(PRINCIPAL PRESERVATION LOGO)
TAX-EXEMPT PORTFOLIO
INSURED TAX-EXEMPT PORTFOLIO
GOVERNMENT PORTFOLIO
S&P100 PLUS PORTFOLIO
DIVIDEND ACHIEVERS PORTFOLIO
BALANCED PORTFOLIO
SELECT VALUE PORTFOLIO
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ANNUAL REPORT
TO SHAREHOLDERS
DECEMBER 31, 1995
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PRESIDENT'S LETTER/MANAGEMENT DISCUSSION AND ANALYSIS
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
February 20, 1996
Dear Shareholders:
We are pleased to provide our annual report for the year ended December 31,
1995. The long-term fund net assets, buoyed by strong capital markets, increased
from $202,000,000 to $237,000,000. The largest increases in fund assets were
realized in the S&P 100 Plus and Wisconsin Tax-Exempt Portfolios (whose annual
report is being sent separately).
The Dow Jones Industrial Average, as well the Standard & Poor's 500 indices
touched new historical highs on December 14, 1995. As of the date of this
report, both indices continue to push to record heights exceeding 5,600 and 660
respectively. The bond markets, through lowering of the overnight lending rate
by the Federal Reserve, witnessed a reduction of long-term interest rates,
causing bond prices to increase. Each of the long-term portfolios participated
in this positive performance, giving the shareholders good comparative total
returns in their respective categories. A further discussion of the individual
fund performances follow on the next few pages.
It is with mixed emotion that I report that effective January 19, 1996,
Steven Roell tendered his resignation to the Principal Preservation Portfolios
Board of Directors. We wish him well in his pursuits. However, I am pleased to
report that Ralph Eckert has been appointed to fill his position. Ralph is the
retired Chief Executive Officer of Benefit Trust Life Insurance Company. More
recently, he served on The Prime Portfolios (a registered investment company)
Board of Trustees. Ralph, as was Steve, is a very competent and thorough
individual in whom we are confident will make a strong addition to the Board.
Finally, at the end of March, 1996, we will be saying goodbye to Vern Van
Vooren, who will be retiring after nearly 33 years with B.C. Ziegler and
Company. Vern has been an outstanding individual to work with and who always
exhibited a high degree of integrity in his portfolio management work for
Principal Preservation. Thomas Sancomb will assume the management
responsibilities of the Tax-Exempt and Insured Tax-Exempt Portfolios, while the
Government Portfolio will be managed by the Investment Committee. Tom, as the
Tax-Exempt and Insured Tax-Exempt Portfolios trader, has worked closely with
Vern since the inception of these Funds in 1984 and 1986 respectively. Tom has
been with B.C. Ziegler and Company since 1975 and has served on the Investment
Committee for Principal Preservation since 1984. While we will miss Vern, we are
committed to providing the shareholders of Principal Preservation with the same
degree of care exhibited by Vern in the management of each of the fixed income
portfolios.
Sincerely,
/s/ R. D. Ziegler
R. D. Ziegler
President
The report contained herein is meant to be information to the existing
shareholders of Principal Preservation. This does not constitute an offer to
sell securities of any portfolio and should an investor wish to receive more
information about the portfolios, should obtain a prospectus which includes a
discussion of each portfolio's investment objective and all applicable sales
charges and expenses.
MANAGEMENT DISCUSSION AND ANALYSIS
TAX-EXEMPT PORTFOLIO
Shown below is a comparison of the change in value of a $10,000 investment in
Principal Preservation Tax-Exempt Portfolio and the Lehman 20-Year Municipal
Bond Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 13.92%
5-YEAR 7.81%
10-YEAR 6.42%
Date Principal Preservation Lehman 20-Year
Tax-Exempt Portfolio Municipal Bond Index
12/31/85 $9,650 $10,000
1/31/86 $10,035 $10,589
2/28/86 $9,819 $11,009
3/31/86 $9,457 $11,012
4/30/86 $9,437 $11,021
5/31/86 $9,593 $10,841
6/30/86 $9,385 $10,944
7/31/86 $9,553 $11,011
8/31/86 $9,700 $11,504
9/30/86 $9,904 $11,533
10/31/86 $10,019 $11,733
11/30/86 $10,119 $11,965
12/31/86 $10,128 $11,931
1/31/87 $10,229 $12,290
2/28/87 $10,262 $12,350
3/31/87 $10,295 $12,219
4/30/87 $10,026 $11,606
5/31/87 $10,014 $11,548
6/30/87 $10,192 $11,888
7/31/87 $10,372 $12,009
8/31/87 $10,554 $12,037
9/30/87 $10,388 $11,593
10/31/87 $9,688 $11,634
11/30/87 $9,909 $11,938
12/31/87 $10,040 $12,111
1/29/88 $9,963 $12,542
2/29/88 $9,947 $12,675
3/31/88 $10,004 $12,528
4/29/88 $10,099 $12,623
5/31/88 $10,219 $12,586
6/30/88 $10,327 $12,770
7/29/88 $10,373 $12,853
8/31/88 $10,433 $12,865
9/30/88 $10,519 $13,098
10/31/88 $10,656 $13,329
11/30/88 $10,532 $13,206
12/31/88 $10,644 $13,341
1/31/89 $10,796 $13,617
2/28/89 $10,751 $13,462
3/31/89 $10,706 $13,430
4/28/89 $10,902 $13,748
5/31/89 $11,086 $14,034
6/30/89 $11,217 $14,225
7/31/89 $11,321 $14,418
8/31/89 $11,275 $14,277
9/30/89 $11,283 $14,234
10/31/89 $11,403 $14,408
11/30/89 $11,494 $14,660
12/31/89 $11,627 $14,780
1/31/90 $11,606 $14,711
2/28/90 $11,656 $14,842
3/31/90 $11,706 $14,846
4/30/90 $11,598 $14,739
5/31/90 $11,764 $15,060
6/30/90 $11,856 $15,193
7/31/90 $11,992 $15,416
8/31/90 $11,865 $15,192
9/30/90 $11,870 $15,201
10/31/90 $12,042 $15,476
11/30/90 $12,256 $15,787
12/31/90 $12,352 $15,856
1/31/91 $12,494 $16,068
2/28/91 $12,636 $16,208
3/31/91 $12,657 $16,214
4/30/91 $12,739 $16,430
5/31/91 $12,822 $16,576
6/30/91 $12,890 $16,559
7/31/91 $12,974 $16,761
8/31/91 $13,136 $16,982
9/30/91 $13,253 $17,203
10/31/91 $13,386 $17,358
11/30/91 $13,422 $17,407
12/31/91 $13,587 $17,781
1/31/92 $13,673 $17,822
2/29/92 $13,662 $17,827
3/31/92 $13,714 $17,834
4/30/92 $13,863 $17,993
5/31/92 $14,028 $18,205
6/30/92 $14,210 $18,511
7/31/92 $14,724 $19,066
8/31/92 $14,509 $18,879
9/30/92 $14,544 $19,002
10/30/92 $14,327 $18,816
11/30/92 $14,651 $19,153
12/31/92 $14,756 $19,348
1/31/93 $15,032 $19,572
2/28/93 $15,650 $20,281
3/31/93 $15,497 $20,066
4/30/93 $15,671 $20,269
5/31/93 $15,759 $20,383
6/30/93 $16,021 $20,723
7/31/93 $16,055 $20,750
8/31/93 $16,405 $21,182
9/30/93 $16,633 $21,423
10/30/93 $16,665 $21,464
11/30/93 $16,502 $21,275
12/31/93 $16,873 $21,724
1/31/94 $17,084 $21,998
2/28/94 $16,594 $21,340
3/31/94 $15,831 $20,215
4/30/94 $15,972 $20,381
5/31/94 $16,113 $20,621
6/30/94 $15,997 $20,415
7/31/94 $16,322 $20,883
8/31/94 $16,353 $20,941
9/30/94 $16,090 $20,522
10/31/94 $15,733 $19,980
11/30/94 $15,393 $19,512
12/31/94 $15,787 $20,125
1/31/95 $16,333 $20,912
2/28/95 $16,843 $21,671
3/31/95 $17,028 $21,918
4/30/95 $17,042 $21,914
5/31/95 $17,650 $22,740
6/30/95 $17,394 $22,390
7/31/95 $17,484 $22,506
8/31/95 $17,729 $22,814
9/30/95 $17,839 $22,994
10/31/95 $18,146 $23,484
11/30/95 $18,435 $24,003
12/31/95 $18,633 $24,339
Past performance is not predictive of future performance.
LEHMAN 20-YEAR MUNICIPAL BOND INDEX
The Lehman 20-Year Municipal Bond Index is a broad based index containing
over 22,000 issues with maturities ranging from 2-30 years. The issues
comprising the index are generated from the issues completed within the last
five years with total issue size of $50,000,000 and larger. The average quality
rating is ''AA.'' The index performance shown above does not include sales
charges or other fees which would have been incurred had an investor attempted
to replicate the index.
TAX-EXEMPT PORTFOLIO
The Tax-Exempt Portfolio's performance is presented from December 31, 1985
through December 31, 1995.
It is based upon a $10,000 investment at the Portfolio's then offering price,
which included a 3.5% sales charge. It represents the actual total returns for
each of the years ended December 31, net of any fees and expenses charged during
those periods.
DISCUSSION AND ANALYSIS
During 1995, interest rates declined in tax-exempt securities in response to
the Federal Reserve policy makers lowering the overnight lending rate twice
during the last two quarters of 1995. However, because of much discussion on the
flat tax proposal, prices on municipal securities did not increase as much as
the taxable sector. Therefore, at December 31, 1995, the yield on a generic AAA
municipal security was 5.28% compared to the yield on the 30 year Treasury of
5.95%, a very small spread by historical standards and gave many more investors
an after tax income advantage for investing in municipal securities. The
Tax-Exempt Portfolio manager continued to take advantage of a relatively stable
interest rate environment in the latter half of the year and readjusted the
portfolio. The manager reduced the holdings in the Utility sector from
approximately 24.5% to 13.8% of the portfolio and increased the power and lease
revenue sectors from 2.0% to 7.6% and from 8.9% to 14.6%, respectively. The
manager did so to improve on the overall yield to maturity, as well as the
credit quality, of the portfolio. The major state diversification changes
included reductions in California, Illinois and Pennsylvania with additions to
Alaska, Indiana, Michigan and New York. Many of these moves were done to
facilitate a higher yield as well as the improvement in the credit quality. The
Tax-Exempt Portfolio has produced returns over the five year period that puts it
in the 15th percentile of 203 general municipal bond funds as measured by
Morningstar for the year ended December 31, 1995.
The one, five and ten year average annualized total returns, including the
effect of the sales charges, for the period ended December 31, 1995, were
13.92%, 7.81% and 6.42%, respectively.
INSURED TAX-EXEMPT PORTFOLIO
Shown below is a graphical depiction of the Insured Tax-Exempt Portfolio
versus the broad based Lehman 20-Year Municipal Bond Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 13.54%
5-YEAR 7.23%
SINCE INCEPTION 9/30/86 7.18%
Date Principal Preservation Insured Lehman 20-Year
Tax-Exempt Portfolio Municipal Bond Index
9/30/86<F1>* $9,550 $10,000
10/31/86 $9,717 $10,172
11/30/86 $9,922 $10,372
12/31/86 $9,967 $10,342
1/31/87 $10,216 $10,653
2/28/87 $10,322 $10,704
3/31/87 $10,183 $10,589
4/30/87 $9,409 $10,057
5/31/87 $9,336 $10,006
6/30/87 $9,598 $10,299
7/31/87 $9,705 $10,403
8/31/87 $9,748 $10,426
9/30/87 $9,240 $10,040
10/31/87 $9,328 $10,074
11/30/87 $9,631 $10,336
12/31/87 $9,860 $10,485
1/29/88 $10,253 $10,857
2/29/88 $10,363 $10,971
3/31/88 $10,076 $10,843
4/29/88 $10,174 $10,924
5/31/88 $10,227 $10,892
6/30/88 $10,370 $11,050
7/29/88 $10,435 $11,121
8/31/88 $10,478 $11,130
9/30/88 $10,636 $11,330
10/31/88 $10,851 $11,528
11/30/88 $10,724 $11,421
12/31/88 $10,999 $11,537
1/31/89 $11,137 $11,775
2/28/89 $11,020 $11,639
3/31/89 $10,995 $11,611
4/28/89 $11,288 $11,885
5/31/89 $11,606 $12,131
6/30/89 $11,781 $12,295
7/31/89 $11,896 $12,461
8/31/89 $11,749 $12,338
9/30/89 $11,697 $12,300
10/31/89 $11,816 $12,449
11/30/89 $12,008 $12,666
12/31/89 $12,067 $12,769
1/31/90 $11,967 $12,708
2/28/90 $12,052 $12,820
3/31/90 $12,113 $12,823
4/30/90 $11,937 $12,729
5/31/90 $12,212 $13,006
6/30/90 $12,311 $13,119
7/31/90 $12,500 $13,311
8/31/90 $12,271 $13,117
9/30/90 $12,245 $13,124
10/31/90 $12,451 $13,361
11/30/90 $12,749 $13,628
12/31/90 $12,801 $13,687
1/31/91 $12,931 $13,869
2/28/91 $13,034 $13,989
3/31/91 $13,031 $13,994
4/30/91 $13,187 $14,179
5/31/91 $13,291 $14,304
6/30/91 $13,262 $14,289
7/31/91 $13,380 $14,462
8/31/91 $13,540 $14,652
9/30/91 $13,646 $14,841
10/31/91 $13,766 $14,974
11/30/91 $13,818 $15,015
12/31/91 $14,035 $15,337
1/31/92 $14,088 $15,371
2/29/92 $14,071 $15,375
3/31/92 $14,110 $15,380
4/30/92 $14,216 $15,516
5/31/92 $14,378 $15,698
6/30/92 $14,612 $15,960
7/31/92 $15,145 $16,438
8/31/92 $14,867 $16,276
9/30/92 $14,931 $16,381
10/30/92 $14,679 $16,219
11/30/92 $15,022 $16,509
12/31/92 $15,158 $16,676
1/31/93 $15,408 $16,869
2/28/93 $16,091 $17,478
3/31/93 $15,888 $17,292
4/30/93 $16,060 $17,466
5/31/93 $16,127 $17,562
6/30/93 $16,378 $17,855
7/31/93 $16,430 $17,877
8/31/93 $16,790 $18,248
9/30/93 $16,965 $18,455
10/30/93 $16,999 $18,489
11/30/93 $16,800 $18,325
12/31/93 $17,165 $18,711
1/31/94 $17,365 $18,947
2/28/94 $16,875 $18,380
3/31/94 $16,053 $17,411
4/30/94 $16,170 $17,554
5/31/94 $16,337 $17,761
6/30/94 $16,203 $17,583
7/31/94 $16,522 $17,986
8/31/94 $16,555 $18,036
9/30/94 $16,270 $17,675
10/31/94 $15,932 $17,208
11/30/94 $15,559 $16,805
12/31/94 $15,979 $17,333
1/31/95 $16,689 $18,011
2/28/95 $17,233 $18,665
3/31/95 $17,411 $18,878
4/30/95 $17,397 $18,874
5/31/95 $17,965 $19,586
6/30/95 $17,716 $19,284
7/31/95 $17,805 $19,384
8/31/95 $18,021 $19,650
9/30/95 $18,127 $19,805
10/31/95 $18,435 $20,227
11/30/95 $18,816 $20,674
12/31/95 $18,998 $20,963
*<F1>September 30, 1986 inception date
Past performance is note predictive of future performance.
LEHMAN 20-YEAR MUNICIPAL BOND INDEX
The Lehman 20-Year Municipal Bond Index is a broad based index containing
over 22,000 issues with maturities ranging from 2-30 years. The issues
comprising the index are generated from the issues completed within the last
five years with total issue size of $50,000,000 and larger. The average quality
rating is ''AA.'' The index performance shown above does not include sales
charges or other fees which would have been incurred had an investor attempted
to replicate the index.
INSURED TAX-EXEMPT PORTFOLIO
The Insured Tax-Exempt Portfolio's performance is presented from September 30,
1986, commencement of operations, through December 31, 1995. It is based upon a
$10,000 investment at the Portfolio's then offering price, which included a 3.5%
sales charge. It represents the actual total returns for each of the years
ended December 31, net of any fees and expenses charged during those periods.
DISCUSSION AND ANALYSIS
The Insured Tax-Exempt Portfolio also participated in the falling interest
rate environment. The manager, while following much the same strategy of the
Tax-Exempt Portfolio, readjusted the portfolio into different sectors and
states. The manager reduced the exposure to the utility, lease revenue and
general obligation sectors and increased the power and hospital sectors. The
state diversification changes were the elimination of California and Georgia,
with reductions to Mississippi, Nevada, Oklahoma and Texas. Increases were made
to bonds issued by Illinois, Michigan, North Carolina and Vermont. In the
process, the manager reduced the average maturity by approximately one half
year.
The one, five and since inception average annualized total returns, including
the effect of the sales charges, for the period ended December 31, 1995, were
13.54%, 7.23% and 7.18%, respectively.
GOVERNMENT PORTFOLIO
Shown below is a graphic depiction of the Government Portfolio versus the
Lehman Intermediate Government Bond Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 12.27%
5-YEAR 7.57%
10-YEAR 8.19%
date Principal Preservation Lehman Intermediate
Government Portfolio Government Bond Index
12/31/85 $9,650 $10,000
1/31/86 $9,654 $10,062
2/28/86 $10,170 $10,300
3/31/86 $10,531 $10,577
4/30/86 $10,572 $10,647
5/31/86 $10,347 $10,510
6/30/86 $10,701 $10,764
7/31/86 $10,679 $10,882
8/31/86 $11,062 $11,136
9/30/86 $10,779 $11,031
10/31/86 $10,920 $11,170
11/30/86 $11,051 $11,277
12/31/86 $11,044 $11,306
1/31/87 $11,224 $11,408
2/28/87 $11,321 $11,465
3/31/87 $11,190 $11,440
4/30/87 $10,957 $11,238
5/31/87 $10,957 $11,213
6/30/87 $11,063 $11,345
7/31/87 $10,924 $11,370
8/31/87 $10,868 $11,340
9/30/87 $10,632 $11,198
10/31/87 $11,238 $11,532
11/30/87 $11,266 $11,601
12/31/87 $11,416 $11,714
1/29/88 $11,796 $12,005
2/29/88 $11,849 $12,132
3/31/88 $11,700 $12,081
4/29/88 $11,587 $12,060
5/31/88 $11,472 $12,002
6/30/88 $11,720 $12,198
7/29/88 $11,722 $12,161
8/31/88 $11,805 $12,177
9/30/88 $12,047 $12,388
10/31/88 $12,211 $12,559
11/30/88 $12,107 $12,451
12/31/88 $12,161 $12,463
1/31/89 $12,262 $12,588
2/28/89 $12,143 $12,534
3/31/89 $12,204 $12,593
4/28/89 $12,392 $12,847
5/31/89 $12,676 $13,095
6/30/89 $13,032 $13,429
7/31/89 $13,277 $13,702
8/31/89 $13,049 $13,887
9/30/89 $13,093 $13,954
10/31/89 $13,402 $14,247
11/30/89 $13,523 $14,388
12/31/89 $13,555 $14,430
1/31/90 $13,409 $14,341
2/28/90 $13,443 $14,394
3/31/90 $13,432 $14,411
4/30/90 $13,315 $14,363
5/31/90 $13,641 $14,670
6/30/90 $13,831 $14,864
7/31/90 $14,022 $15,072
8/31/90 $13,872 $15,018
9/30/90 $14,004 $15,152
10/31/90 $14,215 $15,363
11/30/90 $14,523 $15,595
12/31/90 $14,736 $15,810
1/31/91 $14,854 $15,973
2/28/91 $14,937 $16,070
3/31/91 $14,988 $16,158
4/30/91 $15,138 $16,324
5/31/91 $15,206 $16,415
6/30/91 $15,141 $16,428
7/31/91 $15,311 $16,605
8/31/91 $15,703 $16,920
9/30/91 $16,028 $17,208
10/31/91 $16,199 $17,404
11/30/91 $16,390 $17,608
12/31/91 $16,965 $18,036
1/31/92 $16,614 $17,863
2/29/92 $16,664 $17,918
3/31/92 $16,516 $17,846
4/30/92 $16,632 $18,007
5/31/92 $16,965 $18,275
6/30/92 $17,264 $18,538
7/31/92 $17,763 $18,894
8/31/92 $17,953 $19,087
9/30/92 $18,273 $19,350
10/30/92 $17,948 $19,118
11/30/92 $17,830 $19,040
12/31/92 $18,122 $19,286
1/31/93 $18,566 $19,645
2/28/93 $18,973 $19,934
3/31/93 $19,039 $20,008
4/30/93 $19,197 $20,164
5/31/93 $19,143 $20,110
6/30/93 $19,593 $20,402
7/31/93 $19,620 $20,443
8/31/93 $20,038 $20,748
9/30/93 $20,140 $20,833
10/30/93 $20,182 $20,883
11/30/93 $19,906 $20,781
12/31/93 $19,990 $20,866
1/31/94 $20,254 $21,073
2/28/94 $19,768 $20,784
3/31/94 $19,244 $20,481
4/30/94 $19,061 $20,348
5/31/94 $19,042 $20,362
6/30/94 $18,983 $20,366
7/31/94 $19,294 $20,633
8/31/94 $19,338 $20,693
9/30/94 $19,025 $20,521
10/31/94 $19,004 $20,525
11/30/94 $18,879 $20,435
12/31/94 $18,905 $20,502
1/31/95 $19,230 $20,836
2/28/95 $19,676 $21,238
3/31/95 $19,767 $21,355
4/30/95 $20,010 $21,603
5/31/95 $20,714 $22,212
6/30/95 $20,844 $22,354
7/31/95 $20,819 $22,365
8/31/95 $21,040 $22,548
9/30/95 $21,198 $22,699
10/31/95 $21,469 $22,946
11/30/95 $21,761 $23,226
12/31/95 $21,995 $23,456
Past performance is not predictive of future performance.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX
The Lehman Intermediate Government Bond Index represents a total return of
U.S. Government bonds ranging in maturity from 2-10 years. The average duration
of the underlying index is approximately four years. The index does not contain
any sales charge or expenses or other fees that would have to be incurred had an
investor attempted to replicate the index.
GOVERNMENT PORTFOLIO
The Government Portfolio's performance is presented from December 31, 1985
through December 31, 1995. It is based upon a $10,000 investment at the
Portfolio's then offering price, which included a 3.5% sales charge. It
represents the actual total returns for each of the years ended December 31,
net of any fees and expenses charged during those periods.
DISCUSSION AND ANALYSIS
The Government Portfolio enjoyed good total return performance during 1995 by
posting a total return, including reinvested dividends, of 16.34%. Vern Van
Vooren, the Portfolio Manager, began the year with a barbell strategy. This
involved investing approximately 50% of the portfolio in bonds with a maturity
in two to three years and the other half in bonds with an average maturity of
eight to ten years. Shortly after the Fed moved interest rates lower, the
manager moved the long end of the portfolio from ten to seven years. This move,
while it provided immediate benefit, did not keep pace with the overall Treasury
market. At that time, the portfolio manager was concerned with an economy that
was showing signs of being inflationary.
During the last half of 1995, Vern moved once again to a laddered maturity
approach for the portfolio by investing approximately 5% in a position that
matured on February 15, 1996, as well as approximately 20% in bonds that mature
in the year 2003. These moves kept the average maturity of the portfolio at
approximately 4.75 years and a duration of 3.54 years at December 31, 1995. Vern
is expecting further easing by the Federal Reserve during the first six months
of 1996 due to a slowing of the economy.
The one, five and ten year average annualized total returns, including the
effect of the sales charges, for the period ended December 31, 1995, were
12.27%, 7.57% and 8.19%, respectively.
S&P 100 PLUS PORTFOLIO
Shown below is a comparison of a $10,000 investment in the S&P 100 Plus
Portfolio versus the S&P 100 Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 30.56%
5-YEAR 14.24%
10-YEAR 12.70%
Date Principal Preservation S&P 100 Index
S&P 100 Plus Portfolio
12/31/85 $9,550 $10,000
1/31/86 $9,520 $9,933
2/28/86 $10,071 $10,555
3/31/86 $10,572 $11,067
4/30/86 $10,552 $11,049
5/31/86 $10,954 $11,614
6/30/86 $11,088 $11,626
7/31/86 $10,485 $10,919
8/31/86 $11,192 $11,695
9/30/86 $10,454 $10,860
10/31/86 $10,925 $11,382
11/30/86 $11,260 $11,741
12/31/86 $11,074 $11,524
1/31/87 $12,305 $13,150
2/28/87 $12,773 $13,700
3/31/87 $13,137 $14,166
4/30/87 $13,137 $14,167
5/31/87 $13,372 $14,381
6/30/87 $14,046 $15,117
7/31/87 $14,616 $15,803
8/31/87 $15,230 $16,550
9/30/87 $14,864 $16,058
10/31/87 $11,861 $12,660
11/30/87 $10,831 $11,443
12/31/87 $11,526 $12,233
1/29/88 $11,933 $12,633
2/29/88 $12,484 $13,200
3/31/88 $12,017 $12,613
4/29/88 $12,247 $12,855
5/31/88 $12,441 $13,034
6/30/88 $13,008 $13,684
7/29/88 $13,020 $13,637
8/31/88 $12,644 $13,062
9/30/88 $13,081 $13,544
10/31/88 $13,411 $13,946
11/30/88 $13,301 $13,811
12/31/88 $13,499 $14,040
1/31/89 $14,380 $15,183
2/28/89 $14,033 $14,670
3/31/89 $14,100 $14,843
4/28/89 $14,650 $15,645
5/31/89 $15,053 $16,117
6/30/89 $14,902 $15,967
7/31/89 $16,185 $17,423
8/31/89 $16,536 $17,815
9/30/89 $16,452 $17,742
10/31/89 $16,113 $17,378
11/30/89 $16,411 $17,701
12/31/89 $16,772 $18,099
1/31/90 $15,705 $16,946
2/28/90 $15,992 $17,280
3/31/90 $16,358 $17,731
4/30/90 $16,070 $17,435
5/31/90 $17,555 $19,097
6/30/90 $17,443 $18,973
7/31/90 $17,415 $18,937
8/31/90 $15,867 $17,206
9/30/90 $15,159 $16,401
10/31/90 $15,076 $16,316
11/30/90 $15,938 $17,292
12/31/90 $16,241 $17,615
1/31/91 $17,081 $18,517
2/28/91 $18,313 $19,869
3/31/91 $18,758 $20,328
4/30/91 $18,801 $20,356
5/31/91 $19,645 $21,292
6/30/91 $18,741 $20,359
7/31/91 $19,646 $21,365
8/31/91 $19,858 $21,653
9/30/91 $19,389 $21,151
10/31/91 $19,573 $21,413
11/30/91 $18,735 $20,556
12/31/91 $20,749 $22,581
1/31/92 $20,442 $22,285
2/29/92 $20,763 $22,648
3/31/92 $20,402 $22,279
4/30/92 $21,032 $22,999
5/31/92 $21,165 $23,162
6/30/92 $20,801 $22,812
7/31/92 $21,508 $23,544
8/31/92 $20,934 $22,958
9/30/92 $21,011 $23,006
10/30/92 $20,937 $22,928
11/30/92 $21,603 $23,634
12/31/92 $21,823 $23,920
1/31/93 $22,087 $24,243
2/28/93 $22,476 $24,696
3/31/93 $22,885 $25,168
4/30/93 $22,448 $24,745
5/31/93 $23,074 $25,470
6/30/93 $23,051 $25,480
7/31/93 $22,878 $25,358
8/31/93 $23,741 $26,299
9/30/93 $23,428 $25,952
10/30/93 $23,805 $26,375
11/30/93 $23,695 $26,317
12/31/93 $23,941 $26,756
1/31/94 $24,848 $27,797
2/28/94 $24,227 $27,144
3/31/94 $23,025 $25,866
4/30/94 $23,200 $26,060
5/31/94 $23,727 $26,706
6/30/94 $23,020 $25,918
7/31/94 $23,823 $26,880
8/31/94 $24,562 $27,759
9/30/94 $24,095 $27,223
10/31/94 $24,627 $27,871
11/30/94 $23,790 $26,932
12/31/94 $24,206 $27,457
1/31/95 $24,644 $27,998
2/28/95 $25,728 $29,306
3/31/95 $26,505 $30,276
4/30/95 $27,480 $31,472
5/31/95 $28,585 $32,841
6/30/95 $29,194 $33,600
7/31/95 $30,076 $34,716
8/31/95 $29,914 $34,535
9/30/95 $31,341 $36,262
10/31/95 $31,341 $36,287
11/30/95 $32,585 $37,793
12/31/95 $33,100 $38,428
Past performance is not predictive of future performance.
S&P 100 INDEX
The S&P 100 Index is a broad based stock index comprised of the largest 100
securities in the United States based upon market capitalization. The index
results do not include any sales charges or any other fees investors would incur
had they attempted to replicate the index.
S&P 100 PLUS PORTFOLIO
The S&P 100 Plus Portfolio's performance is presented from December 31, 1985
through December 31, 1995. It is based upon a $10,000 investment at the
Portfolio's then offering price, which included a 4.5% sales charge. It
represents the actual total returns for each of the years ended December 31,
net of any fees and expenses charged during those periods.
DISCUSSION AND ANALYSIS
The S&P 100 Plus Portfolio continued to benefit from the investor focus on
large capitalized securities in 1995 and posted a total return, including
dividends reinvested, of 36.71%. A moderate 6-7% cash position in this portfolio
continued to keep the portfolio behind the actual index. However, because of the
index strategy, the fund clearly outperformed the average growth and income
average by 5.9%.
During the latter half of 1995, William Zink, the Portfolio Manager, did not
utilize much of the option strategies except as a means of equitizing cash. Bill
believed that the overall market was going to continue to trend upwards but was
concerned with the strong possibility of weaker earnings across many
corporations. Bill was also concerned about the lack of a compromise on the
federal budget and the long-term effects to the overall economy.
The one, five and ten year average annualized total returns, including the
effect of the sales charges, for the period ended December 31, 1995, were
30.56%, 14.24% and 12.70%, respectively.
DIVIDEND ACHIEVERS PORTFOLIO
Shown below is a graphic comparison between a $10,000 investment made in
Dividend Achievers versus the S&P 500 Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 25.76%
5-YEAR 11.54%
SINCE INCEPTION 1/2/87 9.80%
Date Principal Preservation S&P 500 Index
Dividend Achievers Portfolio
1/2/87<F4>* $9,550 $10,000
1/31/87 $9,920 $11,346
2/28/87 $10,220 $11,793
3/31/87 $10,250 $12,133
4/30/87 $10,109 $12,024
5/31/87 $10,119 $12,128
6/30/87 $10,612 $12,739
7/31/87 $11,098 $13,384
8/31/87 $11,392 $13,882
9/30/87 $11,144 $13,577
10/31/87 $9,064 $10,652
11/30/87 $8,656 $9,773
12/31/87 $9,242 $10,516
1/29/88 $9,643 $10,957
2/29/88 $10,065 $11,467
3/31/88 $9,839 $11,112
4/29/88 $9,839 $11,234
5/31/88 $9,849 $11,331
6/30/88 $10,263 $11,850
7/29/88 $10,180 $11,804
8/31/88 $10,003 $11,401
9/30/88 $10,422 $11,886
10/31/88 $10,611 $12,216
11/30/88 $10,401 $12,040
12/31/88 $10,629 $12,248
1/31/89 $11,054 $13,144
2/28/89 $10,905 $12,816
3/31/89 $11,136 $13,113
4/28/89 $11,457 $13,793
5/31/89 $11,918 $14,350
6/30/89 $11,857 $14,268
7/31/89 $12,751 $15,555
8/31/89 $12,762 $15,859
9/30/89 $12,711 $15,793
10/31/89 $12,224 $15,426
11/30/89 $12,397 $15,739
12/31/89 $12,701 $16,116
1/31/90 $11,948 $15,034
2/28/90 $11,992 $15,226
3/31/90 $12,188 $15,629
4/30/90 $11,870 $15,239
5/31/90 $12,857 $16,724
6/30/90 $12,999 $16,611
7/31/90 $12,922 $16,556
8/31/90 $11,887 $15,059
9/30/90 $11,424 $14,324
10/31/90 $11,446 $14,262
11/30/90 $12,255 $15,182
12/31/90 $12,825 $15,605
1/31/91 $13,349 $16,284
2/28/91 $14,274 $17,447
3/31/91 $15,044 $17,869
4/30/91 $14,999 $17,910
5/31/91 $15,727 $18,681
6/30/91 $15,021 $17,825
7/31/91 $15,640 $18,654
8/31/91 $16,000 $19,095
9/30/91 $15,646 $18,776
10/31/91 $16,166 $19,026
11/30/91 $15,601 $18,258
12/31/91 $17,758 $20,346
1/31/92 $17,196 $19,967
2/29/92 $17,100 $20,225
3/31/92 $16,813 $19,830
4/30/92 $16,873 $20,412
5/31/92 $16,825 $20,511
6/30/92 $16,297 $20,204
7/31/92 $17,091 $21,030
8/31/92 $17,031 $20,598
9/30/92 $17,066 $20,840
10/30/92 $17,596 $20,912
11/30/92 $18,272 $21,624
12/31/92 $18,311 $21,889
1/31/93 $17,913 $22,072
2/28/93 $17,733 $22,375
3/31/93 $18,189 $22,846
4/30/93 $17,326 $22,292
5/31/93 $17,468 $22,889
6/30/93 $17,403 $22,954
7/31/93 $17,132 $22,861
8/31/93 $17,558 $23,727
9/30/93 $17,430 $23,543
10/30/93 $17,767 $24,029
11/30/93 $17,210 $23,800
12/31/93 $17,393 $24,087
1/31/94 $17,782 $24,906
2/28/94 $17,497 $24,231
3/31/94 $16,709 $23,175
4/30/94 $17,008 $23,472
5/31/94 $17,372 $23,857
6/30/94 $17,080 $23,273
7/31/94 $17,537 $24,036
8/31/94 $17,954 $25,021
9/30/94 $17,411 $24,408
10/31/94 $17,726 $24,957
11/30/94 $17,333 $24,049
12/31/94 $17,607 $24,405
1/31/95 $17,700 $25,037
2/28/95 $18,179 $26,011
3/31/95 $18,552 $26,778
4/30/95 $19,326 $27,565
5/31/95 $19,833 $28,665
6/30/95 $20,084 $29,330
7/31/95 $20,674 $30,301
8/31/95 $20,566 $30,377
9/30/95 $21,381 $31,659
10/31/95 $21,958 $31,545
11/30/95 $22,791 $32,930
12/31/95 $23,186 $33,566
*<F4>January 2, 1987 inception date.
Past performance is not predictive of future performance.
S&P 500 INDEX
The S&P 500 Index is a broad based stock index representing, based upon
market capitalization, the 500 largest companies in the United States. The index
does not adjust for any sales charges or other fees and expenses which would
have been incurred had an investor attempted to replicate the index.
DIVIDEND ACHIEVERS PORTFOLIO
The Dividend Achievers Portfolio's performance is presented from January 2,
1987, commencement of operations, through December 31, 1995. It is based upon a
$10,000 investment at the Portfolio's then offering price, which included a 4.5%
sales charge. It represents the actual total returns for each of the years
ended December 31, net of any fees and expenses charged during those periods.
DISCUSSION AND ANALYSIS
The Dividend Achievers Portfolio enjoyed a solid year of performance posting
a total return of 31.69% which was ahead of the growth and income fund average
of 29.6%. At the start of 1995, the larger cash position impacted the total
return. However, Doug Ziegler, the Portfolio Manager, quickly reduced his cash
position and consequently, the portfolio participated either at or above the
market performance in each of the last three quarters of 1995.
During the second half of 1995, investors moved into the types of companies
in which the portfolio invests. These include companies whose strong balance
sheet, and increasing earnings and dividends make them popular with investors
concerned about the future of the economy. In addition, Doug balanced this
approach with sector diversification among strong companies, that while
exhibiting increased earnings and dividends, fall just outside of the universe
of companies whose dividends increased in at least eight of the last ten years.
This strategy helped the shareholders to realize a return of 15.45% for the last
half of 1995 compared with a return of 14.45% for the S&P 500 Index during the
same period.
The current portfolio, as of February 9, 1996 contains 34 issues, and has a
slight overweighting in the technology sector as compared to the S&P 500 Index.
Doug is currently maintaining a 2% cash position and believes that the market
will continue to push to higher levels during the first half of 1996. The top
five stock holdings as of December 31, 1995, were Gillette Company, Federal
National Mortgage Corp., Pepsico Incorporated, McDonalds Corporation and General
Motors Class E.
The one, five and since inception average annualized total returns, including
the effect of the sales charges, for the period ended December 31, 1995, were
25.76%, 11.54% and 9.80%, respectively.
BALANCED PORTFOLIO
Shown below is a graphic comparison of a $10,000 investment in the Balanced
Portfolio versus the broad based indexes of the S&P 500 Index and the Lehman
Intermediate Government Bond Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 20.40%
SINCE INCEPTION 7/1/92 7.40%
Date Principal Preservation Lehman Intermediate S&P 500 Index
Balanced Portfolio Government Bond Index
7/1/92<F2>* $9,550 $10,000 $10,000
7/31/92 $9,731 $10,191 $10,408
8/31/92 $9,798 $10,294 $10,194
9/30/92 $9,805 $10,435 $10,313
10/30/92 $9,940 $10,309 $10,348
11/30/92 $10,113 $10,266 $10,700
12/31/92 $10,105 $10,397 $10,830
1/31/93 $10,057 $10,589 $10,920
2/28/93 $10,115 $10,744 $11,070
3/31/93 $10,217 $10,783 $11,303
4/30/93 $10,022 $10,866 $11,028
5/31/93 $10,091 $10,836 $11,323
6/30/93 $10,130 $10,992 $11,355
7/31/93 $10,002 $11,013 $11,308
8/31/93 $10,169 $11,176 $11,736
9/30/93 $10,142 $11,221 $11,644
10/30/93 $10,261 $11,247 $11,884
11/30/93 $10,162 $11,191 $11,771
12/31/93 $10,253 $11,236 $11,912
1/31/94 $10,343 $11,347 $12,317
2/28/94 $10,213 $11,192 $11,983
3/31/94 $9,974 $11,029 $11,461
4/30/94 $10,014 $10,957 $11,608
5/31/94 $10,105 $10,965 $11,798
6/30/94 $9,964 $10,967 $11,509
7/31/94 $10,167 $11,111 $11,886
8/31/94 $10,349 $11,143 $12,373
9/30/94 $10,250 $11,051 $12,070
10/31/94 $10,312 $11,053 $12,342
11/30/94 $10,056 $11,004 $11,893
12/31/94 $10,184 $11,040 $12,069
1/31/95 $10,349 $11,220 $12,382
2/28/95 $10,587 $11,437 $12,864
3/31/95 $10,772 $11,500 $13,243
4/30/95 $11,023 $11,633 $13,632
5/31/95 $11,273 $11,961 $14,176
6/30/95 $11,352 $12,038 $14,505
7/31/95 $11,458 $12,044 $14,985
8/31/95 $11,468 $12,143 $15,022
9/30/95 $11,886 $12,224 $15,656
10/31/95 $12,099 $12,357 $15,600
11/30/95 $12,597 $12,508 $16,285
12/31/95 $12,839 $12,632 $16,599
*<F2> July 1, 1992 inception date.
Past performance is not predictive of future performance.
S&P 500 INDEX
The S&P 500 Index is a broad based stock index representing, based upon
market capitalization, the 500 largest companies in the United States. The index
does not reflect any sales charges or other fees and expenses which would have
been incurred had an investor attempted to replicate the index.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX
The Lehman Intermediate Government Bond Index represents a total return of
U.S. Government bonds ranging in maturity from 2-10 years. The average duration
of the underlying index is approximately four years. The index does not contain
any sales charge or expenses or other fees that would have to be incurred had an
investor attempted to replicate the index.
BALANCED PORTFOLIO
The Balanced Portfolio's performance is presented from July 1, 1992,
commencement of operations, through December 31, 1995. It is based upon a
$10,000 investment at the Portfolio's then offering price, which included a 4.5%
sales charge. It represents the actual total returns for each of the years
ended December 31, net of any fees and expenses charged during those periods.
DISCUSSION AND ANALYSIS
The Balanced Portfolio had a total return of 26.08% for the year ended
December 31, 1995. During the first half of 1995, Ralph Patek, the Portfolio
Manager, had a cash position of approximately 6%. He subsequently reduced that
to approximately 2%. He, as well, kept a very short maturity on the fixed income
securities which therefore did not participate as much in the rising bond prices
due to falling interest rates.
As investors began to focus on large capitalized stocks with higher dividend
yields, the equity side of the portfolio performed extremely well. At the end of
1995, Ralph was overweighting the oil stock sector and slightly underweighting
the technology sector which clearly helped the fund performance in the fourth
quarter. His top five holdings were Federal National Mortgage Corporation, Loral
Corporation, Pepsico Incorporated, SBC Communications Inc. and GTE Corp.
The one year and since inception average annualized total returns, including
the effect of the sales charges, for the period ended December 31, 1995, were
20.40% and 7.40%, respectively.
SELECT VALUE PORTFOLIO
Shown below is a comparison of a $10,000 investment in the Select Value
Portfolio versus the S&P MidCap 400 Index.
AVERAGE ANNUAL TOTAL RETURN
(Includes the effect of the sales charge)
1-YEAR 15.37%
SINCE INCEPTION 8/23/94 7.01%
Date Principal Preservation S&P MidCap
Select Value Portfolio 400 Index
8/23/94*<F3> $9,550 $10,000
8/31/94 $9,550 $10,524
9/30/94 $9,440 $10,327
10/31/94 $9,230 $10,441
11/30/94 $8,870 $9,970
12/31/94 $9,077 $10,061
1/31/95 $8,825 $10,166
2/28/95 $9,117 $10,699
3/31/95 $9,294 $10,885
4/30/95 $9,284 $11,104
5/31/95 $9,435 $11,372
6/30/95 $9,690 $11,835
7/31/95 $10,329 $12,452
8/31/95 $10,491 $12,681
9/30/95 $10,790 $12,988
10/31/95 $10,484 $12,654
11/30/95 $10,851 $13,203
12/31/95 $10,965 $13,170
* <F3>August 23, 1994 inception date.
Past performance is not predictive of future performance.
S&P MIDCAP 400 INDEX
S&P MidCap 400 Index is a broad stock index comprised of 400 medium-size
companies. The index tracks the general stock market performance of 400 medium-
size companies. The index results do not include any sales charge or any other
fees investors would incur had they attempted to replicate the index.
SELECT VALUE PORTFOLIO
The Select Value Portfolio's performance is presented from August 23, 1994,
commencement of operations, through December 31, 1995. It is based upon a
$10,000 investment at the Portfolio's then offering price, which included a 4.5%
sales charge. It represents the actual total returns for each of the years
ended December 31, net of any fees and expenses charged during those periods.
DISCUSSION AND ANALYSIS
The Select Value Portfolio had a total return, including reinvested
dividends, of 20.81% for the year ended December 31, 1995. The performance
improved from the first half of the year when it lagged the indices, to the
second half when it outperformed both the Russell 2000 and S&P 400 Midcap
Indexes.
According to Ken Kailin, the Portfolio Manager, small to mid company
investment managers tended to outperform value-oriented managers due to strong
returns from technology and health care stocks. While the Portfolio was helped
considerably by an overweighting in financial stocks in 1995, underweighted
positions in technology and health care hindered the Portfolio's performance for
most of the year. The Portfolio was also overweighted in economically sensitive
stocks, which hurt performance. In general, 1995 saw industries with low market
values relative to growth prospects underperformed the general stock market,
while sectors with rapid profit growth and high market values surged. Therefore
the value style approach to investing did not do as well as the rest of the
market.
The one year and since inception average annualized total returns, including
the effect of the sales charges, for the period ended December 31, 1995, were
15.37% and 7.01%, respectively.
RESULTS OF VOTING
On August 29, 1995, Principal Preservation Portfolios, Inc. Select Value
Portfolio held a special meeting of the shareholders to approve the change in
the subadvisor from Mesirow Asset Management, Inc. to Skyline Asset Management,
Inc. The total shares outstanding on the record date were 296,074 shares. At the
meeting, 186,685 shares were represented by proxy or in person. A total of
185,877 shares or 62.8% of the shares outstanding, voting in favor of the
proposal, 593 shares voted against and 215 abstained voting the proposal.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of
each of seven 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 included in this annual report:
<TABLE>
TAX-EXEMPT PORTFOLIO
-----------------------------------------------------------------------
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $8.36 $9.41 $8.67 $8.46 $8.19 $8.23 $8.06 $8.14 $8.81 $9.02
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .45 .45 .48 .50 .53 .53 .55 .55 .60 .63
Net realized and
unrealized gains (losses)
on investments 1.03 (1.05) .74 .21 .27 (.04) .17 (.08) (.67) (.21)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.48 (.60) 1.22 .71 .80 .49 .72 .47 (.07) .42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55) (.60) (.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55) (.60) (.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $ 9.39 $ 8.36 $ 9.41 $ 8.67 $ 8.46 $ 8.19 $ 8.23 $ 8.06 $ 8.14 $ 8.81
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN*<F1> 18.1% (6.4)% 14.3% 8.6% 10.0% 6.2% 9.2% 6.0% (0.9)% 5.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $56,443$55,492 $68,102$60,171 $63,932$65,265 $73,333$85,469$107,471$143,635
Ratio of net expenses to
average net assets 1.0%+<F2>1.0% 0.9% 0.9% 0.9% 0.9% 1.0% 1.2% 1.1% 1.1%
Ratio of net investment
income to average net assets 4.9%+<F2>5.2% 5.2% 5.9% 6.3% 6.6% 6.7% 6.9% 7.1% 7.2%
Portfolio turnover rate 105.9% 36.1% 56.3% 48.5% 38.3% 40.3% 21.5% 38.8% 18.0% 26.0%
*<F1>The Fund's sales charge is not reflected in total return as set forth in the
table.
+<F2>Reflects a voluntary reimbursement of fund expenses of 0.01% in 1995.
</TABLE>
PINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
INSURED TAX-EXEMPT PORTFOLIO
-------------------------------------------------------------------------------------------
<CAPTION>
For the
period from
September 30,
1986
(commencement
of operations)
For the years ended December 31, to December 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $9.26 $10.50 $10.14 $10.14 $9.80 $9.82 $9.50 $9.07 $9.81 $9.55
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .48 .49 .52 .56 .58 .59 .58 .59 .63 .16
Net realized and
unrealized gains (losses)
on investments 1.12 (1.21) .80 .23 .34 (.02) .32 .43 (.74) .26
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.60 (.72) 1.32 .79 .92 .57 .90 1.02 (.11) .42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.48) (.49) (.53) (.55) (.58) (.59) (.58) (.59) (.63) (.16)
Distributions from net
realized gains
on investments (.06) (.03) (.43) (.24) - - - - - -
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.54) (.52) (.96) (.79) (.58) (.59) (.58) (.59) (.63) (.16)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $10.32 $9.26 $10.50 $10.14 $10.14 $9.80 $9.82 $9.50 $9.07 $9.81
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F4> 17.7% (6.9)% 13.2% 8.0% 9.7% 6.1% 9.7% 11.6% (1.1)% 4.4%
RATIOS/SUPPLEMENTAL DATA:
Net asset value, end of period
(to nearest thousand) $18,830$17,848 $20,540$18,362 $17,971$17,081 $18,088$17,658 $16,272 $11,615
Ratio of net expenses to
average net assets 1.2%+<F5>1.2% 1.1% 1.2% 1.2% 1.2% 1.3% 1.3%+<F5>0.7%+<F5> -%*<F3>+<F5>
Ratio of net investment
income to average net assets 4.8%+<F5>5.1% 4.9% 5.4% 5.9% 6.1% 6.0% 6.3%+<F5>6.8%+<F5> 5.8%*<F3>+<F5>
Portfolio turnover rate 64.9% 26.5% 39.3% 57.4% 51.1% 25.1% 29.4% 82.9% 44.8% 1.2%
*<F3>Annualized.
**<F4>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F5>Reflects a voluntary reimbursement of fund expenses of 0.06% in 1995, 0.5%
in 1988, 1.2% in 1987 and 5.0% in 1986 respectively.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
GOVERNMENT PORTFOLIO
------------------------------------------------------------------------
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $8.84 $9.98 $9.64 $9.68 $9.10 $9.11 $8.88 $9.11 $9.71 $9.37
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .61 .61 .63 .67 .73 .76 .75 .75 .73 .80
Net realized and
unrealized gains (losses)
on investments .80 (1.14) .35 (.04) .58 (.01) .23 (.17) (.42) .49
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.41 (.53) .98 .63 1.31 .75 .98 .58 .31 1.29
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.75) (.73) (.83)
Distributions from net
realized gains
on investments - - - - - - - (.06) (.13) (.12)
Distribution of capital - - - - - - - - (.05) -
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.81) (.91) (.95)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $ 9.64 $ 8.84 $ 9.98 $ 9.64 $ 9.68 $ 9.10 $ 9.11 $ 8.88 $ 9.11 $ 9.71
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN*<F6> 16.3% (5.4)% 10.3% 6.8% 15.1% 8.7% 11.5% 6.5% 3.4% 14.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $49,319$47,324 $54,327$37,634 $32,737$29,351 $30,631$32,950 $31,036$32,162
Ratio of net expenses to
average net assets 1.1%+<F7>1.1% 1.0% 1.0% 1.1% 1.2% 1.2%+<F7>1.2%+<F7>1.3%+<F7>0.7%+<F7>
Ratio of net investment
income to average net assets 6.5%+<F7>6.6% 6.2% 7.0% 8.0% 8.5% 8.4%+<F7>8.3%+<F7>7.8%+<F7>7.8%+<F7>
Portfolio turnover rate 68.2% 106.1% 8.7% 10.0% 62.2% 57.1% 141.8% 36.7% 80.2% 307%
*<F6>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F7>Reflects a voluntary reimbursement of fund expenses of 0.02% in 1995, 0.1%
in 1989, 0.5% in 1988, 0.3% in 1987 and 1.2% in 1986 respectively.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
S&P 100 PLUS PORTFOLIO
-------------------------------------------------------------------------
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62 $10.43 $9.42
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .25 .25 .21 .24 .27 .28 .26 .26 .33 .38
Net realized and
unrealized gains (losses)
on investments 5.21 (.09) 1.14 .48 2.93 (.67) 2.17 1.37 .14 1.03
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
TOTAL FROM INVESTMENT
OPERATIONS 5.46 .16 1.35 .72 3.20 (.39) 2.43 1.63 .47 1.41
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.25) (.25) (.21) (.24) (.27) (.28) (.26) (.26) (.33) (.36)
Distributions from
net realized gains
on investments (.63) - (.11) (.69) (.31) - (.01) (.88) (.95) (.04)
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
TOTAL DISTRIBUTIONS (.88) (.25) (.32) (.93) (.58) (.28) (.27) (1.14) (1.28) (.40)
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
NET ASSET VALUE,
END OF PERIOD $ 19.53 $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62 $10.43
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN*<F8> 36.7% 1.1% 9.7% 5.2% 27.8% (3.2)% 24.3% 17.1% 4.1% 16.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $57,062$40,034 $38,944$30,025 $27,420$20,413 $20,811$16,960 $18,752 $9,826
Ratio of net expenses to
average net assets 1.2% 1.2% 1.2% 1.3% 1.3% 1.3%+<F9>1.3%+<F9>1.4%+<F9>0.6%+<F9>-%+<F9>
Ratio of net investment
income to average
net assets 1.4% 1.7% 1.4% 1.7% 2.0% 2.4%+<F9>2.3%+<F9>2.5%+<F9>2.7%+<F9>3.7%+<F9>
Portfolio turnover rate 3.5% 1.0% 2.2% 8.5% 3.1% 1.9% 3.0% 37.5% 54.3% 12.8%
*<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 0.2% in 1990, 0.4%
in 1989, 0.8% in 1988, 1.7% in 1987 and 3.7% in 1986 respectively.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
DIVIDEND ACHIEVERS PORTFOLIO
-------------------------------------------------------------------
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------ ------ ----- ------ ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $13.24 $13.40 $14.25 $14.84 $11.50 $11.65 $10.00 $8.99 $9.55
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .18 .18 .14 .14 .25 .25 .28 .28 .28
Net realized and unrealized gains (losses)
on investments 3.99 (.02) (.85) .31 4.14 (.15) 1.65 1.06 (.56)
------ ------ ------ ----- ------ ----- ------ ----- -----
TOTAL FROM INVESTMENT OPERATIONS 4.17 .16 (.71) .45 4.39 .10 1.93 1.34 (.28)
------ ------ ------ ----- ------ ----- ------ ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.18) (.18) (.14) (.14) (.25) (.25) (.28) (.27) (.28)
Distributions from net realized gains
on investments (.26) (.14) - (.90) (.80) - - (.06) -
------ ------ ------ ----- ------ ----- ------ ----- -----
TOTAL DISTRIBUTIONS (.44) (.32) (.14) (1.04) (1.05) (.25) (.28) (.33) (.28)
------ ------ ------ ----- ------ ----- ------ ----- -----
NET ASSET VALUE, END OF PERIOD $16.97 $13.24 $13.40 $14.25 $14.84 $11.50 $11.65 $10.00 $8.99
------ ------ ------ ----- ------ ----- ------ ----- -----
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN*<F10> 31.7% 1.2% (5.0)% 3.1% 38.5% 1.0% 19.5% 15.0% (3.2)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $25,393$20,231 $24,928$27,020 $18,202$11,468 $12,750 $6,854 $6,796
Ratio of net expenses to average net assets 1.3%+<F11>1.5% 1.3%+<F11>1.2%+<F11>1.2%+<F11>1.2%+<F11>1.2%+<F11>1.2%+<F11>0.6%+<F11>
Ratio of net investment income to average
net assets 1.2%+<F11>1.3% 1.0%+<F11>1.0%+<F1>1.8%+<F11>2.3%+<F11>2.6%+<F11>2.9%+<F11>2.7%+<F11>
Portfolio turnover rate 28.2% 36.5% 92.7% 83.0% 96.5% 47.7% 30.9% 10.1% 10.5%
*<F10>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F11>Reflects a voluntary reimbursement of fund expenses of 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>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
BALANCED PORTFOLIO
------------------------------------------------------
<CAPTION>
For the
period from
July 1, 1992
(commencement
For the years ended December 31, of operations) to
--------------------------------
1995 1994 1993 December 31, 1992
------- ------ ------ -----------------
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $9.85 $10.29 $10.44 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .36 .37 .30 .13
Net realized and unrealized gains (losses)
on investments 2.17 (.44) (.15) .45
------ ------ ----- ------
TOTAL FROM INVESTMENT OPERATIONS 2.53 (.07) .15 .58
------ ------ ----- ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.36) (.37) (.30) (.13)
Distributions from net realized gains
on investments - - - (.01)
------ ------ ----- ------
TOTAL DISTRIBUTIONS (.36) (.37) (.30) (.14)
------ ------ ----- ------
NET ASSET VALUE, END OF PERIOD $12.02 $9.85 $10.29 $10.44
------ ------ ----- ------
------ ------ ------ ------
TOTAL RETURN**<F13> 26.1% (0.7)% 1.5% 5.8%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $7,023 $10,255 $18,099 $17,408
Ratio of net expenses to average net assets 1.3%+<F14>1.2%+<F14>1.3%+<F14> 1.3%*<F12>
Ratio of net investment income to average
net assets 3.2%+<F14>3.7%+<F14>2.9%+<F14> 2.6%*<F12>
Portfolio turnover rate 1.9% 13.7% 30.8% 16.6%
*<F12>Annualized.
**<F13>The Fund's sales charge is not reflected in total return as set forth
in the table.
+<F14>Reflects a voluntary reimbursement of fund expenses of 0.6% in 1995, 0.3%
in 1994 and 0.1% for 1993.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (Continued)
SELECT VALUE PORTFOLIO
-------------------------------------
For the period from
August 23, 1994
For the year ended (commencement of
operations) to
December 31, 1995 December 31, 1994
------------------- ------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $9.03 $9.55
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .14 .04
Net realized and unrealized gains (losses)
on investments 1.73 (.51)
----- -----
TOTAL FROM INVESTMENT OPERATIONS 1.87 (.47)
----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.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 (.69) (.05)
------ -----
NET ASSET VALUE, END OF PERIOD $10.21 $9.03
------ ------
------ ------
TOTAL RETURN**<F16> 20.8% (5.0)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $3,445 $1,935
Ratio of net expenses to average net assets 0.8%+<F17>0.8%*<F15><F17>+
Ratio of net investment income to average
net assets 1.4%+<F17>1.1%*+<F15><F17>
Portfolio turnover rate 124.3% 20.2%
*<F15>Annualized.
**<F16>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F17>Reflects a voluntary reimbursement of fund expenses of 2.5% in 1995 and
0.4% in 1994.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
<TABLE>
BALANCE SHEETS
DECEMBER 31, 1995
<CAPTION>
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE
----------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Long-term investments
in securities $55,427,133 $18,548,131 $48,436,732 $53,320,630 $24,653,721 $6,987,797 $3,067,129
Short-term investments 113,452 32,185 181,097 3,851,931 800,329 237,763 388,783
----------- ---------- ---------- ---------- ---------- --------- ---------
Total investments (See
Schedule of Investments) 55,540,585 18,580,316 48,617,829 57,172,561 25,454,050 7,225,560 3,455,912
Cash 799 422 746 500 261 590 967
Receivables:
Capital shares sold 6,827 5,251 40,710 115,712 8,112 4,303 3,660
Dividends and interest 1,103,463 341,605 1,004,383 121,292 45,583 58,565 6,035
----------- ---------- ---------- ---------- ---------- --------- ---------
Total receivables 1,110,290 346,856 1,045,093 237,004 53,695 62,868 9,695
Other assets 2,690 879 2,511 2,601 1,026 137 9,927
----------- ---------- ---------- ---------- ---------- --------- ---------
Total assets $56,654,364 $18,928,473 $49,666,179 $57,412,666 $25,509,032 $7,289,155 $3,476,501
----------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES:
Payables:
Capital shares redeemed $66 $1,076 $157,316 $24,404 $6,040 $220,015 $-
Distributions to shareholders 102,910 52,880 102,195 160,676 25,944 3,384 1,356
Expenses 108,818 44,214 87,290 104,783 84,324 42,673 20,051
Investments purchased - - - - - - 10,225
Outstanding Option
Contracts - - - 61,188 - - -
----------- ---------- ---------- ---------- ---------- --------- ---------
Total liabilities 211,794 98,170 346,801 351,051 116,308 266,072 31,632
----------- ---------- ---------- ---------- ---------- --------- ---------
NET ASSETS:
Capital stock 56,285,533 17,937,660 49,913,318 36,593,532 17,767,359 5,825,124 3,155,990
Undistributed
net investment income - 2,452 2,525 1,634 - 311 -
Accumulated distributions in
excess of net investment income (24,415) - - - - - -
Undistributed net realized gains
(losses) on investments (2,646,336) 454 (2,785,860) 5,698 188 (196,695) (38,905)
Net unrealized appreciation
on investments 2,827,788 889,737 2,189,395 20,460,751 7,625,177 1,394,343 327,784
----------- ---------- ---------- ---------- ---------- --------- ---------
Total net assets 56,442,570 18,830,303 49,319,378 57,061,615 25,392,724 7,023,083 3,444,869
----------- ---------- ---------- ---------- ---------- --------- ---------
Total liabilities
and net assets $56,654,364 $18,928,473 $49,666,179 $57,412,666 $25,509,032$ 7,289,155 $3,476,501
----------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $ 9.39 $10.32 $ 9.64 $19.53 $16.97 $12.02 $10.21
----------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- ----------
MAXIMUM OFFERING PRICE
PER SHARE $ 9.73 $10.69 $9.99 $20.45 $17.77 $12.59 $10.69
----------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
<TABLE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE
---------- ---------- ---------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $- $- $- $1,129,421 $462,175 $131,463 $42,598
Interest 3,386,999 1,110,406 3,755,141 142,330 96,055 205,588 17,550
---------- ---------- ---------- --------- --------- -------- -------
Total investment
income 3,386,999 1,110,406 3,755,141 1,271,751 558,230 337,051 60,148
EXPENSES:
Investment advisory fees 332,888 110,521 295,379 292,466 168,713 45,711 21,143
Custodian fees 19,465 9,855 20,075 18,250 12,775 8,395 3,650
Transfer agent fees 51,465 20,805 59,320 68,445 47,815 9,125 3,920
Broker service fees 81,288 26,750 91,726 90,873 41,325 18,792 7,140
Professional fees 53,617 31,025 50,090 47,876 32,120 27,740 30,126
Registration 17,193 13,140 16,004 16,060 16,060 16,060 18,967
Communication 5,032 2,255 6,175 12,210 6,656 1,229 1,694
Director fees 17,364 5,687 15,516 14,205 7,231 3,457 365
Pricing of investments 8,165 3,640 2,640 7,275 5,390 8,760 4,990
Deferred organization
expense - - - - - - 2,723
Other (income) expense 9,015 4,087 4,265 4,071 3,369 2,955 (307)
---------- ---------- ---------- --------- --------- -------- -------
Total expenses 595,492 227,765 561,190 571,731 341,454 142,224 94,411
Less expenses absorbed
by advisor (3,699) (9,688) (10,105) - (49,439) (47,880) (72,971)
---------- ---------- ---------- --------- --------- -------- -------
Net expenses 591,793 218,077 551,085 571,731 292,015 94,344 21,440
---------- ---------- ---------- --------- --------- -------- -------
NET INVESTMENT INCOME 2,795,206 892,329 3,204,056 700,020 266,215 242,707 38,708
---------- ---------- ---------- --------- --------- -------- -------
NET REALIZED GAINS
ON INVESTMENTS 1,105,058 111,976 1,836,450 1,785,019 382,791 142,554 136,222
NET UNREALIZED APPRECIATION
ON INVESTMENTS 5,538,312 2,004,622 2,379,924 12,487,128 5,573,287 1,369,971 371,571
---------- ---------- ---------- --------- --------- -------- -------
Net gains
on investments 6,643,370 2,116,598 4,216,374 14,272,147 5,956,078 1,512,525 507,793
---------- ---------- ---------- --------- --------- -------- -------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $9,438,576 $3,008,927 $7,420,430 $14,972,167 $ 6,222,293 $1,755,232 $546,501
---------- ---------- ---------- --------- --------- -------- -------
---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<CAPTION>
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE
---------- ---------- ---------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $2,795,206 $892,329 $3,204,056 $700,020 $266,215 $242,707 $38,708
Net realized gains
on investments 1,105,058 111,976 1,836,450 1,785,019 382,791 142,554 136,222
Change in unrealized
appreciation on
investments for the year 5,538,312 2,004,622 2,379,924 12,487,128 5,573,287 1,369,971 371,571
---------- --------- --------- ---------- --------- --------- -------
Net increase
in net assets resulting
from operations 9,438,576 3,008,927 7,420,430 14,972,167 6,222,293 1,755,232 546,501
---------- --------- --------- ---------- --------- --------- -------
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) (893,180) (3,204,316) (702,285) (267,608) (245,116) (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) - (113,460) - (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) (1,006,640) (3,204,316) (2,478,134) (652,361) (245,116) (214,476)
---------- --------- --------- ---------- --------- --------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 1,111,492 582,297 2,072,873 6,000,304 1,607,602 303,619 1,242,252
Net asset value of shares
issued in distributions 1,671,982 664,850 2,001,656 2,263,855 610,544 224,079 212,883
Cost of shares redeemed (8,437,841) (2,267,046) (6,295,288) (3,730,220) (2,626,317) (5,269,345) (277,053)
---------- --------- --------- ---------- --------- --------- -------
Net increase (decrease)
in net assets from
capital share
transactions (5,654,367) (1,019,879) (2,220,759) 4,533,939 (408,171) (4,741,647) 1,178,082
---------- --------- --------- ---------- --------- --------- -------
Total increase (decrease) 950,935 982,388 1,995,355 17,027,972 5,161,761 (3,231,531) 1,510,107
NET ASSETS:
Balance at beginning of year 55,491,635 17,847,915 47,324,023 40,033,643 20,230,963 10,254,614 1,934,762
---------- --------- --------- ---------- --------- --------- -------
Balance at end of year $56,442,570 $18,830,303 $49,319,378 $57,061,615 $25,392,724 $7,023,083 $3,444,869
---------- --------- --------- ---------- --------- --------- -------
---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<CAPTION>
FOR THE
PERIOD FROM
AUGUST 23, 1994
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1994
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE
---------- ---------- ---------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $3,173,829 $955,841 $3,293,561 $666,087 $283,776 $561,540 $5,209
Net realized gains (losses)
on investments (47,241) 66,090 (2,756,736) 35,946 247,262 (158,142) 1,218
Change in unrealized
depreciation on
investments for the year (7,355,137) (2,433,455) (3,446,518) (280,056) (283,366) (551,820) (43,787)
---------- ---------- ---------- -------- -------- -------- -------
Net increase (decrease)
in net assets resulting
from operations (4,228,549) (1,411,524) (2,909,693) 421,977 247,672 (148,422) (37,360)
---------- ---------- ---------- -------- -------- -------- -------
NET EQUALIZATION CREDITS
(DEBITS) - - - (1,543) (6,017) (34,419) 3,533
---------- ---------- ---------- -------- -------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
($0.45, $0.49, $0.61, $0.25,
$0.18, $0.37 and $0.03 per share,
respectively) (3,161,569) (955,954) (3,291,718) (662,823) (278,981) (524,879) (5,172)
Net realized gains on
investments ($0.03, $0.01,
$0.14, and $0.01 per share,
respectively) - (64,943) - (9,023) (217,698) - (1,218)
Book return of capital
($0.01 per share) - - - - - - (3,533)
---------- ---------- ---------- -------- -------- -------- -------
Total distributions (3,161,569) (1,020,897) (3,291,718) (671,846) (496,679) (524,879) (9,923)
---------- ---------- ---------- -------- -------- -------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 2,416,990 766,966 4,589,107 6,312,396 823,795 755,568 1,972,277
Net asset value of shares
issued in distributions 1,892,770 658,465 2,070,080 611,250 462,811 479,744 9,910
Cost of shares redeemed (9,529,596) (1,684,903) (7,461,251) (5,582,809) (5,728,824) (8,372,304) (3,675)
---------- ---------- ---------- -------- -------- -------- -------
Net increase (decrease)
in net assets from
capital share
transactions (5,219,836) (259,472) (802,064) 1,340,837 (4,442,218) (7,136,992) 1,978,512
---------- ---------- ---------- -------- -------- -------- -------
Total increase (decrease) (12,609,954) (2,691,893) (7,003,475) 1,089,425 (4,697,242) (7,844,712) 1,934,762
NET ASSETS:
Balance at beginning of year 68,101,589 20,539,808 54,327,498 38,944,218 24,928,205 18,099,326 -
---------- ---------- ---------- -------- -------- -------- -------
Balance at end of year $55,491,635 $17,847,915 $47,324,023 $40,033,643 $20,230,963 $10,254,614 $ 1,934,762
---------- ---------- ---------- -------- -------- -------- -------
---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
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 nine portfolios: Tax-Exempt Portfolio, Insured Tax-Exempt
Portfolio, Government Portfolio, S&P100 Plus Portfolio, Dividend Achievers
Portfolio, Balanced Portfolio, Select Value Portfolio, Wisconsin Tax-Exempt
Portfolio and the Cash Reserve Portfolio. This report contains the information
of all portfolios, except for the Cash Reserve Portfolio and the Wisconsin Tax-
Exempt Portfolio which are contained in separate reports. 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 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) 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 on investments for the year ended December 31, 1995, were
comprised of the following:
<TABLE>
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE
---------- ---------- ---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net realized gains
on investments $1,105,058 $111,976 $1,836,450 $1,623,224 $382,791 $142,554 $136,222
Net realized gains
on options - - - 161,795 - - -
--------- -------- ---------- --------- -------- -------- --------
Total net realized gains
on investments $1,105,058 $111,976 $1,836,450 $1,785,019 $382,791 $142,554 $136,222
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
(d) 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 2002; the Government Portfolio has capital loss carry
forwards of $29,000 expiring in 1999 and $2,757,000 expiring in 2002; the
Balanced Portfolio has capital loss carry forwards of $38,000 expiring in 2001
and $158,000 expiring in 2002. 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.
(e) 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.
(f) Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
(g) 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.
(h) 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.
(i) 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH RELATED PARTIES -
The Fund has Investment Advisory Agreements (the ''Agreements'') with B.C.
Ziegler and Company (''Ziegler''), (with whom certain officers and directors of
the Fund are affiliated) to serve as Investment Advisor (the ''Advisor'').
Pursuant to a SubAdvisory Agreement, Ziegler retains Ziegler Asset Management,
Inc. (''ZAMI''), an affiliate of Ziegler, to assist in the management of the
Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government Portfolio,
Dividend Achievers Portfolio and Balanced Portfolio. In January 1996, the
investment operations conducted by Ziegler were transferred to ZAMI and,
following approval by the Fund's Board of Directors, the Agreements were
assigned to ZAMI, which became the ''Advisor,'' and the Sub-Advisory Agreement
with ZAMI was thereby terminated. See Note 7-Subsequent Events below. The
information set forth below in this note describes the Agreements (and Sub-
Advisory Agreement) in effect for the year ended December 31, 1995. Under the
Agreement, the Tax-Exempt, Insured Tax-Exempt and Government Portfolios pay
Ziegler 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. Ziegler pays ZAMI 30% of the fee paid by each of the
portfolios, net of a pro rata amount of expenses, if any, paid by Ziegler in the
operation of the portfolio.
Under its Agreement, the Dividend Achievers Portfolio pays Ziegler 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. Ziegler pays ZAMI 50% of the fee paid by the Dividend Achievers
Portfolio, net of a pro rata amount of expenses, if any, paid by Ziegler in the
operation of the portfolio.
Under its Agreement, the Balanced Portfolio pays Ziegler a monthly fee based
upon the Balanced average daily net assets at the rate of 0.60% of the first
$50,000,000 of average daily net assets, 0.50% of the next $200,000,000 of
average daily net assets and 0.40% of the average daily net assets in excess of
$250,000,000. Ziegler pays ZAMI .30% on the first $50,000,000 of average daily
net assets, 25% on the next $150,000,000 of average daily net assets and .20% on
average daily net assets over $200,000,000, net of a pro rata amount of
expenses, if any, paid by Ziegler in the operation of the fund.
Pursuant to the Agreement, Ziegler 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 .75% of the first $20,000,000 of the
Portfolio's average daily net assets, .50% 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. Ziegler pays PanAgora 50% of
the fee paid by the S&P 100 Plus Portfolio, net of a pro rata amount of
expenses, if any, paid by Ziegler in the operation of the Portfolio.
Pursuant to the Agreement, Ziegler has retained Skyline Asset Management, Inc.
(''Skyline'') to manage the Select Value Portfolio. Under the Agreement, the
Select Value Portfolio pays Ziegler 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. Ziegler pays Skyline 50% of the fee paid by the Select
Value Portfolio, net of a pro rata amount of expenses, if any, paid by Ziegler
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 S&P 100 Plus
Portfolio any such reduction or reimbursement will be shared by PanAgora in the
same proportion it would share in the advisory fee after expenses. The same
applies for the Select Value Portfolio and its' relationship with Skyline.
For the year ended December 31, 1995, none of the Portfolios exceeded the
statutory expense limitation. However, the Advisor voluntarily reimbursed the
Tax-Exempt Portfolio $3,699, the Insured Tax-Exempt Portfolio $9,688, the
Government Portfolio $10,105, the Dividend Achievers Portfolio $49,439, the
Balanced Portfolio $47,880 and the Select Value Portfolio $72,971. 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 during the year ended December
31, 1995, were as follows for each Portfolio:
ACCOUNTING
TRANSFER COMMISSIONS AND PRICING DEPOSITORY
AGENT FEES ON PORTFOLIO FEES FEES
SHARES
------------ --------- ----------- ---------
Tax-Exempt Portfolio $45,055 $46,341 $26,951 $20,253
Insured Tax-Exempt Portfolio 18,159 17,253 19,000 8,964
Government Portfolio 55,057 76,633 24,731 19,319
S&P100 Plus Portfolio 64,422 177,540 24,213 17,017
Dividend Achievers Portfolio 37,897 35,089 19,000 9,721
Balanced Portfolio 8,274 14,357 19,000 4,825
Select Value Portfolio 3,855 18,676 19,000 3,090
------- -------- -------- --------
TOTAL $232,719 $385,889 $151,895 $83,189
-------- -------- -------- --------
-------- -------- -------- --------
During 1995, an affiliate of Ziegler received $17,596 representing commissions
from the purchases and sales of investments of the Dividend Achievers Portfolio
and $3,770 representing commissions from the purchases and sales of investments
of the Balanced Portfolio.
3. INVESTMENT TRANSACTIONS -
Purchases and proceeds from sales of securities, excluding short-term
investments, for the year ended December 31, 1995 aggregated:
PURCHASES PROCEEDS FROM SALES
---------- -------------------
Tax-Exempt Portfolio $59,078,284 $63,125,257
Insured Tax-Exempt Portfolio 11,763,688 12,597,904
Government Portfolio 32,985,594 33,416,339
S&P100 Plus Portfolio 3,608,113 1,606,198
Dividend Achievers Portfolio 7,604,624 5,876,866
Balanced Portfolio 136,781 3,807,199
Select Value Portfolio 4,121,566 3,193,458
Net unrealized appreciation on investments as of December 31, 1995, included:
<TABLE>
<CAPTION>
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE
---------- ---------- ---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross unrealized
appreciation $2,844,924 $904,163 $2,189,395 $21,441,857 $7,625,177 $1,419,969 $379,736
Gross unrealized
(depreciation) (17,136) (14,426) - (981,106) - (25,626) (51,952)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net unrealized
appreciation $2,827,788 $889,737 $2,189,395 $20,460,751 $7,625,177 $1,394,343 $327,784
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
</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. CAPTIAL 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 fifty million of the Fund's authorized shares are allocated to the
existing portfolios as follows:
AUTHORIZED SHARES
-----------------
Tax-Exempt Portfolio 50,000,000
Insured Tax-Exempt Portfolio 50,000,000
Government Portfolio 50,000,000
S&P100 Plus Portfolio 50,000,000
Dividend Achievers Portfolio 50,000,000
Balanced Portfolio 50,000,000
Select Value Portfolio 50,000,000
------------
TOTAL 350,000,000
------------
------------
The Cash Reserve Portfolio has been allotted 400,000,000 shares and the
Wisconsin Tax-Exempt Portfolio has been allotted 50,000,000 shares. The Cash
Reserve Portfolio's shares are further subdivided into separate series of
200,000,000 shares each, Class X Common Stock (Retail Class) and Class Y Common
Stock (Institutional Class). The remaining 200,000,000 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 were as follows:
<TABLE>
<CAPTION>
INSURED S&P 100 DIVIDEND SELECT
TAX-EXEMPT TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS BALANCED VALUE*<F23>
---------- ---------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES OUTSTANDING
AT DECEMBER 31, 1993 7,235,721 1,955,796 5,443,146 2,589,791 1,859,976 1,759,073 -
Shares issued 270,681 77,746 486,979 420,403 61,803 74,790 213,466
Shares issued in distributions 216,632 68,070 223,291 41,686 35,116 48,404 1,097
Shares redeemed (1,086,789) (173,684) (801,549) (373,786) (428,336) (841,181) (410)
---------- --------- --------- --------- --------- --------- -------
SHARES OUTSTANDING
AT DECEMBER 31, 1994 6,636,245 1,927,928 5,351,867 2,678,094 1,528,559 1,041,086 214,153
Shares issued 123,855 58,905 223,052 336,655 109,425 28,818 129,950
Shares issued in distributions 185,261 66,428 214,457 118,292 37,666 20,506 21,034
Shares redeemed (934,740) (229,298) (672,644) (210,737) (179,324) (505,930) (27,781)
--------- --------- --------- --------- --------- --------- ----------
SHARES OUTSTANDING
AT DECEMBER 31, 1995 6,010,621 1,823,963 5,116,732 2,922,304 1,496,326 584,480 337,356
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
*<F23>Amounts shown for the Select Value Portfolio are the result of the
Fund's operations from its commencement of operations on August 23, 1994.
</TABLE>
(c) Maximum offering price per share for the S&P 100 Plus, Dividend Achievers,
Balanced and Select Value Portfolios is computed based on a maximum sales charge
of 4.5% of the offering price or 4.71% of the net asset value. As of May 1, 1995
the maximum offering price per share for the Tax-Exempt, Insured Tax-Exempt and
Government Portfolios is computed based on a maximum sales charge of 3.5% of the
offering price or 3.62% 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 and
96.5, respectively.
6. OPTION CONTRACTS WRITTEN -
An analysis of option contracts written by the S&P 100 Plus Portfolio for the
year ended December 31, 1995 is as follows:
NUMBER OF CONTRACTS AMOUNT OF PREMIUM
------------------- -----------------
Written 845 $173,891
Expired 332 71,898
Closed 100 7,962
Exercised 358 41,948
Outstanding:
Beginning of year 0 0
------ --------
End of Year 55 52,083
------ --------
------ --------
7. SUBSEQUENT EVENTS -
(a) At the January 19, 1996 Board of Directors Meeting, the Directors approved
the assignment of the Advisory contract from B.C. Ziegler and Company to Ziegler
Asset Management, Inc. Both of the companies are wholly owned subsidiaries of
The Ziegler Companies, Inc. All of the expenses, personnel and terms of
agreements will be identical in all material respects and will not affect the
shareholders.
(b) At the January 19, 1996 Board of Directors Meeting, the Directors approved,
subject to shareholder approval, the reorganization of the Balanced Portfolio
into the S&P 100 Plus Portfolio and the reorganization of the Insured Tax-Exempt
Portfolio into the Tax-Exempt Portfolio, and recommended that the shareholders
of the Balanced Portfolio and the Insured Tax-Exempt Portfolio, as the case may
be, approve the reorganizations. These reorganizations must now be approved by
such shareholders. If consummated, the net assets of the Balanced Portfolio and
Insured Tax-Exempt Portfolio would be sold through tax-free reorganizations on
or about April 30, 1996.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
TAX-EXEMPT PORTFOLIO
<TABLE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<CAPTION>
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES - 98.2%
ALASKA - 6.7%
$1,000,000 Alaska Energy Authority, Power Revenue Bonds, First Series (Bradley AAA Aaa $1,086,250
Lake Hydroelectric Project), 7.25%, due 07-01-2009
1,500,000 Municipality of Anchorage, Alaska, 1995 General Obligation, General AAA Aaa 1,550,625
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 1,125,000
Bonds (Sisters of Providence Project), 7.125%, due 10-01-2005
CALIFORNIA - 2.0%
1,095,000 The City of Los Angeles, Wastewater System Revenue Bonds, AAA Aaa 1,153,856
Refunding Series 1993-D, 6.00%, due 11-01-2014
FLORIDA - 1.9%
1,000,000 City of Cape Coral, Florida, Wastewater Assessment Refunding and AAA Aaa 1,083,750
Improvement Bonds, Series 1992 (Green Area), 6.25%, due 07-01-2008
HAWAII - 1.8%
1,000,000 City and County of Honolulu, Hawaii, General Obligation Bonds, AAA Aaa 998,750
Series 1995A, 5.25%, due 11-01-2013
ILLINOIS - 10.0%
1,000,000 City of Chicago, General Obligation Bonds, Project Series A of 1992, AAA Aaa 1,055,000
6.25%, due 01-01-2012
1,000,000 Public Building Commission of Chicago, Building Revenue Bonds AAA Aaa 1,028,750
(Chicago Part District) Series C of 1993, 5.80%, due 01-01-2013
1,515,000 Illinois Educational Facilities Authority, Revenue Bonds, Illinois A A1 1,537,725
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 1,022,500
Bonds) Series Q, 5.75%, due 06-15-2014
1,000,000 Metropolitan Fair and Exposition Authority (Illinois)Dedicated State AAA Aaa 1,002,070
Tax Revenue Bonds, Series 1986, 6.00%, due 06-01-2014
INDIANA - 13.6%
1,400,000 Ball State University Board of Trustees, Ball State University Student AAA Aaa 1,463,000
Fee Bonds, Series G, 6.125%, due 07-01-2014
1,000,000 Hammond Multi-School Building Corporation (Lake County, Indiana) AAA Aaa 1,027,500
First Mortgage Bonds, Series 1995, 5.80%, due 01-15-2015
1,000,000 Indiana State Office Building Commission Capitol Complex Revenue AAA Aaa 1,241,250
Bonds, Series 1990A (Senate Avenue Parking Facility), 7.40%,
due 07-01-2015
1,170,000 Hospital Authority of Marion County (Indiana) Hospital Revenue AA- AA2 1,212,413
Refunding Bonds, Series 1989 (Methodist Hospital of Indiana, Inc.),
6.50%, due 09-01-2013
1,110,000 Hospital Authority of Monroe County, Hospital Revenue Refunding AAA Aaa 1,180,762
Bonds, Series 1989 (Bloomington Hospital Project), 7.125%,
due 05-01-2011
1,500,000 School Building Corporation of Warren Township, (Marion County, NR A2 1,556,250
Indiana)First Mortgage Bonds, Series 1992A, 6.00%, due 07-15-2012
IOWA - 1.9%
1,000,000 State of Iowa, Certificates of Participation, Series 1992, 6.500%, AAA Aaa 1,087,500
due 07-01-2006
MASSACHUSETTS - 1.8%
1,040,000 Town of Franklin, Massachusetts, General Obligation Bonds, 5.25%, AAA Aaa 1,036,100
due 11-15-2012
MICHIGAN - 13.6%
1,210,000 Berkley School District, Oakland County, Michigan, 1995 School AAA Aaa 1,229,663
Building and Site Bonds (General Obligation - Unlimited Tax),
5.625%, due 01-01-2015
1,000,000 Clarkston Community Schools, County of Oakland, Michigan, 1993 AA AA2 1,028,750
School Building &Site & Refunding Bonds (GO-Unlimited Tax),
5.90%, due 05-01-2016
1,750,000 City of Detroit, Michigan, Sewage Disposal System Revenue and AAA Aaa 1,789,375
Revenue Refunding Bonds, Series 1993-A, 5.70%, due 07-01-2013
1,000,000 City of Kalamazoo, Kalamazoo County, Michigan, Downtown AA- A1 1,010,000
Development Refunding Bonds, Series 1993 (General Obligation
Limited Tax), 5.50%, due 04-01-2013
1,500,000 Michigan Municipal Bond Authority, Local Government Loan Program AAA Aaa 1,586,250
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 1,015,000
Series 1992B, 5.75%, due 05-15-2011
MINNESOTA - 1.8%
1,000,000 Independent School District 196 (Rosemount - Apple Valley - Eagan), AA AA2 1,035,000
Minnesota, General Obligation School Building Bonds, Series 1994A,
5.875%, due 06-01-2014
NEVADA - 1.9%
1,000,000 Washoe County, Nevada, Gas and Water Facility Revenue Refunding AAA Aaa 1,053,750
Bonds, Variable Rate Demand, 6.30%, due 12-01-2014
NEW YORK - 6.4%
1,650,000 Dutchess County Resource Recovery Agency, New York Solid AAA Aaa 1,831,500
Waste Management System Revenue Bonds, Series 1990A, 7.50%,
due 01-01-2009
1,700,000 Dormitory Authority of the State of New York, New York University AAA Aaa 1,780,750
Insured Revenue Bonds, Series 1991, 6.00%, due 07-01-2015
OKLAHOMA - 7.0%
1,000,000 Norman Regional Hospital Authority, (Norman, Oklahoma) Hospital AAA Aaa 1,090,000
Revenue Bonds, Series 1991, 6.75%, due 09-01-2011
1,000,000 City of Oklahoma City, Oklahoma, General Obligation Bonds, Series AA AA2 1,026,250
1994, 5.625%, due 03-01-2013
1,800,000 Pottawatomie County Development Authority, Water Revenue AAA Aaa 1,831,500
Bonds, Series 1993 (North Deer Creek Reservoir Project), 5.80%,
due 07-01-2015
RHODE ISLAND - 2.0%
1,150,000 Rhode Island Convention Center Authority, Revenue Bonds, 1993 AAA Aaa 1,157,188
Series A, 5.50%, due 05-15-2013
TENNESSEE - 1.8%
1,000,000 Shelby County, Tennessee, General Obligation Refunding Bonds, 1995 AA+ AA2 1,028,750
Series A, 5.625%, due 04-01-2015
TEXAS - 6.3%
1,300,000 Brazos River Authority (Texas), Collateralized Revenue Refunding AAA Aaa 1,327,625
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 1,165,000
Series 1992A, 7.375%, due 11-01-2011
1,000,000 Texas Water Development Board, State Revolving Fund, Senior Lien AAA AA2 1,057,500
Revenue Bonds, Series 1992, 6.00%, due 07-15-2013
UTAH - 4.0%
1,185,000 State of Utah, State Building Ownership Authority, Lease Revenue AA AA2 1,216,106
Refunding Bonds, Series 1992A, (Department of Employment Security
Project), 5.75%, due 08-15-2011
1,000,000 State of Utah, State Building Ownership Authority Lease Revenue AAA Aaa 1,023,750
Bonds (State Facilities Master Lease Program), Series 1995A, 5.70%,
due 05-15-2015
VIRGINIA - 6.8%
1,000,000 Chesapeake, Virginia, Industrial Development Authority, Public AAA Aaa 1,020,000
Facility Lease Revenue Bonds (City Jail Project), Series of 1994,
5.625%, due 06-01-2014
1,750,000 Fairfax County Water Authority, Water Refunding Revenue Bonds, AA- AA2 1,785,000
Series 1992, 5.75%, due 04-01-2014
1,000,000 Southeastern Public Service Authority of Virginia, Senior Revenue & AAA Aaa 1,016,250
Revenue Refunding Bonds, Series 1989 (Regional Solid Waste
System), 6.00%, due 07-01-2015
WASHINGTON - 1.8%
1,000,000 State of Washington, General Obligation Bonds, Series 1994B, 5.75%, AAA Aaa 1,013,750
due 05-01-2013
WISCONSIN - 5.1%
1,000,000 Wisconsin Health and Educational Facilities Authority, Revenue AA2 NR 1,043,750
Bonds, Series 1995, (Franciscan Skemp Medical Center, Inc.),
6.125%, due 11-15-2015
1,750,000 Wisconsin Health Facility Authority, Revenue Bonds, Series 1987 A NR 1,815,625
(Good Samaritan Medical Center, Inc. Refinancing), St. Luke's ----------
Hospital, Inc., Milwaukee, Wisconsin, 7.00%, due 03-01-2009
Total Long-Term Tax-Exempt Securities (Cost $52,599,345) 55,427,133
SHORT-TERM TAX-EXEMPT SECURITIES - 0.2%
MONEY MARKET
$113,452 Federated Tax-Free Trust 113,452
-----------
Total Investments $55,540,585
----------
----------
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.
INSURED TAX-EXEMPT PORTFOLIO
<TABLE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<CAPTION>
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES - 98.5%
ALASKA - 4.3%
$800,000 Municipality of Anchorage, Alaska, 1993 General Obligation School AAA Aaa $804,000
Bonds, 5.60%, due 01-01-2014 (AMBAC)
DISTRICT OF COLUMBIA - 1.1%
200,000 District of Columbia, (Washington, D.C.) General Obligation Bonds, AAA Aaa 209,750
Series 1992B, 6.30%, due 06-01-2012 (MBIA)
ILLINOIS - 17.0%
900,000 City of Chicago, General Obligation Bonds, (Emergency Telephone AAA Aaa 904,500
System) Series 1993, 5.625%, due 01-01-2023 (FGIC)
700,000 Public Building Commission of Chicago, Building Revenue Bonds, AAA Aaa 797,125
(Board of Education of the City of Chicago) Series A of 1990, 6.50%,
due 01-01-2018 (MBIA)
550,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1992B, AAA Aaa 591,250
(Franciscan Sisters Health Care Corp. Project), 6.625%,
due 09-01-2013 (MBIA)
900,000 Illinois Municipal Electric Agency, Power Supply System Revenue AAA Aaa 905,625
Bonds, Series 1991A, 5.75%, due 02-01-2021 (AMBAC)
INDIANA - 6.3%
600,000 Hospital Authority of Richmond (Indiana) Hospital Refunding Revenue AAA Aaa 633,000
Bonds, Series 1992 (Reid Hospital &Health Care Services, Inc.),
6.25%, due 01-01-2012 (FGIC)
500,000 Hospital Authority of St. Joseph County (Indiana) Fixed Rate AAA Aaa 550,625
Hospital Revenue Refunding Bonds, Series 1991A, 7.00%,
due 08-15-2011 (MBIA)
IOWA - 2.8%
510,000 City of Waterloo, Black Hawk County, Iowa, General Obligation AAA Aaa 524,662
Bonds, Series 1994A, 6.00%, due 06-01-2014 (FSA)
LOUISIANA - 3.8%
700,000 Public Improvement Bonds, Issue of 1995, City of New Orleans, AAA Aaa 717,500
Louisiana, 5.85%, due 11-01-2013 (FGIC)
MASSACHUSETTS - 3.3%
600,000 Boston Water and Sewer Commission, General Revenue Bonds, 1991 AAA Aaa 616,500
Series A (Senior Series) 6.00%, due 11-01-2021 (FGIC)
MICHIGAN - 10.0%
1,000,000 Economic Development Corporation of the County of Gratiot, AAA Aaa 973,750
Michigan, Limited Obligation Revenue Refunding Bonds Series 1993
(Michigan Masonic Home Project), 5.20%, due 11-15-2012 (AMBAC)
400,000 School District of the City of River Rouge, County of Wayne, State of AAA Aaa 406,500
Michigan, 1993 School Building and Site Bonds (General Obligation-
Unlimited Tax), 5.60%, due 05-01-2014 (FSA)
500,000 Shelby Public School, Oceana County, Michigan, 1995 School Building AAA Aaa 507,500
and Site Bonds (General Obligation-Unlimited Tax), 5.60%,
due 05-01-2013 (MBIA)
NORTH CAROLINA - 7.0%
900,000 North Carolina Municipal Power Agency Number 1, Catawba Electric AAA Aaa 911,250
Revenue Bonds, Series 1992, 5.75%, due 01-01-2015 (MBIA)
400,000 North Carolina Eastern Municipal Power Agency, Power System AAA Aaa 398,000
Revenue Bonds, Refunding Series 1993 B, 5.50%, due 01-01-2017
(FGIC)
PENNSYLVANIA - 3.9%
700,000 Greater Johnstown Water Authority, Cambria County, Pennsylvania AAA Aaa 740,250
Water Revenue Bonds, Series of 1992, 6.40%, due 01-01-2012 (FSA)
SOUTH CAROLINA - 2.3%
400,000 Piedmont Municipal Power Agency (South Carolina) Electric Revenue AAA Aaa 441,000
Bonds, 1991 Refunding Series A, 6.125%, due 01-01-2007 (FGIC)
TEXAS - 4.0%
700,000 City of Houston, Texas, Water and Sewer System, Junior Lien Revenue AAA Aaa 750,750
Bonds, Series 1991A, 6.50%, due 12-01-2021 (AMBAC)
UTAH - 8.2%
675,000 Central Utah Water Conservancy District, State of Utah, General AAA Aaa 652,219
Obligation (Limited Tax) Refunding Bonds, Series 1993, 5.25%,
due 04-01-2018 (MBIA)
900,000 Salt Lake County Water Conservancy District, Water Conservancy AAA Aaa 886,500
Revenue Bonds, Series 1993A, 5.35%, due 10-01-2018 (AMBAC)
VERMONT - 5.5%
1,000,000 Vermont Educational & Health Buildings Financing Agency, Hospital AAA Aaa 1,036,250
Revenue Bonds (Medical Center Hospital of Vermont)Series 1993,
6.20%, due 09-01-2016 (FGIC)
WASHINGTON - 4.3%
350,000 Everett School District No. 2, Snohomish County, Unlimited Tax AAA Aaa 371,875
General Obligation and Refunding Bonds, Series 1993, 6.20%,
due 12-01-2012 (MBIA)
400,000 Snohomish County, Washington, Solid Waste Revenue Bonds, 7.00%, AAA Aaa 437,000
due 12-01-2010 (MBIA)
WISCONSIN - 10.1%
700,000 Unified School District of Antigo, Langlade, Marathon and AAA Aaa 742,875
Shawano Counties, Wisconsin, Certificates of Participation, 6.60%,
due 07-15-2008 (FSA)
400,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds, AAA Aaa 433,000
Series 1992, (Children's Hospital of Wisconsin, Inc. Project), 6.50%,
due 08-15-2010 (FGIC)
700,000 Wisconsin Health Facilities Authority Revenue Bonds Series 1987 A NR 728,875
(Good Samaritan Medical Center Refinancing)St. Luke's Hospital Inc.,
Milwaukee, Wisconsin, 7.25%, due 03-01-2014 (FGIC)
WYOMING - 4.6%
800,000 Trustees of the University of Wyoming, Facilities Revenue Bonds, AAA Aaa 876,000
Series 1991, 7.10%, due 06-01-2010 (MBIA) ----------
Total Long-Term Tax-Exempt Securities (Cost $17,658,395) 18,548,131
SHORT-TERM TAX-EXEMPT SECURITIES - 0.2%
MONEY MARKET
$27,072 Federated Tax-Free Trust 27,072
5,113 Portico Tax-Exempt 5,113
----------
Total Short-Term Investments 32,185
----------
Total Investments $18,580,316
----------
----------
AMBAC: American Municipal Bond Assurance Corporation
FSA: Financial Security Assurance
FGIC: Financial Guaranty Insurance Company
MBIA: Municipal Bond Insurance Association
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.
GOVERNMENT PORTFOLIO
<TABLE>
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<CAPTION>
PRINCIPAL INTEREST MARKET
AMOUNT DESCRIPTION RATE MATURITY VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 98.2%
$7,800,000 U.S. Treasury Note 8.125% 02-15-1998 $8,248,500
2,000,000 U.S. Treasury Note 7.375% 05-15-1996 2,016,250
7,800,000 U.S. Treasury Note 11.625% 11-15-2002 10,520,250
7,500,000 U.S. Treasury Note 7.375% 11-15-1997 7,785,937
8,500,000 U.S. Treasury Note 11.125% 08-15-2003 11,419,206
3,300,000 U.S. Treasury Note 7.875% 11-15-2004 3,822,839
4,500,000 U.S. Treasury Note 8.000% 01-15-1997 4,623,750
----------
Total U.S. Government Obligations (Cost $46,247,337) 48,436,732
SHORT-TERM INVESTMENTS - 0.4%
MONEY MARKET
$181,097 Dreyfus Treasury Prime Cash Management 181,097
----------
Total Investments $48,617,829
----------
----------
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
DECEMBER 31, 1995
NUMBER MARKET
OF SHARES VALUE
--------- --------
COMMON STOCKS - 93.3%
BASIC INDUSTRIES - 5.2%
Aluminum Company of America 4,800 $253,800
*<F18>Bethlehem Steel Corporation 2,900 40,600
Boise Cascade Corporation 1,266 43,835
Champion International 2,600 109,200
Dow Chemical Company 7,250 510,219
Dupont (E.I.) de Nemours
and Company 15,200 1,062,100
Homestake Mining Company 3,800 59,375
International Paper Company 6,800 257,550
Monsanto Company 3,300 404,250
Weyerhaeuser Company 5,700 246,525
---------
2,987,454
---------
CONSUMER DURABLES - 4.7%
Black &Decker Corporation 2,300 81,075
Brunswick Corporation 2,600 62,400
Chrysler Corporation 10,600 586,975
Ford Motor Company 29,600 858,400
General Motors Corporation 20,700 1,094,513
---------
2,683,363
---------
CONSUMER NONDURABLES - 9.8%
Avon Products, Inc. 2,000 150,750
Coca-Cola Company 35,000 2,598,750
Colgate-Palmolive Company 4,000 281,000
Eastman Kodak Company 9,400 629,800
Heinz (H.J.) Company 10,100 334,562
International Flavors &
Fragrances Inc. 3,100 148,800
PepsiCo, Inc. 21,900 1,223,662
Polaroid Corporation 1,300 61,588
Ralston Purina Group 2,900 180,888
---------
5,609,800
---------
CONSUMER SERVICE - 8.7%
Capital Cities/ABC, Inc. 4,300 530,512
Walt Disney Company 14,300 843,700
*<F18>Harrah's Entertainment, Inc. 2,850 69,112
Kmart Corporation 12,600 91,350
Limited (The), Inc. 10,000 173,750
May Department Stores Company 6,900 291,525
McDonald's Corporation 19,400 875,425
Sears, Roebuck &Co. 10,700 417,300
Tandy Corporation 2,000 83,000
*<F18>Toys ''R'' Us, Inc. 7,625 165,844
Wal-Mart Stores, Inc. 63,500 1,420,813
---------
4,962,331
---------
CAPITAL GOODS - 10.7%
The Boeing Company 9,350 732,806
Fluor Corporation 2,300 151,800
General Dynamics Corporation 1,800 106,425
General Electric Company 46,100 3,319,200
Minnesota Mining &
Manufacturing Company 11,700 775,125
Raytheon Company 6,700 316,575
Rockwell International Corporation 6,100 322,538
Teledyne, Inc. 1,500 38,438
United Technologies Corporation 3,500 332,062
---------
6,094,969
---------
ENERGY - 11.6%
Amoco Corporation 13,700 984,687
Atlantic Richfield Company 4,400 487,300
Baker Hughes Incorporated 3,860 94,087
Coastal Corporation 2,900 108,025
Exxon Corporation 34,300 2,748,288
Halliburton Company 3,200 162,000
Mobil Corporation 11,000 1,232,000
Occidental Petroleum Corporation 8,800 188,100
Schlumberger Limited 6,700 463,975
Williams Companies, Inc. 2,800 122,850
---------
6,591,312
---------
FINANCIAL - 8.7%
American International Group, Inc. 13,143 1,215,728
American Express Company 13,500 558,562
American General Corporation 5,600 195,300
BankAmerica Corporation 10,300 666,925
CIGNA Corporation 2,000 206,500
Citicorp 11,700 786,825
First Chicago NBD Corporation 8,725 344,638
First Fidelity Bancorporation 2,200 165,825
First Interstate Bancorp 2,300 313,950
Great Western Financial Corporation 3,650 93,075
ITT Hartford Group, Inc. 3,200 154,800
Merrill Lynch &Co., Inc. 4,900 249,900
---------
4,952,028
---------
HEALTH CARE - 10.4%
Baxter International Inc. 7,600 318,250
Bristol-Myers Squibb Company 14,260 1,224,578
Johnson &Johnson 17,800 1,524,125
Mallinckrodt Group Inc. 2,100 76,387
Merck &Co., Inc. 34,200 2,248,650
Pharmacia & Upjohn, Inc. 13,860 537,075
---------
5,929,065
---------
TECHNOLOGY - 10.5%
AMP Incorporated 5,800 222,575
*<F18>Ceridian Corporation 1,800 74,250
*<F18>Computer Sciences Corporation 1,400 98,350
*<F18>Digital Equipment Corporation 4,100 262,913
*<F18>Federal Express Corporation 1,500 110,812
Harris Corporation 1,100 60,088
Hewlett-Packard Company 14,000 1,172,500
Honeywell Inc. 3,700 179,912
International Business Machines
Corporation 15,700 1,440,475
Intel Corporation 23,000 1,305,250
*<F18>National Semiconductor Corporation 3,300 73,425
Northern Telecom Limited 6,900 296,700
Tektronix, Inc. 800 39,300
Texas Instruments Inc. 5,000 258,750
*<F18>Unisys Corporation 4,700 26,437
Xerox Corporation 2,847 390,039
---------
6,011,776
---------
TRANSPORTATION - 1.2%
Burlington Northern
Santa Fe Corporation 3,900 304,200
Delta Air Lines, Inc. 1,400 103,425
Norfolk Southern Corporation 3,800 301,625
--------
709,250
-------
UTILITIES - 11.8%
American Telephone and
Telegraph Company 43,742 2,832,295
American Electric Power
Company, Inc. 5,100 206,550
Ameritech Corporation 15,300 902,700
Bell Atlantic Corporation 12,000 802,500
Entergy Corporation 6,400 187,200
MCICommunications Corporation 18,800 491,150
*<F18>NYNEX Corporation 11,800 637,200
Southern Company 18,400 453,100
Unicom Corporation 5,900 193,225
---------
6,705,920
---------
Total Common Stocks
(cost $32,754,313) 53,237,268
----------
PREFERRED STOCK - 0.0%
CAPITAL GOODS - 0.0%
Teledyne Inc. Series E Preferred 60 862
------
Total Preferred Stock (cost $892) 862
------
OPTION CONTRACTS PURCHASED - 0.1%
SPXMarch 96 615 Call 5,500 82,500
------
Total Calls Purchased (cost $95,727) 82,500
------
SHORT-TERM INVESTMENTS - 6.7%
MONEY MARKET - 5.0%
Federated Master Trust 1,700,651 1,700,651
Prospect Hill 1,162,012 1,162,012
---------
Total Short-Term Investments 2,862,663
---------
GOVERNMENT OBLIGATIONS - 1.7%
+<F19>U.S. Treasury Bill
4.90%, due 03-21-1996 $1,000,000 989,268
---------
Total Government
Obligations (cost $989,111) 989,268
----------
Total Investments $57,172,561
----------
----------
*<F18> Non-income producing
+<F19> Segregated as collateral against option contracts.
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
DECEMBER 31, 1995
NUMBER MARKET
OF SHARES VALUE
---------- -------
COMMON STOCKS - 97.1%
AUTOS AND TRANSPORTATION - 1.5%
Illinois Central Corporation 10,000 $383,750
--------
383,750
--------
CONSUMER NONDURABLES - 24.5%
Coca-Cola Company 8,000 594,000
Eastman Kodak Company 10,800 723,600
Gillette Company 21,600 1,125,900
Heinz (H.J.)Company 15,000 496,875
International Flavors &
Fragrances Inc. 14,900 715,200
Kimberly-Clark Corporation 10,800 893,700
PepsiCo, Inc. 18,500 1,033,688
Sherwin-Williams Company 15,700 639,775
---------
6,222,738
---------
CONSUMER SERVICE - 11.3%
Albertsons, Inc. 18,100 595,037
Walt Disney Company 10,000 590,000
McDonald's Corporation 21,600 974,700
Walgreen Co. 24,000 717,000
---------
2,876,737
---------
CAPITAL GOODS - 8.8%
Avery-Dennison Corporation 14,200 711,775
General Electric Company 12,000 864,000
Minnesota Mining &
Manufacturing Company 10,000 662,500
---------
2,238,275
---------
ENERGY - 9.6%
Mobil Corporation 7,200 806,400
Royal Dutch Petroleum Company 5,935 837,577
Williams Companies, Inc. 18,000 789,750
---------
2,433,727
---------
FINANCIAL - 11.8%
BankAmerica Corporation 10,000 647,500
Federal National Mortgage
Association 9,000 1,117,125
Jefferson-Pilot Corporation 15,000 697,500
MGICInvestment Corporation 10,000 542,500
---------
3,004,625
---------
HEALTH CARE - 5.3%
Baxter International Inc. 10,000 418,750
Johnson &Johnson 10,800 924,750
---------
1,343,500
---------
TECHNOLOGY - 17.7%
AMP Incorporated 16,000 614,000
Diebold, Inc. 16,250 899,844
General Motors Corporation -
Class E Common Stock 18,400 956,800
Hewlett-Packard Company 10,000 837,500
Intel Corporation 10,000 567,500
Motorola, Inc. 10,800 615,600
---------
4,491,244
---------
UTILITIES - 6.6%
GTE Corporation 10,000 440,000
SBC Communications, Inc. 10,800 621,000
Sprint Corporation 15,000 598,125
---------
1,659,125
---------
Total Common Stocks
(cost $17,028,544) 24,653,721
----------
SHORT-TERM INVESTMENTS - 3.1%
MONEY MARKET - 3.1%
Federated Master Trust 700,675 700,675
Prospect Hill 99,654 99,654
----------
Total Short-Term Investments 800,329
----------
Total Investments $25,454,050
-----------
-----------
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.
BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
NUMBER MARKET
OF SHARES VALUE
OR PAR VALUE
------------ --------
COMMON STOCKS - 65.5%
CONSUMER NONDURABLES - 13.1%
Colgate-Palmolive Company 1,850 $129,962
Eastman Kodak Company 2,350 157,450
Gillette Company 3,200 166,800
International Flavors &
Fragrances Inc. 2,750 132,000
Kimberly-Clark Corporation 2,000 165,500
PepsiCo, Inc. 3,100 173,213
-------
924,925
-------
CONSUMER SERVICE - 6.7%
Dun & Bradstreet Corporation 2,300 148,925
McDonald's Corporation 3,500 157,938
Walgreen Co. 5,400 161,325
-------
468,188
-------
CAPITAL GOODS - 6.8%
Avery-Dennison Corporation 3,300 165,412
General Electric Company 2,300 165,600
Minnesota Mining &
Manufacturing Company 2,200 145,750
-------
476,762
-------
ENERGY - 8.5%
Amoco Corporation 2,000 143,750
Exxon Corporation 1,900 152,237
Mobil Corporation 1,350 151,200
Royal Dutch Petroleum Company 1,100 155,238
-------
602,425
-------
FINANCIAL - 8.8%
Banc One Corporation 3,388 127,897
BankAmerica Corporation 2,100 135,975
Federal National Mortgage
Association 1,550 192,394
Jefferson-Pilot Corporation 3,412 158,681
-------
614,947
-------
HEALTH CARE - 4.5%
Johnson & Johnson 2,000 171,250
Schering-Plough Corporation 2,600 142,350
-------
313,600
-------
TECHNOLOGY - 10.4%
AMP Incorporated 3,000 115,125
General Motors Corporation -
$3.25 Preferred, Series C 1,900 139,175
Loral Corporation 5,200 183,950
Pitney Bowes Inc. 2,900 136,300
Xerox Corporation 1,150 157,550
-------
732,100
-------
UTILITIES - 6.7%
American Telephone and
Telegraph Company 1,900 123,025
GTE Corporation 3,900 171,600
SBC Communications, Inc. 3,000 172,500
-------
467,125
-------
Total Common Stocks
(cost $3,210,177) 4,600,072
---------
CORPORATE BONDS - 4.3%
Northern States Power,
6.125%, 12-01-2005 $300,000 299,648
-------
Total Corporate Bonds
(cost $297,360) 299,648
-------
PRINCIPAL INTEREST MARKET
AMOUNT DESCRIPTION RATE MATURITY VALUE
- -----------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 29.7%
$300,000 U.S. Treasury Note 5.750% 10-31-1997 $303,000
500,000 U.S. Treasury Note 6.125% 12-31-1996 504,843
250,000 U.S. Treasury Note 5.375% 05-31-1998 250,859
500,000 U.S.Treasury Note 7.000% 09-30-1996 506,562
500,000 U.S. Treasury Note 6.750% 06-30-1999 522,813
---------
Total U.S. Government Obligations (Cost $2,085,917) 2,088,077
---------
SHORT-TERM INVESTMENTS - 3.4%
MONEY MARKET - 3.4%
$129,562 Dreyfus Cash Management Plus 129,562
108,201 Prospect Hill 108,201
---------
Total Short-Term Investments 237,763
---------
Total Investments $7,225,560
----------
----------
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
DECEMBER 31, 1995
NUMBER MARKET
OF SHARES VALUE
OR PAR VALUE
------------ -------
COMMON STOCKS - 89.0%
AUTOS & TRANSPORTATION - 5.2%
*<F22>Canadian National Railway Company,
Common Shares Represented by
Installment Receipts 500 $7,500
Echlin Inc. 2,300 83,950
Illinois Central Corporation 2,300 88,263
-------
179,713
-------
CONSUMER DISCRETIONARY - 11.5%
Alberto-Culver Company, Class A 2,800 85,400
*<F22>Buffets, Inc. 3,300 45,375
Claire's Stores, Inc. 3,500 61,687
*<F22>Jones Apparel Group, Inc. 2,600 102,375
Pier 1 Imports, Inc. 8,420 95,778
Royal Caribbean Cruises, Ltd. 200 4,400
-------
395,015
-------
CONSUMER STAPLES - 7.7%
Dial Corporation 3,000 88,875
First Brands Corporation 2,200 104,775
Hudson Foods, Inc. 4,200 72,450
-------
266,100
-------
ENERGY - 1.8%
*<F22>Newfield Exploration Company 2,300 62,100
-------
62,100
-------
FINANCIAL - 25.8%
AT&T Capital Corporation 700 26,775
Advanta Corporation, Class B 1,700 61,837
*<F22>Amresco, Inc. 2,800 35,700
Cullen/Forst Bankers, Inc. 1,400 70,000
Finova Group Inc. 1,200 57,900
Fremont General Corporation 2,000 73,500
Greenpoint Financial Corporation 2,900 77,575
Paul Revere Corporation (The) 3,200 66,400
PennCorp Financial Group, Inc. 3,000 88,125
Prudential Reinsurance Holdings, Inc. 3,800 88,825
Reinsurance Group of America,
Incorporated 2,000 73,250
Selective Insurance Group, Inc. 500 17,750
Southern National Corporation 3,000 78,750
The PMI Group, Inc. 1,600 72,400
-------
888,787
-------
HEALTH CARE - 7.9%
*<F22>Community Psychiatric Centers 6,900 $84,525
*<F22>Sierrs Health Services, Inc. 3,000 95,250
*<F22>Sybron International Corporation -
Wisconsin 3,900 92,625
-------
272,400
-------
MATERIALS & PROCESSING - 7.2%
*<F22>American Standard Companies, Inc. 2,800 78,400
Interface, Inc. 3,100 52,700
*<F22>UCAR International Inc. 2,900 97,875
*<F22>WCI Steel, Inc. 4,500 19,688
-------
248,663
-------
OTHER - 3.6%
Patriot American Hospitality, Inc. 2,200 56,650
Public Storage, Inc. 3,500 66,500
-------
123,150
-------
PRODUCER DURABLES - 8.8%
AGCOCorporation 2,000 102,000
Belden Inc. 3,200 82,400
Kaydon Corporation 1,700 51,638
Mark IVIndustries, Inc. 3,395 67,051
-------
303,089
-------
TECHNOLOGY - 9.5%
*<F22>Arrow Electronics, Inc. 1,700 73,312
Dallas Semiconductor Corporation 2,500 51,875
*<F22>Gateway 2000, Inc. 2,500 61,250
*<F22>Komag, Incorporated 1,400 64,575
*<F22>Marshall Industries 2,400 77,100
-------
328,112
-------
Total Common Stocks
(cost $2,739,345) 3,067,129
---------
SHORT-TERM INVESTMENTS - 11.3%
COMMERCIAL PAPER - 3.6%
American Express Credit Corporation,
5.628%, due 01-22-1996 $125,000 125,000
MONEY MARKET - 7.7%
Federated Master Trust 133,535 133,535
Prospect Hill 130,248 130,248
---------
263,783
---------
Total Short-Term Investments 388,783
---------
Total Investments $3,455,912
----------
----------
*<F22>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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Principal Preservation Portfolios, Inc. and
the Shareholders of the Tax-Exempt,
Insured Tax-Exempt, Government, S&P 100 Plus,
Dividend Achievers, Balanced and Select Value Portfolios:
We have audited the accompanying balance sheets, including the schedules of
investments, of the PRINCIPAL PRESERVATION PORTFOLIOS, INC. (a Maryland
corporation) Tax-Exempt, Insured Tax-Exempt, Government, S&P 100 Plus, Dividend
Achievers, Balanced and Select Value Portfolios as of December 31, 1995, and the
related statements of operations for the year then ended and the statements of
changes in net assets for each of the two years in the period then ended (the
year ended December 31, 1995 and the period August 23, 1994
commencement of operations to December 31, 1994
for the Select Value Portfolio) and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the depositories, banks and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Principal Preservation Portfolios, Inc. Tax-Exempt, Insured Tax-Exempt,
Government, S&P 100 Plus, Dividend Achievers, Balanced and Select Value
Portfolios as of December 31, 1995, the results of their operations for the year
then ended and the changes in their net assets for each of the two years in the
period then ended (the year ended December 31, 1995 and the period August 23,
1994 to December 31, 1994 for the Select Value Portfolio) and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 19, 1996.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
R.D. Ziegler, President, Director
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Robert J. Tuszynski, Vice President, Director
Jay Ferrara, Treasurer
John Lauderdale, Vice President of Marketing
S. Charles O'Meara, Secretary
INVESTMENT ADVISORS
Skyline Asset Management
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, TRANSFER AND DIVIDEND
DISBURSING AGENT
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.
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 343-2/96
