Rate.
All borrowings under this line of credit are guaranteed by Ziegler. Each
Portfolio's policies allow borrowings for temporary or emergency purposes.
5. CAPITAL SHARE TRANSACTIONS --
(a) The Fund has authorized capital of 1,000,000,000 shares at $.001 par
value per share. The Fund's shares are divided into the separate portfolios.
Three hundred million of the Fund's authorized shares are allocated to the
existing portfolios as follows:
AUTHORIZED SHARES
------------------
Tax-Exempt Portfolio .....................50,000,000
Government Portfolio .....................50,000,000
S&P100 Plus Portfolio ....................50,000,000
Dividend Achievers Portfolio .............50,000,000
Select Value Portfolio ...................50,000,000
PSE Tech 100 Index Portfolio .............50,000,000
-----------
TOTAL 300,000,000
-----------
-----------
The Cash Reserve Portfolio has been allotted 400,000,000 shares 200 million
shares of which are designated as Class X Common Stock (the Retail Class) and
200 million shares of which are designated Class Y Common Stock (the
Institutional Class) and the Wisconsin Tax-Exempt Portfolio has been allotted
50,000,000 shares. The remaining 250,000,000 Fund shares may be allocated to any
of the above portfolios, the Cash Reserve Portfolio, the Wisconsin Tax-Exempt
Portfolio or to new portfolios as determined by the Board of Directors. The
shares of each Portfolio have equal rights and privileges with all other shares
of that Portfolio.
(b)Capital share activity during the years ended December 31, 1994 and
December 31, 1995 and the six months ended June 30, 1996, were as follows:
<TABLE>
<CAPTION>
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX*<F22>
----------- ----------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHARES OUTSTANDING
AT DECEMBER 31, 1994 6,636,245 5,351,867 2,678,094 1,528,559 214,153 --
Shares issued 123,855 223,052 336,655 109,425 129,950 --
Shares issued in distributions 185,261 214,457 118,292 37,666 21,034 --
Shares redeemed (934,740) (672,644) (210,737) (179,324) (27,781) --
--------- --------- --------- --------- --------- ---------
SHARES OUTSTANDING
AT DECEMBER 31, 1995 6,010,621 5,116,732 2,922,304 1,496,326 337,356 --
Shares issued 1,946,759 67,831 493,262 41,010 52,061 224,661
Shares issued in distributions 90,022 108,832 17,096 4,496 650 --
Shares redeemed (496,566) (300,070) (174,190) (69,984) (15,213) --
--------- --------- --------- --------- --------- ---------
SHARES OUTSTANDING
AT JUNE 30, 1996 7,550,836 4,993,325 3,258,472 1,471,848 374,854 224,661
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
*<F22>Amounts shown for the PSE Tech 100 Index Portfolio are the result of the
Fund's operations from its commencement of operations on June 10, 1996.
</TABLE>
(c)For the S&P 100 Plus Portfolio, the Dividend Achievers Portfolio, the
Select Value Portfolio and the PSE Tech 100 Index Portfolio, the maximum
offering price per share is computed based on a maximum sales charge of 4.5% of
the offering price or 4.71% of the net asset value. For the purpose of this
computation, the price per share is derived from multiplying the net asset value
and redemption price per share by 100 and then dividing the product by 95.5.
For the Tax-Exempt and Government Portfolios, the maximum offering price per
share is computed based on a maximum sales charge of 3.5% of the offering price
or 3.63% of the net asset value. For these portfolios the price per share is
derived from multiplying the net asset value and redemption price per share by
100 and then dividing the product by 96.5.
6.OPTION CONTRACTS WRITTEN --
An analysis of option contracts written for the six months ended June 30, 1996
is as follows:
NUMBER OF CONTRACTS AMOUNT OF PREMIUM
------------------- -----------------
S&P 100 PLUS PORTFOLIO:
Written 65 110,301
Expired 120 162,384
Closed -- --
Exercised -- --
Outstanding:
Beginning of year 55 52,083
---- -------
End of Period 0 0
---- -------
---- -------
7.FUTURES CONTRACTS WRITTEN --
An analysis of the futures contracts written for the six months ended June 30,
1995, and for the period from June 10, 1996 (commencement of operations) through
June 30, 1996 for the S&P 100 Plus and PSE Tech 100 Index Portfolios,
respectively, were as follows:
AGGREGATE FACE
NUMBER OF CONTRACTS VALUE OF CONTRACTS
------------------- ------------------
S&P 100 PLUS PORTFOLIO:
Outstanding at December 31, 1995 0 $0
Contracts opened 14 4,726
Contracts closed -- --
---- -------
Outstanding at June 30, 1996 14 $4,726
---- -------
---- -------
AGGREGATE FACE
NUMBER OF CONTRACTS VALUE OF CONTRACTS
------------------- ------------------
PSE TECH 100 INDEX PORTFOLIO:
Outstanding at June 10, 1996
(commencement of operations) 0 $0
Contracts opened 3 327
Contracts closed -- --
---- -------
Outstanding at June 30, 1996 3 $327
---- -------
---- -------
The number of financial futures contracts and the gross unrealized appreciation
(depreciation), in thousands, as of June 30, 1996, for each Portfolio were as
follows:
UNREALIZED
NUMBER OF CONTRACTS APPRECIATION
------------------- ------------
S&P 100 PLUS PORTFOLIO:
S&P 500 Financial Futures
Contract expiration date 9/96 14 $12
PSE TECH 100 INDEX PORTFOLIO:
PSE Technology 100 Index Futures
Contract expiration date 9/96 3 ($12)
8.On April 24, 1996, a special meeting of the shareholders at the Insured Tax-
Exempt and Balanced Portfolios was held to vote on the Plan of Reorganization
and Liquidation of the Balanced Portfolio into the S&P 100 Plus Portfolio and
the Insured Tax-Exempt Portfolio into the Tax-Exempt Portfolio. The proposal, in
each portfolio's instance, was approved and the voting results are shown below:
BALANCED PORTFOLIO INSURED TAX EXEMPT
------------------ ------------------
Shares Outstanding......... 556,059 1,795,873
Shares Voting in Favor..... 325,117 1,018,764
Shares Voting Against...... 0 26,868
Shares Abstaining.......... 2,139 37,223
At the close of business on April 30, 1996, the net assets of the Balanced and
Insured Tax-Exempt Portfolios were transferred to the S&P 100 Plus and Tax-
Exempt Portfolios, respectively.
<TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
TAX-EXEMPT PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<CAPTION>
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
- ----------- ------------ ------- ------- --------
<S> <C> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES -- 98.7%
ALABAMA - 1.4%
$1,000,000 Refunding and Capital Outlay Special Tax Bonds, Series 1992, AAA Aaa $962,500
Birmingham-Jefferson Civic Center Authority (Jefferson City,
Alabama), 5.50%, due 09-01-2014
ALASKA - 4.6%
1,000,000 Alaska Energy Authority, Power Revenue Bonds, First Series (Bradley AAA Aaa 1,070,00
Lake Hydroelectric Project), 7.25%, due 07-01-2009
1,000,000 Municipality of Anchorage, Alaska, 1995 General Obligation General AAA Aaa 1,001,250
Purpose and General Obligation Refunding General Purpose Bonds,
Series A, 6.00%, due 02-01-2015
1,000,000 Municipality of Anchorage, Alaska, Hospital Revenue Refunding AA- A1 1,093,750
Bonds (Sisters of Providence Project), 7.125%, due 10-01-2005
ARIZONA - 1.6%
1,125,000 Kyrene Elementary School District No. 28 of Maricopa County, AAA Aaa 1,139,063
Arizona, School Improvement Bonds, Project of 1993, Series B (1995),
6.00%, due 07-01-2014
CALIFORNIA - 6.3%
1,250,000 Irwindale Community Redevelopment Agency City Industrial AAA Aaa 1,243,750
Development Project, 1996 Senior Lien Tax Allocation Bonds, 5.875%,
due 08-01-2016
2,135,000 Los Angeles County Public Works Financing Authority Lease Revenue Bonds AAA Aaa 1,953,525
(Multiple Capital Facilities Project IV), 5.25%, due 12-01-2016
1,095,000 The City of Los Angeles, Wastewater System Revenue Bonds, AAA Aaa 1,104,581
Refunding Series 1993-D, 6.00%, due 11-01-2014
CONNECTICUT - 1.4%
1,000,000 City of Bridgeport, Connecticut, General Obligation Refunding Bonds, AAA Aaa 961,250
1996 Series A, 5.50%, due 09-01-2015
FLORIDA - 4.8%
1,000,000 City of Cape Coral, Florida, Wastewater Assessment Refunding and AAA Aaa 1,032,500
Improvement Bonds, Series 1992 (Green Area), 6.25%, due 07-01-2008
2,500,000 State of Florida, Full Faith and Credit State Board of Education, Public AA Aa2 2,293,750
Education Capital Outlay Refunding Bonds, 1993 Series D, 5.00%, due
06-01-2013
ILLINIOS - 9.4%
1,000,000 Aurora, Illinois, Unlimited General Obligation Bonds, 5.875%, AAA Aaa 991,250
due 01-01-2016
1,000,000 City of Chicago, General Obligation Bonds, Project Series A of 1992, AAA Aaa 1,026,250
6.25%, due 01-01-2012
1,000,000 Public Building Commission of Chicago, Building Revenue Bonds AAA Aaa 991,250
(Chicago Park District) Series C of 1993, 5.80%, due 01-01-2013
1,515,000 Illinois Educational Facilities Authority, Revenue Bonds, Illinois A A1 1,479,019
Wesleyan University, Series 1993, 5.60%, due 09-01-2013
1,000,000 State of Illinois, Build Illinois Bonds (Sales Tax Revenue Refunding AAA A1 971,250
Bonds) Series Q, 5.75%, due 06-15-2014
1,000,000 Metropolitan Fair and Exposition Authority (Illinois) Dedicated State AAA Aaa 1,000,230
Tax Revenue Bonds, Series 1986, 6.00%, due 06-01-2014
INDIANA - 9.4%
1,400,000 Ball State University Board of Trustees, Ball State University Student AAA Aaa 1,422,750
Fee Bonds, Series G, 6.125%, due 07-01-2014
1,000,000 Hammond Multi-School Building Corporation (Lake County, Indiana), AAA Aaa 985,000
First Mortgage Bonds, Series 1995, 5.80%, due 01-15-2015
1,000,000 Indiana State Office Building Commission Capitol Complex Revenue AAA Aaa 1,176,250
Bonds, Series 1990A (Senate Avenue Parking Facility), 7.40%,
due 07-01-2015
1,500,000 School Building Corporation of Warren Township, (Marion County, NR A2 1,528,125
Indiana), First Mortgage Bonds, Series 1992A, 6.00%, due 07-15-2012
1,350,000 Westfield High School 1995 Building Corporation, (Hamilton County, AAA Aaa 1,334,812
Indiana), First Mortgage Bonds, Series 1995, 5.70%, due 07-15-2013
IOWA - 1.6%
1,000,000 State of Iowa, Certificates of Participation, Series 1992, 6.500%, AAA Aaa 1,067,500
due 07-01-2006
MICHIGAN - 7.9%
1,000,000 Clarkston Community Schools, County of Oakland, Michigan, 1993 AA Aa2 988,750
School Building &Site &Refunding Bonds (GO-Unlimited Tax),
5.90%, due 05-01-2016
1,000,000 Economic Development Corporation of the County of Gratiot, AAA Aaa 926,250
Michigan, Limited Obligation Revenue Refunding Bond Series 1993
(Michigan Masonic Home Project), 5.20%, due 11-15-2012
1,500,000 Michigan Municipal Bond Authority, Local Government Loan Program AAA Aaa 1,528,125
Revenue Bonds, Series 1994A (Wayne County Building Authority
Bonds), 6.00%, due 12-01-2013
1,000,000 State of Michigan, Comprehensive Transportation Refunding Bonds, AA- A1 996,250
Series 1992B, 5.75%, due 05-15-2011
1,000,000 Warren, Michigan, Consolidated School District Refunding Bonds, AAA Aaa 962,500
5.50%, due 05-01-2014
MINNESOTA - 1.5%
1,000,000 Independent School District 196 (Rosemount-Apple Valley-Eagan), AA Aa1 1,003,750
Minnesota, General Obligation School Building Bonds, Series 1994A,
5.875%, due 06-01-2014
NEVADA - 1.5%
1,000,000 Washoe County, Nevada, Gas and Water Facility Revenue Refunding AAA Aaa 1,025,000
Bonds, Variable Rate Demand, 6.30%, due 12-01-2014
NEW MEXICO - 1.5%
1,000,000 City of Rio Rancho, New Mexico, Water and Wastewater System AAA Aaa 1,001,250
Bonds, Series 1995A, 5.90%, due 05-15-2015
NEW YORK - 5.4%
1,650,000 Dutchess County Resource Recovery Agency, New York, AAA Aaa 1,788,188
Solid Waste Management System Revenue Bonds, Series 1990A,
7.50%, due 01-01-2009
1,900,000 Dormitory Authority of the State of New York, New York University AAA Aaa 1,935,625
Insured Revenue Bonds, Series 1991, 6.00%, due 07-01-2015
NORTH CAROLINA - 1.5%
1,000,000 Charlotte-Mecklenberg Hospital Authority (North Carolina) Health AA Aa2 1,002,500
Care Revenue Bonds, Series 1996A, 5.90%, due 01-15-2016
OHIO - 1.4%
1,000,000 Northeast Ohio Regional Sewer District Wastewater Improvement AAA Aaa 985,000
Revenue Refunding Bonds, Series 1995, 5.6%, due 11-15-2014
OKLAHOMA - 6.9%
1,000,000 The McAlester Public Works Authority, Refunding and Improvement AAA Aaa 932,500
Revenue Bonds, Series 1995, 5.25%, due 12-01-2014
1,000,000 Norman Regional Hospital Authority, (Norman, Oklahoma) Hospital AAA Aaa 1,061,250
Revenue Bonds, Series 1991, 6.75%, due 09-01-2011
1,000,000 City of Oklahoma City, Oklahoma, General Obligation Bonds, Series AA Aa2 990,000
1994, 5.625%, due 03-01-2013
1,800,000 Pottawatomie County Development Authority, Water Revenue AAA Aaa 1,766,250
Bonds, Series 1993 (North Deer Creek Reservoir Project), 5.80%,
due 07-01-2015
PENNSYLVANIA - 1.7%
1,200,000 Pennsylvania Higher Educational Facilities Authority, The Trustees of AA Aa2 1,192,500
the University of Pennsylvania Revenue Bonds, Series A of 1995,
5.90%, due 09-01-2015
RHODE ISLAND - 1.6%
1,150,000 Rhode Island Convention Center Authority, Revenue Bonds, 1993 AAA Aaa 1,106,875
Series A, 5.50%, due 05-15-2013
SOUTH CAROLINA - 1.5%
1,150,000 Charleston County Airport District, Charleston, South Carolina, AAA Aaa 1,039,312
Airport System Revenue Bonds, Refunding Series 1993, 5.00%,
due 07-01-2013
TENNESSEE - 2.9%
1,000,000 Shelby County, Tennessee, General Obligation Refunding Bonds, 1995 AA+ Aa2 982,500
Series A, 5.625%, due 04-01-2015
1,000,000 The Health, Educational and Housing Facilities Board of the County AAA Aaa 998,750
of Sullivan, Tennessee, Hospital Revenue Bonds Series 1993,
(Holston Valley Health Care, Inc.), 5.75%, due 02-15-2013
TEXAS - 6.0%
2,000,000 Brazos River Authority (Texas) Collateralized Revenue Refunding AAA Aaa 1,985,000
Bonds (Houston Lighting & Power Company Project)Series 1995,
5.80%, due 08-01-2015
1,000,000 Dallas-Fort Worth Regional Airport Joint Revenue Refunding Bonds, AAA Aaa 1,122,500
Series 1992A, 7.375%, due 11-01-2011
1,000,000 Texas Water Development Board, State Revolving Fund, AAA Aa1 1,013,750
Senior Lien Revenue Bonds, Series 1992, 6.00%, due 07-15-2013
UTAH - 5.4%
750,000 Board of Education of Juab School District, Juab County, Utah, AAA Aaa 719,063
General Obligation School Building Bonds, Series 1996, 5.375%,
due 06-15-2014
900,000 Salt Lake County Water Conservancy District, Water Conservancy AAA Aaa 835,875
Revenue Bonds, Series 1993A, 5.35%, due 10-01-2018
1,000,000 State of Utah, State Building Ownership Authority Lease Revenue AAA Aaa 980,000
Bonds (State Facilities Master Lease Program), Series 1995A, 5.70%,
due 05-15-2015
1,185,000 State of Utah, State Building Ownership Authority, Lease Revenue AA Aa2 1,186,481
Refunding Bonds, Series 1992A, (Department of Employment Security
Project), 5.75%, due 08-15-2011
VERMONT - 1.5%
1,000,000 Vermont Educational &Health Buildings Financing Agency, Hospital AAA Aaa 1,002,500
Revenue Bonds (Medical Center Hospital of Vermont)Series 1993,
6.20%, due 09-01-2016
VIRGINIA - 5.7%
1,000,000 Chesapeake, Virginia, Industrial Development Authority, Public AAA Aaa 980,000
Facility Lease Revenue Bonds (City Jail Project) Series of 1994,
5.625%, due 06-01-2014
1,000,000 Fairfax County, Virginia, Sewer Revenue Refunding Bonds, Series AAA Aaa 967,500
1993, 5.50%, due 11-15-2013
1,000,000 Fairfax County Water Authority Water Refunding Revenue Bonds, AA- Aa2 991,250
Series 1992, 5.75%, due 04-01-2014
1,000,000 Southeastern Public Service Authority of Virginia, Senior AAA Aaa 1,002,500
Revenue & Revenue Refunding Bonds, Series 1989 (Regional
Solid Waste System), 6.00%, due 07-01-2015
WASHINGTON - 1.5%
1,000,000 State of Washington, General Obligation Bonds, Series 1994B, 5.75%, AA Aa2 998,750
due 05-01-2013
WISCONSIN - 2.8%
1,000,000 Wisconsin Health and Educational Facilities Authority, Revenue AA+ NR 998,750
Bonds, Series 1995, (Franciscan Skemp Medical Center, Inc.),
6.125%, due 11-15-2015
1,000,000 Wisconsin Health and EducationalFacilities Authority, Revenue AAA Aaa 955,000
Bonds, Series 1996, (Aurora Medical Group, Inc. Project), ---------
5.60%, due 11-15-2016
Total Long-Term Tax-Exempt Securities (Cost $66,888,143) 67,781,649
SHORT-TERM TAX-EXEMPT SECURITIES - 1.3%
DEMAND NOTE - 0.9%
600,000 Denver, Colorado, City and County Multi-Family Housing Revenue
Bonds, (Seasons Apartments Project), 3.6%, due 10-01-2006 AAA Aaa 600,000
MONEY MARKET - 0.4%
316,107 Federated Tax-Free Trust 316,107
--------
Total Short-Term Tax-Exempt Securities 916,107
----------
Total Investments $68,697,756
----------
----------
NR: Not Rated
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
</TABLE>
<TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<CAPTION>
PRINCIPAL INTEREST MARKET
AMOUNT DESCRIPTION RATE MATURITY VALUE
--------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 98.3%
$2,400,000 U.S. Treasury Note 8.000% 01-15-1997 $2,431,500
7,500,000 U.S. Treasury Note 7.375% 11-15-1997 7,633,590
7,800,000 U.S. Treasury Note 8.125% 02-15-1998 8,046,176
7,800,000 U.S. Treasury Note 11.625% 11-15-2002 9,823,125
8,500,000 U.S. Treasury Note 11.125% 08-15-2003 10,638,268
6,000,000 U.S. Treasury Note 7.875% 11-15-2004 6,451,866
----------
Total U.S. Government Obligations (Cost $45,191,755) 45,024,525
SHORT-TERM INVESTMENTS -- 0.1%
MONEY MARKET
39,612 Dreyfus Treasury Prime Cash Management 39,612
-----------
Total Investments $45,064,137
-----------
-----------
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
S&P100 PLUS PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
NUMBER MARKET
OF SHARES VALUE
OR PAR VALUE
------------ ------
COMMON STOCKS -- 93.3%
BASIC INDUSTRIES -- 5.5%
Aluminum Company of America 4,800 $275,400
*<F23> Bethlehem Steel Corporation 2,900 34,438
Boise Cascade Corporation 1,266 46,367
Champion International 14,000 584,500
Dow Chemical Company 7,250 551,000
Dupont (E.I.) de Nemours
and Company 15,200 1,202,700
Homestake Mining Company 3,800 65,075
International Paper Company 8,100 298,687
Monsanto Company 8,500 276,250
Weyerhaeuser Company 11,700 497,250
----------
3,831,667
----------
CONSUMER DURABLES -- 5.0%
Black &Decker Corporation 2,300 88,838
Brunswick Corporation 2,600 52,000
Chrysler Corporation 10,600 657,200
Ford Motor Company 32,300 1,045,712
General Motors Corporation 32,200 1,686,475
----------
3,530,225
----------
CONSUMER NONDURABLES -- 10.2%
Avon Products, Inc. 4,000 180,500
Coca-Cola Company 68,800 3,362,600
Colgate-Palmolive Company 5,850 495,788
Eastman Kodak Company 6,800 528,700
Heinz (H.J.) Company 10,100 306,788
International Flavors & Fragrances Inc. 5,850 278,606
PepsiCo, Inc. 49,400 1,747,525
Polaroid Corporation 1,300 59,312
Ralston Purina Group 2,900 185,962
----------
7,145,781
----------
CONSUMER SERVICE -- 8.1%
Walt Disney Company 18,600 1,169,475
*<F23> Harrah's Entertainment, Inc. 12,150 343,238
Kmart Corporation 12,600 155,925
Limited (The), Inc. 7,539 162,088
May Department Stores Company 6,900 301,875
McDonald's Corporation 22,500 1,051,875
*<F23> Payless ShoeSource 1,104 35,052
Sears, Roebuck &Co. 10,700 520,288
Tandy Corporation 1,700 80,538
*<F23> Toys "R" Us, Inc. 7,625 217,312
Wal-Mart Stores, Inc. 63,000 1,598,625
----------
5,636,291
----------
CAPITAL GOODS -- 10.5%
The Boeing Company 9,350 814,619
Fluor Corporation 4,700 307,262
General Dynamics Corporation 1,800 111,600
General Electric Company 45,950 3,974,675
Minnesota Mining &
Manufacturing Company 13,900 959,100
Raytheon Company 6,700 345,888
Rockwell International Corporation 6,100 349,225
Teledyne, Inc. 1,500 54,187
United Technologies Corporation 3,500 402,500
----------
7,319,056
----------
ENERGY -- 11.9%
Amoco Corporation 26,400 1,910,700
Atlantic Richfield Company 4,400 521,400
Baker Hughes Incorporated 3,860 126,897
Coastal Corporation 2,900 121,075
+<F24> Exxon Corporation 36,200 3,144,875
Halliburton Company 3,200 177,600
Mobil Corporation 12,350 1,384,744
Occidental Petroleum Corporation 8,800 217,800
Schlumberger Limited 6,700 564,475
Williams Companies, Inc. 2,800 138,600
----------
8,308,166
----------
FINANCIAL -- 9.4%
American International Group, Inc. 13,143 1,296,228
American Express Company 13,500 602,438
American General Corporation 5,600 203,700
BankAmerica Corporation 12,400 939,300
CIGNA Corporation 2,000 235,750
Citicorp 14,000 1,156,750
First Chicago NBD Corp. 26,825 1,049,528
Great Western Financial Corporation 3,650 87,144
ITT Hartford Group, Inc. 3,200 170,400
Merrill Lynch &Co., Inc. 12,300 801,037
----------
6,542,275
----------
HEALTH CARE -- 8.1%
Baxter International Inc. 7,600 359,100
Bristol-Myers Squibb Company 660 59,400
Columbia/HCA Healthcare
Corporation 12,200 651,175
Johnson &Johnson 18,800 930,600
Mallinckrodt Group Inc. 2,100 81,638
Merck &Co., Inc. 28,100 1,815,962
Pharmacia & Upjohn, Inc. 39,160 1,737,725
----------
5,635,600
----------
TECHNOLOGY -- 14.4%
AMP Incorporated 8550 343,069
*<F23> Ceridan Corporation 7,200 363,600
*<F23> Cisco Systems, Inc. 18,200 1,030,575
*<F23> Computer Sciences Corporation 1,400 104,650
*<F23> Digital Equipment Corporation 4,100 184,500
*<F23>+<F24>Federal Express Corporation 1,500 123,000
Harris Corporation 1,100 67,100
Hewlett-Packard Company 14,000 1,394,750
Honeywell Inc. 3,700 201,650
+<F24> International Business Machines
Corporation 15,700 1,554,300
Intel Corporation 22,600 1,659,688
*<F23> National Semiconductor Corporation 3,700 57,350
Northern Telecom Limited 6,900 375,188
*<F23> Oracle Corporation 26,650 1,051,009
Tektronix, Inc. 8,400 375,900
Texas Instruments Inc. 10,300 513,712
*<F23> Unisys Corporation 4,700 33,488
Xerox Corporation 11,991 641,518
----------
10,075,047
----------
TRANSPORTATION -- 1.1%
Burlington Northern Santa Fe
Corporation 3,900 315,412
Delta Air Lines, Inc. 1,400 116,200
Norfolk Southern Corporation 3,800 322,050
----------
753,662
----------
UTILITIES -- 9.1%
+<F24> AT&T Corp. 36,892 2,287,304
American Electric Power
Company, Inc. 5,100 217,388
Ameritech Corporation 15,300 908,438
Bell Atlantic Corporation 12,000 765,000
Entergy Corporation 6,400 181,600
MCICommunications Corporation 18,800 481,750
NYNEX Corporation 11,800 560,500
Southern Company 18,400 453,100
Unicom Corporation 17,100 476,662
----------
6,331,742
----------
Total Common Stocks
(Cost $41,405,371) 65,109,512
----------
PREFERRED STOCK -- 0.0%
CAPITAL GOODS
Teledyne Inc. Ser E Preferred 15 231
----------
Total Preferred Stock
(Cost $218) 231
----------
FUTURES CONTRACTS -- 6.8%
*<F23> S&P 500 Index Future expires
September 1996 14 4,737,600
----------
Total Futures Contracts
(Cost $4,725,562) 4,737,600
----------
SHORT-TERM INVESTMENTS -- 6.5%
MONEY MARKET -- 6.1%
Dreyfus Cash Management Plus $2,301,059 2,301,059
Federated Master Trust 1,978,991 1,978,991
----------
4,280,050
----------
Total Short-Term Investments 4,280,050
----------
GOVERNMENT SECURITIES -- 0.4%
+<F24> U.S. Treasury Bill
5.03%, due 09-19-1996 300,000 296,600
----------
Total Government Obligations
(Cost $296,647) 296,600
----------
Total Investments $74,423,993
----------
----------
*<F23>Non-income producing
+<F24>Segregated as collateral against futures
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
DIVIDEND ACHIEVERS PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
NUMBER MARKET
OF SHARES VALUE
OR PAR VALUE
------------ -------
COMMON STOCKS -- 98.8%
CONSUMER NONDURABLES -- 22.8%
Coca-Cola Company 16,000 $782,000
Eastman Kodak Company 10,800 839,700
Gillette Company 21,600 1,347,300
Heinz (H.J.) Company 15,000 455,625
Kimberly-Clark Corporation 10,800 834,300
PepsiCo, Inc. 37,000 1,308,875
Sherwin-Williams Company 15,700 730,050
----------
6,297,850
----------
CONSUMER SERVICE -- 11.6%
Albertson's, Inc. 18,100 748,888
Walt Disney Company 10,000 628,750
McDonald's Corporation 21,600 1,009,800
Walgreen Co. 24,000 804,000
----------
3,191,438
----------
CONSUMER NONCYCLICAL -- 2.6%
Becton, Dickinson & Company 9,000 722,250
----------
722,250
----------
CAPITAL GOODS -- 9.1%
Avery-Dennison Corporation 14,200 779,225
General Electric Company 12,000 1,038,000
Minnesota Mining and
Manufacturing Company 10,000 690,000
----------
2,507,225
----------
ENERGY -- 8.4%
Mobil Corporation 7,200 807,300
Royal Dutch Petroleum Company 4,000 615,000
Williams Companies, Inc. 18,000 891,000
----------
2,313,300
----------
FINANCIAL -- 12.8%
BankAmerica Corporation 10,000 757,500
Federal Home Loan Mortgage
Corporation 4,000 342,000
Federal National Mortgage
Association 36,000 1,206,000
Green Tree Financial Corporation 14,750 460,937
Jefferson - Pilot Corporation 15,000 774,375
----------
3,540,812
----------
HEALTH CARE -- 6.7%
Baxter International Inc. 10,000 472,500
Johnson &Johnson 21,600 1,069,200
Merck & Co., Inc. 5,000 323,125
----------
1,864,825
----------
INDUSTRIAL -- 4.0%
Illinois Central Corporation 15,000 425,625
Illinois Tool Works, Inc. 10,000 676,250
----------
1,101,875
----------
TECHNOLOGY -- 15.0%
Diebold, Inc. 24,375 1,176,094
Electronic Data Systems Corporation 18,400 989,000
Hewlett-Packard Company 10,000 996,250
Motorola, Inc. 15,800 993,425
----------
4,154,769
----------
UTILITIES -- 5.8%
GTE Corporation 10,000 447,500
SBCCommunications, Inc. 10,800 531,900
Sprint Corporation 15,000 630,000
----------
1,609,400
----------
Total Common Stocks
(Cost $17,620,018) 27,303,744
----------
SHORT-TERM INVESTMENTS -- 1.6%
MONEY MARKET
Dreyfus Cash Management Plus $231,513 231,513
Federated Master Trust 205,846 205,846
----------
437,359
----------
Total Short-Term Investments 437,359
----------
Total Investments $27,741,103
----------
----------
*Non-income producing
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
NUMBER MARKET
OF SHARES VALUE
OR PAR VALUE
------------ ------
COMMON STOCKS -- 91.8%
AUTOS & TRANSPORTATION -- 7.6%
Borg-Warner Automotive, Inc. 2,800 $110,600
Canadian National Railway Company,
Common Shares Represented by
Installment Receipts 6,700 123,112
Echlin Inc. 2,400 90,900
----------
324,612
----------
CONSUMER DISCRETIONARY -- 16.8%
Alberto-Culver Company, Class A 2,400 96,000
Harman International Industries, Inc. 2,700 132,975
Herman Miller, Inc. 2,900 88,813
Pier 1 Imports, Inc. 7,020 104,422
Royal Caribbean Cruises, Ltd. 3,100 88,350
Toro Company 2,500 82,813
*<F25> World Color Press, Inc. 5,000 126,875
----------
720,248
----------
CONSUMER STAPLES -- 2.8%
First Brands Corporation 4,400 118,800
----------
118,800
----------
ENERGY -- 4.6%
*<F25> Flores &Rucks Inc. 1,500 51,750
*<F25> Newfield Exploration Company 1,300 50,538
*<F25> Nuevo Energy Company 3,000 96,750
----------
199,038
----------
FINANCIAL -- 18.5%
Advanta Corporation, Class B 2,000 90,500
CMAC Investment Corporation 1,600 92,000
Finova Group Inc. 1,700 82,875
Horace Mann Educators Corporation 2,700 85,725
*<F25> Olympic Financial Ltd. 4,100 94,300
Paul Revere Corporation (The) 3,100 85,250
PennCorp Financial Group, Inc. 3,600 114,300
Reinsurance Group of
America, Incorporated 2,000 75,500
United Companies Financial
Corporation 2,100 71,400
----------
791,850
----------
HEALTH CARE -- 8.6%
Fisher Scientific International 3,400 127,500
*<F25> Sierrs Health Services, Inc. 4,300 135,450
*<F25> Sybron International Corporation -
Wisconsin 4,300 107,500
----------
370,450
----------
MATERIALS & PROCESSING -- 7.1%
*<F25> American Standard Companies, Inc. 4,500 148,500
*<F25> UCARInternational Inc. 3,200 133,200
WCI Steel, Inc. 4,500 23,625
----------
305,325
----------
OTHER -- 3.2%
Patriot American Hospitality, Inc. 2,200 65,175
Public Storage, Inc. 3,500 72,187
----------
137,362
----------
PRODUCER DURABLES -- 10.3%
AGCOCorporation 4,400 122,100
Applied Power Inc. - Class A 2,800 78,400
Belden Inc. 3,900 117,000
Greenfield Industries, Inc. 3,800 125,400
----------
442,900
----------
TECHNOLOGY -- 9.9%
*<F25> Arrow Electronics, Inc. 800 34,500
*<F25> Berg Electronics Corporation 5,300 125,875
*<F25> DecisionOne Corporation 4,200 99,750
*<F25> Komag, Incorporated 3,800 100,225
Wyle Electronics 2,000 66,250
----------
426,600
----------
UTILITIES -- 2.4%
Enron Global Power &Pipelines L.L.C. 4,300 104,275
----------
104,275
----------
Total Common Stocks
(Cost $3,489,228) 3,941,460
----------
SHORT-TERM INVESTMENTS
MONEY MARKET -- 8.3%
Dreyfus Cash Management Plus $177,855 $177,855
Federated Master Trust 179,104 179,104
----------
356,959
----------
Total Short-Term Investments 356,959
----------
Total Investments $4,298,419
----------
----------
*<F25>Non-income producing
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECHNOLOGY 100 INDEX PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
NUMBER MARKET
OF SHARES VALUE
OR PAR VALUE
------------ --------
COMMON STOCKS -- 86.4%
BIOTECHNOLOGY --7.3%
*<F26>+<F27>Amgen, Inc. 500 $27,000
*<F26>+<F27>Biogen, Inc. 500 27,438
*<F26> Centocor, Inc. 500 14,938
*<F26>+<F27>Chiron Corporation 500 49,000
*<F26> Genentech, Inc. 500 26,187
*<F26> Immunex Corporation 500 6,813
*<F26> Xoma Corporation 500 3,375
----------
154,751
----------
CAD/CAM -- 2.0%
+<F27> Autodesk, Inc. 500 14,938
*<F26> Evans &Sutherland Computer
Corporation 500 10,625
*<F26> Intergraph Corporation 500 6,062
*<F26> Mentor Graphics Corporation 500 8,125
*<F26> QMS, Inc. 500 2,750
----------
42,500
----------
DATA COMMUNICATIONS -- 13.2%
*<F26> 3Com Corporation 500 22,875
*<F26>+<F27>Adaptec, Inc. 500 23,687
*<F26>+<F27>ADC Telecommunications, Inc. 500 22,500
*<F26> Bay Networks, Inc. 500 12,875
*<F26> Cabletron Systems, Inc. 500 34,313
*<F26> Cisco Systems, Inc. 500 28,313
*<F26> DSCCommunications Corporation 500 15,062
Harris Corporation 500 30,500
*<F26> Novellus Systems, Inc. 500 18,000
*<F26> Octel Communications Corporation 500 9,875
Scientific - Atlanta, Inc. 500 7,750
*<F26> Symbol Technologies, Inc. 500 22,250
*<F26> Tellabs, Inc. 500 33,437
----------
281,437
----------
DATA STORAGE AND PROCESSING -- 3.6%
*<F26>+<F27>Applied Magnetics Corporation 500 5,250
*<F26> AST Research, Inc. 500 3,375
*<F26>+<F27>Exabyte Corporation 500 6,531
*<F26> Komag, Incorporated 500 13,188
*<F26> Quantum Corporation 500 7,313
*<F26> Seagate Technology, Inc. 500 22,500
*<F26> Storage Technology Corporation 500 19,125
----------
77,282
----------
ELECTRONIC EQUIPMENT -- 1.3%
AMP Incorporated 500 20,062
Sensormatic Electronics Corporation 500 8,188
----------
28,250
----------
INFORMATION PROCESSING -- 5.5%
*<F26>+<F27>America Online, Inc. 500 21,875
Automatic Data Processing, Inc. 500 19,313
*<F26> Ceridian Corporation 500 25,250
*<F26>+<F27>Computer Sciences Corporation 500 37,375
Comsat Corporation 500 13,000
----------
116,813
----------
LARGE DIVERSIFIED COMPUTER
MANUFACTURING -- 4.8%
*<F26> Digital Equipment Corporation 500 22,500
Honeywell Inc. 500 27,250
International Business
Machines Corporation 500 49,500
*<F26> Unisys Corporation 500 3,563
----------
102,813
----------
MEDICAL TECHNOLOGY -- 7.8%
*<F26>+<F27>Acuson Corporation 500 8,000
*<F26> Biomet, Inc. 500 7,187
*<F26> Boston Scientific Corporation 500 22,500
*<F26> Coherent, Inc. 500 26,000
*<F26>+<F27>Genzyme Corporation 500 25,125
Medtronic, Inc. 500 28,000
Shared Medical Systems Corporation 500 32,125
*<F26> St. Jude Medical, Inc. 500 16,750
----------
165,687
----------
MICRO COMPUTER MANUFACTURERS -- 3.6%
+<F27> Apple Computer, Inc. 500 10,500
*<F26> Compaq Computer Corporation 500 24,625
*<F26> Dell Computer Corporation 500 25,437
*<F26> Gateway 2000, Inc. 500 17,000
----------
77,562
----------
MINI AND MAINFRAME COMPUTER
MANUFACTURERS -- 4.4%
*<F26>+<F27>Amdahl Corporation 500 5,375
*<F26> Data General Corporation 500 6,500
*<F26> EMC Corporation 500 9,312
*<F26> Informix Corporation 500 11,250
*<F26> Silicon Graphics, Inc. 500 12,000
*<F26> Stratus Computer, Inc. 500 14,500
*<F26> Sun Microsystems, Inc. 500 29,437
*<F26> Tandem Computers, Inc. 500 6,187
----------
94,561
----------
OFFICE AUTOMATION EQUIPMENT -- 3.6%
*<F26> CUC International, Inc. 500 17,750
*<F26> Newbrige Networks Corporation 500 32,750
Xerox Corporation 500 26,750
----------
77,250
----------
SEMICONDUCTOR CAPITAL EQUIPMENT
MANUFACTURERS -- 2.4%
*<F26>+<F27>Applied Materials, Inc. 500 15,250
*<F26> Cadence Design Systems, Inc. 500 16,875
*<F26> KLA Instruments Corporation 500 11,625
*<F26> Kulicke &Soffa Industries, Inc. 500 7,312
----------
51,062
----------
SEMICONDUCTOR MANUFACTURERS -- 7.3%
*<F26>+<F27>Advanced Micro Devices, Inc. 500 6,812
*<F26> Chips &Technologies, Inc. 500 4,875
*<F26> Cypress Semiconductor Corporation 500 6,000
Intel Corporation 500 36,719
Micron Technology, Inc. 500 12,937
Motorola, Inc. 500 31,438
*<F26> National Semiconductor Corporation 500 7,750
*<F26> Standard Microsystems Corporation 500 7,625
Texas Instruments Inc. 500 24,937
*<F26> Xilinx, Inc. 500 15,875
----------
154,968
----------
SOFTWARE PRODUCTS -- 9.5%
+<F27> Adobe Systems, Inc. 500 17,938
*<F26>+<F27>BMC Software, Inc. 500 29,875
*<F26> Borland International, Inc. 500 4,562
+<F27> Computer Associates
International, Inc. 500 35,625
*<F26> Microsoft Corporation 500 60,063
*<F26> Novell, Inc. 500 6,937
*<F26> Oracle Corporation 500 19,719
*<F26> Sybase, Inc. 500 11,813
*<F26> Symantec Corporation 500 6,250
System Software Associates, Inc. 500 8,500
----------
201,282
----------
TEST, ANALYSIS, AND INSTRUMENTATION
EQUIPMENT -- 10.1%
*<F26>+<F27>Analog Devices, Inc. 500 12,750
General Signal Corporation 500 18,937
Hewlett-Packard Company 500 49,813
Measurex Corporation 500 14,625
Millipore Corporation 500 20,938
Perkin-Elmer Corporation 500 24,125
Tektronix, Inc. 500 22,375
*<F26> Teradyne, Inc. 500 8,625
*<F26> Thermo Instrument Systems, Inc. 500 16,125
Varian Associates, Inc. 500 25,875
----------
214,188
----------
Total Common Stocks
(Cost $1,913,202) 1,840,406
----------
FUTURES -- 14.8%
PSE Technology 100 Index,
September 1996 3 315,075
----------
Total Futures
(Cost $327,199) 315,075
----------
SHORT-TERM INVESTMENTS -- 9.2%
MONEY MARKET -- 6.9%
Dreyfus Cash Management Plus $80,000 80,000
Federated Master Trust 66,000 66,000
----------
Total Money Market 146,000
----------
GOVERNMENT SECURITIES -- 2.3%
+<F27> U.S. Treasury Bill
4.590%, due 02-06-1997 $50,000 $48,411
----------
Total Government Securities
(Cost $48,380) 48,411
----------
Total Short-Term Investments 194,411
----------
Total Investments $2,349,892
----------
----------
*<F26>Non-income producing
+<F27>Segregated as collateral against futures
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
R.D. Ziegler, Chairman, Director
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Robert J. Tuszynski, President, Director
Jay Ferrara, Chief Financial Officer and Treasurer
John Lauderdale, Vice President of Marketing
S. Charles O'Meara, Secretary
INVESTMENT ADVISORS
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Skyline Asset Management
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
DISTRIBUTOR, TRANSFER AND DIVIDEND
DISBURSING AGENT, DEPOSITORY AND FUND ACCOUNTANT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
CUSTODIAN
Principal Preservation Portfolios, Inc.
215 North Main Street
West Bend, Wisconsin 53095
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
AUDITOR
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
"Standard & Poor's," "Standard & Poor's 100," "S&P," "100" are trademarks of
Standard &Poor's Corporation and have been licensed for use by B.C. Ziegler and
Company.
PSE is the service mark of the Pacific Stock Exchange Incorporated and has been
licensed for use by B.C. Ziegler and Company.
This report has been prepared for the information of shareholders of Principal
Preservation Portfolios, Inc., and may not be used in connection with the
offering of securities unless preceded or accompanied by a current Prospectus.
PP 344-8/96
