(PRINCIPAL PRESERVATION LOGO)
WISCONSIN
TAX-EXEMPT
PORTFOLIO
ANNUAL REPORT
TO SHAREHOLDERS
DECEMBER 31, 1996
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
PRESIDENT'S LETTER/MANAGEMENT DISCUSSION AND ANALYSIS
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1996
February 24, 1997
Dear Wisconsin Shareholder:
We are pleased to present the annual report to shareholders of the Wisconsin
Tax-Exempt Portfolio. The assets of the portfolio continued to increase during
1996 from approximately $19,000,000 at the beginning of the year to $25,800,000
at December 31, 1996. The overall long term assets of the Principal Preservation
mutual fund family increased as well from $236,500,000 to $255,800,000. The
Wisconsin Tax-Exempt Portfolio enjoys a competitive niche, as it is the fastest
growing double tax free fund in the state in terms of percentage asset growth.
Generally, 1996 was a good year for investors in the stock markets. As a
result, stocks and stock mutual funds attracted more attention and greater
financial press than bonds and other fixed-income securities. The Federal
Reserve Board, after lowering the overnight Fed Funds target rate during the
first quarter, left the lending rate unchanged for the remainder of the year.
Generally, demand for municipal securities was soft and contributed to a
lackluster market. Looking ahead, it appears that for the foreseeable future the
stock market will continue to capture much of the attention, and yields on
municipal securities likely will remain relatively stable.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
MANAGEMENT DISCUSSION AND ANALYSIS
WISCONSIN TAX-EXEMPT PORTFOLIO
Shown below is a comparison of the change in value of a $10,000 investment in
Principal Preservation Wisconsin Tax-Exempt Portfolio and the Lehman 20-Year
Municipal Bond Index.
Principal Preservation Wisconsin Lehman 20-Year
Date Tax-Exempt Portfolio Municipal Bond Index
6/13/94*<F1> $9,750 $10,000
6/30/94 9,452 9,700
7/31/94 9,544 9,922
8/31/94 9,544 9,950
9/30/94 9,446 9,751
10/31/94 9,180 9,494
11/30/94 8,863 9,272
12/31/94 9,113 9,563
1/31/95 9,404 9,937
2/28/95 9,688 10,298
3/31/95 9,781 10,415
4/30/95 9,804 10,413
5/31/95 10,082 10,806
6/30/95 9,993 10,640
7/31/95 10,027 10,695
8/31/95 10,112 10,842
9/30/95 10,166 10,928
10/31/95 10,303 11,161
11/30/95 10,493 11,408
12/31/95 10,599 11,568
1/31/96 10,652 11,627
2/29/96 10,547 11,494
3/31/96 10,409 11,310
4/30/96 10,324 11,265
5/31/96 10,389 11,279
6/30/96 10,466 11,438
7/31/96 10,576 11,550
8/31/96 10,556 11,532
9/30/96 10,710 11,765
10/31/96 10,799 11,906
11/30/96 10,998 12,155
12/31/96 10,945 12,083
AVERAGE ANNUAL TOTAL RETURN
(includes the effect of the sales charge)
1-YEAR SINCE INCEPTION 6/13/94
Wisconsin Tax-Exempt:
Full Sales Charge 0.67% 3.60%
Net Asset Value 3.25% 4.63%
*<F1>June 13, 1994 inception date.
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.
WISCONSIN TAX-EXEMPT PORTFOLIO
The Wisconsin Tax-Exempt Portfolio's performance is presented from June 13,
1994, commencement of operations, through December 31, 1996. It is based upon a
$10,000 investment at the Portfolio's public offering price then in effect,
which included a 2.5% sales charge. It represents the actual total returns for
each of the years ended December 31, net of any fees and expenses charged to the
Portfolio during those periods.
DISCUSSION AND ANALYSIS
For much of 1996, the investing public received conflicting reports regarding
the strength of the economy, and whether the Federal Reserve, in response, would
change the Fed Funds rate to tighten the reins on potential interest rate
increases. The Fed Reserve reduced the Fed Funds rate in the first quarter, but
showed restraint and left short interest rates unchanged for the remainder of
the year. However, long term rates on both the AAA and A rated municipal general
obligation bonds rose slightly, causing a slight decline in the prices of
municipal securities. As a result, the Wisconsin Tax-Exempt Portfolio
experienced a slight decline. As reflected in the graph, the total return each
month of the Wisconsin Tax-Exempt Portfolio generally tracked the Lehman 20-Year
Index quite closely. The average weighted maturity of the Portfolio was 19.3
years at December 31, 1996, and remained constant throughout 1996.
The Wisconsin Tax-Exempt Portfolio invests in securities that generate income
which is exempt from both Federal and Wisconsin income tax. Very few municipal
bond issues qualify for this dual exemption. Therefore, the manager maintains a
higher concentration in the housing sector, territorial paper and municipal
securities issued by the State of Wisconsin, as compared to a national tax-
exempt mutual fund. While the portfolio manager has diversified the portfolio,
the concentration has led to a slight under performance to the Lehman benchmark
for the entire year. Currently, the Portfolio maintains 41% of its assets in
bonds issued by municipalities in Wisconsin and less than 18% in territorial
paper. The remaining 41% is invested in new public housing authorities in 21
states. During 1996 the manager did not invest in any municipal security that
was subject to the alternative minimum tax.
The total return, before the effect of a sales charge, for the one year ended
December 31, 1996 was 3.25%. The average annualized return since inception was
4.63%. The comparative returns for the benchmark were 4.45% and 7.70%,
respectively.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table presents information relating to a share of capital stock
of the Wisconsin Tax-Exempt Portfolio of Principal Preservation Portfolios Inc.
outstanding for the periods presented. This information should be read in
conjunction with the financial statements and related notes.
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------------------------
For the
period from
June 13, 1994
For the years ended (commencement
December 31, of operations) to
-----------------
1996 1995 December 31, 1994
----- ----- -----------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.05 $9.10 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .49 .50 .25
Net realized and unrealized gains
(losses) on investments (.18) .95 (.90)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .31 1.45 (.65)
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income (.49) (.50) (.25)
------ ------ ------
TOTAL DISTRIBUTIONS (.49) (.50) (.25)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $9.87 $10.05 $9.10
====== ====== ======
TOTAL RETURN **<F3> 3.3% 16.3% (6.5)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $25,750 $18,986 $8,116
Ratio of expenses to average
net assets 0.5%+<F4> 0.4%+<F4> 0.2%*+
Ratio of net investment income <F2><F4>
to average net assets 4.9%+<F4> 5.0%+<F4> 4.4%*+
<F2><F4>
Portfolio turnover rate 16.0% 9.7% 23.4%
*<F2>Annualized.
**<F3>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F4>Reflects a voluntary reimbursement of fund expenses of 0.6% in 1996, 0.8%
in 1995 and 1.4% in 1994, respectively.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
BALANCE SHEET
DECEMBER 31, 1996
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
ASSETS:
Investments:
Long-term investments in securities,
(cost of $24,829,500) $25,348,926
-----------
Total investments 25,348,926
Cash 24,753
Receivables:
Capital shares sold 20,023
Dividends and interest 396,543
-----------
Total receivables 416,566
Other assets 9,119
-----------
Total assets $25,799,364
===========
LIABILITIES:
Payables:
Distributions to shareholders $34,083
Expenses 15,683
-----------
Total liabilities 49,766
-----------
NET ASSETS:
Capital stock 25,236,178
Accumulated distributions in excess of net
investment income (2,830)
Undistributed net realized (losses) on investments (3,176)
Net unrealized appreciation on investments 519,426
-----------
Total net assets 25,749,598
-----------
Total liabilities and net assets $25,799,364
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $9.87
===========
MAXIMUM OFFERING PRICE PER SHARE $10.12
===========
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
INVESTMENT INCOME:
Interest $1,241,952
----------
Total investment income 1,241,952
----------
EXPENSES:
Investment advisory fees 112,522
Custodian fees 8,188
Transfer agent fees 17,484
Broker service fees 56,148
Professional fees 34,084
Registration 3,532
Communication 5,376
Director fees 6,121
Pricing of investments 11,856
Deferred organization expense 2,606
Other 4,939
----------
Total expenses 262,856
Less expenses absorbed by advisor (144,215)
----------
Net expenses 118,641
----------
NET INVESTMENT INCOME 1,123,311
----------
NET REALIZED GAINS ON INVESTMENTS 55,980
CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS FOR THE YEAR (322,111)
----------
Net losses on investments (266,131)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $857,180
=========
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
OPERATIONS:
Net investment income $1,123,311
Net realized gains on investments 55,980
Change in unrealized appreciation on
investments for the year (322,111)
----------
Net increase in net assets resulting from operations 857,180
----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ($0.49 per share) (1,124,700)
Distributions in excess of net investment
income ($0.0014 per share) (3,642)
----------
Total distributions (1,128,342)
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 8,406,005
Net asset value of shares issued in distributions 781,624
Cost of shares redeemed (2,153,115)
----------
Net increase in net assets from capital share transactions 7,034,514
----------
Total increase 6,763,352
NET ASSETS:
Balance at beginning of year 18,986,246
----------
Balance at end of year $25,749,598
==========
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
OPERATIONS:
Net investment income $714,924
Net realized (losses) on investments (27,982)
Change in unrealized appreciation on
investments for the year 1,218,259
----------
Net increase in net assets resulting from operations 1,905,201
----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ($0.50 per share) (715,944)
----------
Total distributions (715,944)
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 9,786,055
Net asset value of shares issued in distributions 505,977
Cost of shares redeemed (610,880)
----------
Net increase in net assets from capital
share transactions 9,681,152
----------
Total increase 10,870,409
NET ASSETS:
Balance at beginning of year 8,115,837
----------
Balance at end of year $18,986,246
===========
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES --
Principal Preservation Portfolios, Inc. (the "Fund"), registered under the
Investment Company Act of 1940 as an open-end management investment company, is
a series company with eight portfolios: Tax-Exempt Portfolio, Government
Portfolio, S&P100 Plus Portfolio, Dividend Achievers Portfolio, PSE Tech 100
Index Portfolio, Cash Reserve Portfolio, Wisconsin Tax-Exempt Portfolio and the
Select Value Portfolio. This report presents information only for the Wisconsin
Tax-Exempt Portfolio (the "Portfolio"). Information regarding the other
portfolios is presented 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
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 in accordance with procedures approved by the Fund's Board of
Directors. Among other factors, these procedures 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.
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) Net Realized Gains and Losses and Investment Income
Net realized gains and losses on securities sales are computed on the
identified cost basis. Dividend income is recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
(c) Federal Income Taxes
Provision has not been made for Federal income taxes, because the Portfolio
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise to
comply with the provisions of the Internal Revenue Code applicable to
regulated investment companies. As of December 31, 1996, the Portfolio had
Federal income tax capital loss carryforwards of $3,176 expiring in 2003. It
is management's intention to make no distribution of any future realized
capital gains until the Federal income tax capital loss carryforward is
exhausted.
Distributions in excess of net investment income in the Wisconsin Tax-Exempt
Portfolio of $3,642 for the year ended December 31, 1996, are the result of
different accounting treatment of market discount on investments for book
and tax purposes. This distribution does not represent a return of capital
for tax purposes.
(d) 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.
(e) Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
(f) Deferred Organization Costs
Costs incurred with the organization, initial registration and public
offering of shares aggregating $13,000 for the Portfolio have been paid by
the Fund and are being amortized over a five year period.
(g) 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 -
On January 31, 1996 the Fund's Investment Advisory Agreement (the "Agreement")
with B.C. Ziegler and Company ("Ziegler") (with whom certain officers and
directors of the Fund are affiliated), was assigned to Ziegler Asset Management,
Inc. ("ZAMI"). Both Ziegler and ZAMI are wholly owned subsidiaries of The
Ziegler Companies, Inc., therefore the assignment did not constitute a change in
control. Under the Agreement, the Portfolio pays ZAMI a monthly fee based upon
the average daily net assets of the Portfolio at the rate of .50% of the first
$250,000,000 of the Portfolio's average daily net assets, reducing to .40% of
the Portfolio's average daily net assets in excess of $250,000,000.
For the year ended December 31, 1996, ZAMI voluntarily reimbursed expenses to
the Portfolio totaling $144,215. ZAMI 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 Ziegler, as the distributor, which is passed through to the
broker/dealer as a service fee. This fee is calculated on the average daily net
assets and is shown as broker service fees in the Statement 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 serve
as depository for all investment securities and cash, and a Transfer and
Dividend Disbursing and Shareholder Servicing Agreement with the Fund to provide
Transfer Agent Services. In addition, the Portfolio pays Ziegler commissions on
sales of Portfolio shares and 12b-1 distribution fees. The transfer agent fees,
commissions, accounting and pricing fees, depository and 12b-1 fees paid to
Ziegler by the Portfolio for the year ended December 31, 1996 were as follows:
COMMISSIONS ACCOUNTING
ON AND
TRANSFER PORTFOLIO PRICING DEPOSITORY
AGENT FEES SHARES FEES FEES 12B-1 FEES
---------- ---------- ---------- ----------- ---------
Wisconsin Tax-Exempt
Portfolio $17,375 $83,525 $19,000 $9,719 $31,971
3. INVESTMENT TRANSACTIONS --
Purchases and proceeds from sales of securities, excluding short-term
investments, for the year ended December 31, 1996, consisted of purchases of
$10,530,217 and $3,555,509 in proceeds from the sale of securities.
Net tax basis unrealized appreciation (depreciation) on investments as of
December 31, 1996, included:
WISCONSIN
TAX-EXEMPT
----------
Gross unrealized appreciation $584,087
Gross unrealized (depreciation) (67,491)
--------
Net unrealized appreciation $516,596
========
The tax basis cost of investments at December 31, 1996 was $24,832,330.
4. LINE OF CREDIT --
The Fund has an available line of credit of $3,000,000. However, each
portfolio's borrowings, by investment restriction, cannot exceed 10% of the
total net assets not including the borrowings. Interest expense incurred in
connection with such borrowings was not material during the year. Borrowings
under this arrangement bear interest approximating the then current Prime Rate.
All borrowings under this line of credit are guaranteed by Ziegler. Each
portfolio's policies allow borrowings for temporary or emergency purposes.
5. CAPITAL SHARE TRANSACTIONS --
(a) The Fund has authorized capital of 1,000,000,000 shares at $.001 par value
per share. The Fund's shares are divided into eight separate portfolios:
Wisconsin Tax-Exempt Portfolio, Government Portfolio, Tax-Exempt Portfolio,
S&P 100 Plus Portfolio, Dividend Achievers Portfolio, Select Value
Portfolio, PSE Tech 100 Index Portfolio and Cash Reserve Portfolio,
consisting of 50,000,000 shares in each of the first seven portfolios and
400,000,000 in the Cash Reserve Portfolio. The shares of the Cash Reserve
Portfolio have been subdivided into 200,000,000 shares of Class X (Retail
Shares) and 200,000,000 shares of Class Y (Institutional Shares). The
remaining 250,000,000 authorized shares of common stock of the Fund may be
allocated to any of the above portfolios 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, 1995 and
December 31, 1996, were as follows:
WISCONSIN
TAX-EXEMPT
----------
SHARES OUTSTANDING AT DECEMBER 31, 1994 891,486
=========
Shares issued 1,007,871
Shares issued in distributions 51,771
Shares redeemed (62,225)
---------
SHARES OUTSTANDING AT DECEMBER 31, 1995 1,888,903
=========
Shares issued 860,313
Shares issued in distributions 79,825
Shares redeemed (219,263)
---------
SHARES OUTSTANDING AT DECEMBER 31, 1996 2,609,778
=========
(c) Maximum offering price per share is computed based on a maximum sales
charge of 2.5% of the offering price or 2.56% of the net asset value. For
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 97.5.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
(UNAUDITED)
- ------------ ------------ ------------- -----
LONG-TERM TAX-EXEMPT SECURITIES -- 98.3%
ALABAMA -- 2.4%
$200,000 Birmingham, Alabama, New Public
Housing Authority, 5.125%, AAA Aaa $197,500
due 11-01-2009
450,000 Birmingham, Alabama, New Public
Housing Authority, 5.00%, AAA Aaa 430,875
due 05-01-2012
ARKANSAS -- 0.9%
130,000 Hot Springs, Arkansas, New Public
Housing Authority, 5.00%, AAA Aaa 131,137
due 09-01-2006
105,000 Little Rock, Arkansas, New Public
Housing Authority, 5.25%, AAA Aaa 104,34
due 08-01-2012
CALIFORNIA -- 1.3%
170,000 Sacramento, California, New Public
Housing Authority, 5.25%, AAA Aaa 172,975
due 12-01-2011
160,000 Sacramento, California, New Public
Housing Authority, 5.25%, AAA Aaa 162,800
due 12-01-2010
FLORIDA -- 0.6%
150,000 Gainesville, Florida, New Public
Housing Authority, 5.25%, AAA Aaa 151,688
due 02-01-2008
GEORGIA -- 2.9%
325,000 Atlanta, Georgia, New Public
Housing Authority, 5.00%, AAA Aaa 331,877
due 05-01-2007
250,000 Newnan, Georgia, New Public
Housing Authority, 5.00%, AAA Aaa 250,313
due 04-01-2012
150,000 Newnan, Georgia, New Public
Housing Authority, 5.25%, AAA Aaa 153,217
due 05-01-2007
GUAM -- 4.8%
650,000 Guam Government Limited
Obligation Highway Bonds, AAA Aaa 689,813
Series A, 6.30%, due 05-01-2012
515,000 Guam Power Authority Revenue
Bonds, Series A, 6.375%, AAA Aaa 557,487
due 10-01-2008
ILLINOIS -- 1.9%
200,000 Cook County, Illinois, New Public
Housing Authority, 5.25%, AAA Aaa 200,500
due 04-01-2010
300,000 Peoria, Illinois, New Public
Housing Authority, 5.00%, AAA Aaa 290,250
due 06-01-2012
KANSAS -- 0.5%
125,000 Kansas City, Kansas, New Public
Housing Authority, 5.125%, AAA Aaa 127,187
due 10-01-2006
LOUISIANA -- 0.4%
100,000 Lake Charles, Louisiana, New Public
Housing Authority, 5.125%, AAA Aaa 96,750
due 08-01-2013
MASSACHUSETTS -- 3.9%
600,000 Massachusetts State Housing Finance
Agency, Multi-Family Housing AAA A1 687,750
Bonds, First Issue, 1979 Series A,
7.00%, due 04-01-2021
315,000 Worcester, Massachusetts, New Public
Housing Authority, 5.25%, AAA Aaa 324,450
due 08-01-2006
MISSISSIPPI -- 0.5%
135,000 Biloxi, Mississippi, New Public
Housing Authority, 5.25%, AAA Aaa 134,156
due 08-01-2011
NEVADA -- 1.0%
255,000 Las Vegas, Nevada, New Public
Housing Authority, 5.00%, AAA Aaa 245,438
due 01-01-2012
NEW JERSEY -- 3.6%
150,000 Newark, New Jersey, New Public
Housing Authority, 5.25%, AAA Aaa 153,137
due 04-01-2006
250,000 Newark, New Jersey, New Public
Housing Authority, 4.50%, AAA Aaa 242,187
due 04-01-2008
435,000 Newark, New Jersey, New Public
Housing Authority, 5.25%, AAA Aaa 436,631
due 04-01-2009
100,000 Hoboken, New Jersey, New Public
Housing Authority, 6.00%, AAA Aaa 103,057
due 09-01-2011
NEW YORK -- 2.8%
200,000 New York, New York, New Public
Housing Authority, 5.125%, AAA Aaa$ 201,000
due 01-01-2008
135,000 New York, New York, New Public
Housing Authority, 6.000%, AAA Aaa 138,141
due 01-01-2010
200,000 New York, New York, New Public
Housing Authority, 5.375%, AAA Aaa 201,750
due 01-01-2012
200,000 New York, New York, New Public
Housing Authority, 5.00%, AAA Aaa 191,500
due 01-01-2012
NORTH CAROLINA -- 2.2%
165,000 Durham, North Carolina, New Public
Housing Authority, 5.25%, AAA Aaa 166,650
due 12-01-2009
400,000 Durham, North Carolina, New Public
Housing Authority, 5.00%, AAA Aaa 387,000
due 02-01-2012
NORTH DAKOTA -- 1.5%
200,000 Burleigh County, North Dakota,
New Public Housing Authority, AAA Aaa 194,250
4.875%, due 01-01-2009
185,000 Burleigh County, North Dakota,
New Public Housing Authority, AAA Aaa 181,762
4.875%, due 01-01-2010
OHIO -- 4.8%
250,000 Youngstown, Ohio, New Public
Housing Authority, 4.875%, AAA Aaa 245,625
due 05-01-2009
200,000 Youngstown, Ohio, New Public
Housing Authority, 4.875%, AAA Aaa 192,500
due 05-01-2010
500,000 Youngstown, Ohio, New Public
Housing Authority, 5.00%, AAA Aaa 489,375
due 05-01-2011
300,000 Youngstown, Ohio, New Public
Housing Authority, 5.00%, AAA Aaa 300,375
due 05-01-2012
PENNSYLVANIA -- 0.8%
200,000 Clinton County, Pennsylvania,
New Public Housing Authority, AAA Aaa 206,130
5.25%, due 11-01-2007
PUERTO RICO -- 13.0%
100,000 Puerto Rico Commonwealth Highway
& Transportation, 6.625%, A Baa1 111,125
due 07-01-2012
325,000 Puerto Rico Commonwealth, Refunding
Bonds, Series A, 6.00%, A Baa1 332,313
due 07-01-2014
800,000 Puerto Rico Public Buildings Authority,
Guaranteed Public Education A Baa1 794,000
& Health Facilities, Refunding Series M,
5.75%, due 07-01-2015
180,000 Puerto Rico Commonwealth Electric &
Power Authority, Series R, AAA Aaa 188,550
6.25%, due 07-01-2017
350,000 Puerto Rico Commonwealth Highway
& Transportation Authority, A Aaa 390,688
Highway Revenue Unrefunded Balance,
Series T, 6.625%,
due 07-01-2018
350,000 Puerto Rico Commonwealth General
Obligation Bonds, 6.00%, A Baa1 354,812
due 07-01-2022
200,000 University of Puerto Rico University
Revenue Bonds, Series M, 5.25%, AAA Aaa 194,000
due 06-01-2025
500,000 Puerto Rico Commonwealth Highway
& Transportation Authority, A Baa1 482,500
Revenue Bonds, Series Y, 5.50%,
due 07-01-2026
150,000 Puerto Rico Telephone Authority,
Series L, 5.75%, due 01-01-2011 A+ A2 151,500
350,000 Puerto Rico Telephone Authority,
Series L, 6.125%, due 01-01-2022 A+ A2 357,000
SOUTH CAROLINA -- 0.8%
200,000 Marion, South Carolina, New Public
Housing Authority, 4.875%, AAA Aaa 200,750
due 09-01-2010
TENNESSEE -- 1.2%
190,000 Nashville, Tennessee, New Public
Housing Authority, 5.00%, AAA Aaa 185,250
due 08-01-2010
140,000 Memphis, Tennessee, New Public
Housing Authority, 5.00%, AAA Aaa 136,325
due 07-01-2011
TEXAS -- 5.0%
300,000 El Paso, Texas, New Public
Housing Authority, 5.00%, AAA Aaa 303,750
due 07-01-2005
160,000 Galveston, Texas, New Public
Housing Authority, 5.25%, AAA Aaa 163,442
due 10-01-2008
120,000 Galveston, Texas, New Public
Housing Authority, 5.25%, AAA Aaa 116,700
due 10-01-2012
180,000 Sherman, Texas, New Public
Housing Authority, 5.25%, AAA Aaa 181,800
due 07-01-2009
340,000 Waco, Texas, New Public
Housing Authority, 4.875%, AAA Aaa 337,025
due 12-01-2009
200,000 Waco, Texas, New Public
Housing Authority, 4.875%, AAA Aaa 192,750
due 12-01-2012
WASHINGTON -- 0.6%
155,000 Seattle, Washington, New Public
Housing Authority, 5.00%, AAA NR 153,450
due 03-01-2009
WISCONSIN -- 40.9%
155,000 Redevelopment Authority of the
City of Superior, Wisconsin, NR Aa2 159,069
Revenue Bonds, Series 1994
(Superior Memorial Hospital, Inc.),
5.60%, due 05-01-2007
150,000 Redevelopment Authority of the City
of Superior, Wisconsin, NR Aa2 153,937
Revenue Bonds, Series 1994
(Superior Memorial Hospital, Inc.),
5.65%, due 11-01-2008
100,000 Redevelopment Authority of the City
of Superior, Wisconsin, NR Aa2 102,000
Revenue Bonds, Series 1994
(Superior Memorial Hospital, Inc.),
5.80%, due 05-01-2010
500,000 Redevelopment Authority of the City
of Milwaukee, Wisconsin, NR A1 530,625
Development Revenue Bonds (Goodwill
Industries of Southeastern
Wisconsin Project), 6.35%, due 10-01-2009
1,000,000 Madison, Wisconsin, Community
Development Authority, Lease NR Aa3 1,063,750
Revenue Bonds, Monona Terrace
Community & Convention Center
Project, 6.10%, due 03-01-2010
600,000 Community Development Authority
of the Village of Sussex, NR NR 607,500
Wisconsin, Community Development
Revenue Bonds, Series 1995,
6.10%, due 04-01-2015
275,000 Community Development Authority
of the City of Madison, NR NR 279,469
Wisconsin, Project Revenue Bonds,
(Series 1986), 5.875%,
due 07-01-2016
600,000 Redevelopment Authority of the
Village of Slinger, Wisconsin, NR NR 612,000
Redevelopment Lease Revenue Bonds,
Series 1995-A, 6.25%,
due 09-01-2017
500,000 Community Development Authority of
the Village of Little Chute, NR NR 502,500
Wisconsin, Community Development
Lease Revenue Bonds,
5.625%, due 03-01-2019
500,000 Madison, Wisconsin, Community
Development Authority, NR NR 520,625
Redevelopment Revenue Bonds, Series
1995,(Meriter Retirement
Project), 6.125%, due 12-01-2019
855,000 Housing Authority of Winnebago County,
Wisconsin, Multifamily NR NR 856,069
Housing Refunding Revenue Bonds
(Neenah-Menasha Ecumenical
Retirement Community, Inc. Project),
5.60%, due 10-01-2020
265,000 Wisconsin Housing Finance Authority
Revenue Bonds, AAA Aaa 279,575
Prerefunded 12-01-2017 at Par, Escrowed
by U.S. Government
Security, 6.10%, due 06-01-2021
300,000 Community Development Authority of
the City of Madison, NR NR 300,750
Wisconsin, Multifamily Housing Revenue
Bonds, Series 1995
(Dempsey Manor Project), 6.65%,
due 10-01-2025
3,000,000 Wisconsin Center District, Junior
Dedicated Tax Revenue Bonds, A NR 2,951,250
Series 1996B, 5.75%, due 12-15-2027
1,000,000 Housing Authority of the City of Oak
Creek, Wisconsin, Multifamily NR NR 1,023,750
Housing Refunding Revenue Bonds, Series
1994A, (Country Oaks II
Project), 6.30%, due 08-01-2028
600,000 Housing Authority of the City of
Superior, Wisconsin, Housing NR NR 606,750
Revenue Refunding Bonds, Series 1996, --------
(GNMA Collateralized-
St. Francis Home, Inc. Project), 6.15%,
due 07-20-2031
Total Long-Term Tax-Exempt Securities (Cost $24,829,500) 25,348,926
----------
Total Investments $25,348,926
===========
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.
WISCONSIN TAX-EXEMPT PORTFOLIO
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Principal Preservation Portfolios, Inc. and the
Shareholders of the Wisconsin Tax-Exempt Portfolio:
We have audited the accompanying balance sheet, including the schedule of
investments, of the Wisconsin Tax-Exempt Portfolio of Principal Preservation
Portfolios, Inc. (a Maryland corporation) as of December 31, 1996, and the
related statement of operations for the year then ended, and the statements of
changes in net assets for the two years in the period then ended and 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
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, 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
Wisconsin Tax-Exempt Portfolio of Principal Preservation Portfolios, Inc. as of
December 31, 1996, the results of its operations for the year then ended, and
the changes in its net assets for the two years in the period then ended and
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 17, 1997.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
R.D. Ziegler, Chairman, Director
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Robert J. Tuszynski, President, Director
Frank Ciano, Chief Financial Officer and Treasurer
John Lauderdale, Vice President of Marketing
S. Charles O'Meara, Secretary
Marc Dion, Vice President
INVESTMENT ADVISOR
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, DEPOSITORY, TRANSFER AND DIVIDEND
DISBURSING ACCOUNTING/PRICING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
This report has been prepared for the information of shareholders of Principal
Preservation Portfolios, Inc. Wisconsin Tax-Exempt Portfolio, and may not be
used in connection with the offering of securities unless preceded or
accompanied by a current Prospectus.
PP842-2/97
