(B.C. ZIEGLER AND COMPANY LOGO)
Quality Investments Since 1902
Cash Reserve Portfolio
Class X Common Stock
(Retail Shares)
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 2000
(PRINCIPAL PRESERVATION LOGO)
Cash Reserve Portfolio
Class X Common Stock
(Retail Shares)
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 2000
(PRINCIPAL PRESERVATION LOGO)
Cash Reserve Portfolio
Class Y Common Stock
(Institutional Shares)
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 2000
(PRINCIPAL PRESERVATION LOGO)
Cash Reserve Portfolio
Class B Common Stock
(Contingent
Deferred Shares)
SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 2000
CASH RESERVE PORTFOLIO
CLASS X COMMON STOCK (RETAIL SHARES)
PRESIDENT'S LETTER
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
August 30, 2000
Dear Shareholder:
During the six months ending June 30, 2000, we continued our tremendous
growth in assets as we went from $1,042,000,000 on December 31, 1999 to
$1,302,000,000 on June 30, 2000. Contributing to our growth has been the sales
inflows to our PSE Tech 100 Index Portfolio. Our participation in the
technology market has been better on the upside while providing protection on
the downside, through this diversified approach to a volatile market segment.
Recently, articles have been written discussing the benefits of the price-
weighted PSE Index vs. the more concentrated Nasdaq 100 and the widely accepted
technology laden Nasdaq composite indices. We continue to see growing interest
as well as substantial inflows into this fund.
Finally, to better leverage our opportunities in the marketplace and position
the mutual fund group to compete effectively into the new millennium, I have
stepped away from the Board. I retain the titles of President and CEO. The Board
of Directors elected Peter Ziegler as Chairman and a director of the fund
family. Peter has been involved in the financial services industry for over 20
years. I look forward to his contribution to the fund family as a fiduciary on
behalf of the fund shareholders.
On the following pages, we discuss in further detail, the investment
performance for the Cash Reserve Portfolio and look forward to your continued
trust with us.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
The accompanying report is intended for the existing shareholders of Principal
Preservation. It does not constitute an offer to sell. Any investor wishing to
receive more information about the portfolios should obtain a prospectus which
includes a discussion of each investment objective and all sales charges and
expenses of the relevant portfolio(s).
CASH RESERVE PORTFOLIO
CLASS Y COMMON STOCK (INSTITUTIONAL SHARES)
PRESIDENT'S LETTER
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
August 30, 2000
Dear Shareholder:
During the six months ending June 30, 2000, we continued our tremendous
growth in assets as we went from $1,042,000,000 on December 31, 1999 to
$1,302,000,000 on June 30, 2000. Contributing to our growth has been the sales
inflows to our PSE Tech 100 Index Portfolio. Our participation in the
technology market has been better on the upside while providing protection on
the downside, through this diversified approach to a volatile market segment.
Recently, articles have been written discussing the benefits of the price-
weighted PSE Index vs. the more concentrated Nasdaq 100 and the widely accepted
technology laden Nasdaq composite indices. We continue to see growing interest
as well as substantial inflows into this fund.
Finally, to better leverage our opportunities in the marketplace and position
the mutual fund group to compete effectively into the new millennium, I have
stepped away from the Board. I retain the titles of President and CEO. The Board
of Directors elected Peter Ziegler as Chairman and a director of the fund
family. Peter has been involved in the financial services industry for over 20
years. I look forward to his contribution to the fund family as a fiduciary on
behalf of the fund shareholders.
On the following pages, we discuss in further detail, the investment
performance for the Cash Reserve Portfolio and look forward to your continued
trust with us.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
The accompanying report is intended for the existing shareholders of Principal
Preservation. It does not constitute an offer to sell. Any investor wishing to
receive more information about the portfolios should obtain a prospectus which
includes a discussion of each investment objective and all sales charges and
expenses of the relevant portfolio(s).
CASH RESERVE PORTFOLIO
CLASS B COMMON STOCK (CONTINGENT DEFERRED SHARES)
PRESIDENT'S LETTER
SEMIANNUAL REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
August 30, 2000
Dear Shareholder:
During the six months ending June 30, 2000, we continued our tremendous
growth in assets as we went from $1,042,000,000 on December 31, 1999 to
$1,302,000,000 on June 30, 2000. Contributing to our growth has been the sales
inflows to our PSE Tech 100 Index Portfolio. Our participation in the
technology market has been better on the upside while providing protection on
the downside, through this diversified approach to a volatile market segment.
Recently, articles have been written discussing the benefits of the price-
weighted PSE Index vs. the more concentrated Nasdaq 100 and the widely accepted
technology laden Nasdaq composite indices. We continue to see growing interest
as well as substantial inflows into this fund.
Finally, to better leverage our opportunities in the marketplace and position
the mutual fund group to compete effectively into the new millennium, I have
stepped away from the Board. I retain the titles of President and CEO. The Board
of Directors elected Peter Ziegler as Chairman and a director of the fund
family. Peter has been involved in the financial services industry for over 20
years. I look forward to his contribution to the fund family as a fiduciary on
behalf of the fund shareholders.
On the following pages, we discuss in further detail, the investment
performance for the Cash Reserve Portfolio and look forward to your continued
trust with us.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
The accompanying report is intended for the existing shareholders of Principal
Preservation. It does not constitute an offer to sell. Any investor wishing to
receive more information about the portfolios should obtain a prospectus which
includes a discussion of each investment objective and all sales charges and
expenses of the relevant portfolio(s).
CASH RESERVE PORTFOLIO
PORTFOLIO REVIEW
JUNE 30, 2000 (UNAUDITED)
Short term interest rates continued their upward climb during the first
quarter as robust economic growth and inflation concerns prompted the Federal
Reserve to increase the Federal Funds rate another 50 basis points. Commercial
paper spreads increased relative to Treasury bills and agencies as direct
issuers enticed investors to extend maturities. As a result, the portfolio's
quarter-end allocation to commercial paper increased to 76.8%, from 62.8% on
December 31st. The percentage in the overnight repurchase agreement was also
raised in anticipation of further tightening moves by the Fed in the second
quarter.
These actions resulted in the average maturity extending from 35 days, at
year end, to 44 days by March 31st. We continued to methodically lengthen the
average maturity towards the 55 day industry average. The shorter average
maturity allowed us to meaningfully increase the gross yield, relative to our
"longer" peers, as securities were reinvested at successfully higher rates.
Short-term interest rates continued their upward climb during the second
quarter as robust economic growth and inflation concerns prompted the Federal
Reserve to increase the Federal Funds rate by 50 basis points on May 16th. As a
result, commercial paper and agency spreads increased dramatically relative to
Treasury bills as issuers continued to entice investors to extend maturities.
During the quarter, commercial paper and agency discount note spreads increased
from roughly 40 basis points to nearly 100 basis points relative to Treasury
bills. To take advantage of this opportunity, the portfolio's quarter-end
allocation to commercial paper and agencies increased to 93.2%, from 85.7% on
March 31st. The percentage of the portfolio in the overnight repurchase
agreement declined accordingly during the month of June after our anticipated
tightening move by the Fed was behind us.
These actions resulted in the average maturity extending further from 44
days, at the end of the first quarter, to 59 days by June 30th. The slightly
longer average maturity is a reflection of the positive slope in the money
market yield curve for securities maturing in less than one year.
CASH RESERVE PORTFOLIO
CLASS X COMMON STOCK (RETAIL SHARES)
FINANCIAL HIGHLIGHTS
<TABLE>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, 2000 ---------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996
----------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(Selected data for each retail share of the Fund
outstanding throughout the periods)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income .03 0.04 0.05 0.05 0.05
Less distributions:
Dividends from net investment income (.03) (0.04) (0.05) (0.05) (0.05)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (a)<F1> 2.63% 4.35% 4.77% 4.80% 4.78%
Ratios/Supplemental Data:
Net assets, end of period (nearest thousand) $127,305 $136,998 $147,995 $122,710 $89,946
Ratio of expenses to average net assets (b)<F2> 0.82% 0.90% 0.89% 0.86% 0.78%
Capital contributions (a)<F1> -- -- -- 0.13% --
Ratio of net investment income
to average net assets (b)<F2> 5.09% 4.26% 4.65% 4.71% 4.73%
</TABLE>
(a)<F1> In 1997 the advisers made capital contributions to offset losses in
securities. Without those capital contributions, the adjusted total
returns would have been 4.67% for 1997.
(b)<F2> For the years ended December 31, 1999, 1998, 1997 and 1996, the Fund's
adviser and administrator voluntarily waived a portion of their fees.
Without these voluntary waivers and expense reimbursements, the ratios
of net investment income and expenses to average net assets would have
been as follows:
<TABLE>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1999 1998 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Ratio of expenses to average net assets 0.93% 0.96% 0.94% 0.99%
Ratio of net investment income
to average net assets 4.23% 4.58% 4.63% 4.63%
</TABLE>
The accompanying notes are an integral part of the financial statements.
CASH RESERVE PORTFOLIO
CLASS Y COMMON STOCK (INSTITUTIONAL SHARES)
FINANCIAL HIGHLIGHTS
<TABLE>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, 2000 ---------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996
----------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(Selected data for each institutional share of the Fund
outstanding throughout the periods)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.03 0.05 0.05 0.05 0.05
Less distributions:
Dividends from net investment income (0.03) (0.05) (0.05) (0.05) (0.05)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (b)<F4> 2.79% 4.67% 5.15% 5.21% 5.20%
Ratios/Supplemental Data:
Net assets, end of period (nearest thousand) $15,926 $10,536 $19,889 $33,057 $35,120
Ratio of expenses to average net assets (a)<F3> 0.44% 0.58% 0.48% 0.45% 0.34%
Capital contribution (b)<F4> -- -- -- 0.17% --
Ratio of net investment income
to average net assets (a)<F3> 5.54% 4.54% 5.06% 5.10% 4.95%
(a)<F3> For the years ended December 31, 1999, 1998, 1997 and 1996 the adviser and administrator voluntarily waived a portion of
their fees. Without these voluntary waivers, the ratios would have been as follows:
Ratio of expenses to average net assets 0.62% 0.55% 0.54% 0.54%
Ratio of net investment income to average net assets 4.50% 4.99% 5.01% 4.75%
(b)<F4> During 1997, the adviser made capital contributions to offset losses in securities. Had the adviser not made capital
contributions, the adjusted total return would have been 5.04%.
</TABLE>
The accompanying notes are an integral part of the financial statements.
CASH RESERVE PORTFOLIO
CLASS B COMMON STOCK (CONTINGENT DEFERRED SHARES)
FINANCIAL HIGHLIGHTS
<TABLE>
FOR THE FOR THE PERIOD FROM
SIX MONTHS DECEMBER 15, 1999
ENDED (COMMENCEMENT OF
JUNE 30, 2000 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
(Selected data for each Class B share of the Fund
outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00
------ ------
Income from investment operations:
Net investment income .02 --
Less distributions:
Dividends from net investment income (.02) --
------ ------
Net asset value, end of period $ 1.00 $ 1.00
------ ------
------ ------
Total investment return 2.34% 3.47%*<F5>
Ratios/Supplemental Data:
Net assets, end of period (nearest thousand) $1,047 $117
Ratio of expenses to average net assets 1.39% 1.39%*<F5>
Ratio of net investment income to average net assets 4.16% 3.47%*<F5>
</TABLE>
*<F5> Annualized.
The accompanying notes are an integral part of the financial statements.
CASH RESERVE PORTFOLIO
BALANCE SHEET
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in Securities, at amortized cost and value:
U.S. Government and Agency Obligations $ 20,874,908
Investment in Repurchase Agreement 8,359,134
Short-term investments 115,650,090
Interest receivable 162,301
Other assets 3,328
------------
Total Assets 145,049,761
LIABILITIES:
Payable for capital shares redeemed $558,432
Dividends payable (Retail Class B) 199
Dividends payable (Institutional Class Y) 62,660
Management fees 25,166
Accrued expenses 125,511
--------
Total Liabilities 771,968
------------
NET ASSETS $144,277,793
------------
------------
NET ASSETS CONSIST OF:
Capital stock $144,274,631
Undistributed net investment income 3,976
Undistributed accumulated net realized (loss) (814)
------------
Net Assets $144,277,793
------------
------------
RETAIL CLASS X
Net Assets (in 000's) $ 127,305
Shares Authorized 200,000
Shares Issued and Outstanding 127,307
Net asset value and redemption price per share $1.00
INSTITUTIONAL CLASS Y
Net Assets (in 000's) $ 15,926
Shares Authorized 200,000
Shares Issued and Outstanding 15,924
Net asset value and redemption price per share $1.00
RETAIL CLASS B
Net Assets (in 000's) $ 1,047
Shares Authorized 200,000
Shares Issued and Outstanding 1,047
Net asset value and redemption price per share $1.00
</TABLE>
The accompanying notes are an integral part of the financial statements.
CASH RESERVE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $4,662,776
----------
Total investment income 4,662,776
----------
EXPENSES:
Investment advisory fees 154,258
Administration fees 115,693
Shareholder servicing fees Class X 174,154
Distribution fees Class X 106,273
Distribution fees Class B 3,038
Professional fees 21,300
Depository fees 7,182
Director fees 3,098
Registration fees --
Transfer agent fees Class X 725
Transfer agent fees Class Y 725
Pricing --
Printing and postage fees Class X 18,489
Printing and postage fees Class Y 5,702
Miscellaneous expenses 3,474
-------
Total expenses 614,111
Less: Waiver by the Adviser/Administrator --
-------
Net expenses 614,111
----------
NET INVESTMENT INCOME 4,048,665
NET REALIZED GAIN FROM PORTFOLIO SALES 1,039
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,049,704
----------
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
CASH RESERVE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,048,665 $ 6,924,463
Net realized gain (loss) 1,039 (1,852)
------------ ------------
Net increase in net assets resulting from operations 4,049,704 6,922,611
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 152,533,378 337,606,702
Net asset value of shares issued in distributions 3,687,963 6,269,819
Cost of shares redeemed (159,593,517) (364,108,393)
------------ ------------
Net decrease in net assets from capital share transactions (3,372,176) (20,231,872)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class B Shares (14,884) (145)
Class X Shares (3,665,682) (6,216,350)
Class Y Shares (369,823) (707,877)
------------ ------------
Total distributions (4,050,389) (6,924,372)
------------ ------------
CAPITAL CONTRIBUTIONS -- --
Total decrease in net assets (3,372,861) (20,233,633)
NET ASSETS:
Balance at beginning of period 147,650,654 167,884,287
------------ ------------
Balance at end of period $144,277,793 $147,650,654
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
CASH RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
NOTE 1 - ORGANIZATION
Principal Preservation Portfolios, Inc. (the "Company"), 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 Cash Reserve Portfolio (the "Fund"). 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 Fund is a separate series of the Company, a Maryland corporation organized
in 1984. The Fund's investment objective is a high level of current income
consistent with stability of principal and the maintenance of liquidity. The
Fund commenced operations on April 5, 1993. Institutionalshares were first
offered on January 1, 1996. Class B shares were first offered on December 15,
1999.
Through December 31, 1995, the Fund sought to achieve its investment objective
by investing all the investable assets in the Prime Money Market Portfolio (the
"Portfolio") a separate series of The Prime Portfolios, an open-end, diversified
management investment company. Prime had the same investment objectives as the
Fund.
Effective January 1, 1996, pursuant to an Agreement and Plan of Reorganization
and Liquidation dated December 8, 1995, this master/feeder fund structure was
unwound, and the Fund withdrew its investment in the Portfolio. The Fund was
restructured to increase its authorized capital from 300 million to 400 million
shares of the Company's common stock, which were subdivided into two separate
classes of 200 million shares each: Class X Common Stock (Retail Shares) and
Class Y Common Stock (Institutional Shares). All shares of the Fund outstanding
immediately prior to this restructuring were redesignated (without otherwise
affecting their rights and preferences) as Retail Shares. Financial highlights
presented herein as of and for periods ended prior to January 1, 1996 reflect
the performance of the Fund's investments through Prime.
Each class of shares has identical rights and privileges, except with respect to
service organization fees and distribution fees paid by Retail Shares, voting
rights on matters affecting a single Class of shares and the exchange privileges
of each Class of shares.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the Fund:
a) VALUATION OF INVESTMENTS - Money market instruments are valued at
amortized cost, which the Directors have determined in good faith
constitutes fair value. The Fund's use of amortized cost is subject to
the Fund's compliance with certain conditions as specified under Rule
2a-7 of the Investment Company Act of 1940.
b) INTEREST INCOME - Interest income consists of interest accrued and
discount earned (including both original issue and market discount) on
the investments of the Fund, accrued ratably to the date of expected
maturity. Premiums are amortized on the investments of the Fund, accrued
ratably to the date of expected maturity.
c) FEDERAL INCOME TAXES - The Fund intends to distribute substantially all
of its taxable income to its shareholders and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income or
excise taxes is necessary. As of December 31, 1999 the Fund has a
Federal income tax capital loss carryforward of $1,852 expiring in 2007.
Management does not intend to make any distributions of future realized
capital gains until its 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 increase undistributed
net investment income by $4,228, decrease capital stock by $3,532 and
increase accumulated net realized loss by $696.
d) EXPENSE ALLOCATION - The Fund bears all costs of its operations other
than expenses specifically assumed by B.C. Ziegler and Company ("BCZ").
Expenses incurred by the Company with respect to any two or more funds
in the series are allocated in proportion to the average net assets of
each fund, except where allocations of direct expenses in each fund can
otherwise be made fairly. Net investment income, including expenses,
other than class specific expenses and realized and unrealized gains and
losses are allocated daily to each class of shares based upon the
relative net asset value of outstanding shares of each class of shares
at the beginning of the day.
e) 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 reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
f) OTHER - Investment transactions are accounted for on the date the
security is purchased or sold. The Fund has investments in repurchase
agreements, which are securities purchased from another party who agrees
to repurchase the security within a specified time period at a specified
price. It is the policy of the Fund to require the custodian bank to
have legally segregated within the Federal Reserve/Treasury book-entry
system, all securities held as collateral in support of the repurchase
agreements. Procedures have been established by the Fund to monitor the
market value of the collateral to ensure the existence of a proper level
of collateral.
Risks may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of the collateral
securities.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
a) INVESTMENT ADVISORY FEES - Ziegler Asset Management, Inc. ("ZAMI"), a
wholly-owned subsidiary of The Ziegler Companies, Inc., is the
Investment Adviser to the Fund. For its services under the Investment
Advisory Agreement, the advisor receives from the Fund a fee accrued
daily and paid monthly at an annual rate equal to 0.20% of the
Portfolio's average daily net assets. For the six months ended June 30,
2000, the Fund incurred total Advisory fees of $154,258.
b) ADMINISTRATION FEES - Pursuant to an Administrative Services Agreement,
BCZ, an affiliate of ZAMI, provides the Fund general office facilities
and supervises the overall administration of the Fund. For these
services, BCZ receives a fee computed daily and payable monthly
totalling 0.15% of average daily net assets up to $200 million, and
0.10% of such assets over $200 million. For the six months ended June
30, 2000, the Fund incurred administration fees of $115,693.
c) BCZ has an Accounting and Pricing Agreement with the Fund to provide
accounting and pricing services. In addition, the Fund pays BCZ
distribution fees and shareholder service fees for shareholder accounts
maintained by BCZ instead of the applicable transfer agent fees. The
total amount of the fees paid to BCZ for the six months ended June 30,
2000 were as follows:
SHAREHOLDER SERVICE DISTRIBUTION - DISTRIBUTION - FUND
CLASS X CLASS X CLASS B ACCOUNTING
------------------- -------------- -------------- ----------
$174,154 $104,726 $3,038 $25,900
NOTE 4 - 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 and Managed
Growth also have designated Class B (contingent deferred sales charge)
shares. Each of the aforementioned portfolios and the Government
Portfolio have designated Class C shares. The shares of the Cash Reserve
Portfolio have Class X (Retail Shares) and Class Y (Institutional
Shares) and Class B shares. 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) Shown below is the Capital share activity, in thousands, during the year
ended December 31, 1999 and the six months ended June 30, 2000 for
Class X and Class Y shares. The activity for Class B shares is from
December 15, 1999 (inception) through December 31, 1999 and the six
months ended June 30, 2000.
CLASS X CLASS Y CLASS B
------- ------- -------
SHARES OUTSTANDING
AT DECEMBER 31, 1998 147,994 19,889 --
-------- ------- -----
Shares sold 253,274 84,215 117
Shares reinvested 6,215 55 --
Shares redeemed (270,481) (93,628) --
-------- ------- -----
SHARES OUTSTANDING
AT DECEMBER 31, 1999 137,002 10,531 117
-------- ------- -----
Shares sold 121,498 29,368 1,668
Shares reinvested 3,660 15 13
Shares redeemed (134,853) (23,990) (751)
-------- ------- -----
SHARES OUTSTANDING
AT JUNE 30, 2000 127,307 15,924 1,047
-------- ------- -----
-------- ------- -----
CASH RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
PRINCIPAL MATURITY INTEREST VALUE
AMOUNT DATE RATE (NOTE 2A)
--------- -------- -------- ---------
<S> <C> <C> <C>
CORPORATE BONDS -- 0.7%
$1,000,000 Toyota Motor Credit Corporation 7/6/00 5.770% $ 999,915
------------
Total Corporate Bonds 999,915
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 14.5%
FEDERAL FARM CREDIT BANKS ("FFCB")
2,000,000 FFCB Note 10/10/00 5.900 1,996,650
------------
Total Federal Farm Credit Banks 1,996,650
------------
FEDERAL HOME LOAN BANK ("FHLB")
2,000,000 FHLB Note 9/22/00 5.750 1,999,858
1,000,000 FHLB Note 7/13/00 5.480 999,800
3,000,000 FHLB Discount Note 7/6/00 6.460 2,997,308
500,000 FHLB Note 7/3/00 6.190 500,000
------------
Total Federal Home Loan Bank 6,496,966
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC")
2,613,000 FHLMC Discount Note 8/24/00 6.430 2,587,798
2,500,000 FHLMC Discount Note 7/25/00 6.360 2,489,400
2,000,000 FHLMC Discount Note 7/18/00 6.420 1,993,937
2,000,000 FHLMC Discount Note 7/14/00 6.410 1,995,371
225,290 FHLMC Gold Participation Certificate Pool #G40001 8/1/00 7.000 225,253
726,151 FHLMC Pool #M90443 3/1/00 6.500 722,223
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Total Federal Home Loan Mortgage Corporation 10,013,982
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FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")
150,000 FNMA Medium Term Note 3/15/01 6.180 149,047
150,000 FNMA Medium Term Note 2/2/01 5.600 148,766
157,000 FNMA Medium Term Note 1/16/01 5.380 155,652
500,000 FNMA Medium Term Note 10/13/00 4.390 497,046
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Total Federal National Mortgage Association 950,511
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STUDENT LOAN MARKETING ASSOCIATION ("SLMA")
920,000 SLMA Medium Term Note 11/3/00 6.045 917,342
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Total Student Loan Marketing Association 917,342
------------
TENNESSEE VALLEY AUTHORITY ("TVA")
500,000 TVA Power Bond 1995 Series B 6/10/01 6.000 499,457
------------
Total Tennessee Valley Authority 499,457
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TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 20,874,908
------------
SHORT TERM -- 85.2%
COMMERCIAL PAPER
4,000,000 American General Finance Corporation 11/20/00 6.580 3,895,926
3,500,000 American General Finance Corporation 7/6/00 5.950 3,497,108
3,000,000 American Express Credit Corporation 10/17/00 6.530 2,941,230
4,000,000 American Express Credit Corporation 9/5/00 6.580 3,951,747
500,000 American Express Credit Corporation 7/10/00 6.540 499,182
3,500,000 Associates Corporation 9/18/00 6.540 3,449,769
3,500,000 Associates Corporation 9/5/00 6.560 3,457,907
500,000 Associates Corporation 7/17/00 6.540 498,542
500,000 The CIT Group Holdings Corporation 10/23/00 6.680 489,423
4,000,000 The CIT Group Holdings Corporation 9/11/00 6.180 3,950,560
3,000,000 The CIT Group Holdings Corporation 8/8/00 6.100 2,980,683
4,500,000 Citicorp 8/3/00 6.510 4,473,146
3,000,000 Citicorp 7/5/00 6.550 2,997,817
1,000,000 DuPont EI De Nemours Company 8/17/00 6.580 991,409
3,000,000 DuPont EI De Nemours Company 7/21/00 6.500 2,989,167
1,000,000 DuPont EI De Nemours Company 7/12/00 6.510 998,011
3,500,000 Ford Motor Credit Corporation 10/10/00 6.570 3,435,486
3,500,000 Ford Motor Credit Corporation 9/7/00 6.560 3,456,631
500,000 Ford Motor Credit Corporation 7/10/00 6.540 499,182
2,000,000 General Electric Capital Corporation 1/9/01 6.670 1,928,853
5,500,000 General Electric Capital Corporation 8/1/00 6.000 5,471,584
4,000,000 General Motors Acceptance Corporation 10/5/00 6.580 3,929,814
3,500,000 General Motors Acceptance Corporation 7/10/00 5.980 3,494,768
3,000,000 Household Finance Corporation 11/16/00 6.570 2,924,445
4,000,000 Household Finance Corporation 9/5/00 6.540 3,952,040
500,000 Household Finance Corporation 8/22/00 6.620 495,219
4,000,000 IBM Credit Corporation 8/17/00 6.510 3,966,003
3,500,000 IBM Credit Corporation 7/21/00 6.500 3,487,361
3,000,000 John Deere Capital Corporation 11/15/00 6.560 2,925,107
500,000 John Deere Capital Corporation 8/22/00 6.640 495,233
4,000,000 John Deere Capital Corporation 8/7/00 6.550 3,973,072
3,500,000 Marshall & Ilsley Corporation 8/9/00 6.130 3,476,757
3,500,000 Marshall & Ilsley Corporation 7/10/00 6.100 3,494,663
4,000,000 Merrill Lynch 8/21/00 6.650 3,962,317
3,500,000 Merrill Lynch 8/11/00 6.530 3,473,971
4,000,000 Norwest Financial Corporation 10/6/00 6.600 3,928,867
3,500,000 Norwest Financial Corporation 8/28/00 6.640 3,462,558
4,000,000 Prudential Funding Corporation 11/20/00 6.710 3,893,855
2,500,000 Prudential Funding Corporation 9/25/00 6.570 2,460,762
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Total Commercial Paper 114,650,175
REPURCHASE AGREEMENT
8,359,134 Credit Suisse First Boston Corporation 7/3/00 6.300 8,359,134
------------
(Agreement dated 6/30/00, collateralized by $4,989,000
U.S. Treasury Bonds, at 12.750%, due 11/15/10, $6,464,848
market value and $1,819,000 U.S. Treasury Bonds, at 10.375%,
due 11/15/09, $2,106,132 market value)
TOTAL SHORT-TERM 123,009,309
------------
Total Investments, at Amortized Cost $144,884,132
------------
------------
</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.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
Peter D. Ziegler, Chairman, Director
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Robert J. Tuszynski, President
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
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
ADMINISTRATOR, DISTRIBUTOR
AND ACCOUNTING/PRICING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC Global Fund Services
P.O. Box 60504
King of Prussia, Pennsylvania 19406
CUSTODIAN
Firstar Trust Company
777 East Wisconsin Avenue
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 who own Retail Shares of Principal
Preservation Portfolios, Inc.' s Cash Reserve Portfolio. It may not be used in
connection with the offering of securities unless preceded or accompanied by a
current Prospectus.
