PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PRESIDENT'S LETTER
ANNUAL REPORT TO SHAREHOLDERS
OCTOBER 31, 2000
December 26, 2000
Dear Shareholder:
I am pleased to present our annual report for the fiscal year ended October
31, 2000. Despite a rather tumultuous year for the financial markets, I'm
pleased to report the size of our fund family has grown from $831,000,000 to
$1,290,000,000. What's even more exciting is that the majority of this growth
has been from net new investments into our fund family.
As I sit down to write this letter, I look back over some of the stories that
influenced the markets and our portfolios over the past year. This year's
volatile equity market, fueled by one of the most memorable presidential
elections our nation has ever witnessed, tested investors' resolve.
An upside to these rather uncertain market conditions has been the resiliency
of our mutual fund family as a whole, as well as each of our individual
portfolios. This past year has seen many funds fall well below their respective
benchmark indicators. Our portfolios, on the other hand, moved by and large in
tandem with their respective benchmarks and the marketplace, providing our
shareholders with few surprises.
As we begin our new fiscal year, it remains important to revisit your long-
term investment strategy. It's also important to be patient and realistic in
your expectations of market growth. The unprecedented gains over the last few
years appear to be settling into a more normalized pattern.
Now, more than ever, responsible investing -- believing the underlying
quality of investments is as important as any current return characteristics. We
believe strongly in holding fixed income investments that meet the highest
quality standards, and equity investments that offer good growth in earnings and
strong management.
We appreciate the trust you've placed in us over the past year. Now, we
invite you to read through our annual report, including our manager's
discussions of performance on the following pages.
Sincerely Yours,
/s/Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
This report contains information for existing shareholders of Principal
Preservation. It does not constitute an offer to sell. If an investor wishes to
receive more information about the portfolios, the investor should obtain a
prospectus, which includes a discussion of each portfolio's investment objective
and all sales charges and expenses of the relevant portfolio(s).
TAX-EXEMPT PORTFOLIO
Principal Preservation Lehman 20-Year
Date Tax-Exempt Portfolio Municipal Bond Index
---- -------------------- --------------------
10/31/90 $9,653 $10,000
11/30/90 $9,825 $10,201
12/31/90 $9,902 $10,246
1/31/91 $10,016 $10,383
2/28/91 $10,130 $10,473
3/31/91 $10,147 $10,477
4/30/91 $10,214 $10,616
5/31/91 $10,280 $10,710
6/30/91 $10,335 $10,699
7/31/91 $10,402 $10,830
8/31/91 $10,533 $10,973
9/30/91 $10,626 $11,116
10/31/91 $10,733 $11,216
11/30/91 $10,762 $11,247
12/31/91 $10,894 $11,489
1/31/92 $10,962 $11,515
2/29/92 $10,953 $11,518
3/31/92 $10,995 $11,523
4/30/92 $11,115 $11,626
5/31/92 $11,248 $11,763
6/30/92 $11,394 $11,961
7/31/92 $11,807 $12,320
8/31/92 $11,635 $12,199
9/30/92 $11,663 $12,278
10/30/92 $11,490 $12,158
11/30/92 $11,749 $12,376
12/31/92 $11,833 $12,502
1/31/93 $12,054 $12,647
2/28/93 $12,550 $13,105
3/31/93 $12,427 $12,966
4/30/93 $12,567 $13,097
5/31/93 $12,638 $13,170
6/30/93 $12,847 $13,390
7/31/93 $12,874 $13,407
8/31/93 $13,154 $13,686
9/30/93 $13,336 $13,842
10/30/93 $13,362 $13,868
11/30/93 $13,231 $13,746
12/31/93 $13,529 $14,036
1/31/94 $13,698 $14,213
2/28/94 $13,306 $13,788
3/31/94 $12,694 $13,061
4/30/94 $12,807 $13,168
5/31/94 $12,921 $13,323
6/30/94 $12,828 $13,190
7/31/94 $13,089 $13,492
8/31/94 $13,114 $13,530
9/30/94 $12,903 $13,259
10/31/94 $12,616 $12,909
11/30/94 $12,343 $12,607
12/31/94 $12,660 $13,003
1/31/95 $13,098 $13,511
2/28/95 $13,507 $14,001
3/31/95 $13,656 $14,161
4/30/95 $13,666 $14,158
5/31/95 $14,155 $14,692
6/30/95 $13,949 $14,466
7/31/95 $14,022 $14,541
8/31/95 $14,219 $14,740
9/30/95 $14,306 $14,856
10/31/95 $14,552 $15,172
11/30/95 $14,784 $15,507
12/31/95 $14,945 $15,724
1/31/96 $15,017 $15,804
2/29/96 $14,898 $15,624
3/31/96 $14,698 $15,374
4/30/96 $14,643 $15,313
5/31/96 $14,638 $15,331
6/30/96 $14,826 $15,547
7/31/96 $14,932 $15,699
8/31/96 $14,891 $15,674
9/30/96 $15,162 $15,991
10/31/96 $15,320 $16,183
11/30/96 $15,610 $16,521
12/31/96 $15,507 $16,424
1/31/97 $15,483 $16,408
2/28/97 $15,609 $16,584
3/31/97 $15,299 $16,324
4/30/97 $15,475 $16,505
5/31/97 $15,736 $16,802
6/30/97 $15,915 $17,014
7/31/97 $16,518 $17,586
8/31/97 $16,198 $17,370
9/30/97 $16,444 $17,610
10/31/97 $16,553 $17,739
11/30/97 $16,661 $17,883
12/31/97 $16,965 $18,208
1/31/98 $17,129 $18,412
2/28/98 $17,043 $18,425
3/31/98 $16,973 $18,451
4/30/98 $16,829 $18,357
5/31/98 $17,210 $18,689
6/30/98 $17,232 $18,773
7/31/98 $17,233 $18,812
8/31/98 $17,580 $19,137
9/30/98 $17,803 $19,407
10/31/98 $17,656 $19,345
11/30/98 $17,710 $19,434
12/31/98 $17,688 $19,477
1/31/99 $17,899 $19,685
2/28/99 $17,726 $19,602
3/31/99 $17,763 $19,671
4/30/99 $17,780 $19,724
5/31/99 $17,565 $19,576
6/30/99 $17,174 $19,259
7/31/99 $17,152 $19,282
8/31/99 $16,798 $18,972
9/30/99 $16,680 $18,911
10/31/99 $16,286 $18,520
11/30/99 $16,523 $18,796
12/31/99 $16,285 $18,567
1/31/00 $16,104 $18,437
2/29/00 $16,339 $18,789
3/31/00 $16,796 $19,396
4/30/00 $16,651 $19,212
5/31/00 $16,506 $19,060
6/30/00 $16,990 $19,687
7/31/00 $17,274 $20,026
8/31/00 $17,578 $20,410
9/30/00 $17,389 $20,245
10/31/00 $17,633 $20,524
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 5-YEAR 10-YEAR
Tax-Exempt: ------ ------ -------
Full Sales Charge 4.48% 3.17% 5.83%
Net Asset Value 8.27% 3.91% 6.20%
The graph above compares the change in value of a $10,000 investment in the
Tax-Exempt Portfolio with the Lehman 20-Year Municipal Bond Index. The graph
reflects a deduction from the amount invested for the applicable sales charge.
LEHMAN 20-YEAR MUNICIPAL BOND INDEX
The Lehman 20-Year Municipal Bond Index is a broad-based index containing
more than 22,000 issues with maturities ranging from two to 30 years. The issues
comprising the Index are those completed within the last five years with a 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 you would
pay if you attempted to replicate the Index.
FISCAL YEAR IN REVIEW
The United States Treasury market started a rally in mid-January as the
Treasury Department started a buy-back program of longer term, higher coupon
bonds. This caused an inversion in the yield curve. Consequently, the municipal
bond market lagged in January and February, until a March rally lifted the
municipal market relative to Treasuries. Over the course of the first quarter,
customer redemptions totaled nearly $2,000,000 more than total sales. However,
this net outflow was less than the redemptions many other municipal bond funds
experienced during the same period. Total return for the first calendar quarter
was 3.14%.
The second calendar quarter saw a continued decrease in new issue supply in
the tax-exempt municipal market, coupled with a tightening of interest rates
across the maturity spectrum. This resulted in tax-exempt municipals
outperforming taxable fixed income investments. The quarter also saw a 22.4%
decrease in new issues compared to the same period in 1999. Total return
performance at the end of the second calendar quarter was 4.00%, compared to the
returns of its peer group which advanced 3.21%.
A continued decrease in new issue supply carried through the third calendar
quarter, coupled with a further tightening of interest rates across the maturity
spectrum. This resulted in tax-exempt municipals outperforming taxable fixed
income investments. Year-to-date at September 30, 2000, the Portfolio provided a
total return of 6.78% versus 6.44% for its peer group.
At the end of the Portfolio's fiscal year on October 31, 2000, its total
return for the ten calendar months of 2000 was 8.28%. With higher-yielding
sectors of the municipal market substantially underperforming higher quality
tax-exempt assets, the fund enjoyed a resurgent October. Trades were limited
during the month. Overall, the portfolio remains invested in securities rated
"AA" or higher, making it, on average, a higher-quality fund compared to its
peer group.
GOVERNMENT PORTFOLIO
Principal Preservation Lehman Intermediate
Date Government Portfolio Government Bond Index
---- -------------------- ---------------------
10/31/90 $9,653 $10,000
11/30/90 $9,862 $10,151
12/31/90 $10,008 $10,291
1/31/91 $10,088 $10,397
2/28/91 $10,144 $10,460
3/31/91 $10,179 $10,518
4/30/91 $10,281 $10,626
5/31/91 $10,327 $10,686
6/30/91 $10,283 $10,695
7/31/91 $10,399 $10,811
8/31/91 $10,665 $11,016
9/30/91 $10,885 $11,203
10/31/91 $11,002 $11,331
11/30/91 $11,131 $11,464
12/31/91 $11,522 $11,743
1/31/92 $11,284 $11,630
2/29/92 $11,317 $11,666
3/31/92 $11,216 $11,619
4/30/92 $11,295 $11,724
5/31/92 $11,521 $11,899
6/30/92 $11,723 $12,070
7/31/92 $12,062 $12,302
8/31/92 $12,191 $12,427
9/30/92 $12,409 $12,598
10/30/92 $12,188 $12,447
11/30/92 $12,107 $12,396
12/31/92 $12,305 $12,556
1/31/93 $12,606 $12,790
2/28/93 $12,882 $12,978
3/31/93 $12,927 $13,026
4/30/93 $13,035 $13,128
5/31/93 $12,999 $13,093
6/30/93 $13,304 $13,283
7/31/93 $13,323 $13,310
8/31/93 $13,606 $13,508
9/30/93 $13,676 $13,563
10/30/93 $13,704 $13,596
11/30/93 $13,517 $13,529
12/31/93 $13,573 $13,584
1/31/94 $13,753 $13,718
2/28/94 $13,424 $13,530
3/31/94 $13,068 $13,332
4/30/94 $12,944 $13,245
5/31/94 $12,932 $13,254
6/30/94 $12,891 $13,257
7/31/94 $13,103 $13,431
8/31/94 $13,133 $13,470
9/30/94 $12,920 $13,358
10/31/94 $12,907 $13,361
11/30/94 $12,821 $13,302
12/31/94 $12,839 $13,346
1/31/95 $13,060 $13,564
2/28/95 $13,362 $13,826
3/31/95 $13,424 $13,902
4/30/95 $13,589 $14,063
5/31/95 $14,068 $14,460
6/30/95 $14,156 $14,553
7/31/95 $14,139 $14,560
8/31/95 $14,289 $14,679
9/30/95 $14,395 $14,777
10/31/95 $14,579 $14,938
11/30/95 $14,778 $15,120
12/31/95 $14,936 $15,270
1/31/96 $15,020 $15,398
2/29/96 $14,788 $15,235
3/31/96 $14,669 $15,165
4/30/96 $14,596 $15,121
5/31/96 $14,554 $15,113
6/30/96 $14,719 $15,267
7/31/96 $14,741 $15,314
8/31/96 $14,716 $15,331
9/30/96 $14,933 $15,529
10/31/96 $15,216 $15,784
11/30/96 $15,468 $15,975
12/31/96 $15,276 $15,889
1/31/97 $15,298 $15,949
2/28/97 $15,320 $15,975
3/31/97 $15,106 $15,884
4/30/97 $15,314 $16,064
5/31/97 $15,423 $16,189
6/30/97 $15,584 $16,328
7/31/97 $16,020 $16,628
8/31/97 $15,835 $16,565
9/30/97 $16,067 $16,746
10/31/97 $16,315 $16,942
11/30/97 $16,335 $16,979
12/31/97 $16,513 $17,117
1/31/98 $16,779 $17,340
2/28/98 $16,693 $17,321
3/31/98 $16,721 $17,375
4/30/98 $16,786 $17,458
5/31/98 $16,926 $17,578
6/30/98 $17,045 $17,696
7/31/98 $17,077 $17,763
8/31/98 $17,531 $18,099
9/30/98 $18,115 $18,521
10/31/98 $18,034 $18,552
11/30/98 $17,968 $18,494
12/31/98 $18,015 $18,566
1/31/99 $18,100 $18,650
2/28/99 $17,712 $18,394
3/31/99 $17,803 $18,515
4/30/99 $17,855 $18,565
5/31/99 $17,618 $18,452
6/30/99 $17,574 $18,480
7/31/99 $17,513 $18,482
8/31/99 $17,511 $18,508
9/30/99 $17,702 $18,667
10/31/99 $17,710 $18,704
11/30/99 $17,666 $18,717
12/31/99 $17,541 $18,659
1/31/00 $17,434 $18,596
2/29/00 $17,583 $18,750
3/31/00 $17,914 $18,964
4/30/00 $17,852 $18,956
5/31/00 $17,895 $19,007
6/30/00 $18,162 $19,309
7/31/00 $18,288 $19,436
8/31/00 $18,538 $19,654
9/30/00 $18,554 $19,825
10/31/00 $18,698 $19,962
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 5-YEAR 10-YEAR
Government: ------ ------ -------
Full Sales Charge 1.89% 4.35% 6.45%
Net Asset Value 5.58% 5.09% 6.83%
The graph above compares the change in value of a $10,000 investment in the
Government Portfolio Class A Shares with the Lehman Intermediate Government Bond
Index. The graph reflects a deduction from the amount invested for the
applicable sales charge. Class C Shares were first offered beginning May 8,
2000, so results for Class C Shares are not presented in the graph.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX
The Lehman Intermediate Government Bond Index represents a total return on
United States Government bonds in the Index is approximately four years. The
Index does not contain any sales charge, expenses or other fees that you would
incur if you attempted to replicate the Index.
FISCAL YEAR IN REVIEW
The first quarter of 2000 marked the first fully inverted treasury yield
curve in many years. From a true fundamental standpoint, the inversion and
related long government securities rally reflects investor confidence that the
Federal Reserve's aggressive monetary policy has successfully curbed inflation.
During this period, the manager of the Government Portfolio responded by
lengthening the overall duration of the fund, and made specific selections in
the longer end of the curve to achieve price appreciation.
Throughout the second calendar quarter of 2000, the yield curve remained
inverted as the Federal Reserve continued its pursuit of restraining the
imbalances between the growth of aggregate demand and expansion of production
potential. A key element in this disparity was the very rapid growth of
consumption resulting from the rise in household wealth. In response, the
Federal Reserve increased the Federal Reserve Funding rate by 50 basis points at
its May meeting. After the Federal Reserve meeting in May, the economy began to
show indications of moderating as the growth in household spending slowed.
The Treasury market continued its rally throughout the third calendar
quarter, the source being the continued convergence between the growth in
aggregate demand and the expansion in production potential. More importantly,
market participants perceived that the Federal Reserve had completed its pursuit
of slowing economic growth, they began buying the short-end of the yield curve
and selling the long-end.
The Portfolio ended the fiscal year 2000 up 6.60%. For the month of October,
the manager maintained a duration that was slightly shorter than the duration of
the benchmark index by underweighting between the 20- and 30-year sectors. He
continued to reposition the Portfolio's asset allocation to take advantage of
the dynamics of the economy. As market opportunities arise, the Portfolio will
continue to make specific security selections to capture price appreciation. In
addition, the Portfolio will continue to focus on sector specific spread
relationships to improve its performance against the benchmark.
S&P 100 PLUS PORTFOLIO
Principal Preservation
Date S&P 100 Plus Portfolio S&P 100 Index
---- ---------------------- -------------
10/31/90 $9,476 $10,000
11/30/90 $10,017 $10,598
12/31/90 $10,208 $10,796
1/31/91 $10,736 $11,349
2/28/91 $11,510 $12,177
3/31/91 $11,790 $12,458
4/30/91 $11,817 $12,475
5/31/91 $12,348 $13,049
6/30/91 $11,780 $12,477
7/31/91 $12,349 $13,093
8/31/91 $12,482 $13,270
9/30/91 $12,187 $12,962
10/31/91 $12,303 $13,123
11/30/91 $11,776 $12,598
12/31/91 $13,041 $13,839
1/31/92 $12,849 $13,658
2/29/92 $13,051 $13,881
3/31/92 $12,824 $13,655
4/30/92 $13,220 $14,096
5/31/92 $13,303 $14,196
6/30/92 $13,075 $13,982
7/31/92 $13,519 $14,431
8/31/92 $13,158 $14,072
9/30/92 $13,206 $14,102
10/30/92 $13,160 $14,054
11/30/92 $13,578 $14,487
12/31/92 $13,716 $14,662
1/31/93 $13,882 $14,860
2/28/93 $14,127 $15,138
3/31/93 $14,384 $15,427
4/30/93 $14,108 $15,168
5/31/93 $14,502 $15,612
6/30/93 $14,487 $15,618
7/31/93 $14,378 $15,543
8/31/93 $14,921 $16,120
9/30/93 $14,725 $15,907
10/30/93 $14,962 $16,166
11/30/93 $14,893 $16,130
12/31/93 $15,047 $16,399
1/31/94 $15,617 $17,037
2/28/94 $15,227 $16,637
3/31/94 $14,472 $15,853
4/30/94 $14,582 $15,972
5/31/94 $14,914 $16,368
6/30/94 $14,469 $15,885
7/31/94 $14,973 $16,474
8/31/94 $15,437 $17,013
9/30/94 $15,145 $16,685
10/31/94 $15,479 $17,082
11/30/94 $14,952 $16,506
12/31/94 $15,215 $16,828
1/31/95 $15,489 $17,160
2/28/95 $16,171 $17,961
3/31/95 $16,660 $18,556
4/30/95 $17,273 $19,289
5/31/95 $17,967 $20,128
6/30/95 $18,349 $20,593
7/31/95 $18,903 $21,277
8/31/95 $18,800 $21,166
9/30/95 $19,697 $22,224
10/31/95 $19,697 $22,240
11/30/95 $20,479 $23,163
12/31/95 $20,800 $23,552
1/31/96 $21,620 $24,546
2/29/96 $21,886 $24,892
3/31/96 $22,102 $25,146
4/30/96 $22,369 $25,506
5/31/96 $22,914 $26,200
6/30/96 $22,949 $26,302
7/31/96 $21,814 $25,074
8/31/96 $22,307 $25,676
9/30/96 $23,448 $27,039
10/31/96 $24,039 $27,845
11/30/96 $25,908 $30,064
12/31/96 $25,463 $29,571
1/31/97 $27,020 $31,724
2/28/97 $26,939 $31,654
3/31/97 $25,941 $30,419
4/30/97 $27,479 $32,451
5/31/97 $28,937 $34,210
6/30/97 $30,157 $35,683
7/31/97 $32,638 $38,591
8/31/97 $30,516 $36,117
9/30/97 $32,087 $38,038
10/31/97 $30,669 $36,395
11/30/97 $32,250 $38,320
12/31/97 $32,280 $38,450
1/31/98 $32,949 $39,214
2/28/98 $35,301 $42,049
3/31/98 $37,163 $44,370
4/30/98 $37,713 $45,037
5/31/98 $37,175 $44,477
6/30/98 $39,016 $46,678
7/31/98 $38,789 $46,418
8/31/98 $33,148 $39,757
9/30/98 $34,801 $41,672
10/31/98 $37,848 $45,412
11/30/98 $40,763 $48,878
12/31/98 $42,712 $51,217
1/31/99 $45,318 $54,326
2/28/99 $43,691 $52,517
3/31/99 $45,722 $54,980
4/30/99 $47,768 $57,493
5/31/99 $46,543 $56,102
6/30/99 $49,857 $60,063
7/31/99 $48,337 $58,315
8/31/99 $48,999 $59,137
9/30/99 $47,681 $57,517
10/31/99 $50,882 $61,376
11/30/99 $53,286 $63,303
12/31/99 $56,505 $68,000
1/31/00 $53,712 $64,722
2/29/00 $52,843 $63,453
3/31/00 $58,392 $70,090
4/30/00 $55,946 $67,237
5/31/00 $54,530 $65,596
6/30/00 $56,554 $68,102
7/31/00 $56,020 $67,496
8/31/00 $59,249 $71,445
9/30/00 $54,418 $65,651
10/31/00 $53,797 $64,916
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 5-YEAR 10-YEAR
S&P 100 Plus: ------ ------- -------
Class A Shares 0.18% 20.90% 18.30%
Class B Shares -0.06% N/A N/A
The graph above compares the change in value of a $10,000 investment in the
S&P 100 Plus Portfolio Class A Shares with the S&P 100 Index. The graph reflects
a deduction from the amount invested for the applicable sales charge. Class B
Shares were first offered beginning July 27, 1998, Class C shares were first
offered beginning May 8, 2000 so results for Class C Shares are not presented in
the graph.
S&P 100 INDEX
The S&P 100 Index is a broad based stock index made up of the largest 100
securities in the United States based upon market capitalization. The Index
results do not include any sales charges or any other fees you would incur if
you attempted to replicate the Index.
FISCAL YEAR IN REVIEW
After ending calendar 1999 on a high note, the S&P 100 Plus Portfolio began
2000 at a somewhat slower pace. Both January and February saw negative returns
as the Federal Reserve continued hiking interest rates. Worries about the
effects on economic growth of emerging inflationary pressures put a damper on
investor enthusiasm, although the large-cap technology sector continued to roll.
The beginning of March saw the markets begin to broaden out, and the Portfolio
finished the first quarter on a high note.
The second calendar quarter was marked by acquisition and merger activity,
resulting in several changes in the composition of the Index. The changes
increased the projected underlying long-term earnings growth rate of the Index
by more than 1.5%. The new faster growing companies which were added to the
Index were larger capitalization companies compared to the ones they replaced.
Unfortunately, the changes in the Index failed to positively influence the
Portfolio, as it fell -3.15%, while its benchmark, the S&P 100 Index, fell -
2.83%. The negative performance was mainly due to uncertainty surrounding the
Federal Reserve board's tightening of their monetary policy.
Third calendar quarter performance was relatively neutral as the Portfolio
remained down -3.78% versus -3.60% for its benchmark. The Portfolio finished its
fiscal year down an additional percentage point with a calendar year-to-date
return of -4.81% versus -4.54% for the S&P 100 Index at October 31, 2000.
Heightened levels of volatility and the general short-term focus of equity
investors were the principal reasons for the fall. In response to these
conditions, the Portfolio is retaining a neutral stance.
Ongoing concerns regarding a slowing economy, low levels of unemployment,
rising inflation and a slowdown in earnings and revenue growth are forcing many
investors to the sidelines. Valuations are being reigned in after operating at
heightened levels for many months. Hopefully, with reported third quarter
earnings meeting or exceeding expectations almost 90% of the time with S&P
companies, investors will gain renewed enthusiasm for some of the larger, faster
growing companies in the world.
ACHIEVERS PORTFOLIO
Principal Preservation
Date Achievers Portfolio S&P 500 Index
---- ------------------- -------------
10/31/90 $9,477 $10,000
11/30/90 $10,147 $10,646
12/31/90 $10,618 $10,943
1/31/91 $11,052 $11,420
2/28/91 $11,819 $12,237
3/31/91 $12,456 $12,533
4/30/91 $12,419 $12,563
5/31/91 $13,022 $13,104
6/30/91 $12,437 $12,504
7/31/91 $12,950 $13,087
8/31/91 $13,248 $13,397
9/30/91 $12,954 $13,173
10/31/91 $13,385 $13,350
11/30/91 $12,917 $12,812
12/31/91 $14,704 $14,278
1/31/92 $14,238 $14,012
2/29/92 $14,159 $14,194
3/31/92 $13,921 $13,917
4/30/92 $13,971 $14,326
5/31/92 $13,931 $14,396
6/30/92 $13,494 $14,181
7/31/92 $14,151 $14,761
8/31/92 $14,101 $14,458
9/30/92 $14,130 $14,629
10/30/92 $14,569 $14,680
11/30/92 $15,128 $15,181
12/31/92 $15,161 $15,368
1/31/93 $14,831 $15,497
2/28/93 $14,682 $15,711
3/31/93 $15,060 $16,043
4/30/93 $14,345 $15,655
5/31/93 $14,463 $16,075
6/30/93 $14,409 $16,122
7/31/93 $14,185 $16,058
8/31/93 $14,538 $16,667
9/30/93 $14,432 $16,539
10/30/93 $14,711 $16,881
11/30/93 $14,250 $16,721
12/31/93 $14,401 $16,923
1/31/94 $14,723 $17,498
2/28/94 $14,487 $17,024
3/31/94 $13,834 $16,282
4/30/94 $14,082 $16,466
5/31/94 $14,384 $16,736
6/30/94 $14,141 $16,326
7/31/94 $14,520 $16,861
8/31/94 $14,866 $17,552
9/30/94 $14,416 $17,122
10/31/94 $14,676 $17,507
11/30/94 $14,351 $16,870
12/31/94 $14,578 $17,120
1/31/95 $14,655 $17,563
2/28/95 $15,051 $18,246
3/31/95 $15,361 $18,784
4/30/95 $16,002 $19,336
5/31/95 $16,422 $20,108
6/30/95 $16,629 $20,575
7/31/95 $17,117 $21,256
8/31/95 $17,028 $21,309
9/30/95 $17,703 $22,208
10/31/95 $18,181 $22,128
11/30/95 $18,870 $23,099
12/31/95 $19,197 $23,545
1/31/96 $20,091 $24,346
2/29/96 $20,283 $24,572
3/31/96 $20,280 $24,808
4/30/96 $20,574 $25,173
5/31/96 $20,926 $25,822
6/30/96 $21,303 $25,920
7/31/96 $20,622 $24,774
8/31/96 $20,803 $25,297
9/30/96 $22,160 $26,721
10/31/96 $22,387 $27,458
11/30/96 $23,912 $29,534
12/31/96 $23,375 $28,949
1/31/97 $24,859 $30,755
2/28/97 $25,244 $30,998
3/31/97 $23,952 $29,727
4/30/97 $25,403 $31,499
5/31/97 $26,304 $33,416
6/30/97 $27,498 $34,913
7/31/97 $29,066 $37,689
8/31/97 $26,819 $35,582
9/30/97 $28,212 $37,527
10/31/97 $27,825 $36,277
11/30/97 $29,268 $37,953
12/31/97 $29,889 $38,604
1/31/98 $30,543 $39,031
2/28/98 $32,648 $41,844
3/31/98 $33,588 $43,985
4/30/98 $33,731 $44,427
5/31/98 $32,588 $43,664
6/30/98 $33,397 $45,436
7/31/98 $32,731 $44,953
8/31/98 $27,968 $38,462
9/30/98 $29,933 $40,926
10/31/98 $32,268 $44,123
11/30/98 $34,389 $46,796
12/31/98 $35,687 $49,491
1/31/99 $36,722 $51,560
2/28/99 $36,096 $49,956
3/31/99 $37,380 $51,954
4/30/99 $38,978 $53,970
5/31/99 $37,917 $52,696
6/30/99 $39,061 $55,615
7/31/99 $38,486 $53,880
8/31/99 $37,604 $53,611
9/30/99 $36,223 $52,169
10/31/99 $38,767 $55,445
11/30/99 $40,256 $56,571
12/31/99 $41,177 $59,903
1/31/00 $40,522 $56,896
2/29/00 $40,448 $55,821
3/31/00 $43,021 $61,280
4/30/00 $42,753 $59,435
5/31/00 $42,560 $58,217
6/30/00 $43,676 $59,655
7/31/00 $42,828 $58,724
8/31/00 $45,505 $62,371
9/30/00 $42,143 $59,078
10/31/00 $41,905 $58,830
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
1-YEAR 5-YEAR 10-YEAR
Achievers: ------ ------ -------
Class A Shares 2.42% 16.87% 15.39%
Class B Shares 2.47% N/A N/A
The graph above compares the change in value of a $10,000 investment in the
Achievers Portfolio Class A Shares with the S&P 500 Index. The graph reflects a
deduction from the amount invested for the applicable sales charge. Class B
Shares were first offered beginning July 27, 1998, Class C shares were first
offered beginning May 8, 2000, so results for Class C Shares are not presented
in the graph.
S&P 500 INDEX
The S&P 500 Index is a broad based stock index representing, based upon
market capitalization, the 500 largest companies in the United States. The Index
does not adjust for any sales charges or other fees and expenses which you would
incur if you attempted to replicate the Index.
FISCAL YEAR IN REVIEW
During the first calendar quarter of 2000 the Portfolio performed well
relative to its benchmarks. During the quarter the Portfolio's technology and
utility holdings performed particularly well. In fact, six of the top 10
performing holdings were in the technology sector. The end of the first quarter
saw the Portfolio return 3.99% versus 2.29% for the S&P 500 Index.
Though the second calendar quarter was marked by increased volatility, the
Portfolio's performance remained positive. Health care and consumer staples
holdings advanced strongly as investors moved out of higher-flying sectors such
as technology. Even so, a number of the Portfolio's technology holdings were
able to overcome the technology exodus, adding value for the quarter.
Compared to the overall markets the Portfolio held up well over the third
calendar quarter, which saw much of the same volatility experienced in the
second quarter. As technology and communications holdings continued growing
weaker, financials and consumer groups were able to offset the weakness.
Calendar year to date at September 30, 2000, the Portfolio returned 1.87% versus
-1.39% for the S&P 500 Index. Continuing to rely on a longer-term perspective,
changes to the Portfolio remained relatively minor during the market downturn.
The Portfolio ended the first 10 calendar months of 2000 with a total return
of 1.29% versus -1.81% for the S&P 500 Index. As in prior months, the Portfolio
fell victim to a slowing economy and a deteriorating environment for large-cap
growth companies as investors continued to turn their backs on technology
issues. After negative earnings announcements from bellwethers such as Intel
Corp., Apple Computer and Dell Computer, investors decided that current
valuations were too aggressive given their anticipation of a slowdown in both
revenues and earnings. Although many companies tried to contradict this
prevailing viewpoint, investors began moving into safer areas of the equity
markets.
We recommend this Portfolio as a core holding for investors who are
interested in a portfolio of large-cap, blue chip stocks with an element of
growth bias and a strong potential to perform favorably relative to its
benchmark S&P 500 Index.
SELECT VALUE PORTFOLIO
Principal Preservation
Date Select Value Portfolio Russell 2000 Index
---- ---------------------- ------------------
8/23/94*<F1> $9,475 $10,000
8/31/94 $9,474 $10,232
9/30/94 $9,365 $10,184
10/31/94 $9,157 $10,141
11/30/94 $8,800 $9,712
12/31/94 $9,005 $9,956
1/31/95 $8,755 $9,816
2/28/95 $9,044 $10,203
3/31/95 $9,220 $10,370
4/30/95 $9,210 $10,585
5/31/95 $9,360 $10,746
6/30/95 $9,613 $11,279
7/31/95 $10,247 $11,920
8/31/95 $10,408 $12,142
9/30/95 $10,704 $12,344
10/31/95 $10,401 $11,782
11/30/95 $10,764 $12,272
12/31/95 $10,878 $12,565
1/31/96 $11,102 $12,542
2/29/96 $11,421 $12,922
3/31/96 $11,452 $13,078
4/30/96 $12,209 $13,477
5/31/96 $12,551 $13,659
6/30/96 $12,232 $13,455
7/31/96 $11,453 $12,547
8/31/96 $12,114 $13,271
9/30/96 $12,521 $13,850
10/31/96 $12,799 $13,891
11/30/96 $13,472 $14,672
12/31/96 $13,777 $14,688
1/31/97 $13,928 $15,239
2/28/97 $13,676 $15,114
3/31/97 $13,162 $14,472
4/30/97 $13,400 $14,847
5/31/97 $14,656 $16,145
6/30/97 $15,774 $16,599
7/31/97 $16,590 $18,241
8/31/97 $16,866 $18,219
9/30/97 $18,152 $19,266
10/31/97 $17,396 $18,428
11/30/97 $17,371 $18,701
12/31/97 $17,526 $19,426
1/31/98 $17,511 $19,130
2/28/98 $19,021 $20,564
3/31/98 $19,733 $21,428
4/30/98 $19,951 $21,546
5/31/98 $19,094 $20,390
6/30/98 $18,615 $20,448
7/31/98 $17,613 $18,778
8/31/98 $14,419 $15,137
9/30/98 $15,333 $16,308
10/31/98 $15,333 $16,977
11/30/98 $16,292 $17,873
12/31/98 $16,408 $18,989
1/31/99 $16,103 $19,236
2/28/99 $14,970 $17,686
3/31/99 $14,346 $17,958
4/30/99 $15,638 $19,565
5/31/99 $16,175 $19,855
6/30/99 $17,018 $20,746
7/31/99 $16,916 $20,173
8/31/99 $16,175 $19,431
9/30/99 $15,566 $19,431
10/31/99 $15,508 $19,513
11/30/99 $16,219 $20,703
12/31/99 $17,295 $23,045
1/31/00 $16,772 $22,672
2/29/00 $17,382 $26,417
3/31/00 $18,602 $24,679
4/30/00 $18,500 $23,193
5/31/00 $17,963 $21,841
6/30/00 $18,225 $23,750
7/31/00 $18,108 $23,007
8/31/00 $19,720 $24,751
9/30/00 $19,212 $24,018
10/31/00 $19,793 $22,947
*<F1> August 23, 1994 inceptin date.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
SINCE
INCEPTION
1-YEAR 5-YEAR 8/23/94
Select Value: ------ ------ -------
Class A Shares 20.93% 12.49% 11.65%
Class B Shares 21.79% N/A N/A
The graph above compares the change in value of a $10,000 investment in the
Select Value Portfolio Class A Shares with the Russell 2000 Index. The graph
reflects a deduction from the amount invested for the applicable sales charge.
Class B Shares began on July 27, 1998 and their results are not presented in the
graph.
RUSSELL 2000 INDEX
The Russell 2000 Index is a broad stock index made up of 2000 small market
capitalization companies. The Index tracks the general stock market performance
of 2000 small market capitalization companies. The Index results do not include
any sales charges or any other fees you would incur if you attempted to
replicate the Index.
FISCAL YEAR IN REVIEW
The Select Value Portfolio began the fiscal year on a high note as the end of
1999 saw a significantly improved operating environment as a strong economy
furled solid stock market returns. Above-average volatility, however was the
theme for the first quarter of 2000, delivering more mixed performance. For the
first quarter of 2000, the portfolio returned 7.45% versus 3.82% for the Russell
2000 Index.
A combination of strong earnings growth and rising interest rates ensured
above-average volatility going into the second quarter of 2000. With the equity
markets reacting negatively to a tightening monetary policy by the Federal
Reserve Board, all major domestic market indexes generated negative returns --
including the Russell 2000 Index. The Select Value Portfolio's value-oriented
strategy enabled the fund to outperform its benchmark index for a second
straight quarter. For the first half of the year, the characteristics of the
holdings within the portfolio continued to focus on undervalued securities.
Weak performance of the fund's growth components contributed to negative
returns in July: -0.6% for the fund versus -3.2% for the Russell 2000 Index. The
portfolio's financial holdings, responding to an anticipated slowing in the
growth of the economy, rose 9.3% during the month. Sterling Bancshares, Heller
Financial, Arthur J. Gallagher and Radian Group all advanced in the mid-teens to
lead the sector. Responding to rising oil and natural gas prices, energy
holdings fueled an August advance of 8.9% for the portfolio. In large part due
to a higher than usual cash position, and a value-oriented strategy helped the
portfolio end the fiscal year on a positive note with a year to date return of
14.44% as of October 31, 2000.
On September 22, 2000 Portfolio Manager Leon Dodge resigned as manager of the
Select Value Portfolio. Since his resignation, the Select Value Portfolio has
been managed by NorthPointe Capital, Inc. It has been proposed to shareholders
of the Select Value Portfolio that the fund be combined into the Nationwide
Value Opportunities Fund managed by NorthPointe.
PSE TECH 100 INDEX PORTFOLIO
Principal Preservation Pacific Stock Exchange
Date PSE Tech 100 Index Portfolio Technology Stock Index
---- ---------------------------- ----------------------
6/10/96*<F2> $9,475 $10,000
6/30/96 $8,976 $9,506
7/31/96 $8,303 $8,775
8/31/96 $8,825 $9,315
9/30/96 $9,626 $10,157
10/31/96 $9,483 $10,005
11/30/96 $10,755 $11,362
12/31/96 $10,492 $11,095
1/31/97 $11,584 $12,267
2/28/97 $11,096 $11,750
3/31/97 $10,476 $11,096
4/30/97 $10,828 $11,477
5/31/97 $12,136 $12,866
6/30/97 $12,208 $12,956
7/31/97 $14,075 $14,956
8/31/97 $14,056 $14,937
9/30/97 $14,529 $15,444
10/31/97 $12,993 $13,858
11/30/97 $13,032 $13,897
12/31/97 $12,522 $13,361
1/31/98 $13,038 $13,908
2/28/98 $14,625 $15,615
3/31/98 $14,877 $15,923
4/30/98 $15,453 $16,544
5/31/98 $14,230 $15,236
6/30/98 $14,877 $15,936
7/31/98 $14,837 $15,896
8/31/98 $12,056 $12,917
9/30/98 $13,745 $14,745
10/31/98 $15,292 $16,418
11/30/98 $16,981 $18,241
12/31/98 $19,282 $20,727
1/31/99 $22,093 $23,766
2/28/99 $19,825 $21,328
3/31/99 $21,320 $22,962
4/30/99 $22,062 $23,775
5/31/99 $22,668 $24,469
6/30/99 $25,657 $27,714
7/31/99 $25,490 $27,548
8/31/99 $26,775 $28,967
9/30/99 $26,796 $29,008
10/31/99 $28,353 $30,717
11/30/99 $33,263 $35,149
12/31/99 $41,386 $44,949
1/31/00 $40,305 $43,978
2/29/00 $49,476 $54,014
3/31/00 $49,187 $53,749
4/30/00 $46,011 $50,331
5/31/00 $42,022 $46,018
6/30/00 $46,535 $50,965
7/31/00 $43,392 $47,540
8/31/00 $49,421 $54,162
9/30/00 $43,838 $48,074
10/31/00 $40,963 $46,493
*<F2> June 10, 1996 inception date.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
SINCE
INCEPTION
1-YEAR 6/10/96
PSE Tech 100 Index: ------ -------
Class A Shares 36.89% 37.82%
Class B Shares 38.38% N/A
The graph above compares the change in value of a $10,000 investment in the
PSE Tech 100 Index Portfolio Class A Shares with the Pacific Stock Exchange
Technology Stock Index. The graph reflects a deduction from the amount invested
for the applicable sales charge. Class B Shares were first offered beginning
July 27, 1998. Class C shares were first offered beginning May 8, 2000, so
results for Class C Shares are not presented in the graph.
PACIFIC STOCK EXCHANGE TECHNOLOGY STOCK INDEX
The Pacific Stock Exchange Technology Stock Index consists of 100 common
stocks of companies in 15 different industries. The Index results do not include
any sales charges or any other fees you would incur if you attempted to
replicate the Index.
FISCAL YEAR IN REVIEW
After 1999's fourth quarter return of 54%, the PSE Tech 100 Index Portfolio
stormed into the first quarter of 2000 with a solid 18.83% return versus 19.57%
for the PSE Technology Stock Index. It was also during the first part of the
fiscal year that many companies held by the Portfolio began planning and
executing stock splits in order to bring down their price per share. These stock
splits, within a price weighted portfolio, caused a nearly 20 percent capital
gains payout for the fiscal year.
While the Portfolio had a strong start in 2000, a repeat performance of 1998
(50 plus percent return) and 1999 (115 plus percent return) was not to happen.
Towards the end of the first quarter, inflation indicators began raising some
red flags within the Federal Reserve. The second quarter introduced the trend of
uncertainty as investors debated the merits, earnings and valuations of
technology bellwethers. This uncertainty and lack of investor confidence led to
a decline during the months of April and May, with June seeing a slight rebound
thanks to expectations for another strong earnings season. Actual returns for
the second quarter were -5.39% for the Portfolio versus -5.18% for its
benchmark.
The third quarter continued the trend of deteriorating investment performance
within the technology sector. Although earnings and revenue growth continued to
accelerate faster than any other industry sector, momentum turned decidedly
negative. In fact, from a price to earnings perspective, the Index ended the
quarter trading below its 12-month growth rate for both earnings and revenue.
October continued the recent battering of technology stocks as investors
continued to move out of the technology sector. Specific reasons for the sell-
off seemed to revolve around a perceived slowdown of earnings growth, which in
turn caused a questioning of valuation levels for the sector. Additional
earnings shortfalls added fuel to the fire.
Year to date, the portfolio returned -1.02% and the portfolio finished the
fiscal year up 44.47%.
MANAGED GROWTH PORTFOLIO
Date Managed Growth Portfolio S&P Mid Cap Index
---- ------------------------ -----------------
1/1/99*<F3> $9,475 $10,000
1/31/99 $9,365 $9,610
2/28/99 $8,815 $9,107
3/31/99 $8,853 $9,362
4/30/99 $9,175 $10,100
5/31/99 $9,166 $10,144
6/30/99 $9,583 $10,687
7/31/99 $9,299 $10,460
8/31/99 $9,109 $10,101
9/30/99 $9,090 $9,790
10/31/99 $9,526 $10,289
11/30/99 $10,028 $10,826
12/31/99 $10,701 $11,469
1/31/00 $10,038 $11,146
2/29/00 $10,739 $11,926
3/31/00 $11,280 $12,923
4/30/00 $10,673 $12,471
5/31/00 $10,521 $12,318
6/30/00 $10,768 $12,499
7/31/00 $11,185 $12,696
8/31/00 $11,972 $14,113
9/30/00 $12,152 $14,017
10/31/00 $12,569 $13,542
*<F3> January 1, 1999 inception date.
Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURN
SINCE
INCEPTION
1-YEAR 1/1/99
Managed Growth: ------ ------
Class A Shares 25.01% 13.33%
Class B Shares 25.97% 14.05%
The graph above compares the change in value of a $10,000 investment in the
Managed Growth Portfolio Class A Shares with the S&P 400 Index. The graph
reflects a deduction from the amount invested for the applicable sales charge.
Class B Shares were first offered beginning January 1, 1999. Class C shares were
first offered beginning May 8, 2000, and results for Class C Shares are not
presented in the graph.
S&P 400 MID CAP INDEX
The S&P 400 Index is a broad based United States stock index representing 400
mid-sized companies, based upon market capitalization. The companies comprising
the Index have market capitalization between approximately $200,000,000 and
$23,000,000,000. The 400 domestic stocks are chosen based upon market size,
liquidity, and industry group representation. The Index does not adjust for any
sales charges or other fees and expenses which you would incur if you attempted
to replicate the Index.
FISCAL YEAR IN REVIEW
Imagine a roller coaster ride. That is how most of the market felt throughout
2000. The same technology stocks that had climbed to dizzying heights in 1999
continued to drive performance through the first four months of 2000. For
managers committed to a high-quality growth stock philosophy, there was
seemingly no end to the speculative market environment they had suffered through
for 15 months. Further compounding matters was the resurgence of cyclical energy
and utility stocks. The Managed Growth Portfolio rarely invests in these sectors
because of its focus on companies with consistent growth in both sales and
earnings. The high returns of stocks in these sectors significantly impacted the
overall performance of the S&P 400 Midcap benchmark. For these reasons the
Managed Growth Portfolio saw its first quarter return of positive 5.40%
completely over-shadowed by the return of 12.68% for the S&P 400.
The May meltdown of technology stocks brought a June recovery for the
Portfolio gaining slightly against its benchmark. This was the first sign of
what was to come, namely a deterioration in the stock prices of low quality, no
earnings companies and a shift toward the more consistent and reliable growers.
This turnaround was the result of investors returning to more traditional
quality growth companies. However, the fund's performance was still driven by
high-quality technology and healthcare stocks.
The Portfolio overtook its benchmark Index in July with a year-to-date total
return of 3.87% versus 1.58% for the S&P 400 Mid Cap Index. Unlike the June
recovery, performance this time was driven by non-technology companies in a
broad range of industries.
In September, the Portfolio returned 1.50% versus -0.68% for the S&P 400 Mid
Cap Index. The performance was again driven by non-technology stocks. Early in
the third quarter, the managers reduced the Portfolio's bias in technology by
adding healthcare, business services and financial issues. The Portfolio's low-
risk, high-quality approach is rewarding shareholders as lower quality issues
continue to sell off and the market searches for quality companies with
earnings and reasonable price to earnings ratios.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS
The table below presents information for a share of capital stock of each of
seven portfolios of Principal Preservation Portfolios, Inc. outstanding for the
periods indicated. This information should be read in conjunction with the
financial statements and related notes:
<TABLE>
TAX-EXEMPT PORTFOLIO
-------------------------------------------------------------------------------
For the For the ten For the years ended December 31,
year ended months ended ---------------------------------------
October 31, 2000 October 31, 1999 1998 1997 1996
---------------- ---------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.23 $ 9.24 $ 9.52 $ 9.30 $ 9.39
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .34 .29 .37 .41 .43
Net realized and unrealized gains
(losses) on investments .32 (1.01) .03 .44 (.09)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .66 (.72) .40 .85 .34
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.34) (.29) (.37) (.41) (.43)
Distributions from net realized
gains on investments -- -- (.31) (.22) --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.34) (.29) (.68) (.63) (.43)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 8.55 $ 8.23 $ 9.24 $ 9.52 $ 9.30
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN**<F5> 8.2% (7.8)%++<F7> 4.3% 9.4% 3.8%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $37,427 $42,954 $54,914 $60,252 $66,310
Ratio of net expenses to
average net assets 1.3%+<F6> 1.2%*<F4> 1.1% 1.1% 1.1%+<F6>
Ratio of net investment income to
average net assets 4.2%+<F6> 4.0%*<F4> 3.9% 4.4% 4.7%+<F6>
Portfolio turnover rate 57.5% 39.1%++<F7> 236.7% 209.2% 163.1%
</TABLE>
*<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 0.03% in 2000
and 0.1% in 1996.
++<F7> Not annualized.
<TABLE>
GOVERNMENT PORTFOLIO
-------------------------------------------------------------------------------------
For the
period from
May 8, 2000
(commencement
of operations) For the
through year ended For the ten For the years ended December 31,
October 31, October 31, months ended ----------------------------------
2000 2000 October 31, 1999 1998 1997 1996
---------- ---------- ---------------- ------ ------ ------
Class C Class A
Shares Shares
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.89 $ 8.92 $ 9.55 $ 9.28 $ 9.20 $ 9.64
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .08 .51 .47 .55 .63 .64
Net realized and unrealized gains
(losses) on investments -- (.03) (.63) .27 .08 (.44)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .08 .48 (.16) .82 .71 .20
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.51) (.47) (.55) (.63) (.64)
Distributions from net realized
gains on investments -- -- -- -- -- --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.08) (.51) (.47) (.55) (.63) (.64)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 8.89 $ 8.89 $ 8.92 $ 9.55 $ 9.28 $ 9.20
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN**<F9> 2.1%++<F11> 5.5% (1.7)%++<F11> 9.1% 8.1% 2.3%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $228 $30,261 $37,379 $40,088 $40,683 $44,920
Ratio of net expenses to
average net assets 1.9%*+ 1.2%+<F10> 1.2%*<F8> 1.2% 1.1%+<F10> 1.1%+<F10>
<F8><F10>
Ratio of net investment income to
average net assets 4.9%*+ 5.9%+<F10> 6.2%*<F8> 5.9% 7.0%+<F10> 7.0%+<F10>
<F8><F10>
Portfolio turnover rate 329.0% 329.0% 30.3%++<F11> 87.7% 78.6% 36.9%
</TABLE>
*<F8> Annualized.
**<F9> The Fund's sales charge is not reflected in total return as set
forth in the table.
+<F10> Reflects a voluntary reimbursement of fund expenses of 0.30% in
Class C Shares and 0.05% in Class A Shares in 2000, 0.04% in 1997
and 0.04% in 1996.
++<F11> Not annualized.
<TABLE>
S&P 100 PLUS PORTFOLIO
---------------------------------------------------------------------------------------------------
For the For the
period from period from
May 8, 2000 July 27, 1998
(commencement (commencement
of operations) of operations) For the years ended
through For the For the ten to December 31,
October 31, year ended months ended December 31, ----------------------------
2000 October 31, 2000 October 31, 1999 1998 1998 1997 1996
----------- ------------------ ------------------ ------------ ------ ------ ------
Class C Class B Class A Class B Class A Class B Class A
Shares Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $43.69 $41.35 $41.49 $34.91 $34.90 $33.13 $27.04 $22.08 $19.53
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (.07) (.18) .07 (.13) .10 .01 .20 .26 .29
Net realized and unrealized
gains on investments (.43) 2.22 2.31 6.57 6.57 2.43 8.51 5.63 4.07
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (.50) 2.04 2.38 6.44 6.67 2.44 8.71 5.89 4.36
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income -- -- (.06) -- (.08) (.01) (.20) (.26) (.29)
Distributions from net realized
gains on investments -- (.49) (.49) -- -- (.59) (.59) (.65) (1.52)
Distributions in excess of
net realized gains -- -- -- -- -- (.06) (.06) (.02) --
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS -- (.49) (.55) -- (.08) (.66) (.85) (.93) (1.81)
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $43.19 $42.90 $43.32 $41.35 $41.49 $34.91 $34.90 $27.04 $22.08
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F13> (3.4)%++ 4.9% 5.7% 18.4%++ 19.1%++ 7.4%++ 32.3% 26.8% 22.4%
<F15> <F15> <F15> <F15>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $3,259 $68,697 $246,017 $37,160 $214,358 $6,123 $160,190 $105,738 $77,517
Ratio of net expenses to
average net assets 1.6%*+ 1.6%+ 0.9%+ 1.5%* 0.8%* 1.3%*+ 0.9%+ 0.9%+ 1.0%+
<F12><F14> <F14> <F14> <F12> <F12> <F12><F14> <F14> <F14> <F14>
Ratio of net investment income
(loss) to average net assets (0.7)%*+ (0.6)%+ 0.2%+ (0.4)%* 0.3%* --*+ 0.6%+ 1.0%+ 1.4%+
<F12><F14> <F14> <F14> <F12> <F12> <F12><F14> <F14> <F14> <F14>
Portfolio turnover rate 7.0% 7.0% 7.0% 4.9%++ 4.9%++ 10.2% 10.2% 17.0% 8.0%
<F15> <F15>
</TABLE>
*<F12> Annualized.
**<F13> The Fund's sales charge is not reflected in total return as set
forth in the table.
+<F14> Reflects a voluntary reimbursement of fund expenses of 0.14% in
Class C Shares, 0.06% in Class B Shares and 0.05% in Class A Shares
in 2000, 0.03% in Class B Shares and 0.07% in Class A Shares in
1998, 0.11% in 1997 and 0.01% in 1996.
++<F15> Not annualized.
<TABLE>
ACHIEVERS PORTFOLIO
---------------------------------------------------------------------------------------------------
For the For the
period from period from
May 8, 2000 July 27, 1998
(commencement (commencement
of operations) of operations) For the years ended
through For the For the ten to December 31,
October 31, Year Ended months ended December 31, ----------------------------
2000 October 31, 2000 October 31, 1999 1998 1998 1997 1996
----------- ------------------ ------------------ ------------ ------ ------ ------
Class C Class B Class A Class B Class A Class B Class A
Shares Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $27.66 $30.12 $30.32 $27.86 $27.92 $28.48 $25.13 $20.01 $16.97
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (.06) (.18) (.08) (.16) .02 .01 .07 .13 .14
Net realized and unrealized
gains on investments .49 2.27 2.35 2.42 2.39 1.39 4.80 5.43 3.54
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .43 2.09 2.27 2.26 2.41 1.40 4.87 5.56 3.68
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income -- -- (.01) -- (.01) (.01) (.07) (.13) (.14)
Distributions from net realized
gains on investments -- (4.41) (4.41) -- -- (2.01) (2.01) (.31) (.50)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS -- (4.41) (4.42) -- (.01) (2.02) (2.08) (.44) (.64)
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $28.09 $27.80 $28.17 $30.12 $30.32 $27.86 $27.92 $25.13 $20.01
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F17> (1.0)%++ 7.4% 8.0% 8.1%++ 8.6%++ 4.9%++ 19.4% 27.9% 21.8%
<F19> <F19> <F19> <F19>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $66 $2,749 $46,978 $1,138 $45,071 $338 $44,219 $39,565 $30,504
Ratio of net expenses to
average net assets 2.1%*+ 2.1%+ 1.4%+ 2.0%*+ 1.3%*+ 1.7%*+ 1.3%+ 1.2%+ 1.2%+
<F16><F18> <F18> <F18> <F16><F18> <F16><F18> <F16><F18> <F18> <F18> <F18>
Ratio of net investment income
(loss) to average net assets (1.2)%*+ (1.0)%+ (0.3)%+ (0.7)%*+ 0.1%*+ --*+ 0.2%+ 0.6%+ 0.8%+
<F16><F18> <F18> <F18> <F16><F18> <F16><F18> <F16><F18> <F18> <F18> <F18>
Portfolio turnover rate 33.3% 33.3% 33.3% 18.1%++ 18.1%++ 11.9% 11.9% 11.9% 13.1%
<F19> <F19>
</TABLE>
*<F16> Annualized.
**<F17> The Fund's sales charge is not reflected in total return as set
forth in the table.
+<F18> Reflects a voluntary reimbursement of fund expenses of 0.13% in
Class C Shares, 0.02% in Class B Shares and 0.02% in Class A Shares
in 2000, 0.02% in Class B and Class A Shares in 1999, 0.06% in Class
B Shares and 0.02% in Class A Shares in 1998, 0.1% in 1997 and 0.1%
in 1996.
++<F19> Not annualized.
<TABLE>
SELECT VALUE PORTFOLIO
----------------------------------------------------------------------------------------
For the
period from
July 27, 1998 For the years ended
For the For the ten (commencement December 31,
year ended months ended of operations) to ----------------------------
October 31, 2000 October 31, 1999 December 31, 1998 1998 1997 1996
------------------ ------------------ ----------------- ------ ------ ------
Class B Class A Class B Class A Class B Class A
Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $10.60 $10.68 $11.27 $11.30 $12.32 $12.07 $10.97 $10.21
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (.09) -- (.09) (.03) -- -- .01 .04
Net realized and unrealized
gains (losses) on
investments 2.93 2.95 (.58) (.59) (1.05) (.77) 2.93 2.68
------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 2.84 2.95 (.67) (.62) (1.05) (.77) 2.94 2.72
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income -- -- -- -- -- -- (.01) (.04)
Distributions from net realized
gains on investments -- -- -- -- -- -- (1.83) (1.92)
------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS -- -- -- -- -- -- (1.84) (1.96)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $13.44 $13.63 $10.60 $10.68 $11.27 $11.30 $12.07 $10.97
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F21> 26.7% 27.6% (5.9)%++ (5.5)%++ (8.5)%++ (6.4)% 27.2% 26.7%
<F23> <F23> <F23>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $1,255 $8,257 $1,234 $9,219 $1,012 $10,520 $8,497 $4,829
Ratio of net expenses to
average net assets 2.2%+ 1.4%+ 2.0%*+ 1.4%*+ 1.7%*+ 1.3%+ 1.1%+ 1.0%+
<F22> <F22> <F20><F22> <F20><F22> <F20><F22> <F22> <F22> <F22>
Ratio of net investment
income (loss) to average
net assets (0.7)%+ --+ (1.0)%*+ (0.3)%*+ --*+ --+ 0.1%+ 0.3%+
<F22> <F22> <F20><F22> <F20><F22> <F20><F22> <F22> <F22> <F22>
Portfolio turnover rate 57.6% 57.6% 91.2%++ 91.2%++ 110.0% 110.0% 82.5% 122.2%
<F23> <F23>
</TABLE>
*<F20> Annualized.
**<F21> The Fund's sales charge is not reflected in total return as set
forth in the table.
+<F22> Reflects a voluntary reimbursement of fund expenses of 0.7% in Class
B Shares and 0.7% in Class A Shares in 2000, 0.6% in Class B Shares
and 0.6% in Class A Shares in 1999, 0.5% in Class B Shares and 0.5%
in Class A Shares in 1998, 1.0% in 1997 and 1.4% in 1996.
++<F23> Not annualized.
<TABLE>
PSE TECH 100 INDEX PORTFOLIO
-----------------------------------------------------------------------------------------------------
For the
period from For the For the
May 8, 2000 period from period from
(commence- July 27, 1998 June 10, 1996
ment of (commencement (commencement
operations) of operations) For the of operations)
through For the For the ten to years ended to
October 31, year ended months ended December 31, --------------- December 31,
2000 October 31, 2000 October 31, 1999 1998 1998 1997 1996
----------- ------------------ ------------------ ------------ ------ ------ -------------
Class C Class B Class A Class B Class A Class B Class A
Shares Shares Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $38.33 $26.90 $27.13 $18.39 $18.45 $14.94 $12.39 $10.76 $10.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment
income (loss) (.12) (.39) (.18) (.22) (.08) .01 .01 .04 .03
Net realized and unrealized
gains on investments (1.55) 11.56 11.79 8.73 8.76 4.07 6.68 2.04 1.03
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (1.67) 11.17 11.61 8.51 8.68 4.08 6.69 2.08 1.06
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income -- -- -- -- -- (.01) (.01) (.04) (.03)
Distributions from net
realized gains on
investments -- (1.98) (1.98) -- -- (.60) (.60) (.38) (.24)
Distributions in excess of
net realized gains -- -- -- -- -- (.02) (.02) (.03) (.03)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS -- (1.98) (1.98) -- -- (.63) (.63) (.45) (.30)
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $36.66 $36.15 $36.76 $26.90 $27.13 $18.39 $18.45 $12.39 $10.76
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**<F25> (7.0)%++ 43.3% 44.4% 46.3%++ 47.0%++ 27.2%++ 54.0% 19.4% 10.7%++
<F27> <F27> <F27> <F27> <F27>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $11,423 $205,213 $408,040 $60,038 $169,247 $6,559 $72,724 $27,144 $6,004
Ratio of net expenses to
average net assets 1.5%*+ 1.4%+ 0.7%+ 1.4%*+ 0.7%*+ 1.2%*+ 0.6%+ 0.2%+ --*+
<F24><F26> <F26> <F26> <F24><F26> <F24><F26> <F24><F26> <F26> <F26> <F24><F26>
Ratio of net investment income
(loss) to average net assets (1.3)%*+ (1.2)%+ (0.5)%+ (1.1)%*+ (0.4)%*+ --*+ --+ 0.3%+ 0.7%*+
<F24><F26> <F26> <F26> <F24><F26> <F24><F26> <F24><F26> <F26> <F26> <F24><F26>
Portfolio turnover rate 40.2% 40.2% 40.2% 33.0%++ 33.0%++ 25.4%++ 25.4% 22.0% 3.0%++
<F27> <F27> <F27> <F27>
</TABLE>
*<F24> Annualized.
**<F25> The Fund's sales charge is not reflected in total return as set
forth in the table.
+<F26> Reflects a voluntary reimbursement of fund expenses of 0.24% in
Class C Shares, 0.10% in Class B Shares and 0.09% in Class A Shares
in 2000, 0.13% in Class B Shares and 0.13% in Class A Shares in
1999, 0.3% in Class B Shares and 0.5% in Class A Shares in 1998,
1.1% in 1997 and 3.3% in 1996.
++<F27> Not annualized.
<TABLE>
MANAGED GROWTH PORTFOLIO
-------------------------------------------------------------------------------
For the
period from
May 8, 2000
(commencement For the period from
of operations) January 1, 1999
through For the year ended (commencement of operations)
October 31, 2000 October 31, 2000 to October 31, 1999
---------------- ----------------------- ----------------------------
Class C Class B Class A Class B Class A
Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $10.30 $10.01 $10.05 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.04) (.17) (.09) (.07) (.01)
Net realized and unrealized gains on investments 2.96 3.27 3.30 .08 .06
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.92 3.10 3.21 .01 .05
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains on investments -- -- -- -- --
Distributions in excess of net realized gains -- -- -- -- --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS -- -- -- -- --
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.22 $13.11 $13.26 $10.01 $10.05
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN**<F29> 22.1%* 30.9% 31.9% 0.1%++ 0.5%++
<F28> <F31> <F31>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $173 $4,519 $12,457 $1,701 $5,913
Ratio of net expenses to average net assets 2.0%*+ 2.0%+ 1.3%+ 1.2%*+ 0.6%*+
<F28><F30> <F30> <F30> <F28><F30> <F28><F30>
Ratio of net investment income (loss)
to average net assets (1.7)%*+ --+ (0.7)%+ (0.8)%*+ (0.1)%*+
<F28><F30> <F30> <F30> <F28><F30> <F28><F30>
Portfolio turnover rate 38.7% 38.7% 38.7% 27.5%++ 27.5%++
<F31> <F31>
</TABLE>
*<F28> Annualized.
**<F29> The Fund's sales charge is not reflected in total return as set
forth in the table.
+<F30> Reflects a voluntary reimbursement of fund expenses of 0.59% in
Class C Shares, 0.44% in Class B Shares, and 0.45% in Class A Shares
in 2000, 0.5% in Class B Shares and 0.5% in Class A Shares in 2000,
2.3% in Class B Shares and 2.3% in Class A Shares in 1999.
++<F31> Not annualized.
BALANCE SHEETS
OCTOBER 31, 2000
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH
---------- ---------- ------- --------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Cost basis
of investments $37,604,686 $29,973,418 $198,521,746 $27,995,162 $7,467,469 $594,816,382 $12,954,350
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
Long-term investments
in securities $36,184,998 $30,036,900 $315,626,880 $48,690,466 $9,055,925 $618,162,278 $16,987,540
Short-term investments 842,000 108,000 1,694,000 1,174,000 485,000 7,059,000 330,000
----------- ----------- ------------ ----------- ---------- ------------ -----------
Total investments
(See Schedule of
Investments) 37,026,998 30,144,900 317,320,880 49,864,466 9,540,925 625,221,278 17,317,540
Cash 296 445 83 184 213 161 114
Receivables:
Capital shares sold -- 97 848,844 16,627 22,259 2,210,530 26,938
Dividends and interest 639,482 485,192 212,017 13,385 8,595 64,223 2,755
Investments sold -- -- -- -- -- 11,115,101 --
Due from advisor -- -- -- -- -- 266,045 --
Margin variation -- -- 51,625 -- -- 405,000 --
----------- ----------- ------------ ----------- ---------- ------------ -----------
Total receivables 639,482 485,289 1,112,486 30,012 30,854 14,060,899 29,693
Other assets 856 681 7,923 1,242 213 19,930 422
----------- ----------- ------------ ----------- ---------- ------------ -----------
Total assets $37,667,632 $30,631,315 $318,441,372 $49,895,904 $9,572,205 $639,302,268 $17,347,769
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
LIABILITIES:
Payables:
Capital shares
redeemed 79,635 33,142 136,555 3,602 19,580 1,504,460 400
Distributions to
shareholders 49,518 51,694 -- -- -- -- --
Management fees 18,790 15,614 98,393 30,214 5,715 138,572 9,635
Other accrued expenses 92,591 40,741 233,845 68,861 21,649 531,382 22,713
Investments purchased -- -- -- -- 12,261 12,451,963 166,419
Other liabilities 90 1,030 -- -- 462 -- --
----------- ----------- ------------ ----------- ---------- ------------ -----------
Total liabilities 240,624 142,221 468,793 102,677 59,667 14,626,377 199,167
----------- ----------- ------------ ----------- ---------- ------------ -----------
NET ASSETS:
Capital stock 41,559,179 34,764,398 194,419,639 24,609,666 7,521,994 482,406,726 13,359,334
Undistributed net
investment income (losses) 4,058 10,555 -- -- -- -- --
Undistributed net realized
gains (losses) on
investments (3,558,541) (4,457,341) 4,753,806 3,314,257 (82,912) 111,864,269 (573,922)
Net unrealized appreciation
(depreciation) on
investments (577,688) 171,482 118,799,134 21,869,304 2,073,456 30,404,896 4,363,190
----------- ----------- ------------ ----------- ---------- ------------ -----------
Total net assets 37,427,008 30,489,094 317,972,579 49,793,227 9,512,538 624,675,891 17,148,602
----------- ----------- ------------ ----------- ---------- ------------ -----------
Total liabilities and
net assets $37,667,632 $30,631,315 $318,441,372 $49,895,904 $9,572,205 $639,302,268 $17,347,769
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
NET ASSET VALUE,OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
Class A
Net Asset Value $37,427,008 $30,260,613 $246,016,715 $46,977,968 $8,257,497 $408,039,947 $12,457,228
Shares Outstanding 4,379,380 3,403,029 5,679,219 1,667,523 605,723 11,099,407 939,722
Redemption Price $ 8.55 $ 8.89 $ 43.32 $ 28.17 $ 13.63 $ 36.76 $ 13.26
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
Offering Price $ 8.86 $ 9.21 $ 45.72 $ 29.73 $ 14.39 $ 38.80 $ 13.99
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
Class B
Net Asset Value $ 68,697,135 $ 2,748,779 $1,255,041 $205,212,739 $ 4,518,681
Shares Outstanding 1,601,276 98,894 93,396 5,676,449 344,582
Offering and
Redemption Price $ 42.90 $ 27.80 $ 13.44 $ 36.15 $ 13.11
------------ ----------- ---------- ------------ -----------
------------ ----------- ---------- ------------ -----------
Class C
Net Asset Value $ 228,481 $ 3,258,729 $ 66,480 $ 11,423,205 $ 172,693
Shares Outstanding 25,691 75,455 2,367 311,582 13,059
Redemption Price $ 8.89 $ 43.19 $ 28.09 $ 36.66 $ 13.22
----------- ------------ ----------- ------------ -----------
----------- ------------ ----------- ------------ -----------
Offering Price $ 8.98 $ 43.63 $ 28.37 $ 37.03 $ 13.35
----------- ------------ ----------- ------------ -----------
----------- ------------ ----------- ------------ -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH
---------- ---------- ------- --------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ 2,995,211 $ 443,581 $ 68,608 $ 629,702 $ 27,575
Interest 2,132,185 2,348,824 133,001 83,500 70,873 437,539 13,161
---------- ---------- ----------- ---------- ---------- ----------- ----------
Total investment
income 2,132,185 2,348,824 3,128,212 527,081 139,481 1,067,241 40,736
---------- ---------- ----------- ---------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees 233,863 200,953 1,169,901 370,153 73,598 1,545,410 91,708
Custodian fees 15,244 11,446 59,002 13,732 5,684 123,477 3,591
Transfer agent fees 36,844 28,604 314,938 51,988 30,280 721,547 18,996
Broker service fees 98,671 84,632 1,062,075 136,265 30,841 2,249,686 47,840
Distribution fees -
Class B & C -- 74 146,537 5,815 3,028 442,861 8,536
Professional fees 58,596 38,815 126,742 33,155 33,087 159,247 36,015
Registration 25,826 25,370 79,605 35,198 25,598 109,410 22,856
Communication 17,888 7,115 53,800 11,178 7,275 69,366 2,743
Director fees 4,861 3,904 22,343 4,619 1,463 36,479 640
Pricing of investments 5,613 4,342 10,039 7,318 5,009 7,874 4,698
Administration fee 18,827 15,820 159,330 25,165 4,733 314,959 6,881
Deferred organization
expense -- -- -- -- -- 3,389 --
Other expense 8,173 4,280 37,401 3,717 2,688 58,914 --
---------- ---------- ----------- ---------- ---------- ----------- ----------
Total expenses 524,406 425,355 3,241,713 698,303 223,284 5,842,619 244,504
Less expenses absorbed
by advisor (13,047) (15,829) (167,242) (10,639) (76,911) (545,399) (57,159)
---------- ---------- ----------- ---------- ---------- ----------- ----------
Net expenses 511,359 409,526 3,074,471 687,664 146,373 5,297,220 187,345
---------- ---------- ----------- ---------- ---------- ----------- ----------
NET INVESTMENT
INCOME (LOSS) 1,620,826 1,939,298 53,741 (160,583) (6,892) (4,229,979) (146,609)
---------- ---------- ----------- ---------- ---------- ----------- ----------
NET REALIZED GAINS (LOSSES)
ON INVESTMENTS (2,622,180) (1,332,199) 4,983,105 3,318,740 538,660 116,194,452 (311,149)
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 4,063,442 1,146,974 6,757,789 524,454 1,862,681 (23,949,786) 3,848,771
---------- ---------- ----------- ---------- ---------- ----------- ----------
Net gains (losses)
on investments 1,441,262 (185,225) 11,740,894 3,843,194 2,401,341 92,244,666 3,537,622
---------- ---------- ----------- ---------- ---------- ----------- ----------
NET INCREASE
IN NET ASSETS RESULTING
FROM OPERATIONS 3,062,088 $1,754,073 $11,794,635 $3,682,611 $2,394,449 $88,014,687 $3,391,013
---------- ---------- ----------- ---------- ---------- ----------- ----------
---------- ---------- ----------- ---------- ---------- ----------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH
---------- ---------- ------- --------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income (loss) $ 1,620,826 $ 1,939,298 $ 53,741 $ (160,583) $ (6,892) $ (4,229,979) $ (146,609)
Net realized gains (losses)
on investments (2,622,180) (1,332,199) 4,983,105 3,318,740 538,660 116,194,452 (311,149)
Net unrealized
appreciation (depreciation)
on investments 4,063,442 1,146,974 6,757,789 524,454 1,862,681 (23,949,786) 3,848,771
----------- ----------- ------------ ----------- ----------- ------------ -----------
Net increase
in net assets resulting
from operations 3,062,088 1,754,073 11,794,635 3,682,611 2,394,449 88,014,687 3,391,013
----------- ----------- ------------ ----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (1,622,578) (1,945,623) (298,881) (14,808) (917) -- --
Net realized gains
on investments -- -- (3,037,938) (6,720,673) -- (17,586,019) --
----------- ----------- ------------ ----------- ----------- ------------ -----------
Total distributions (1,622,578) (1,945,623) (3,336,819) (6,735,481) (917) (17,586,019) --
----------- ----------- ------------ ----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from
shares issued 421,293 4,137,881 107,842,459 5,617,780 1,330,210 429,411,307 6,899,660
Net asset value of shares
issued in distributions 989,088 1,117,507 3,065,405 6,134,531 897 15,936,636 --
Cost of shares redeemed (8,376,752) (11,953,452) (52,910,805) (5,115,579) (4,665,274) (120,386,002) (756,936)
----------- ----------- ------------ ----------- ----------- ------------ -----------
Net increase (decrease)
in net assets from
capital share
transactions (6,966,371) (6,698,064) 57,997,059 6,636,732 (3,334,167) 324,961,941 6,142,724
----------- ----------- ------------ ----------- ----------- ------------ -----------
Total increase
(decrease) (5,526,861) (6,889,614) 66,454,875 3,583,862 (940,635) 395,390,609 9,533,737
NET ASSETS:
Balance at beginning
of period 42,953,869 37,378,708 251,517,704 46,209,365 10,453,173 229,285,282 7,614,865
----------- ----------- ------------ ----------- ----------- ------------ -----------
Balance at end of period $37,427,008 $30,489,094 $317,972,579 $49,793,227 $ 9,512,538 $624,675,891 $17,148,602
----------- ----------- ------------ ----------- ----------- ------------ -----------
----------- ----------- ------------ ----------- ----------- ------------ -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1999
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH*<F32>
---------- ---------- ------- --------- ------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income (loss) $ 1,660,699 $ 1,995,419 $ 424,436 $ 24,345 $ (32,275) $ (693,556) $ (11,383)
Net realized gains (losses)
on investments (936,361) (999,954) 3,363,466 6,720,588 (186,769) 18,387,897 (262,773)
Change in unrealized
appreciation (depreciation)
on investments
for the year (4,675,154) (1,722,840) 31,625,617 (3,033,691) (456,173) 35,036,837 514,419
----------- ----------- ------------ ----------- ----------- ------------ ----------
Net increase (decrease)
in net assets resulting
from operations (3,950,816) (727,375) 35,413,519 3,711,242 (675,217) 52,731,178 240,263
----------- ----------- ------------ ----------- ----------- ------------ ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (1,655,072) (1,980,343) (388,855) (15,045) -- -- --
Net realized gains
on investments (4,647) -- -- -- -- -- --
----------- ----------- ------------ ----------- ----------- ------------ ----------
Total distributions (1,659,719) (1,980,343) (388,855) (15,045) -- -- --
----------- ----------- ------------ ----------- ----------- ------------ ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from
shares issued 734,230 2,679,791 63,805,712 3,200,433 2,667,230 118,207,229 7,517,403
Net asset value of shares
issued in distributions 1,058,496 1,249,962 355,785 14,155 -- 931 --
Cost of shares redeemed (8,142,535) (3,931,011) (13,981,568) (5,258,236) (3,070,703) (14,377,969) (142,801)
----------- ----------- ------------ ----------- ----------- ------------ ----------
Net increase (decrease)
in net assets from
capital share
transactions (6,349,809) (1,258) 50,179,929 (2,043,648) (403,473) 103,830,191 7,374,602
----------- ----------- ------------ ----------- ----------- ------------ ----------
Total increase
(decrease) (11,960,344) (2,708,976) 85,204,593 1,652,549 (1,078,690) 156,561,369 7,614,865
NET ASSETS:
Balance at beginning
of period 54,914,213 40,087,684 166,313,111 44,556,816 11,531,863 72,723,913 --
----------- ----------- ------------ ----------- ----------- ------------ ----------
Balance at end of period $42,953,869 $37,378,708 $251,517,704 $46,209,365 $10,453,173 $229,285,282 $7,614,865
----------- ----------- ------------ ----------- ----------- ------------ ----------
----------- ----------- ------------ ----------- ----------- ------------ ----------
</TABLE>
*<F32> The Managed Growth Portfolio is from January 1, 1999, the commencement
of its operations, through October 31, 1999.
The accompanying notes to financial statements are an integral part of these
statements.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
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&P 100 Plus Portfolio, Achievers Portfolio, Select Value
Portfolio, PSE Tech 100 Index Portfolio, Wisconsin Tax-Exempt Portfolio,
Cash Reserve Portfolio and the Managed Growth Portfolio. This report
contains the information of all portfolios, except for the Cash Reserve
Portfolio and the Wisconsin Tax-Exempt Portfolio which information 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.
In 1999 the Board of Directors elected to change the fiscal year end of all
of the Portfolios except for the Cash Reserve and Wisconsin Tax-Exempt
Portfolios to October 31. The S&P 100 Plus Portfolio, Achievers Portfolio,
PSE Tech 100 Index Portfolio and Managed Growth Portfolio each offer three
classes of shares - Class A Shares, Class B Shares and Class C Shares. The
Select Value Portfolio offers Class A and Class B Shares. The Government
Portfolio offers Class A and Class C Shares. Each class represents interests
in the same portfolio of investments of each Portfolio and are substantially
the same in all respects except that the classes are subject to different
sales load structures and 12b-1 fees.
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 Tax-Exempt 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.
Through the year, investment transactions are recorded on the next date
after trade date. However, the fiscal year-end financial statements are
adjusted to reflect trade date, which adjustment does not materially
impact the Fund's financial results.
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 Portfolio gives up the
opportunity for profit if the market price of the security increases.
The risk in writing a put option is that a Portfolio 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 Portfolio pays a
premium whether or not the option is exercised. A Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 (losses) on investments for the period
ended October 31, 2000, were comprised of the following:
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH
---------- ---------- ------- --------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net realized gains (losses)
on investment $(2,622,180) $(1,332,199) $4,883,454 $3,318,740 $538,660 $114,206,917 $(311,149)
Net realized gains
on options and futures -- -- 99,651 -- -- 1,987,535 --
----------- ----------- ---------- ---------- -------- ------------ ---------
Total net realized gains
(losses) on investments $(2,622,180) $(1,322,199) $4,983,105 $3,318,740 $538,660 $116,194,452 $(311,149)
----------- ----------- ---------- ---------- -------- ------------ ---------
----------- ----------- ---------- ---------- -------- ------------ ---------
</TABLE>
(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 October 31, 2000,
the Government Portfolio has capital loss carry forwards of $1,963,517,
$151,408, $1,001,047 and $1,292,748 expiring in 2002, 2005, 2007 and
2008 respectively. As of October 31, 2000, the Tax-Exempt Portfolio
has capital loss carry forwards of $936,361and $2,607,520 expiring in
2007 and 2008 respectively. As of October 31, 2000, the Select Value
Portfolio has capital loss carry forwards of $71,877 expiring in 2007.
As of October 31, 2000, the Managed Growth Portfolio has capital loss
carry forwards of $256,063 and $306,274 expiring in 2007 and 2008
respectively. It is management's intention to make no distribution of
any future realized capital gains until the Federal income tax capital
loss carry forwards are exhausted.
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 October 31, reclassifications were recorded to increase (decrease)
undistributed net investment income by ($6,878), $203,012, $165,699,
$7,809, $4,229,979 and $146,609 in the Tax-Exempt, S&P 100 Plus,
Achievers, Select Value, PSE Tech 100 and Managed Growth Portfolios;
increase (decrease) capital stock by $7,307, ($161,255), ($6,753),
($82), and ($146,609) in the Tax-Exempt, Achievers, Select Value, PSE
Tech 100 and Managed Growth Portfolios; increase (decrease)
undistributed net realized gains by ($429), ($203,012), ($4,444),
($1,056), and ($4,229,897) in the Tax-Exempt, S&P 100 Plus, Achievers,
Select Value, and PSE Tech 100 Portfolios. There were no
reclassifications in the Government Portfolio.
Pursuant to section 852 of the Internal Revenue Code, the Portfolios
have designated approximately the following amounts as long- term 20%
capital gain distributions for the fiscal year which were distributed
on November 17, 2000:
S&P 100 Plus Portfolio $4,538,007
Achievers Portfolio $3,318,740
PSE Tech 100 Portfolio $60,218,185
For corporate shareholders, the following percentages of ordinary
income dividends paid during the fiscal year qualified for the
dividends received deduction.
S&P 100 Plus Portfolio 79.74%
(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 $16,900 for the PSE Tech 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 May 1, 1999, the separate investment advisory functions of B.C. Ziegler
and Company ("BCZ") and Ziegler Asset Management, Inc. ("ZAMI") were
consolidated in BCZ, and BCZ became investment advisor for all of the
portfolios covered in this report pursuant to an Investment Advisory
Agreement of that date. BCZ and ZAMI are wholly owned subsidiaries of The
Ziegler Companies, Inc. Certain officers and directors of the Fund are
affiliated with BCZ. Under the Agreement, the Tax-Exempt and Government
Portfolios pay BCZ 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.
Pursuant to the Agreement, the S&P 100 Plus Portfolio pays BCZ a monthly fee
based upon the S&P 100 Plus average daily net assets at the rate of 0.575%
of the first $20,000,000, .45% of the next $30,000,000, .40% of the next
$50,000,000, .35% of the next $400,000,000 and .30% of assets over
$500,000,000.
Pursuant to the Agreement, the Achievers Portfolio pays BCZ a monthly fee
based upon the 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 PSE Tech 100 Index Portfolio pays BCZ 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.
Under the Agreement, the Select Value Portfolio pays BCZ 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. In connection with a
proposed reorganization under consideration involving the merger of the
Select Value Portfolio into the Nationwide Value Opportunities Fund,
effective September 29, 2000, NorthPointe Capital, LLC has been engaged as
interim investment advisor for the Select Value Portfolio, replacing BCZ.
The Fund paid investment advisory fees to BCZ of $55,050 during the period
from November 1, 1999 through September 29, 2000.
Pursuant to the Agreement, BCZ has retained Geneva Capital Management
("Geneva") to manage the Managed Growth Portfolio. Under the Agreement, the
Managed Growth Portfolio pays BCZ 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 assets, and .65% on the average daily net
assets exceeding $250,000,000. BCZ pays Geneva 50% of the fee paid by the
Managed Growth Portfolio.
The Advisor voluntarily reimbursed the Tax Exempt Portfolio $13,047, the
Government Portfolio $15,829, the S&P 100 Plus Portfolio $167,242, the
Achievers Portfolio $10,639, the Select Value Portfolio $76,911, the PSE
Tech 100 Index Portfolio $545,399 and the Managed Growth Portfolio $57,159
in 2000. The Advisor is not obligated to continue the voluntary
reimbursement in the future.
BCZ has an Accounting and Pricing Agreement with the Fund to perform
accounting and pricing services and also an Administrative Service
Agreement. In addition, each Portfolio pays BCZ commissions on sales of
Portfolio shares. The commissions, accounting and pricing fees, and
administrative service fees paid to BCZ for the period ended October 31,
2000, were as follows for each Portfolio:
<TABLE>
COMMISSIONS ACCOUNTING
ADMINISTRATIVE ON AND PRICING
FEES PORTFOLIO SHARES FEES 12B-1 FEES
-------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Tax-Exempt Portfolio $ 15,809 $ 4,890 $ 21,880 $ 79,156
Government Portfolio 13,318 5,063 20,202 82,097
S&P 100 Plus Portfolio 134,399 767,144 74,825 402,829
Achievers Portfolio 21,272 40,961 24,695 115,484
Select Value Portfolio 4,001 12,082 19,000 14,520
PSE Tech 100 Index Portfolio 265,747 2,008,371 95,924 235,472
Managed Growth Portfolio 5,622 36,503 19,000 8,902
-------- ---------- -------- --------
TOTAL $460,168 $2,875,014 $275,526 $938,460
-------- ---------- -------- --------
-------- ---------- -------- --------
</TABLE>
During the period ended October 31, 2000, BCZ received $16,075, $6,768,
$20,283, $1,280 and $780 representing commissions from the purchases and
sales of investments of the S&P 100 Plus Portfolio, Achievers Portfolio, PSE
Tech 100 Portfolio, Managed Growth Portfolio and Select Value Portfolio
respectively.
3. INVESTMENT TRANSACTIONS --
Purchases and proceeds from sales of securities, excluding short-term
investments, for the period ended October 31, 2000 aggregated:
PURCHASES PROCEEDS FROM SALES
--------- -------------------
Tax-Exempt Portfolio $ 22,206,204 $ 29,797,448
Government Portfolio 108,934,356 115,393,719
S&P 100 Plus Portfolio 78,668,821 25,879,675
Achievers Portfolio 20,534,739 19,248,940
Select Value Portfolio 5,026,170 7,884,077
PSE Tech 100 Index Portfolio 627,903,162 327,129,577
Managed Growth Portfolio 10,325,546 4,374,259
Net tax basis unrealized appreciation (depreciation) on investments as of
October 31, 2000, included:
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH
---------- ---------- ------- --------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross unrealized appreciation $ 471,643 $ 331,834 $132,511,025 $22,613,592 $2,362,116 $113,409,932 $ 4,715,468
Gross unrealized (depreciation) (1,063,992) (208,973) (13,959,868) (744,289) (299,697) (82,694,803) (363,863)
----------- ----------- ------------ ----------- ---------- ------------ -----------
Net unrealized appreciation
(depreciation) $ (592,349) $ 122,861 $118,551,157 $21,869,303 $2,062,419 $ 30,715,129 $ 4,351,605
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
Tax basis cost of investments $37,619,346 $30,022,039 $198,769,723 $27,995,162 $7,478,505 $594,506,148 $12,965,936
----------- ----------- ------------ ----------- ---------- ------------ -----------
----------- ----------- ------------ ----------- ---------- ------------ -----------
</TABLE>
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, 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 400,000,000 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, Achievers, Select Value, PSE Tech 100 Index
and Managed Growth Portfolio also have designated Class B (contingent
deferred sales charge) shares. The S&P 100 Plus, Achievers, PSE Tech
100 Index, Managed Growth Portfolio and Government Portfolio also have
designated Class C (front-end and contingent deferred sales charge)
shares. The Cash Reserve Portfolio has designated three Classes of
shares: Class X (Retail Shares); Class B (CDSC Retail Shares); and
Class Y (Institutional Shares). The remaining 200,000,000 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 twelve months ended October 31, 2000
and ten months ended October 31, 1999, were as follows:
<TABLE>
S&P 100 SELECT PSE TECH 100 MANAGED
CLASS A SHARES TAX-EXEMPT GOVERNMENT PLUS ACHIEVERS VALUE INDEX GROWTH
--------------- ---------- ---------- ------- --------- ------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
SHARES OUTSTANDING
AT DECEMBER 31, 1998 5,940,969 4,196,154 4,589,364 1,583,829 931,156 3,586,552 --
Shares issued 80,908 289,467 906,985 79,241 194,286 3,125,619 599,783
Shares issued in distributions 119,300 136,833 9,222 473 -- 41 --
Shares redeemed (919,228) (430,122) (339,320) (177,226) (261,992) (473,777) (11,359)
--------- --------- --------- --------- -------- ---------- --------
SHARES OUTSTANDING
AT OCTOBER 31, 1999 5,221,949 4,192,332 5,166,251 1,486,317 863,450 6,238,435 588,424
Shares issued 51,119 442,214 1,466,413 123,931 89,453 7,139,352 395,065
Shares issued in distributions 119,051 127,216 60,632 219,376 76 377,787 --
Shares redeemed (1,012,739) (1,358,733) (1,014,077) (162,101) (347,256) (2,656,167) (43,767)
--------- --------- --------- --------- -------- ---------- --------
SHARES OUTSTANDING
AT OCTOBER 31, 2000 4,379,380 3,403,029 5,679,219 1,667,523 605,723 11,099,407 939,722
--------- --------- --------- --------- -------- ---------- --------
--------- --------- --------- --------- -------- ---------- --------
S&P 100 SELECT PSE TECH 100 MANAGED
CLASS B SHARES PLUS ACHIEVERS VALUE INDEX GROWTH
--------------- ------- --------- ------ ------------ -------
SHARES OUTSTANDING
AT DECEMBER 31, 1998 175,393 12,145 89,822 356,643 --
Shares issued 744,928 28,472 53,591 2,017,439 173,279
Shares issued in distributions -- -- -- 9 --
Shares redeemed (21,648) (2,824) (27,044) (142,028) (3,345)
--------- --------- -------- ---------- --------
SHARES OUTSTANDING
AT OCTOBER 31, 1999 898,673 37,793 116,369 2,232,063 169,934
Shares issued 880,690 72,745 20,557 3,710,002 196,917
Shares issued in distributions 10,336 7,290 -- 157,635 --
Shares redeemed (188,423) (18,934) (43,530) (423,251) (22,269)
--------- --------- -------- ---------- --------
SHARES OUTSTANDING
AT OCTOBER 31, 2000 1,601,276 98,894 93,396 5,676,449 344,582
--------- --------- -------- ---------- --------
--------- --------- -------- ---------- --------
S&P 100 PSE TECH 100 MANAGED
CLASS C SHARES GOVERNMENT PLUS ACHIEVERS INDEX GROWTH
--------------- ---------- ------- --------- ------------ -------
SHARES OUTSTANDING
AT MAY 8, 2000 (Commencement
of Operations) -- -- -- -- --
Shares issued 28,030 76,140 2,367 316,639 13,105
Shares issued in distributions 149 -- -- -- --
Shares redeemed (2,488) (685) -- (5,057) (46)
------ ------ ----- ------- ------
SHARES OUTSTANDING
AT OCTOBER 31, 2000 25,691 75,455 2,367 311,582 13,059
------ ------ ----- ------- ------
------ ------ ----- ------- ------
</TABLE>
(c) For the S&P 100 Plus Portfolio, the Achievers Portfolio, the Select
Value Portfolio, the PSE Tech 100 Index Portfolio, and the Managed
Growth Portfolio, the maximum offering price per Class A Share is
computed based on a maximum sales charge of 5.25% of the offering price
or 5.54% 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
94.75.
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.
For the Government, S&P 100 Plus, Achievers, PSE Tech 100 and Managed
Growth Portfolios, the maximum offering price per Class C shares is
computed based on a maximum sales charge of 1% of the offering price on
1.01% of the net asset value.
6. FUTURES CONTRACTS WRITTEN --
An analysis of the futures contracts written for the twelve months ended
October 31, 2000, in the S&P 100 Plus and PSE Tech 100 Index Portfolios,
respectively, were as follows:
<TABLE>
AGGREGATE FACE
NUMBER OF CONTRACTS VALUE OF CONTRACTS
------------------- ------------------
<S> <C> <C>
S&P 100 PLUS PORTFOLIO:
Outstanding at October 31, 1999 6 $ 2,064,048
Contracts opened 15 5,534,495
Contracts closed (14) (4,941,987)
---- ------------
Outstanding at October 31, 2000 7 $ 2,656,556
---- ------------
---- ------------
AGGREGATE FACE
NUMBER OF CONTRACTS VALUE OF CONTRACTS
------------------- ------------------
PSE TECH 100 INDEX PORTFOLIO:
Outstanding at October 31, 1999 60 $ 4,006,979
Contracts opened 350 37,534,147
Contracts closed (320) (31,766,407)
---- ------------
Outstanding at October 31, 2000 90 $ 9,774,719
---- ------------
---- ------------
The number of financial futures contracts and the gross unrealized appreciation (depreciation), as of October 31, 2000, for each
Portfolio were as follows:
UNREALIZED
NUMBER OF CONTRACTS APPRECIATION (DEPRECIATION)
------------------- ---------------------------
S&P 100 PLUS PORTFOLIO:
S&P 500 Index Futures Contract expiring March 2001 7 $ (98,931)
PSE TECH 100 INDEX PORTFOLIO:
PSE Technology 100 Index Futures Contract expiring December 2000 90 $(963,720)
</TABLE>
7. CHANGE IN ACCOUNTING PRINCIPLE --
As required, effective November 1, 2000, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing discount or premium on debt securities for all funds. Prior to
November 1, 2000 the Fund did not amortize premiums on debt securities for
the Government Portfolio. The cumulative effect of this accounting change
had no impact on total net assets of the Fund, but resulted in a $166,220
reduction in cost of securities and a corresponding $166,220 increase in net
unrealized appreciation, based on securities held in the Fund on November 1,
2000.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
TAX-EXEMPT PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
<TABLE>
PRINCIPAL S&P MOODY'S MARKET
AMOUNT DESCRIPTION RATING RATING VALUE
------ ----------- ------ ------ -----
<S> <C> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES -- 96.7%
ALABAMA -- 5.3%
$1,000,000 The Board of Trustees of Alabama Agricultural and Mechanical AAA Aaa $ 957,500
University Revenue Bonds, Series 1998, 5.00%, due 11-01-2016
1,000,000 City of Tuscaloosa, Alabama, General Obligation Bonds, Series 2000, AA- Aa3 1,017,500
5.75%, due 01-01-2020
ARIZONA -- 2.7%
1,000,000 Arizona State Transportation Board Highway Revenue Bonds, Series A, AA Aaa 1,028,060
6.35%, due 07-01-2005
COLORADO -- 11.3%
1,300,000 Colorado Post Secondary Educational Facilities Authority Revenue AAA A2 1,327,625
Refunding Bonds (University of Denver Project) 6.00%, due 03-01-2016
2,000,000 City of Colorado Springs, Colorado, Revenue Bonds (The Colorado AA- Aa3 1,892,500
College Project), Series 1999, 5.25%, due 06-01-2024
1,000,000 City of Westminster, Colorado, Sales and Use Tax Revenue Refunding AA- NR 1,015,000
and Improvement Bonds, Series 1997A, 5.60%, due 12-01-2016
CONNECTICUT -- 2.8%
1,000,000 City of New Haven, Connecticut, General Obligation Bonds Issue of 2000, AAA Aaa 1,033,750
Series B, 5.75%, due 11-01-2018
ILLINOIS -- 9.4%
1,000,000 Public Building Commission of Chicago Building Revenue Bonds, AAA Aaa 1,183,750
Series A of 1990, (Board of Education of the City of Chicago), 7.00%,
due 01-01-2020
1,250,000 State of Illinois General Obligation Bond, 5.60%, due 04-01-2020 AAA Aaa 1,251,563
1,000,000 Community Unit School District #220 (Barrington) Lake, Cook, Kane AAA Aaa 1,095,000
and McHenry Counties, Illinois, General Obligation School Bonds,
Series 1998, 6.30%, due 12-01-2017
INDIANA -- 12.1%
1,500,000 Indiana State Office Building Commission Capitol Complex Revenue AAA Aaa 1,803,750
Bonds, Series 1990A, (Senate Avenue Parking Facility), 7.40%,
due 07-01-2015
1,000,000 Indianapolis - Marion County Public Library, Indianapolis, Indiana, NR Aa2 1,035,000
General Obligation Bonds, Series 2000, 5.90%, due 01-01-2017
1,500,000 The Indianapolis Local Public Improvement Bond Bank, Series 1992D AA NR 1,700,625
Bonds, 6.750%, due 02-01-2014
MAINE -- 2.5%
1,000,000 Maine Turnpike Authority Special Obligation Refunding Bonds, AAA Aaa 947,500
Series 1998, 5.00%, due 07-01-2018
MASSACHUSETTS -- 5.3%
1,000,000 City of Springfield, Massachusetts, General Obligation State Qualified AAA Aaa 950,000
Municipal Purpose Loan of 1998 Bonds, 5.00%, due 11-15-2018
1,000,000 Town of Sterling, Massachusetts General Obligation School NR Aaa 1,046,250
Construction Bonds Unlimited Tax, 6.00%, due 02-15-2020
MICHIGAN -- 8.0%
1,000,000 Dexter Community Schools, Counties of Washtenaw and Livingston, AAA Aaa 981,250
State of Michigan, 1998 School Building and Site Bonds, (Unlimited
Tax General Obligation), 5.10%, due 05-01-2018
1,000,000 Board of Control of Northern Michigan University, General Revenue AAA Aaa 950,000
Bonds, Series 1997, 5.125%, due 12-01-2020
1,000,000 West Bloomfield, Michigan, School District General Obligation Bond, AAA Aaa 1,047,500
5.85%, due 05-01-2016
MINNESOTA -- 2.4%
1,000,000 Minnesota Public Facilities Authority, Water Pollution Control Revenue AAA Aaa 898,750
Bonds, Series 1998A, 4.750%, due 03-01-2019
MISSISSIPPI -- 2.5%
1,000,000 Certificates of Participation, (East Mississippi Correctional Facility AAA Aaa 946,250
Project), Series 1997, Payments under Lease/Purchase Agreement,
5.0%, due 01-01-2018
NEW MEXICO -- 2.6%
1,000,000 Bernalillo County, New Mexico, Gross Receipts Tax Refunding AA Aa3 960,000
Revenue Bonds, Series 1998, 5.25%, due 04-01-2027
NEW YORK -- 2.9%
1,000,000 County of Monroe, New York, General Obligation Bonds Public AA Aa2 1,073,750
Improvement Refunding Bonds-1996, Series A, 6.00%, due 03-01-2019
OKLAHOMA -- 2.9%
1,000,000 Tulsa Industrial Authority Revenue and Refunding Bonds, (The AAA Aaa 1,086,250
University of Tulsa), Series 1996A, 6.00%, due 10-01-2016
PENNSYLVANIA -- 2.6%
1,000,000 Public Auditorium Authority of Pittsburgh and Allegheny County, AAA Aaa 955,000
(Allegheny County, Pennsylvania), Hotel Room Excise Tax Revenue
Bonds, Series of 1999, 5.00%, due 02-01-2017
SOUTH CAROLINA -- 2.5%
1,000,000 City of Spartanburg, South Carolina, Water System Refunding AAA Aaa 942,500
Revenue Bonds, Series 1997, 5.00%, due 06-01-2019
TENNESSEE -- 4.9%
1,000,000 Harpeth Valley Utilities District of Davidson and Williamson Counties, AAA Aaa 931,250
Tennessee, Utilities Improvement Revenue Bonds, Series 1998,
5.05%, due 09-01-2020
1,000,000 Knox County, Tennessee General Obligation Public Improvement AA Aa2 896,250
Bonds, Series 1998, 4.75%, due 04-10-2018
VIRGINIA -- 2.7%
1,000,000 City of Norfolk, Virginia, Water Revenue Bonds, Series 1995, AAA Aaa 1,023,750
5.875%, due 11-01-2020
WISCONSIN -- 8.6%
1,300,000 Marinette County, Wisconsin, General Obligation Refunding Bonds, NR Aaa 1,412,125
6.50%, due 09-01-2018
1,000,000 School District of Waupun, Dodge and Fond du Lac Counties, Wisconsin, NR Aaa 906,250
General Obligation Refunding Bonds, 4.75%, due 04-01-2018
1,000,000 Wisconsin State Transportation Revenue Refunding Bonds, Series B, AAA Aaa 888,750
4.75%, due 07-01-2019
WYOMING -- 2.7%
1,000,000 The Trustees of the University of Wyoming Facilities Improvement AAA Aaa 1,000,000
and Refunding Revenue Bonds, Series 1999, 5.50%, due 06-01-2019 -----------
Total Municipal Bonds (Cost $36,762,686) 36,184,998
-----------
SHORT-TERM INVESTMENTS -- 2.2%
MONEY MARKET
842,000 Firstar Tax-Exempt Money Market Fund 842,000
-----------
Total Short-Term Investments 842,000
-----------
Total Investments $37,026,998
-----------
</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.
GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
<TABLE>
PRINCIPAL INTEREST MARKET
AMOUNT DESCRIPTION RATE MATURITY VALUE
------ ----------- ---- -------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 98.5%
U.S. GOVERNMENT OBLIGATIONS -- 94.7%
$2,000,000 U.S. Treasury Bond 6.250% 05-15-2030 $ 2,130,936
1,000,000 U.S. Treasury Note 5.500% 08-15-2028 941,434
1,000,000 U.S. Treasury Note 6.250% 08-15-2023 1,031,852
1,000,000 U.S. Treasury Bond 7.875% 02-15-2021 1,217,034
1,300,000 U.S. Treasury Bond 9.000% 11-15-2018 1,723,718
2,000,000 U.S. Treasury Bond 7.250% 05-15-2016 2,251,190
1,000,000 U.S. Treasury Note 6.500% 02-15-2010 1,047,110
700,000 U.S. Treasury Note 6.000% 08-15-2009 707,487
500,000 U.S. Treasury Note 5.500% 02-15-2008 489,688
2,000,000 U.S. Treasury Note 6.125% 08-15-2007 2,029,006
1,500,000 U.S. Treasury Bond 9.375% 02-15-2006 1,737,127
1,100,000 U.S. Treasury Bond 10.750% 08-15-2005 1,320,215
1,300,000 U.S. Treasury Note 7.875% 11-15-2004 1,392,110
2,200,000 U.S. Treasury Note 5.750% 04-30-2003 2,191,919
2,000,000 U.S. Treasury Note 6.375% 04-30-2002 2,008,526
1,000,000 U.S. Treasury Note 6.625% 03-31-2002 1,006,564
2,375,000 U.S. Treasury Note 6.500% 02-28-2002 2,384,783
2,350,000 U.S. Treasury Note 6.375% 01-31-2002 2,354,841
890,000 U.S. Treasury Note 7.500% 11-15-2001 900,676
-----------
Total U.S. Government Obligations 28,866,216
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 3.8%
1,184,753 Pool #780852 6.500% 09-15-2013 1,170,684
-----------
Total Agency Obligations 1,170,684
-----------
Total U.S. Government and Agency Obligations (Cost $29,865,418) 30,036,900
-----------
SHORT-TERM INVESTMENTS -- 0.4%
MONEY MARKET
108,000 Firstar Government Trust 108,000
-----------
Total Short-Term Investments 108,000
-----------
Total Investments $30,144,900
-----------
-----------
</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.
S&P 100 PLUS PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
NUMBER MARKET
OF SHARES VALUE
--------- -----
COMMON STOCKS -- 99.3%
BASIC INDUSTRIES -- 1.9%
Alcoa Inc. 41,540 $ 1,191,679
Allegheny Technologies, Inc. 3,856 78,084
*<F33> Bethlehem Steel Corporation 5,690 16,359
Boise Cascade Corporation 2,606 74,760
Dow Chemical Company 32,230 987,044
Homestake Mining Company 12,780 52,718
International Paper Company 23,132 847,209
International Flavors &
Fragrances Inc. 5,030 84,252
Weyerhaeuser Company 11,070 519,598
DuPont (E.I.) de Nemours
and Company 50,270 2,281,001
------------
6,132,704
------------
COMMUNICATION SERVICES -- 3.7%
AT&T Corp. 181,098 4,199,210
Verizon Communications 130,732 7,557,944
------------
11,757,154
------------
CONSUMER CYCLICALS -- 6.7%
Black & Decker Corporation 4,060 152,758
Brunswick Corporation 3,660 71,141
Ford Motor Company 89,855 2,347,462
General Motors Corporation 25,470 1,582,324
*<F33> Harrah's Entertainment, Inc. 5,840 167,170
The Home Depot, Inc. 111,710 4,803,530
*<F33> Kmart Corporation 22,860 135,731
Limited (The), Inc. 20,378 514,544
May Department Stores Company 16,200 425,250
Radioshack Corporation 8,530 508,601
Sears, Roebuck and Co. 16,270 483,707
*<F33> Toys "R" Us, Inc. 10,405 178,836
Wal-Mart Stores, Inc. 215,200 9,764,700
------------
21,135,754
------------
CONSUMER STAPLES -- 9.3%
Avon Products, Inc. 11,780 571,330
Campbell Soup Company 19,910 582,368
Coca-Cola Company 119,000 7,184,625
Colgate-Palmolive Company 27,520 1,617,075
Walt Disney Company 100,540 3,600,589
Heinz (H.J.) Company 16,960 711,260
McDonald's Corporation 64,090 1,986,790
PepsiCo, Inc. 69,890 3,385,297
Procter & Gamble Company 62,720 4,480,560
Ralston Purina Group 14,730 357,202
Sara Lee Corporation 41,670 898,509
*<F33> Viacom Inc. 74,220 4,221,263
------------
29,596,868
------------
CAPITAL GOODS -- 12.1%
The Boeing Company 43,852 2,973,714
Fluor Corporation 3,740 130,900
General Dynamics Corporation 9,140 654,081
General Electric Company 477,720 26,185,027
Minnesota Mining &
Manufacturing Company 18,690 1,805,921
Rockwell International Corporation 8,630 339,267
Tyco International Ltd. 82,289 4,664,758
United Technologies Corporation 23,050 1,609,178
------------
38,362,846
------------
ENERGY -- 5.9%
Baker Hughes Incorporated 16,090 553,094
Exxon Mobil Corporation 168,203 15,001,605
Halliburton Company 21,020 779,054
Occidental Petroleum Corporation 17,370 345,229
Schlumberger Limited 27,590 2,100,288
------------
18,779,270
------------
FINANCIAL -- 14.6%
American International Group, Inc. 112,467 11,021,766
American Express Company 64,290 3,857,400
American General Corporation 11,680 940,240
Bank One Corporation 55,394 2,021,881
Bank of America Corporation 80,060 3,847,884
CIGNA Corporation 8,230 1,003,648
Citigroup Inc. 217,233 11,431,887
Hartford Financial Services Group 10,150 755,541
Merrill Lynch & Co., Inc. 38,540 2,697,800
Morgan Stanley Dean Witter & Co. 54,640 4,388,275
U.S. Bancorp 35,640 862,042
Wells Fargo Company 78,720 3,645,720
------------
46,474,084
------------
HEALTH CARE -- 7.6%
Baxter International Inc. 13,910 1,143,228
Bristol-Myers Squibb Company 95,480 5,818,313
Columbia/HCA Healthcare
Corporation 26,810 1,070,725
Johnson & Johnson 67,330 6,202,776
Merck & Co., Inc. 110,540 9,941,691
------------
24,176,733
------------
TECHNOLOGY -- 35.5%
*<F33> America Online, Inc. 111,000 5,597,730
*<F33> Amgen, Inc. 49,760 2,882,970
*<F33> Ceridian Corporation 6,990 174,750
*<F33> Cisco Systems, Inc. 341,520 18,399,390
*<F33> Computer Sciences Corporation 8,410 529,830
*<F33> EMC Corporation 105,600 9,405,000
Eastman Kodak Company 15,340 688,382
Hewlett-Packard Company 97,500 4,527,656
Honeywell International Inc. 38,142 2,052,516
International Business Machines
Corporation 86,040 8,474,940
Intel Corporation 323,160 14,542,200
Lucent Technologies, Inc. 160,850 3,749,816
*<F33> Microsoft Corporation 253,930 17,489,429
*<F33> National Semiconductor Corporation 7,620 198,120
Nortel Networks Corp. 143,560 6,531,980
*<F33> Oracle Corporation 275,428 9,089,124
Pharmacia Corporation 62,089 3,414,895
Polaroid Corporation 1,520 15,295
Raytheon Company, Class B Shares 15,950 545,291
Tektronix, Inc. 1,620 115,425
Texas Instruments Inc. 83,600 4,101,625
*<F33> Unisys Corporation 14,520 185,130
Xerox Corporation 31,262 263,773
------------
112,975,267
------------
TRANSPORTATION -- 0.6%
Burlington Northern
Santa Fe Corporation 20,530 545,328
Delta Air Lines, Inc. 6,190 292,478
*<F33> FedEx Corporation 14,120 661,663
Norfolk Southern Corporation 18,180 256,792
------------
1,756,261
------------
UTILITIES -- 1.4%
American Electric Power
Company, Inc. 15,040 624,160
Coastal Corporation 9,850 743,059
+<F34> Entergy Corporation 11,580 443,659
Exelon Corporation 14,244 856,405
Southern Company 31,090 913,269
Williams Companies, Inc. 21,510 899,387
------------
4,479,939
------------
Total Common Stocks
(Cost $196,728,816) 315,626,880
------------
SHORT-TERM INVESTMENTS -- 0.5%
MONEY MARKET
Firstar Institutional Money
Market Fund $1,694,000 1,694,000
------------
Total Short-Term Investments 1,694,000
------------
Total Investments $317,320,880
------------
------------
FUTURES CONTRACTS -- 0.8%
FUTURES
S&P 500 Index Futures expiring
March, 2001 7 2,557,625
------------
Total Futures Contracts
(cost $2,656,555) $ 2,557,625
------------
------------
*<F33> Non-income producing
+<F34> 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.
ACHIEVERS PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
NUMBER
OF SHARES MARKET
OR PAR VALUE VALUE
------------ -----
COMMON STOCKS -- 97.8%
COMMUNICATIONS SERVICES -- 4.9%
*<F35> Qwest Communications
International Inc. 25,000 $ 1,215,625
SBC Communications, Inc. 21,600 1,246,050
-----------
2,461,675
-----------
CONSUMER CYCLICALS -- 6.9%
Best Buy Co., Inc. 10,000 501,875
The Home Depot, Inc. 27,500 1,182,500
McGraw-Hill Companies, Inc. 17,000 1,091,188
Wal-Mart Stores, Inc. 15,000 680,625
-----------
3,456,188
-----------
CONSUMER STAPLES -- 11.7%
Cardinal Health, Inc. 25,000 2,368,750
Kimberly-Clark Corporation 16,600 1,095,600
PepsiCo, Inc. 25,000 1,210,937
Walgreen Co. 25,000 1,140,625
-----------
5,815,912
-----------
CAPITAL GOODS -- 8.5%
General Electric Company 48,000 2,631,000
*<F35> Jabil Circuit, Inc. 8,000 456,500
Tyco International Ltd. 20,000 1,133,750
-----------
4,221,250
-----------
ENERGY -- 5.1%
Chevron Corporation 10,000 821,250
Exxon Mobil Corporation 19,010 1,695,454
-----------
2,516,704
-----------
FINANCIAL -- 15.5%
American International Group, Inc. 19,500 1,911,000
Bank of America Corporation 22,632 1,087,751
Chase Manhattan Corporation 19,500 887,250
Citigroup Inc. 26,666 1,403,298
Merrill Lynch & Co., Inc. 20,000 1,400,000
Wells Fargo Company 22,000 1,018,875
-----------
7,708,174
-----------
HEALTH CARE -- 10.4%
Johnson & Johnson 19,000 1,750,375
Merck & Co., Inc. 24,000 2,158,500
Pfizer,Inc. 30,000 1,295,625
-----------
5,204,500
-----------
TECHNOLOGY -- 28.7%
*<F35> Applied Materials, Inc. 10,000 531,250
Automatic Data Processing, Inc. 15,000 979,687
*<F35> Cisco Systems, Inc. 5,000 269,375
*<F35> EMC Corporation 5,000 445,313
Hewlett-Packard Company 40,000 1,857,500
Intel Corporation 42,000 1,890,000
Linear Technology Corporation 38,000 2,453,375
Nokia Corp - ADR 50,000 2,137,500
Nortel Networks Corp. 50,000 2,275,000
Texas Instruments Inc. 29,600 1,452,250
-----------
14,291,250
-----------
UTILITIES -- 6.1%
Enron Corp. 24,000 1,969,500
Williams Companies, Inc. 25,000 1,045,313
-----------
3,014,813
-----------
Total Common Stocks
(Cost $26,821,162) 48,690,466
-----------
SHORT-TERM INVESTMENTS -- 2.4%
MONEY MARKET
Firstar Institutional Money
Market Fund $1,174,000 1,174,000
-----------
Total Short-Term Investments 1,174,000
-----------
Total Investments $49,864,466
-----------
-----------
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
*<F35> Non-income producing
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
SELECT VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
NUMBER MARKET
OF SHARES VALUE
--------- -----
COMMON STOCKS -- 95.2%
CONSUMER DURABLES -- 6.7%
*<F36> Arrow Electronics, Inc. 3,800 $ 121,600
*<F36> Gildan Activewear, Inc. Class A
Subordinate Voting Shares 7,300 253,675
Oshkosh Truck Corporation 2,200 90,475
Snap-on Incorporated 3,600 92,025
Superior Industries
International, Inc. 2,500 85,156
----------
642,931
----------
CONSUMER NONDURABLES -- 26.0%
Alberto-Culver Company, Class A 2,900 80,475
*<F36> American Management Systems,
Incorporated 2,900 62,712
*<F36> Apria Healthcare Group Inc. 6,400 128,000
*<F36> Brinker International, Inc. 400 15,700
*<F36> CACI International, Inc. 10,100 208,312
DENTSPLY International, Inc. 7,500 260,156
*<F36> Edwards Lifesciences Corporation 2,800 37,625
*<F36> Footstar, Inc. 2,400 86,100
*<F36> Gadzooks, Inc. 14,000 254,625
Hormel Foods Corporation 5,400 90,788
*<F36> IDEXX Laboratories, Inc. 4,400 105,600
*<F36> IHOP Corp. 6,300 133,087
*<F36> Invitrogen Corporation 600 45,638
*<F36> Medicis Pharmaceutical Corporation 1,500 110,437
Mylan Laboratories, Inc. 2,700 75,600
Owens & Minor, Inc. 6,200 93,776
*<F36> Pharmaceutical Product
Development, Inc. 2,800 87,675
*<F36> PolyMedica Corporation 1,200 69,000
*<F36> R.H. Donnelley Corporation 3,600 81,450
Ruby Tuesday, Inc. 13,600 184,450
*<F36> United Rentals, Inc. 4,600 98,900
*<F36> Venator Group, Inc. 6,600 93,225
*<F36> Whitehall Jewellers, Inc. 8,650 69,200
----------
2,472,531
----------
CAPITAL GOODS -- 15.7%
*<F36> APW Ltd. 8,600 397,213
*<F36> Artesyn Technologies, Inc. 6,400 260,000
C&D Technologies, Inc. 3,900 230,587
Cooper Companies, Inc. 5,500 196,625
*<F36> MSC Industrial Direct Co., Inc. 11,000 163,625
*<F36> Multex.com Inc. 2,400 31,050
*<F36> ScanSource, Inc. 1,700 81,175
Stewart & Stevenson Services, Inc. 5,600 134,400
----------
1,494,675
----------
ENERGY -- 3.3%
*<F36> Key Energy Services, Inc. 4,800 43,200
*<F36> Newfield Exploration Company 7,100 268,025
----------
311,225
----------
FINANCIAL -- 24.3%
American Capital Strategies, Ltd. 9,500 209,594
Arthur J. Gallagher & Co. 2,600 164,125
CNASurety Corporation 4,300 49,988
*<F36> Camden Property Trust 2,500 71,562
Cullen/Frost Bankers, Inc. 3,800 126,588
Dime Bancorp, Inc. 3,000 73,312
*<F36> FirstFed Financial Corp. 3,100 79,050
*<F36> Gabelli Asset Management, Inc. 9,800 352,800
Heller Financial, Inc. 4,800 140,400
Mack-Cali Realty Corporation 3,400 92,225
Metris Companies Inc. 2,000 64,750
Prentiss Properties Trust 4,600 116,725
Radian Group Inc. 4,700 333,112
StanCorp Financial Group, Inc. 2,700 110,025
Sterling Bancshares, Inc. 19,000 326,563
----------
2,310,819
----------
INTERMEDIATES -- 12.7%
Actuant Corp. 8,600 31,175
Belden Inc. 12,500 324,219
Carpenter Technology Corporation 2,600 80,600
*<F36> Centex Corporation 1,500 55,500
Englehard Corporation 4,800 100,200
Harsco Corporation 3,400 68,637
*<F36> Jones Lang LaSalle Inc. 5,000 63,750
Olin Corporation 6,100 108,275
Pentair, Inc. 4,400 131,175
Primex Technologies, Inc. 8,300 243,294
----------
1,206,825
----------
TRANSPORTATION -- 3.3%
*<F36> Atlas Air, Inc. 2,100 76,125
Tidewater, Inc. 5,100 235,556
----------
311,681
----------
UTILITIES -- 3.2%
American States Water Company 1,600 49,900
IDACORP, Inc. 2,000 98,625
*<F36> New Jersey Resources Corporation 2,200 87,863
WGL Holdings Inc. 2,700 68,850
----------
305,238
----------
Total Common Stocks
(cost $6,982,469) 9,055,925
----------
SHORT-TERM INVESTMENTS -- 5.1%
DEMAND NOTE -- 3.2%
Wisconsin Electric Power Company,
Variable Demand Note 6.215% $300,000 300,000
----------
300,000
----------
MONEY MARKET -- 1.9%
Firstar Institutional Money
Market Fund 185,000 185,000
----------
185,000
----------
Total Short-Term Investments 485,000
----------
Total Investments $9,540,925
----------
----------
*<F36> Non-income producing
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECH 100 INDEX PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
NUMBER MARKET
OF SHARES VALUE
--------- -----
COMMON STOCKS -- 99.0%
BIOTECHNOLOGY --7.9%
*<F37> Amgen, Inc. 144,000 $ 8,343,000
*<F37> Biogen, Inc. 144,000 8,667,000
*<F37> Chiron Corporation 144,000 6,237,000
*<F37> Genentech, Inc. 144,000 11,880,000
*<F37> Immunex Corporation 144,000 6,129,000
Pharmacia Corporation 144,000 7,920,000
------------
49,176,000
------------
CAD/CAM -- 1.8%
Autodesk, Inc. 144,000 3,177,000
*<F37> Mentor Graphics Corporation 144,000 3,375,000
*<F37> Synopsys, Inc. 144,000 5,022,000
------------
11,574,000
------------
DATA COMMUNICATIONS -- 16.0%
*<F37> 3Com Corporation 144,000 2,556,000
*<F37> Adaptec, Inc. 144,000 2,277,000
*<F37> ADC Telecommunications, Inc. 144,000 3,078,000
Alcatel ADR 144,000 8,982,000
*<F37> Cabletron Systems, Inc. 144,000 3,906,000
*<F37> Cisco Systems, Inc. 144,000 7,758,000
*<F37> JDS Uniphase Corporation 144,000 11,718,000
Lucent Technologies 144,000 3,357,000
*<F37> Nextel Communications, Inc. 144,000 5,535,000
Nortel Networks Corporation 144,000 6,552,000
*<F37> Palm, Inc. 144,000 7,713,000
*<F37> QUALCOMM Inc. 144,000 9,375,739
Scientific - Atlanta, Inc. 144,000 9,855,000
*<F37> Standard Microsystems Corporation 144,000
3,456,000
Symbol Technologies, Inc. 144,000 6,543,000
*<F37> Tellabs, Inc. 144,000 7,191,000
------------
99,852,739
------------
DATA STORAGE AND PROCESSING -- 4.2%
*<F37> EMC Corp 144,000 12,825,000
*<F37> Quantum Corporation - DLT &
Storage Systems 144,000 2,160,000
*<F37> Seagate Technology, Inc. 144,000 10,062,000
*<F37> Storage Technology Corporation 144,000 1,404,000
------------
26,451,000
------------
ELECTRONIC EQUIPMENT -- 6.4%
*<F37> American Power
Conversion Corporation 144,000 1,863,000
Linear Technologies 144,000 9,297,000
*<F37> Maxim Integrated Products, Inc. 144,000 9,549,000
*<F37> Sensormatic Electronics Corporation 144,000 2,592,000
*<F37> Solectron Corporation 144,000 6,336,000
*<F37> Vitesse Semiconductors 144,000 10,071,000
------------
39,708,000
------------
INFORMATION PROCESSING -- 10.9%
*<F37> America Online, Inc. 144,000 7,261,920
Automatic Data Processing, Inc. 144,000 9,405,000
*<F37> Ceridian Corporation 144,000 3,600,000
*<F37> Computer Sciences Corporation 144,000 9,072,000
*<F37> DST System, Inc. 144,000 8,874,000
Electronic Data Systems 144,000 6,759,000
First Data Corporation 144,000 7,218,000
*<F37> SunGard Data Systems, Inc. 144,000 7,362,000
*<F37> Yahoo!, Inc. 144,000 8,442,000
------------
67,993,920
------------
LARGE DIVERSIFIED COMPUTER
MANUFACTURING -- 2.6%
+<F38> International Business
Machines Corporation 144,000 14,184,000
*<F37> Unisys Corporation 144,000 1,836,000
------------
16,020,000
------------
MEDICAL TECHNOLOGY -- 6.7%
*<F37> Acuson Corporation 144,000 3,285,000
Biomet, Inc. 144,000 5,211,000
*<F37> Boston Scientific Corporation 144,000 2,295,000
*<F37> Coherent, Inc. 144,000 5,013,000
*<F37> Genzyme Corporation 144,000 10,224,000
Medtronic, Inc. 144,000 7,821,000
*<F37> St. Jude Medical, Inc. 144,000 7,920,000
------------
41,769,000
------------
MICRO COMPUTER MANUFACTURERS -- 6.7%
*<F37> Apple Computer, Inc. 144,000 2,817,000
Compaq Computer Corporation 144,000 4,379,040
*<F37> Dell Computer Corporation 144,000 4,248,000
*<F37> Gateway, Inc. 144,000 7,431,840
*<F37> Micron Electronics, Inc. 144,000 1,138,493
*<F37> NCR Corporation 144,000 6,210,000
*<F37> Sun Microsystems, Inc. 144,000 15,966,000
------------
42,190,373
------------
MINI AND MAINFRAME COMPUTER
MANUFACTURERS -- 1.2%
Hewlett-Packard Company 144,000 6,687,000
*<F37> Silicon Graphics, Inc. 144,000 648,000
------------
7,335,000
------------
OFFICE AUTOMATION EQUIPMENT -- 0.9%
Harris Corporation 144,000 4,563,000
Xerox Corporation 144,000 1,215,000
------------
5,778,000
------------
SEMICONDUCTOR CAPITAL EQUIPMENT
MANUFACTURERS -- 5.2%
*<F37> Analog Devices, Inc. 144,000 9,360,000
*<F37> Applied Materials, Inc. 144,000 7,650,000
*<F37> KLA-Tencor Corporation 144,000 4,869,000
*<F37> Kulicke & Soffa Industries, Inc. 144,000 2,115,000
*<F37> Lam Research Corporation 144,000 2,790,000
*<F37> Novellus Systems, Inc. 144,000 5,895,000
------------
32,679,000
------------
SEMICONDUCTOR MANUFACTURERS -- 8.0%
*<F37> Advanced Micro Devices, Inc. 144,000 3,258,000
*<F37> Cypress Semiconductor Corporation 144,000 5,391,000
Intel Corporation 144,000 6,480,000
*<F37> LSI Logic Corporation 144,000 4,734,000
*<F37> Micron Technology, Inc. 144,000 5,004,000
Motorola, Inc. 144,000 3,591,000
*<F37> National Semiconductor Corporation 144,000 3,744,000
Texas Instruments Inc. 144,000 7,065,000
*<F37> Xilinx, Inc. 144,000 10,431,000
------------
49,698,000
------------
SOFTWARE PRODUCTS -- 14.0%
Adobe Systems, Inc. 144,000 10,953,000
*<F37> BMC Software, Inc. 144,000 2,925,000
*<F37> Cadence Design Systems, Inc. 144,000 3,699,000
Computer Associates
International, Inc. 144,000 4,590,000
*<F37> Compuware Corp. 144,000 1,134,000
*<F37> Electronic Arts, Inc. 144,000 7,200,000
*<F37> Informix Corporation 144,000 612,000
*<F37> Microsoft Corporation 144,000 9,918,000
*<F37> Network Associates 144,000 2,772,000
*<F37> Novell, Inc. 144,000 1,296,000
*<F37> Oracle Corporation 144,000 4,752,000
*<F37> PeopleSoft, Inc. 144,000 6,284,246
SAP AG -- ADR 144,000 7,344,000
*<F37> Siebel Systems, Inc. 144,000 15,111,000
*<F37> Sybase, Inc. 144,000 3,015,000
*<F37> Symantec Corporation 144,000 5,625,000
------------
87,230,246
------------
TEST, ANALYSIS, AND INSTRUMENTATION
EQUIPMENT -- 6.5%
*<F37> Agilent Technologies, Inc. 144,000 6,669,000
Millipore Corporation 144,000 7,560,000
PE Biosystems Group 144,000 16,848,000
Tektronix, Inc. 72,000 5,130,000
*<F37> Teradyne, Inc. 144,000 4,500,000
------------
40,707,000
------------
Total Common Stocks
(Cost $586,793,663) 618,162,278
------------
SHORT-TERM INVESTMENTS -- 1.1%
MONEY MARKET
Firstar Institutional Money
Market Fund $7,059,000 7,059,000
------------
Total Short-Term Investments 7,059,000
------------
Total Investments $625,221,278
------------
------------
FUTURES CONTRACTS -- 1.4%
FUTURES Contracts
---------
PSE Technology 100 Index,
expiring December, 2000 90 8,811,000
------------
Total Futures Contracts
(Cost $9,774,719) $ 8,811,000
------------
------------
*<F37> Non-income producing
+<F38> 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.
MANAGED GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
NUMBER
OF SHARES MARKET
OR PAR VALUE VALUE
------------ -----
COMMON STOCKS -- 99.1%
BUSINESS SERVICES --16.9%
*<F39> Acxiom Corporation 13,040 $ 524,860
Cintas Corporation 7,890 365,899
Fastenal Company 6,620 380,236
*<F39> Fiserv, Inc. 9,500 498,156
Omnicom Group Inc. 4,410 406,823
Paychex, Inc. 10,312 584,562
*<F39> Zebra Technologies Corporation 3,300 144,581
-----------
2,905,117
-----------
CONSUMER CYCLICALS -- 9.6%
Harley-Davidson, Inc. 11,550 556,566
The Home Depot, Inc. 6,160 264,879
*<F39> Kohl's Corporation 8,730 473,057
*<F39> Starbucks Corporation 7,840 350,350
-----------
1,644,852
-----------
CONSUMER STAPLES -- 6.9%
Cardinal Health, Inc. 6,000 568,500
Walgreen Co. 13,400 611,374
-----------
1,179,874
-----------
CONSUMER SERVICE -- 5.9%
*<F39> Catalina Marketing Corporation 12,800 502,400
*<F39> Scholastic Corporation 6,400 511,999
-----------
1,014,399
-----------
EDUCATION -- 2.7%
*<F39> DeVry, Inc. 12,350 456,178
-----------
456,178
-----------
FINANCIAL -- 9.0%
Commerce Bancorp 6,400 387,600
*<F39> Concord EFS, Inc. 16,360 675,873
Fifth Third Bancorp 9,220 473,678
-----------
1,537,151
-----------
HEALTH CARE -- 12.1%
*<F39> Biogen, Inc. 1,390 83,661
*<F39> Forest Laboratories, Inc. 1,450 192,125
*<F39> Guidant Corporation 5,050 267,334
*<F39> Health Management
Associates, Inc. 7,200 142,650
*<F39> MedImmune, Inc. 3,500 228,813
*<F39> MiniMed Inc. 3,850 280,809
*<F39> Patterson Dental Company 12,940 405,184
UnitedHealth Group Incorporated 4,400 481,250
-----------
2,081,826
-----------
TECHNOLOGY -- 29.3%
*<F39> Advent Software, Inc. 4,350 260,184
CTS Corporation 7,000 300,563
*<F39> Cisco Systems, Inc. 4,230 227,891
*<F39> Citrix Systems, Inc. 9,600 212,400
*<F39> Comverse Technology, Inc. 5,640 630,270
*<F39> Diamond Technology Partners
Incorporated 3,300 147,263
*<F39> Electronic Arts Inc. 10,900 545,000
Intel Corporation 6,500 292,500
*<F39> Intuit, Inc. 3,900 239,606
Linear Technology Corporation 6,500 419,656
*<F39> QUALCOMM Incorporated 3,150 205,094
*<F39> SEI Investments Company 2,500 226,875
*<F39> Sanmina Corporation 4,100 468,681
*<F39> SunGard Data Systems, Inc. 13,365 683,286
*<F39> Tellabs, Inc. 3,300 164,794
-----------
5,024,063
-----------
TRANSPORTATION -- 6.7%
Expeditors International
of Washington, Inc. 12,200 632,875
Southwest Airlines Co. 17,937 511,205
-----------
1,144,080
-----------
Total Common Stocks
(Cost $12,624,350) 16,987,540
-----------
SHORT-TERM INVESTMENTS -- 1.9%
MONEY MARKET
Firstar Institutional Money
Market Fund $330,000 $ 330,000
-----------
Total Short-Term Investments 330,000
-----------
Total Investments $17,317,540
-----------
-----------
*<F39> Non-income producing
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this
schedule.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Principal Preservation Portfolios, Inc. and the
Shareholders of the Tax-Exempt, Government,
S&P 100 Plus, Achievers, Select Value, PSE Tech 100 Index
and Managed Growth Portfolios:
We have audited the accompanying balance sheets, including the schedules of
investments, of the PRINCIPAL PRESERVATION PORTFOLIOS, INC. (a Maryland
corporation) Tax-Exempt, Government, S&P 100 Plus, Achievers, Select Value, PSE
Tech 100 Index and Managed Growth Portfolios as of October 31, 2000, and the
related statements of operations for the year then ended and the statements of
changes in net assets for the year ended October 31, 2000, and the ten months
ended October 31, 1999 and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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 October 31, 2000, 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Principal Preservation Portfolios, Inc. Tax-Exempt, Government, S&P 100 Plus,
Achievers, Select Value, PSE Tech 100 Index and Managed Growth Portfolios as of
October 31, 2000, the results of their operations for the year then ended and
the changes in their net assets for the year ended October 31, 2000, and the ten
months ended October 31, 1999 and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
November 22, 2000.
NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained in this annual report for
Principal Preservation Portfolios, Inc., the matters discussed in this report
may constitute forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform act of 1995. These include any
advisor, sub-advisor and/or portfolio manager predictions, assessments, analyses
or outlooks for individual securities, industries, market sectors and/or
markets. These statements involve risks and uncertainties. In addition to the
general risks described for each Portfolio in the current Prospectus, other
factors bearing on these reports include the accuracy of the advisor's and any
sub-advisor's or portfolio manager's forecasts and predictions, and the
appropriateness of the investment programs designed by the advisor, any sub-
advisor or portfolio manager to implement their strategies efficiently and
effectively. Any one or more of these factors, as well as other risks affecting
the securities markets and investment instruments generally, could cause the
actual results of any Portfolio to differ materially as compared to benchmarks
associated with the particular Portfolio.
