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PRINCIPAL PRESERVATION
Tax-Exempt Portfolio
Government Portfolio
S&P 100 Plus Portfolio
Dividend Achievers Portfolio
Select Value Portfolio
PSE Tech 100 Index Portfolio
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 1997
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PRESIDENT'S LETTER/MANAGEMENT DISCUSSION AND ANALYSIS
SEMIANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1997
August 25, 1997
Dear Shareholder:
We are pleased to provide the semiannual report of Principal Preservation
Portfolios, Inc. for the six months ended June 30, 1997. The long term assets of
the fund grew from $255,800,000 to $290,000,000. We can attribute most of the
growth to our stock portfolios, especially in the S&P 100 Plus and PSETech 100
Index Portfolios.
The overall economy has been strong during 1997, and investors' confidence
showed up through increased purchases in the equity market. This support
generated very strong first half stock market returns as the S&P 500 and Dow
Jones Industrials were up 20.60% and 20.12%, respectively. We are quite neutral
in our outlook for the remainder of the year and could be looking back at the
close of 1997 as the fourth consecutive year of strong investment returns in the
stock market. The bond market, while rallying in the second quarter, took a
definite back seat to stock funds.
As you will read on the following pages, our funds, especially the stock
funds, enjoyed not only good total returns, but also strong comparative returns
when compared with their individual benchmarks. The portfolios, especially the
PSE Tech 100 Index Portfolio, received increased attention in the media. The
PSETech 100 Index Portfolio has continued to grow rapidly and, as of the date of
this report, has over $19,700,000 in net assets. Because of the popularity of
index vehicles, investors made significant mutual fund purchases in major market
index funds causing the stocks in those portfolios to do very well. This buying
support also made it difficult for actively managed portfolios, especially those
funds that invest in small capitalization stocks, to beat the major market
indexes.
I get very concerned when I personally talk to individual investors chasing
strong short term performance returns. While an investor should evaluate past
performance as one criterion, the most important factors to evaluate when
purchasing a fund, are how strictly does the investment manager follow his
discipline to achieve the results and how does that style fit within an overall
investment strategy for the long term. Each investment in a long term mutual
fund should be made by looking at a minimum of a three-year time horizon and
conservatively should be a least five to six years. An investor can then have
time to adequately judge the investment results regularly, and be mentally
prepared to accept a downturn in overall market returns. We thank you for the
continued support and trust you as shareholders have had in us and look forward
to a long term association.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
The report contained herein is meant to be information to the existing
shareholders of Principal Preservation. This does not constitute an offer to
sell and should an investor wish to receive more information about the
portfolios, they should obtain a prospectus which includes a discussion of each
investment objective and all sales charges and expenses of the fund.
MANAGEMENT DISCUSSION AND ANALYSIS
GENERAL FIXED INCOME ANALYSIS
During March 1997, the Federal Reserve Board raised the Target Fed Funds rate
from 5.25% to 5.50%. The Fed made the move to stem an inflationary trend that
began to appear in the economy. As a result the fixed income market suffered a
slight decline in prices and increased yields shown by the 30-year U.S. Treasury
bond moving from a 6.64% at December 31, 1996 to a 6.78% at June 30, 1997.
Comparatively, the 30-year AAA general obligation municipal bond yield of 5.38%
finished at roughly the same yield it began the year. The high point of long
term interest rates were in mid April when U.S. Treasuries hit 7.17% and the
municipal bonds were at 5.90%. From that point, as the investment community
recognized that the economy was growing at a moderate pace and inflationary
signals were small, the bond market staged a rally. The market rally has
extended into the third quarter. Since the Producer Price Index and the Consumer
Price Index are at their lowest increases since 1965, they convince us that the
Fed will be hard pressed to increase rates anytime soon. We therefore look for a
stable interest rate environment throughout the remainder of the year.
TAX-EXEMPT PORTFOLIO
The Tax-Exempt Portfolio had a net asset value total return for the six
months ended June 30, 1997, of 2.63% which compares to the year-to-date total
return of 2.71% for the General Municipal Bond Fund and 2.42% for the average
Insured Municipal Bond Fund as measured by Lipper Analytical Services. The one
year net asset value total returns for the twelve-month period ended June 30,
1997 were 7.33%, 7.81% and 7.19%, respectively. It is important to realize that
the portfolio is approximately 90% in AAA securities many of which are pre-
insured issues. Therefore, on an ongoing basis, the portfolio will perform more
closely to an insured fund. During the first quarter of 1997, the anticipated
federal fund rate increase of 25 basis points took place after the March
meeting. Although some of the perceived increase was reflected in prior market
valuations, municipal yields on AAA insured bonds rose to 5.90% or an increase
of approximately 0.25%. The typical 15 to 20 year treasury security rose 0.47%
in yield, and therefore, narrowed the spread between municipal bond and treasury
yields. The two factors the Portfolio Manager utilized in purchasing municipal
securities were the fact that yields for specialty states (those states that
exempt only bonds issued in that state to be free from state income tax), and
non-specialty states (those that either exempt all municipal bonds regardless of
where issued or those states that don't allow any municipal bonds free from
state income tax), and also investment quality yield spreads were compressed. As
a result, the Portfolio Manager made an active decision to invest most of the
securities in "specialty states" and securities with high credit quality.
While this caused an under performance versus all municipal bonds,
specifically high yield municipal bonds, the second quarter rally focused on the
types of securities that the Tax-Exempt Portfolio owned. Therefore, the Tax-
Exempt Portfolio enjoyed a second quarter net asset value total return of 4.02%
which compared with an average total return of the Insured Municipal Bond Fund
category of 3.34% and the General Municipal Bond Fund average of 3.15%. The last
two months of the period began a rally in fixed income securities which was
caused by a strong sentiment in the investment community that the Federal
Reserve would not touch the federal funds rate, thereby indicating that the
remainder of the year had a good chance of being a fairly stable interest rate
environment.
The Portfolio Manager in the last half of 1997 will focus on state and sector
diversification to provide as broad of diversification of the portfolio as
possible. For the foreseeable future, the Portfolio Manager will not be
investing in municipal securities with a lower credit quality than AA. However,
if yields spread differentials between A and AAA widen dramatically, he may take
advantage of moderate investments (five to 10%) in A municipal bonds.
GOVERNMENT PORTFOLIO
The Government Portfolio net asset value total return for the year to date
period ended June 30, 1997, was 2.01% which compared to the Merrill Lynch All
Maturity Average of 2.16% and the Lipper Intermediate Government Fund Category
of 2.64% (a peer group measured by Lipper Analytical Services of funds primarily
investing in U.S. Governments and an average maturity of between five and 10
years). The comparative one year total returns were 5.87%, 7.35% and 6.47%.
While interest rates rose significantly in the first quarter, as the bond
market anticipated an increase in the Fed Funds rate, the second quarter
provided a reversal in up-trends for rates. Market participants began to feel
more confident that the above average growth rate experienced in the first
quarter would not be repeated. As a result, the bond market rallied in April and
June reversing the first quarter's negative returns. At the end of the first
quarter, the market was convinced that the Fed would raise rates at their May
meeting. When this did not happen, it paved the way for a market rally. The lack
of Fed intervention and indications of a softer economy, with continuing signs
of little or no inflation, provided the platform for rates to move lower.
During the second quarter the duration of the portfolio was increased to
equal that of the Merrill Lynch All Treasuries Index. This was done in part to
take advantage of the bond rally. In addition, some of the premium securities
were sold and more current coupon securities purchased in order to improve the
portfolio. Generally, current coupon securities will perform better in a
declining rate environment. As a result of the bond rally, yield spreads of
mortgage backed securities widened during the second quarter. We took advantage
of this in mid June when we purchased a GNMA position in the portfolio. The
Portfolio Manager sold the shortest treasury position, a two-year security, and
bought the 30 year GNMA's. As a result, in addition to the portfolio's duration,
the portfolio picked up over 1% in the yield of the position. Since GNMA's is an
agency issued mortgage pool that is backed by the full faith and credit of the
U.S. Government, the Portfolio Manager has not altered the high credit quality
strategy. The Portfolio Manager intends to keep the GNMA positions to 5% or less
at the current time.
With no sign of inflation, currently, nor or on the horizon, the market will
continue to look for change in attitude by the Fed. As long as economic
indicators continue to show us a steady, slow growing economy, that is not
producing any significant inflation, the market will remain bullish. We must
bear in mind that sentiment can change quickly, as we have seen in the last
quarter. We believe that we will continue to be in trading range approximately
100 basis points on the longer end of the yield curve. With the Fed indicating
that they will continue to remain cautious, we can expect to see further yield
curve flattening this year.
GENERAL EQUITY MARKET ANALYSIS
Bullish optimism can characterize the first six months of 1997. Everyone,
including fixed income specialists, recognized the stock market as the place to
be invested. The major market indices continued to set new records as the Dow
Jones Industrial Average Index and the Standard and Poors 100 Index broke
through the 7,900 and 890 level, respectively. The first quarter continued the
three-year charge of large capitalized securities. A shift by investors to small
and mid size companies in the second quarter brought the performance of the S&P
500 Index and the Russell 2000 closer to the performance of the larger market
cap indices. However, most stock funds enjoyed strong positive returns in the
first half of this year. The sentiment for the remainder of the year is that
without any surprises from the Federal Reserve or a catastrophe, the stock
market should finish on a strong note through the end of 1997.
S&P 100 PLUS PORTFOLIO
The year to date net asset value total return of the S&P 100 Plus Portfolio
was 18.44% compared to the S&P 100 Index of 20.67% and the S&P 500 Index of
20.60%. The comparative one year total returns for the 12 months ended June 30,
1997 were 31.41%, 35.65% and 34.68%, respectively. The portfolio's net assets
began the year at $77,500,000 and finished at $94,700,000 on June 30, 1997.
During the first four months of the year, the portfolio was managed by PanAgora
Asset Management, who employed an active overweighting and underweighting
strategy of the various securities in the portfolio. At the end of April 1997,
the negative spread against the 100 Index was approximately 2%. In addition to
keeping the maximum net expense ratio charge to shareholders at 0.80%, the new
Portfolio Manager has focused on re-balancing the portfolio in tighter weighting
against the S&P 100 Index and taking smaller over and under weighted positions
in approximately ten securities. As a result, for the first two months under the
new management, the difference between the Fund's performance and the Index
performance can greatly be attributed to the expense ratio only.
In conjunction with the change in managers on May 1, 1997, $20,490,000 of
market value equity securities were repositioned against the S&P 100 Index and
an additional $4,480,000 was utilized to reduce the cash position from
approximately 9% to 3%. Due to the identification of tax lots, capital gains
generated from these transactions were only approximately $330,000 or $0.09 per
share. At that time, the Portfolio Manager overweighted equity positions in Bank
America, Boeing, General Electric, Intel, Johnson & Johnson, Mobil, and Pepsi
Co., and underweighted AT&T, and Bell Atlantic.
The current stable interest rate environment, negligible inflation, low
unemployment and increasing productivity through technological innovation may
provide a strong second half of 1997.
DIVIDEND ACHIEVERS PORTFOLIO
The Dividend Achievers Portfolio net asset value total return for the six
months ended June 30, 1997, was 17.64% versus the S&P 500 return of 20.60% and
the Lipper Analytical Growth and Income Fund Average of 15.59%. The comparative
one year total returns of the 12 months ended June 30, 1997 were 29.08%, 34.68%
and 28.07%, respectively. While the Dividend Achievers Portfolio did not match
the S&P 500 Index performance, it did post better returns relative to the Growth
and Income Fund universe. During the first quarter, the Portfolio Manager sold
off positions in Illinois Central Corp. Series A, Baxter International and
Electronic Data Systems, and added or added to positions in Reynolds & Reynolds,
Intel Corporation, Pfizer Inc., and British Tele-Communications. During the last
three trading days of the quarter, the financial sector, Reynolds & Reynolds,
Johnson & Johnson and Merek were down between 8 and 10% whereas the remaining
portfolio was down approximately 4%.
During the second quarter, Reynolds & Reynolds, was replaced with Xerox. The
definite move from large-cap growth stocks in the second quarter to mid-cap and
value type stocks slowed the performance of Dividend Achievers Portfolio versus
benchmarks. However, the Dividend Achievers Portfolio quarter return of 14.80%
continued to out perform the Average Growth and Income Fund by 0.50%. At June
30, 1997, the portfolio's sector concentration is similar to the S&P 500 Index
except a higher weighting in the Consumer Non-Cyclical (26.87% vs. 24.1%) and
Industrials (12.84% vs. 8.70%) sectors and an under weighting in the Technology
(11.99% vs. 16.87%) sector. The portfolio, by nature, will always have a bias
toward the Consumer Non-Cyclical sector.
The Portfolio Manager does not anticipate making many changes in the
portfolio for the second half of the year and has managed the portfolio in the
current environment, to be a tax efficient portfolio, that is generating very
few capital gains.
SELECT VALUE PORTFOLIO
The Select Value Portfolio net asset value total return for the six-month
period ending June 30, 1997, was 14.49%. This return compares well against the
Russell 2000 Index, which rose 10.2% for the same period. The average small
company stock fund increased by 9.0% during this period.
For the 12-month period ending June 30, 1997, the Fund rose 28.96% compared
to the Russell 2000 Index, which grew 16.3%. The return for the average small
company stock fund paled in comparison at 13.7%. Clearly, the past year has been
very successful for the shareholders of the Fund.
In an environment where the economic conditions were almost perfect (solid
Gross Domestic Product growth, low unemployment, low inflation, high consumer
confidence, and failing interest rates), stock prices were strong in most
segments of the market.
The portfolio's strong second quarter return cannot be attributed to any one
or two factors. The performance was generated from generally good stock
selection and proper industry exposure. All of the portfolio's major industry
sectors produced positive results, and eight of the ten sectors generated
returns which exceeded the Russell 2000 Index return of 16.2% for the quarter.
The best sectors for the portfolio included producer durables, technology,
health care, and consumer discretionary. Each of these sectors returned over 20%
during the three months ending June 30, 1997. The healthy economy
allowed strong business profits in many areas. The only modestly disappointing
sectors were utilities, materials and processing, health care and consumer
staples, which returned over 10%.
Individual stock selection was also quite successful during the second
quarter. A number of relatively new portfolio additions performed very well,
along with many stocks that recovered from stock price corrections seen in the
first quarter. Thus far in 1997, the portfolio has also benefited from several
stocks which received buy-out offers at higher than market prices.
Value investors, by their nature, tend to own more economically and interest
rate sensitive stocks than most investors, and the 1997 economy has been kind to
our style thus far. While the stock market appears expensive on most valuation
measures, the economy has been extremely well-behaved. All signs at this time
point toward continued economic growth with modest inflation. This environment
seems likely to produce a stable backdrop for further corporate profit growth,
with potentially higher stock prices. This would be a good scenario for the
portfolio. However, if consumer spending picks up later this year as many
suspect, fears concerning higher interest rates could create additional market
volatility along the way.
Small stock performance, while improved, has continued to lag the performance
of larger stocks for a long time. This has been frustrating. However, it has
also created many situations where smaller companies are simply selling at
valuations which are very cheap relative to large company peers. The portfolio
owns a collection of these stocks where growth prospects are bright, yet the
stocks trade at a big valuation discount compared to the general stock market.
For this reason, we remain upbeat concerning the long-term relative potential of
the portfolio.
PSE TECH 100 INDEX PORTFOLIO
The PSE Tech 100 Index Portfolio net asset value total return for the six-
month period ended June 30, 1997, was 16.36% compared to the Pacific Exchange
High Technology index performance of 16.76%. The comparative one year total
returns for the 12 months ended June 30, 1997 were 36.01% and 36.24%,
respectively. Although nominal, the spread between the index performance and
portfolio can mostly be attributed to the transaction cost of buying the
portfolio securities. We would expect that the spread would slowly close as the
portfolio size increases.
The first quarter finished relatively flat in the technology market as the
portfolio was down (0.15%) compared to the index performance of 0.0%. During
January, the large cap companies such as Microsoft, Intel and Compaq remained
favorites with investors. Perceived safety in capitalization, financial strength
and dominant market share made these companies appear to be infallible to
portfolio managers, investors and the media. Unfortunately, a number of similar
stocks surprised Wall Street during the latter stages of the quarter, which put
downward pressure on the technology sector. The first was 3COM which announced
earnings disappointment for the fiscal first quarter. This was followed with the
introduction by Advanced Micro Devices of a microprocessor that was as fast, if
not faster, than Intel's Pentium MMX Microprocessors. The reverberations of
these announcements caused a perception to develop that demand was slowing,
margin pressures were increasing and the strong dollar eroding international
profits. The decline of the sector carried through to the middle of March.
However, once the second quarter began, investors' focus turned from interest
rate and inflation increases to company and sector profits. Specifically, for
the technology sector, analyst's expectations were for positive revenue and
earnings growth but at a subdued pace compared to 1996. The first quarter
earnings releases of many of the blue chip large capitalized companies renewed
the interest in the sector and caused a further rally. The top sub sectors in
the portfolio have been computer manufacturers, office automation equipment,
semiconductor capital equipment and software.
As the move by more and more companies to address their year 2000 issues is
occurring, the need by those companies to invest in technology continues to
increase. The portfolio manager believes that the remainder of the year could
see inflation continuing to be held in check and the finish to the year to be
strong. However, the manager is not expecting a duplication of the first half
return.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of
each of six portfolios of Principal Preservation Portfolios, Inc. outstanding
for the following periods presented, which should be read in conjunction with
the financial statements and related notes:
<TABLE>
<CAPTION>
TAX-EXEMPT PORTFOLIO
-----------------------------------------------------------------------------------------------------
For the six
months ended For the years ended December 31,
June 30, 1997 --------------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988
------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.30 $ 9.39 $ 8.36 $ 9.41 $ 8.67 $ 8.46 $ 8.19 $ 8.23 $ 8.06 $ 8.14
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .21 .43 .45 .45 .48 .50 .53 .53 .55 .55
Net realized and
unrealized gains (losses)
on investments .03 (.09) 1.03 (1.05) .74 .21 .27 (.04) .17 (.08)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .24 .34 1.48 (.60) 1.22 .71 .80 .49 .72 .47
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.21) (.43) (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.21) (.43) (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.33 $ 9.30 $ 9.39 $ 8.36 $ 9.41 $ 8.67 $ 8.46 $ 8.19 $ 8.23 $ 8.06
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN**<F2> 2.6% 3.8% 18.1% (6.4)% 14.3% 8.6% 10.0% 6.2% 9.2% 6.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $61,873 $66,310 $56,443 $55,492 $68,102 $60,171 $63,932 $65,265 $73,333 $85,469
Ratio of net expenses to
average net assets 1.1%*<F1> 1.1%+<F3> 1.0%+<F3> 1.0% 0.9% 0.9% 0.9% 0.9% 1.0% 1.2%
Ratio of net investment
income to average
net assets 4.6%*<F1> 4.7%+<F3> 4.9%+<F3> 5.2% 5.2% 5.9% 6.3% 6.6% 6.7% 6.9%
Portfolio turnover rate 81.7% 163.1% 105.9% 36.1% 56.3% 48.5% 38.3% 40.3% 21.5% 38.8%
*<F1>Annualized.
**<F2>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F3>Reflects a voluntary reimbursement of fund expenses of 0.1% in 1996 and
0.01% in 1995, respectively.
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------------------------------------------------------------
For the six
months ended For the years ended December 31,
June 30, 1997 ---------------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988
------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.20 $ 9.64 $ 8.84 $ 9.98 $ 9.64 $ 9.68 $ 9.10 $ 9.11 $ 8.88 $ 9.11
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .32 .64 .61 .61 .63 .67 .73 .76 .75 .75
Net realized and
unrealized gains (losses)
on investments (.14) (.44) .80 (1.14) .35 (.04) .58 (.01) .23 (.17)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .18 .20 1.41 (.53) .98 .63 1.31 .75 .98 .58
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.32) (.64) (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.75)
Distributions from net
realized gains
on investments -- -- -- -- -- -- -- -- -- (.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.32) (.64) (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.81)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 9.06 $ 9.20 $ 9.64 $ 8.84 $ 9.98 $ 9.64 $ 9.68 $ 9.10 $ 9.11 $ 8.88
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN**<F5> 2.0% 2.3% 16.3% (5.4)% 10.3% 6.8% 15.1% 8.7% 11.5% 6.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $40,875 $44,920 $49,319 $47,324 $54,327 $37,634 $32,737 $29,351 $30,631 $32,950
Ratio of net expenses to
average net assets 1.1%*<F4>+ 1.1%+<F6> 1.1%+<F6> 1.1% 1.0% 1.0% 1.1% 1.2% 1.2%+<F6> 1.2%+<F6>
Ratio of net investment <F6>
income to average
net assets 7.1%*<F4>+ 7.0%+<F6> 6.5%+<F6> 6.6% 6.2% 7.0% 8.0% 8.5% 8.4%+<F6> 8.3%+<F6>
<F6>
Portfolio turnover rate 30.6% 36.9% 68.2% 106.1% 8.7% 10.0% 62.2% 57.1% 141.8% 36.7%
*<F4>Annualized.
**<F5>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F6>Reflects a voluntary reimbursement of fund expenses of 0.05% in 1997, 0.04%
in 1996, 0.02% in 1995, 0.1% in 1989 and 0.5% in 1988, respectively.
</TABLE>
<TABLE>
<CAPTION>
S&P 100 PLUS PORTFOLIO
-------------------------------------------------------------------------------------------------------
For the six
months ended For the years ended December 31,
June 30, 1997 --------------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $22.08 $19.53 $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .13 .29 .25 .25 .21 .24 .27 .28 .26 .26
Net realized and
unrealized gains (losses)
on investments 3.93 4.07 5.21 (.09) 1.14 .48 2.93 (.67) 2.17 1.37
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 4.06 4.36 5.46 .16 1.35 .72 3.20 (.39) 2.43 1.63
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.13) (.29) (.25) (.25) (.21) (.24) (.27) (.28) (.26) (.26)
Distributions from
net realized gains
on investments -- (1.52) (.63) -- (.11) (.69) (.31) -- (.01) (.88)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.13) (1.81) (.88) (.25) (.32) (.93) (.58) (.28) (.27) (1.14)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $26.01 $22.08 $19.53 $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN**<F8> 18.4% 22.4% 36.7% 1.1% 9.7% 5.2% 27.8% (3.2)% 24.3% 17.1%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $94,919 $77,517 $57,062 $40,034 $38,944 $30,025 $27,420 $20,413 $20,811 $16,960
Ratio of net expenses to
average net assets 0.9%*<F7>+ 1.0%+<F9> 1.2% 1.2% 1.2% 1.3% 1.3% 1.3%+<F9> 1.3%+<F9> 1.4%+<F9>
Ratio of net investment <F9>
income to average
net assets 1.1%*<F7>+ 1.4%+<F9> 1.4% 1.7% 1.4% 1.7% 2.0% 2.4%+<F9> 2.3%+<F9> 2.5%+<F9>
<F9>
Portfolio turnover rate 10.5% 8.0% 3.5% 1.0% 2.2% 8.5% 3.1% 1.9% 3.0% 37.5%
Average commission paid
per share+<F10> $0.0218 $0.0348 -- -- -- -- -- -- -- --
*<F7>Annualized.
**<F8>The Fund's sales charge is not reflected in total return as set forth in the
table.
+<F9>Reflects a voluntary reimbursement of fund expenses of 0.05% in 1997, 0.01%
in 1996, 0.2% in 1990, 0.4% in 1989 and 0.8% in 1988, respectively.
+<F10>Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal years
beginning after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND ACHIEVERS PORTFOLIO
--------------------------------------------------------------------------------------------------------
For the six
months ended For the years ended December 31,
June 30, 1997 ---------------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $20.01 $16.97 $13.24 $13.40 $14.25 $14.84 $11.50 $11.65 $10.00 $8.99
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .04 .14 .18 .18 .14 .14 .25 .25 .28 .28
Net realized and
unrealized gains (losses)
on investments 3.48 3.54 3.99 (.02) (.85) .31 4.14 (.15) 1.65 1.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 3.52 3.68 4.17 .16 (.71) .45 4.39 .10 1.93 1.34
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.04) (.14) (.18) (.18) (.14) (.14) (.25) (.25) (.28) (.27)
Distributions from
net realized gains
on investments -- (.50) (.26) (.14) -- (.90) (.80) -- -- (.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.04) (.64) (.44) (.32) (.14) (1.04) (1.05) (.25) (.28) (.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $23.49 $20.01 $16.97 $13.24 $13.40 $14.25 $14.84 $11.50 $11.65 $10.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN**<F12> 17.6% 21.8% 31.7% 1.2% (5.0)% 3.1% 38.5% 1.0% 19.5% 15.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $36,306 $30,504 $25,393 $20,231 $24,928 $27,020 $18,202 $11,468 $12,750 $6,854
Ratio of net expenses to
average net assets 1.2%*<F11>+ 1.2%+<F13>1.3%+<F13> 1.5% 1.3%+<F13>1.2%+<F13>1.2%+<F13>1.2%+<F13>1.2%+<F13>1.2%+<F13>
Ratio of net investment <F13>
income to average
net assets 0.4%*<F11>+ 0.8%+<F13>1.2%+<F13> 1.3% 1.0%+<F13>1.0%+<F13>1.8%+<F13>2.3%+<F13>2.6%+<F13>2.9%+<F13>
<F13>
Portfolio turnover rate 6.7% 13.1% 28.2% 36.5% 92.7% 83.0% 96.5% 47.7% 30.9% 10.1%
Average commission paid
per share+<F14> $0.0416 $0.0609 -- -- -- -- -- -- -- --
*<F11>Annualized.
**<F12>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F13>Reflects a voluntary reimbursement of fund expenses of 0.1% in 1997, 0.1%
in 1996, 0.2% in 1995, 0.1% in 1993, 0.1% in 1992, 0.2% in 1991, 0.5% in 1990,
0.7% in 1989 and 1.7% in 1988, respectively.
+<F14>Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal years
beginning after September 1, 1995.
</TABLE>
SELECT VALUE PORTFOLIO
--------------------------------------------------------
For the
For the period from
For the six years ended August 23, 1994
months ended December 31, (commencement
June 30, 1997 --------------- of operations) to
(Unaudited) 1996 1995 December 31, 1994
-------------- ---- ---- -----------------
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $10.97 $10.21 $ 9.03 $ 9.55
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income -- .04 .14 .04
Net realized and unrealized
gains (losses) on
investments 1.59 2.68 1.73 (.51)
------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 1.59 2.72 1.87 (.47)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income -- (.04) (.14) (.03)
Distributions from
net realized
gains on investments -- (1.92) (.43) (.01)
Distributions in excess
of net realized gains
on investments -- -- (.12) --
Book return of capital -- -- -- (.01)
------ ------ ------ ------
TOTAL DISTRIBUTIONS -- (1.96) (.69) (.05)
------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $12.56 $10.97 $10.21 $ 9.03
====== ====== ====== ======
TOTAL RETURN**<F16> 14.5% 26.7% 20.8% (5.0)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $6,289 $4,829 $3,445 $1,935
Ratio of net expenses to
average net assets 1.1%*<F15>+ 1.0%+<F17>0.8%+<F17> 0.8%*+
Ratio of net investment <F17> <F15><F17>
income to average
net assets 0.0%*<F15>+ 0.3%+<F17>1.4%+<F17> 1.1%*+
<F17> <F15><F17>
Portfolio turnover rate 48.1% 122.2% 124.3% 20.2%
Average commission paid
per share+<F18> $0.0461 $0.0611 -- --
*<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 1.5% in 1997, 1.4%
in 1996, 2.5% in 1995 and 0.4% in 1994, respectively.
+<F18>Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal years
beginning after September 1, 1995.
PSE TECH 100 INDEX PORTFOLIO
-----------------------------------
For the period from
For the six June 10, 1996
months ended (commencement
June 30, 1997 of operations) to
(Unaudited) December 31, 1996
------------- -------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.76 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .03 .03
Net realized and unrealized gains
on investments 1.73 1.03
------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.76 1.06
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) (.03)
Distributions from net realized gains
on investments -- (.24)
Distributions in excess of
net realized gains -- (.03)
------ ------
TOTAL DISTRIBUTIONS (.03) (.30)
------ ------
NET ASSET VALUE, END OF PERIOD $12.49 $10.76
====== ======
TOTAL RETURN**<F20> 16.4% 10.7%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $12,112 $6,004
Ratio of net expenses to
average net assets 0.0%*<F19>+<F21> 0.0%*+
Ratio of net investment <F19><F21>
income to average
net assets 0.5%*<F19>+<F21> 0.7%*+
<F19><F21>
Portfolio turnover rate 4.9% 3.0%
Average commission paid per share $0.0730 $0.0634
*<F19>Annualized.
**<F20>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F21>Reflects a voluntary reimbursement of fund expenses of 1.47% and 3.3% in
1997 and 1996, respectively.
<TABLE>
<CAPTION>
BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED)
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Cost basis of investments $60,785,485 $43,320,371 $52,610,521 $18,965,673 $ 5,138,250 $10,203,008
=========== =========== =========== =========== =========== ===========
Long-term investments
in securities $61,066,293 $40,039,487 $93,858,447 $35,439,880 $ 6,025,776 $11,742,782
Short-term investments 187 2,311,645 968,422 693,974 229,244 200,753
----------- ----------- ----------- ----------- ----------- -----------
Total investments
(See Schedule of
Investments) 61,066,480 42,351,132 94,826,869 36,133,854 6,255,020 11,943,535
Cash 367 768 148 231 366 603
Receivables:
Capital shares sold 15,928 1,952 109,610 201,653 5,706 139,104
Dividends and interest 1,034,228 855,147 114,380 35,092 4,995 5,328
Investments sold 1,619,060 -- -- -- 69,878 24,681
Margin variation -- -- (19,950) -- -- (2,025)
----------- ----------- ----------- ----------- ----------- -----------
Total receivables 2,669,216 857,099 204,040 236,745 80,579 167,088
Other assets 2,305 1,504 2,128 843 5,973 13,355
----------- ----------- ----------- ----------- ----------- -----------
Total assets $63,738,368 $43,210,503 $95,033,185 $36,371,673 $ 6,341,938 $12,124,581
=========== =========== =========== =========== =========== ===========
LIABILITIES:
Payables:
Capital shares redeemed $8,012 $45,728 $2,000 $-- $-- $1,948
Distributions to shareholders 88,779 97,179 19,412 871 -- 10,792
Expenses 94,938 68,657 93,084 64,566 37,745 --
Investments purchased 1,243,243 2,254,226 -- -- 15,290 --
Other liabilities 430,447 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 1,865,419 2,465,790 114,496 65,437 53,035 12,740
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Capital stock 61,509,632 44,215,627 51,641,863 18,889,159 4,945,807 10,257,467
Undistributed
net investment income -- 8,078 2,738 937 535 1,417
Accumulated distributions in
excess of net investment income (31,913) -- -- -- -- --
Undistributed net realized gains
(losses) on investments 114,235 (2,509,753) 1,057,740 247,959 225,791 112,430
Net unrealized appreciation
on investments 280,995 (969,239) 42,216,348 17,168,181 1,116,770 1,740,527
----------- ----------- ----------- ----------- ----------- -----------
Total net assets 61,872,949 40,744,713 94,918,689 36,306,236 6,288,903 12,111,841
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities
and net assets $63,738,368 $43,210,503 $95,033,185 $36,371,673 $ 6,341,938 $12,124,581
=========== =========== =========== =========== =========== ===========
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $9.33 $9.06 $26.01 $23.49 $12.56 $12.49
====== ====== ====== ====== ====== ======
MAXIMUM OFFERING PRICE
PER SHARE $9.67 $9.39 $27.24 $24.60 $13.15 $13.08
====== ====== ====== ====== ====== ======
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $722,697 $260,949 $20,773 $16,619
Interest 1,782,681 1,742,096 130,876 14,435 8,131 8,956
----------- ----------- ----------- ----------- ----------- -----------
Total investment
income 1,782,681 1,742,096 853,573 275,384 28,904 25,575
----------- ----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees 182,541 125,656 193,915 123,088 21,746 22,181
Custodian fees 11,575 9,349 11,211 7,099 2,419 3,813
Transfer agent fees 26,690 28,291 37,153 21,099 5,692 5,227
Broker service fees 79,127 53,061 106,925 41,421 6,579 11,241
Professional fees 25,665 19,863 32,499 16,888 15,687 13,841
Registration 490 5,727 3,064 3,894 4,877 5,803
Communication 1,669 1,510 10,032 1,886 1,343 2,178
Director fees 7,511 4,447 9,578 3,085 7,435 453
Pricing of investments 2,487 1,020 3,741 4,115 4,155 3,119
Deferred organization expense -- -- -- -- 1,350 1,676
Other expense 5,563 2,140 2,493 1,366 -- --
----------- ----------- ----------- ----------- ----------- -----------
Total expenses 343,318 251,064 410,611 223,941 71,283 69,532
Less expenses absorbed
by advisor -- (11,771) (23,381) (17,020) (42,914) (69,532)
----------- ----------- ----------- ----------- ----------- -----------
Net expenses 343,318 239,293 387,230 206,921 28,369 --
----------- ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME 1,439,363 1,502,803 466,343 68,463 535 25,575
----------- ----------- ----------- ----------- ----------- -----------
NET REALIZED GAINS
ON INVESTMENTS 302,505 15,883 1,072,251 247,959 205,593 127,104
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS (90,930) (684,313) 13,012,124 5,046,428 580,914 1,183,485
----------- ----------- ----------- ----------- ----------- -----------
Net gains
on investments 211,575 (668,430) 14,084,375 5,294,387 786,507 1,310,589
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,650,938 $ 834,373 $14,550,718 $5,362,850 $ 787,042 $1,336,164
=========== =========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $1,439,363 $1,502,803 $ 466,343 $ 68,463 $ 535 $ 25,575
Net realized gains
on investments 302,505 15,883 1,072,251 247,959 205,593 127,104
Change in unrealized
appreciation on
investments for the year (90,930) (684,313) 13,012,124 5,046,428 580,914 1,183,485
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net
assets resulting
from operations 1,650,938 834,373 14,550,718 5,362,850 787,042 1,336,164
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
($0.21, $0.32, $0.13,
$0.04, $0.00 and $0.03
per share, respectively) (1,440,410) (1,501,380) (467,090) (67,526) -- (24,455)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (1,440,410) (1,501,380) (467,090) (67,526) -- (24,455)
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 327,353 478,855 5,738,999 1,455,981 798,728 4,952,308
Net asset value of shares
issued in distributions 875,260 914,207 435,768 63,948 -- 23,980
Cost of shares redeemed (5,850,149) (4,901,638) (2,856,483) (1,012,793) (125,868) (180,112)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets from
capital share
transactions (4,647,536) (3,508,576) 3,318,284 507,136 672,860 4,796,176
----------- ----------- ----------- ----------- ----------- -----------
Total increase
(decrease) (4,437,008) (4,175,583) 17,401,912 5,802,460 1,459,902 6,107,885
NET ASSETS:
Balance at beginning of period 66,309,957 44,920,296 77,516,777 30,503,776 4,829,001 6,003,956
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $61,872,949 $40,744,713 $94,918,689 $36,306,236 $6,288,903 $12,111,841
=========== =========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE
PERIOD FROM
JUNE 10, 1996
(COMMENCEMENT
OF OPERATIONS) TO
FOR THE YEAR ENDED DECEMBER 31, 1996 DECEMBER 31, 1996
----------------------------------------------------------------------
S&P 100 DIVIDEND SELECT PSE TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $2,957,312 $3,192,630 $ 924,307 $ 209,810 $ 13,336 $ 17,041
Net realized gains
on investments 2,354,480 255,262 4,967,362 745,303 776,545 133,242
Change in unrealized
appreciation (depreciation) on
investments for the year (2,455,863) (2,474,321) 8,743,473 4,496,576 208,072 557,042
----------- ----------- ----------- ----------- ----------- -----------
Net increase
in net assets resulting
from operations 2,855,929 973,571 14,635,142 5,451,689 997,953 707,325
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
($0.43, $0.64, $0.29,
$0.14, $0.04 and $0.03 per
share, respectively) (2,945,969) (3,188,500) (922,456) (209,079) (13,315) (16,744)
Distribution in excess of net
investment income ($0.0025
per share) (17,791) -- -- -- -- --
Net realized gains on investments
($0.00, $0.00, $1.52, $0.50, $1.92,
$0.27 per share, respectively) -- -- (4,967,362) (745,546) (716,162) (133,242)
Distributions in excess of net
realized gains on investments
($0.00, $0.00, $0.0041,
$0.00, $0.0029 and
$0.0263 respectively) -- -- (20,209) -- (1,280) (14,674)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (2,963,760) (3,188,500) (5,910,027) (954,625) (730,757) (164,660)
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 18,035,561 1,716,722 13,143,343 2,130,809 919,856 5,472,772
Net asset value of shares
issued in distributions 1,761,086 1,988,896 5,526,856 903,536 730,066 156,519
Cost of shares redeemed (9,821,429) (5,889,771) (6,940,152) (2,420,357) (532,986) (168,000)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets from
capital share transactions 9,975,218 (2,184,153) 11,730,047 613,988 1,116,936 5,461,291
----------- ----------- ----------- ----------- ----------- -----------
Total increase
(decrease) 9,867,387 (4,399,082) 20,455,162 5,111,052 1,384,132 6,003,956
NET ASSETS:
Balance at beginning of period 56,442,570 49,319,378 57,061,615 25,392,724 3,444,869 --
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $66,309,957 $44,920,296 $77,516,777 $30,503,776 $4,829,001 $6,003,956
=========== =========== =========== =========== =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES --
Principal Preservation Portfolios, Inc. (the "Fund"), registered under the
Investment Company Act of 1940 as an open-end management investment company, is
a series company with eight portfolios: Tax-Exempt Portfolio, Government
Portfolio, S&P100 Plus Portfolio, Dividend Achievers Portfolio, Select Value
Portfolio, PSE Tech 100 Index Portfolio, Wisconsin Tax-Exempt Portfolio and the
Cash Reserve Portfolio. This report contains the information of all portfolios,
except for the Cash Reserve Portfolio and the Wisconsin Tax-Exempt Portfolio,
information with respect to which is 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 and the PSE Tech 100 Index
Portfolio may buy and sell put and call options, write covered call options on
portfolio securities, write cash-secured puts, and write call options that are
not covered for cross-hedging purposes. The risk in writing a call option is
that a fund gives up the opportunity for profit if the market price of the
security increases. The risk in writing a put option is that a fund may incur a
loss if the market price of the security decreases and the option is exercised.
The risk in buying an option is that a fund pays a premium whether or not the
option is exercised. A fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not exist.
The S&P 100 Plus Portfolio also may write over-the-counter options where the
completion of the obligation is dependent upon the credit standing of another
party.
Option contracts are valued daily, and unrealized appreciation or
depreciation is recorded. A fund will realize a gain or loss upon expiration or
closing of the option transaction. When an option is exercised, the proceeds on
sales for a written call option, the purchase cost for a written put option, or
the cost of a security for a purchased put or call option is adjusted by the
amount of premium received or paid.
(c) Futures Contracts
The S&P 100 Plus and PSE Tech 100 Index Portfolios may utilize futures
contracts to a limited extent. The primary risks associated with the use of
futures contracts include an imperfect correlation between the change in market
value of the securities held by the Fund and the prices of futures contracts and
the possibility of an illiquid market. Futures contracts are based upon their
quoted daily settlement prices.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized
appreciation (depreciation) until the contracts are terminated at which time
realized gains and losses are recognized.
(d) Net Realized Gains and Losses and Investment Income
Net realized gains and losses on securities sales (including options) are
computed on the identified cost basis. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on an accrual basis. Total net
realized gains on investments for the period ended June 30, 1997, were comprised
of the following:
PSE
S&P 100 DIVIDEND SELECT TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
---------- ---------- ------- --------- ------ --------
Net realized gains
on investments $302,505 $15,883 $673,785 $247,959 $205,592 $98,615
Net realized gains
on options and
futures -- -- 398,476 -- -- 28,488
-------- ------- ---------- -------- -------- --------
Total net realized gains
(losses) on
investments $302,505 $15,883 $1,071,251 $247,959 $205,592 $127,103
======== ======= ========== ======== ======== ========
(e) Federal Income Taxes
Provision has not been made for Federal income taxes since each portfolio
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies. As of December 31, 1996, the Tax-Exempt Portfolio has
Federal income tax capital loss carryforwards of $47,000 expiring in 2001 and
$141,270 expiring in 2003; the Government Portfolio has capital loss
carryforwards of $2,525,636 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 carryforwards are exhausted.
Distributions in excess of net investment income in the Tax-Exempt
Portfolio of $24,414 for the year ended December 31, 1996, respectively, 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 and PSE Tech 100 Index Portfolio of $1,280 and $18,730,
respectively, for the year ended December 31, 1996, 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.
Distributions in excess of net realized gains on investments in the S&P 100
Plus Portfolio of $20,209, for the year ended December 31, 1996 are as a result
of the reversal of Section 1256 mark to market loss utilized in 1995. This
distribution does not represent a tax return of capital.
(f) Expenses
Fund expenses associated with a specific portfolio are charged to that
portfolio as they are incurred. Common expenses incurred by the Fund are
allocated, as incurred, between the portfolios based upon the ratio of the net
assets of each portfolio to the combined net assets of the Fund.
(g) Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
(h) Deferred Organization Costs
Costs incurred with the organization, initial registration and public
offering of shares aggregating $13,627 for the Select Value Portfolio and
$16,900 for the PSETech 100 Index 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 -
On January 31, 1996, the Fund assigned its Investment Advisory Agreements
(the "Agreements") with B.C. Ziegler and Company ("Ziegler"), (with whom certain
officers and directors of the Fund are affiliated) to Ziegler Asset Management,
Inc., ("ZAMI") to serve as Investment Advisor (the "Advisor"). Both Ziegler and
ZAMI are wholly owned subsidiaries of The Ziegler Companies, Inc. and therefore
the assignment did not constitute a change in control. Pursuant to the
Agreement, ZAMI manages the Tax-Exempt Portfolio, Government Portfolio, Dividend
Achievers Portfolio and PSE Tech 100 Index Portfolio. Under the Agreement, the
Tax-Exempt and Government Portfolios pay ZAMI a monthly fee based upon the
average daily net assets of each portfolio at the rate of .60% of the first
$50,000,000 of each portfolio's average daily net assets, reducing to .50% on
the next $200,000,000 of each portfolio's average daily net assets and .40% of
each portfolio's average daily net assets in excess of $250,000,000.
Under its Agreement, the Dividend Achievers Portfolio pays ZAMI a monthly
fee based upon the Dividend Achievers average daily net assets at the rate of
.75% of the first $250,000,000 of average daily net assets, reducing to .70% on
the next $250,000,000 and .65% on the average daily net assets of over
$500,000,000.
Under its Agreement, the PSETech 100 Index Portfolio pays ZAMI a monthly
fee based upon the PSE Tech 100 average daily net assets at the rate of .50% of
the first $50,000,000 of average daily net assets, .30% of the next $200,000,000
of average daily net assets, .25% of the next $250,000,000 of average daily net
assets and .20% of average daily net assets in excess of $500,000,000.
Pursuant to the Agreement, ZAMI has retained Skyline Asset Management, Inc.
("Skyline") to manage the Select Value Portfolio. Under the Agreement, the
Select Value Portfolio pays ZAMI a monthly fee based on the average daily net
assets of the Portfolio at the rate of .75% of the first $250,000,000 of the
Portfolio's average daily net assets, and .65% on average daily net assets
exceeding $250,000,000. ZAMI pays Skyline 50% of the fee paid by the Select
Value Portfolio.
Pursuant to the Agreement, ZAMI has retained PanAgora Asset Management,
Inc. ("PanAgora") to manage the S&P 100 Plus Portfolio. Under the Agreement, the
S&P 100 Plus Portfolio pays Ziegler a monthly fee based on the average daily net
assets of the Portfolio at the rate of .575% of the first $20,000,000 of the
Portfolio's average daily net assets, .45% on the next $30,000,000, .40% on the
next $50,000,000 in assets, .35% on the next $400,000,000 in assets, down to
.30% on average daily net assets over $500,000,000. ZAMI pays PanAgora .20% on
the first $100,000,000 in assets and 50% of the fee paid by the S&P 100 Plus
Portfolio, net of a pro rata amount of expenses, if any, paid by ZAMI in the
operation of the Portfolio.
The Advisor voluntarily reimbursed the Government Portfolio $11,771, S&P
100 Plus Portfolio $23,381, the Dividend Achievers Portfolio $17,020, the Select
Value Portfolio $42,914 and the PSE Tech 100 Index Portfolio $69,532. The
Advisor is not obligated to continue the voluntary reimbursement in the future.
Ziegler has an Accounting and Pricing Agreement with the Fund to perform
accounting and pricing services, a Depository Agreement with the Fund to be the
depository for all investment securities and cash, and a Transfer and Dividend
Disbursing and Shareholder Services Agency Agreement with the Fund to provide
Transfer Agent Services. In addition, each Portfolio pays Ziegler commissions on
sales of Portfolio shares. The transfer agent fees, commissions, accounting and
pricing fees and depository fees paid to Ziegler for the six months ended June
30, 1997, were as follows for each Portfolio:
COMMISSIONS ON ACCOUNTING
TRANSFER PORTFOLIO AND PRICING DEPOSITORY 12B-1
AGENT FEES SHARES FEES FEES FEES
---------- ------------- ----------- ---------- -----
Tax-Exempt Portfolio $22,218 $ 6,247 $14,587 $11,087 $ 51,271
Government Portfolio 23,405 8,644 11,470 8,973 42,266
S&P100 Plus Portfolio 38,899 117,649 17,391 12,910 86,241
Dividend Achievers
Portfolio 16,205 10,499 9,853 6,590 37,491
Select Value Portfolio 2,843 13,543 9,500 1,744 3,120
PSE Tech 100 Index
Portfolio 7,231 26,622 9,500 3,134 6,920
-------- -------- ------- ------- --------
TOTAL $110,831 $185,864 $72,301 $44,441 $227,309
======== ======== ======= ======= ========
During the period ended June 30, 1997, an affiliate of Ziegler received
$5,562 representing commissions from the purchases and sales of investments of
the Dividend Achievers Portfolio.
3. INVESTMENT TRANSACTIONS --
Purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended June 30, 1997 aggregated:
PURCHASES PROCEEDS FROM SALES
--------- -------------------
Tax-Exempt Portfolio $51,100,400 $55,412,952
Government Portfolio 12,781,952 15,910,750
S&P100 Plus Portfolio 15,861,225 9,072,426
Dividend Achievers Portfolio 2,398,915 2,168,871
Select Value Portfolio 3,221,290 2,929,697
PSE Tech 100 Index Portfolio 5,279,151 513,376
Net tax basis unrealized appreciation (depreciation) on investments as of June
30, 1997, included:
<TABLE>
<CAPTION>
PSE
S&P 100 DIVIDEND SELECT TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross unrealized appreciation $448,656 $357,891 $29,886,145 $17,168,181 $623,463 $2,049,623
Gross unrealized (depreciation) (119,022) (642,817) (702,280) -- (89,923) (309,095)
----------- ----------- ----------- ----------- ----------- -----------
Net unrealized appreciation
(depreciation) $ 329,634 $(284,926) $29,183,865 $17,168,181 $ 533,540 $1,740,527
=========== =========== =========== =========== ========== ===========
Tax basis cost of investments $60,736,660 $41,008,725 $67,345,332 $18,271,699 $5,492,236 $10,429,230
=========== =========== =========== =========== ========== ===========
</TABLE>
4. LINE OF CREDIT --
The Fund has an available line of credit of $3,000,000. However, each
Portfolio's borrowings, by investment restriction, cannot exceed 10% of the
total net assets not including the borrowings. Interest expense incurred in
connection with such borrowings was not material during the year. Borrowings
under this arrangement bear interest approximating the then current Prime Rate.
All borrowings under this line of credit are guaranteed by Ziegler. Each
Portfolio's policies allow borrowings for temporary or emergency purposes.
5. CAPITAL SHARE TRANSACTIONS --
(a) The Fund has authorized capital of 1,000,000,000 shares at $.001 par value
per share. The Fund's shares are divided into the separate portfolios. The
Fund's 300,000,000 authorized shares are allocated to the existing portfolios as
follows:
AUTHORIZED SHARES
-----------------
Tax-Exempt Portfolio 50,000,000
Government Portfolio 50,000,000
S&P100 Plus Portfolio 50,000,000
Dividend Achievers Portfolio 50,000,000
Select Value Portfolio 50,000,000
PSE Tech 100 Index Portfolio 50,000,000
-----------
TOTAL 300,000,000
===========
The Cash Reserve Portfolio has been allotted 400,000,000 shares,
200,000,000 shares of which are designated as Class X Common Stock (the Retail
Class) and 200,000,000 shares of which are designated Class Y Common Stock (the
Institutional Class) and the Wisconsin Tax-Exempt Portfolio has been allotted
50,000,000 shares. The remaining 250,000,000 Fund shares may be allocated to any
of the above portfolios, the Cash Reserve Portfolio, the Wisconsin Tax-Exempt
Portfolio or to new portfolios as determined by the Board of Directors. The
shares of each Portfolio have equal rights and privileges with all other shares
of that Portfolio.
(b) Capital share activity during the year ended December 31, 1996 and the
period ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
PSE
S&P 100 DIVIDEND SELECT TECH 100
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX*<F22>
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SHARES OUTSTANDING
AT DECEMBER 31, 1995 6,010,621 5,116,732 2,922,304 1,496,326 337,356 --
Shares issued 2,002,713 184,756 659,065 112,219 82,311 558,213
Shares issued in distributions 191,596 214,869 251,205 45,606 66,517 14,582
Shares redeemed (1,071,548) (634,765) (321,653) (129,911) (46,028) (15,052)
---------- ---------- ---------- ---------- --------- ---------
SHARES OUTSTANDING
AT DECEMBER31, 1996 7,133,382 4,881,592 3,510,921 1,524,240 440,156 557,743
Shares issued 35,526 52,684 239,938 66,035 72,237 424,885
Shares issued in distributions 94,909 100,998 18,098 3,032 -- 2,082
Shares redeemed (632,808) (539,800) (120,092) (47,466) (11,605) (15,063)
---------- ---------- ---------- ---------- --------- ---------
SHARES OUTSTANDING
AT JUNE 30, 1997 6,631,009 4,495,474 3,648,865 1,545,841 500,788 969,647
========== ========== ========== ========== ========= ========
*<F22>Amounts shown for the PSE Tech 100 Index Portfolio are the result of the
Fund's operations from its commencement of operations on June 10, 1996.
</TABLE>
(c) For the S&P 100 Plus Portfolio, the Dividend Achievers Portfolio, the Select
Value Portfolio and the PSE Tech 100 Index Portfolio, the maximum offering price
per share is computed based on a maximum sales charge of 4.5% of the offering
price or 4.71% of the net asset value. For the purpose of this computation, the
price per share is derived from multiplying the net asset value and redemption
price per share by 100 and then dividing the product by 95.5.
For the Tax-Exempt and Government Portfolios, the maximum offering price per
share is computed based on a maximum sales charge of 3.5% of the offering price
or 3.62% of the net asset value. For these portfolios the price per share is
derived from multiplying the net asset value and redemption price per share by
100 and then dividing the product by 96.5.
6. FUTURES CONTRACTS WRITTEN --
An analysis of the futures contracts written for the period ended June 30,
1997, in the S&P 100 Plus and PSE Tech 100 Index Portfolios, respectively, were
as follows:
AGGREGATE FACE
NUMBER OF CONTRACTS VALUE OF CONTRACTS
------------------- ------------------
S&P 100 PLUS PORTFOLIO:
Outstanding at December 31, 1996 17 $ 6,329,536
Contracts opened 28 11,311,599
Contracts closed (39) (15,194,962)
---- ------------
Outstanding at June 30, 1997 6 $ 2,446,173
==== ============
AGGREGATE FACE
NUMBER OF CONTRACTS VALUE OF CONTRACTS
------------------- ------------------
PSE TECH 100 INDEX PORTFOLIO:
Outstanding at December 31, 1996 3 $ 369,474
Contracts opened 7 946,356
Contracts closed 7 (895,806)
---- ------------
Outstanding at June 30, 1997 3 $ 420,024
==== ============
The number of financial futures contracts and the gross unrealized
appreciation, as of June 30, 1997, for each Portfolio were as follows:
UNREALIZED
NUMBER OF CONTRACTS APPRECIATION
------------------- ------------
S&P 100 PLUS PORTFOLIO:
S&P 500 Financial Futures Contract
expiration date September 1997 6 $224,577
PSE TECH 100 INDEX PORTFOLIO:
PSE Technology 100 Index Futures
Contract expiration
date September 1997 3 $6,951
<TABLE>
TAX-EXEMPT PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<CAPTION>
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
---------- ------------ ------- -------- ------
<S> <C> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES -- 98.7%
ALABAMA -- 3.3%
$1,000,000 Private Colleges and Universities Facilities Authority (Alabama)
Revenue Bonds (Tuskegee University Project), Series 1996-A, 5.90%,
due 09-01-2016 AAA Aaa $1,015,000
1,000,000 Refunding and Capital Outlay Special Tax Bonds, Series 1992,
Birmingham-Jefferson Civic Center Authority (Jefferson County,
Alabama), 5.50%, due 09-01-2014 AAA Aaa 996,250
CALIFORNIA -- 9.2%
1,000,000 State Public Works Board of the State of California, Lease Revenue
Refunding Bonds, (The Trustees of the California State University),
1996 Series A, (Various California State University Projects), 5.375%,
due 10-01-2017 AAA Aaa 977,500
1,000,000 Los Angeles County Public Works Financing Authority, Lease Revenue
Bonds (Multiple Capital Facilities Project IV), 5.25%, due 12-01-2016 AAA Aaa 957,500
1,200,000 City and County of San Francisco Sewer Revenue Refunding Bonds,
Series 1992, 5.50%, due 10-01-2015 AAA Aaa 1,191,000
1,000,000 The Regents of the University of California Refunding Revenue Bonds,
(Multiple Purpose Projects), Series B, 5.00%, due 09-01-2016 AAA Aaa 923,750
1,875,000 The Regents of the University of California Refunding Revenue Bonds,
(Multiple Purpose Projects), Series C, 4.75%, due 09-01-2016 AAA Aaa 1,666,406
CONNECTICUT -- 1.6%
1,000,000 City of Bridgeport, Connecticut, General Obligation Bonds, 1997
Series A, 5.250%, due 03-01-2017 AAA Aaa 965,000
FLORIDA -- 3.0%
1,000,000 State of Florida, Full Faith and Credit, State Board of Education, Public
Education Capital Outlay Refunding Bonds, 1993 Series D, 5.125%,
due 06-01-2018 AA+ Aa2 942,500
1,000,000 State of Florida, Full Faith and Credit, State Board of Education, Public
Education Capital Outlay Refunding Bonds, 1995 Series D, 4.75%,
due 06-01-2017 AA+ Aa2 900,000
HAWAII -- 1.6%
1,000,000 State of Hawaii General Obligation Bonds, (Unlimited Tax), Series CL,
FGIC-TCRS Insured, 5.25%, due 03-01-2015 AAA Aaa 975,000
ILLINOIS -- 8.2%
1,000,000 City of Aurora, Kane, Dupage, Kendall and Will Counties, Illinois,
General Obligation Corporate Purpose Bonds, Series 1996, 5.875%,
due 01-01-2016 AAA Aaa 1,018,750
2,000,000 Illinois Health Facilities Authority, Revenue Bonds, (Trinity Medical
Center), 5.875%, due 07-01-2016 AAA Aaa 2,025,000
1,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1996,
(Silver Cross Hospital), 5.875%, due 08-15-2016 AAA Aaa 1,012,500
1,000,000 The Board of Trustees of Northern Illinois University, Auxiliary
Facilities System Revenue Bonds, Series 1996, 5.70%, due 04-01-2016 AAA Aaa 1,006,250
INDIANA --7.7%
1,000,000 Carmel High School Building Corporation, (Hamilton County, Indiana),
First Mortgage Bonds, Series 1996, 5.25%, due 01-15-2018 AAA Aaa 957,500
1,000,000 Evansville-Vanderburgh County, (Indiana), Building Authority Excise
and Income Tax Lease Rental Bonds of 1996, 5.80%, due 08-01-2016 AAA Aaa 1,011,250
1,000,000 Goshen Multi-School Building Corp., First Mortgage Bonds, Series
1996, 5.60%, due 01-15-2016 AAA Aaa 1,001,250
1,500,000 Indiana State Office Building Commission Capitol Complex Revenue
Bonds, Series 1990A (Senate Avenue Parking Facility), 7.40%,
due 07-01-2015 AAA Aaa 1,820,625
LOUISIANA -- 2.0%
1,240,000 Parishwide School District of the Parish of Orleans, State of Louisiana,
General Obligation School Bonds, Series 1995, 5.375%,
due 09-01-2018 AAA Aaa 1,220,656
MAINE -- 1.5%
1,000,000 Maine Health and Higher Educational Facilities Authority, Revenue
Bonds, Series 1993C, (Maine Medical Center), 5.00%, due 11-15-2013 AAA Aaa 937,500
MASSACHUSETTS -- 1.6%
1,000,000 Massachusetts Water Resources Authority, General Revenue Refunding
Bonds, 1992 Series B, 5.500%, due 11-01-2015 AAA Aaa 992,500
MICHIGAN -- 6.3%
1,000,000 City of Dearborn, County of Wayne, State of Michigan, Sewage
Disposal System Revenue Bonds, Series 1995A, 5.125%,
due 04-01-2016 AAA Aaa 943,750
1,000,000 Ecorse Public Schools, Wayne County, Michigan, 1997 School
Building and Site Bonds, (Unlimited Tax General Obligation), 5.50%,
due 05-01-2017 AAA Aaa 985,000
1,000,000 Board of Control of Grand Valley State University, General Revenue
and Refunding Bonds, Series 1997, 5.25%, due 10-01-2017 AAA Aaa 962,500
1,000,000 Paw Paw Public Schools, County of Van Buren, State of Michigan,
1995 School Building and Site Bonds, (General Obligation-Unlimited
Tax), 5.60%, due 05-01-2015 AAA Aaa 1,007,500
MINNESOTA -- 3.4%
1,000,000 General Obligation School Building Bonds of 1995, Special School
District No. 1 Minneapolis, Minnesota, 5.375%, due 02-01-2014 AAA Aaa 1,001,250
1,200,000 St. Paul, Minnesota, Independent School District #625, Series A,
General Obligation, (Unlimited Tax), 4.75%, due 02-01-2016 AA Aa1 1,098,000
MISSOURI -- 4.7%
1,000,000 School District of Kansas City, Missouri, Building Corp. Insured
Leasehold Revenue Bonds, Series 1993, (The School District of Kansas
City, Missouri, Capital Improvement Project), 5.00%, due 02-01-2014 AAA Aaa 951,250
2,000,000 Convention and Sports Facility Project and Refunding Bonds, Series A
1993, annually renewable lease payments made by State of Missouri,
5.60%, due 08-15-2017 AAA Aaa 1,985,000
NEW HAMPSHIRE -- 1.7%
1,000,000 New Hampshire Municipal Bond Bank, 1996 Series D Bonds, 5.50%,
due 01-15-2013 AAA Aaa 1,037,588
NEWYORK -- 1.6%
1,000,000 Montgomery, Otsego, Schoharie Counties, New York, Solid Waste
Management Authority, Revenue Refunding Bonds, Series A, 5.25%,
due 01-01-2014 AAA Aaa 971,250
OHIO -- 9.4%
1,800,000 Greater Cleveland Regional Transit Authority, General Obligation,
(Limited Tax), Capital Improvement Bonds, Series 1996, 5.650%,
due 12-01-2016 AAA Aaa 1,820,250
1,000,000 County of Cuyahoga, Ohio, General Obligation, (Limited Tax), Various
Purpose Improvement Bonds, Series 1995, 5.25%, due 11-15-2015 AA Aa2 976,250
1,000,000 County of Franklin, Ohio, Hospital Refunding and Improvement Bonds,
1996 Series A, (The Children's Hospital Project), 5.75%,
due 10-01-2015 NR Aa3 1,016,250
1,000,000 State of Ohio, (Ohio Higher Educational Facility Commission), Higher
Educational Facility Revenue Bonds, (Oberlin College Project), Series 1993,
5.375%, due 10-01-2015 AA NR 983,750
1,000,000 State of Ohio Turnpike, Revenue Bonds, 1996 Series A, Issued by the
Ohio Turnpike Commission, 5.70%, due 02-15-2017 AAA Aaa 1,015,000
OKLAHOMA -- 4.6%
1,020,000 Norman Regional Hospital Authority, (Norman, Oklahoma), Hospital
Revenue Refunding Bonds, 1996 Series A, 5.625%, due 09-01-2016 AAA Aaa 1,012,350
1,800,000 Pottawatomie County Development Authority, Water Revenue Bonds,
Series 1993, (North Deer Creek Reservoir Project), 5.80%,
due 07-01-2015 AAA Aaa 1,813,500
PENNSYLVANIA -- 10.5%
2,000,000 Delaware County Authority, Revenue Bonds, Series of 1996, (Elwyn,
Inc. Project), 5.650%, due 06-01-2016 AAA Aaa 1,997,500
1,000,000 Ephrata Area School District, Lancaster County, Pennsylvania, General
Obligation Bonds, Series of 1996, 5.75%, due 10-15-2016 AAA Aaa 1,012,500
1,000,000 The Harrisburg Authority, Dauphin County, Pennsylvania, Tax-Exempt
Revenue Bonds, (The City of Harrisburg Project), Series II of 1997,
5.625%, due 09-15-2017 AAA Aaa 996,250
2,505,000 County of Montgomery, Pennsylvania, General Obligation Bonds,
Series of 1997, 5.40%, due 09-15-2018 AAA Aaa 2,495,606
RHODE ISLAND -- 1.8%
1,150,000 Rhode Island Convention Center Authority, Revenue Bonds, 1993
Series A, 5.50%, due 05-15-2013 AAA Aaa 1,144,250
TENNESSEE -- 1.6%
1,000,000 The Sports Authority of the Metro Government of Nashville &
Davidson County, Public Improve Revenue Bonds, (Stadium Project),
Series 1996, 5.75%, due 07-01-2014 AAA Aaa 1,017,500
TEXAS -- 3.2%
1,000,000 Corpus Christi Independent School District, (Nueces County, Texas),
Unlimited Tax School Building and Refunding Bonds, Series 1995,
5.40%, due 08-15-2015 AAA Aaa 992,500
1,000,000 City of Dallas, Texas, (Dallas, Denton & Collin Counties), Waterworks
and Sewer System Revenue Refunding and Improvement Bonds, Series
1997, 5.375%, due 04-01-2015 AA Aa2 978,750
VIRGINIA -- 1.6%
1,000,000 Hampton Roads Regional Jail Authority, Regional Jail Facility,
Revenue Bonds, Series A, 5.625%, due 07-01-2016 AAA Aaa 1,008,750
WASHINGTON -- 3.2%
1,000,000 Port Seattle, Washington, Revenue Bonds, Series A, 5.50%,
due 10-01-2017 AAA Aaa 992,500
1,000,000 State of Washington, General Obligation Bonds, Series AT-6, 5.75%,
due 02-01-2017 AA Aa1 1,008,750
WISCONSIN -- 5.4%
1,000,000 Wisconsin Health and Educational Facilities Authority, Revenue
Bonds, Series 1996, (The Medical College of Wisconsin, Inc. Project),
5.40%, due 12-01-2016 AAA Aaa 960,000
1,000,000 Wisconsin Health and EducationalFacilities Authority, Revenue
Bonds, Series 1995, (Franciscan Skemp Medical Center, Inc.),
6.125%, due 11-15-2015 AA+ NR 1,032,500
1,350,000 Wisconsin Health and EducationalFacilities Authority, Revenue
Bonds, Series 1996, (Aurora Medical Group, Inc. Project),
5.60%, due 11-15-2016 AAA Aaa 1,334,812
Total Long-Term Tax-Exempt Securities (Cost $60,785,298) 61,066,293
SHORT-TERM TAX-EXEMPT SECURITIES -- 0.0%
MONEY MARKET -- 0.0%
187 Federated Tax-Free Trust 187
-----------
Total Short-Term Tax-Exempt Securities 187
-----------
Total Investments $61,066,480
\ ===========
NR: Not Rated.
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
</TABLE>
GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
PRINCIPAL INTEREST MARKET
AMOUNT DESCRIPTION RATE MATURITY VALUE
---------- ----------- -------- -------- ------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 98.3%
U.S. GOVERNMENT OBLIGATIONS -- 92.8%
$ 4,200,000 U.S. Treasury Note 7.875% 08-15-2001 $4,429,685
6,300,000 U.S. Treasury Note 11.625% 11-15-2002 7,782,466
8,500,000 U.S. Treasury Note 11.125% 08-15-2030 10,486,875
8,650,000 U.S. Treasury Note 7.875% 11-15-2004 9,333,886
4,575,000 U.S. Treasury Bond 10.750% 08-15-2005 5,770,219
-----------
Total U.S. Government Obligations 37,803,131
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION POOLS -- 5.5%
815,808 *<F23>Pool #419701 7.000% 06-15-2027 818,867
249,000 *<F23>Pool #431989 7.000% 07-15-2027 248,930
159,586 *<F23>Pool #436794 7.000% 06-15-2027 160,184
1,004,607 *<F23>Pool #441570 7.000% 06-15-2027 1,008,374
-----------
Total Agency Obligations 2,236,355
-----------
Total U.S. Government and Agency
Obligations (cost $41,008,725) 40,039,486
-----------
SHORT-TERMINVESTMENTS -- 5.6%
MONEYMARKET -- 0.1%
53,101 Dreyfus Treasury Prime Cash Management 52,102
-----------
DISCOUNT NOTE -- 5.5%
2,265,000 +<F24>Federal National
Mortgage Association 5.420% 07-17-1997 2,259,544
-----------
Total Short-Term Investments 2,311,646
-----------
Total Investments $42,351,132
===========
*<F23>Purchased "When as and if issued" with July settlement.
+<F24>Segregated as collateral against WAII.
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
S&P 100 PLUS PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
NUMBER
OF SHARES MARKET
OR PAR VALUE VALUE
------------ ------
COMMON STOCKS -- 97.1%
BASIC INDUSTRIES -- 5.4%
Aluminum Company of America 5,300 $399,488
*<F25>Bethlehem Steel Corporation 3,400 35,488
Boise Cascade Corporation 1,466 51,768
Champion International 2,900 160,225
Dow Chemical Company 7,450 649,081
Homestake Mining Company 4,500 58,781
International Paper Company 9,200 446,775
Monsanto Company 18,000 775,125
Weyerhaeuser Company 6,100 317,200
DuPont (E.I.) de Nemours
and Company 35,400 2,225,775
-----------
5,119,706
-----------
CONSUMER DURABLES -- 3.8%
Black & Decker Corporation 2,900 107,844
Brunswick Corporation 3,000 93,750
Chrysler Corporation 21,500 705,469
Ford Motor Company 36,200 1,366,550
General Motors Corporation 23,500 1,308,656
-----------
3,582,269
-----------
CONSUMER NONDURABLES -- 10.8%
Avon Products, Inc. 4,100 289,306
Coca-Cola Company 79,800 5,386,500
Colgate-Palmolive Company 8,900 580,725
Eastman Kodak Company 10,200 782,850
Heinz (H.J.) Company 11,200 516,600
International Flavors & Fragrances Inc. 3,350 169,175
PepsiCo, Inc. 57,500 2,159,844
Polaroid Corporation 1,400 77,700
Ralston Purina Group 3,200 263,000
-----------
10,225,700
-----------
CONSUMER SERVICE -- 7.4%
Walt Disney Company 21,600 1,733,400
*<F25>Harrah's Entertainment, Inc. 3,150 56,700
*<F25>Kmart Corporation 14,800 181,300
Limited (The), Inc. 8,239 166,840
May Department Stores Company 7,500 354,375
McDonald's Corporation 21,300 1,029,055
Sears, Roebuck & Co. 12,000 645,000
Tandy Corporation 1,800 100,800
*<F25>Toys "R" Us, Inc. 8,825 308,875
Wal-Mart Stores, Inc. 72,600 2,454,788
-----------
7,031,133
-----------
CAPITAL GOODS -- 12.9%
Allegheny Teledyne Inc. 5,292 142,884
The Boeing Company 25,812 1,369,649
Fluor Corporation 2,600 143,487
General Dynamics Corporation 1,900 142,500
General Electric Company 118,700 7,760,013
Minnesota Mining &
Manufacturing Company 12,800 1,305,600
Raytheon Company 7,200 367,200
Rockwell International Corporation 6,700 395,300
United Technologies Corporation 7,300 605,900
-----------
12,232,533
-----------
ENERGY -- 11.5%
Amoco Corporation 15,200 1,321,450
+<F26>Atlantic Richfield Company 9,800 690,900
Baker Hughes Incorporated 4,460 172,546
Coastal Corporation 3,200 170,200
+<F26>Exxon Corporation 79,300 4,876,950
Halliburton Company 3,800 301,150
Mobil Corporation 28,300 1,977,463
Occidental Petroleum Corporation 10,100 253,131
Schlumberger Limited 7,500 937,500
Williams Companies, Inc. 4,800 210,000
-----------
10,911,290
-----------
FINANCIAL -- 9.8%
American International Group, Inc. 14,843 2,217,173
American Express Company 14,500 1,080,250
American General Corporation 6,200 296,050
BankAmerica Corporation 27,000 1,743,187
CIGNA Corporation 2,300 408,250
Citicorp 14,900 1,796,381
First Chicago NBD Corp. 9,725 588,363
Great Western Financial Corporation 4,250 228,438
Hartford Financial Services Group 3,600 297,900
Merrill Lynch & Co., Inc. 10,000 596,250
-----------
9,252,242
-----------
HEALTH CARE -- 12.1%
Baxter International Inc. 8,300 433,675
Bristol-Myers Squibb Company 31,920 2,585,520
Columbia/HCA Healthcare
Corporation 20,500 805,906
Johnson &Johnson 47,700 3,070,688
Mallinckrodt, Inc. 2,300 87,400
Merck & Co., Inc. 38,500 3,984,750
Pharmacia & Upjohn, Inc. 15,560 540,710
-----------
11,508,649
-----------
TECHNOLOGY -- 16.1%
AMP Incorporated 6,750 281,813
*<F25>Ceridan Corporation 2,100 88,725
*<F25>Cisco Systems, Inc. 25,100 1,684,837
*<F25>Computer Sciences Corporation 2,300 165,888
*<F25>Digital Equipment Corporation 4,800 170,100
*<F25>Federal Express Corporation 3,500 202,125
Harris Corporation 1,200 100,800
Hewlett-Packard Company 32,000 1,792,000
Honeywell Inc. 3,900 295,912
International Business Machines
Corporation 33,000 2,976,188
Intel Corporation 30,100 4,268,556
*<F25>National Semiconductor Corporation 4,300 131,687
Northern Telecom Limited 7,900 718,900
*<F25>Oracle Corporation 20,650 1,040,244
Tektronix, Inc. 1,000 60,000
Texas Instruments Inc. 5,800 487,562
*<F25>Unisys Corporation 5,400 41,175
Xerox Corporation 9,891 780,153
-----------
15,286,665
-----------
TRANSPORTATION -- 1.0%
Burlington Northern Santa Fe
Corporation 4,700 422,413
Delta Air Lines, Inc. 2,200 180,400
Norfolk Southern Corporation 3,800 382,850
-----------
985,663
-----------
UTILITIES -- 6.3%
AT&T Corp. 39,492 $ 1,384,688
American Electric Power
Company, Inc. 5,700 239,400
Ameritech Corporation 15,800 1,073,412
+<F26>Bell Atlantic Corporation 12,400 940,850
Entergy Corporation 7,100 194,363
MCI Communications Corporation 20,900 800,077
NYNEX Corporation 13,400 772,175
Southern Company 20,600 450,625
Unicom Corporation 6,600 146,850
-----------
6,002,440
-----------
Total Common Stocks
(Cost $50,150,607) 92,138,290
-----------
U.S. GOVERNMENTAND AGENCY OBLIGATIONS -- 1.8%
+<F26>U.S. Treasury Bill
5.54%, due 04-30-1998 1,800,000 1,720,157
-----------
Total Government Obligations
(Cost $1,716,069) 1,720,157
-----------
SHORT-TERM INVESTMENTS -- 1.0%
MONEY MARKET -- 1.0%
Dreyfus Cash Management Plus $871,186 871,186
Federated Master Trust 97,236 97,236
-----------
968,422
-----------
Total Short-Term Investments 968,422
-----------
Total Investments $94,826,869
===========
FUTURES CONTRACTS
S&P 500 Index Future expires
September 1997 6 2,670,750
-----------
Total Futures Contracts
(Cost $2,446,173) 2,670,750
-----------
*<F25>Non-income producing
+<F26>Segregated as collateral against futures
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
DIVIDEND ACHIEVERS PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
NUMBER
OF SHARES MARKET
OR PAR VALUE VALUE
------------ ------
COMMON STOCKS -- 97.6%
CONSUMER NONDURABLES -- 22.3%
Coca-Cola Company 16,000 $ 1,080,000
Eastman Kodak Company 10,800 828,900
Gillette Company 21,600 2,046,600
Heinz (H.J.) Company 15,000 691,875
Kimberly-Clark Corporation 21,600 1,074,600
PepsiCo, Inc. 37,000 1,389,812
Sherwin-Williams Company 31,400 969,475
-----------
8,081,262
-----------
CONSUMER SERVICE -- 8.6%
Walt Disney Company 10,000 802,500
McDonald's Corporation 21,600 1,043,550
Walgreen Co. 24,000 1,287,000
-----------
3,133,050
-----------
CONSUMER NONCYCLICAL -- 2.5%
Becton, Dickinson & Company 18,000 911,250
-----------
911,250
-----------
CAPITAL GOODS -- 10.3%
Avery-Dennison Corporation 28,400 1,139,550
General Electric Company 24,000 1,569,000
Minnesota Mining &
Manufacturing Company 10,000 1,020,000
-----------
3,728,550
-----------
ENERGY -- 9.6%
Mobil Corporation 14,400 1,006,200
Royal Dutch Petroleum Company 24,000 1,305,000
Williams Companies, Inc. 27,000 1,181,250
-----------
3,492,450
-----------
FINANCIAL -- 13.7%
BankAmerica Corporation 20,000 1,291,250
Federal Home Loan Mortgage
Corporation 16,000 550,000
Federal National Mortgage
Association 36,000 1,570,500
Green Tree Financial Corporation 14,750 525,469
Jefferson-Pilot Corporation 15,000 1,048,125
-----------
4,985,344
-----------
HEALTH CARE -- 9.4%
Johnson & Johnson 21,600 1,390,500
Merck & Co., Inc. 12,000 1,242,000
Pfizer, Inc. 6,500 776,750
-----------
3,409,250
-----------
INDUSTRIAL -- 2.7%
Illinois Tool Works, Inc. 20,000 998,750
-----------
998,750
-----------
TECHNOLOGY -- 11.7%
Diebold, Inc. 36,562 1,425,918
Hewlett-Packard Company 20,000 1,120,000
Intel Corporation 8,100 1,148,681
Xerox Corporation 7,000 552,125
-----------
4,246,724
-----------
UTILITIES -- 6.8%
British Telecommunications PLC
Sponsored ADR 7,500 556,875
GTE Corporation 10,000 438,750
Southwestern Bell Corporation 10,800 668,250
Sprint Corporation 15,000 789,375
-----------
2,453,250
-----------
Total Common Stocks
(Cost $18,271,699) 35,439,880
-----------
SHORT-TERM INVESTMENTS -- 1.9%
MONEY MARKET
Dreyfus Cash Management Plus $655,604 655,604
Federated Master Trust 38,370 38,370
-----------
693,974
-----------
Total Short-Term Investments 693,974
-----------
Total Investments $36,133,854
===========
*Non-income producing
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
NUMBER
OF SHARES MARKET
OR PAR VALUE VALUE
------------ ------
COMMON STOCKS -- 95.8%
AUTOS & TRANSPORTATION -- 6.2%
Borg-Warner Automotive, Inc. 1,900 $102,719
Canadian National Railway Company 2,700 118,125
*<F27>Gulfstream Aerospace Corporation 3,300 97,350
USFreightways Corporation 2,800 72,450
-----------
390,644
-----------
BASIC INDUSTRIES -- 0.1%
Cambrex Corporation 100 3,962
-----------
3,962
-----------
CONSUMER DISCRETIONARY -- 19.7%
Fingerhut Companies, Inc. 7,000 122,063
*<F27>Furniture Brands International, Inc. 8,700 168,562
Harman International Industries, Inc. 2,800 177,950
Hughes Supply, Inc. 5,400 216,000
Harland (John H.) Company 5,100 166,344
Kellwood Co. 5,800 160,950
Libbey, Inc. 4,400 154,000
*<F27>World Color Press, Inc. 7,700 182,875
-----------
1,238,744
-----------
ENERGY -- 6.2%
*<F27>Forcenergy Inc. 4,200 127,575
*<F27>Newfield Exploration Company 6,100 122,000
*<F27>Santa Fe Energy Resources, Inc. 9,400 138,063
-----------
387,638
-----------
FINANCIAL -- 24.2%
American Heritage Life Investment
Corporation 3,900 128,700
CMAC Investment Corporation 3,600 171,900
Capital Re Corporation 2,700 144,450
Community First Bankshares, Inc. 3,200 122,800
*<F27>FIRSTPLUS Financial Group, Inc. 3,300 112,200
Fremont General Corporation 2,700 108,675
Horace Mann Educators Corporation 2,500 122,500
PennCorp Financial Group, Inc. 3,600 138,600
Peoples Heritage Financial Group, Inc. 3,400 128,775
Sovereign Bancorp, Inc. 8,280 126,270
United Companies Financial
Corporation 3,800 107,350
Western National Corporation 4,200 112,612
-----------
1,524,832
-----------
HEALTH CARE -- 5.7%
Intergrated Health Services, Inc. 4,000 154,000
*<F27>Sierrs Health Services, Inc. 2,900 90,625
*<F27>Trigon Healthcare, Inc. 4,700 133,975
-----------
358,600
-----------
MATERIALS & PROCESSING -- 6.1%
*<F27>Essex International, Inc. 5,500 153,313
TriMas Corporation 4,400 123,750
*<F27>UCARInternational Inc. 2,400 109,800
-----------
386,863
-----------
OTHER -- 12.4%
Americal General
Hospitality Corporation 2,800 69,300
Arden Realty Group, Inc. 3,300 85,800
*<F27>Brylane Inc. 5,800 223,662
Cornerstone Properties Inc. 5,200 79,950
*<F27>General Cable Corp. 4,100 105,062
*<F27>Lone Star Steakhouse &Saloon 2,800 72,800
Prentiss Properties Trust 2,300 58,938
*<F27>Zale Corporation 4,200 83,212
-----------
778,724
-----------
PRODUCER DURABLES -- 8.1%
AGCOCorporation 6,100 219,219
Applied Power Inc. - Class A 2,400 123,900
Cincinnati Milacron, Inc. 6,300 163,406
-----------
506,525
-----------
TECHNOLOGY -- 7.1%
*<F27>BancTec, Inc. 5,700 147,844
*<F27>Coherent, Inc. 3,400 151,300
Wyle Electronics 3,800 150,100
-----------
449,244
-----------
Total Common Stocks
(Cost $4,909,006) 6,025,776
-----------
SHORT-TERM INVESTMENTS -- 3.6%
MONEYMARKET
Dreyfus Cash Management Plus $92,943 $ 92,943
Federated Master Trust 136,301 136,301
-----------
Total Short-Term Investments 229,244
-----------
Total Investments $ 6,255,020
===========
*<F27>Non-income producing
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PSE TECHNOLOGY 100 INDEX PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
NUMBER
OF SHARES MARKET
OR PAR VALUE VALUE
------------ ------
COMMON STOCKS -- 96.1%
BIOTECHNOLOGY --5.7%
*+ Amgen, Inc. 2,850 $ 165,656
<F28><F29>
*+ Biogen, Inc. 2,850 96,544
<F28><F29>
*<F28>Centocor, Inc. 2,850 88,528
*+ Chiron Corporation 2,850 59,494
<F28><F29>
*<F28>Genentech, Inc. 2,850 167,972
*<F28>Immunex Corporation 2,850 103,313
*<F28>Xoma Corporation 2,850 13,716
-----------
695,223
-----------
CAD/CAM -- 2.0%
+<F29>Autodesk, Inc. 2,850 109,191
*<F28>Evans & Sutherland Computer
Corporation 2,850 79,444
*<F28>Intergraph Corporation 2,850 24,225
*<F28>Mentor Graphics Corporation 2,850 26,362
*<F28>QMS, Inc. 2,850 7,481
-----------
246,703
-----------
DATA COMMUNICATIONS -- 14.2%
*<F28>3Com Corporation 2,850 128,250
*+ Adaptec, Inc. 2,850 99,038
<F28><F29>
*+ ADC Telecommunications, Inc. 2,850 95,119
<F28><F29>
*<F28>Ascend Communications 2,850 112,219
*<F28>Bay Networks, Inc. 2,850 75,703
*<F28>Cabletron Systems, Inc. 2,850 80,691
*<F28>Cisco Systems, Inc. 2,850 191,306
*<F28>DSC Communications Corporation 2,850 63,412
Harris Corporation 2,850 239,400
*<F28>Novellus Systems, Inc. 2,850 246,525
*<F28>Octel Communications Corporation 2,850 66,797
Scientific - Atlanta, Inc. 2,850 62,344
Symbol Technologies, Inc. 2,850 95,831
*<F28>Tellabs, Inc. 2,850 159,244
-----------
1,715,879
-----------
DATA STORAGE AND PROCESSING -- 3.6%
*+ Applied Magnetics Corporation 2,850 64,481
<F28><F29>
*+ Exabyte Corporation 2,850 36,516
<F28><F29>
*<F28>Komag, Incorporated 2,850 46,669
*<F28>Quantum Corporation 2,850 57,891
*<F28>Seagate Technology, Inc. 2,850 100,284
*<F28>Storage Technology Corporation 2,850 126,825
-----------
432,666
-----------
ELECTRONIC EQUIPMENT -- 1.3%
AMP Incorporated 2,850 118,988
Sensormatic Electronics Corporation 2,850 36,694
-----------
155,682
-----------
INFORMATION PROCESSING -- 6.6%
*+ America Online, Inc. 2,850 158,530
<F28><F29>
Automatic Data Processing, Inc. 2,850 133,950
*<F28>Ceridian Corporation 2,850 120,412
*+ Computer Sciences Corporation 2,850 205,556
<F28><F29>
Comsat Corporation 2,850 67,866
Electronic Data Systems 2,850 116,850
-----------
803,164
-----------
LARGE DIVERSIFIED COMPUTER
MANUFACTURING -- 4.9%
*<F28>Digital Equipment Corporation 2,850 100,997
Honeywell Inc. 2,850 216,244
International Business
Machines Corporation 2,850 257,034
*<F28>Unisys Corporation 2,850 21,731
-----------
596,006
-----------
MEDICAL TECHNOLOGY -- 8.2%
*+ Acuson Corporation 2,850 65,550
<F28><F29>
*<F28>Biomet, Inc. 2,850 53,081
*+ Boston Scientific Corporation 2,850 175,097
<F28><F29>
*<F28>Coherent, Inc. 2,850 126,825
*+ Genzyme Corporation 2,850 79,088
<F28><F29>
Medtronic, Inc. 2,850 230,850
Shared Medical Systems Corporation 2,850 153,900
*<F28>St. Jude Medical, Inc. 2,850 111,150
-----------
995,541
-----------
MICRO COMPUTER MANUFACTURERS -- 6.2%
+<F29>Apple Computer, Inc. 2,850 40,612
*<F28>Compaq Computer Corporation 2,850 282,862
*<F28>Dell Computer Corporation 2,850 334,697
*<F28>Gateway 2000, Inc. 2,850 92,447
-----------
750,618
-----------
MINI AND MAINFRAME COMPUTER
MANUFACTURERS -- 4.8%
*+ Amdahl Corporation 2,850 24,937
<F28><F29>
*<F28>Data General Corporation 2,850 74,100
*<F28>EMC Corporation 2,850 111,150
*<F28>Informix Corporation 2,850 25,650
*<F28>Silicon Graphics, Inc. 2,850 42,750
*<F28>Stratus Computer, Inc. 2,850 142,500
*<F28>Sun Microsystems, Inc. 2,850 160,073
*<F28>Tandem Computers, Inc. 2,850 57,712
-----------
584,872
-----------
OFFICE AUTOMATION EQUIPMENT -- 3.5%
*<F28>CUC International, Inc. 2,850 73,566
*<F28>Newbrige Networks Corporation 2,850 123,975
Xerox Corporation 2,850 224,794
-----------
422,335
-----------
SEMICONDUCTOR CAPITAL EQUIPMENT
MANUFACTURERS -- 4.4%
*+ Applied Materials, Inc. 2,850 201,816
<F28><F29>
*<F28>Cadence Design Systems, Inc. 2,850 95,475
*<F28>KLA Instruments Corporation 2,850 138,937
*<F28>Kulicke & Soffa Industries, Inc. 2,850 92,536
-----------
528,764
-----------
SEMICONDUCTOR MANUFACTURERS -- 11.6%
*+ Advanced Micro Devices, Inc. 2,850 102,600
<F28><F29>
*<F28>Chips & Technologies, Inc. 2,850 29,569
*<F28>Cypress Semiconductor Corporation 2,850 41,325
Intel Corporation 2,850 404,166
Micron Technology, Inc. 2,850 113,822
Motorola, Inc. 2,850 216,600
*<F28>National Semiconductor Corporation 2,850 87,281
*<F28>Standard Microsystems Corporation 2,850 25,294
Texas Instruments Inc. 2,850 239,578
*<F28>Xilinx, Inc. 2,850 139,828
-----------
1,400,063
-----------
SOFTWARE PRODUCTS -- 8.9%
+<F29>Adobe Systems, Inc. 2,850 99,928
*+ BMC Software, Inc. 2,850 157,819
<F28><F29>
*<F28>Borland International, Inc. 2,850 19,772
*+ Computer Associates
<F28><F29>
International, Inc. 2,850 158,709
*<F28>Microsoft Corporation 2,850 360,169
*<F28>Novell, Inc. 2,850 19,772
*<F28>Oracle Corporation 2,850 143,569
*<F28>Sybase, Inc. 2,850 42,394
*<F28>Symantec Corporation 2,850 55,575
*<F28>System Software Associates, Inc. 2,850 21,731
-----------
1,079,438
-----------
TEST, ANALYSIS, AND INSTRUMENTATION
EQUIPMENT -- 10.2%
*+ Analog Devices, Inc. 2,850 75,703
<F28><F29>
General Signal Corporation 2,850 124,331
Hewlett-Packard Company 2,850 159,600
Millipore Corporation 2,850 125,400
Perkin-Elmer Corporation 2,850 226,753
Tektronix, Inc. 2,850 171,000
*<F28>Teradyne, Inc. 2,850 111,862
*<F28>Thermo Instrument Systems, Inc. 2,850 87,281
Varian Associates, Inc. 2,850 154,612
-----------
1,236,542
-----------
Total Common Stocks
(Cost $9,909,989) 11,643,496
-----------
GOVERNMENT SECURITIES -- 0.8%
+<F29>U.S. Treasury Bill
5.52%, due 08-21-1997 $100,000 99,286
-----------
Total Government Securities
(Cost $99,217) 99,286
-----------
SHORT-TERM INVESTMENTS -- 1.7%
MONEY MARKET
Dreyfus Cash Management Plus 184,414 184,414
Federated Master Trust 16,340 16,339
-----------
Total Short-Term Investments 200,753
-----------
Total Investments $11,943,535
===========
FUTURES CONTRACTS
PSE Technology 100 Index
expiring September 1997 3 $ 426,975
-----------
Total Futures Contracts
(Cost $420,024) 426,975
-----------
*<F28>Non-income producing
+<F29>Segregated as collateral against futures
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
R.D. Ziegler, Chairman, Director
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Robert J. Tuszynski, President, Director
Frank Ciano, Chief Financial Officer and Treasurer
John Lauderdale, Vice President of Marketing
S. Charles O'Meara, Secretary
Marc Dion, Vice President
INVESTMENT ADVISORS
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Skyline Asset Management
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
DISTRIBUTOR, TRANSFER AND DIVIDEND
DISBURSING AGENT, DEPOSITORY AND FUND ACCOUNTANT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
CUSTODIAN
Principal Preservation Portfolios, Inc.
215 North Main Street
West Bend, Wisconsin 53095
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
AUDITOR
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
"Standard & Poor's," "Standard & Poor's 100," "S&P," "100" are trademarks of
Standard & Poor's Corporation and have been licensed for use by B.C. Ziegler
and Company.
PSE is the service mark of the Pacific Stock Exchange Incorporated and has been
licensed for use by B.C. Ziegler and Company.
This report has been prepared for the information of shareholders of Principal
Preservation Portfolios, Inc., and may not be used in connection with the
offering of securities unless preceded or accompanied by a current Prospectus.
PP 344-8/97
