(WISCONSIN TAX-EXEMPT PORTFOLIO LOGO)
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SEMIANNUAL REPORT
TO SHAREHOLDERS
(UNAUDITED)
JUNE 30, 1998
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
PRESIDENT'S LETTER/MANAGEMENT DISCUSSION AND ANALYSIS
SEMIANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1998
August 25, 1998
Dear Shareholder:
I am pleased to present the June 30, 1998 semiannual report to the Wisconsin
Tax-Exempt Shareholders. The net assets for the portfolio continued to increase
from $32,850,000 at December 31, 1997 to $38,500,000 at June 30, 1998. The
overall assets for the fund family increased from $463,000,000 to $521,000,000
during the same period.
Generally, the economy for the first six months continued at a consistently
strong pace with extended low unemployment and interest rates. Due to a slowing
of the growth in the economy, Chairman Allen Greenspan of the Federal Reserve
led the Fed on a stable course of action. The Fed has not adjusted the short
term Fed Funds interest rate during the past 12 months. As a result, yields on
fixed income securities moved in a very narrow band during the period. The
following pages discuss the factors and the Portfolio Manager's actions which
influenced the performance of the Wisconsin Tax-Exempt Portfolio.
On May 15, 1998, the shareholders of Principal Preservation re-elected four
of the five serving directors to the Board, and elected Richard Glaisner as the
fifth director to replace R.D. Ziegler. At least 182,447,482 shares of
Principal Preservation voted in favor of each nominee, which represented 91.3%
of the 199,845,457 shares outstanding for the fund family. Shareholders of the
Wisconsin Tax-Exempt Portfolio representing 2,486,605 shares, or 71.93% of the
3,416,419 shares outstanding, voted in favor of reappointing Arthur Andersen LLP
as the independent accountants.
Concurrent with the vote, R. Douglas Ziegler left the board to focus on
private account management. Doug was the first President and CEO of Principal
Preservation. He was instrumental in the initial growth of the fund family and
responsible for developing many new ideas on products. Personally, he has given
me the opportunity to be part of Principal Preservation and I thank him for the
wise counsel he provided. Replacing Doug is Richard Glaisner. Richard is head
of the investment unit at B.C. Ziegler and Company. Dick has varied experience
in the securities industry and is active as a board member of various colleges
and foundations. We welcome Dick to the Board of Principal Preservation and
look forward to his contribution to our fund family.
We sincerely thank you for your continued trust with us at Principal
Preservation.
Sincerely,
/S/ Robert J. Tuszynski
Robert J. Tuszynski
President and CEO
The information in this report is directed to the existing shareholders of
Principal Preservation. This report does not constitute an offer to sell shares
of the Wisconsin Tax-Exempt Portfolio. Any investor who wants more information
about the portfolios should obtain a complete prospectus which includes a
discussion of the investment objective and all sales charges and expenses of the
relevant portfolio(s).
MANAGEMENT DISCUSSION AND ANALYSIS
The total return of the Wisconsin Tax-Exempt Portfolio for the year-to-date
period ended June 30, 1998 was 2.48% compared to the Lipper General Municipal
Bond Fund return of 2.26%. During the first quarter, yields in the U.S.
Treasury market rallied through mid January and finished unchanged compared to
December 31, 1997. As the assets grew from $32.6 million at December 31, 1997
to $34.9 million at March 31, 1998, the Manager invested the proceeds in either
Public Housing Agencies issued in Kansas City or AAA bonds issued by Puerto
Rico. The Portfolio Manager has been able to continue investing in securities
that would not subject shareholders to any alternative minimum tax. As we moved
into the second quarter of 1998, the Manager sold the AAA rated Puerto Rico
securities and replaced them with a Glendale Wisconsin Lease Revenue issue with
a coupon of 5.4% maturing in 2018 and a Sheboygan Wisconsin Housing issue 5.1%
rated AAA and preinsured by FNMA. As a result, the percentage invested in
Wisconsin issues was approaching 70% during the quarter. The Portfolio reduced
exposure to issues from the territory Puerto Rico down to 7.5%. Approximately
half of the Puerto Rico bonds were rated AAA by virtue of the fact that they are
either pre-refunded or escrowed in U.S. Treasury securities.
The focus is to purchase Wisconsin issues. The credit quality of the
Wisconsin Tax-Exempt Portfolio in a flat yield environment has caused the
performance to lag slightly (0.30% of a year-to-date basis) as compared to
higher yielding municipal bond funds. For the remainder of this year, the
Manager anticipates that the new issue supply in the municipal market will
decline, which may help to reduce the percentage of municipal yields. On a tax
comparative basis, 30-year U.S. Treasury municipal yields are 90% of the yield.
Historically, municipal bond yields have maintained an 80% comparative yield
spread to U.S. Treasury bonds. In addition, underwriters of bonds exempt from
taxes in the state of Wisconsin predict there should be a good supply coming to
market. The combination of these factors points to two things. First, with a
supply of new Wisconsin issues, investors should continue to see a high level of
bonds issued by the state of Wisconsin in the Wisconsin Tax-Exempt Portfolio.
Second, the general market decline in new issue volume should help support the
value of the Wisconsin securities compared to the rest of the municipal market.
The standardized average annualized total return, including the sales charge
for the one, since inception period ending June 30, 1998 were 5.26% and 5.01%,
respectively.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of
Principal Preservation Portfolios, Inc. Wisconsin Tax-Exempt Portfolio
outstanding for the following period presented, which should be read in
conjunction with the financial statements and related notes:
<TABLE>
WISCONSIN
TAX-EXEMPT PORTFOLIO
------------------------------------------------------------------
For the
period from
For the six For the June 13, 1994
months ended years ended (commencement
June 30, 1998 December 31, of operations) to
------------------------------------------
(Unaudited) 1997 1996 1995 December 31, 1994
------------ ----- ----- ------ -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.21 $ 9.87 $10.05 $ 9.10 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .24 .49 .49 .50 .25
Net realized and unrealized gains
(losses) on investments .01 .34 (.18) .95 (.90)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .25 .83 .31 1.45 (.65)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.24) (.49) (.49) (.50) (.25)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.24) (.49) (.49) (.50) (.25)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.22 $10.21 $ 9.87 $10.05 $ 9.10
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN **<F2> 2.5% 8.7% 3.3% 16.3% (6.5)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $38,674 $32,852 $25,750 $18,986 $8,116
Ratio of expenses to
average net assets 0.6%*+<F1><F3> 0.5%+ <F3> 0.5%+<F3> 0.4%+<F3> 0.2%*+<F1><F3>
Ratio of net investment income
to average net assets 4.6%*+<F1><F3> 4.9%+<F3> 4.9%+<F3> 5.0%+<F3> 4.4%*+<F1><F3>
Portfolio turnover rate 13.6% 16.9% 16.0% 9.7% 23.4%
____________________
</TABLE>
*<F1> Annualized.
**<F2> The Fund's sales charge is not reflected in total return as set forth
in the table.
+<F3> Reflects a voluntary reimbursement of fund expenses of 0.5% in 1998,
0.6% in 1997, 0.6% in 1996, 0.8% in 1995 and 1.4% in 1994,
respectively.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
BALANCE SHEET
JUNE 30, 1998 (UNAUDITED)
WISCONSIN
TAX-EXEMPT PORTFOLIO
---------------------
ASSETS:
Investments:
Cost basis of investments $36,507,955
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--------------
Long-term investments in securities $38,072,756
Cash 49,523
Receivables:
Capital shares sold 114,695
Interest 522,029
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Total receivables 636,724
Other assets 3,171
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Total assets $38,762,174
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--------------
LIABILITIES:
Payables:
Capital shares redeemed $ 8,000
Distributions to shareholders 42,797
Management fees 14,910
Other accrued expenses 22,182
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Total liabilities 79,889
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NET ASSETS:
Capital stock 37,114,775
Undistributed net investment income 2,956
Undistributed net realized gains (losses) on investments (8,247)
Net unrealized appreciation on investments 1,564,801
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Total net assets 38,674,285
--------------
Total liabilities and net assets $38,754,174
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--------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 10.22
--------------
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MAXIMUM OFFERING PRICE PER SHARE $ 10.48
--------------
--------------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
WISCONSIN
TAX-EXEMPT PORTFOLIO
---------------------
INVESTMENT INCOME:
Interest $ 938,157
---------
Total investment income 938,157
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EXPENSES:
Investment advisory fees 87,773
Custodian fees 6,335
Transfer agent fees 10,860
Broker service fees 43,791
Professional fees 20,466
Registration 2,312
Communication 3,258
Director fees 3,151
Pricing of investments 5,068
Deferred organization expense 1,289
Other 3,458
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Total expenses 187,761
Less expenses absorbed by advisor (82,495)
---------
Net expenses 105,266
---------
NET INVESTMENT INCOME 832,891
---------
NET REALIZED GAINS (LOSSES) ON INVESTMENTS (2,059)
CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS FOR THE YEAR 30,772
---------
Net gain on investments 28,713
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 861,604
---------
---------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
WISCONSIN
TAX-EXEMPT PORTFOLIO
---------------------
OPERATIONS:
Net investment income $ 832,891
Net realized gains (losses) on investments (2,059)
Change in unrealized appreciation on investments for the year 30,772
-------------
Net increase (decrease) in net assets
resulting from operations 861,604
-------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ($0.2402 per share) (831,739)
-------------
Total distributions (831,739)
-------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 7,263,214
Net asset value of shares issued in distributions 586,633
Cost of shares redeemed (2,057,108)
-------------
Net increase in net assets from
capital share transactions 5,792,739
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Total increase 5,822,604
NET ASSETS:
Balance at beginning of period 32,851,681
-------------
Balance at end of period $38,674,285
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-------------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
WISCONSIN
TAX-EXEMPT PORTFOLIO
---------------------
OPERATIONS:
Net investment income $ 1,409,828
Net realized losses on investments (3,012)
Change in unrealized appreciation on investments for the year 1,014,603
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Net increase in net assets resulting from operations 2,421,419
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DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ($0.49 per share) (1,408,836)
------------
Total distributions (1,408,836)
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued 8,494,645
Net asset value of shares issued in distributions 972,957
Cost of shares redeemed (3,378,102)
------------
Net increase in net assets from capital
share transactions 6,089,500
------------
Total increase 7,102,083
NET ASSETS:
Balance at beginning of year 25,749,598
------------
Balance at end of year $32,851,681
------------
------------
The accompanying notes to financial statements are an integral part of this
statement.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES --
Principal Preservation Portfolios, Inc. (the "Fund"), registered under the
Investment Company Act of 1940 as an open-end management investment company, is
a series company with eight portfolios: Tax-Exempt Portfolio, Government
Portfolio, S&P100 Plus Portfolio, Dividend Achievers Portfolio, PSE Tech 100
Index Portfolio, Cash Reserve Portfolio, Wisconsin Tax-Exempt Portfolio and the
Select Value Portfolio. This report presents information only for the Wisconsin
Tax-Exempt Portfolio (the "Portfolio"). Information regarding the other
portfolios is presented in separate reports. The assets and liabilities of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which the shareholder owns shares.
The following is a summary of the significant accounting policies of the Fund.
(a) Long-Term Securities
The long-term tax-exempt securities are valued at market or fair value using
quotations by an independent pricing service (the "Service"). When, in the
judgment of the Service, quoted bid prices for securities are readily
available and are representative of the bid side of the market, these
investments are valued at the mean between quoted bid prices (as obtained by
the Service from dealers in such securities) and ask prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Securities for which, in the judgment of the Service, there are no readily
obtainable market quotations (which may constitute a majority of the
portfolio's securities) are carried at fair value as determined by the
Service in accordance with procedures approved by the Fund's Board of
Directors. Among other factors, these procedures include consideration of
yields or prices of municipal securities of comparable quality, coupon,
maturity, type, indications as to values from dealers, and general market
conditions.
Investment transactions are recorded on the trade date.
Premiums on long-term tax-exempt securities are amortized to the shorter of
call date or maturity. The fund does not amortize premiums on taxable long-
term securities. The fund amortizes all discounts on taxable securities and
on original issue discount tax-exempt securities.
(b) Net Realized Gains and Losses and Investment Income
Net realized gains and losses on securities sales are computed on the
identified cost basis. Dividend income is recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
(c) Federal Income Taxes
Provision has not been made for Federal income taxes, because the Portfolio
has elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise to
comply with the provisions of the Internal Revenue Code applicable to
regulated investment companies. As of December 31, 1997, the Portfolio had
Federal income tax capital loss carryforwards of $3,176 expiring in 2003 and
$3,012 expiring in 2004. It is management's intention to make no
distribution of any future realized capital gains until the Federal income
tax capital loss carryforward is exhausted.
The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for
federal income tax purposes due to differences in the recognition of income,
expense or gain items for financial statement and tax purposes. Where
appropriate, reclassifications between net asset accounts are made for such
differences that are permanent in nature. Accordingly, at December 31, 1997,
reclassifications were recorded to increase undistributed net investment
income by $3,201 and decrease capital stock by $3,201.
(d) Expenses
Fund expenses associated with a specific portfolio are charged to that
portfolio as they are incurred. Common expenses incurred by the Fund are
allocated, as incurred, between the portfolios based upon the ratio of the
net assets of each portfolio to the combined net assets of the Fund.
(e) Distributions to Shareholders
Dividends to shareholders are recorded on the ex-dividend date.
(f) Deferred Organization Costs
Costs incurred with the organization, initial registration and public
offering of shares aggregating $13,000 for the Portfolio have been paid by
the Fund and are being amortized over a five year period.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(h) Reclassifications
Certain reclassifications have been made to the 1996 financial statements
to conform with 1997 presentation.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS
WITH RELATED PARTIES --
The Fund has an Investment Advisory Agreement (the "Agreement") with Ziegler
Asset Management, Inc. ("ZAMI") (with whom certain officers and directors of the
Fund are affiliated), to serve as the Investment Advisor. ZAMI is a wholly owned
subsidiary of The Ziegler Companies, Inc. Under the Agreement, the Portfolio
pays ZAMI a monthly fee based upon the average daily net assets of the Portfolio
at the rate of .50% of the first $250,000,000 of the Portfolio's average daily
net assets, reducing to .40% of the Portfolio's average daily net assets in
excess of $250,000,000.
For the six months ended June 30, 1998, ZAMI voluntarily reimbursed expenses
to the Portfolio totaling $82,495. ZAMI is not obligated to continue the
voluntary reimbursement in the future.
On May 17, 1991, the Fund's shareholders approved a Distribution Agreement
under Rule 12b-1. According to this agreement the Fund pays a distribution fee
of up to 0.25% to Ziegler, as the distributor, which is passed through to the
broker/dealer as a service fee. This fee is calculated on the average daily net
assets and is shown as broker service fees in the Statement of Operations.
Ziegler has an Accounting and Pricing Agreement with the Fund to perform
accounting and pricing services, a Depository Agreement with the Fund to serve
as depository for all investment securities and cash, and a Transfer and
Dividend Disbursing and Shareholder Servicing Agreement with the Fund to provide
Transfer Agent Services. In addition, the Portfolio pays Ziegler commissions on
sales of Portfolio shares and 12b-1 distribution fees. The transfer agent fees,
commissions, accounting and pricing fees, depository and 12b-1 fees paid to
Ziegler by the Portfolio for the six months ended June 30, 1998 were as follows:
<TABLE>
ACCOUNTING
TRANSFER COMMISSIONS AND PRICING DEPOSITORY*<F4>
AGENT FEES ON PORTFOLIO SHARES FEES FEES 12B-1 FEES
---------- ---------------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Wisconsin Tax-Exempt Portfolio $11,752 $58,489 $10,186 $4,402 $28,824
</TABLE>
*<F4> On March 30, 1998, Firstar Trust Company became the Fund's Custodian.
Therefore, the depository fees paid to Ziegler are for the period from
January 1, 1998 through March 30, 1998.
3. INVESTMENT TRANSACTIONS --
Purchases and proceeds from sales of securities, excluding short-term
investments, for the six months ended June 30, 1998, consisted of purchases of
$10,863,608 and $4,823,592 in proceeds from the sale of securities.
Net tax basis unrealized appreciation (depreciation) on investments as of June
30, 1998, included:
WISCONSIN
TAX-EXEMPT
-------------
Gross unrealized appreciation $1,585,996
Gross unrealized (depreciation) (21,195)
-------------
Net unrealized appreciation $1,564,801
-------------
-------------
The tax basis cost of investments at June 30, 1998 was $36,507,955.
4. LINE OF CREDIT --
The Fund has an available line of credit of $3,000,000. However, each
portfolio's borrowings, by investment restriction, cannot exceed 10% of the
total net assets not including the borrowings. Interest expense incurred in
connection with such borrowings was not material during the year. Borrowings
under this arrangement bear interest approximating the then current Prime Rate.
All borrowings under this line of credit are guaranteed by Ziegler. Each
portfolio's policies allow borrowings for temporary or emergency purposes.
5. CAPITAL SHARE TRANSACTIONS --
(a)The Fund has authorized capital of 1,000,000,000 shares at $.001 par value
per share. The Fund's shares are divided into eight separate portfolios:
Wisconsin Tax-Exempt Portfolio, Government Portfolio, Tax-Exempt Portfolio,
S&P 100 Plus Portfolio, Dividend Achievers Portfolio, Select Value
Portfolio, PSE Tech 100 Index Portfolio and Cash Reserve Portfolio,
consisting of 50,000,000 shares in each of the first seven portfolios and
400,000,000 in the Cash Reserve Portfolio. The shares of the Cash Reserve
Portfolio have been subdivided into 200,000,000 shares of Class X (Retail
Shares) and 200,000,000 shares of Class Y (Institutional Shares). The
remaining 250,000,000 authorized shares of common stock of the Fund may be
allocated to any of the above portfolios or to new portfolios as determined
by the Board of Directors. The shares of each portfolio have equal rights
and privileges with all other shares of that portfolio.
(b)Capital share activity during the year ended December 31, 1997 and six
months ended June 30, 1998, respectively, were as follows:
WISCONSIN
TAX-EXEMPT
-----------
SHARES OUTSTANDING AT DECEMBER 31, 1996 2,609,778
------------
------------
Shares issued 851,162
Shares issued in distributions 97,574
Shares redeemed (339,806)
------------
SHARES OUTSTANDING AT DECEMBER 31, 1997 3,218,708
------------
------------
Shares issued 711,371
Shares issued in distributions 57,490
Shares redeemed (201,863)
------------
SHARES OUTSTANDING AT JUNE 30, 1998 3,785,706
------------
------------
(c)Maximum offering price per share is computed based on a maximum sales
charge of 2.5% of the offering price or 2.56% of the net asset value. For
purpose of this computation, the price per share is derived from multiplying
the net asset value and redemption price per share by 100 and then dividing
the product by 97.5.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
WISCONSIN TAX-EXEMPT PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
PRINCIPAL S&P MOODY'S
AMOUNT DESCRIPTION RATING RATING VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM TAX-EXEMPT SECURITIES -- 98.4%
GEORGIA -- 1.5%
$ 325,000 Atlanta, Georgia, New Public Housing Authority, 5.00%, AAA Aaa $ 332,436
due 05-01-2007
250,000 Newnan, Georgia, New Public Housing Authority, 5.00%, AAA Aaa 255,368
due 04-01-2012
GUAM -- 5.1%
650,000 Guam Government Limited Obligation Highway Bonds, Series A, AAA Aaa 702,000
6.30%, due 05-01-2012
700,000 Government of Guam, Limited Obligation Infrastructure AAA Aaa 706,125
Improvement Bonds, 1997 Series A, 5.00%, due 11-01-2017
515,000 Guam Power Authority Revenue Bonds, Series A, 6.375%, AAA Aaa 565,212
due 10-01-2008
ILLINOIS -- 1.3%
200,000 Cook County, Illinois, New Public Housing Authority, 5.25%, AAA Aaa 204,442
due 04-01-2010
300,000 Peoria, Illinois, New Public Housing Authority, 5.00%, due 06-01-2012 AAA Aaa 306,495
MASSACHUSETTS -- 2.1%
670,000 Massachusetts State Housing Finance Agency, Multi-Family Housing AAA A1 809,863
Bonds, First Issue, 1979 Series A, 7.00%, due 04-01-2021
NEVADA -- 0.7%
255,000 Las Vegas, Nevada, New Public Housing Authority, 5.00%, AAA Aaa 260,740
due 01-01-2012
NEW JERSEY -- 1.8%
435,000 Newark, New Jersey, New Public Housing Authority, 5.25%, AAA Aaa 440,407
due 04-01-2009
250,000 Newark, New Jersey, New Public Housing Authority, 4.50%, AAA Aaa 251,875
due 04-01-2008
NEW YORK -- 1.1%
200,000 New York, New York, New Public Housing Authority, 5.375%, AAA Aaa 204,958
due 01-01-2012
200,000 New York, New York, New Public Housing Authority, 5.00%, AAA Aaa 204,502
due 01-01-2012
NORTH CAROLINA -- 1.5%
165,000 Durham, North Carolina, New Public Housing Authority, 5.25%, AAA Aaa 168,635
due 12-01-2009
400,000 Durham, North Carolina, New Public Housing Authority, 5.00%, AAA Aaa 408,164
due 02-01-2012
NORTH DAKOTA -- 1.0%
200,000 Burleigh County, North Dakota, New Public Housing Authority, AAA Aaa 204,648
4.875%, due 01-01-2009
185,000 Burleigh County, North Dakota, New Public Housing Authority, AAA Aaa 189,299
4.875%, due 01-01-2010
OHIO -- 3.3%
300,000 Youngstown, Ohio, New Public Housing Authority, 5.00%, AAA Aaa 306,933
due 05-01-2012
250,000 Youngstown, Ohio, New Public Housing Authority, 4.875%, AAA Aaa 255,507
due 05-01-2009
200,000 Youngstown, Ohio, New Public Housing Authority, 4.875%, AAA Aaa 204,342
due 05-01-2010
500,000 Youngstown, Ohio, New Public Housing Authority, 5.00%, AAA Aaa 511,555
due 05-01-2011
PENNSYLVANIA -- 1.2%
270,000 Allentown, Pennsylvania, New Public Housing Authority, 4.875%, AAA Aaa 275,651
due 11-01-2011
200,000 Clinton County, Pennsylvania, New Public Housing Authority, AAA Aaa 204,538
5.25%, due 11-01-2007
PUERTO RICO -- 11.9%
350,000 Puerto Rico Commonwealth Highway & Transportation Authority, A Aaa 388,500
Highway Revenue Unrefunded Balance, Series T, 6.625%,
due 07-01-2018
100,000 Puerto Rico Commonwealth Highway & Transportation Authority, A Baa1 110,750
6.625%, due 07-01-2012
325,000 Puerto Rico Commonwealth, Refunding Bonds, Series A, 6.00%, A Baa1 344,906
due 07-01-2014
350,000 Puerto Rico Commonwealth, General Obligation Bonds, 6.00%, A Aaa 380,625
due 07-01-2022
180,000 Puerto Rico Commonwealth Electric &Power Authority, Series R, AAA Aaa 197,325
6.25%, due 07-01-2017
1,750,000 Puerto Rico Infrastructure Financing Authority, Special AAA Aaa 1,715,000
Tax Revenue Bonds, Series 1997A, 5.00%, due 07-01-2028
200,000 Puerto Rico Municipal Finance Agency, 1997 Series A Bonds, AAA Aaa 209,750
5.50%, due 07-01-2017
700,000 Puerto Rico Public Buildings Authority, Public Education &Health A Baa1 728,000
Facilities, Refunding Bonds, Series M, 5.75%, due 07-01-2015
150,000 Puerto Rico Telephone Authority, Series L, 5.75%, due 01-01-2011 A+ A2 157,875
350,000 Puerto Rico Telephone Authority, Series L, 6.125%, due 01-01-2022 A+ A2 371,000
SOUTH CAROLINA -- 0.5%
200,000 Marion, South Carolina, New Public Housing Authority, 4.875%, AAA Aaa 204,120
due 09-01-2010
TENNESSEE -- 0.5%
190,000 Nashville, Tennessee, New Public Housing Authority, 5.00%, AAA Aaa 192,850
due 08-01-2010
TEXAS -- 3.5%
300,000 El Paso, Texas, New Public Housing Authority, 5.00%, AAA Aaa 306,915
due 07-01-2005
160,000 Galveston, Texas, New Public Housing Authority, 5.25%, AAA Aaa 163,648
due 10-01-2008
150,000 Sherman, Texas, New Public Housing Authority, 5.00%, AAA Aaa 153,172
due 06-01-2010
180,000 Sherman, Texas, New Public Housing Authority, 5.25%, AAA Aaa 184,504
due 07-01-2009
340,000 Waco, Texas, New Public Housing Authority, 4.875%, AAA Aaa 348,123
due 12-01-2009
200,000 Waco, Texas, New Public Housing Authority, 4.875%, AAA Aaa 204,354
due 12-01-2012
WISCONSIN -- 61.4%
500,000 Housing Authority of the City of Ashland, Wisconsin, Student NR Aa3 500,625
Housing Revenue Bonds, Series 1998, (Northland College
Project), 5.10%, due 04-01-2018
200,000 Brown County (Wisconsin) Housing Authority, Student NR NR 203,250
Housing Revenue Bonds, Series 1997B, (University Village
Housing, Inc. Project), 5.400%, due 04-01-2017
3,000,000 Community Development Authority of the City of Glendale, Wisconsin, NR NR 2,985,000
Lease Revenue Bonds, Series 1998A, (Tax Increment District
No. 7), 5.40%, due 09-01-2018
150,000 Housing Authority of the City of Green Bay, Wisconsin, Student NR NR 157,125
Housing Refunding Revenue Bonds, Series 1997, (University Village
Housing, Inc.), 6.00%, due 04-01-2017
200,000 City of Hartford Community Development Authority, Dodge and NR NR 214,000
Washington Counties, Wisconsin, Community Development Lease
Revenue Bonds, 5.90%, due 12-01-2006
500,000 Community Development Authority of the Village of Little Chute, NR NR 522,500
Wisconsin, Community Development Lease Revenue Bonds, 5.625%,
due 03-01-2019
300,000 Community Development Authority of the City of Madison, NR NR 308,625
Wisconsin, Multifamily Housing Revenue Bonds, Series 1995,
(Dempsey Manor Project), 6.65%, due 10-01-2025
500,000 Community Development Authority of the City of Madison, Wisconsin, NR NR 541,875
Redevelopment Revenue Bonds, Series 1995, (Meriter Retirement
Services, Inc.), 6.125%, due 12-01-2019
270,000 Community Development Authority of the City of Madison, NR NR 289,230
Wisconsin, Project Revenue Bonds, (Series 1986), 5.875%,
due 07-01-2016
1,000,000 Madison, Wisconsin, Community Development Authority, Lease NR Aa2 1,085,000
Revenue Bonds, Monona Terrace Community &Convention Center
Project, 6.10%, due 03-01-2010
500,000 Redevelopment Authority of the City of Milwaukee, Wisconsin, NR A1 525,625
Development Revenue Bonds, (Goodwill Industries of Southeastern
Wisconsin Project), 6.35%, due 10-01-2009
100,000 Milwaukee, Wisconsin, Housing Authority Multifamily Revenue NR Aa2 104,125
Refunding Bonds-Blatz Apartments Project, 7.50%, due 12-01-2028
1,000,000 Housing Authority of the City of Oak Creek, Wisconsin, Multifamily NR NR 1,072,500
Housing Refunding Revenue Bonds,Series 1994A, (Country Oaks II
Project), 6.30%, due 08-01-2028
75,000 Housing Authority of the City of Oak Creek, Wisconsin, Multifamily AAA NR 76,313
Housing Refunding Revenue Bonds, Series 1993, (Wood Creek
Project), 5.625%, due 07-20-2029
210,000 Community Development Authority of the City of Onalaska, Wisconsin, NR NR 212,888
Redevelopment Lease Revenue Refunding Bonds,
5.30%, due 06-01-2015
1,275,000 Housing Authority of the City of Oshkosh, Wisconsin, GNMA NR Aaa 1,306,875
Collateralized Multifamily Housing Revenue Bonds, Series 1997,
(VNA Assisted Living, Inc. Project), 5.75%, due 09-20-2038
125,000 Housing Authority of the City of Oshkosh, Wisconsin, GNMA NR Aaa 128,281
Collateralized Multifamily Housing Revenue Bonds, Series 1997,
(VNA Assisted Living, Inc. Project), 5.45%, due 09-20-2017
2,260,000 Southeast Wisconsin Professional Baseball Park District Sales Tax AAA Aaa 2,381,475
Revenue Bonds, Series 1996, 5.750%, due 12-15-2021
1,000,000 Housing Authority of the City of Sheboygan, Wisconsin, AAA NR 998,750
Multifamily Housing Refunding Revenue Bonds, Series 1998A,
(GNMA Collateralized - Lake Shore Apartments), 5.10%,
due 11-20-2026
600,000 Redevelopment Authority of the Village of Slinger, Wisconsin, NR NR 620,250
Redevelopment Lease Revenue Bonds, Series 1995-A, 6.25%,
due 09-01-2017
150,000 Redevelopment Authority of the City of Superior, Wisconsin, Revenue NR Aa2 157,500
Bonds, Series 1994, (Superior Memorial Hospital, Inc.), 5.65%,
due 11-01-2008
155,000 Redevelopment Authority of the City of Superior, Wisconsin, Revenue NR Aa2 162,750
Bonds, Series 1994, (Superior Memorial Hospital, Inc.), 5.60%,
due 05-01-2007
100,000 Redevelopment Authority of the City of Superior, Wisconsin, Revenue NR Aa2 104,625
Bonds, Series 1994, (Superior Memorial Hospital, Inc.), 5.80%,
due 05-01-2010
600,000 Housing Authority of the City of Superior, Wisconsin, Housing NR NR 624,000
Revenue Refunding Bonds, Series 1996, (GNMA Collateralized -
St. Francis Home, Inc. Project), 6.15%, due 07-20-2031
600,000 Community Development Authority of the Village of Sussex, NR NR 631,500
Wisconsin, Community Development Revenue Bonds, Series 1995,
6.10%, due 04-01-2015
445,000 Community Development Lease Revenue Bonds, Series 1997A, NR NR 460,575
Community Development Authority of City of Verona, Wisconsin,
5.50%, due 06-01-2017
3,000,000 Wisconsin Center District, Junior Dedicated Tax Revenue Bonds, A NR 3,135,000
Series 1996B, 5.75%, due 12-15-2027
545,000 Wisconsin Housing Finance Authority Revenue Bonds, Prerefunded NR NR 597,456
12-01-2017 at Par, Escrowed by U.S. Government Sec., 6.10%,
due 06-01-2021
460,000 Walworth County, Wisconsin, Housing Authority Housing Revenue NR NR 470,925
Bonds, Series 1997, (FHA Insured Mortgage Loan - Kiwanis
Herigage, Inc. Senior Apartment Project), 5.70%, due 03-01-2039
500,000 Housing Authority City of Waukesha, Wisconsin, Multifamily Housing NR NR 504,375
Refund Revenue Bonds, Series 1998A, (FHA Insured Mortgage Loan -
Oak Hills Terrace Project), 5.45%, due 06-01-2027
1,000,000 Wauwatosa, Wisconsin, Redevelopment Authority, Milwaukee County, AAA Aaa 1,052,500
Wisconsin, Redevelopment Authority Lease Revenue Bonds, Series
1997, 5.65%, due 10-01-2015
715,000 Housing Authority of Winnebago County, Wisconsin, Multifamily NR NR 731,088
Housing Refunding Revenue Bonds, (Neenah-Menasha Ecumenical
Retirement Community, Inc. Project), 5.50%, due 10-01-2015
855,000 Housing Authority of Winnebago County, Wisconsin, Multifamily NR NR 871,031
Housing Refunding Revenue Bonds, (Neenah-Menasha Ecumenical
Retirement Community, Inc. Project), 5.60%, due 10-01-2020
------------
Total Long-Term Tax-Exempt Securities (Cost $36,507,955) 38,072,756
------------
Total Investments $38,072,756
------------
------------
Percentages shown are a percent of net assets.
The accompanying notes to financial statements are an integral part of this schedule.
</TABLE>
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
OFFICERS AND DIRECTORS
Richard H. Aster, M.D., Director
Augustine J. English, Director
Ralph J. Eckert, Director
Richard J. Glaisner, Director
Robert J. Tuszynski, President, Director
Frank Ciano, Chief Financial Officer and Treasurer
John Lauderdale, Vice President of Marketing
S. Charles O'Meara, Secretary
Marc Dion, Vice President
INVESTMENT ADVISOR
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, TRANSFER AND DIVIDEND
DISBURSING AGENT AND FUND ACCOUNTANT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
CUSTODIAN
Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
AUDITOR
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
This report has been prepared for the information of shareholders of Principal
Preservation Portfolios, Inc. Wisconsin Tax-Exempt Portfolio, and may not be
used in connection with the offering of securities unless preceded or
accompanied by a current Prospectus.
PP861-8/98
