(PRINCIPAL PRESERVATION LOGO)
WISCONSIN
TAX-EXEMPT
PORTFOLIO
------------
ANNUAL REPORT
TO SHAREHOLDERS
DECEMBER 31, 1999
------------
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
PRESIDENT'S LETTER/MANAGEMENT DISCUSSION AND ANALYSIS
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1999
February 28, 2000
Dear Wisconsin Shareholder:
I am pleased to provide you with the Wisconsin Tax-Exempt Portfolio annual
report for the year ended December 31, 1999. Since December 31, 1998, the
Wisconsin Tax Exempt Portfolio's net assets increased from $45,693,000 to
$52,320,000. At the same time, total assets of the Principal Preservation
mutual fund family grew from $602,000,000 to $1,046,000,000. Investors
continued to focus on the broad base stock market, rather than the tax-exempt
bond markets. The increase in our fund family can be attributed to both net
inflows and market appreciation of our equity portfolios.
The domestic economy continued to grow at a healthy pace during the year.
Higher income levels, combined with a robust real estate market and increasing
stock prices, fueled the consumer sector, as the primary driver of domestic
growth. The Federal Reserve Bank, concerned about inflation in light of the
strong economy all year, instituted a series of 0.25% increases in the overnight
lending rate. The bond market reacted with higher yields and lower prices,
causing negative returns on investments. Short term interest rates, as measured
by the 90 day U.S. Treasury, rose from 4.5% at December 31, 1998 to 5.31% at
December 31, 1999. Tax-exempt securities, while experiencing market declines,
performed slightly better than the general taxable bond market.
On the following pages, we describe in further detail the factors affecting
the performance of your Portfolio. We thank you for your continued support and
trust with us at Principal Preservation.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
This report was prepared for shareholders of Principal Preservation's Wisconsin
Tax-Exempt Portfolio. It does not constitute an offer to sell shares of the
Portfolio. Any investor who wishes to receive more information about the
Wisconsin Tax-Exempt Portfolio or any of the other portfolios in the Principal
Preservation Fund Family should obtain a prospectus, which includes a discussion
of the investment objective, all sales charges and expenses and the investment
risks associated with each portfolio.
MANAGEMENT DISCUSSION AND ANALYSIS
WISCONSIN TAX-EXEMPT PORTFOLIO
The graph below compares the change in the value of a $10,000 investment in
Principal Preservation Wisconsin Tax-Exempt Portfolio with that of the Lehman
20-Year Municipal Bond Index.
Date Principal Preservation Lehman 20-Year
Wisconsin Tax-Exempt Portfolio Municipal Bond Index
6/13/94*<F1> $9,750 $10,000
6/30/94 $9,452 $9,900
7/31/94 $9,543 $10,127
8/31/94 $9,543 $10,155
9/30/94 $9,446 $9,952
10/31/94 $9,179 $9,689
11/30/94 $8,862 $9,462
12/31/94 $9,112 $9,759
1/31/95 $9,403 $10,141
2/28/95 $9,687 $10,509
3/31/95 $9,780 $10,629
4/30/95 $9,803 $10,627
5/31/95 $10,081 $11,028
6/30/95 $9,992 $10,858
7/31/95 $10,026 $10,914
8/31/95 $10,112 $11,064
9/30/95 $10,166 $11,151
10/31/95 $10,303 $11,389
11/30/95 $10,493 $11,641
12/31/95 $10,599 $11,804
1/31/96 $10,652 $11,864
2/29/96 $10,546 $11,729
3/31/96 $10,408 $11,541
4/30/96 $10,322 $11,495
5/31/96 $10,388 $11,509
6/30/96 $10,465 $11,671
7/31/96 $10,575 $11,785
8/31/96 $10,554 $11,766
9/30/96 $10,708 $12,004
10/31/96 $10,797 $12,148
11/30/96 $10,996 $12,402
12/31/96 $10,943 $12,329
1/31/97 $10,944 $12,317
2/28/97 $11,057 $12,449
3/31/97 $10,901 $12,254
4/30/97 $11,004 $12,390
5/31/97 $11,174 $12,613
6/30/97 $11,288 $12,772
7/31/97 $11,551 $13,201
8/31/97 $11,449 $13,039
9/30/97 $11,588 $13,219
10/31/97 $11,648 $13,315
11/30/97 $11,718 $13,423
12/31/97 $11,895 $13,667
1/31/98 $11,988 $13,820
2/28/98 $11,999 $13,830
3/31/98 $12,011 $13,849
4/30/98 $11,999 $13,778
5/31/98 $12,141 $14,027
6/30/98 $12,189 $14,090
7/31/98 $12,213 $14,120
8/31/98 $12,346 $14,364
9/30/98 $12,487 $14,567
10/31/98 $12,473 $14,520
11/30/98 $12,508 $14,587
12/31/98 $12,531 $14,619
1/31/99 $12,650 $14,775
2/28/99 $12,648 $14,713
3/31/99 $12,670 $14,764
4/30/99 $12,704 $14,804
5/31/99 $12,626 $14,693
6/30/99 $12,448 $14,455
7/31/99 $12,469 $14,472
8/31/99 $12,353 $14,239
9/30/99 $12,310 $14,193
10/31/99 $12,054 $13,899
11/30/99 $12,178 $14,106
12/31/99 $12,060 $13,934
AVERAGE ANNUAL TOTAL RETURN
(includes the effect of the sales charge)
SINCE INCEPTION
1-YEAR 5-YEAR 6/13/94
------ ------ ---------------
Wisconsin Tax-Exempt:
Full Sales Charge -6.16% 4.34% 3.43%
Net Asset Value -3.80% 5.77% 4.70%
*<F1> June 13, 1994 inception date.
Past performance is not predictive of future performance.
LEHMAN 20-YEAR MUNICIPAL BOND INDEX
The Lehman 20-Year Municipal Bond Index is a broad based index containing
over 22,000 issues with maturities ranging from 2-30 years. The issues
comprising the index are those completed within the last five years with total
issue size of $50 million or more. The average quality rating is "AA." The
performance of the index does not include sales charges or other fees which an
investor would incur if s/he attempted to replicate this index.
WISCONSIN TAX-EXEMPT PORTFOLIO
The Wisconsin Tax-Exempt Portfolio's performance is presented from June 13,
1994, commencement of operations, through December 31, 1999. It is based upon a
$10,000 investment at the Portfolio's public offering price then in effect,
which included a 2.5% sales charge. It represents the actual total returns for
each of the years ended December 31, net of any fees and expenses charged to the
Portfolio during those periods.
GENERAL MARKET & PORTFOLIO ANALYSIS
U.S. TREASURY MARKET -- The decline in U.S. Treasury prices continued through
most of the year with the high point in yields and the low point in prices
taking place on October 26th. The thirty-year treasury bond was selling to
yield 6.38%, the ten-year selling to yield 6.238% and the five year selling to
yield 6.15%. All three yields were the high for the year. Shortly thereafter,
Federal Reserve Chairman Alan Greenspan cooled speculation about a series of
interest rate increases by the central bank. This produced the best government
bond rally in 1999 during the week ended October 29th. Treasuries extended
gains after reports showing a drop in home sales and prices paid by
manufacturers suggested the pace of economic growth was slowing. Treasury Bonds
gave back much of that gain during the last month of the year.
MUNICIPAL BOND MARKET -- The municipal bond market followed the U.S. Treasury
market through October. However, because of an increase in underwriting of new
securities, municipals did slightly worse. Municipal bond yields in thirty-year
insured bonds rose by 1.20% from the beginning of the year through October 26,
1999 compared to a yield increase in the U.S. Treasury thirty-year bond of 1.07%
during that period. By the end of October, the supply of new municipal issues
had dwindled from $5 billion to $3.5 billion. Long term AAA rated municipal
bonds continued to sell at roughly 93% of the thirty-year U.S. Treasury yields.
The nine-year average of long term high quality municipal bonds to thirty-year
U.S. Treasury bonds is 82%. The performance of the municipal bond market
continued to lag U.S. Treasuries.
PORTFOLIO REVIEW -- The total return for the Wisconsin Tax-Exempt Portfolio
for the year ended December 31, 1999 was -3.75%, as compared to the Lehman 20
Year Municipal Bond Index return of -4.67%. For the entire period, Mr. Tom
Sancomb, the portfolio manager, maintained the maturity level of the Wisconsin
Portfolio around 20 years, with a duration of approximately nine years. As a
result, the performance was in line with general tax-exempt averages. The
Portfolio does not hold any day bonds subject to Alternative Minimum Tax.
Mr. Sancomb did not make any trades of portfolio securities during the year,
except in response to either purchases or redemptions. When possible, Mr.
Sancomb continued to eliminate non-Wisconsin issues to increase holdings in
securities from Wisconsin. Therefore, by December 31, 1999 bonds issued by
municipalities in the State of Wisconsin represented 78% of the Portfolio's
securities, as compared to 72% on December 31, 1998. The moderate trading in the
Portfolio, along with a "market like" maturity and duration, resulted in
performance for the year that approximated the municipal market. Mr. Sancomb
does not anticipate making any significant changes in the approach to the
municipal bond market during the next few months.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
FINANCIAL HIGHLIGHTS
The table below presents information for a share of capital stock of
Principal Preservation Portfolios, Inc.' s. Wisconsin Tax-Exempt Portfolio
outstanding for the periods indicated. You should read this information in
conjunction with the financial statements and related notes.
<TABLE>
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------------------------------------------
For the years ended December 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.27 $10.21 $ 9.87 $10.05 $ 9.10
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .45 .48 .49 .49 .50
Net realized and unrealized gains (losses) on investments (.82) .06 .34 (.18) .95
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (.37) .54 .83 .31 1.45
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.45) (.48) (.49) (.49) (.50)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.45) (.48) (.49) (.49) (.50)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.45 $10.27 $10.21 $ 9.87 $10.05
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN *<F2> (3.8%) 5.4% 8.7% 3.3% 16.3%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $52,320 $45,693 $32,852 $25,750 $18,986
Ratio of expenses to average net assets 0.9%+<F3> 0.6%+<F3> 0.5%+<F3> 0.5%+<F3> 0.4%+<F3>
Ratio of net investment income to average net assets 4.5%+<F3> 4.6%+<F3> 4.9%+<F3> 4.9%+<F3> 5.0%+<F3>
Portfolio turnover rate 15.2% 12.5% 16.9% 16.0% 9.7%
</TABLE>
*<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 1999,
0.4% in 1998, 0.6% in 1997, 0.6% in 1996 and 0.8% in 1995,
respectively.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
BALANCE SHEET
DECEMBER 31, 1999
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
ASSETS:
Investments:
Cost basis of investments $54,117,039
-----------
-----------
Long-term investments in securities $51,877,990
Cash 502
Receivables:
Capital shares sold 471
Interest 645,958
-----------
Total receivables 646,429
Other assets 3,100
-----------
Total assets $52,528,021
-----------
-----------
LIABILITIES:
Payables:
Capital shares redeemed $ 25,233
Distributions to shareholders 53,238
Management fees 22,021
Other accrued expenses 72,450
Other liabilities 35,015
-----------
Total liabilities 207,957
-----------
NET ASSETS:
Capital stock 55,081,126
Undistributed net investment income 8,988
Undistributed net realized losses on investments (531,001)
Net unrealized depreciation on investments (2,239,049)
-----------
Total net assets 52,320,064
-----------
Total liabilities and net assets $52,528,021
-----------
-----------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 9.45
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE $ 9.69
-----------
-----------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
WISCONSIN
TAX-EXEMPT PORTFOLIO
---------------------
INVESTMENT INCOME:
Interest $ 2,795,842
-----------
Total investment income 2,795,842
-----------
EXPENSES:
Investment advisory fees 260,395
Custodian fees 11,972
Transfer agent fees 29,989
Broker service fees 133,361
Professional fees 41,348
Registration 10,516
Communication 12,135
Director fees 4,418
Pricing of investments 13,226
Deferred organization expense 1,160
Other 9,144
-----------
Total expenses 527,664
Less expenses absorbed by advisor (65,498)
-----------
Net expenses 462,166
-----------
NET INVESTMENT INCOME 2,333,676
-----------
NET REALIZED LOSSES ON INVESTMENTS (495,751)
CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS FOR THE YEAR (4,041,529)
-----------
Net loss on investments (4,537,280)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,203,604)
-----------
-----------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
OPERATIONS:
Net investment income $ 2,333,676
Net realized losses on investments (495,751)
Change in unrealized appreciation on investments for the year (4,041,529)
-----------
Net decrease in net assets resulting from operations (2,203,604)
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ($0.45 per share) (2,333,895)
-----------
Total distributions (2,333,895)
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 21,530,243
Net asset value of shares issued in distributions 1,654,328
Cost of shares redeemed (12,019,713)
-----------
Net increase in net assets from capital
share transactions 11,164,858
-----------
Total increase 6,627,359
NET ASSETS:
Balance at beginning of period 45,692,705
-----------
Balance at end of period $52,320,064
-----------
-----------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
WISCONSIN
TAX-EXEMPT PORTFOLIO
--------------------
OPERATIONS:
Net investment income $ 1,800,897
Net realized losses on investments (29,062)
Change in unrealized appreciation on investments for the year 268,450
-----------
Net increase in net assets resulting from operations 2,040,285
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ($0.48 per share) (1,792,682)
-----------
Total distributions (1,792,682)
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 14,532,615
Net asset value of shares issued in distributions 1,251,011
Cost of shares redeemed (3,190,205)
-----------
Net increase in net assets from capital
share transactions 12,593,421
-----------
Total increase 12,841,024
NET ASSETS:
Balance at beginning of period 32,851,681
-----------
Balance at end of period $45,692,705
-----------
-----------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES --
Principal Preservation Portfolios, Inc. (the "Fund"), registered under the
Investment Company Act of 1940 as an open-end management investment company,
is a series company with nine portfolios: Tax-Exempt Portfolio, Government
Portfolio, S&P100 Plus Portfolio, Dividend Achievers Portfolio, PSE Tech 100
Index Portfolio, Cash Reserve Portfolio, Wisconsin Tax-Exempt Portfolio,
Select Value Portfolio and Managed Growth Portfolio. This report presents
information only for the Wisconsin Tax-Exempt Portfolio (the "Portfolio").
Information regarding the other portfolios is presented in separate reports.
The assets and liabilities of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which the shareholder
owns shares.
The following is a summary of the significant accounting policies of the
Fund.
(a) Long-Term Securities
The long-term tax-exempt securities are valued at market or fair value
using quotations by an independent pricing service (the "Service").
When, in the judgment of the Service, quoted bid prices for securities
are readily available and are representative of the bid side of the
market, these investments are valued at the mean between quoted bid
prices (as obtained by the Service from dealers in such securities) and
ask prices (as calculated by the Service based upon its evaluation of
the market for such securities). Securities for which, in the judgment
of the Service, there are no readily obtainable market quotations
(which may constitute a majority of the portfolio's securities) are
carried at fair value as determined by the Service in accordance with
procedures approved by the Fund's Board of Directors. Among other
factors, these procedures include consideration of yields or prices of
municipal securities of comparable quality, coupon, maturity, type,
indications as to values from dealers, and general market conditions.
Investment transactions are recorded on the day after trade date.
However, the financial statement information reflects an adjustment to
reflect trade date activity.
Premiums on long-term tax-exempt securities are amortized to the
shorter of call date or maturity. The fund does not amortize premiums
on taxable long-term securities. The fund amortizes all discounts on
taxable securities and on original issue discount tax-exempt
securities.
(b) Net Realized Gains and Losses and Investment Income
Net realized gains and losses on securities sales are computed on the
identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on an accrual basis.
(c) Federal Income Taxes
Provision has not been made for Federal income taxes, because the
Portfolio has elected to be taxed as a "regulated investment company"
and intends to distribute substantially all income to its shareholders
and otherwise to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. As of December 31,
1999, the Portfolio had Federal income tax capital loss carryforwards
of $3,176 expiring in 2003, $3,012 expiring in 2004, $29,062 expiring
in 2006 and $495,751 expiring in 2007. It is management's intention to
make no distribution of any future realized capital gains until the
Federal income tax capital loss carryforward is exhausted.
The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for
federal income tax purposes due to differences in the recognition of
income, expense or gain items for financial statement and tax purposes.
Where appropriate, reclassifications between net asset accounts are
made for such differences that are permanent in nature. Accordingly at
December 31, 1999 reclassifications were made to decrease undistributed
net investment income and increase capital stock by $811.
(d) Expenses
Fund expenses associated with a specific portfolio are charged to that
portfolio as they are incurred. Common expenses incurred by the Fund
are allocated, as incurred, between the portfolios based upon the ratio
of the net assets of each portfolio to the combined net assets of the
Fund, by the ratio of accounts maintained in each portfolio or some
other fair allocation process.
(e) Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
(f) Deferred Organization Costs
Costs incurred with the organization, initial registration and public
offering of shares aggregating $13,000 for the Portfolio have been paid
by the Fund and are being amortized over a five year period.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH RELATED PARTIES --
The Fund has an Investment Advisory Agreement (the "Agreement") with B.C.
Ziegler and Company ("BCZ") (with whom certain officers and directors of the
Fund are affiliated), to serve as the Investment Advisor. BCZ is a wholly
owned subsidiary of The Ziegler Companies, Inc. Under the Agreement, the
Portfolio pays BCZ a monthly fee based upon the average daily net assets of
the Portfolio at the rate of .50% of the first $250,000,000 of the
Portfolio's average daily net assets, reducing to .40% of the Portfolio's
average daily net assets in excess of $250,000,000.
For the year ended December 31, 1999, the Portfolio incurred total advisory
fees of $260,395. BCZ voluntarily reimbursed expenses to the Portfolio
totaling $65,498. BCZ is not obligated to continue the voluntary
reimbursement in the future.
On May 17, 1991, the Fund's shareholders approved a Distribution Agreement
under Rule 12b-1. According to this agreement the Fund pays a distribution
fee of up to 0.25% to BCZ, as the distributor, which is passed through to
the broker/dealer as a service fee. This fee is calculated on the average
daily net assets and is shown as broker service fees in the Statement of
Operations.
BCZ has an Accounting and Pricing Agreement with the Fund to perform
accounting and pricing services and through November 8, 1999, a Transfer and
Dividend Disbursing and Shareholder Servicing Agreement with the Fund to
provide Transfer Agent Services. In addition, the Portfolio pays BCZ
commissions on sales of Portfolio shares and 12b-1 distribution fees. The
transfer agent fees, commissions, accounting and pricing fees, depository
and 12b-1 fees paid to BCZ by the Portfolio for the year ended December 31,
1999 were as follows:
<TABLE>
ACCOUNTING
TRANSFER COMMISSIONS AND PRICING
AGENT FEES ON PORTFOLIO SHARES FEES 12B-1 FEES
---------- ------------------- ----------- ----------
<S> <C> <C> <C> <C>
Wisconsin Tax-Exempt Portfolio $23,176 $97,396 $25,436 $73,895
</TABLE>
3. INVESTMENT TRANSACTIONS --
Purchases and proceeds from sales of securities, excluding short-term
investments, for the year ended December 31, 1999, consisted of $18,786,224
and $7,826,034, respectively.
Net tax basis unrealized appreciation (depreciation) on investments as of
December 31, 1999, included:
WISCONSIN
TAX-EXEMPT
----------
Gross unrealized appreciation $ 723,426
Gross unrealized depreciation (2,962,475)
-----------
Net unrealized depreciation $(2,239,049)
-----------
-----------
The tax basis cost of investments at December 31, 1999 was $54,117,039.
4. LINE OF CREDIT --
The Fund has an available line of credit of $7,500,000. 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 BCZ. 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 nine separate
portfolios: Wisconsin Tax-Exempt Portfolio, Government Portfolio, Tax-
Exempt Portfolio, S&P 100 Plus Portfolio, Dividend Achievers Portfolio,
Select Value Portfolio, PSE Tech 100 Index Portfolio, Managed Growth
Portfolio and Cash Reserve Portfolio, consisting of 50,000,000 shares
in each of the first eight portfolios and 450,000,000 in the Cash
Reserve Portfolio. Each portfolio (other than the Cash Reserve
Portfolio) has designated Class A (front-end load) shares. In
addition, the S&P 100 Plus, Dividend Achievers, Select Value, PSE Tech
100 Index, Managed Growth and Cash Reserve Portfolio also have
designated Class B (contingent deferred sales charge) shares. The
shares of the Cash Reserve Portfolio have been subdivided into
200,000,000 shares of each of Class X (Retail Shares) and Class Y
(Institutional Shares) and 50,000,000 shares of Class B. The remaining
150,000,000 authorized shares of common stock of the Fund may be
allocated to any of the above portfolios or to new portfolios as
determined by the Board of Directors. The shares of each portfolio have
equal rights and privileges with all other shares of that portfolio.
(b) Capital share activity during the years ended December 31, 1998 and
December 31, 1999, respectively, were as follows:
WISCONSIN
TAX-EXEMPT
----------
SHARES OUTSTANDING AT DECEMBER 31, 1997 3,218,708
---------
---------
Shares issued 1,419,230
Shares issued in distributions 122,119
Shares redeemed (312,229)
---------
SHARES OUTSTANDING AT DECEMBER 31, 1998 4,447,828
---------
---------
Shares issued 2,160,989
Shares issued in distributions 150,612
Shares redeemed (1,236,225)
---------
SHARES OUTSTANDING AT DECEMBER 31, 1999 5,523,204
---------
---------
(c) Maximum offering price per share is computed based on a maximum sales
charge of 2.5% of the offering price or 2.56% of the net asset value.
For purpose of this computation, the price per share is derived from
multiplying the net asset value and redemption price per share by 100
and then dividing the product by 97.5.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES -- 99.2%
GEORGIA -- 1.1%
$ 325,000 Atlanta, Georgia, New Public Housing Authority, 5.00%, AAA Aaa $ 327,844
due 05-01-2007
250,000 Newnan, Georgia, New Public Housing Authority, 5.00%, AAA Aaa 245,937
due 04-01-2012
GUAM -- 2.3%
650,000 Guam Government Limited Obligation Highway Bonds, AAA Aaa 680,062
Series A, 6.30%, due 05-01-2012
515,000 Guam Power Authority Revenue Bonds, Series A, 6.375%, AAA Aaa 549,763
due 10-01-2008
ILLINOIS -- 1.0%
200,000 Cook County, Illinois, New Public Housing Authority, 5.25%, AAA Aaa 202,000
due 04-01-2010
300,000 Peoria, Illinois, New Public Housing Authority, 5.00%, AAA Aaa 298,500
due 06-01-2012
MASSACHUSETTS -- 1.8%
860,000 Massachusetts State Housing Finance Agency, Multi-Family Housing AAA A1 943,850
Bonds, First Issue, 1979 Series A, 7.00%, due 04-01-2021
NEVADA -- 0.5%
255,000 Las Vegas, Nevada, New Public Housing Authority, 5.00%, AAA Aaa 250,856
due 01-01-2012
NEW JERSEY -- 1.3%
435,000 Newark, New Jersey, New Public Housing Authority, 5.25%, AAA Aaa 437,719
due 04-01-2009
250,000 Newark, New Jersey, New Public Housing Authority, 4.50%, AAA Aaa 241,250
due 04-01-2008
NEWYORK -- 0.8%
200,000 New York, New York, New Public Housing Authority, 5.00%, AAA Aaa 196,750
due 01-01-2012
200,000 New York, New York, New Public Housing Authority, 5.375%, AAA Aaa 203,904
due 01-01-2012
NORTH CAROLINA -- 0.8%
400,000 Durham, North Carolina, New Public Housing Authority, 5.00%, AAA Aaa 397,000
due 02-01-2012
NORTH DAKOTA -- 0.7%
200,000 Burleigh County, North Dakota, New Public Housing Authority, AAA Aaa 197,500
4.875%, due 01-01-2009
185,000 Burleigh County, North Dakota, New Public Housing Authority, AAA Aaa 181,763
4.875%, due 01-01-2010
N MARIANA ISLANDS -- 0.2%
100,000 Commonwealth of the Northern Mariana Islands General Obligation AAA Aaa 99,750
Bonds, Series 1999A, (Public School System Projects), 5.125%,
due 10-01-2008
OHIO -- 2.3%
300,000 Youngstown, Ohio, New Public Housing Authority, 5.00%, AAA Aaa 292,500
due 05-01-2012
200,000 Youngstown, Ohio, New Public Housing Authority, 4.875%, AAA Aaa 196,500
due 05-01-2010
500,000 Youngstown, Ohio, New Public Housing Authority, 5.00%, AAA Aaa 490,625
due 05-01-2011
250,000 Youngstown, Ohio, New Public Housing Authority, 4.875%, AAA Aaa 246,875
due 05-01-2009
PENNSYLVANIA -- 0.9%
270,000 Allentown, Pennsylvania, New Public Housing Authority, 4.875%, AAA Aaa 262,912
due 05-01-2011
200,000 Clinton County, Pennsylvania, New Public Housing Authority, AAA Aaa 204,098
5.25%, due 11-01-2007
PUERTO RICO -- 4.7%
400,000 Puerto Rico Highway &Transportation Authority, Highway A Baa1 362,500
Revenue Bonds (Series Y), 5.50%, due 07-01-2036
350,000 Puerto Rico Commonwealth Highway & Transportation Authority, A Aaa 372,750
Highway Revenue Unrefunded Balance, Series T, 6.625%,
due 07-01-2018
100,000 Puerto Rico Commonwealth Highway &Transportation, 6.625%, A Baal 106,250
due 07-01-2012
325,000 Puerto Rico Commonwealth, Refunding Bonds, Series A, 6.00%, A Baal 335,562
due 07-01-2014
350,000 Puerto Rico Commonwealth General Obligation Bonds, 6.00%, A Aaa 367,500
Prefunded 07-01-2002
180,000 Puerto Rico Commonwealth Electric &Power Authority, Series R, AAA Aaa 190,125
6.25%, due 07-01-2017
200,000 Puerto Rico New Public Housing Authority, 5.00%, AAA Aaa 197,750
due 06-01-2010
150,000 Puerto Rico Telephone Authority, Series L, 5.75%, due 01-01-2011 A+ A2 153,188
350,000 Puerto Rico Telephone Authority, Series L, 6.125%, due 01-01-2022 A+ A2 364,000
SOUTH CAROLINA -- 0.4%
200,000 Marion, South Carolina, New Public Housing Authority, 4.875%, AAA Aaa 196,250
due 09-01-2010
TENNESSEE -- 0.3%
190,000 Nashville, Tennessee, New Public Housing Authority, 5.00%, AAA Aaa 186,438
due 08-01-2010
TEXAS -- 1.6%
300,000 El Paso, Texas, New Public Housing Authority, 5.00%, AAA Aaa 302,625
due 07-01-2005
200,000 Waco, Texas, New Public Housing Authority, 4.875%, AAA Aaa 194,750
due 12-01-2012
340,000 Waco, Texas, New Public Housing Authority, 4.875%, AAA Aaa 332,775
due 12-01-2009
VIRGIN ISLANDS -- 0.5%
255,000 Virgin Islands Water and Power Authority Revenue Bonds, AAA Aaa 251,813
5.25%, due 07-01-2012
WISCONSIN -- 78.0%
500,000 Housing Authority of the City of Ashland, Wisconsin, Student NR Aa3 443,125
Housing Revenue Bonds, Series 1998, (Northland College Project),
5.10%, due 04-01-2018
200,000 Brown County (Wisconsin) Housing Authority, Student Housing NR NR 177,000
Revenue Bonds, Series 1997B, (University Village Housing, Inc.,
Project), 5.400%, due 04-01-2017
500,000 Community Development Authority of the City of Cudahy NR Aa3 463,125
(Wisconsin) Redevelopment Lease Revenue Bonds,
Series 1999, 5.10%, due 06-01-2017
600,000 Community Development Authority of the City of Franklin, NR NR 556,500
(Wisconsin), Redevelopment Lease Revenue Refunding Bonds,
Series 1998-B, 4.80%, due 04-01-2009
1,000,000 Community Development Authority of the City of Glendale, Wisconsin, NR NR 953,750
Community Development Lease Revenue Bonds, Series 1998A,
(Tax Increment District No. 7), 5.50%, due 09-01-2017
3,000,000 Community Development Authority of the City of Glendale, NR NR 2,756,250
Wisconsin, Lease Revenue Bonds, Series 1998A,
(Tax Increment District No. 7), 5.40%, due 09-01-2018
1,000,000 Housing Authority of the County of Grant, Wisconsin, Housing NR A3 896,250
Refunding Revenue Bonds, Series 1998, (Orchard Manor), 5.35%,
due 07-01-2026
500,000 Housing Authority of the County of Grant, Wisconsin, Housing NR A3 456,875
Refunding Revenue Bonds, Series 1998, (Orchard Manor), 5.25%,
due 07-01-2018
150,000 Housing Authority of the City of Green Bay, Wisconsin, Student NR NR 146,438
Housing Refunding Revenue Bonds, Series 1997, (University Village
Housing, Inc.), 6.00%, due 04-01-2017
1,000,000 Redevelopment Authority of the City of Green Bay (Wisconsin), NR Aa2 881,250
Lease Revenue Bonds, Series 1999A, (Convention Center
Project), 5.10%, due 06-01-2029
200,000 City of Hartford Community Development Authority, Dodge and NR Aa2 207,750
Washington Counties, Wisconsin, Community Development Lease
Revenue Bonds, 5.90%, due 12-01-2006
100,000 Community Development Authority of the Village of Jackson, NR NR 91,500
Wisconsin, Community Development Refunding Revenue Bonds,
Series 1999, 4.90%, due 12-01-2013
600,000 Community Development Authority of the Village of Jackson, NR NR 543,000
Wisconsin, Community Development Refunding Revenue Bonds,
Series 1999, 5.10%, due 12-01-2017
500,000 Community Development Authority of the Village of Little Chute, NR NR 481,875
Wisconsin, Community Development Lease Revenue Bonds, 5.625%,
due 03-01-2019
3,050,000 Community Development Authority of the City of Madison,Wisconsin, AA- NR 2,623,000
Fixed Rate Development Revenue Bonds, Series 1998A, (Fluno
Center Project), 5.00%, due 11-01-2020
500,000 Community Development Authority of the City of Madison, Wisconsin, NR NR 462,500
Redevelopment Revenue Bonds, Series 1995,(Meriter Retirement
Services, Inc.), 6.125%, due 12-01-2019
300,000 Community Development Authority of the City of Madison,Wisconsin, NR NR 281,625
Multifamily Housing Revenue Bonds, Series 1995, (Dempsey Manor
Project), 6.65%, due 10-01-2025
1,000,000 Madison, Wisconsin, Community Development Authority Lease NR Aa2 1,045,000
Revenue Bonds, Monona Terrace Community & Convention Center
Project, 6.10%, due 3-01-2010
260,000 Community Development Authority of the City of Madison, Wisconsin, NR NR 248,625
Project Revenue Bonds, (Series 1986), 5.875%, due 07-01-2016
500,000 Redevelopment Authority of the City of Milwaukee, Wisconsin, NR A1 513,125
Development Revenue Bonds, (Goodwill Industries of Southeastern
Wisconsin Project), 6.35%, due 10-01-2009
100,000 Milwaukee, Wisconsin, Housing Authority Multifamily Revenue NR Aa2 101,625
Refunding Bonds-Blatz Apartments Project, 7.50%, due 12-01-2028
1,000,000 Redevelopment Authority of the City of Milwaukee (Wisconsin), NR NR 873,750
Development Revenue Bonds, Series 1998, (YMCA of Metropolitan
Milwaukee, Inc. Project), 5.10%, due 12-01-2023
750,000 Redevelopment Authority of the City of Milwaukee, Wisconsin, NR A1 690,000
Redevelopment Revenue Bonds, Series 1999A, (Young Women's
Christian Association of Greater Milwaukee), 5.30%, due 6-01-2029
215,000 Redevelopment Authority of the City of Milwaukee, Wisconsin, NR A1 200,219
Redevelopment Revenue Bonds, Series 1999A, (Young Women's
Christian Association of Greater Milwaukee), 5.25%, due 6-01-2019
180,000 Redevelopment Authority of the City of Milwaukee, Wisconsin, NR Aaa 165,150
Redevelopment Revenue Bonds, Series 1999B, (Young Women's
Christian Association of Greater Milwaukee), 5.20%, due 06-01-2029
1,000,000 Housing Authority of the City of Oak Creek, Wisconsin, Multifamily NR NR 1,015,000
Housing Refunding Revenue Bonds, Series 1994A, (Country Oaks II
Project), 6.30%, due 08-01-2028
75,000 Housing Authority of the City of Oak Creek, Wisconsin, Multifamily AAA NR 71,250
Housing Refunding Revenue Bonds, Series 1993, (Wood Creek
Project), 5.625%, due 07-20-2029
210,000 Community Development Authority of the City of Onalaska, NR NR 197,662
Wisconsin, Redevelopment Lease Revenue Refunding Bonds,
5.30%, due 06-01-2015
125,000 Housing Authority of the City of Oshkosh, Wisconsin, GNMA NR Aaa 119,219
Collateralized Multifamily Housing Revenue Bonds, Series 1997,
(VNA Assisted Living, Inc. Project), 5.45%, due 09-20-2017
1,275,000 Housing Authority of the City of Oshkosh, Wisconsin, GNMA NR Aaa 1,196,906
Collateralized Multifamily Housing Revenue Bonds, Series 1997,
(VNA Assisted Living, Inc. Project), 5.75%, due 09-20-2038
2,260,000 Southeast Wisconsin Professional Baseball Park District Sales AAA Aaa 2,370,175
Tax Revenue Bonds, Series 1996, 5.750%, prerefunded 03-13-2007
1,000,000 Housing Authority of the City of Sheboygan, Wisconsin, Multifamily AAA NR 891,250
Housing Refunding Revenue Bonds, Series 1998A, (GNMA Collat-
Lake Shore Apartments), 5.10%, due 11-20-2026
400,000 Redevelopment Lease Revenue Refunding Bonds, Redevelopment NR NR 368,000
Authority of the Village of Slinger, Wisconsin, 4.70%, due 09-01-2012
600,000 Redevelopment Authority of the Village of Slinger, Wisconsin, NR NR 615,750
Redevelopment Lease Revenue Bonds, Series 1995-A, 6.25%,
prerefunded 09-01-2001
2,000,000 Waterfront Redevelopment Authority of the City of Sturgeon Bay, NR NR 1,740,000
Wisconsin, Redevelopment Lease Revenue Bonds, Series 1998A,
5.20%, due 10-01-2021
1,360,000 Waterfront Redevelopment Authority of the City of Sturgeon Bay, A NR 1,169,600
Wisconsin, Redevelopment Lease Revenue Bonds, Series 1998B,
5.00%, due 10-01-2017
100,000 Redevelopment Authority of the City of Superior, Wisconsin, NR Aa2 104,250
Revenue Bonds, Series 1994, (Superior Memorial Hospital, Inc.),
5.80%, prerefunded 05-01-2002 @ 102
155,000 Redevelopment Authority of the City of Superior, Wisconsin, NR Aa2 161,006
Revenue Bonds, Series 1994, (Superior Memorial Hospital, Inc.),
5.60%, prerefunded 5-01-2002 @ 102
150,000 Redevelopment Authority of the City of Superior, Wisconsin, NR Aa2 155,812
Revenue Bonds, Series 1994, (Superior Memorial Hospital, Inc.),
5.65%, prerefunded 05-01-2002 @ 102
600,000 Housing Authority of the City of Superior, Wisconsin, Housing NR NR 586,500
Revenue Refunding Bonds, Series 1996, (GNMA Collateralized-
St. Francis Home, Inc. Project), 6.15%, due 07-20-2031
600,000 Community Development Authority of the Village of Sussex, NR NR 630,000
Wisconsin, Community Development Revenue Bonds, Series 1995,
6.10%, due 04-01-2015
445,000 Community Development Lease Revenue Bonds, Series 1997A, NR NR 428,869
Community Development Authority of the City of Verona, Wisconsin,
5.50%, due 06-01-2017
1,400,000 Wisconsin Center District, Junior Dedicated Tax Revenue Refunding AAA Aaa 1,258,250
Bonds, Series 1999, 5.25%, due 12-15-2027
1,600,000 Wisconsin Center District, Junior Dedicated Tax Revenue Refunding A NR 1,440,000
Bonds, Series 1999, 5.25%, due 12-15-2023
3,000,000 Wisconsin Center District, Junior Dedicated Tax Revenue Bonds, A NR 3,150,000
Series 1996B, 5.75%, Prerefunded 12-15-2006 @ 101
1,265,000 Wisconsin Housing Finance Authority Revenue Bonds, Prerefunded NR NR 1,277,650
12-01-2017 at Par, Escrowed by U.S. Government Security, 6.10%,
prerefunded 12-01-2017
1,425,000 Wisconsin Housing Finance Authority Revenue Bonds, Prerefunded AAA Aaa 1,425,000
12-01-2017 at Par, Escrowed by U.S. Government Security, (MBIA
Insured), 6.10%, prerefunded 12-01-2017
460,000 Walworth County (Wisconsin) Housing Authority Housing Revenue NR NR 427,800
Bonds, Series 1997, (FHA Insured Mortgage Loan-Kiwanis Herigage,
Inc. Senior Apartment Project), 5.70%, due 03-01-2039
1,000,000 Community Development Authority of the City of Watertown, NR NR 888,750
(Wisconsin), Redevelopment Lease Revenue Bonds, Series 1998A,
5.00%, due 05-01-2018
500,000 Housing Authority City of Waukesha, Wisconsin, Multifamily NR NR 455,625
Housing Refunding Revenue Bonds, Series 1998A, (FHA Insured
Mortgage Loan-Oak Hills Terrace Project), 5.45%, due 06-01-2027
1,000,000 Wauwatosa, Wisconsin, Redevelopment Authority, Milwaukee County, AAA Aaa 982,500
Wisconsin, Redevelopment Authority Lease Revenue Bonds, Series
1997, 5.65%, due 12-01-2015
715,000 Housing Authority of Winnebago County, Wisconsin, Multifamily NR NR 711,425
Housing Refunding Revenue Bonds, (Neenah-Menasha Ecumenical
Retirement Community, Inc. Project), 5.50%, due 10-01-2015
855,000 Housing Authority of Winnebago County, Wisconsin, Multifamily NR NR 718,200
Housing Refunding Revenue Bonds, (Neenah-Menasha Ecumenical -----------
Retirement Community, Inc. Project), 5.60%, due 10-01-2020
Total Long-Term Tax-Exempt Securities (Cost $54,117,039) $51,877,990
-----------
-----------
</TABLE>
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Principal Preservation Portfolios, Inc. and the
Shareholders of the Wisconsin Tax-Exempt Portfolio:
We have audited the accompanying balance sheet, including the schedule of
investments, of the PRINCIPAL PRESERVATION PORTFOLIOS, INC. (a Maryland
corporation) Wisconsin Tax-Exempt Portfolio as of December 31, 1999, and the
related statement of operations for the year then ended, and the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Principal Preservation Portfolios, Inc. Wisconsin Tax-Exempt Portfolio as
December 31, 1999, the results of its operations for the year then ended, and
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 19, 2000.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Richard J. Glaisner, Director
Robert J. Tuszynski, President, Director
Frank Ciano, Chief Financial Officer and Treasurer
James Brendemuehl, Senior Vice President of Sales
John Lauderdale, Senior Vice President of Marketing
Kathleen Cain, Secretary
INVESTMENT ADVISOR
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, TRANSFER AND DIVIDEND
DISBURSING AGENT, ACCOUNTING/PRICING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
CUSTODIAN
Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, Wisconsin 53202
COUNSEL
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
This report was prepared for shareholders of Principal Preservation Portfolios,
Inc.' s Wisconsin Tax-Exempt Portfolio. It may not be used in connection with
the offering of shares of the Wisconsin Tax-Exempt Portfolio unless preceded or
accompanied by a current Prospectus.
PP842-2/00
