As filed with the Securities and Exchange Commission on March 27, 1996.
1933 Act Registration No. 33-12
1940 Act File No. 811-4401
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 33 x
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 35 x
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(Check appropriate box or boxes)
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
(Exact name of registrant as specified in charter)
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (414) 334-5521
ROBERT J. TUSZYNSKI
Vice President and Director
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
(Name and Address of Agent for Service)
Copy to:
CONRAD G. GOODKIND, ESQ.
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Approximate Date of Proposed Public Offerings: As soon as practicable
following the effective date of this amendment to the registration statement.
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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X 75 days after filing pursuant to paragraph (a)(2) of rule
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485.
If appropriate, check the following:
this post-effective amendment designates a new
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effective date for a previously filed post-effective
amendment
Registrant has elected to register an indefinite number of shares of Common
Stock, $0.001 par value, pursuant to Rule 24f-2 under The Investment Company Act
of 1940. The Registrant's Rule 24f-2 Notice for the year ended December 31,
1995 was filed on February , 1996.
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FORM N-1A
CROSS REFERENCE SHEET
PSE TECHNOLOGY INDEX PORTFOLIO
Form N-1A
Item No. Prospectus Heading
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PART A
1. Cover Page................................. Cover Page
2. Synopsis................................... Questions and
Answers; Expenses
3. Condensed Financial Information............ NA
4. General Description of
Registrant............................... Questions and
Answers; Investment Objectives
and Policies; Description of
Shares
5. Management of the Fund..................... Management;
Determination of Net Asset
Value Per Share; Other
Information
5A. Management's Discussion of Fund
Performance NA
6. Capital Stock and Other
Securities............................... Redemptions; Dividends,
Capital Gains Distributions
and Reinvestments; Tax Status;
Description of Shares
7. Purchase of Securities Being
Offered.................................. Purchase of Shares;
Determination of Net Asset
Value Per Share; Distribu
tion Expenses
8. Redemption or Repurchase................... Redemptions
9. Pending Legal Proceedings.................. None
PART B
10. Cover Page................................ Cover Page
11. Table of Contents......................... Table of Contents
12. General Information and History........... N/A
13. Investment Objectives and Policies......... Investment Program; Investment
Restrictions
14. Management of the Fund..................... Management of Principal
Preservation
15. Control Persons and Principal
Holders of Securities.................... Control Persons and Principal
Holders of Securities
16. Investment Advisory and
Other Services........................... Management of Principal
Preservation
17. Brokerage Allocation and
Brokerage............................... Portfolio Transactions and
Brokerage
18. Capital Stock and Other
Securities.............................. Determination of Net Asset
Value Per Share; Tax Status
19. Purchase, Redemption and Pricing
of Securities Being Offered.............. Determination of Net Asset
Value Per Share; Purchase of
Shares; Distribution Expenses
20. Tax Status................................. Tax Status
21. Underwriters............................... Purchase of Shares;
Distribution Expenses;
Management of Principal
Preservation
22. Calculation of Performance Data............ Performance Information;
Portfolio Ratings
23. Financial Statements....................... N/A
[PRINCIPAL PRESERVATION LOGO]
PSE TECHNOLOGY INDEX
PORTFOLIO
March 27, 1996
PROSPECTUS
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to the time the
Registration Statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECHNOLOGY INDEX PORTFOLIO
The PSE Technology Index Portfolio (the "Portfolio") of the Principal
Preservation Portfolios, Inc. ("Principal Preservation") family of mutual funds
is offered by this Prospectus. The Portfolio's investment objective is to
obtain a total return, before operating expenses of the Portfolio, that
replicates the total return of the Pacific Stock Exchange Technology Stock Index
(the "PSE Technology Index" or the "Index"). The Index consists of 100 common
stocks of companies in 15 different industries, including biotechnology,
CAD/CAM, data communications, data storage and processing, diversified computer
manufacturing, electronic equipment, information processing, medical technology,
micro-computer manufacturers, semi-conductor manufacturers, software products,
and test and instrumentation equipment. There can be no assurance that the
Portfolio will achieve its investment objective.
The risks and special characteristics of investing in the Portfolio are
highlighted in the sections of this Prospectus titled "Questions and Answers"
and "Special Considerations." The Portfolio is managed by Ziegler Asset
Management, Inc. ("ZAMI" or the "Advisor"). Shareholder inquiries should be
directed to Principal Preservation at 215 North Main Street, West Bend, WI
53095; telephone 800-826-4600.
This Prospectus sets forth concisely the information that an investor
should know before investing in shares of the Portfolio. Investors should read
and retain this Prospectus for future reference. A Statement of Additional
Information dated , containing additional information about
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Principal Preservation and the Portfolio has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. A
copy of the Statement of Additional Information can be obtained without charge
upon request to B. C. Ziegler and Company ("Ziegler"), 215 North Main Street,
West Bend, WI 53095 (telephone 800-826-4600) or from Selected Dealers (as
defined herein) that have entered into agreements with respect to the
distribution of shares of the Portfolio.
SHARES OF THE PORTFOLIO ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANKING INSTITUTION, ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS
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QUESTIONS AND ANSWERS
WHAT ARE THE PRINCIPAL PRESERVATION PORTFOLIOS?
Principal Preservation is a Maryland corporation organized in 1984 as an
open-end, diversified investment company. Principal Preservation is a series
company, which means that its Board of Directors may establish additional
portfolios at any time. Seven other series of Principal Preservation are
offered by separate prospectuses.
WHAT ARE THE BENEFITS FROM INVESTING IN THE PORTFOLIO?
Economy of Size. The Portfolio is designed to provide investors with an
opportunity to pool their money to achieve economies of size and
diversification. This permits investors, whose own securities' portfolios may
not be large enough to obtain individual investment management services on a
cost-effective basis, to take advantage of the professional investment
management expertise of the Advisor.
Professional management. The Portfolio provides professional management of
your investment. Maintaining records of your investments is made timely and
convenient with detailed statements of your investment activity and account
status.
Pooled Investing. The Portfolio combines the funds of many investors to
obtain a portfolio of numerous different issues of investment securities. This
pooled investing strategy permits an investor to spread his or her risk over a
greater number of issues of investment securities, as compared to the number of
issues in which the investor may be able to invest individually. However,
investors should bear in mind that the Portfolio is a non-diversified mutual
fund, meaning that a significant portion of its assets may be invested from time
to time in securities of issuers associated with a particular industry. See
"Investment Program -- Special Considerations."
Liquidity. Shares of the Portfolio may be redeemed at any time at their
current net asset value. See "Redemptions."
WHAT IS THE PORTFOLIO'S INVESTMENT OBJECTIVE?
The Portfolio's investment objective is to obtain a total return, before
operating expenses of the Portfolio, that replicates the total return of the PSE
Technology Index. The PSE Technology Index consists of 100 common stocks of
companies that represents 15 different industries. Diversity within the Index
ranges from biotechnology firms to semiconductor capital equipment manufacturers
and includes a cross-section of U.S. companies that are leaders in the following
subsectors: biotechnology, CAD/CAM, data communications, data storage and
processing, diversified computer manufacturing, electronic equipment,
information processing, medical technology, micro-computer manufacturers, semi-
conductor manufacturers, software products, and test and instrumentation
equipment. The PSE Technology Index is price weighted, which means that its
component stocks are given a percentage weighting based on their price.
Although this indexing method allows the PSE Technology Index to accurately
measure a broad representation of technology stocks without being dominated by a
few large companies, it may cause the Portfolio to experience higher turnover
and brokerage expenses than if the Index's component stocks were not indexed in
this fashion, and a higher percentage of the companies represented on the Index
may be smaller- and medium-sized companies, whose stock tends to be more
volatile and less liquid than stocks of large companies.
The Portfolio attempts to achieve its objective by investing in all 100
common stocks included in the PSE Technology Index in approximately the same
proportions as they are represented on the Index. The Advisor does not manage
the Portfolio according to traditional methods of active investment management,
which involve the buying and selling of securities based upon economic,
financial, and market analysis and investment judgment. Instead the Portfolio
utilizes a "passive" or "indexing" investment approach, attempting to replicate
the investment performance of the PSE Technology Index through statistical
procedures. The Portfolio is managed without regard to tax ramifications. See
"Investment Objectives" and "Investment Program" in this Prospectus and
"Investment Program" in the Statement of Additional Information. There can be
no assurance that the Portfolio's investment objective will be achieved.
ARE THERE ANY RISKS TO CONSIDER?
The PSE Technology Index includes common stocks of companies which have, or
likely will develop, products, processes, or services that will provide or will
benefit significantly from technological advances and improvements. The PSE
Technology Index therefore is subject to volatility and price fluctuations as
the technology market sector increases and decreases in favor with the investing
public. Notwithstanding its focus on technology, the PSE Technology Index
includes companies in a wide range of industries. This industry diversification
serves to reduce the volatility of the PSE Technology Index.
An investment in the portfolio may involve an above average degree of risk
because of the significant representation on the Index of common stocks of
smaller- and medium-sized companies, which tend to be more volatile and less
liquid than stocks of large companies.
The Portfolio may invest a portion of it assets in futures contracts and
options traded on recognized stock exchanges. There are special risks
associated with such options and futures instruments. See "Special
Considerations."
HOW DOES THE PORTFOLIO DISTRIBUTE INCOME?
Dividends will be declared and paid quarterly. Net realized capital gains
will be declared and paid annually. Investors may receive their income
dividends and capital gains distributions in additional shares of the Portfolio,
in additional shares in another Principal Preservation portfolio, or in cash.
See "Dividends, Capital Gains Distributions and Reinvestments."
WHAT ARE THE ADVANTAGES OF STOCK INDEXING?
Stock indexing allows investors to purchase a package of common stocks, the
value of which moves with the value of the market index it is designed to
follow. Frequently, the performance of individual investment managers, who
attempt to beat the market, does not match the performance of stock indices,
including the PSE Technology Index.
WHO MANAGES THE PORTFOLIO?
ZAMI is the investment Advisor for the Portfolio. ZAMI's principal office
is located at 215 North Main Street, West Bend, Wisconsin 53095; their telephone
number is 800-826-4600. See "Management."
HOW CAN SHARES BE PURCHASED?
Shares may be purchased at the public offering price next determined after
receipt of an order to purchase. The offering price is the net asset value per
share plus a sales charge. UntilAugust 15, 1996, a purchaser (as that term
is defined herein) that makes an initial investment of at least $100,000 in the
Portfolio may purchase shares at net asset value (that is, without a sales
charge). Shares may be purchased from Ziegler in its capacity as distributor of
the Portfolio's shares (the "Distributor"), or from broker-dealers and other
financial institutions or firms that have entered into agreements with the
Distributor with respect to their assistance in distributing shares of the
Portfolio ("Selected Dealers"). See "Purchase of Shares." Ziegler's principal
office is at 215 North Main Street, West Bend, WI 53095; telephone 800-826-
4600.
The minimum initial investment in the Portfolio is $1,000. The minimum
subsequent investment is $50.
HOW CAN YOU REDEEM OR EXCHANGE YOUR SHARES?
Shares may be redeemed by mail or telephone. The redemption value of the
shares is the net asset value per share as of the close of business on the day
the redemption request is received in proper form. Subject to a service charge
(currently $5.00), shares of the Portfolio may be exchanged for shares of any
other Principal Preservation portfolio on the basis of their relative net asset
value after the shares to be exchanged have been held for more than six months.
See "Redemptions" and "Shareholder Services." Information as to Principal
Preservation portfolios other than this Portfolio is provided by separate
prospectuses, copies of which may be obtained from the Distributor.
EXPENSES
PSE
TECHNOLOGY
INDEX
PORTFOLIO
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SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)(1)<F1>..................................4.5%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).....................................0%
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds)..................................0%
Redemption Fees (as a percentage of amount redeemed)(2)<F2>...............0%
Exchange Fee...........................................................$5.00
ANNUAL FUND OPERATING EXPENSES (AFTER REIMBURSEMENT)(3)<F3>
(AS A PERCENTAGE OF ESTIMATED AVERAGE NET ASSETS OF $10 MILLION)(3)<F3>
Management Fees........................................................0.05%
12b-1 Fee(4)<F4>......................................................0.25%
Other Expenses After Reimbursement(3)<F3>:
Custodian Fees.......................................................0.05%
Transfer Agent Fees..................................................0.15%
Other Fees...........................................................0.30%
Total Other Expenses...................................................0.50%
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Total Fund Operating Expenses..........................................0.80%
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(1)<F1>Investors may be able to qualify for a lower sales load. See "Purchase
of Shares" and "Shareholder Services."
(2)<F2>Ziegler, in its capacity as transfer agent, charges a fee (presently
$7.50) for redemptions by wire transfer.
(3)<F3>The Advisor has committed to waive advisory fees or reimburse expenses so
that, for the period ending December 31, 1996, total operating expenses (on
an annualized basis) will not exceed 0.80 of 1% of average assets. Without
giving effect to such waivers or reimbursements, management of the
Portfolio estimates that, for the period ending December 31, 1996,
"Management Fees," "Other Fees," and "Total Fund Operating Expenses" will
be 0.50%, 0.85% and 1.80%, respectively.
(4)<F4>Because the Rule 12b-1 distribution fee is paid annually rather than as a
one-time fee, long term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers ("NASD"), which generally is 6.25% of new
sales, plus an interest factor.
EXAMPLE
You would pay the following expenses on a $1,000 investment in the Portfolio,
assuming 5% annual return and redemption at the end of each time period:
1 Year $53.00
3 Year $69.00
The purpose of the table is to assist investors in understanding the
various costs and expenses they will bear directly or indirectly. For more
complete descriptions of the various costs and expenses, see "Management,"
"Purchase of Shares," "Redemptions," and "Shareholder Services." THE ABOVE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN SHOWN.
INVESTMENT OBJECTIVES AND POLICIES
The following is a brief description of the investment objectives and
policies of the Portfolio. The Portfolio seeks to obtain a total return, before
operating expenses of the Portfolio, that replicates the total return of the PSE
Technology Index. The Portfolio seeks to achieve this objective by investing in
all 100 common stocks included in the PSE Technology Index in approximately the
same proportions as they are represented in the Index.
The Portfolio will attempt to remain fully invested in common stocks.
Under normal circumstances, the Portfolio will invest at least 95% of its assets
in the common stocks included in the PSE Technology Index and futures contracts
and options. The Portfolio may invest in certain short-term, fixed-income
securities as cash reserves, although cash or cash equivalents are normally
expected to represent 5% or less of the Portfolio's assets. The Portfolio may
invest up to 20% of its assets in exchange-traded index futures contracts and
index options in order to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions, or to minimize trading costs, while
still tracking the Index. The Portfolio intends to remain fully invested, to
the extent practicable, in a pool of securities that duplicates the investment
characteristics of the PSE Technology Index. Certain instruments and techniques
discussed in this summary are described in greater detail under "Investment
Program" in this Prospectus and in the Statement of Additional Information.
There can be no assurance that the investment objective of the Portfolio will be
achieved.
The Portfolio is subject to a number of investment restrictions that are
described in the section of the Statement of Additional Information entitled
"Investment Restrictions." Among these restrictions are that the Portfolio may
not borrow money or property except for temporary or emergency purposes. If the
Portfolio borrows money it will only borrow from banks and in an amount not
exceeding 10% of the market value of its total assets (not including the amount
borrowed). The Portfolio will not pledge more than 15% of its net assets to
secure such borrowings. In the event the Portfolio's borrowing exceeds 5% of
the market value of its total assets, the Portfolio will not invest in any
additional securities until its borrowings are reduced to less than 5% of total
assets. For purposes of these restrictions, collateral arrangements for premium
and margin payments in connection with the hedging activities of the Portfolio
are not deemed to be a pledge of assets.
The Statement of Additional Information contains other specific investment
restrictions that govern the investments of the Portfolio. Certain of these
restrictions and the Portfolio's investment objective are fundamental policies,
which means that they may not be changed without a majority vote of shareholders
of the Portfolio. All other investment policies and practices may be changed
without shareholder approval.
INVESTMENT PROGRAM
OVERVIEW
This section contains a general description of the investment program and
other investment practices of the Portfolio. Further information is contained
in the Statement of Additional Information. Shareholders will be notified prior
to implementation of any material change in the Portfolio's investment program.
The Portfolio attempts to replicate the investment results of the PSE
Technology Index by investing in and holding all 100 common stocks included in
the Index in approximately the same proportions as they are represented on the
Index. This indexing technique is known as "complete replication."
In attempting to replicate the performance of the PSE Technology Index, the
Portfolio will incur operating expenses, including management fees, transfer and
dividend disbursing agent fees, depository fees, accounting/pricing agent fees,
distribution fees, operating and brokerage fees, and other transactional fees
incurred in connection with adjusting the composition of the Portfolio to
replicate the composition of the PSE Technology Index, and other administrative
expenses. The total return of the PSE Technology Index does not include any
such operating expense and, accordingly, the total return of the Portfolio is
expected to be somewhat less than the total return of the PSE Technology Index.
Additionally, unlike the Index, the Portfolio retains, from time to time,
certain liquid reserves. The Portfolio will attempt to utilize exchange-traded
index futures contracts and options in connection with such reserves in order to
replicate the Index's performance.
PSE TECHNOLOGY INDEX
The PSE Technology Index comprises 100 common stocks, which are chosen by
Bridge Data Corporation based on its assessment that the issuer thereof is a
company which has, or likely will develop, products, processes, or services that
will provide or will benefit significantly from technological advances and
improvements. The PSE Index offers a broad basket of 100 stocks spanning the
full spectrum of high tech industry groups. Diversity within the Index ranges
from biotechnology firms to semiconductor capital equipment manufacturers and
includes a cross section of U.S. companies that are leaders in 15 technology
subsectors. Of the 100 stocks on the Index, 52 are listed on NASDAQ, 46 on the
New York Stock Exchange, and two on the American Stock Exchange. A full listing
of the companies is attached as Appendix A to this Prospectus. As soon as
practicable after receipt of notification of changes in the PSE Technology Index
(as to the securities comprising the Index), the Advisor will attempt to adjust
the composition of the Portfolio in a similar manner.
Similar to the Dow Jones Industrial Average, the PSE Technology Index is
price weighted, meaning the component stocks are given a percentage weighting
based on their price. The PSE Technology Index is calculated by adding the
closing prices of the component stocks and using a divisor that is adjusted for
splits and stock dividends equal to 10% or more of the market value of an issue.
Although this indexing method allows the PSE Technology Index to accurately
measure a broad representation of technology stocks without being dominated by a
few large companies, it results in smaller- and mid-sized companies representing
a more significant portion of the Index than is the case for indexes such as the
S&P 500 Index, which are weighted by the market value of the companies
represented on the index. This factor may result in the Portfolio experiencing
more price fluctuation, less liquidity, and higher brokerage fees than certain
other index funds. See "Special Considerations."
Bridge Data Corporation performs both the calculation and dissemination of
the Index. As the composition of the PSE Technology Index changes, so will the
underlying portfolio of common stocks in the Portfolio. The PSE Technology
Index Portfolio is not sponsored, endorsed, sold, or promoted by the PSE
SM SM SM
Technology Index (PSE , Pacific Stock Exchange , PSE Technology Index , and PSE
SM
Tech 100 are servicemarks of the Pacific Stock Exchange Incorporated) or the
Bridge Data Corporation.
INDEX OPTIONS AND FUTURES STRATEGIES
Options and Futures Strategy. The Portfolio may utilize exchange-traded
index futures contracts and options on stock indices to a limited extent. Such
futures contracts and options may be used for several reasons: to simulate
investment in the underlying index while retaining a cash balance for fund
management purposes (commonly referred to as equitizing cash), to facilitate
trading, to reduce transaction costs, or to seek higher investment returns when
such a futures contract or option thereon is priced more attractively than the
underlying index. For example, cash maintained by the Portfolio for liquidity
purposes and/or cash received by the Portfolio in connection with sales of
Portfolio shares may, pending investment in common stocks in the PSE Technology
Index, be invested in exchange-traded index futures contracts or index options,
thereby generating a return on such cash proceeds that approximates the return
on the underlying index.
On February 29, 1996, the U.S. Commodity Futures Trading Commission
designated the New York Futures Exchange, Inc. a contract market in futures and
futures options on the PSE Technology Index. The New York Futures Exchange,
Inc. expects trading on this Index to begin in early Spring of this year. If
and when such instruments begin trading on the Pacific Stock Exchange, the
Advisor plans to utilize options and futures on the PSE Technology Index traded
on that exchange. However, pending availability of such instruments on the New
York Futures Exchange, the Advisor plans to utilize futures and options on the
S&P 500 Index to implement these strategies. S&P 500 Index options and futures
are routinely traded on The Chicago Mercantile Exchange. Since the S&P 500
Index cannot be expected, at all times, to move in parallel with the PSE
Technology Index, the Portfolio's utilization of futures and options on the S&P
500 Index may reduce the correlation between the performance of the Portfolio
and the performance of the PSE Technology Index.
The Portfolio will not use these instruments for leverage purposes and may
enter into such futures contracts and options only if, after giving effect
thereto, not more than 5% of the Portfolio's assets are required as margin
deposits for all of the Portfolio's open futures contracts and options
positions, and provided further that not more than 20% of the Portfolio's assets
are invested in futures and options at any one time.
Risks Associated with Index Options and Futures. The risk of loss
associated with index futures contracts and index options in some strategies can
be substantial due both to the low margin deposits required and the extremely
high degree of leverage involved in options and futures pricing. As a result, a
relatively small price movement in an index option or an index futures contract
may result in an immediate and substantial loss or gain. However, the Portfolio
will not use options and futures contracts for speculative purposes or to
leverage its net assets. The primary risks associated with the Portfolio's
intended use of such options and futures contracts are: (a) imperfect
correlation between the change in market value of the PSE Technology Index and
the prices of the futures contracts and options; (b) imperfect correlation
between the price movement in the index underlying the futures contract or
option agreement, such as the S&P 500 Index, and the PSE Technology Index which
the Portfolio seeks to replicate; and (c) possible lack of a liquid secondary
market for a futures contract or option and the resulting inability to close a
position prior to its maturity date. The risk of imperfect correlation will be
minimized by investing only in those futures contracts and options whose
behavior is expected to resemble that of the Portfolio's underlying securities.
The risk that the Portfolio will be unable to close out a futures position will
be minimized by entering into such transactions on an exchange with an active
and liquid secondary market.
OTHER INVESTMENT PRACTICES
Short-Term, Fixed-Income Securities and Lending of Portfolio Securities.
Although the Portfolio normally seeks to remain substantially fully invested in
common stocks, the Portfolio may invest temporarily in certain short-term,
fixed-income securities. Such securities may be used to invest uncommitted cash
balances or to maintain liquidity to meet shareholder redemptions. These
securities include: obligations of the United States Government and its
agencies or instrumentalities; commercial paper, short-term notes, variable rate
demand notes, bank certificates of deposit, and bankers' acceptances; and
repurchase agreements collateralized by these securities and shares of money
market mutual funds. To the extent the Portfolio invests in shares of money
market mutual funds, investment management and administrative fees, distribution
costs, and other operating expenses incurred by those funds would be duplicative
of those incurred by the Portfolio and would reduce the return received by the
Portfolio on assets so invested. The Portfolio may not invest more than 10% of
its total assets in securities of other investment companies. See "Investment
Program -- Investments in Other Investment Companies" in the Statement of
Additional Information. The Portfolio may lend its portfolio securities to
brokers, dealers, and other institutional investors, but has no present
intention to do so. See "Investment Program -- Lending of Portfolio Securities"
in the Statement of Additional Information.
Portfolio Turnover. Although the Portfolio generally seeks to invest for
the long term, the Portfolio retains the right to sell securities irrespective
of how long they have been held. However, because of the passive investment
management approach of the Portfolio, its portfolio turnover rate is expected to
be under 50%. Notwithstanding the passive investment management approach, the
fact that the PSE Technology Index is "price weighted" may cause higher turnover
and brokerage expenses than if the Index's component stocks were not given a
percentage weighting based on price. A portfolio turnover rate of 50% would
occur if one-half of the Portfolio's securities were sold within one year.
Ordinarily, the Portfolio will sell securities only to reflect certain
administrative changes in the PSE Technology Index (including mergers or changes
in the composition of the Index) or to accommodate cash flows into and out of
the Portfolio while maintaining the similarity of the Portfolio to the PSE
Technology Index.
Short Sales "Against-the-Box." The Portfolio may make short sales of
securities or maintain a short position, provided that at all times when a short
position is open the Portfolio owns an equal amount of such securities of the
same issue as, and equal in amount to, the securities sold short, and that not
more than 10% of the Portfolio's net assets (determined at the time of short
sale) may be held as collateral for such sales.
SPECIAL CONSIDERATIONS
CONCENTRATIONS
A significant portion of the Portfolio's investments will consist of
technology-based issues, which exposes the Portfolio to risks associated with
economic conditions in that market sector. Due to competition, a less
diversified product line, and other factors, companies that develop and/or rely
on technology could become increasingly sensitive to down swings in the economy.
However, the companies whose common stocks are included in the PSE Technology
Index comprise a fairly broad range of industries. This industry
diversification likely will soften volatility associated with economic and
political developments that disproportionately affect specific industries
represented within the Index. See "Industry Concentration Factors" in the
Statement of Additional Information.
COMMON STOCKS
As discussed above, the Portfolio will invest a portion of its assets in
common stock and securities convertible into common stocks. The market for such
securities tends to be cyclical, with alternating periods of rising and falling
market prices.
An investment in the Portfolio may involve an above average degree of risk
because of the significant representation on the PSE Technology Index of common
stocks of smaller- and medium-sized companies. Smaller- and medium-sized
companies, as compared to larger companies, may have shorter histories of
operations, may not have as great an ability to raise additional capital, may
have a less diversified product line making them susceptible to market pressure,
and may have a smaller public market for their shares, causing stocks of these
companies to be more volatile and less liquid than stocks of larger companies.
Because the Portfolio's investments will tend to mirror the Index, the Portfolio
can be expected to experience some volatility and, with respect to certain
issues, reduced liquidity that could make it more difficult to purchase and sell
such common stocks at favorable prices. Also, because of the price weighted
aspect of the Index, the stocks comprising the Index may change with some
frequency, which would tend to increase the Portfolio's turnover rate and
increase brokerage commissions, thereby reducing the Portfolio's total return
when compared with the Index.
MANAGEMENT
DIRECTORS AND OFFICERS
The Board of Directors of Principal Preservation is responsible for
management of Principal Preservation and provides broad supervision over its
affairs. The Advisor is responsible for the Portfolio's investment management
and Principal Preservation's officers are responsible for the Portfolio and
Principal Preservation's overall operations.
ZIEGLER ASSET MANAGEMENT, INC.
The Advisor of the Portfolio is Ziegler Asset Management, Inc., 215 North
Main Street, West Bend, Wisconsin 53095. The Advisor is registered with the
Securities and Exchange Commission as an investment advisor and is a member of
the National Association of Securities Dealers. In addition to the Portfolio,
the Advisor serves as investment advisor to seven other mutual fund series of
Principal Preservation and privately manages numerous customer advisory
accounts. On December 31, 1995, the Advisor had more than $ million dollars
----
under discretionary management. The Advisor is a wholly-owned subsidiary of The
Ziegler Companies, Inc. The Ziegler Companies, Inc. is a publicly-owned
financial services holding company.
B.C. Ziegler and Company ("Ziegler"), another wholly-owned subsidiary of
The Ziegler Companies, Inc., currently serves as Distributor, Transfer and
Dividend Disbursing Agent, and Depository and Accounting/Pricing Agent for the
Portfolio. Ziegler is registered with the Securities and Exchange Commission as
an investment advisor and securities broker-dealer and is a member of the
National Association of Securities Dealers, Inc.
Pursuant to the terms of an Investment Advisory Agreement (the "Advisory
Agreement"), the Advisor provides the Portfolio with overall investment advisory
and administrative services. Subject to such policies as the Board of Directors
may determine, the Advisor makes investment decisions on behalf of the
Portfolio, makes available research and statistical data in connection
therewith, and supervises the acquisition and disposition of investments by the
Portfolio, including the selection of broker-dealers to carry out portfolio
transactions. The Advisor bears all of its own expenses of providing services
under the Advisory Agreement and pays all salaries, fees, and expenses of the
officers and Directors of Principal Preservation who are affiliated with the
Advisor. The Portfolio bears all other expenses including, but not limited to,
necessary office space, telephone and other communications facilities, and
personnel competent to perform administrative, clerical, and shareholder
relations functions; salary, fees, and expenses (including legal fees) of those
Directors, officers, and employees of Principal Preservation who are not
officers, directors, or employees of the Advisor; interest expenses; fees and
expenses of the Depository, Transfer, and Dividend Disbursing Agent, Distributor
and Accounting/Pricing Agent; administrative expenses; taxes and governmental
fees; brokerage commissions and other expenses incurred in acquiring or
disposing of portfolio securities, expenses of registering and qualifying shares
for sale with the Securities and Exchange Commission and with various state
securities commissions; accounting and legal costs; insurance premiums; expenses
of maintaining Principal Preservation's legal existence and of shareholders'
meetings; expenses of preparation and distribution to existing shareholders of
reports, proxies, and prospectuses; and fees and expenses of membership in
industry organizations. Fees common to more than one Principal Preservation
portfolio are prorated among them based on their total assets.
Under the Advisory Agreement, the Portfolio pays the Advisor a fee, in
monthly installments, at an annual rate equal to 0.50 of 1% of the average daily
net assets of the Portfolio up to $50 million, 0.30 of 1% of the next $200
million in net assets, 0.25 of 1% of the next $250 million in net assets, and
0.20 of 1% of net assets in excess of $500 million.
B. C. ZIEGLER AND COMPANY
Ziegler serves as the Distributor of the shares of the Portfolio pursuant
to a Distribution Agreement; provides accounting and other administrative
services, including daily valuation of the shares of the Portfolio, pursuant to
an Accounting/Pricing Agreement; provides depository and custodial services with
respect to the portfolio securities of the Portfolio pursuant to a Depository
Contract; and provides transfer agent services pursuant to a Transfer and
Dividend Disbursing Agency Agreement. In addition, Ziegler Thrift Trading,
Inc., an affiliate of Ziegler which is a registered broker-dealer may effect
portfolio securities transactions as agent for the Portfolio and, in that
capacity, receives brokerage commissions from the Portfolio. See "Portfolio
Transactions and Brokerage."
The Distribution Agreement appointing Ziegler as Distributor for the
various portfolios of Principal Preservation (including the Portfolio) provides
that Ziegler is entitled to receive a commission on its sales of shares of the
Portfolio at the rate disclosed in Principal Preservations's current prospectus
relating to the relevant portfolio (see "Purchase of Shares"). Out of these
commissions, Ziegler allows Selected Dealer discounts (which are alike for all
Selected Dealers) from the applicable public offering price. The Distribution
Agreement continues from year to year if it is approved annually by Principal
Preservation's Board of Directors, including a majority of those Directors who
are not interested persons of Principal Preservation or of the Distributor, or
by vote of the holders of a majority of the outstanding shares. The
Distribution Agreement may be terminated at any time by either party on 60 days
written notice and will automatically terminate if assigned. Principal
Preservation also reimburses Ziegler for certain expenditures incurred by it in
connection with the distribution of the Portfolio's shares pursuant to a
Distribution Plan adopted under Rule 12b-1 of the 1940 Act. See "Distribution
Expenses."
The Accounting/Pricing Agreement provides that Ziegler is entitled to
receive a fee for accounting services provided thereunder at an annual rate of
.03 of 1% of the Portfolio's total assets of $30 million but less than $100
million, .02 of 1% of the Portfolio's total assets of $100 million but less than
$250 million, and .01 of 1% of the Portfolio's total assets of $250 million or
more, with a minimum fee of $19,000 per portfolio per year, plus expenses. The
Depository Contract provides that Ziegler is entitled to receive compensation
deemed reasonable by the Board of Directors of Principal Preservation for
services provided thereunder. The rate of compensation is currently set at .055
of 1% of the first $10 million of Principal Preservation's assets, .03 of 1% of
the next $40 million of Principal Preservation's assets, .016 of 1% of the next
$200 million of assets, and .015 of 1% of assets in excess of $250 million. The
Transfer and Dividend Disbursing Agency Agreement provides that Ziegler is
entitled to receive compensation deemed reasonable by the Board of Directors of
Principal Preservation for services provided thereunder. The rate of
compensation is currently at $13.50 per account for the Portfolio. Principal
Preservation also reimburses Ziegler for all out-of-pocket expenses incurred in
providing such services.
THE PORTFOLIO MANAGER
Mr. Jay Ferrara has been with Principal Preservation for one year, and
currently serves as Treasurer for the mutual fund family. Mr. Ferrara brings to
Principal Preservation more than 10 years of experience in the mutual fund
industry. Prior to coming to Principal Preservation, Mr. Ferrara served as
Senior Portfolio Accountant for Wells Fargo Nikko Investment Advisors and, from
1993 to 1994, as Controller of the California Investment Trust.
In addition to serving as Treasurer of Principal Preservation, Mr. Ferrara
presently oversees the transfer agent operations for the Principal Preservation
and assists with the overall daily operations of the portfolios. Mr.
Ferrara attended Brown University where he earned a BA in Management
and a BA in Political Science. In addition to previously attending the
University of San Francisco, Mr. Farrara is currently completing his
MBA in Finance at Marquette University.
DETERMINATION OF NET ASSET VALUE PER SHARE
Net asset value per share of the Portfolio is determined by subtracting the
Portfolio's liabilities (including accrued expenses and dividends payable) from
the Portfolio's total assets (the value of the securities the Portfolio holds
plus cash or other assets, including interest accrued but not yet received) and
dividing the result by the total number of shares outstanding. The net asset
value per share will be calculated every week day, Monday through Friday, except
on customary national business holidays which result in closing of the New York
Stock Exchange (the "Exchange"). The calculation is as of the close of trading
on the Exchange, 4:00 p.m. New York time for the Portfolio.
PURCHASE OF SHARES
Orders received by the Distributor or a Selected Dealer prior to the close
of business on the Exchange will be invested at the net asset value computed on
that day. Orders received after the close of trading on the Exchange will be
invested at the net asset value determined as of the close of trading on the
Exchange on the next business day. The minimum initial investment is $1,000 and
the minimum additional investment (except for exchanges between portfolios, the
reinvestment of distributions from the Portfolio or distributions from various
unit investment trusts sponsored by Ziegler, contributions for various
retirement plans, and the reinvestment of interest payments on bonds issued by
Ziegler Mortgage Securities, Inc. II) is $50. However, an initial investment of
$500 is permitted if made pursuant to an automatic investment plan providing for
subsequent automatic investments of at least $25. See "Shareholder Services --
Systematic Purchase Plan."
Shares may be purchased by investors at net asset value plus a sales charge
as set forth below. The Portfolio will not issue shares for consideration other
than cash except in the case of a bona fide reorganization or statutory merger
or in certain other acquisitions of Portfolio securities which meet certain
criteria in accordance with state securities laws. See "Purchase of Shares" in
the Statement of Additional Information. Shares may be purchased by sending a
check payable to Principal Preservation Portfolios, Inc., 215 North Main Street,
West Bend, Wisconsin 53095.
Shares may be purchased by investors at net asset value plus a sales charge
as follows:
PUBLIC NET AMOUNT SELECTED DEALER
SIZE OF INVESTMENT OFFERING PRICE*<F5> INVESTED REALLOWANCE
- ------------------ --------------- ---------- ---------------
Less than $50,000 4.50% 4.71% 4.00%
$50,000 but less than 4.00% 4.17% 3.50%
$100,000
$100,000 but less than 3.50% 3.63% 3.00%
$250,000
$250,000 but less than 3.00% 3.09% 2.60%
$500,000
$500,000 but less than 2.50% 2.56% 2.20%
$1,000,000
$1,000,000 or more 0.00% 0.00% 0.00%
*<F5>In addition to the Selected Dealer Reallowance shown above, the
Distributor may offer additional compensation in the form of trips,
merchandise, or entertainment as sales incentives to Selected Dealers. The
Distributor's sales representatives may not qualify to participate in some
of these incentive compensation programs and the Distributor may offer
similar incentive compensation programs in which only its own sales
representatives qualify to participate. In addition to the amount paid to
Selected Dealers, the Distributor may from time to time pay an additional
concession to a Selected Dealer which employs a registered representative
who sells, during a specific period, a minimum dollar amount of shares. In
no event will such additional concession paid by the Distributor to the
Selected Dealer exceed the difference between the sales charge and the
Selected Dealer's allowance in respect of shares sold by the qualifying
registered representative. Selected Dealers which receive a concession may
be deemed to be an "underwriter" in connection with sales by them of such
shares and in that capacity they may be subject to the applicable
provisions of the Securities Act of 1933.
Banks, acting as agents for their customers and not for the Portfolio or
the Distributor, from time to time may purchase Portfolio shares for the
accounts of such customers. Generally, the Glass-Steagall Act prohibits banks
from engaging in the business of underwriting, selling, or distributing
securities. Should the activities of any bank, acting as agent for its
customers in connection with the purchase of the Portfolio's shares, be deemed
to violate the Glass-Steagall Act, management will take whatever action, if any,
is appropriate in order to provide efficient services for the Portfolio.
Management does not believe that a termination in the relationship with a bank
would result in any material adverse consequences to the Portfolio. In
addition, state securities laws on this issue may differ and banks and financial
institutions may be required to register as dealers pursuant to state law. The
Portfolio shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank and are not insured or guaranteed by the U.S. Government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
federal agency.
Reduced Sales Charges. There are several ways to pay a lower sales charge.
One is to increase the initial investment to reach a higher discount level.
The above scale is applicable to initial purchases of Principal Preservation
shares by any "purchaser." The term "purchaser" includes (1) an individual, (2)
an individual, his or her spouse, and their children under the age of 21
purchasing shares for his or her own accounts, (3) a trustee or other fiduciary
purchasing shares for a single trust estate or single fiduciary account, (4) a
pension, profit-sharing, or other employee benefit plan qualified or non-
qualified under Section 401 of the Internal Revenue Code (the "Code"), (5) tax-
exempt organizations enumerated in Section 501(c)(3) or (13) of the Code, (6)
employee benefit plans qualified under Section 401 of the Code of a single
employer or employers who are "affiliated persons" of each other within the
meaning of Section 2(a)(3)(c) of the Act, or (7) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
Another way to pay a lower sales charge is for a "purchaser" to add to his
investment so that the current offering price value of his shares plus the new
investment, reach a higher discount level. For example, if the current offering
price value of the shares held by a shareholder in the Portfolio equals
$100,000, the shareholder will pay a reduced sales charge on additional
purchases of shares. If the shareholder invested an additional $100,000, the
sales charge would be 3.5% on that additional investment. A shareholder's
holdings in all portfolios that have a sales charge will be aggregated in
determining the break-point at which he or she is entitled to purchase in the
Portfolio or in any other Principal Preservation portfolio.
A third way is for a "purchaser" to sign a non-binding statement of
intention to invest $50,000 or more over a 13 month period in any one or
combination of Principal Preservation portfolios which have a sales charge. If
the purchases are completed during that period, each purchase will be at a sales
charge applicable to the aggregate of the shareholder's intended purchases.
Under terms set forth in the statement of intention, shares valued at 5% of the
amount of intended purchase are escrowed and will be redeemed to cover the
additional sales charge payable if the statement is not completed. Any
remaining shares held in escrow will be released to the purchaser. A purchaser
will continue to earn dividends and capital gains distributions declared by a
portfolio with respect to shares held in escrow.
Group Purchases. A reduced sales charge is also available to members of a
qualified group. The sales charge for such persons is calculated by taking into
account the aggregate dollar value of shares of all Principal Preservation
shares sold subject to a sales charge being purchased or currently held by all
members of the group. Further information on group purchases is contained in
"Purchase of Shares" in the Statement of Additional Information.
To receive the benefit of the reduced sales charge, the shareholder must
inform Principal Preservation, Ziegler, or the Selected Dealer that the
shareholder qualifies for such a discount.
PURCHASES AT NET ASSET VALUE
Shares may be purchased at net asset value (that is, without a sales
charge) by a purchaser purchasing at least $1 million of shares or the value of
whose account at the time of purchase is at least $1 million if the purchase is
made through a Selected Dealer that has executed a dealer agreement with the
Distributor. The term "purchaser" has the meaning described in "Reduced Sales
Charges," above. The Distributor may make a payment or payments, out of its own
funds, to the Selected Dealer in an amount not to exceed 0.75 of 1% of the
amount invested. All or a part of such payment may be conditioned on the monies
remaining invested with Principal Preservation for a minimum period of time.
Until August 15, 1996, a purchaser that makes an initial investment of at
least $100,000 in the Portfolio may purchase shares at net asset value. The
Distributor may make a payment or payments, out of its own funds, to the
Selected Dealer in an amount not to exceed 0.75 of 1% of the amount invested.
Any pension, profit sharing, or other employee benefit plan qualified under
Section 401 of the Internal Revenue Code may also purchase shares at net asset
value. If such a plan purchases shares of the Portfolio through a Selected
Dealer, the Distributor may make a payment or payments out of its own funds, to
the Selected Dealer, in an amount not to exceed 0.75 of 1% of the amount
invested.
Any state, county, or city, or any instrumentality, department, authority,
or agency thereof, that purchases at least $500,000 of share or the value of
whose account at the time of purchase is at least $500,000 also qualifies to
purchase shares without a sales charge.
Shares may also be purchased at net asset value when payment for those
shares represents the proceeds from the redemption of shares of another mutual
fund which charges a front end sales charge and which is not part of Principal
Preservation. A purchase of shares of Principal Preservation may be made at net
asset value under this provision regardless of whether the sales charge was paid
on the shares redeemed in the unrelated fund, but the redemption of those shares
must have occurred no more than 60 days prior to the purchase of shares of
Principal Preservation. The Distributor may make a payment or payments, out of
its own funds, to Selected Dealers effecting such exchanges, in an amount not to
exceed 0.50 of 1% of the amount invested. All or a part of such payment may be
conditioned upon the monies remaining invested with Principal Preservation for a
minimum period of time. Shares of Principal Preservation in addition to those
qualifying for purchase at net asset value under this provision may be purchased
at net asset value plus the normal sales charge.
Shares may also be purchased at net asset value by: Directors and offices
of Principal Preservation (including shares purchased jointly with or
individually by any such person's spouse and shares purchased by any such
person's children or grandchildren under age 21); employees of the Advisor,
Ziegler, Selected Dealers, Panagora Asset Management, Inc. (which serves as the
sub-Advisor to Principal Preservation's S&P 100 Plus Portfolio), and Skyline
Asset Management, LLP (which serves as sub-Advisor to Principal Preservations's
Select Value Portfolio), and the trustee or custodian under any pension or
profit-sharing plan established for the benefit of the employees of any of the
foregoing. The term "employee" includes an employee's spouse (including the
surviving spouse of a deceased employee), parents, children, and grandchildren
under age 21, and retired employees. Shares may also be purchased with a
reduced sales charge of 0.50 of 1% by directors of The Ziegler Companies, Inc.
who are not also employees of Ziegler.
Additionally, shares may be purchased without a sales charge upon the
reinvestment of distributions from the Portfolio or any other Principal
Preservation portfolio, or investment of distributions from various unit
investment trusts sponsored by Ziegler; the reinvestment of principal or
interest payments on bonds issued by Ziegler Mortgage Securities, Inc. II; or
the reinvestment of interest payments on bonds underwritten by Ziegler.
REDEMPTIONS
You may have any or all of your shares redeemed as described below on any
day Principal Preservation is open for business at the net asset value next
determined. See "Determination of Net Asset Value Per Share." If the order is
received prior to the close of the Exchange the redemption will be at the net
asset value calculated that day. If not, you will receive the net asset value
calculated as of the close of trading on the next business day.
By Telephone. If you have completed the Telephone Redemption Authorization
and signature guarantee sections of the account application, you may redeem
shares by calling Principal Preservation at 800-826-4600. This authorization
must be on file at least five days prior to the first telephone redemption.
This authorization requires a signature guarantee. At your request, redemption
will be made by wire to the bank account designated on the account application
or a check will be sent to you at the registered address for your account on the
business day following the redemption. See "Redemptions -- Sending Redemption
Proceeds -- By Wire."
You cannot redeem shares by telephone if you hold stock certificates for
those shares. Additionally, shares paid for by personal, corporate, or
government check cannot normally be redeemed before the 15th day after the
purchase date or until the check clears.
By establishing the telephone redemption service, you authorize Ziegler, as
Principal Preservation's transfer agent, to: (1) act upon the instruction of
any person by telephone to redeem shares from the account for which such
services have been authorized and (2) honor any written instructions for a
change of address if accompanied by a signature guarantee. You assume some risk
for unauthorized transactions by establishing the telephone redemption service.
The Transfer Agent has implemented procedures designed to reasonably assure
that telephone instructions are genuine. These procedures include recording
telephone conversations, requesting verification of various pieces of personal
information, and providing written confirmation of such transactions. If the
Transfer Agent, Principal Preservation, or any of their employees fails to abide
by these procedures, Principal Preservation may be liable to a shareholder for
losses the shareholder suffers from any resulting unauthorized transaction.
However, neither the Transfer Agent, Principal Preservation, nor any of their
employees will be liable for losses suffered by a shareholder that results from
borrowing telephone instructions reasonably believed to be genuine after
verification pursuant to these procedures. This service may be changed,
modified, or terminated at any time. There is currently no charge for telephone
redemptions, although a charge may be imposed in the future.
By Mail. To redeem shares by mail, send the following information to the
Transfer Agent: (1) a written request for redemption signed by the registered
owner(s) of the shares, exactly as the account is registered, together with the
shareholder's account number; (2) the stock certificates for the shares being
redeemed, if the certificates are held by the shareholders; (3) any required
signature guarantees (see "Signature Guarantees" below); and (4) any additional
documents which might be required for redemptions by corporations, executors,
administrators, trustees, guardians, or other similar entities.
The Transfer Agent will redeem shares when it has received all necessary
documents. You will be notified promptly by the Transfer Agent if your
redemption request cannot be accepted. The Transfer Agent cannot accept
redemption requests that specify a particular date for redemption or that
specify any special conditions. Questions concerning redemption procedures
should be directed to the Transfer Agent at 800-826-4600.
Signature Guarantees. To protect you, the Transfer Agent, and Principal
Preservation from fraud, signature guarantees are required for certain
redemptions. Signature guarantees enable the Transfer Agent to be sure that you
are the person who has authorized a redemption from your account. Signature
guarantees are required for: (1) any redemptions by mail if the proceeds are to
be paid to someone else or are to be sent to an address other than your address
as shown on Principal Preservation's records; (2) any redemptions by mail which
request that the proceeds be wired to a bank, unless you designated the bank as
an authorized recipient of the wire on your account application or subsequent
authorization form and such application or authorization includes a signature
guarantee; (3) any redemptions by mail if the proceeds are to be sent to an
address for the shareholder that has changed within the past 30 days; (4)
authorizations to redeem by telephone; and (5) requests to transfer the
registration of shares to another owner. These requirements may be waived by
Principal Preservation in certain instances.
The Transfer Agent will accept signature guarantees from all institutions
that are eligible to provide them under federal or state law. Institutions
which typically are eligible to provide signature guarantees include commercial
banks, trust companies, brokers, dealers, national securities exchanges, savings
and loan associations, and credit unions. A signature guarantee is not the same
as a notarized signature.
Sending Redemption Proceeds. The Transfer Agent will not send redemption
proceeds until all payments for the shares being redeemed have cleared, which
may take up to 15 days from the purchase date of the shares.
By Mail. The Transfer Agent mails checks for redemption proceeds typically
within one or two days, but not later than seven days, after it receives the
request and all necessary documents.
By Wire. The Transfer Agent will normally wire redemption proceeds to your
bank the next business day after receiving the redemption request and all
necessary documents. The signatures on any written request for a wire
redemption must be guaranteed. The Transfer Agent currently deducts a $7.50
wire charge from the redemption proceeds. This charge is subject to change.
You will be responsible for any charges that your bank may make for receiving
wires.
Redemption Through Securities Brokers. Shares can also be redeemed through
a securities dealer, who may charge a fee.
Conditions on Redemptions. If, due to redemption, your account in the
Portfolio drops below $500 for three months or more, the Portfolio has the right
to redeem your account, after giving 60 days' written notice, unless you make
additional investments to bring the account value to $1,000 or more.
Principal Preservation may suspend the right to redeem shares for any
period during which: (1) the Exchange is closed or the Securities and Exchange
Commission determines that trading on the Exchange is restricted; (2) there is
an emergency as a result of which it is not reasonably practical for the
Portfolio to sell its securities or to calculate the fair value of its net
assets; or (3) the Securities and Exchange Commission may permit for the
protection of the Portfolio's shareholders.
It is possible that conditions may arise in the future which would, in the
opinion of the Board of Directors of Principal Preservation, make it undesirable
for the Portfolio to pay for all redemptions in cash. In such cases, the Board
may authorize payment to be made in securities or other property of the
Portfolio. However, the Portfolio has obligated themselves under the 1940 Act
to redeem for cash all shares presented for redemption by any one shareholder up
to $250,000 (or 1% of a Portfolio's net assets if that is less) in any 90-day
period. Securities delivered in payment of redemptions would be valued at the
same value assigned to them in computing the net asset value per share. Persons
receiving such securities would incur brokerage costs when these securities are
sold.
SHAREHOLDER SERVICES
Principal Preservation offers a number of shareholder services designed to
facilitate investment in Portfolio shares. Full details of each of the
services, copies of the various plans described below, and instructions as to
how to participate in the various services or plans can be obtained from
Principal Preservation or the Distributor.
Systematic Purchase Plan. A Systematic Purchase Plan ("SPP") may be
established at any time with a minimum initial investment of $100 and minimum
subsequent monthly investments of $100. The minimum subsequent monthly
investment is reduced to $50 for IRAs, Keogh plans, self-directed retirement
plan accounts, and custodial accounts under the Uniform Gifts/Transfers to
Minors Act until your account balance reaches $500, after which the minimum is
further reduced to $25. Also, the minimum subsequent investment is reduced to
$50 for all other accounts with balances of $100 or more. By participating in
the SPP, you may automatically make purchases of Principal Preservation shares
on a regular, convenient basis. Under the SPP, your bank or other financial
institution honors preauthorized debits of a selected amount drawn on your
account each month and applied to the purchase of Principal Preservation shares.
The SPP can be implemented with any financial institution that will accept the
debits. There is no service fee for participating in the SPP. An application
and instructions on establishing the SPP are available from your registered
representative, the Distributor, or Principal Preservation.
Periodic Withdrawal Plan. You may establish a periodic withdrawal plan if
you own or purchase shares having a current offering price value of at least
$10,000 in a single Portfolio (except no such minimum applies for distributions
from an IRA). The periodic withdrawal plan involves the planned redemption of
shares on a periodic basis by receiving either fixed or variable amounts at
periodic intervals. The minimum amount you may receiver under a periodic
withdrawal plan is $150 per month. Normally, you would not make regular
investments at the same time you are receiving periodic withdrawal payments
because it is not in your interest to pay a sales charge on new investments
when, in effect, a portion of your new investment is soon withdrawn. The
minimum investment accepted while a withdrawal plan is in effect is $1,000. You
may terminate your periodic withdrawal plan at any time by written notice to
Principal Preservation or the Transfer Agent.
Reinvestment Privilege. If you redeem shares, you may reinvest all or part
of the redemption proceeds in the same Portfolio, without a sales charges, if
you send written notice to Principal Preservation or the Transfer Agent not more
than 30 days after the shares are redeemed. Your redemption proceeds will be
reinvested on the basis of net asset value of the shares in effect immediately
after receipt of the written request. You may exercise this reinvestment
privilege only once upon redemption of your shares. Any capital gains tax you
incur on the redemption of your shares is not altered by your subsequent
exercise of this privilege. If the redemption resulted in a loss and
reinvestment is made in shares, the loss will not be recognized.
Exchange Privilege. Subject to compliance with applicable minimum
investment requirements, shares of any Principal Preservation portfolio may be
exchanged for shares of any other Principal Preservation portfolio at their
respective net asset values without a sales charge, in states where the exchange
may legally be made. The standard sales commission applicable to purchases of
shares of the Principal Preservation portfolio into which the exchange is being
made (as disclosed in the then current prospectus for that Principal
Preservation portfolio) will be charged in connection with the exchange, less
any sales commission previously paid by the shareholder with respect to the
shares being exchanged. However, if a front-end sales commission was previously
paid with respect to the shares being exchanged and the investment represented
by such shares has been held in one or more Principal Preservation portfolios
continuously for at least one year prior to the proposed exchange, then no
additional sales commission will be charged in connection with the exchange.
Before engaging in any such exchange, a shareholder should obtain and carefully
read the current prospectus relating to the Principal Preservation portfolio
into which he or she intends to exchange. Such exchanges may be subject to a
service charge by Ziegler (currently $5.00). Instruction must be received prior
to 3:00 p.m. Eastern Standard Time to qualify for an exchange on any business
day. In order to exercise this service, you must obtain a copy of the
prospectus by which the other Principal Preservation portfolio is offered prior
to opening an account for the other Principal Preservation portfolio and you
must have completed an exchange authorization form.
In order to effect an exchange on a particular business day, the Transfer
Agent must receive a completed exchange authorization form or other written
instructions, signed by all account holders, no later than 3:00 p.m. Eastern
Standard Time. Exchange authorization forms may be obtained from, and should be
returned to, the Transfer Agent at 215 North Main Street, West Bend, Wisconsin
53095. The Transfer Agent may accept instructions from Selected Dealers,
subject to certain conditions and requirements, by wire or telephone, for the
exchange of shares held in an investor's account. Principal Preservation may
amend, suspend, or revoke this exchange privilege at any time, but will provide
shareholders at least 60 days' prior notice of any change that adversely affects
their rights under this exchange privilege. Exchanges are subject to the
conditions described above under "Redemptions - Conditions on Redemptions."
An exchange of shares is considered a sale for tax purposes and you will
realize a gain or loss for federal income tax purposes.
An excessive number of exchanges may be disadvantageous to Principal
Preservation. Therefore, Principal Preservation, in addition to its right to
reject any exchange, reserves the right to terminate the exchange privilege of
any shareholder who makes more than three exchanges of shares in 12 months or
more than one exchange per calendar quarter.
Reinvestment of Distributions or Interest Payments. Unit holders of
Ziegler sponsored unit investment trusts, holders of Ziegler Mortgage
Securities, Inc. II bonds, and holders of bonds underwritten by Ziegler may
purchase shares of Principal Preservation by automatically reinvesting
distributions from their unit investment trust, reinvesting principal or
interest from their Ziegler Mortgage Securities, Inc. II bonds, or reinvesting
interest from bonds underwritten by Ziegler, as the case may be. Unit holders
and bondholders desiring to participate in this plan should contact Ziegler for
further information.
Tax Sheltered Retirement Plans. Shares of the Portfolio are available for
purchase in connection with the following tax-sheltered plans: (1) Individual
Retirement Accounts; (2) Keogh plans; (3) 401(k) Plans; and (4) 403(b) Plans for
employees of most nonprofit organizations. Detailed information concerning
these plans and prototypes of these plans and other information are available
from the Distributor. They should be carefully reviewed and considered with
your tax or financial adviser. IRA investors do not receive the benefits of
long-term capital gains treatment when funds are distributed from their account.
For further information regarding plan administration, custodial fees and
other details, investors should contact the Distributor.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND REINVESTMENTS
Dividends from net investment income will be declared and paid quarterly in
the Portfolio. Dividends may be taken in cash or additional shares at net asset
value (without a sales charge). You may also direct the Transfer Agent to
invest the dividends in shares of any other Principal Preservation portfolio for
which you have any account. The investment occurs on the same day as the
dividend distribution date. Unless you have elected in writing to the Transfer
Agent to receive dividends and capital gain distributions in cash, they will be
automatically reinvested in additional shares of the Portfolio.
Capital gains distributions in the Portfolio will be declared annually and
normally will be paid within 45 days after the end of the fiscal year.
TAX STATUS
The Portfolio is treated as a separate entity for federal income tax
purposes. The Portfolio intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). In order
to so qualify, the Portfolio must satisfy a number of requirements, including
the requirement that at least ninety percent (90%) of the Portfolio's gross
income be derived from dividends, interest, and gains from the sale or other
disposition of stock or other securities. Another requirement is that less than
thirty percent (30%) of the Portfolio's gross income be derived from the sale or
other disposition of securities held for less than three months (netting gains
and losses which are parts of designated hedges). In determining these gross
income requirements, a loss from the sale or other disposition of securities
does not enter into the computation.
The Portfolio will distribute substantially all of its net income and
capital gains. Regulated investment companies, in most instances, pay a non-
deductible four percent (4%) excise tax on the amount, if any, by which actual
distributions of investment income and capital gains are less than distributions
required by the Code. Principal Preservation intends to make distributions in a
manner that will avoid the excise tax. The federal income tax status of all
distributions will be reported to shareholders annually. A portfolio's
distributions are taxable when they are paid, whether a shareholder takes them
in cash or reinvests them in additional shares, except that distributions
declared in December and paid in January each year are taxable as if paid on
December 31 of the earlier year.
A portion of the net investment income of the Portfolio will qualify for
the seventy percent (70%) dividends received deduction for corporations.
Each series of a series company, such as Principal Preservation, is treated
as a separate entity for federal income tax purposes so that the net realized
capital gains and losses of the Portfolio are not combined with those of
Principal Preservation's other portfolios, nor vice versa.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Portfolio and its shareholders. This discussion is not
intended as a substitute for careful tax planning. You are urged to consult
your tax advisor with specific reference to your own tax situation.
DESCRIPTION OF SHARES
The authorized common stock of Principal Preservation consists of one
billion shares, par value of $0.001 per share. The shares of Principal
Preservation are presently divided into eight series: The PSE Technology Index
Portfolio, Wisconsin Tax-Exempt Portfolio, Government Portfolio, Tax-Exempt
Portfolio, S&P 100 Plus Portfolio, Select Value Portfolio, Dividend Achievers
Portfolio, and Cash Reserve Portfolio. Presently, 50 million shares of
Principal Preservation's common stock are allocated to each of the Portfolios,
except that there are allocated to the Cash Reserve Portfolio 400 million shares
of common stock, 200 million shares of which are designated as Class X Common
Stock (the Retail Class) and 200 million of which are designated as Class Y
Common Stock (the Institutional Class). The Board of Directors of Principal
Preservation may authorize the issuance of additional series and may increase or
decrease the number of shares in each series.
Each share of Principal Preservation has one vote and, when issued and paid
for in accordance with the terms of the offering, will be fully paid and
nonassessable. Each share of a series is entitled to participate pro rata in
dividends or other distributions declared by the Board of Directors of Principal
Preservation with respect to that series, and all shares of a series have equal
rights in the event of liquidation of that series. Shares of stock are
redeemable at net asset value, at the option of the shareholder. Shares have no
preemptive, subscription, or conversion rights and are freely transferable.
Shares can be issued as full shares or fractions of shares. A fraction of a
share has the same kind of rights and privileges as a full share.
Each share of each series of Principal Preservation (including each share
of the Portfolio) is entitled to one vote on each matter presented to
shareholders of that series. As a Maryland corporation, Principal Preservation
is not required to hold, and in the future does not plan to hold, annual
shareholder meetings unless required by law or otherwise deemed appropriate by
the Board of Directors. Special meetings may be called for purposes such as
electing or removing Directors, changing fundamental policies, or approving an
investment advisory contract. On matters affecting the individual series (such
as approval of advisory or sub-advisory contracts and changes in fundamental
policies of a series) a separate vote of the shares of that series is required.
Shares of a series are not entitled to vote on any matter not affecting that
series. All shares of each series vote together in the election of Directors.
Shares do not have cumulative voting rights.
As used in the Prospectus, the phrase "majority vote" of the outstanding
shares of the Portfolio (or of Principal Preservation) means the vote of the
lesser of: (1) 67% of the shares of the Portfolio (or Principal Preservation)
present at the meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Portfolio (or Principal Preservation).
PORTFOLIO TRANSACTIONS AND BROKERAGE
Purchase and sale orders for Portfolio securities may be effected through
brokers, although it is expected that transactions in debt securities will
generally be conducted with dealers acting as principals. Purchases and sales
of securities on a stock exchange are effected through brokers or dealers.
Brokerage commissions on securities and options are subject to negotiation
between Principal Preservation and the broker.
Principal Preservation will not deal with Ziegler or its affiliates in any
transaction in which they act as a principal, but to the extent and in the
manner permitted by the 1940 Act may effect brokerage transactions through them.
The Advisor may utilize the services of Ziegler or an affiliate as a broker if
the commissions, fees, or other remuneration received by them are reasonable and
fair compared to the commissions, fees, and other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. See "Portfolio Transactions and Brokerage" in the Statement of Additional
Information.
Allocation of transactions, including their frequency, to various dealers
is determined by the Advisor in its best judgment and in a manner deemed fair
and reasonable to shareholders. The primary consideration is prompt and
efficient execution of orders in an effective manner at the most favorable
price. Principal Preservation may also consider sales of shares of its
portfolios as a factor in the selection of broker-dealers, subject to the policy
of obtaining best price and execution.
DISTRIBUTION EXPENSES
In addition to the sales charge deducted at the time of purchase, the
Portfolio is authorized under a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act to use a portion of its assets to finance certain
activities relating to the distribution of its shares to investors. The Plan
permits payments to be made by the Portfolio to the Distributor to reimburse it
for expenditures incurred by it in connection with the distribution of the
Portfolio's shares to investors. These payments include, but are not limited
to, the payments to selling representatives or brokers as a service fee,
advertising, preparation and distribution of sales literature and prospectuses
to prospective investors, implementing and operating the Plan, and performing
other promotional or administrative activities on behalf of the Portfolio. Plan
payments may also be made to reimburse the Distributor for its overhead expenses
related to distribution of the Portfolio's shares. No reimbursement may be made
under the Plan for expenses of the past fiscal years or in contemplation of
expenses for future fiscal years.
Under the Plan, the payments may not exceed an amount computed at an annual
rate of 0.25 of 1% of the average daily net assets of the Portfolio. The
Distribution Plan continues in effect, if not sooner terminated, for successive
one-year periods, provided that its continuance is specifically approved by the
vote of the Directors, including a majority of the Directors who are not
interested persons of the Advisor. For further information regarding the
Distribution Plan, see "Distribution Expenses" in the Statement of Additional
Information.
OTHER INFORMATION
Transfer and Dividend Disbursing Agent. B. C. Ziegler and Company, 215
North Main Street, West Bend, Wisconsin 53095, acts as Transfer and Dividend
Disbursing Agent.
Shareholder Statements and Reports. Shareholders receive confirmation at
least quarterly regarding their transactions and reports at least semiannually
setting forth various financial and other information related to the Portfolio.
Shareholder Inquiries. Shareholder inquiries may be direct to Principal
Preservation at 215 North Main Street, West Bend, Wisconsin 53095; or by
telephone at (800) 826-4600.
Performance Information. From time to time the Portfolio may advertise its
"yield" and "total return." Yield is based on historical earnings and total
return is based on historical distributions; neither is intended to indicate
future performance. The "yield" of the Portfolio refers to the income generated
by an investment in that Portfolio over a one-month period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during the month is assumed to be
generated each month over a 12-month period and is shown as a percentage of the
investment. "Total return" of the Portfolio refers to the average annual total
return for one, five, and ten-year periods (or so much thereof as the Portfolio
has been in existence). Total return is the change in redemption value of
shares purchased with an initial $1,000 investment, assuming the reinvestment of
dividends and capital gains distributions, after giving effect to the maximum
applicable sales charge. Performance information should be considered in light
of the Portfolio's investment objectives and policies, characteristics and
quality of the Portfolio, and the market conditions during the time period, and
should not be considered as a representation of what may be achieved in the
future. Further information is contained in the Statement of Additional
Information.
Portfolio Rating. From time to time the Portfolio may obtain and use a
rating from a nationally recognized statistical rating organization. For a
description of such ratings, see "Portfolio Ratings" in the Statement of
Additional Information.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
TERMS AND CONDITIONS OF GENERAL APPLICATION FORM
ADDITIONAL INVESTMENTS
After a Shareholder account is established, additional investments in the
amount of $50 or more ($25 or more for IRAs, Keogh Plans, Self-Directed
Retirement Plan Accounts, and Custodial Accounts under the Uniform
Gifts/Transfers to Minors Act) may be made to that existing account at any time.
Additional investments will be applied to the purchase of full and fractional
shares of the specified Portfolio at the public offering price. These
investments should be accompanied by an investment transmittal stub (attached to
any previously received shareholder confirmation) and mailed directly to B.C.
Ziegler and Company, 215 North Main Street, West Bend, Wisconsin 53095 (the
Transfer Agent). Additional investments can also be made through your dealer.
INFORMATION PERTAINING TO THE STATEMENT OF INTENTION
Subject to conditions specified below, each purchase during the 13-month
period subsequent to the effective date of this application will be made at the
public offering price applicable to a single transaction of the dollar amount
indicated, as described in the then effective prospectus. The offering price may
be further reduced under the Combined Purchase and Cumulative Investment
Privilege if the Transfer Agent is advised of any shares previously purchased
and still owned. You understand that you may, at any time during the period,
revise upward your stated intention by submitting a written request to that
effect. Such revision shall provide for the escrowing of additional shares. The
original period of the Statement, however, shall remain unchanged. Each separate
purchase made pursuant to the Statement is subject to the terms and conditions
contained in the prospectus in effect at the time of that particular purchase.
It is understood that you make no commitment to purchase shares, but that if
purchases so made within 13 months from this date do not aggregate the amount
specified, you will pay the increased amounts of sales charge prescribed in the
terms of escrow. You or your dealer must refer to this Statement of Intention in
placing each future order for shares while this Statement is in effect. It is
understood that when remitting funds directly to the Transfer Agent for
investment in your account, specific reference must be made to this Statement.
This cancels and supersedes any previous instructions which you may have given
inconsistent with the above. You have received a copy of the current prospectus
to which this application relates.
TERMS OF ESCROW TO THE STATEMENT OF INTENTION
1. To assure compliance with provisions of the Investment Company Act of
1940, out of the initial purchase (or subsequent purchase if necessary) 5% of
the dollar amount indicated on the reverse side hereof will be held in escrow in
the form of shares (computed to the nearest full share at the applicable public
offering price) registered in your name. These shares will be held by the
Transfer Agent and be subject to the terms of escrow.
2. If total purchases pursuant to this Statement equal the amount of the
specified expected aggregate purchase, escrow shares will be released from
restriction and be deposited to your account.
3. If the total purchases pursuant to this Statement are less than the
amount specified, you shall remit to the Dealer an amount equal to the
difference between the dollar amount of sales charge actually paid and the
amount of sales charge which would have been paid on the total purchases if all
such purchases had been made at a single time. If the Distributor or the dealer,
within 10 business days after request, does not receive this amount, they will
instruct the Transfer Agent to redeem an appropriate number of escrow shares to
realize such difference. If the proceeds from this redemption are inadequate,
you will be liable to the Distributor or the dealer for the difference. The
remaining shares after the redemption will be deposited to your account unless
otherwise instructed.
4. You hereby irrevocably constitute and appoint the Transfer Agent as
attorney to surrender for redemption any or all shares on the books of Principal
Preservation, under the conditions previously outlined, with full power of
substitutions in the premises.
5. Any dividends and capital gain distributions declared by Principal
Preservation with respect to escrowed shares will be added to the escrow
account.
COMBINED PURCHASE AND CUMULATIVE INVESTMENT PRIVILEGE
Shares may be purchased at the offering price applicable to the total of
(a) dollar amount then being purchased plus (b) an amount equal to the value of
the combined holdings of all series of Principal Preservation that have a sales
charge of (1) an individual; (2) an individual, his spouse and their children
under the age of 21 purchasing securities for his or their own account; (3) a
trustee or other fiduciary purchasing for a single trust, estate or single
fiduciary account; (4) a pension, profit sharing or other employee benefit plan
qualified or non-qualified under Section 401 of the Internal Revenue Code (the
"Code"); (5) tax-exempt organizations enumerated in Section 501(c)(3) or (13) of
the Code; (6) employee benefit plans qualified under Section 401 of the Code of
a single employer or of employers who are "affiliated persons" of each other
within the meaning of Section 2(a)(3)(c) of the Securities Act of 1933, as
amended; or (7) any other organized group of persons, whether incorporated or
not, provided the organization has been in existence for at least six months and
has some purpose other than the purchase of redeemable securities of a
registered investment company at a discount. In order for this cumulative
quantity discount to be made available, the shareholder or his securities dealer
must notify B.C. Ziegler and Company of the total holdings in all series of
Principal Preservation each time an order is placed.
TELEPHONE REDEMPTIONS
If you elect to redeem by telephone, a signature guarantee must be included
with the application. This authorizes and directs Principal Preservation and the
Transfer Agent, acting as your attorneys-in-fact, to redeem any or all shares of
Principal Preservation pursuant to instructions received by telephone from you
or any other person and to wire the proceeds to the bank account designated in
your application. You agree that any telephone instructions may be recorded.
DEALER AUTHORIZATION
The dealer, in signing the Authorization, authorizes B.C. Ziegler and
Company, as its agent and on its behalf, to purchase from time to time shares of
Principal Preservation necessary for the shareholder who has signed the
Authorization. B.C. Ziegler and Company is authorized and directed where
necessary to cause the shares to be transferred to the name of the shareholder
on the books of Principal Preservation to retain and to account to the dealer
for the dealer's sales charge due on each purchase, to confirm each direct sale
to the shareholder on behalf of the dealer, and to transmit to the shareholder
each new prospectus of Principal Preservation or supplement thereto delivered to
it for that purpose. The dealer guarantees the genuineness of the signature(s)
on the Authorization and represents that each person who has signed the
Authorization is of legal age and not under legal disability. The dealer also
represents that it is a duly licensed and registered dealer and that it may
lawfully sell the specified securities in the state designated as the investor's
mailing address. It further represents, if the sale has been made within the
United States, that it is a member of the NASD and has entered into a soliciting
dealer agreement with B.C. Ziegler and Company with respect to such shares.
TERMS AND CONDITIONS FOR ESTABLISHING SYSTEMATIC PURCHASE PLAN
1. OPENING A SYSTEMATIC PURCHASE PLAN ("SPP"). An SPP may be established at
any time by submitting the information requested above to the Transfer Agent.
Depending on the date you elect to have automatic investments made, the SPP may
take up to 30 days to commence after receipt of the SPP request by the Transfer
Agent. There is a minimum initial investment of $100.00 for accounts opened
under the SPP, and for subsequent investments ($50 or more for IRAs, Keogh
Plans, Self-Directed Retirement Plan Accounts, and Custodial Accounts under the
Uniform Gifts/Transfers to Minors Act, until your account balance reaches $500,
after which investments can be made in increments of $25 or more). The
additional investment amount drops to $50 for SPP participants whose accounts
exceed $1,000.
2. INVESTMENTS. Principal Preservation shall collect the amount specified
from your account at the designated financial institution as hereby authorized,
debiting such account to its own order. Other than the sales charge, there are
no service fees for participation in the SPP. Principal Preservation shall treat
each deposit as if it were made by you directly.
3. TERMINATION. The privilege of making deposits under this service may be
revoked by Principal Preservation without prior notice if any debit is not paid
upon presentation. Principal Preservation shall be under no obligation to notify
you of the non-payment and Principal Preservation shall have no liability
whatsoever with respect thereto. You may discontinue the SPP by written notice
to the Transfer Agent which is received at least ten business days prior to the
collection date or the SPP may be discontinued at any time by Principal
Preservation upon 30 days written notice prior to any collection date.
4. CHANGES IN ACCOUNT. In order to continue participation in the SPP, you
must notify the Transfer Agent in writing of changes in your account. A "Voided"
check reflecting the change of account must be attached to the written
notification.
5. AVAILABILITY. The SPP is available only through financial institutions
that have agreed to participate in such plans and may not be available to
residents of certain states.
APPENDIX A
COMPANIES ON PACIFIC STOCK EXCHANGE INDEX
TICKER SYMBOL COMPANY NAME
------------- ------------
COMS 3Com Corp
ACN Acuson Corp
ADPT Adaptec Inc
ADCT ADC Telecom Inc
ADBE Adobe Systems Inc
AMD Advanced Micro Devices
AMH Amdahl Corp
AMER America Online
AMGN Amgen Inc
AMP AMP Inc
ADI Analog Devices
AAPL Apple Computer Inc
APM Applied Magnetic
AMAT Applied Material
ASTA AST Research Inc
ACAD Autodesk Inc
AUD Automatic Data
BAY Bay Networks Inc
BGEN Biogen Inc
BMET Biomet Inc
BMCS BMC Software Inc
BORL Borland International
BSX Boston Scientific
CS Cabletron Systems
CDN Cadence Design
CNTO Centocor Inc
CEN Ceridian Corp
CHPS Chips & Tech Inc
CHIR Chiron Corp
CSCO Cisco Systems
COHR Coherent Inc
CPQ Compaq Computer
CA Computer Associates
CSC Computer Science
CQ Comsat Corp
CYR Cray Research
CU CUC International Inc
CY Cypress Semiconductor
DGN Data General
DELL Dell Computer
DEC Digital Equipment
DIGI DSC Communications Corp
ESCC Evans & Suther
EXBT Exabyte Corp
GATE Gateway 2000 Inc
GSX General Signal Corp
GNE Genentech Inc
GENZ Genzyme Corp
HRS Harris Corp
HWP Hewlett-Packard
HON Honywell Inc
IMNX Immunex Corp
IFMX Informix Corp
INTC Intel Corp
INGR Intergraph Corp
IBM International Business
Machines
KLAC KLA Instruments
KMAG Komag, Inc. (replaces
Conner-CNR)
KLIC Kulicke & Soffa
MX Measurex Corp
MDT Medtronic Inc
MENT Mentor Graphics
MU Micron Technology
MSFT Microsoft Corp
MIL Millipore Corp
MOT Motorola Inc
NSM National Semiconductor
NN Newbridge Network
NOVL Novell Inc
NVLS Novellus Systems
OCTL Octel Communications Corp
ORCL Oracle Corp
PKN Perkin-Elmer
AQM QMS Inc
QNTM Quantum Corp
SFA Scientific Atlanta
SEG Seagate Techology Inc
SRM Sensormatic Elec
SMED Shared Medical Systems
SGI Silicon Graphics
STJM St Jude Medical
SMSC Standard Microsystems
STK Storage Tech
SRA Stratus Computer
SUNW Sun Microsystems
SYBS Sybase Inc
SYMC Symantec Corp
SBL Symbol Tech Inc
SSAX System Software
TDM Tandem Computers
TEK Tektronix Inc
TLAB Tellabs Inc
TER Teradyne Inc
TXN Texas Instruments
THI Thermo Inst Systems
UIS Unisys Corp
VAR Varian Associates Inc
XRX Xerox Corp
XLNX Xilinx Inc
XOMA Xoma Corp
TABLE OF CONTENTS
Page
----
Questions and Answers..........
Expenses.......................
Investment Objectives and
Policies.......................
Investment Program.............
Special Considerations.........
Management.....................
Determination of Net Assets
Value Per Share................
Purchase of Shares.............
Redemptions....................
Shareholder Services...........
Dividends, Capital Gains
Distributions and
Reinvestments............
Tax Status...............
Description of Shares....
Portfolio Transactions and
Brokerage................
Distribution Expenses....
Other Information........
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISOR
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, TRANSFER
AND DIVIDEND DISBURSING AGENT,
DEPOSITORY, AND ACCOUNTING/PRICING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
ACCOUNT APPLICATION FORM
MAKE CHECK OR MAIL TO: Principal Preservation
215 North Main Street
West Bend, WI 53095
MONEY ORDER PAYABLE TO: Principal Preservation Portfolios, Inc.
- ------------------------------------------------------------------------------
ACCOUNT REGISTRATION
Individual
- ------------------------------------------------------------------------------
First Middle Initial Last Name
Joint Owner
- ------------------------------------------------------------------------------
First Middle Initial Last Name
(In case of joint registration, a joint tenancy with right of survivorship will
be presumed, unless otherwise indicated.)
Uniform Gift To Minor
- ------------------------------------------------------------------------------
Custodian's Name
Other
- ------------------------------------------------------------------------------
Name of corporation, other organization or fiduciary; if trust, state trustee,
maker and date of trust
- ------------------------------------------------------------------------------
Print - Street Address (Area code) Telephone No. (optional)
- ------------------------------------------------------------------------------
City State Zip Code
Citizen of: United States Other
----------------------------------------
(please specify)
- ------------------------------------------------------------------------------
PORTFOLIO SELECTION
Indicate the amount you wish to invest in the PSE Technology Index Portfolio.
Minimum initial investment is as indicated.
___PSE Technology Index Portfolio_____________________________________.
(minimum $1,000)
___I'm interested in any or all of the Principal Preservation Government, Tax-
Exempt, S&P 100 Plus, Select Value and/or Dividend Achievers Portfolios. Please
send me the combined Prospectus for these Portfolios.
___I'm interested in the Wisconsin Tax-Exempt Portfolio. Please send me a
Prospectus.
___I'm interested in the Cash Reserve Portfolio. Please send me a Prospectus.
- ------------------------------------------------------------------------------
METHOD OF PAYMENT
Shares purchased by personal or corporate check may not be
redeemed by telephone or otherwise until 15 days after invest-
ment date or until the check clears.
Personal Check or Other (specify)
-----------------
- ------------------------------------------------------------------------------
DIVIDEND AND DISTRIBUTION OPTIONS
Until I advise you to the contrary, I elect to:
Reinvest all dividends and capital Receive dividends in cash and
gain distributions. reinvest capital gains.
(If no box is checked, all dividends and
capital gainb distributions will be Receive all distributions in cash.
reinvested in additional shares.)
- ------------------------------------------------------------------------------
STATEMENT OF INTENTION
Effective Date
-----------------------------------
(Not more than 90 days prior to date of signature)
The investor intends, but shall be under no obligation, to invest over a 13-
month period from the date of purchase an aggregate amount in any of the
Portfolios having a sales charge equal to at least:
$25,000-$49,999 $250,000-$499,999
$50,000-$99,999 $500,000-$999,999
$100,000-$249,999 $1,000,000 or more
Each purchase will be made at the public offering price applicable to a single
purchase of the dollar amount designated above, as described in the Prospectus
(see ''PURCHASE OF SHARES'').
- ------------------------------------------------------------------------------
RIGHTS OF ACCUMULATION
I qualify for Rights of Accumulation as described in a Principal
Preservation Prospectus. Listed
below are all the accounts from the different Portfolios of Principal
Preservation sold subject to a sales charge which should be credited toward the
reduced sales charge.
Account Number Account Number
----------------------- --------------------
Account Number Account Number
----------------------- --------------------
- ------------------------------------------------------------------------------
TELEPHONE EXCHANGE
I authorize telephone exchange privileges.
If you request the telephone exchange option, you must obtain a Signature
Guarantee on back.
- ------------------------------------------------------------------------------
SYSTEMATIC PURCHASE PLAN (''SPP'')
If you select this option please review the terms and conditions in the
Prospectus. New accounts please fill in information in account registration.
I hereby authorize the Portfolio to withdraw from my checking account:
$ (see Terms and
--------
Conditions) on or about the 5th or 20th of each month.
An account must be previously established or a check in the amount of at least
must accompany application to be used to purchase shares of the
- ---------
PSE Technology Index Portfolio through the financial institution as follows:
- ------------------------------------------------------------------------------
Name of Financial Institution Branch Name and Number
- ------------------------------------------------------------------------------
Address of Financial Institution
Please attach an unsigned and voided check from the checking account you wish to
use for the Systematic Purchase Plan. Write ''Void'' across the face of the
check. Your check must be imprinted with all name(s) on your bank account and
carry your financial institution's magnetic ink coding numbers across the
bottom.
Signature Signature Date
- ------------------------------------------------------------------------------
(If your checking account is held by more than one person, all account holders
must sign this application.)
- ------------------------------------------------------------------------------
TELEPHONE REDEMPTIONS - By wire to: or By mail to registered owner's
address of record.
- ------------------------------------------------------------------------------
Bank Name and Your Bank ABA Routing Number
- ------------------------------------------------------------------------------
Bank Address - Street Name of Bank Account
- ------------------------------------------------------------------------------
City State Zip Your Bank Account Number
If you request Telephone Redemptions, you must obtain a Signature Guarantee
(below).
- ------------------------------------------------------------------------------
STEMATIC WITHDRAWAL PAYMENT
Beginning , 19 please send checks in
------------ ----
the amount of $ .
-----------------
($150 minimum)
Monthly Quarterly
----------- --------------
Please allow 30 days to start a program. Checks will be sent on the 26th day of
each month (the next business day if a holiday).
Payment to be made to registered owner's address of record.
Payment to be made to other than registered shareholders, identified at
right:
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By the execution of this Application the investor represents and warrants that
he has full right, power and authority, and, if a natural person is of legal age
in his state of residence, to make the investment applied for pursuant to this
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investor represent and warrant that they are duly authorized to sign this
Application, and to purchase or redeem shares of Principal Preservation on
behalf of the investor. The investor hereby affirms that he has received a
current Prospectus.
''Under penalties of perjury, I certify (1) that the number shown on this form
is my correct taxpayer identification number and (2) that I am not subject to
backup withholding either because I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or dividends,
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B.C. Ziegler and Company (the ''Distributor''), acts as agent in all purchases
by the investor of Principal Preservation. The Distributor and the
authorized dealer, if any, named below each authorizes and appoints B.C. Ziegler
and Company to act as its agent to execute the purchase of shares of Principal
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECHNOLOGY INDEX PORTFOLIO
, 1996
--------------
STATEMENT OF ADDITIONAL INFORMATION
Information contained herein is subject to completion or
amendment. A Registration Statement relating to these securities
has been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the Registration Statement becomes effective.
This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to but nor shall there be any sale of
these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
STATEMENT OF ADDITIONAL INFORMATION
DATED , 1996
----------------
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECHNOLOGY INDEX PORTFOLIO
215 North Main Street
West Bend, Wisconsin 53095
800-826-4600
This Statement of Additional Information and the Prospectus
to which it relates describe the Principal Preservation PSE
Technology Index Portfolio (the "Portfolio"). Principal
Preservation Portfolios, Inc. ("Principal Preservation") offers
other mutual funds by separate prospectuses and statements of
additional information.
Statement of Additional Information
The objective of the Portfolio is to obtain a total return,
before operating expenses of the Portfolio, that replicates the
total return of the Pacific Stock Exchange Technology Index (the
"PSE Technology Index" or the "Index"). The Advisor does not
manage the Portfolio according to traditional methods of active
investment management, which involve the buying and selling of
securities based upon economic, financial, and market analysis
and investment judgment. Instead the Portfolio utilizes a
"passive" or "indexing" investment approach, attempting to
replicate the investment performance of the PSE Technology Index
through statistical procedures. There can be no assurance that
this investment objective will be achieved.
Shares may be purchased, and a Prospectus may be obtained,
directly from the Distributor, 215 North Main Street, West Bend,
Wisconsin 53095, telephone 800-826-4600, or from Selected Dealers
(see the Prospectus dated , 1996 for more complete
---------------
information, including an account application). This Statement
of Additional Information is not a Prospectus, and should be read
in conjunction with the Prospectus. Capitalized terms not
otherwise defined in this Statement of Additional Information
have the meanings ascribed thereto in the Prospectus.
TABLE OF CONTENTS
Page
----
Statement of Additional Information........................... 1
INVESTMENT PROGRAM............................................ 3
INVESTMENT RESTRICTIONS....................................... 9
INDUSTRY CONCENTRATION FACTORS................................ 12
MANAGEMENT OF PRINCIPAL PRESERVATION.......................... 12
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........... 17
PERFORMANCE INFORMATION....................................... 17
DETERMINATION OF NET ASSET VALUE PER SHARE.................... 19
PURCHASE OF SHARES............................................ 20
TAX STATUS.................................................... 21
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................... 22
DISTRIBUTION EXPENSES......................................... 22
CUSTODIAN..................................................... 25
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS.................... 25
PORTFOLIO RATINGS............................................. 25
DESCRIPTION OF RATINGS OF CERTAIN SECURITIES.................. 25
INVESTMENT PROGRAM
The Prospectus describes the investment objective and
policies of the Portfolio. Certain instruments and techniques
discussed in the Prospectus are described in greater detail
below.
Options
-------
To the extent consistent with its investment objective, the
Portfolio's Advisor may employ options strategies designed to
hedge protectively against any anticipated adverse movements in
the market values of its portfolio securities or securities it
intends to purchase and to enhance return. The Portfolio may
write (sell) covered call options and put options, and may
purchase call options and put options on stock indices for the
purposes and subject to the limitations outlined in "Investment
Program" in the Prospectus. See "Investment Program" in the
Prospectus.
An option on an index is a contract that gives the holder of
the option, in return for payment of a premium, the right to
demand from the seller (call) delivery of cash in an amount equal
to the value of the index at a specified exercise price at any
time during the term of the option. Upon exercise, the writer of
an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by
the specified multiplier for the index option.
A call option on an index is considered to be covered if the
writer (seller) maintains with its custodian cash or cash
equivalents equal to the contract value. A call option is also
covered if the writer holds a call on the same index as the call
written where the exercise price of the call purchased is equal
to or less than the exercised price of the call written.
A put option gives the purchaser of the option the right to
sell, and the writer (seller) of the option the obligation to
buy, the cash value of the index at any time during the option
period. The Portfolio will only purchase put options on indices,
which, in the opinion of the Advisor, have investment
characteristics similar to those of securities in the Portfolio
or an index on the securities. A put option is covered if a
writer holds a put on the same index as the put written where the
exercised price of the put held is (i) equal to or greater than
the exercise price of the put written, or (ii) less than the
exercise price of the put written, provided the difference is
maintained by the writer in cash or cash equivalents in a
segregated account with its custodian.
Futures
-------
The Portfolio may purchase and sell exchange-traded index
futures contracts on the PSE Technology Index or the S&P 500
Index for the purposes and strategies described in the
Prospectus. A futures contract on an index is an agreement by
which one party agrees to accept delivery of, and the other party
agrees to make delivery of, an amount of cash equal to the
difference between the value of the underlying index at the close
of the last trading day of the futures contract and the price at
which the contract originally was written. Although the value of
an index might be a function of the value of certain specified
securities, no physical delivery of those securities is made.
Futures contracts covering the PSE Technology Index and the
S&P 500 Index presently are traded on the New York Futures
Exchange and the Chicago Mercantile Exchange, respectively. The
Portfolio also may engage in transactions involving futures
contracts on other indices presently traded or in the future
created and traded on national stock exchanges if, in the opinion
of the Board of Directors of Principal Preservation, such futures
contracts are appropriate instruments to help the Advisor achieve
the Portfolio's objective.
When a purchase or sale of a futures contract is made by the
Portfolio, the Portfolio is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of
cash or U.S. Government Securities ("initial margin"). The
margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term
of the contract. The initial margin is in the nature of a
performance bond or good faith deposit on the futures contract
which is returned to the Portfolio upon termination of the
contract, assuming all contractural obligations have been
satisfied. The Portfolio expects to earn interest income on its
initial margin deposits. A futures contract held by the
Portfolio is valued daily at the official settlement price of the
exchange on which it is traded. Each day the Portfolio pays or
receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known
as "marking to market." Variation margin does not represent a
borrowing or loan by the Portfolio, but is instead a settlement
between the Portfolio and the broker of the amount one would owe
the other if the futures contract expired. In computing daily
net asset value, the Portfolio will mark to market all of its
open futures positions.
Index futures contracts in which the Portfolio will invest
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying index,
and delivery month), or in cash. If an offsetting purchase price
is less than the original sale price, the Portfolio would realize
a capital gain, or if it is more, the Portfolio would realize a
capital loss. Conversely, if an offsetting sale price is more
than the original purchase price, the Portfolio would realize a
capital gain, or if it is less, the Portfolio would realize a
capital loss. The transaction costs must also be included in
these calculations.
There are several risks associated with the use of futures
contracts in the manner intended by the Portfolio. A purchase or
sale of a futures contract may result in losses in excess of the
amount invested in the futures contract. There can be no
guarantee that there will be a correlation between the price
movements in the underlying index and in the portfolio securities
being hedged or the Index being simulated, as the case may be.
In addition, there are significant differences between the
securities and futures markets that could result in an imperfect
correlation between the markets, causing a given strategy not to
achieve its objective. The degree of imperfection of correlation
depends on circumstances such as: variations in speculative
market demand for futures and differences between the financial
instruments being hedged or replicated and the instruments
underlying the standard contracts available for trading.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of the futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price
movements during a particular trading day and, therefore, does
not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures
prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of positions and subjecting some
holders of futures contracts to substantial losses. There can be
no assurance that a liquid market will exist at a time when the
Portfolio seeks to close out a futures position and the Portfolio
would continue to be required to meet margin requirements until
the position is closed.
To minimize such risks, the Portfolio will not enter into a
futures contract if, immediately after such transaction, the
initial margin deposits for futures contracts held by the
Portfolio would exceed 5% of the Portfolio's total assets.
Additionally, the Portfolio may not maintain open short positions
in futures contracts or call options written on indices if, in
the aggregate, the market value of all such open positions
exceeds the current value of the securities in the Portfolio's
investment portfolio, plus or minus unrealized gains and losses
on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions.
Taxation of Options and Futures
-------------------------------
If the Portfolio exercises a call or put option it owns, the
difference between the cash paid at exercise and the premium
received is a capital gain or loss. Entry into a closing purchase
transaction will result in capital gain or loss. A futures
contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures
contract was entered into and the settlement price on the earlier
of the delivery notice date or the expiration date. Should the
Portfolio ever deliver securities under a futures contract (which
is not expected to occur), the Portfolio will realize a capital
gain or loss on those securities.
For federal income tax purposes, a Portfolio generally is
required to recognize as income for each taxable year its net
unrealized gains and losses as of the end of the year on options
and futures positions ("year-end mark to market"). Generally,
any gain or loss recognized with respect to such positions
(either by year-end mark to market or by actually closing of the
positions) is considered to be 60% long term and 40% short term,
without regard to the holding periods of the contracts.
The Portfolio distributes to shareholders annually any net
capital gains which have been recognized for federal income tax
purposes (including year-end mark to market gains) on options and
futures transactions. Such distributions are combined with
distributions of capital gains realized on the Portfolio's other
investments and shareholders are advised of the nature of the
payments.
PSE Technology Index
--------------------
For illustrative purposes, the PSE Technology Index
Portfolio may include in its supplemental sales literature a line
graph showing the price patterns of the PSE Technology Index over
the past decade. The presentation displays superimposed line
graphs of annual prices of the Index over approximately a 10-year
period, with prices reflected on the vertical axis and years
reflected on the horizontal axis.
Historical prices are not necessarily indicative of the
future prices of the Index, or of the performance of the
Portfolio or the ability of that Portfolio to match the
performance of the Index or of the stock market generally.
This Portfolio is not sponsored, endorsed, sold or promoted
by the Pacific Stock Exchange, Inc. The Pacific Stock Exchange,
Inc. makes no representation or warranty, implied or expressed,
to the purchasers of the Portfolio or any member of the public
regarding the advisability of investing in index funds generally,
or in this Portfolio particularly, or the ability of the Index to
track stock market performance.
Short-Term Investments
----------------------
The Portfolio may invest in any of the following securities
and instruments in management of cash receipts, for liquidity for
anticipated redemptions, to meet cash flow needs to enable the
Portfolio to take advantage of buying opportunities, during
periods when attractive investments are unavailable and for
temporary defensive purposes.
BANK CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME
DEPOSITS. The Portfolio may acquire certificates of deposit,
bankers' acceptances, and time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a
commercial bank for a definite period of time and earn a
specified return. Bankers' acceptances are negotiable drafts or
bills of exchange normally drawn by an importer or exporter to
pay for specific merchandise, which are "accepted" by a bank,
meaning in effect that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Certificates of
deposit and bankers' acceptances acquired by the Portfolio will
be dollar-denominated obligations of domestic banks or financial
institutions which at the time of purchase have capital, surplus,
and undivided profits in excess of $100 million, based on latest
published reports, or less than $100 million if the principal
amount of such bank obligations are fully insured by the U.S.
Government.
In addition to purchasing certificates of deposit and
bankers' acceptances, to the extent permitted under its
investment objective and policies, the Portfolio may make
interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified
period of time at a specified interest rate.
SAVINGS ASSOCIATION OBLIGATIONS. The Portfolio may invest
in certificates of deposit (interest-bearing time deposits)
issued by savings banks or savings and loan associations that
have capital and undivided profits in excess of $100 million,
based on latest published reports, or less than $100 million if
the principal amount of such obligations is fully insured by the
U.S. Government.
COMMERCIAL PAPER, SHORT-TERM NOTES, VARIABLE RATE DEMAND
NOTES, AND OTHER CORPORATE OBLIGATIONS. The Portfolio may invest
a portion of its assets in commercial paper and short-term notes,
including variable rate demand notes. Commercial paper consists
of unsecured promissory notes issued by corporations. Issues of
commercial paper and short-term notes will normally have
maturities of less than nine months and fixed rates of return,
although such instruments may have maturities of up to one year.
Commercial paper and short-term notes will consist of issues
rated at the time of purchase "A-2" or higher by S&P, "Prime-1"
or "Prime-2" by Moody's, or similarly rated by another
organization or, if unrated, will be determined by the Advisor to
be of comparable quality. These rating symbols are described
below under "Portfolio Ratings."
Corporate obligations include bonds and notes issued by
corporations to finance longer-term credit needs than supported
by commercial paper. While such obligations generally have
maturities of ten years or more, the Portfolio may purchase
corporate obligations which have remaining maturities of one year
or less from the date of purchase and which are rated "AA" or
higher by S&P or "Aa" or higher by Moody's.
The Portfolio also may purchase corporate obligations known
as variable rate demand notes. Variable rate demand notes are
unsecured instruments that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate.
Although the notes are not normally traded and there may be no
secondary market in the notes, the Portfolio may demand payment
of principal and accrued interest at any time.
Lending of Portfolio Securities
-------------------------------
The Portfolio may lend its portfolio securities to brokers,
dealers, and other institutional investors, provided the
Portfolio receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current
market value of the securities loaned. For the purposes of this
policy, the Portfolio considers collateral consisting of U.S.
Government Securities or irrevocable letters of credit issued by
banks whose securities meet the standards for investment by the
Portfolio to be the equivalent of cash. During the term of the
loan, the Portfolio is entitled to receive interest and other
distributions paid on the loaned securities, as well as any
appreciation in the market value. The Portfolio is also entitled
to receive interest from the institutional borrower based on the
value of the securities loaned. The Portfolio seeks to increase
its income by investing the cash collateral received on the loan.
From time to time, the Portfolio may return to the borrower,
and/or a third party which is unaffiliated with Principal
Preservation and which is acting as a "placing broker," a part of
the interest earned from the investment of the collateral
received for securities loaned.
The Portfolio does not have the right to vote the securities
loaned during the existence of the loan, but can call the loan to
permit voting of the securities, if, in the Advisor's judgment, a
material event requiring a shareholder vote would otherwise occur
before the loan is repaid. In the event of bankruptcy or other
default of the borrowing institution, the Portfolio could
experience delays in liquidating the loan collateral or
recovering the loaned securities, and incur risk of loss
including: (1) possible decline in the value of the collateral or
in the value of the securities loaned during the period while the
Portfolio seeks to enforce its rights thereto; (2) possible
subnormal levels of income and lack of access to income during
this period; and (3) expenses of enforcing its rights. To
minimize these risks, the Advisor evaluates and continually
monitors the creditworthiness of the institutional borrowers to
which the Portfolio lends its securities.
To minimize the foregoing risks, the Portfolio's securities
lending practices are subject to the following conditions and
restrictions: (1) the Portfolio may not make such loans in
excess of 33% of the value of its total assets; (2) the Portfolio
must receive cash collateral in an amount at least equal to 100%
of the value of the securities loaned; (3) the institutional
borrower must be required to increase the amount of the cash
collateral whenever the market value of the loaned securities
rises above the amount of the collateral; (4) the Portfolio must
have the right to terminate the loan at any time; (5) the
Portfolio must receive reasonable interest on the loan, as well
as any interest or other distributions on the loaned securities
and any increase in the market value of the loaned securities;
and (6) the Portfolio may not pay any more than reasonable
custodian fees in connection with the loan.
Investments in Other Investment Companies
-----------------------------------------
An investment by the Portfolio in another investment company
may cause the Portfolio to incur increased administration and
distribution expenses. Such investments are limited by the
Portfolio's investment restrictions. See "Investment
Restrictions" in this Statement of Additional Information.
Diversification
---------------
The number of issues of securities which meet the
Portfolio's investment objective and criteria may be somewhat
limited. As a result, a relatively high percentage of the
Portfolio's assets may be invested from time to time in the
obligations of a limited number of issuers, some of which may be
subject to the same economic trends. Securities held by the
Portfolio may therefore be more susceptible to any single
economic, political, or regulatory occurrence than the portfolio
securities of diversified investment companies.
Portfolio Turnover
------------------
Principal Preservation has not established a limit to its
portfolio turnover rates, nor will it attempt to achieve or be
limited to predetermined rates of portfolio turnover. Although
Principal Preservation cannot predict its portfolio turnover
rates, the Portfolio's portfolio turnover rate is not expected to
exceed 50%.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following fundamental
investment restrictions and policies which cannot be changed
without the approval of the holders of the lesser of (i) a
majority of the outstanding shares of the Portfolio or (ii) 67%
of the shares represented at a meeting of shareholders at which
the holders of 50% or more of the outstanding shares of the
Portfolio are represented. Policies that are not "fundamental
policies" are subject to change by the Board of Directors without
shareholder approval. Any investment restriction which involves
a maximum percentage of securities or assets will not be
considered to be violated unless an excess over the percentage
occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Portfolio. The
Portfolio may not:
(1) Purchase more than 10% of the outstanding voting
securities of an issuer, except as necessary to parallel the
composition of the PSE Technology Index, or invest in a company
to get control or manage it.
(2) Borrow money or property except for temporary or emer-
gency purposes. If the Portfolio ever should borrow money it
would only borrow from banks and in an amount not exceeding 10%
of the market value of its total assets (not including the amount
borrowed). The Portfolio will not pledge more than 15% of its
net assets to secure such borrowings. In the event the
Portfolio's borrowing exceeds 5% of the market value of its total
assets, the Portfolio will not invest in any portfolio securities
until its borrowings are reduced to below 5% of its total assets.
For purposes of these restrictions, collateral arrangements for
premium and margin payments in connection with hedging
activities, if any, are not to be deemed to be a pledge of
assets.
(3) Make loans, except that it may lend its portfolio
securities, subject to the conditions and limitations established
in the Prospectus and this Statement of Additional Information.
For the purposes of this restriction, investments in publicly-
traded debt securities or debt securities of the type customarily
purchased by institutional investors and investments in
repurchase agreements are not considered loans.
(4) Underwrite the securities of other issuers, except
where it might technically be deemed to be an underwriter for
purposes of the Securities Act of 1933 upon the disposition of
certain securities.
(5) Issue senior securities.
(6) Purchase a security if, as a result, more than 10% of
the value of the Portfolio's net assets would be invested in:
(i) securities with legal or contractual restrictions on resale
(other than investments and repurchase agreements); (ii)
securities for which market quotations are not readily available;
and (iii) repurchase agreements which do not provide for payment
within 7 days.
(7) Invest in commodities, but the Portfolio may invest in
futures contracts and options subject to the limitations set
forth in the Prospectus.
(8) Purchase securities on margin or effect short sales of
securities, including short sales "against the box" (but the
Portfolio may obtain such short-term credits as may be necessary
for the clearance of transactions and may make margin payments in
connection with transactions in options, futures and options on
futures).
In accordance with the following non-fundamental policies,
which may be changed without shareholder approval, the Portfolio
may not:
(1) Invest more than 5% of its total assets in securities
of companies which, including any predecessors, have a record of
less than 3 years of continuous operations.
(2) Buy or sell real estate, real estate investment trusts,
real estate limited partnerships, or oil and gas interests or
leases.
(3) Purchase warrants, except that the Portfolio may
purchase warrants which, when valued at lower of cost or market,
do not exceed 5% of the value of the Portfolio's net assets;
included within the 5%, but not to exceed 2% of the Portfolio's
net assets, may be warrants which are not listed on the New York
or American Stock Exchange.
(4) Purchase or retain the securities of an issuer if those
officers or Directors of Principal Preservation or the Advisor
(as defined under the caption "Management of Principal Preserva-
tion -- The Investment Advisors" in this Statement of Additional
Information) who individually own beneficially more than 0.5 of
1% of the outstanding securities of such issuer together own
beneficially more than 5% of such outstanding securities;
provided that no officer or director shall be deemed to own
beneficially securities held in other accounts managed by such
person or held in employee or similar plans for which such person
acts as trustee.
(5) Purchase securities of other investment companies if
the purchase would cause more than 10% of the value of the total
assets of the Portfolio to be invested in investment company
securities, provided that: (i) no investment will be made in the
securities of any single investment company if, immediately after
such investment, more than 3% of the outstanding voting
securities of such investment company would be owned by the
Portfolio or more than 5% of the value of the total assets of the
Portfolio would be invested in such investment company; and (ii)
no such restrictions shall apply to a purchase of investment
company securities as a part of a merger, consolidation,
reorganization or acquisition of assets.
INDUSTRY CONCENTRATION FACTORS
As discussed in the Portfolio's Prospectus (see "Special
Considerations -- Concentrations" in the Prospectus), a
significant portion of the Portfolio's investments will consist
of technology-based issues, which exposes the Portfolio to risks
associated with economic conditions in that industry.
Due to competition, a less diversified product line, and
other factors, companies that develop and/or rely on technology
could become increasingly sensitive to down swings in the economy
and competitive factors. However, the companies whose common
stocks are included in the PSE Technology Index comprise a fairly
broad range of industries. This industry diversification likely
will soften volatility associated with economic and political
developments that disproportionately affect specific industries.
MANAGEMENT OF PRINCIPAL PRESERVATION
Directors and Officers
----------------------
Under applicable law, the Board of Directors is responsible
for management of Principal Preservation, and provides broad
supervision over its affairs. The Advisor is responsible for the
Portfolio's investment management and Principal Preservation's
officers are responsible for the Portfolio's operations.
The Directors and officers of Principal Preservation and
their principal occupations during the past five years are listed
below. Their titles may have varied during that period.
Asterisks indicate those Directors who are "interested persons"
(as defined in the 1940 Act) of Principal Preservation. Unless
otherwise indicated, the address of each Director and officer of
Principal Preservation is 215 North Main Street, West Bend,
Wisconsin 53095.
Position with Principal
Principal Occupation During
Name and Address Preservation Past Five Years
---------------- ------------ ---------------
R. D. Ziegler*<F6> President and Since 1973 Chairman and
Director Director and, prior to 1990,
Chief Executive Officer, and
prior to 1986, President, The
Ziegler Companies, Inc. and
B.C. Ziegler and Company;
Chairman and Director,
Ziegler Asset Management,
Inc.; Director, Johnson
Controls, Inc.
(manufacturing).
Robert J. Vice Director of Mutual Funds,
Tuszynski*<F6> President and B.C. Ziegler and Company,
Director since 1987; Trustee, Chairman
of the Board and President,
Prospect Hill Trust and The
Prime Portfolios (registered
investment companies) from
1994 to 1996.
Richard H. Aster, Director President and Director of
M.D. Research, The Blood Center of
1701 W. Wisconsin Southeastern Wisconsin, Inc.
Ave.
Milwaukee, WI 53223
Augustine J. Director Retired; President,
English Tupperware North America from
1724 Lake Roberts 1990 to 1994 (manufacturing);
Court prior to 1990, President, The
Windermere, FL 34786 West Bend Company (manu-
facturing), a division of
Dart Industries, a subsidiary
of Premark International,
Inc., of which Mr. English
was a Group Vice President.
Ralph J. Eckert Director Chairman, Trustmark Insurance
2059 Keystone Cos. (mutual life insurance
Ranch Road company); prior to 1991,
Dillon, CO 80435 Chairman, President and Chief
Executive Officer, Trustmark
Insurance Cos. since 1971;
Trustee of the Board of
Pensions of the Evangelical
Lutheran Church of America
since 1989; Trustee of the
Board of Pensions for the
Lutheran Church of America
from 1987-1989; and Trustee
of The Prime Portfolios (a
registered investment
company) from 1993 to 1996.
John H. Vice Wholesaler, B.C. Ziegler and
Lauderdale President - Company since 1991; prior
Director of thereto, Account Executive,
Marketing The Patten Company.
Jay Ferrara Treasurer Assistant Vice President,
B.C. Ziegler and Company
since 1994; Controller,
California Investment Trust
from 1993 to 1994; prior
thereto, Senior Portfolio
Accountant, Wells Fargo Nikko
Investment Advisors.
S. Charles Secretary Senior Vice President and
O'Meara General Counsel, B.C. Ziegler
and Company, since 1993;
prior thereto, Partner,
O'Meara, Eckert, Pouros &
Gonring (law firm).
Principal Preservation pays the compensation of the three
Directors who are not officers, directors or employees of the
Advisor. Principal Preservation will pay each of these Directors
an annual fee of $12,000 and an additional $450 for each Board or
committee meeting he attends. Principal Preservation may also
retain consultants, who will be paid a fee, to provide the Board
with advice and research on investment matters.
The table below shows fees paid to Directors of Principal
Preservation for the year ended December 31, 1995. Each series
of Principal Preservation, including the Portfolio, pays a
proportionate share of these expenses based on the ratio such
series' total assets bear to the aggregate of the total assets of
all ten series of Principal Preservation. Principal Preservation
made no payments to its officers or directors who are affiliated
with any investment advisor to Principal Preservation.
Pension or Total
Retirement Compensation
Name of Person Benefits Accrued From Principal
and Aggregate As Part of Estimated Preservation and
Position with Compensation Principal Annual Fund Complex of
Principal from Principal Preservation's Benefits Which Principal
Preservation Preservation Expenses Upon Retirement Preservation
- ------------ ------------- ------------ ------------- Is a Part(1)<F7>
--------------
R. D. Ziegler, -0- -0- -0- -0-
President and
Director
Robert J. -0- -0- -0- -0-
Tuszynski,
Vice President
and Director
Richard H. $13,800 -0- -0- $13,800
Aster, M.D.
Director
Augustine J. $13,800 -0- -0- $13,800
English,
Director
Stephen A. $13,800 -0- -0- $13,800
Roell,
Director
Ralph J. -0- -0- -0- $14,500
Eckert
Director
(1)<F7>Prior to December 29, 1995, Principal Preservation was a
part of a fund complex that included two other registered
investment companies. The operations of those other two
companies were discontinued at the close of business on that
date. Mr. Eckert, who became a Director of Principal
Preservation on January 19, 1996, previously served on the
board of trustees of one of the other companies in that
complex.
Investment Advisor
------------------
The Advisor, Ziegler Asset Management, Inc. ("ZAMI"),
manages the assets of the Portfolio pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") and the investment
policies described herein. Subject to such further policies as
the Board of Directors may determine, the Advisor makes
investment decisions for the Portfolio. The Advisor furnishes,
at its own expense, all services, facilities and personnel
necessary in connection with managing the Portfolio's investments
and effecting securities transactions for the Portfolio.
The Advisory Agreement provides that the Advisor may render
services to others. The Advisory Agreement is terminable without
penalty on not more than sixty (60) days' nor less than thirty
(30) days' written notice by the Portfolio when authorized either
by majority vote of the investors in the Portfolio (with the vote
of each being in proportion to the amount of their investment) or
by vote of a majority of the Board of Directors, or by the
Advisor on not more than sixty (60) days' or nor less than thirty
(30) days' written notice, and will automatically terminate in
the event of its assignment. The Advisory Agreement provides
that neither the Advisor nor its personnel shall be liable for
any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution
of security transactions for the Portfolio, except for willful
misfeasance, bad faith, gross negligence or reckless disregard of
its or their obligations and duties under the Advisory Agreement.
For its services under the Advisory Agreement, the Advisor
receives from the Portfolio a fee accrued daily and paid monthly
at an annual rate equal to 0.50 of 1% of the average daily net
assets of the Portfolio up to $50 million, 0.30 of 1% of the next
$200 million in net assets, 0.25 of 1% of the next $250 million
in net assets, and 0.20 of 1% of net assets in excess of $500
million.
Administrative Services
-----------------------
B.C. Ziegler and Company ("Ziegler") also provides certain
administrative, accounting, and pricing services to Principal
Preservation, including calculating daily net asset value per
share; maintaining original entry documents and books of record
and general ledgers; posting cash receipts and disbursements;
reconciling bank account balances monthly; recording purchases
and sales based upon portfolio manager communications; and
preparing monthly and annual summaries to assist in the
preparation of financial statements of, and regulatory reports
for, Principal Preservation. Ziegler has agreed to provide these
services pursuant to the terms of an Accounting/Pricing Agreement
(the "Accounting/Pricing Agreement") at rates found by the Board
of Directors to be fair and reasonable in light of the usual and
customary charges made by unaffiliated vendors for similar
services. The current rate of payment for these services per
year is .03% of 1% of the Portfolio's total assets of $30 million
but less than $100 million, .02% of 1% of the Portfolio's total
assets of $100 million but less than $250 million and .01% of 1%
of the Portfolio's total assets of $250 million or more, with a
minimum fee of $19,000 per Portfolio per year, plus expenses.
The Accounting/Pricing Agreement will continue in effect from
year to year, as long as it is approved at least annually by
Principal Preservation's Board of Directors or by a vote of the
outstanding voting securities of Principal Preservation and, in
either case, by a majority of the Directors who are not parties
to the Accounting/Pricing Agreement or interested persons of any
such party. The Accounting/Pricing Agreement terminates
automatically if assigned and may be terminated without penalty
by either party on 60 days notice. The Accounting/Pricing
Agreement provides that neither Ziegler nor their personnel shall
be liable for any error of judgment or mistake of law or for any
loss arising out of any act or omission in the execution and the
discharge of its obligations under the Accounting/Pricing Agree-
ment, except for willful misfeasance, bad faith or gross negli-
gence in the performance of their duties or by reason of reckless
disregard of their obligations and duties under the
Accounting/Pricing Agreement, and in no case shall their
liability exceed one year's fee income received by them under
such Agreement.
Depository Services
-------------------
The Portfolio's portfolio securities are held by Ziegler as
depository ("Depository") pursuant to the terms of a Depository
Contract. Ziegler also provides certain administrative, clearing
and record keeping functions for the Portfolio pursuant to the
Depository Contract. Under the terms of the Depository Contract,
Ziegler is entitled to reasonable compensation for its services
and expenses as Depository, as agreed upon from time to time
between it and the Board of Directors of Principal Preservation.
The current rate of compensation for these services is .055 of
1% of the first $10 million of the Portfolio's assets, .03 of 1%
of the next $40 million of assets, and .016 of 1% of the next
$200 million of assets and .015 of 1% of assets in excess of $250
million. The Depository Contract will continue in effect until
terminated, and may be terminated by either party without cause
on 30 days' prior written notice. The Depository Contract
provides that Ziegler shall not be liable to Principal
Preservation or the Portfolio for any action taken or omitted by
it in good faith without negligence.
Other Services
--------------
In addition to the foregoing, Ziegler also serves as the
principal Distributor of the Portfolio's shares and receives
commissions on sales of Portfolio shares. See "Purchase of
Shares." Ziegler also receives reimbursement from the Portfolio
for certain expenses Ziegler incurs in connection with
distributing the Portfolio's shares pursuant to the Distribution
Plan adopted by the Portfolio under Rule 12b-1 of the 1940 Act.
See "Distribution Expenses."
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1996, no person was known to the Fund to
be the "beneficial owner" (determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934) of more than 5%
of the outstanding shares of the Fund's common stock.
PERFORMANCE INFORMATION
From time to time the Portfolio may advertise its "yield"
and "total return." Yield is based on historical earnings and
-----------------------------------------
total return is based on historical distributions; neither is
-------------------------------------------------------------
intended to indicate future performance. The "yield" of the
---------------------------------------
Portfolio refers to the income generated by an investment in the
Portfolio over a one-month period (which period will be stated in
the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during the month
is assumed to be generated each month over a 12-month period and
is shown as a percentage of the investment. "Total return" of
the Portfolio refers to the average annual total return for 1, 5,
and 10-year periods (or so much thereof as the Portfolio has been
in existence). Total return is the change in redemption value of
shares purchased with an initial $1,000 investment, assuming the
reinvestment of dividends and capital gain distributions, after
giving effect to the maximum applicable sales charge.
Performance information should be considered in light of the
Portfolio's investment objectives and policies, characteristics
and quality of its portfolio securities and the market conditions
during the time period, and should not be considered as a
representation of what may be achieved in the future. Investors
should consider these factors and possible differences in the
methods used in calculating performance information when
comparing the Portfolio's performance to performance figures
published for other investment vehicles.
Average annual total return is computed by finding the
average annual compounded rates of return over the 1, 5, and 10-
year periods (or so much thereof as the Portfolio has been in
existence) ended on the date of the balance sheet that would
equate the initial amount invested to the ending redeemable
value, according to the following formula:
n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10-year periods at
the end of the 1, 5, or 10 year periods (or fractional
portion thereof).
In some circumstances the Portfolio may advertise its total
return for a 1, 2, or 3-year period, or the total return since
the Portfolio commenced operations. In such circumstances the
Portfolio will adjust the values used in computing return to
correspond to the time period for which the information is
provided.
Yield quotations are based on a 30-day (or one-month)
period, and are computed by dividing the net investment income
per share earned during the period by the maximum offering price
per share on the last day of the period, according to the
following formula:
6
Yield = 2 [(a-b + 1) - 1]
---
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Performance information for the Portfolios may be compared
to various unmanaged indices as well as indices of similar mutual
funds. The Portfolio's advertising may also quote rankings
published by other recognized statistical services or publishers
such as Lipper Analytical Services, Inc., or Weisenberger
Investment Companies Service, among others.
An illustration may be used comparing the growth in value of
an initial investment in the Portfolio compared to a fixed rate
of return compounded on a monthly basis. This illustration will
reflect the effect of the Portfolio's sales charge and
fluctuations in net asset value, and will assume all income and
capital gain distributions are reinvested. The fixed rate of
return will be clearly stated and presented as a monthly
compounded figure, and therefore will not reflect any market
fluctuation.
In advertising and sales literature, the performance of the
Portfolio may be compared with that of other mutual funds,
indexes or averages of other mutual funds, indexes of related
financial assets or data (and in particular the PSE Technology
Index), and other competing investment and deposit products
available from or through other financial institutions. The
composition of these indexes, averages or accounts differ from
that of the Portfolio. Comparison of the Portfolio to an
alternative investment will consider differences in features and
expected performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which Principal
Preservation generally believes to be accurate. A Portfolio may
also note its mention (including performance or other comparative
rankings) in newspapers, magazines, or other media from time to
time. However, Principal Preservation assumes no responsibility
for the accuracy of such data. Newspapers and magazines which
might mention the Portfolio or Principal Preservation include,
but are not limited to, the following:
The Business Journal Milwaukee Journal/Sentinel
Business Week Money
Changing Times Mutual Fund Letter
Chicago Tribune Mutual Fund Values
Chicago Sun-Times (Morningstar)
Crain's Chicago Newsweek
Business The New York Times
Consumer Reports Pension and Investments
Consumer Digest Personal Investor
Financial World Stanger Reports
Forbes Time
Fortune USA Today
Investor's Daily U.S. News and World Reports
Los Angeles Times The Wall Street Journal
When a newspaper, magazine or other publication mentions
Principal Preservation or the Portfolio, such mention may
include: (i) listings of some or all of the Portfolio's
holdings; (ii) descriptions of characteristics of some or all of
the securities held by the Portfolio, including price-earnings
ratios, earnings, growth rates and other statistical information,
and comparisons of that information or similar statistics for the
securities comprising any of the indexes or averages listed
above; and (iii) descriptions of Principal Preservation or the
Portfolio manager's economic and market outlook, general and for
the Portfolio.
The Portfolio may compare its performance to the Consumer
Price Index (All Urban), a widely recognized measure of
inflation.
DETERMINATION OF NET ASSET VALUE PER SHARE
Shares are sold at their net asset value per share plus the
applicable sales charge. See "Purchase of Shares." Net asset
value per share of the Portfolio is determined by subtracting the
Portfolio's liabilities (including accrued expenses and dividends
payable) from the Portfolio's total assets (the value of the
securities the portfolio holds plus cash or other assets,
including interest accrued but not yet received) and dividing the
result by the total number of shares outstanding.
The net asset value per share will be calculated as of the
close of trading on the New York Stock Exchange (the "Exchange")
at least once every weekday, Monday through Friday, except on
customary national business holidays which result in the closing
of the Exchange (including New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day).
Hedging instruments will be valued at their last sale price
prior to the close of the Exchange, unless there have been no
trades on that day and the last sale price is below the bid, or
above the asked, price. If the last prior sale price is below
the bid, instruments will be valued at the bid price at the close
of the Exchange; if the last prior sale price is above the asked,
the instrument will be valued at the asked price at the close of
the Exchange. Securities for which market quotations are readily
available will be valued in the same manner as for hedging
instruments. Securities and other assets for which quotations
are not readily available will be valued at their fair value on a
consistent basis using valuation methods determined by the Board
of Directors. The Portfolio intends to determine fair value for
such securities based in part upon the information supplied by
pricing services approved by the Board of Directors. Valuations
of portfolio securities furnished by the pricing service will be
based upon a computerized matrix system and/or appraisals by the
pricing service in each case in reliance upon information con-
cerning market transactions and quotations from recognized
securities dealers.
PURCHASE OF SHARES
Ziegler acts as the principal Distributor for the Portfolio.
Ziegler will allow Selected Dealer discounts (which are alike
for all Selected Dealers) from the applicable public offering
price. Neither Ziegler nor Selected Dealers are permitted to
withhold placing orders to benefit themselves by a price change.
The Distribution Agreement between Principal Preservation and
Ziegler will continue from year to year if it is approved
annually by Principal Preservation's Board of Directors,
including a majority of those Directors who are not interested
persons, or by a vote of the holders of a majority of the
outstanding shares. The Agreement may be terminated at any time
by either party on 60 days' notice and will automatically
terminate if assigned.
Shares of the Portfolio may be purchased by certain classes
of persons without a sales charge, or a reduced sales charge, as
described in the Prospectus. The Board of Directors believes
this is appropriate because of the minimal sales effort needed to
accommodate these classes of persons.
Because sales to members of qualified groups result in
economies of sales efforts and sales related expenses, the Dis-
tributor is able to offer a reduced sales charge to such persons.
A "qualified group" is one which: (1) has been in existence for
more than six months; (2) has a purpose other than acquiring
shares at a discount; and (3) has more than ten members, is
available to arrange for group meetings between representatives
of the Distributor or Selected Dealers distributing shares of the
Portfolio, and agrees to include sales and other materials
related to Principal Preservation in its mailings to members at
reduced or no cost to the Distributor or Selected Dealers. See
"Purchase of Shares -- Group Purchases" in the Prospectus.
TAX STATUS
Each series of a series company, such as Principal
Preservation, is treated as a single entity for Federal income
tax purposes so that the net realized capital gains and losses of
the various portfolios in one fund are not combined.
The Portfolio intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986 (the "Code").
In order to qualify as a regulated investment company, the
Portfolio must satisfy a number of requirements. Among such
requirements is the requirement that at least 90 percent of the
Portfolio's gross income must be derived from dividends, interest
and gains from the sale or other disposition of stock or other
securities. Another requirement is that less than 30 percent of
the Portfolio's gross income be derived from the sale or other
disposition of securities (net of losses on designated hedges)
held for less than three months. In determining these gross
income requirements, a loss from the sale or other disposition of
securities does not enter into the computation.
Gain or loss on the sale of U.S. government securities held
by the Portfolio for more than six months will generally be long-
term capital gain or loss. Gain or loss on the sale of U.S.
government securities held for six months or less will be short-
term capital gain or loss. Gain or loss on the sale, exchange,
lapse, or termination of an option on securities will generally
be treated as a gain or loss from the sale of securities.
Dividends and other distributions paid to individuals and
other non-exempt payees are subject to a 31% backup Federal
withholding tax if Principal Preservation or Ziegler is not
provided with the shareholder's correct taxpayer identification
number or certification that the shareholder is not subject to
such backup withholding or if the Portfolio is notified that the
shareholder has underreported income in the past. In addition,
such backup withholding tax will apply to the proceeds of
redemption or repurchase of shares from a shareholder account for
which the correct taxpayer identification number has not been
furnished. For most individual taxpayers, the taxpayer identifi-
cation number is the social security number. An investor may
furnish Ziegler with such number and the required certifications
by completing and sending Ziegler either the Account Application
form attached to the Prospectus or IRS Form W-9.
Interest on indebtedness incurred (directly or indirectly)
by shareholders to purchase or carry shares will not be
deductible for Federal income tax purposes. Further, persons who
are "substantial users" (or persons related thereto) of
facilities financed by industrial development bonds should con-
sult their own tax advisor before purchasing the Portfolio's
shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Basic information with respect to portfolio transactions and
brokerage is set forth in the Prospectus under "Portfolio Trans-
actions and Brokerage." In addition to the conditions and limi-
tations there described, in the event Ziegler is utilized as a
broker by Principal Preservation and other Ziegler clients are
considering the same types of transactions simultaneously,
Ziegler will allocate the transactions and securities in which
they are made in a manner deemed by Ziegler to be equitable,
taking into account size, timing, and amounts. This may affect
the price and availability of securities to the Portfolio.
DISTRIBUTION EXPENSES
Principal Preservation's Distribution Plan (the "Plan") is
its written plan contemplated by Rule 12b-1 (the "Rule") under
the 1940 Act.
The Plan authorizes the Distributor to make certain payments
to any qualified recipient, as defined in the Plan, that has
rendered assistance in the distribution of Principal
Preservation's shares (such as sale or placement of Principal
Preservation's shares, or administrative assistance, such as
maintenance of sub-accounting or other records). Qualified
recipients include banks and other financial institutions. The
Plan also authorizes the Distributor to purchase advertising for
shares of the Portfolio, to pay for sales literature and other
promotional material, and to make payments to its sales
personnel. The Plan also entitles the Distributor to receive a
fee of .25 of 1% on an annual basis of the average daily net
assets of portfolio shares that are owned of record by the
Distributor as nominee for the Distributor's customers or which
are owned by those customers of the Distributor whose records, as
maintained by Principal Preservation or its agent, designate the
Distributor as the customer's dealer of record. Any such
payments to qualified recipients or expenses will be reimbursed
or paid by Principal Preservation, up to a limit of 0.25 of 1% of
the average net assets of the Portfolio. The Distributor bears
its expenses of distribution above the foregoing amounts. No
reimbursement or payment may be made for expenses of past fiscal
years or in contemplation of expenses for future fiscal years
under the Plan.
The Plan states that if and to the extent that any of the
payments by Principal Preservation listed below are considered to
be "primarily intended to result in the sale of shares" issued by
a portfolio within the meaning of the Rule, such payments by
Principal Preservation are authorized without limit under the
Plan and shall not be included in the limitations contained in
the Plan: (1) the costs of the preparation, printing, and
mailing of all required reports and notices to shareholders,
irrespective of whether such reports or notices contain or are
accompanied by material intended to result in the sale of shares
of Principal Preservation or other funds or other investments;
(2) the costs of preparing, printing, and mailing of all prospec-
tuses to shareholders; (3) the costs of preparing, printing, and
mailing of any proxy statements and proxies, irrespective of
whether any such proxy statement includes any item relating to,
or directed toward, the sale of Principal Preservation's shares;
(4) all legal and accounting fees relating to the preparation of
any such reports, prospectuses, proxies, and proxy statements;
(5) all fees and expenses relating to the qualification of
Principal Preservation and or their shares under the securities
or "Blue Sky" laws of any jurisdiction; (6) all fees under the
1940 Act and the Securities Act of 1933, including fees in
connection with any application for exemption relating to or
directed toward the sale of Principal Preservation's shares; (7)
all fees and assessments of the Investment Company Institute or
any successor organization or industry association irrespective
of whether some of its activities are designed to provide sales
assistance; (8) all costs of preparing and mailing confirmations
of shares sold or redeemed or share certificates and reports of
share balances; and (9) all costs of responding to telephone or
mail inquiries of shareholders.
The Plan also states that it is recognized that the costs of
distribution of Principal Preservation's shares are expected to
exceed the sum of permitted payments, permitted expenses, and the
portion of the sales charge retained by the Distributor, and that
the profits, if any, of the Advisor are dependent primarily on
the advisory fees paid by Principal Preservation to ZAMI. If and
to the extent that any investment advisory fees paid by Principal
Preservation might, in view of any excess distribution costs, be
considered as indirectly financing any activity which is
primarily intended to result in the sale of shares issued by
Principal Preservation, the payment of such fees is nonetheless
authorized under the Plan. The Plan states that in taking any
action contemplated by Section 15 of the 1940 Act as to any
investment advisory contract to which Principal Preservation is a
party, the Board of Directors including its Directors who are not
"interested persons" as defined in the 1940 Act, and who have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to the Plan ("Qualified
Directors"), shall, in acting on the terms of any such contract,
apply the "fiduciary duty" standard contained in Sections 36(a)
and (b) of the 1940 Act.
Under the Plan, Principal Preservation is obligated to pay
distribution fees only to the extent of expenses actually
incurred by the Distributor for the current year, and thus there
will be no carry-over expenses from the previous years. The
Plan permits the Distributor to pay a portion of the distribution
fee to authorized broker-dealers, which may include banks or
other financial institutions, and to make payments to such
persons based on either or both of the following: (1) as
reimbursement for direct expenses incurred in the course of
distributing Principal Preservation's shares or providing
administrative assistance to Principal Preservation or its
shareholders, including, but not limited to, advertising,
printing and mailing promotional material, telephone calls and
lines, computer terminals and personnel (including commissions
and other compensation paid to such personnel); and/or (2) at a
specified percentage of the average value of certain qualifying
accounts of customers of such persons.
The Plan requires that while it is in effect the Distributor
shall report in writing at least quarterly to the Directors, and
the Directors shall review, the following: (1) the amounts of
all payments, the identity of recipients of each such payment,
the basis on which each such recipient was chosen and the basis
on which the amount of the payment was made; (2) the amounts of
expenses and the purpose of each such expense; and (3) all costs
of the other payments specified in the Plan (making estimates of
such costs where necessary or desirable) in each case during the
preceding calendar or fiscal quarter.
The Plan will continue in effect from year to year only so
long as such continuance is specifically approved at least
annually by the Board of Directors and its Qualified Directors
cast in person at a meeting called for the purpose of voting on
such continuance. The Plan may be terminated any time without
penalty by a vote of a majority of the Qualified Directors or by
the vote of the holders of a majority of the outstanding voting
securities of Principal Preservation (or with respect to any
Portfolio, by the vote of a majority of the outstanding shares of
such Portfolio). The Plan may not be amended to increase
materially the amount of payments to be made without shareholder
approval. While the Plan is in effect, the selection and
nomination of those Directors who are not interested persons of
Principal Preservation is committed to the discretion of such
disinterested Directors. Nothing in the Plan will prevent the
involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved
by a majority of such disinterested Directors.
CUSTODIAN
Principal Preservation serves as its own Custodian. The
securities of the Portfolio are held by Ziegler, an affiliated
person of Principal Preservation, as Depository. In addition,
Ziegler performs certain administrative, clearing, and record
keeping functions for the Portfolio. See "Management of
Principal Preservation -- Depository Services."
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Quarles & Brady, as counsel to Principal Preservation, has
rendered its opinion as to certain legal matters regarding the
due authorization and valid issuance of the shares of common
stock being sold pursuant to the Prospectus. Arthur Andersen
LLP, independent public accountants, are the auditors of
Principal Preservation.
PORTFOLIO RATINGS
The Portfolio may obtain and use a rating from a nationally
recognized statistical rating organization. A rating on the
shares of an investment company is a current assessment of
creditworthiness with respect to the investments held by such
fund. This assessment takes into consideration the financial
capacity of the issuers and of any guarantors, insurers, lessees,
or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which the Port-
folio's expenses or portfolio asset sales for less than the
Portfolio's purchase price will reduce yield or return. In
addition, the rating is not a recommendation to purchase, sell,
or hold units, inasmuch as the rating does not comment as to
market price of the shares or suitability for a particular
investor.
DESCRIPTION OF RATINGS OF CERTAIN SECURITIES
As set forth in the Prospectus under the captions
"Investment Objectives" and "Investment Program," generally, each
Portfolio will limit its investment in debt securities to those
which are rated in one of certain specified categories by a
Nationally Recognized Statistical Rating Organization or are U.S.
Government Securities. The following is a brief description of
the rating systems used by three of these organizations.
CORPORATE AND MUNICIPAL BOND RATINGS
Standard & Poor's Corporation
-----------------------------
An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obliga-
tion. This assessment may take into consideration obligors such
as guarantors, insurers or lessees.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repay-
ment of principal in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization
or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
S&P's four highest rating categories are as follows:
AAA. Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is
extremely strong.
AA. Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the
higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in the
higher rated categories.
BBB. Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas
they normally exhibit adequate protective parameters,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category
than for bonds in the higher-rated categories.
Moody's Investors Service, Inc.
-------------------------------
The purpose of Moody's Ratings is to provide investors with
a simple system of gradation by which the relative investment
qualities of bonds may be noted. Moody's four highest rating
categories are as follows:
Aaa. Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa. Bonds which are Aa are judged to be of high quality by
all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be
of greater amplitude, or there may be other elements
present which make the long term risks appear somewhat
larger than in Aaa securities.
A. Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium
grade obligations: i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Fitch Investors Service, Inc.
-----------------------------
Fitch investment grade bond ratings provide a guide to
investors in determining the credit risk associated with a
particular security. The ratings represent Fitch's assessment of
the issuer's ability to meet the obligations of a specific debt
issue or class of debt in a timely manner. Fitch's four highest
rating categories are:
AAA. Bonds considered to be investment grade and of the
highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by
reasonably foreseeable events.
AA. Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay
interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is
generally rated F-1+.
A. Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest
and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher
ratings.
BBB. Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse
impact on these bonds and therefore impair timely
payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than
for bonds with higher ratings.
General
-------
The S&P and Fitch "AA", "A" and "BBB" ratings may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
The letter "p" following an S&P rating indicates the rating
is provisional. A provisional rating assumes the successful
completion of the project being financed by the issuance of the
bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion, makes
no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should
exercise his or her own judgment with respect to such likelihood
and risk.
The word "Conditional" following a Fitch rating indicates
the rating is conditional and is premised on the successful
completion of a project or the occurrence of a specific event.
Moody's security rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1
indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
The symbol "Con" in a rating by Moody's indicates a pro-
visional rating given to bonds for which the security depends
upon the completion of some act of the fulfillment of some
condition. These are bonds secured by: (1) earnings of projects
under construction; (2) earnings of projects unseasoned in
operating experience; (3) rentals which begin when facilities are
completed; or (4) payments to which some other limiting condition
attaches. A parenthetical rating denotes probable credit stature
upon completion of construction or elimination of basis of
condition.
MUNICIPAL NOTE RATINGS
Moody's Investors Service, Inc.
-------------------------------
MIG 1. This designation denotes best quality. There is
present strong protection by established cash
flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in
the preceding group.
MIG 3. This designation denotes favorable quality. All
security elements are accounted for but there is
lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely
to be less well established.
MIG 4. This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and although not
distinctly or predominantly speculative, there is
specific risk.
Standard & Poor's Corporation
-----------------------------
SP-1. Notes rated SP-1 have very strong or strong capa-
city to pay principal and interest. Those issues
determined to possess overwhelming safety charac-
teristics are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Notes due in three years or less normally receive a note
rating. Notes maturing beyond three years normally receive a
bond rating, although the following criteria are used in making
that assessment:
-Amortization schedule (the larger the final maturity
relative to other maturities, the more likely the issue will be
rated as a note.)
-Source of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be rated as a
note.)
Fitch Investors Service, Inc.
-----------------------------
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to
three years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes.
F-1+. Exceptionally Strong Credit Quality. Issues assigned
-----------------------------------
this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1. Very Strong Credit Quality. Issues assigned this
--------------------------
rating reflect an assurance of timely payment only
slightly less in degree than issues rated "F-1+."
F-2. Good Credit Quality. Issues assigned this rating
-------------------
have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as
for issues assigned "F-1+" and "F-1" ratings.
F-3. Fair Credit Quality. Issues assigned this rating
-------------------
have characteristics suggesting that the degree of
assurance for timely payment is adequate; however,
near-term adverse changes could cause these
securities to be rated below investment grade.
Fitch also uses the symbol "LOC" which indicates that the
rating is based on a letter of credit issued by a commercial
bank.
RATINGS OF COMMERCIAL PAPER
Standard & Poor's Corporation
-----------------------------
S&P ratings are a current assessment of the likelihood of
timely payment of debt having an original maturity of no more
than 365 days. The ratings are based on current information
furnished to S&P by the issuer and obtained by S&P from other
sources it considers reliable. Ratings are graded into four
categories, ranging from "A" for the highest quality obligations
to "D" for the lowest. Issues within the "A" category are
delineated with the numbers 1, 2, and 3 to indicate the relative
degree of safety, as follows:
A-1. This designation indicates the degree of safety
regarding timely payment is overwhelming or very
strong. Those issuers determined to possess
overwhelming safety characteristics are denoted with
a "plus" (+) designation.
A-2. Capacity for timely payment on issues with this
designation is strong. However, the relative degree
of safety is not as overwhelming as for issues
designated A-1.
A-3. Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however,
somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying
the higher designations.
B. Issues rated "B" are regarded as having only an
adequate capacity for timely payment. However, such
capacity may be damaged by changing conditions or
short-term adversities.
C. Issues rated "C" are regarded as having a doubtful
capacity for payment.
D. Issues rated "D" are in payment default.
Moody's Investors Service, Inc.
-------------------------------
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually their promissory obligations not
having an original maturity in excess of nine months. Moody's
employs the following designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated
issuers:
Prime-1. Issuers (or related supporting institutions) rated
Prime-1 have a superior capacity for repayment or
short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following
characteristics: (a) leading market positions in well-
established industries; (b) high rates of return on
funds employed; (c) conservative capitalization struc-
tures with moderate reliance on debt and ample asset
protection; (d) broad margins in earnings coverage of
fixed financial charges and high internal cash genera-
tion; and (e) well-established access to a range of
financial markets and assured sources of alternate
liquidity.
Prime-2. Issuers (or related supporting institutions) rated
Prime-2 have a strong capacity for repayment of short-
term promissory obligations. This will normally be
evidenced by many of the characteristics cited above in
the Prime-1 category but to a lesser degree. Earning
trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is
maintained.
Prime-3. Issuers (or related supporting institutions) rated
Prime-3 have an acceptable capacity for repayment of
short-term promissory obligations. The effect of
industry characteristics and market composition may be
more pronounced. Variability in earnings and profita-
bility may result in changes in the level of debt
protection measurements and the requirement for
relatively high financial leverage. Adequate alternate
liquidity is maintained.
The ratings of S&P, Moody's and Fitch represent their
opinions as to the quality of the instruments rated by them. It
should be emphasized that such ratings, which are subject to
revision or withdrawal, are general and are not absolute
standards of quality.
Principal Preservation Portfolios, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Investment Advisor
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Distributor, Depository Accounting/
Pricing Agent and Transfer and
Dividend Disbursing Agent
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
Counsel
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Auditor
Arthur Andersen LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
Part C. Other Information
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of the Registrant included or
incorporated by reference into Part B for each series other than
the PSE Technology Stock Index:
(1) Balance Sheet
(2) Statement of Changes in Net Assets
(3) Statement of Operations
(4) Schedule of Investments
(5) Report of Independent Accountants
(b) Exhibits:
See Exhibit Index following Signature Page, which Exhibit Index
is incorporated herein by this reference.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
At January 31, 1996, the number of record holders of each class of
securities of Registrant or its predecessors, as the case may be, was:
Number of Holders of
Record of Shares of
Portfolio Common Stock
--------- -------------------
Government Portfolio 2,480
S&P 100 Plus Portfolio 4,424
Tax-Exempt Portfolio 1,967
Select Value Portfolio 298
Dividend Achievers Portfolio 2,256
Wisconsin Tax-Exempt Portfolio 842
Cash Reserve Portfolio
Class X Common Stock 64
Class Y Common Stock 64
PSE Technology Stock Index 0
Item 27. Indemnification
---------------
Reference is made to Article IX of the Registrant's Bylaws filed as
Exhibit No. 2 to its Registration Statement with respect to the
indemnification of Registrant's directors and officers, which is set
forth below:
Section 9.1. Indemnification of Officers, Directors, Employees and
----------- -----------------------------------------------------
Agents. The Corporation shall indemnify each person who was or is a
------
party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding"), by reason of the fact
that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such Proceeding to the fullest extent permitted by
law; provided that:
--------
(a) whether or not there is an adjudication of liability in such
Proceeding, the Corporation shall not indemnify any person for any
liability arising by reason of such person's willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved
in the conduct of his office or under any contract or agreement with
the Corporation ("disabling conduct"); and
(b) the Corporation shall not indemnify any person unless:
(1) the court or other body before which the Proceeding was
brought (i) dismisses the Proceeding for insufficiency of
evidence of any disabling conduct, or (ii) reaches a final
decision on the merits that such person was not liable by
reason of disabling conduct; or
(2) absent such a decision, a reasonable determination is
made, based upon a review of the facts, by (i) the vote of a
majority of a quorum of the Directors of the Corporation who
are neither interested persons of the Corporation as defined
in the Investment Company Act of 1940 nor parties to the
Proceeding, or (ii) if such quorum is not obtainable, or
even if obtainable, if a majority of a quorum of Directors
described in paragraph (b)(2)(i) above so directs, by
independent legal counsel in a written opinion, that such
person was not liable by reason of disabling conduct.
Expenses (including attorneys' fees) incurred in defending a Proceeding
will be paid by the Corporation in advance of the final disposition thereof upon
an undertaking by such person to repay such expenses (unless it is ultimately
determined that he is entitled to indemnification), if:
(1) such person shall provide adequately security for his
undertaking;
(2) the Corporation shall be insured against losses arising by reason
of such advance; or
(3) a majority of a quorum of the Directors of the Corporation who
are neither interested persons of the Corporation as defined in the Investment
Company Act of 1940 nor parties to the Proceeding, or independent legal counsel
in a written opinion, shall determine, based on a review of readily available
facts, that there is reason to believe that such person will be found to be
entitled to indemnification.
Section 9.2 Insurance of Officers, Directors, Employees and Agents. The
------------------------------------------------------------------
Corporation may purchase and maintain insurance on behalf of any person who is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in or
arising out of his position. However, in no event will the Corporation purchase
insurance to indemnify any such person for any act for which the Corporation
itself is not permitted to indemnify him.
Registrant undertakes that insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor
----------------------------------------------------
(a) Ziegler Asset Management, Inc.
Ziegler Asset Management, Inc. is a wholly owned subsidiary of The
Ziegler Companies, Inc. It serves as investment advisor to all of the
Registrant's Portfolios.
Set forth below is a list of the officers and directors of Ziegler
Asset Management, Inc. as of December 31, 1995, together with information
as to any other business, profession, vocation or employment of a
substantial nature of those officers and directors during the past two
years:
POSITION WITH
ZIEGLER ASSET
NAME MANAGEMENT OTHER AFFILIATIONS(1)<F8>
- ---- ---------- ---------------------
R. D. Ziegler Chairman and Director Chairman and Director, B.C.
Ziegler and Company; Director,
Johnson Controls, Inc., 5757
N. Green Bay Avenue,
Milwaukee, WI 53201 (manu-
facturing)
Geoffrey G. Maclay, President and Chief President and Chief Executive
Jr. Executive Officer Officer, Ziegler Asset
Management, Inc.
P. D. Ziegler Senior Vice President President, Chief Executive
and Director Officer and Director, B.C.
Ziegler and Company; Director,
West Bend Mutual Insurance
Company, 1900 S. 18th Avenue,
West Bend, WI 53095
(insurance company)
Robert J. Tuszynski Vice President Vice President - Director of
Mutual Funds, B.C. Ziegler and
Company
M. J. Dion Vice President - Vice President - Portfolio
Portfolio Manager and Manager and Chief Investment
Chief Investment Officer, Ziegler Asset
Officer Management, Inc.
R. F. Patek Vice President - Vice President - Portfolio
Portfolio Manager Manager, Ziegler Asset
Management, Inc.
D. R. Wyatt Vice President - Market Vice President, B.C. Ziegler
Manager and Company
J. R. Schmidt Secretary Corporate Secretary, B.C.
Ziegler and Company
L. R. Van Horn Treasurer Senior Vice President -
Finance and Director, B.C.
Ziegler and Company
Note (1)<F8>: Certain of the indicated persons are officers or directors, or
both, of B.C. Ziegler and Company's parent, The Ziegler Companies, Inc., and of
other subsidiaries of its parent. Other than these affiliations, and except as
otherwise indicated on the table, the response is none.
(b) PanAgora Asset Management, Inc.
PanAgora Asset Management, Inc. is owned 50% by Nippon Life Insurance
Company; the other 50% is owned by Lehman Brothers, Inc. PanAgora Asset
Management, Inc. serves as sub-advisor to the S&P 100 Plus Portfolio of the
Registrant.
Set forth below is a list of the executive officers and directors of
PanAgora Asset Management, Inc., as of December 31, 1995, together with
information as to any other business, profession, vocation or employment of
a substantial nature of such persons during the past two years(1)<F9>:
NAME TITLE ADDRESS PRINCIPAL OCCUPATION
- ---- ----- ------- --------------------
(ELECTION
- --------
DATE)
- ------
Makoto Director Nippon Life Insurance Managing Director of
Toda Company Nippon Life Insurance
(5/9/95) 1-2-2 Yuraku-cho Company
Chlyoda-Ku Tokyo, Japan
Tokyo 100,
Japan
Masatake Director Nippon Life Insurance Director of NLI
Shimaski Company International, Inc.
(11/12/93) 1251 Avenue of the Life Insurance Company
American Tokyo, Japan
Suite 5210
New York, NY 10020-1195
Haruski Director Nippon Life Insurance General Manager of
Deguohl Company Nippon Life Insurance
(5/9/95) 1-2-1 Yuraku-cho Company
Chlyoda-Ku Tokyo, Japan
Tokyo 100
Japan
Toru Director PanAgora Asset Managing Director
Morishiga (Vice Management, Inc., 260 PanAgora Asset
(5/9/95) Chairman) Franklin Street, 22nd Management, Inc.
Floor, Boston, MA 02110 Boston, MA
USA
Randolph Director Lehman Brothers
S. Petralia Holdings, Inc.
(7/17/95) 3 World Financial
Center
New York, NY 10265
USA
Bruce E. Director PanAgora Asset President and Chief
Clarke and Presi- Management, Inc. Executive Officer,
(10/7/94) dent 260 Franklin Street PanAgora Asset
22nd Floor Management, Inc.
Boston, MA 02110 Boston, MA
USA
Richard Director Lehman Brothers Chairman and Chief
S. Fuld, Holdings, Inc. Executive Officer
Jr. 3 World Financial Lehman Brothers
(11/12/9 Center New York, NY Holdings, Inc.
3) 10285 New York, NY
USA
Bruce R. Director Lehman Brothers Chairman and CEO-
Lakefield (Chairman) International Europe
(4/08/94) One Broadgate Lehman Brothers
London EC2M 7HA International
England London, England
Edgar E. Director PanAgora Asset Director of Asset
Peters Management, Inc. Allocation
(3/15/96) 260 Franklin Street PanAgora Management,
22nd Floor Inc.
Boston, MA 02110 Boston, MA
USA
Paul R. Director PanAgora Asset Director of Equity and
Samuelson Management, Inc. Fixed
(3/15/95) 260 Franklin Street Income Investments
22nd Floor PanAgora Asset
Boston, MA 02110 Management, Inc.
USA Boston, MA
Kathleen Secretary PanAgora Asset Senior Manager,
I. Management, Inc. Compliance Officer
DeVivo 260 Franklin Street PanAgora Asset
(9/20/91) 22nd Floor Management, Inc.
Boston, MA 02110 Boston, MA
USA
Michael Treasurer PanAgora Asset Senior Manager,
H. Turpin Management, Inc. Treasurer
(9/20/91) 260 Franklin Street PanAgora Asset
22nd Floor Management, Inc.
Boston, MA 02110 Boston, MA
USA
Note (1)<F9>:Certain of the indicated persons are officers or directors, or
both, f affiliates of PanAgora. Other than these affiliations, and except as
otherwise indicated on the table above, the response is none.
(c) Skyline Asset Management, L.P.
Skyline Asset Management, L.P. ("Skyline") is a limited partnership
whose general partner is Affiliated Managers Group, Inc. ("AMG") and whose
limited partners consist of corporations owned by four former management
employees of Skyline's predecessor in interest, namely Messrs. Dutton,
Kailin, Lutz and Maloney. AMG may be deemed to be controlled by Advent
VII, L.P., by virtue of the fact that Advent VII, L.P. owns more than 50%
of the voting stock of AMG. Advent VII, L.P. in turn may be deemed to be
controlled by its sole general partner, TA Associates VII, L.P., a limited
partnership, which in turn may be deemed to be controlled by its sole
general partner, TA Associates, Inc. Skyline's principal executive offices
are located at 311 South Wacker Drive, Suite 4500, Chicago, Illinois 60606.
AMG's principal executive offices are located at One International Place,
Boston, Massachusetts 02110. The address of each of Advent VII, L.P., TA
Associates VII, L.P. and TA Associates, Inc. is c/o TA Associates, Inc.,
High Street Tower, Suite 2500, 125 High Street, Boston, Massachusetts
02110.
Set forth below is a list of the officers and directors of Skyline
Asset Management, L.P. as of December 31, 1995, together with information
as to any other business, profession, vocation or employment of a
substantial nature of those officers and directors during the past two
years (the business address of all such persons is c/o Skyline Asset
Management, L.P., 311 South Wacker Drive, Suite 4500, Chicago, Illinois
60606):
Position With Skyline
Name Asset Management, L.P. Principal Occupation
- ---- ---------------- --------------------
William M. Dutton Chief Executive Chief Executive Officer of
Officer and Limited Skyline Asset Management, L.P.
Partner since August, 1995; Executive
Vice President, Mesirow Asset
Management, Inc., from April,
1984 through August, 1995;
President, Skyline Fund (regis-
tered investment company)
Kenneth S. Kailin Principal - Portfolio Principal - Portfolio Manager,
Manager and Limited Skyline Asset Management, L.P.
Partner since August, 1995; Senior Vice
President, Mesirow Asset
Management, Inc., from April,
1987 through August, 1995;
Executive Vice President,
Skyline Fund (registered
investment company)
Geoffrey P. Lutz Principal - Marketing Principal - Marketing, Skyline
and Limited Partner Asset Management, L.P. since
August, 1995; Vice President,
Mesirow Asset Management, Inc.,
August, 1992 through August,
1995; prior thereto, Registered
Representative, Mesirow
Financial, Inc. and Mesirow
Investment Services, Inc.
(registered brokers-
dealers/investment advisers);
Executive Vice President;
Skyline Fund (registered
investment company)
Michael Maloney Principal - Securities Principal - Securities Analyst,
Analyst and Limited Skyline Asset Management, L.P.,
Partner since August, 1995; Investment
Analyst, Mesirow Asset
Management, Inc. from February,
1993 through August, 1995; prior
thereto Investment Analyst,
Baker Fentress & Co. (investment
manager); Senior Vice President,
Skyline Fund (registered
investment company)
Scott C. Blim Chief Operating Chief Operating Officer, Skyline
Officer Asset Management, L.P. since
September, 1995; Vice President,
Director and Chief
Administrative Officer, Murray
Johnstons International Ltd.
(investment firm) from 1989 to
1994; Secretary and Treasurer,
Skyline Fund (registered
investment company)
Item 29. Principal Underwriters
----------------------
(a)
Other Investment
Companies for which
Underwriter Acts
As Underwriter,
Depositor or
Underwriter Investment Adviser
----------- ------------------
B.C. Ziegler and Company An underwriter for American Tax-Exempt
Bond Trust, Series 1 (and subsequent series);
Ziegler U.S. Government Securities Trust,
Series 1 (and subsequent series); American
Income Trust, Series 1 (and subsequent
series); Ziegler Money Market Trust; The
Insured American Tax-Exempt Bond Trust,
Series 1 (and subsequent series); and
principal underwriter for Portico Funds.
(b) Set forth below is a list of the officers and directors of B.C.
Ziegler and Company as of December 31, 1995, together with information
as to any other business, profession, vocation or employment of a
substantial nature of those officers and directors during the past two
years. None of the persons identified serves as an officer or
director of the Registrant, except that R. Douglas Ziegler serves as
the Chairman of the Board, President and a Director of the Registrant,
Robert J. Tuszynski serves as Vice President and a Director of the
Registrant, Jay Ferrara serves as Treasurer of the Registrant, and S.
Charles O'Meara serves as Secretary of the Registrant. The address of
each officer and director of B.C. Ziegler and Company is 215 North
Main Street, West Bend, Wisconsin 53095, Phone (414) 334-5521.
Position With Position with
Name B.C. Ziegler Company Principal Preservation
---- -------------------- ----------------------
R. Douglas Ziegler Chairman of the Board Chairman of the Board
and Director and President
Peter D. Ziegler President, Chief
Executive Officer and
Director
S. Charles O'Meara Senior Vice President Secretary
and General Counsel
Eugene H. Rudnicki Senior Vice President
John C. Wagner Senior Vice President--
Retail Sales
Ronald N. Spears Senior Vice President
and Director
James R. Wyatt Senior Vice President
Donald A.
Carlson, Jr. Senior Vice President
Neil L.
Fuerbringer Senior Vice President--
Administration
Michael P. Doyle Senior Vice President--
Retail Operations
Lynn R. Van Horn Senior Vice President--
Finance and Director
Charles G. Stevens Vice President--
Marketing Director
Jack H. Downer Vice President--
MIS Director
Vernell D. Krueger Vice President--
Operations
Robert J. Tuszynski Vice President-- Vice President and
Director of Mutual Director
Funds
G. Aman Vice President--
Insurance
Sheila K. Hittman Vice President--
Personnel
James M. Bushman Vice President--
Recruiting and
Training Coordinator
Lay C. Rosenheimer Vice President--
Bond Sales Control
Darrell P. Frank Vice President--
Director of
Strategic Change
Janine R. Schmidt Corporate Secretary
Kathleen A. Lochen Assistant Secretary
Jeffrey C.
Vredenbregt Vice President,
Assistant Treasurer
and Controller
Robert J. Johnson Vice President--
Compliance
Ronald C. Strzok Assistant Vice
President--
Administration
Jay Ferrara Assistant Vice Treasurer
President--Mutual Funds
Item 30. Location of Accounts and Records
--------------------------------
(a)B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
General ledger, including subsidiary ledgers, corporate records
and contracts, Portfolio ledger. Shareholders documents,
including IRA documents.
(b)PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Transaction journals and confirmations for options and portfolio
trades.
(c)Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Transaction journals and confirmations for portfolio trades for
all of the Portfolios of the Registrant, except for the S&P 100
Plus Portfolio and the Select Value Portfolio.
(d)Skyline Asset Management, L.P.
311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606
Transaction journals and confirmations for portfolio trades for
the Select Value Portfolio.
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
Registrant undertakes that, at the request of the shareholders holding
10% or more of the outstanding shares of the Registrant, the
Registrant will hold a special meeting for the purpose of considering
the removal of a director from office, and the Registrant will
cooperate with and assist shareholders of record who notify the
Registrant that they wish to communicate with the other shareholders
for the purpose of obtaining signatures to request such a meeting, all
pursuant to and in accordance with Section 16(c) of the Investment
Company Act of 1940, as amended.
Registrant undertakes to file an amendment to this Registration
Statement with Certified Financial Statements showing the initial
capital received before accepting subscriptions from any persons in
excess of 25 if Registrant proposes to raise its initial capital
pursuant to Section 14(a)(3) of the 1940 Act.
Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of Registrant's 1933 Act Registration
Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has caused this Post-Effective
Amendment No. 33 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of West Bend, State of
Wisconsin on this 22nd day of March, 1996.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ R. D. Ziegler
By:
--------------------------------
R. D. Ziegler, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 33 to its Registration Statement on Form N-1A has been
signed on this 22nd day of March, 1996, by the following persons in the
capacities indicated.
Signature Title
--------- -----
/s/ R. D. Ziegler
Director and President
- ------------------------------
R. D. Ziegler (Chief Executive Officer)
/s/ Robert J. Tuszynski
Director and Vice President
- ------------------------------
Robert J. Tuszynski (Chief Financial Officer)
/s/ Jay Ferrara
Treasurer (Chief Accounting
- ------------------------------
Jay Ferrara Officer)
Richard H. Aster*<F10> Director
- ------------------------------
Richard H. Aster
August J. English*<F10> Director
- ------------------------------
August J. English
Ralph J. Eckert*<F10> Director
- -----------------------------
Ralph J. Eckert
/s/ Robert J. Tuszynski
*<F10>By:
---------------------------------------
Robert J. Tuszynski pursuant to a
Power of Attorney dated January 19, 1996
filed herewith (see following page)
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints R. D. Ziegler, Robert J. Tuszynski and S. Charles
O'Meara, or any of them, with full power of substitution, as his true and lawful
attorneys and agents, to execute in his name and on his behalf, in any and all
capacities, Principal Preservation Portfolios, Inc.'s Post-Effective Amendment
No. 33 to its Registration Statement on Form N-1A for the Portfolio known as the
PSE Technology Index Portfolio (Registration No. 811-4401 under the Securities
Act of 1933; File No. 33-12 under the Investment Company Act of 1940) filed with
the Securities and Exchange Commission under both the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, together with any
and all other instruments which such attorneys and agents, or any of them, deem
necessary or advisable to enable Principal Preservation Portfolios, Inc. to
comply with such Acts and the rules, regulations and requirements of the
Securities and Exchange Commission and the securities or Blue Sky laws of any
state or other jurisdiction, and the undersigned hereby ratifies and confirms as
his own act and deed any and all actions that such attorneys and agents, or any
of them, shall do or cause to be done by virtue hereof. Any of such attorneys
and agents have, and may exercise, all of the powers conferred herein.
IN WITNESS WHEREOF, each of the undersigned directors of Principal
Preservation Portfolios, Inc. has hereunto set his hand as of this 19th day of
January, 1996.
/s/ R. D. Ziegler /s/ Richard H. Aster
- ------------------------------ -----------------------------
R. D. Ziegler Richard H. Aster
/s/ Robert J. Tuszynski /s/ August J. English
- ------------------------------ -----------------------------
Robert J. Tuszynski August J. English
/s/ Ralph J. Eckert
-----------------------------
Ralph J. Eckert
EXHIBIT INDEX
-------------
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
1(a) Restated and Amended Articles NA
of Incorporation*<F11>
1(b) December 29, 1995 Articles Supplementary(2)<F13> NA
1(c) Form of Articles Supplementary for PSE
----
Technology Index Portfolio
2(a) By-Laws*<F11> NA
2(b) Amendment to Bylaws Adopted By Board NA
of Directors on January 20, 1995*<F11>
3 N/A
4 The Registrant's Operating Plan Relating NA
to Shares of Class X Common Stock and Class
Y Common Stock of the Cash Reserve
Portfolio(3)<F14>
5(a) Investment Advisory Agreement NA
pertaining to assets of Dividend
Achievers Portfolio(4)<F15>
5(b) Investment Advisory Agreement
----
pertaining to the assets of
Tax-Exempt, S&P 100 Plus,
Government, Wisconsin Tax-Exempt,
Select Value, and PSE Technology
Index Portfolios
5(c) Sub-Advisory Agreement with PanAgora NA
Asset Management, Inc., including
form of amendment reducing fees
effective May 1, 1996(4)<F15>
5(d) Sub-Advisory Agreement with Skyline NA
Asset Management, L.P.(4)<F15>
5(e) Investment Advisory Agreement with NA
Ziegler Asset Management, Inc. with
respect to the Cash Reserve Portfolio(3)<F14>
6(a) Distribution Agreement
----
6(b) Form of Selected Dealers Agreement
----
7 N/A
8 Depository Contract
----
9(a) Transfer and Dividend Disbursing Agent
----
Agreement
9(b) License Agreement with Standard & Poor's NA
Corporation*<F11>
9(c) Accounting/Pricing Agreement between
----
Registrant and B.C. Ziegler and Company
9(d) Shareholder Servicing Agreement by and NA
between B.C. Ziegler and Company and the
Registrant, as amended, relating to Class X
Shares of the Cash Reserve Portfolio*<F11>
9(e) Administrative Services Agreement with NA
Ziegler Asset Management, Inc. with
respect to the Cash Reserve Portfolio(1)<F12>
10 Opinion of Counsel*<F11> NA
11 Consent of Counsel (contained in NA
Exhibit 10)
12 N/A
14 Model Retirement Plan*<F11> NA
15 Rule 12b-1 Distribution Plan, as amended
---
16 Schedule for Computation of Performance NA
Quotations*<F11>
17 Financial Data Schedule (Included
as Exhibit 27) NA
18 See Exhibit 4 NA
27 Financial Data Schedule NA
*<F11>Denotes previously filed as part of Registrant's Registration statement or
an amendment thereto, and incorporated herein by reference.
(1)<F12>Denotes previously filed as part of Registrant's Registration Statement
on Form N-14 (Reg. No. 33-99010) filed with the Commission on November 3,
1995.
(2)<F13>Denotes previously filed as part of Registrant's Registration Statement
on Form N-14 (Reg. No. 333- ) filed with the Commission on
------------
February 20, 1996.
(3)<F14>Denotes previously filed as part of Post-Effective Amendment No. 31 to
this Registration Statement filed with the Commission on December 29, 1995.
(4)<F15>Denotes previously filed as part of Post-Effective Amendment No. 32 to
this Registration Statement filed with the Commission on March 1, 1996.
EXHIBIT 1(C)
Form of Articles Supplementary for PSE Technology Index Portfolio
-----------------------------------------------------------------
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
ARTICLES SUPPLEMENTARY
----------------------
The Board of Directors of Principal Preservation Portfolios, Inc., a
corporation organized and existing under the laws of the State of Maryland, by
Resolution adopted on by a majority of the Directors of said
------------
corporation, has established and designated 50,000,000 shares of its previously
authorized but unissued common stock, 1/10 of 1 cents ($.001) par value per
share, as an additional series to be known as the Principal Preservation PSE
Technology Index Portfolio. Shares of such series shall have the preferences,
rights, voting powers, restrictions, limitations as to dividends, qualifications
and other conditions of redemption as set forth in Section 7.2 of Principal
Preservation Portfolios, Inc.'s Articles of Incorporation. With the addition of
this series, the presently designated series of shares of Principal Preservation
Portfolios, Inc.'s common stock consist of the following:
Series No. of Shares
------ -------------
Tax-Exempt Portfolio 50 million
Government Portfolio 50 million
Dividend Achievers Portfolio 50 million
S&P 100 Plus Portfolio 50 million
Wisconsin Tax-Exempt Portfolio 50 million
Select Value Portfolio 50 million
Cash Reserve Portfolio
Class X Common Stock 200 million
Class Y Common Stock 200 million
PSE Technology Index Portfolio 50 million
This action does not alter the number of authorized shares of Principal
Preservation, which consists of one billion shares, par value $0.001 per
share. The Board of Directors has taken this action pursuant to the powers
conferred upon it under Section 7.1 of Principal Preservation Portfolios,
Inc.'s Articles of Incorporation and Section 2.208 of the Maryland General
Corporation Law.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By:
--------------------------------------
R.D. Ziegler, President
Attest:
By:
--------------------------------------
S. Charles O'Meara, Secretary
STATE OF WISCONSIN )
) SS
COUNTY OF WASHINGTON)
On this day of , 1996, before me a Notary Public for the
--- ---------
State and County set forth above, personally came R.D. Ziegler, as President
of Principal Preservation Portfolios, Inc., and S. Charles O'Meara, as
Secretary of Principal Preservation Portfolios, Inc., and in their said
capacities each acknowledged the foregoing Articles Supplementary to be the
act and deed of said corporation and further acknowledged that, to the best
of their knowledge, the matters and facts set forth are true in all material
respects under the penalties of perjury.
IN WITNESS WHEREOF, I have signed below in my own hand and attached my
official seal on the day and year set forth above.
[Notary Seal]
------------------------------------
Notary Public
My Commission expires:
------------------
EXHIBIT 5(B)
Investment Advisory Agreement with Ziegler Asset Management, Inc.
-----------------------------------------------------------------
The Investment Advisory Agreement, except for the Exhibit A that
follows, was previously filed as Exhibit 5(b) to Post-Effective
Amendment No. 32 to this Registration Statement and is incorporated
into this Exhibit by this reference.
EXHIBIT A TO THE
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
1. TAX-EXEMPT PORTFOLIO.
a. Effective Date: May 1, 1989
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.60
of 1% of the average daily net assets of the Portfolio up to $50
million, reducing to 0.50 of 1% for the next $200 million of average
daily net assets, and 0.40 of 1% of average daily net assets in excess
of $250 million.
2. GOVERNMENT PORTFOLIO.
a. Effective Date: May 1, 1989
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.60
of 1% of the average daily net assets of the Portfolio up to $50
million, reducing to 0.50 of 1% for the next $200 million of average
daily net assets, and 0.40 of 1% of average daily net assets in excess
of $250 million.
3. S&P 100 PLUS PORTFOLIO.
a. Effective Date: May 1, 1996.
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of
0.575 of 1% of average daily net assets of the Portfolio up to $20
million, 0.45 of 1% on the next $30 million, 0.40 of 1% on the next
$50 million, 0.35 of 1% on the next $400 million and 0.30 of 1% on
assets over $500 million.
4. WISCONSIN TAX-EXEMPT PORTFOLIO.
a. Effective Date: June 13, 1994
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.50
of 1% of the first $250 million of the average daily net assets of the
Portfolio, and 0.40 of 1% on average daily net assets in excess of
$250 million.
5. SELECT VALUE PORTFOLIO.
a. Effective Date: August 24, 1994
b. Management Fee: The management fee for this Portfolio, calculated in
accordance with paragraph 5 of the Principal Preservation Portfolios,
Inc. Investment Advisory Agreement, shall be at an annual rate of 0.75
of 1% of the first $250 million of the average daily net assets of the
Portfolio, and 0.65 of 1% on average daily net assets in excess of
$250 million.
6. PSE TECHNOLOGY INDEX PORTFOLIO.
a. Effective Date: Effective Date of Post-Effective
Amendment No. 33 to Principal Preservation's Registration
Statement on Form N-1A.
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.50 of 1% of the first $50
million of the average daily net assets of the Portfolio,
0.30 of 1% of the next $200 million in net assets, 0.25 of
1% of the next $250 million in net assets, and 0.20 of 1%
of net assets in excess of $500 million.
EXHIBIT 6(A)
Distribution Agreement
----------------------
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made this 18th day of December, 1985, between PRINCIPAL
PRESERVATION PORTFOLIOS, INC., a Maryland corporation (the "Fund"), and B.C.
ZIEGLER AND COMPANY, a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified open-end management
investment company and it is in the interest of the Fund to offer its shares for
sale continuously;
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's shares of
Common Stock, $.OO1 par value, which are issuable in series ("Common Stock"), to
commence after the effectiveness of its initial registration statement filed
pursuant to the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act.
WHEREAS, two series of Common Stock, the Government Plus Portfolio and
the Blue Chip 100 plus Portfolio are currently offered by the Fund, and
additional or different series may be offered from time to time, all of which
such series are referred to as the "Portfolios".
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor.
------------------------------
The Fund hereby appoints the Distributor its exclusive agent to sell
and to arrange for the sale of the shares of Common Stock, including both issued
and treasury shares, on the terms and for the period set forth in this Agreement
and the Distributor hereby accepts such appointment and agrees to act hereunder.
It is also understood, however, that purchases of Common Stock may be made
directly through the Fund's transfer and dividend disbursing agent in the manner
set forth in the Prospectus.
Section 2. Services and Duties of the Distributor.
--------------------------------------
(a) The Distributor agrees to sell, as agent for the Fund, from time
to time during the term of this Agreement, Common Stock (whether unissued or
treasury shares, in the Fund's sole discretion) upon the terms described in the
Prospectus. As used in this Agreement, the term "Prospectus" shall mean the
prospectus included as part of the Fund's Registration Statement, as such
prospectus may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement most recently
filed from time to time by the Fund with the Securities and Exchange Commission
and effective under the 1933 Act and the 1940 Act, as such Registration
Statement as amended by any amendments thereto as the time in effect.
(b) Upon commencement of the Fund's operations, the Distributor will
hold itself available to receive orders, satisfactory to the Distributor, for
the purchase of Common Stock and will accept such orders on behalf of the Fund
as of the time of receipt of such orders and will transmit such orders as are so
accepted to the Fund's transfer and dividend disbursing agent as promptly as
practicable. Purchase orders shall be deemed effective at the time in the
manner set forth in the Prospectus.
(c) The Distributor in its discretion may sell shares to such regis-
tered and qualified retail dealers as it may select. In making agreements with
such dealers, the Distributor shall act only as principal and not as agent for
the Fund.
(d) The offering price of shares of each Portfolio of Common Stock
shall be the net asset value (as defined in the Articles of Incorporation of the
Fund and determined as set forth in the Prospectus) per share of such Portfolio
of the Common Stock next determined following receipt of an order, plus the
applicable sales charge, if any, determined as set forth in the Prospectus. The
Fund shall furnish the Distributor, with all possible promptness, an advice of
each computation of net asset value.
(e) The Distributor shall not be obligated to sell any certain number
of shares of Common Stock and nothing herein contained shall prevent the
Distributor from entering into like distribution arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(f) The Distributor is authorized on behalf of the Fund to purchase
shares presented to it by dealers at the price determined in accordance with,
and in the manner set forth in, the Prospectus.
Section 3. Compensation of the Distributor.
-------------------------------
The above-mentioned sales charge shall constitute the entire compen-
sation of the Distributor. Out of such sales charge, the Distributor may allow
such concessions or reallowances to dealers as it may from time to time
determine.
Section 4. Duties of the Fund.
------------------
(a) The Fund agrees to sell its shares so long as it has shares
available for sale; and to deliver certificates for, or cause the Fund's
transfer and dividend disbursing agent to issue non-negotiable share deposit
receipts evidencing, such shares registered in such names and amounts as the
Distributor has requested in writing, as promptly as practicable after receipt
by the Fund of the net asset value thereof and written request of the
Distributor therefor.
(b) The Fund shall keep the Distributor fully informed with regard to
its affairs and shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of the Fund, and
this shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent accountants and such
reasonable number of copies of its most current Prospectus and annual and
interim reports as the Distributor may request and shall cooperate fully in the
efforts of the Distributor to sell and arrange for the sale of the Fund's shares
and in the performance of the Distributor under this Agreement.
(c) The Fund shall take, from time to time, all necessary action to
fix the number of authorized shares and such steps, including payment of the
related filing fee, as may be necessary to register the same under the 1933 Act
to the end that there will be available for sale such number of shares as the
Distributor may be expected to sell. The Fund agrees to file from time to time
such amendments, reports and other documents as may be necessary in order that
there may be no untrue statement of a material fact in a Registration Statement
or Prospectus, or necessary in order that there may be no omission to state a
material fact in the Registration Statement or Prospectus which omission would
make the statements therein misleading.
(d) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its shares for sale under the securi-
ties laws of such states as the Distributor and the Fund may approve, and, if
necessary or appropriate in connection therewith, to qualify and maintain the
qualification of the Fund as a broker or dealer in such states; provided that
the Fund shall not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any state, to
change the terms of the offering of its Common Stock in any state from the terms
set forth in its Registration Statement and Prospectus, to qualify as a foreign
corporation in any state or to consent to service of process in any state other
than with respect to claims arising out of the offering of its Common Stock.
The Distributor shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
Section 5. Expenses.
--------
(a) The Fund shall bear all costs and expenses of the continuous
offering of its shares in connection with: (i) fees and disbursements of its
counsel and independent accountants, (ii) the preparation, filing and printing
of any registration statements and/or prospectuses required by and under the
federal securities laws, (iii) the preparation and mailing of annual and interim
reports, prospectuses and proxy materials to shareholders and (iv) the qualifi-
cations of shares of Common Stock for sale and of the Fund as a broker or dealer
under the securities laws of such states or other jurisdictions as shall be
selected by the Fund and the Distributor pursuant to Section 4(d) hereof and the
cost and expenses payable to each such state for continuing qualification
therein.
(b) The Distributor shall bear (i) the costs and expenses of
preparing, printing and distributing any materials not prepared by the Fund and
other materials used by the Distributor in connection with its offering of
shares for sale to the public, including the additional cost of printing copies
of the Prospectus and of annual and interim reports to shareholders other than
copies thereof required for distribution to shareholders or for filing with any
federal securities authorities, (ii) any expenses of advertising incurred by the
Distributor in connection with such offering and (iii) the expenses of
registration or qualification of the Distributor as a dealer or broker under
federal or state laws and the expenses of continuing such registration or
qualification.
Section 6. Indemnification.
---------------
The Fund agrees to indemnify, defend and hold the Distributor, its
officers and directors and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands liabilities and expense (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
directors or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus or arising
out of or based upon any alleged omission to state a material fact required to
be stated in either thereof or necessary to make the statements in either
thereof not misleading, except insofar as such claims, demands, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information furnished in writing by the Distributor to the Fund for use in
the Registration Statement or Prospectus; provided, however, that this indemnity
agreement, to the extent that it might require indemnity of any person who is
also an officer or director of the Fund or who controls the Fund within the
meaning of Section 15 of the 1933 Act, shall not inure to the benefit of such
officer, director or controlling person unless a court of competent jurisdiction
shall determine, or it shall have been determined by controlling precedent, that
such result would not be against public policy as expressed in the 1933 Act; and
further provided, that in no event shall anything contained herein be so
construed as to protect the Distributor against any liability to the fund or to
its security holders to which the Distributor would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reason of its reckless disregard of its obligations under
this Agreement. The Fund's agreement to indemnify the Distributor, its officers
and directors and any such controlling person as aforesaid is expressly
conditioned upon the Fund's being promptly notified of any action brought
against the Distributor, its officers or directors, or any such controlling
person, such notification to be given by letter or telegram addressed to the
Fund at its principal business office. The Fund agrees promptly to notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issue and sale of any
shares of its capital stock.
The Distributor agrees to indemnify, defend and hold the Fund, its
officers and directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its directors or
officers or any such controlling person may incur under the 1933 Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its directors or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
alleged untrue statement of a material fact contained in information furnished
in writing by the Distributor to the Fund for use in the Registration Statement
or Prospectus or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be stated
in the Registration Statement or Prospectus or necessary to make such
information not misleading. The Distributor's agreement to indemnify the Fund,
its directors and officers, and any such controlling person as aforesaid is
expressly conditioned upon the Distributor's being promptly notified of any
action brought against the Fund, its officers or directors or any such
controlling person, such notification being given to the Distributor at its
principal business office.
Section 7. Compliance with Securities Laws.
-------------------------------
The Fund represents that it is registered as a diversified open-end
management investment company under the 1940 Act, and agrees that it will comply
with all of the provisions of the 1940 Act and of the rules and regulations
thereunder. The Fund and the Distributor each agree to comply with all of the
applicable terms and provisions of the 1940 Act, the 1933 Act and, subject to
the provisions of Section 4(d), all applicable state "Blue Sky" laws. The
Distributor agrees to comply with all of the applicable terms and provisions of
the Securities Exchange Act of 1934.
Section 8. Term of Agreement; Termination.
------------------------------
This Agreement shall commence on the first date set forth above. This
Agreement shall continue in effect for a period more than two years from the
date hereof only so long as such continuance is specifically approved at least
annually in conformity with the requirements of the Investment Company Act of
1940.
This Agreement shall terminate automatically in the event of its
assignment (as defined by the 1940 Act). In addition, this Agreement may be
terminated by either party at any time, without penalty, on not more than sixty
days' nor less than thirty days' written notice to the other party.
Section 9. Notices.
-------
Any notice required to be given pursuant to this Agreement shall be
deemed duly given if delivered or mailed by registered mail, postage prepaid,
(1) to the Distributor at 215 North Main Street, West Bend, Wisconsin 53095,
Attention: Mutual Fund Department; or (2) to the Fund at 215 North Main Street,
West Bend, Wisconsin 53095, Attention: Administration.
Section 10. Governing Law.
-------------
This Agreement shall be governed and construed in accordance with the
laws of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
B.C. ZIEGLER AND COMPANY
By /s/ R.D. Ziegler
----------------------------
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By /s/ R.D. Ziegler
----------------------------
EXHIBIT 6(B)
Form of Selected Dealers Agreement
----------------------------------
SELECTED DEALERS AGREEMENT
--------------------------
Re: Continuous Offering of Principal Preservation Portfolios. Inc.
Gentlemen:
B.C. Ziegler and Company ("Ziegler") as the Distributor of the shares of
each series (each "Portfolio") of Principal Preservation Portfolios, Inc. (the
"Fund"), understands that you are a member in good standing of the National
Association of Securities Dealers, Inc. (your signature below shall constitute a
representation of such membership in good standing) and, on the basis of such
understanding, invites you to become a Selected Dealer to distribute any or all
shares of each Portfolio of the Fund on the following terms:
1. You and ourselves agree to abide by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD") and all other federal
and state rules and regulations that are now or may become applicable to
transactions hereunder. Your expulsion or suspension from the NASD will
automatically terminate this Agreement without notice. Ziegler may terminate
this Agreement at any time upon notice.
2. Orders for shares received from you and accepted by us will be at the
public offering price applicable to each order, as established by the then
effective prospectus of the Fund. The procedure relating to the handling of
orders shall be subject to instructions which we will forward from time to time
to all Selected dealers. All orders are subject to acceptance by us at 215
North Main Street, West Bend, Wisconsin 53095; Attention: Mutual Fund
Department, and we reserve the right in our sole discretion to reject any order.
We also reserve the right to establish minimum orders for individual purchasers
as well as for Selected Dealers.
3. Selected Dealers will be allowed the concessions from the public
offering price as set forth in the then current prospectus of the Fund, or as
may be determined by Ziegler. The Sales Charge and Dealer Concession may be
changed at our discretion and we will advise you of any such change.
4. You agree that your transactions in shares of the Fund will be limited
to the purchase of shares from us for resale to your customers at the public
offering price then in effect or for your bona fide investment and to
repurchases which are made in accordance with the procedures set forth in the
then current prospectus of the Fund.
5. Except for sales pursuant to plans established by the Fund with an
agent bank and providing for the periodic investment of new monies, orders will
not be accepted for less than the number of shares or dollar amount set forth in
the then current prospectus of the Fund.
6. You agree that you will not withhold placing customers' orders so as
to profit yourself as a result of such withholding.
7. You agree to sell shares only to your customers at the applicable
public offering price or to the Fund or us as Distributor for the Fund at net
asset value, in each case determined as set forth in the Fund's Prospectus.
8. An investor will be entitled to a reduction in Sales Charge on
purchases made under a Letter of Intent in accordance with the Fund's then
current prospectus. In such a case, your Dealer's Concession will be paid based
upon the Reduced Sales Charge, but adjustment to a higher Dealer's Concession
will thereafter be made to reflect actual purchases by the investor if he should
fail to fulfill his Letter of Intent. A Portfolio may offer to sell to certain
classes of purchasers at net asset value as described in the current prospectus.
No dealer concession will be paid on such sales; however, the Distributor may
make a payment or payments, out of its own funds, to the Selected Dealer.
9. Settlement shall be made within five business days after our
acceptance of the order. If payment is not so received or made, we reserve the
right forthwith to cancel the sale, or, at our option, to sell the shares at the
then prevailing net asset value in which latter case you agree to be responsible
for any loss resulting to any Portfolio of the Fund or to us from your failure
to make payments as aforesaid.
10. If shares sold to you under the terms of this Agreement are redeemed
by the Fund or repurchased for the account of the Fund or are tendered to the
Fund for redemption or repurchase within seven business days after the date of
our confirmation to you of your original purchase order therefor, you agree to
pay forthwith to us the full amount of the concession allowed to you on the
original sale and we agree to pay such amount to the Fund when received by us.
We also agree to pay to the Fund the amount of our share of the Sales Charge on
the original sale of such shares.
11. If any shares are repurchased from you by the Fund, or by us for the
account of the Fund, such shares shall be tendered in good order within ten
business days. If shares are not tendered within such time period the right is
reserved to cancel, at any subsequent time, the repurchase order, or, at our
option, to reacquire such number of shares at the net asset value next computed,
in which latter case you will agree to be responsible for any loss resulting
from your failure to deliver such shares.
12. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion without notice to you to suspend sales or
withdraw any offering of shares entirely or to change the offering prices as
provided in the Fund's prospectus or, upon notice, to amend or cancel this
Agreement, which shall be construed in accordance with the laws of the State of
Wisconsin. You agree that any order to purchase shares of any Portfolio of the
Fund placed by you after notice of any such amendment has been sent to you shall
constitute your agreement to any such amendment.
13. No person is authorized to make any representation concerning the Fund
or the shares of any Portfolio except those contained in the Fund's effective
prospectus and any such information as may be officially designated as
information supplemental to the prospectus. In purchasing shares from us you
shall rely solely on the representations contained in the effective prospectus
and supplemental information above mentioned.
14. We will supply to Selected Dealers additional copies of the then
effective prospectus in reasonable quantities upon request. All expenses
incurred in connection with your activities under this Agreement shall be borne
by you.
15. In no transaction shall you have any authority whatever to fact as
agent of the Fund or of us or of any other Selected Dealer and nothing in this
Agreement shall constitute either of us the agent of the other or shall
constitute you or the Fund the agent of the other. Except as otherwise
indicated herein, all transactions in these shares between you and us are as
principal, each for his own account. This Agreement shall not be assignable by
you.
16. Any notice to you shall be duly given if mailed or telegraphed to you
at your address as registered from time to time with the NASD. Any notice to
Ziegler shall be sent to 215 North Main Street, West Bend, Wisconsin 53095,
Attention: Mutual Fund Department.
17. This Agreement constitutes the entire agreement between Ziegler and
the undersigned Selected Dealer and supersedes all prior oral or written
agreements between the parties hereto. This Agreement may be amended by
Addendum thereto which need not be executed by the Selected Dealer. Such
Addendum may be used, for example, to add additional Portfolios to the Fund, and
shall be effective as to each Selected Dealer upon making a trade in the shares
of any Portfolio of the Fund.
Sincerely,
B.C. ZIEGLER AND COMPANY
BY /s/
------------------------------
The undersigned accepts your invitation to become a Selected Dealer and
agrees to abide by the foregoing terms and conditions.
Signed , 19 .
----------------------- --- -----------------------------
(Selected Dealer)
BY
------------------------------
(Authorized Signature)
EXHIBIT 8
Depository Contract
-------------------
DEPOSITORY CONTRACT
Between
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
and
B. C. ZIEGLER AND COMPANY
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Depository and Property to be
Held by It.............................................................1
2. Duties of the Depository with Respect to Property
of the Fund Held by the Depository.....................................2
2.1 Holding Securities.................................................2
2.2 Delivery of Securities.............................................2
2.3 Registration of Securities.........................................7
2.4 Collection of Income...............................................7
2.5 Deposit of Fund Assets in Securities Systems.......................8
2.6 Segregated Account.................................................9
2.7 Ownership Certificates for Tax Purposes...........................13
2.8 Proxies...........................................................13
2.9 Communications Relating to Fund Portfolio
Securities.......................................................13
2.10 Proper Instructions..............................................14
2.11 Actions Permitted Without Express Authority......................16
2.12 Evidence of Authority............................................16
3. Duties of Depository With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income........................................................17
4. Records...............................................................17
5. Opinion of Fund's Independent Accountant..............................18
6. Reports to Fund by Independent Public Accountants.....................18
7. Compensation of Depository............................................19
8. Responsibility of Depository..........................................19
9. Effective Period, Termination and Amendment...........................21
10. Interpretive and Additional Provisions................................23
11. Wisconsin Law to Apply................................................23
DEPOSITORY CONTRACT
-------------------
This Contract between Principal Preservation Portfolios, Inc., a
corporation organized and existing under the laws of Maryland having its
principal place of business at 215 North Main Street, West Bend, Wisconsin
53095, hereinafter called the "FUND", and B. C. Ziegler and Company, a
corporation organized and existing under the laws of Wisconsin having its
principal place of business at 215 North Main Street, West Bend, Wisconsin
53095, hereinafter called the "Depository",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Depository and Property to be Held By It
------------------------------------------------------
The Fund hereby employs the Depository as a depository of its assets.
The Fund, as Custodian, agrees to deliver to the Depository securities
owned by the Fund from time to time in each of its Portfolios as described
in the Fund's current prospectus. (Prospectus is herein defined as
including the statement of additional information.) The Fund will provide
to the Depository all additions and deletions to the Portfolios and also
provide a copy of the current registration statement and any related
amendments to it. Each portfolio is to be maintained and accounted for by
the Depository as a separate account. The Depository shall not be
responsible for any property of the Fund held or received by the Fund and
not delivered to the Depository. With respect to the custody and
disposition of certain of the Fund's assets, the Depository shall enter
into agreements substantially in the form of the Procedural Agreement
attached as Exhibit A hereto.
The Fund may from time to time employ one or more sub-custodians or
other agents, but only in accordance with an applicable vote by the
Directors of the Fund.
2. Duties of the Depository with Respect to Property of the Fund Held By the
-------------------------------------------------------------------------
Depository
----------
2.1 Holding Securities. The Depository shall hold and physically
------------------
segregate for the account of the Fund all non-cash property, including
all securities owned by the Fund, other than securities which are
maintained pursuant to Section 2.5 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System".
2.2 Delivery of Securities. The Depository shall release and deliver
----------------------
securities owned by the Fund held by the Depository or in a Securities
System account of the Depository only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1)Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2)Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Fund;
3)In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.5
hereof;
4)To the depository agent in connection with tender or
other similar offers for portfolio securities of the Fund;
5)To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be received;
6)To the issuer thereof, or its agent, for transfer into
the name of or any nominee names of the Fund or into the
name of or any nominee names of the Depository, or into the
name or nominee names of any sub-custodian or other agent
appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities
--------
are to be delivered to the Depository.
7)To the broker selling the same for examination in
accordance with the "street delivery" custom;
8)For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement, provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Depository;
9)In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants,
rights or similar securities or the surrender of interim
receipts or temporary securities for definitive securities;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Depository;
10)For delivery in connection with any loans of securities
made by the Fund, but only against receipt of adequate
--------
collateral as agreed upon from time to time by the Fund,
which may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Fund's account
in the book-entry system authorized by the U.S. Department
of the Treasury, the Depository will not be held liable or
responsible for the delivery of securities owned by the Fund
prior to the receipt of such collateral;
11)For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by the
Fund, but only against receipt of amounts borrowed;
--------
12) For delivery in accordance with the provisions of any
agreement between the Fund and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement between the Fund and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund.
14)Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time to
time in the Fund's currently effective prospectus, in
satisfaction of requests by holders of Shares for repurchase
or redemption; and
15)For any other proper corporate purpose, but only upon
--------
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring
such purposes to be proper corporate purposes, and naming
the person or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Securities held by the Depository (other
--------------------------
than bearer securities) shall be registered in the name of the Fund or
in the name of any nominee of the Fund or in the name or any nominee
name of the Depository which nominee shall be assigned exclusively to
the Fund, unless the Fund has authorized in writing the appointment of
------
a nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in the
name or nominee name of any sub-custodian or agent appointed pursuant
to Article 1. All securities accepted by the Depository on behalf of
the Fund under the terms of this Contract shall be in "street name" or
other good delivery form.
2.4 Collection of Income. The Depository shall collect on a timely basis
--------------------
all income and other payments with respect to registered securities
held hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities
are held by or under the control of the Depository or agent thereof
and shall remit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, the
Depository shall detach and present for payment all coupons and other
income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder. Income
due the Fund on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The
Depository will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Fund's custodian account of the income to which
the Fund is properly entitled.
2.5 Deposit of Fund Assets in Securities Systems. The Depository may
--------------------------------------------
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1)The Depository may keep securities of the Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Depository in
the Securities System which shall not include any assets of
the Depository other than assets held as a fiduciary,
custodian or otherwise for customers;
2)The records of the Depository with respect to
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Fund;
3)The Depository shall advance funds on behalf of the
Fund for securities purchased for the account of the Fund
upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Depository
to reflect such advance and transfer for the account of the
Fund. The Depository shall transfer securities sold for the
account of the Fund upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry
on the records of the Depository to reflect such transfer
and payment for the account of the Fund. Funds received in
connection with securities sales shall be promptly
transmitted to the Fund's custodian account. Copies of all
advices from the Securities System of transfers of
securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Depository and be
provided to the Fund at its request. The Depository shall
furnish the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund;
4)The Depository shall provide the Fund with any report
obtained by the Depository on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5)The Depository shall have received the initial or
annual certificate, as the case may be, required by Article
9 hereof;
6)Anything to the contrary in this Contract notwithstand-
ing, the Depository shall be liable to the Fund for any loss
or damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Depository or any of its agents or of any
of its or their employees or from failure of the Depository
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Depository with respect to any claim against
the Securities System or any other person which the
Depository may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
2.6 Segregated Account. The Depository shall upon receipt of proper
------------------
instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Depository pursuant to Section 2.5 hereof, (i) in
accordance with the provisions of any agreement among the Fund, and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund, (ii) for purposes of segregating cash
or government securities in connection with options purchased, sold or
written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
--------
upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.7 Ownership Certificates for Tax Purposes. The Depository shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
2.8 Proxies. The Depository shall, with respect to the securities held
-------
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.9 Communications Relating to Fund Portfolio Securities. The Depository
----------------------------------------------------
shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith, notice
of exercise options purchased or sold by the Fund, and of the maturity
of futures contracts purchased or sold by the Fund) received by the
Depository from issuers of the securities being held for the Fund.
With respect to tender or exchange offers, the Depository shall
transmit promptly to the Fund all written information received by the
Depository from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to
any tender offer, exchange offer or any other similar transaction, the
Fund shall notify the Depository at least three business days prior to
the date on which the Depository is to take such action.
2.10 Proper Instructions. Proper Instructions as used throughout this
-------------------
Article 2 means a writing signed or initialled by one or more person
or persons as the Board of Directors shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Depository
reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in writing. It
is understood and agreed that the Board of Directors has authorized B.
C. Ziegler and Company ("Ziegler") and/or Boston Company Institutional
Investors, Inc. ("Boston Company") and/or M&I Investment Management
Corporation ("M&I"), as investment advisors of the Fund pursuant to an
Investment Advisory Agreement, dated , between them and
-------------
the Fund to deliver Proper Instructions with respect to all matters
for which Proper Instructions are required by this Article 2. The
Depository may rely upon the certificate of an officer of Ziegler or
Boston Company or M&I, as the case may be, with respect to the person
or persons authorized on behalf of Ziegler and Boston Company and M&I,
respectively, to sign, initial or give Proper Instructions for the
purposes of this Article 2.
Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by
the Board of Directors, Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices
provided that the Board of Directors and the Depository are satisfied
that such procedures afford adequate safeguards for the Fund's assets.
2.11 Actions Permitted without Express Authority. The Depository may
-------------------------------------------
in its discretion, without express authority from the Fund:
1)surrender securities in temporary form for securities
in definitive form; and
2)in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Directors of the Fund.
2.12 Evidence of Authority. The Depository shall be protected in acting
---------------------
upon any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Depository may receive and accept a certified copy
of a vote of the Board of Directors of the Fund as conclusive evidence (a) of
the authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Depository of
written notice to the contrary.
3. Duties of Depository with Respect to the Books of Account and Calculation
-------------------------------------------------------------------------
of Net Asset Value and Net Income.
---------------------------------
The Depository shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the fund to keep
the books of account of the Fund and/or compute the net asset value per
share of the outstanding shares of the Fund or, if directed in writing to
do so by the Fund, shall itself keep such books of account and/or compute
such net asset value per share. If so directed, the Depository shall also
calculate daily the net income of the Fund as described in the Fund's
currently effective prospectus and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the
daily income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. Records
-------
The Depository shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet
the obligations of the fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Fund.
All such records shall be the property of the Fund and shall at all times
during the regular business hours of the Depository be open for inspection
by duly authorized officers, employees or agents of the Fund and employees
and agents of the Securities and Exchange Commission. The Depository
shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Depository and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Depository, include certificate numbers in
such tabulations.
5. Opinion of Fund's Independent Accountants
-----------------------------------------
The Depository shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder
in connection with the preparation of the Fund's Form N-1A, and Form N-SAR
or other annual reports to the Securities and Exchange Commission (or to
its Shareholders) and with respect to any other requirements of such
Commission.
6 Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Depository shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures contracts
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Depository under this Contract;
such reports, which shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund, to provide reasonable assurance
that any material inadequacies would be disclosed by such examination, and,
if there are no such inadequacies, shall so state.
7. Compensation of Depository
--------------------------
The Depository shall be entitled to reasonable compensation for its
services and expenses as Depository, as agreed upon from time to time
between the Fund and the Depository.
8. Responsibility of Depository
----------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Depository shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties. The Depository shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall
be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall
be entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. In order
that the indemnification provisions contained in this Article 8 shall
apply, however, it is understood that if in any case the Fund may be asked
to indemnify or save the Depository harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Depository will use all
reasonable care to identify and notify the fund promptly concerning any
situation which presents or appears likely to present the probability of
such a claim for indemnification against the Fund. The Fund shall have the
option to defend the Depository against any claim which may be the subject
of this indemnification, and in the event that the Fund so elects it will
so notify the Depository and thereupon the Fund shall take over complete
defense of the claim and the Depository shall in such situations initiate
no further legal or other expenses for which it shall seek indemnification
under this Article 8. The Depository shall in no case confess any claim or
make any compromise in any case in which the Fund will be asked to
indemnify the Depository except with the Fund's prior written consent.
If the Fund requires the Depository to take any action with respect to
securities, which action involves the payment of money or which action may,
in the opinion of the Depository, result in the Depository or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Depository to take such action, shall provide indemnity to the Depository
in an amount and form satisfactory to it. The Fund agrees to indemnify and
hold harmless the Depository and its nominee from and against all taxes,
charges, expenses, assessments, claims and liabilities (including counsel
fees) incurred or assessed against it or its nominee in connection with the
performance of this Contract, except such as may arise from it or its
nominee's own negligent action, negligent failure to act or willful
misconduct.
9. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of October 1, 1989, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement to the parties hereto and
may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or
mailing; Provided, however, that the Depository shall not act under Section
--------
2.5 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund
have approved the initial use of a particular Securities System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors have reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under the
Investment Company Act of 1940, as amended; provided further, however, that
----------------
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles
of Incorporation, and further provided, that the Fund may at any time by
action of its Board of Directors immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the Depository or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Depository
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Depository for its costs, expenses and
disbursements.
Upon termination of the Contract, the Depository shall deliver to the
Fund or any agent designated by the Fund in writing, duly endorsed and in
the form for transfer, all securities then held by it hereunder and shall
transfer to an account of the Fund or its designated agent all of the
Fund's securities held in a Securities System.
10. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Depository and
the Fund may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
--------
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
11. Wisconsin Law to Apply
----------------------
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The State of Wisconsin.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of October, 1989.
ATTEST PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
/s/ William Gehl
By: /s/ R. Tuszynski
- ----------------------------- ---------------------------
Secretary Vice President
ATTEST B. C. ZIEGLER AND COMPANY
/s/ William Gehl
By: /s/ L.R. Van Horn
- ----------------------------- --------------------------------
Secretary Vice President - Finance
APPENDIX A
----------
to
Depository Contract Between
Principal Preservation Portfolios, Inc.
and B. C. Ziegler and Company
Dated October 1, 1989
The following amendment to the Depository Agreement between B. C. Ziegler
and Company (the "Depository") and Principal Preservation Portfolios, Inc. (the
"Fund") expands the provisions of the contract to provide for the following:
1. Cash Account
------------
The Depository shall open and maintain a separate cash account or
accounts in the name of the Fund and so hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Fund, other than cash maintained by the Fund in a bank
account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940.
2. Payments for Shares
-------------------
The Depository shall receive for deposit into the Fund's accounts such
payments as are received from the Transfer Agent of the Fund for Shares of
the Fund issued or sold from time to time by the Fund.
3. Payments for Repurchases or Redemption of Shares of the Fund
------------------------------------------------------------
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of
the Board of Directors of the Fund pursuant thereto, the Depository shall,
upon receipt of instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares.
In connection with the redemption or repurchase of Shares of the Fund,
the Depository is authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank designated by the
Transfer Agent.
4. Payment of Fund Moneys
----------------------
Upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the Depository shall
pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities against the delivery of such
securities or evidence of title to the Depository or a sub-depository as
its agent for this purpose registered in the name of the Fund or in the
name or nominee name of the Depository or sub-depository or in proper form
for transfer;
2) For the redemption or repurchase of Shares issued by the Fund as
set forth in Section 3 hereof;
3) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
4) Upon presentation of the proper check by the Fund;
5) For any other proper purpose, but only upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of the Board of
Directors of the Fund signed by an Officer of the Fund and certified by its
Secretary or Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
5. Proper Instructions
-------------------
The term "Proper Instructions" as used throughout this annexation to
the Depository Agreement dated October 1, 1989 shall be consistent with
Article 2, Paragraph 2.10 titled "Proper Instructions."
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the day of March, 1990.
ATTEST PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
/s/ W. Gehl By: /s/ R. Tuszynski
- ---------------------------- ---------------------------
Secretary Vice President and
Treasurer
ATTEST B. C. ZIEGLER AND COMPANY
/s/ W. Gehl By: /s/ L. Van Horn
- ---------------------------- ---------------------------
Secretary Vice President - Finance
EXHIBIT 9(A)
Transfer and Dividend Disbursing Agent Agreement
------------------------------------------------
B. C. ZIEGLER AND COMPANY
CONTRACT FOR
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
September , 1990
----
Principal Preservation Portfolios, Inc.
Attn: Mr. Peter D. Ziegler
215 North Main Street
West Bend, WI 53095
Dear Mr. Ziegler:
Principal Preservation Portfolios, Inc. (the "Fund") is engaged in the business
of an investment company. The Board of Directors of the Fund has selected B. C.
Ziegler and Company ("Agent") to act as Transfer Agent, Dividend Disbursing
Agent and Shareholders' Servicing Agent for the Fund and Plan Agent and Escrow
Agent for the Funds' shareholders, and you are willing to act as such Agent and
perform the respective duties and functions thereof in the manner and on the
conditions hereinafter set forth. Accordingly, the Fund hereby agrees with
Agent as follows:
1. Appointment and Term. Pursuant to a resolution of the Board of Directors
--------------------
of the Fund, a certified copy of which will be provided to Agent, Agent
agrees to act as Agent for the Fund in the capacities listed above for a
term effective as of January 1, 1991 and continuing until December 31,
1991.
2. Copies of Corporate Documents. The Fund will furnish Agent promptly with
-----------------------------
copies of any Registration Statements now in effect or hereafter filed by
it with the Securities and Exchange Commission under the Securities Act of
1933, as amended, or the Investment Company Act of 1940, as amended,
together with any financial statements and Exhibits included therein, and
all amendments or supplements thereto hereafter filed.
3. Transfer of Shares. Agent is authorized to transfer on our records from
------------------
time to time Shares for which certificates are surrendered to Agent in
proper form for transfer, and, upon cancellation and destruction thereof,
to countersign, register and issue new certificates for the same number of
Shares and to deliver them pursuant to instructions received from the
transferor. Agent is authorized to transfer on our records from time to
time Shares for which no certificates are issued upon surrender to Agent of
sufficient documentation in proper form to effect such transfer.
4. Share Certificates. The Fund shall supply Agent with a sufficient supply
------------------
of blank share certificates representing the Shares, in the form approved
from time to time by the Board of Directors of the Fund, and, from time to
time, shall replenish such supply upon your request. Such blank stock
certificates shall be properly signed, manually or by facsimile signature,
by the duly authorized officers of the Fund, and shall bear the corporate
seal or facsimile thereof of the Fund; and notwithstanding the death,
resignation or removal of any officer of the Fund authorized to sign such
share certificates, Agent may continue to countersign certificates which
bear the manual or facsimile signature of such officer until otherwise
directed by the Fund.
5. Lost or Destroyed Certificates. In case of the alleged loss or destruction
------------------------------
of any certificate of stock, no new certificate shall be issued in lieu
thereof, unless there shall first be furnished an appropriate bond
satisfactory to Agent and the Fund, and issued by a comparable surety
company satisfactory to Agent.
6. Receipt of Funds for Investment. Upon receipt of any check drawn or
-------------------------------
endorsed to Agent as agent for, or otherwise identified as being for the
account of, the Fund, or B. C. Ziegler and Company as the principal
underwriter of the Fund (hereinafter referred to as the "Principal
Underwriter"), Agent will stamp the check with the date of receipt,
determine the amount thereof due the Fund, and the Principal Underwriter,
respectively, deposit the portion due the Principal Underwriter in its
account with such bank as may from time to time be designated by the
Principal Underwriter, deposit the net amount due the Fund in its custodial
account with B. C. Ziegler and Company (the "Depository") or any successor
thereto as depository for the Fund, notify the Principal Underwriter and
Depository respectively, of such deposits, such notification to be given as
soon as practicable on the next business day stating the total amount
deposited to said accounts during the previous business day. Such
notification shall be confirmed in writing.
7. Shareholder Accounts. Upon receipt of any check referred to in paragraph 6
--------------------
hereof, Agent will compute the number of Shares due to the shareholder
according to the price of the Fund Shares in effect for purchases made on
the date of such receipt as set forth in the Fund's current Prospectus,
and:
(a) In the case of a new shareholder, open and maintain a bookshare
account for such shareholder in the name or names set forth in the
subscription application form in the appropriate Portfolio;
(b) If specifically requested in writing by the shareholder, countersign,
issue and mail, by first class mail, to the shareholder at his address
as set forth on such application, a share certificate for full shares
of the appropriate Portfolio of the Fund;
(c) Send to the shareholder a confirmation indicating the amount of full
and fractional shares purchased (in the case of fractional shares,
rounded to three decimal places), the price per share and a historical
confirmation of any transactions made on the shareholder's account
since the inception of the calendar year in which such investment is
made; and
(d) In the case of request to establish an accumulation plan, group
program, withdrawal plan or other plan or program being offered by
this Funds' current Prospectus, open and maintain such plan or program
for the shareholder in accordance with the terms thereof;
all subject to any reasonable instructions which the Principal Underwriter
or the Fund may give to Agent with respect to rejection of orders for
Shares.
8. Unpaid Checks and Drafts. In the event that any check or other order for
------------------------
payment of money on the account of any shareholder or new investor is
returned unpaid for any reason, Agent will:
(a) Give prompt notification to the Fund of such non-payment; and
(b) Take such other steps, including redepositing such check for
collection or redelivering such check to the shareholder or new
investor and placing a stop transfer order against any Shares held by
him, as the Fund or the Principal Underwriter may instruct Agent.
9. Sales Charge. In computing the number of Shares to credit to the account
------------
of a shareholder pursuant to paragraph 7 hereof, Agent will calculate the
total of the applicable Principal Underwriter and representative sales
charges with respect to each purchase as set forth in the Fund's current
Prospectus and in accordance with any notification filed with respect to
combined and accumulated purchases; Agent will also determine the portion
of each sales charge payable by the Principal Underwriter to the
representative participating in the sale in accordance with such schedules
as are from time to time delivered by the Principal Underwriter to Agent;
provided, however, Agent shall have no liability hereunder growing out of
the incorrect selection by Agent of the gross rate of sales charges except
that this exculpation shall not apply in the event the rate is specified by
the Principal Underwriter or the Funds and Agent fail to select the rate
specified.
10. Dividends and Distributions. The Fund will promptly notify Agent of the
---------------------------
declarations of any dividend or distribution with respect to Shares. Agent
will, twenty-four (24) hours prior to the payment date of any such dividend
or distribution, notify the Fund of the total number of Shares issued and
outstanding as of the record date for such dividend or distribution and the
amount of cash required to pay such dividend or distribution. The Fund
agrees that on or before the mailing date of such dividend or distribution
it will instruct the Depository to make available to Agent sufficient funds
in the dividend and distribution account maintained by the Fund with the
Depository to pay such dividend and distribution. Agent will prepare and
mail to shareholders any checks to which they are entitled by reason of any
dividend or distribution and, in the case of shareholders entitled to
receive additional Shares by reason of any such dividend or distribution,
Agent will make appropriate credits to their bookshare accounts or prepare
and mail to shareholders certificates, if any, in accordance with their
requests submitted in writing. No later than 1:00 P.M. on any dividend or
distribution payment date, Agent shall inform the Fund of the total number
of full and fractional Shares reinvested by shareholders. Each such
shareholder shall be notified of any dividend and distribution on their
next regularly scheduled statement of account, including the amount of any
reinvested Shares and copies of such notices shall also be sent to such
shareholders' dealers.
11. Repurchases and Redemptions. Agent will receive and stamp with the date
---------------------------
all certificates and requests delivered to Agent for repurchase or
redemption of Shares and Agent will process such repurchases as agent for
the Principal Underwriter and such redemptions as agent for the Fund as
follows:
(a) If such certificate or request complies with the standards for
repurchase or redemption as approved by the Fund, Agent will, on or
prior to the seventh calendar day succeeding the receipt of any such
request for repurchase or redemption in good order, pay from funds
available from time to time in the repurchase and redemption account
maintained by the Fund for the particular Portfolio with Depository,
the appropriate repurchase or redemption price, as the case may be, to
the shareholder as set forth in the current Prospectus of the Fund;
(b) If such certificate or request does not comply with said standards for
repurchases or redemptions as approved by the Fund, Agent will
promptly notify the shareholder of such fact, together with the reason
therefor, and shall effect such repurchase or redemption at the price
in effect at the time of receipt of documents complying with said
standards, or, in the case of a repurchase, at such other time as the
Principal Underwriter shall so direct; and
(c) Agent shall notify the Fund and the Principal Underwriter as soon as
practicable on each business day of the total number of Shares covered
by requests for repurchase or redemption in each Portfolio which were
received by Agent in proper form on the previous business day, such
notification to be confirmed in writing.
12. Systematic Withdrawal Plans. Agent will process systematic withdrawal
---------------------------
orders pursuant to the provisions of withdrawal plans duly executed by
Shareholders and the current Prospectus of the Fund. Payment upon such
withdrawal orders shall be made by Agent from the appropriate account
maintained by the Fund with Depository approximately the 25th day of each
month in which a payment has been requested, and Agent, on or after the
fifth business day prior to the payment date, will withdraw from a
shareholder's account and present for repurchase or redemption as many
shares as shall be sufficient to make such withdrawal payment pursuant to
the provisions of the shareholder's withdrawal plan and the current
Prospectus of the Fund. From time to time on new systematic withdrawal
plans, a check for a payment date already past may be issued upon request
by the shareholder.
13. Letters of Intent. Agent will process such letters of intent for investing
-----------------
Shares as are provided for in the Fund's current Prospectus and Agent will
act as Escrow Agent pursuant to the terms of such letters of intent duly
executed by shareholders. Agent will make appropriate deposits to the
account of the Principal Underwriter for the adjustment of sales charges as
therein provided and will currently report the same to the Principal
Underwriter.
14. Wire-Order Purchases and Redemptions. Wire-Order redemption and sale
------------------------------------
orders will be incorporated into the Fund's clearance file with Agent.
Agent will send written confirmations to the participating dealers
containing all details of the wire-order purchases placed by each such
dealer by close of business on the business day following receipt of such
orders by Agent or the Principal Underwriter, with copies to the Fund and
the Principal Underwriter. Upon receipt of any check drawn or endorsed to
the Fund (or Agent, as agent) or otherwise identified as being payment of
an outstanding wire-order, Agent will stamp said check with the date of its
receipt and deposit the amount represented by such check to the Fund's
deposit account maintained with Agent. No later than 9:30 A.M. on the
third day following such deposit, Agent will by bank wire transfer Federal
Funds in an amount equal to the net asset value of the Shares so purchased
to the Fund's custodial accounts at the Depository. Agent will compute the
respective portions of such deposit which represent the sale charge and the
net asset value of the Shares so purchased and will notify the Fund and the
Principal Underwriter before noon of each business day of the total amount
deposited in the Fund's deposit account during the previous business day.
Agent will remit to the Principal Underwriter the commissions earned by the
Principal Underwriter on the 20th and the last day of each calendar month.
Upon receipt of any such purchase order, Agent will compute the number of
Shares due to the investor and:
(a) upon receipt of payment and registration instructions, issue the
number of Shares to the investor; or
(b) in the absence of registration instructions, place the paid order into
a paid-and-waiting status; or
(c) in the case of an existing shareholder, credit the bookshare account
of said investor with such number of Shares; or
(d) in the case of a new investor, open a bookshare account for such
investor in the name or names and address set forth in the
instructions received from the participating dealer, and credit the
account with such number of Shares; or
(e) if specifically requested in writing by the dealer, countersign, issue
and mail, by first class mail, a stock certificate for full Shares,
together with a refund check equal to any excess of the amount of
payment over the total purchase price, if any, in accordance with the
participating dealer's instructions; and
(f) send to the shareholder a confirmation (copy to the participating
dealer) indicating the amount of full and fractional Shares purchased
(in case of fractional shares, rounded to three decimal places), the
price per share, and a historical confirmation of all transactions
made in the shareholder's account since the beginning of the calendar
year in which such investment was made; and
(g) in the event that payment for a purchase order is not received by
Agent on the seventh business day following receipt of the order,
prepare a notification to the participating dealer that the trade is
in a warning status and forward such notification to the Principal
Underwriter; and in the event that payment for a purchase order is not
received by Agent on the tenth business day following receipt of the
order, prepare a NASD "notice of failure of dealer to make payment"
and forward such notification to the Principal Underwriter.
15. Special Projects. Special projects, not included in the fee schedule and
----------------
requested by proper instructions from the Fund shall be completed by the
Agent and invoiced to the Fund as mutually agreed upon.
16. Other Plans. Agent will process such accumulation plans, group programs,
-----------
exchange programs, reinvestment programs, money market deposit accounts or
transfers to and from money market funds, and other plans or programs for
investing in Shares as are provided for in the Fund's then current
Prospectus and will act as plan agent for shareholders pursuant to the
terms of such plans and programs duly executed by such shareholders. If
such services differ materially from those described in the Fund's current
prospectus, the compensation provided in section 22 hereof shall be
adjusted by mutual agreement of the parties.
17. Tax Returns and Reports. In the event that the Fund revises its investment
-----------------------
objectives and policies to provide for the payment of dividends and other
distributions to its shareholders, Agent will prepare, file with the
Internal Revenue Service and, if required, mail to shareholders such
returns for reporting dividends and distributions paid by the Fund as are
required to be so prepared, filed and mailed by applicable laws, rules and
regulations; and Agent will withhold such sums as are required to be
withheld under applicable federal and state income tax laws, rules and
regulations.
18. Record Keeping. Agent will maintain records, which at all times will be
--------------
the property of the Fund and available for inspection by the Fund and
Principal Underwriter, showing for each shareholder's account in each
Portfolio the following:
(a) Name and address;
(b) Number of Shares held and number of Shares for which certificates have
been issued;
(c) Historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price for
all transactions on a shareholder's account;
(d) Any stop or restraining order placed against a shareholder's account;
(e) Any instructions as to withdrawal orders under withdrawal plans,
letters of intent, dividend address, and any correspondence or
instructions relating to the current maintenance of a shareholder's
account.
Agent shall be obligated to maintain at your expense those records
necessary to carry out your duties hereunder. The remaining records will
be preserved by Agent, at our expense, in a manner that shall be determined
before any change in the status of said records is made by Agent.
19. Other Information Furnished. Agent will furnish to the Fund and the
---------------------------
Principal Underwriter such other information, including shareholder lists
and statistical information as may be agreed upon from time to time between
Agent and the Fund. Agent shall notify the Fund of any request or demand
to inspect the stock books of the Fund and will act upon the instructions
of the Fund as to permitting or refusing such inspection.
20. Correspondence. Agent will answer promptly that correspondence from
--------------
shareholders, representatives, the Fund and the Principal Underwriter
relating to your duties hereunder and such other correspondence as may from
time to time be mutually agreed upon between Agent and the Fund.
21. Communications to Shareholders and Meetings. Agent will address and mail
-------------------------------------------
all communications by the Fund and each of its Portfolios to their
shareholders, including financial reports to shareholders, proxy material
for meetings of shareholders and periodic communications to shareholders.
Agent will receive and examine return proxy cards for meetings of
shareholders and tabulate and certify the vote to the Fund.
22. Compensation. Agent will receive a fee as specified in Schedule A hereto,
------------
payable monthly by each Portfolio for each shareholder account existing
during such month for the performance of all your duties and
responsibilities hereunder, provided further that Agent will be entitled to
additional reasonable compensation in connection with more than one annual
proxy solicitation and in connection with any communications to
shareholders in addition to those currently being distributed. From time
to time, the Fund may request additional reports, dates and/or services
which will be provided by Agent in accordance with our mutual agreement as
to additional reasonable fees. The fee provided for hereunder will not be
increased for one year.
23. Out-of-Pocket Expenses; Reimbursements. The Fund agrees to reimburse Agent
--------------------------------------
for any supplies or equipment ordered by the Fund through Agent, and for
any out-of-pocket expenses Agent may incur, including but not limited to
expenses for stationery, postage, telephone and telegraph line toll
charges, data communications, lines, modems, reasonable travel and living
expenses.
24. Use of Your Name. The Fund will not use your name in any prospectus, sales
----------------
literature or other material relating to the Fund in a manner not approved
by Agent in writing before such use, provided, however, that Agent hereby
agrees to consent to all uses of your name which merely refer in accurate
terms to your appointments hereunder or which are required by the
Securities and Exchange Commission or a state securities commission, and
provided, further, that in no case will such approval be unreasonably
withheld.
25. Duty of Care and Indemnification. Agent shall at all times use reasonable
--------------------------------
care and act in good faith in performing your duties hereunder. Without
limiting the generality of the foregoing, Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances
beyond your control, including acts of civil or military authority,
national or state emergencies, an announced employee strike significant
enough to cease mutual fund transfer operations, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection, war, riots, or
failure of transportation, communication or power supply. You shall not be
responsible for and the Fund will indemnify you for any losses or damages
arising out of the offer or sale of shares of the Fund in violation of
federal securities laws or regulations or any state securities laws or
regulations. The Fund will indemnify and hold Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand,
action or suit not resulting from your bad faith or negligence, and arising
out of, or in connection with your duties on behalf of the Fund hereunder.
In addition, the Fund will indemnify and hold Agent harmless against any
and all losses, claims, damages, liabilities or expenses, (including
reasonable counsel fees and expenses) resulting from any claim, demand,
action or suit as a result of the negligence of the Fund or the Principal
Underwriter (unless contributed to by your negligence or bad faith), or as
a result of your acting upon any instructions executed or orally
communicated only by a duly authorized officer or employee of the Fund or
the Principal Underwriter, according to such lists of authorized officers
and employees furnished Agent and as amended from time to time in writing
by the President or Executive Vice President, or as a result of acting in
reliance upon written or oral advice given by Counsel for the Fund, or as a
result cf acting in reliance upon any genuine instrument or stock
certificate signed, counter-signed or executed by any person or persons
authorized to sign, counter-sign or execute the same. In order for this
paragraph to apply, it is understood that if in any case the Fund may be
asked to indemnify or hold Agent harmless, the Fund shall be advised of all
pertinent facts concerning the situation in question, and it is further
understood that Agent will use reasonable care to identify and notify the
Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have
the option to defend Agent against any claim which may be the subject of
this indemnification and in the event that the Fund so elects, it will so
notify Agent and thereupon the Fund shall take over complete defense of the
claim and Agent shall sustain no further legal or other expenses in such
situation for which Agent shall seek indemnification under this paragraph.
Agent will in no case confess any claim or make any compromise in any case
in which the Fund will be asked to indemnify Agent except with the Fund's
prior written consent.
26. Notices. Notices or other communications hereunder shall be in writing and
-------
shall be deemed effective when served or otherwise delivered to either
party hereto at the addresses set forth in this agreement, or at such other
addresses as the parties hereto may designate by notice to each other.
27. Further Assurances. Each party agrees to perform such further acts and
------------------
execute such further documents as are necessary to effectuate the purposes
hereof.
28. Termination. Neither this agreement nor any provisions hereof may be
-----------
changed, waived, discharged or terminated orally, but only by an instrument
in writing which shall make specific reference to this agreement and which
shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought. Notwithstanding anything
contained herein to the contrary, this Agreement may be terminated at any
time, without penalty or other payment, upon ninety (90) days' written
notice given by one party to the other.
Upon termination hereof, the Fund shall pay to Agent such compensation as
may be due to Agent as of the date of such termination, and shall likewise
reimburse Agent for any out-of-pocket expenses and disbursements reasonably
incurred by Agent to such date. In the event that in connection with
termination a successor to any of your duties or responsibilities hereunder
is designated by the Fund by written notice to Agent, Agent shall, promptly
upon such termination and at the expense of the Fund, transfer to such
successor a certified list of the shareholders of the Fund (with name,
address and tax identification or Social Security number), a record of the
account of such shareholder and the status thereof, and all other relevant
books, records and other data established or maintained by Agent under this
agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from your cognizant
personnel in the establishment of books, records and other data by such
successor.
29. Compliance.
----------
(a) The Fund shall advise Agent by written instructions as to the states
in which the Shares are eligible for sale and the amount in Shares
eligible for sale in each such state, and shall advise Agent by
written instructions of any change in such information. Agent shall
maintain and update the records accordingly and shall communicate the
amount in Shares sold to residents of each such state (as indicated by
the shareholder's account application or other written communication
to Agent) and shall promptly advise the Fund when the amount in Shares
so sold reaches a percentage (as specified by written instruction of
the Fund) of the amount in Shares so registered.
(b) Agent agrees to perform the duties and functions set forth herein so
as to comply at all times with any law, statutes, or rules and
regulations as in effect from time to time which apply to Agent's
responsibilities as Shareholder Servicing Agent, including but not
limited to Section 17A of the Securities Exchange Act of 1934 and the
rules promulgated by the Securities and Exchange Commission
thereunder.
The Fund assumes full responsibility for the preparation, contents,
and distribution of each prospectus of the Fund and for complying with
all applicable requirements of the Investment Company Act of 1940, as
amended, and any laws, rules and regulations of governmental
authorities having jurisdiction.
(c) In any case in which Agent is required under the terms of this
Agreement to take any action in accordance with the current Prospectus
of the Fund, Agent may request written instructions from the Fund
concerning the proper construction of any provisions of such
Prospectus of which Agent is uncertain. Agent may, but is not
obligated to, act in reliance on any such written instructions. If no
written instructions are given by the Fund within five business days
of such a request, or if Agent cannot practicably comply with any such
written instructions, Agent shall be deemed to have acted properly if
it takes any reasonable action with respect to such provision.
The Fund agrees to provide Agent copies of any amended or supplemented
Prospectus. The Fund further agrees that it will not amend or
supplement its Prospectus in such a way as to increase the responsi-
bilities or liabilities of Agent hereunder without Agent's prior
written consent.
(d) This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided,
however, that this Agreement shall not be assignable by the Fund
without the written consent of the Fund, authorized or approved by a
resolution of its Board of Directors.
(e) Agent will address and mail all communications by the Fund to its
shareholders as requested by the Fund promptly following the delivery
by the Fund of the materials to be mailed. Agent shall mail
communications to shareholders in the manner and with the time
required by the Securities Exchange Act of 1934, and the rules and
regulations thereunder (provided the Fund delivers such communication
sufficiently early and in such form as to permit Agent to meet such
requirements), and Agent shall maintain all records required to comply
with such requirements.
30. Miscellaneous. This agreement shall be construed and enforced in
-------------
accordance with and governed by the laws of the State of Wisconsin. The
captions in this agreement are included for convenience of reference only
and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect. This agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed
an original, but all of which taken together shall constitute one and the
same instrument.
31. Confidentiality of Fund Records and Information. Agent agrees to maintain
-----------------------------------------------
in absolute confidence all Fund records and information, including, but not
limited to the identity, address or any other identifying information with
respect to Fund shareholders; and not to disclose any such information to
any person, except as directed by the Fund or required by law.
The Fund acknowledges that Agent and its affiliates currently provide
financial services in the same geographical areas as the Fund and therefore
may currently have mutual clients and that Agent or its affiliates may in
its regular course of business solicit current or future clients of the
Fund without obtaining any information from Fund records and without the
knowledge that such person is a shareholder in the Fund.
In no event shall Agent and its affiliates be required to determine whether
or not individuals are shareholders of the Fund before soliciting their
business.
32. Remedies Available to Fund. In addition to any other remedies that may be
--------------------------
available to the Fund in the event Agent breaches its responsibilities
under Section 31, the Fund shall be entitled to:
(a) Terminate this Agreement; and/or
(b) To petition any court of competent jurisdiction, without notice and
without further consent from Agent, for an order prohibiting and
restraining Agent from further breach of Section 31.
OTHER THAN WITH RESPECT TO A BREACH OF SECTION 31, AGENT SHALL NOT BE LIABLE TO
THE FUND, ANY PORTFOLIO OF THE FUND, OR TO ANY THIRD PARTY, FOR ANY DAMAGES,
INCLUDING SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS OR A LOSS
OF BUSINESS, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF
PREVIOUSLY INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, AND REGARDLESS OF THE
FORM OF ACTION.
If Agent is in agreement with the foregoing, please sign the form of acceptance
on the accompanying counterpart of this letter and return such counterpart to
the Fund whereupon this letter shall become a binding contract.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
Attest:
By: /s/ W. Gehl By: /s/ Robert J. Tuszynski
----------------------------- ----------------------------
Title: Vice President Title: Vice President
-------------------------- --------------------------
Date: 12/31/91 Date: 12/31/91
--------------------------- ---------------------------
The foregoing agreement is hereby accepted as of the date hereof.
B. C. ZIEGLER AND COMPANY
Attest:
By: /s/ L. R. Van Horn By: /s/ R. D. Ziegler
---------------------------- -------------------------------
Title: Senior Vice President Title: Chief Executive Officer
-------------------------- ----------------------------
Date: 12/31/91 Date: 12/31/91
--------------------------- ----------------------------
Schedule A
----------
B. C. ZIEGLER AND COMPANY
MUTUAL FUND SERVICES
FOR
PRINCIPAL PRESERVATION
FOR THE PERIOD JANUARY 1, 1996
THROUGH DECEMBER 31, 1996
Tax-Exempt Portfolio
Government Portfolio
Insured Tax-Exempt Portfolio
Wisconsin Tax-Exempt Portfolio
PSE Technology Index Portfolio
and Any Other Funds - Dividends declared daily paid monthly
- -----------------------------------------------------------
$13.50 Per Shareholder Account
Dividend Achievers Portfolio
S&P 100 Plus Portfolio
Balanced Portfolio
Select Value Portfolio
$8.50 Per Shareholder Account
Minimum Monthly Portfolio Charge $500
Cash Reserve Portfolio(1)<F1>
- -------------------------
$16.00 Per Shareholder Account
Fees Billed Monthly
Out-of-Pocket Expenses Including:
- Postage
- Programming
- Stationery/Envelopes
- Mailing
- Insurance
- Proxies
- Retention of Records
- Microfilm
- Special Reports
- All other out-of-pocket expenses
(1)<F1>No fee shall be paid on shareholder accounts in the Cash Reserve
Portfolio which are subject to a Shareholder Servicing Agreement.
EXHIBIT 9(C)
Accounting/Pricing Agreement
----------------------------
ACCOUNTING/PRICING AGREEMENT
This Accounting/Pricing Agreement is made as of this 1st day of May, 1993
by and between Principal Preservation Portfolios, Inc., a Maryland corporation
(the "Fund") and B. C. Ziegler and Company, a Wisconsin corporation ("Ziegler").
WHEREAS, a majority of the Directors of the Fund and a majority of the
disinterested Directors of the Fund have approved this Agreement between Ziegler
and the Fund, and in so approving the Agreement made the following findings:
a. the Agreement is in the best interest of the Fund and its
Shareholders;
b. the services to be performed pursuant to the Agreement are services
required for the operation of the Fund;
c. Ziegler can provide services, the nature and quality of which are at
least equal to those provided by others offering the same or similar
services; and
d. the fees for such services are fair and reasonable in light of the
usual and customary charges made by others for services of the same
nature and quality.
WHEREAS, the Fund is authorized to issue shares in separate classes (the
"Portfolios") with each such class representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund desires Ziegler to render the services to the Fund in the
manner and on the terms and conditions hereinafter set forth with respect to
each of the Fund's Portfolios identified on Schedule C attached hereto, as
modified from time to time by the mutual consent of the parties; and
WHEREAS, the Administrative Services Agreement, dated as of August 26,
1988, by and between the Fund and Ziegler, as amended and renamed the
Accounting/Pricing Services Agreement by Amendment No. 1, is terminated and
superseded upon the effectiveness of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Services. The Fund hereby engages Ziegler, and Ziegler accepts such
--------
engagement, to perform accounting and pricing services for the Fund as described
in more detail on Schedule A, as the same may be modified from time to time by
vote of a majority of the Fund's directors including a majority of those who are
not interested persons of Ziegler, (the "Services"). The Fund agrees that
Ziegler shall have ready access to the Fund's agents, books, records, financial
information, management and resources, at such times and for such periods as
Ziegler deems necessary to perform the Services.
2. Rate of Payment for the Services.
---------------------------------
A. Contract Price. The Fund agrees to pay Ziegler for the Services
--------------
at such rate, as may be approved annually by a majority of the Fund's directors,
including a majority of directors who are not parties to this Agreement or
interested persons of Ziegler, (the "Contract Price") as stated in Schedule B.
The Fund shall also pay all expenses, as set forth in paragraph B below,
applicable taxes, duties and charges (including sales, use and excise taxes)
levied or assessed as a result of this Agreement. The Contract Price shall be
payable monthly within ten (10) days of the date of invoice. The Contract Price
shall be adjusted annually by mutual agreement.
B. Reimbursement for Expenses. Subject to the Fund's prior
--------------------------
approvals, Ziegler shall be paid by the Fund for actual expenses and costs
incurred by Ziegler in the performance of the Services, including, but not
limited to, long distance telephone calls, postage, computer time, supplies and
expenses and costs stated in Schedule B hereto.
3. Employees. All personnel assigned by Ziegler to perform the Services
---------
will be employees of Ziegler or its affiliates. Ziegler will be considered for
all purposes, an independent contractor, and it will not, directly or
indirectly, act as an agent, servant or employee of the Fund, or make any
commitments or incur any liabilities on behalf of the Fund without its prior
written consent.
4. Ziegler's Use of the Services of Others. Ziegler may (at its cost
---------------------------------------
except as contemplated by Paragraph 2(B) of this Agreement) employ, retain or
otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing the Fund with such information or
Services as it may deem necessary, appropriate or convenient for the discharge
of its obligations hereunder or otherwise helpful to the Fund, or in the
discharge of its overall responsibilities with respect to the Services to be
provided to the Fund.
5. Ownership of Records. All records required to be maintained and
--------------------
preserved by the Fund pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the Investment Company
Act of 1940, as amended (the "Act"), and maintained and preserved by Ziegler on
behalf of the Fund are the property of the Fund and will be surrendered by
Ziegler promptly on request by the Fund.
6. Reports to Fund by Ziegler. Ziegler shall provide the Fund, at such
--------------------------
times as the Fund may reasonably require, with reports relating to the Services
provided by Ziegler under this Agreement. Such reports shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the Fund.
7. Services to Other Clients. Nothing herein contained shall limit the
-------------------------
freedom of Ziegler or any affiliated person of Ziegler to render investment
advice or corporate administrative services to other investment companies, to
act as investment advisor or investment counselor to other persons, firms or
corporations, or to engage in other business activities.
8. Limitation of Liability of Ziegler. Neither Ziegler, nor any of its
----------------------------------
officers, directors, or employees, nor any person performing administrative or
other functions for the Fund (at the direction or request of Ziegler) or the
Advisor in connection with Ziegler's discharge of its obligations undertaken or
reasonably assumed with respect to this Agreement, shall be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except for loss resulting from
willful misfeasance, bad faith, or gross negligence in the performance of its or
their duties on behalf of the Fund or from reckless disregard by Ziegler or any
such person of the duties of Ziegler under this Agreement. In no case shall
Ziegler's or any such person's liability in connection with the matters to which
this contract relates be greater than one year's fee income received by Ziegler
under performance of this contract.
9. Term of Agreement. The term of this Agreement shall begin, with
-----------------
respect to any Portfolio of the Fund, on the date agreed upon between the
parties. Once effective with respect to any Portfolio, this Agreement will
continue in effect from year to year with respect to such Portfolio, subject to
the termination provisions and all other terms and conditions hereof, so long as
such continuation shall be specifically approved at least annually by the board
of directors of the Fund or by vote of a majority of the outstanding voting
securities of such Portfolio and, concurrently with such approval by the board
of directors or prior to such approval by the holders of the outstanding voting
securities of such Portfolio, as the case may be, by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the directors of the Fund who are not parties to this Agreement or interested
persons of any such party. Ziegler shall furnish to the Fund, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment hereof.
10. Termination of Agreement. This Agreement may be terminated with
------------------------
respect to each Portfolio by any party hereto without the payment of any
penalty, upon 60 days prior notice in writing to the other party; provided that,
in the case of termination by the Fund, such action shall have been authorized
by resolutions of a majority of the directors of the Fund who are not parties to
this Agreement or interested persons of any such party, or by vote of a majority
of the outstanding voting securities of each Portfolio affected by such
termination. This Agreement shall automatically and immediately terminate in
the event of its assignment.
11. Miscellaneous.
-------------
A. Captions. The captions in this Agreement are included for convenience of
--------
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
B. Interpretation. Nothing herein contained shall be deemed to require the
--------------
Fund to take any action contrary to its Articles of Incorporation or By-Laws, or
any applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the board of directors of the Fund
of its responsibility for and control of the conduct of the affairs of the Fund.
C. Definitions. Any question of interpretation of any term or provision of
-----------
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretations thereof, if any, by the United States courts or,
in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission validly issued
pursuant to the Act. In addition, where the effect of a requirement of the Act
reflected in any provision of this Agreement is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or of
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
D. Governing Law. This Agreement shall be construed and governed by the laws
-------------
of the state of Wisconsin.
E. Amendment. This Agreement, including the Schedules hereto, may be amended
---------
only by an instrument in writing executed by the parties.
F. Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party or when
deposited in the United States Mail, certified or registered mail, postage
prepaid, return receipt requested, and addressed to the principal place of
business of such party, unless and until any of such parties notifies the
parties in accordance with this section of a change of address.
G. Entire Agreement. This Agreement together with the Schedules hereto
----------------
constitutes the entire agreement between the Fund and Ziegler with respect to
the subject matter hereof. There are no restrictions, promises, warranties,
covenants or undertakings other than those expressly set forth herein and
therein. This Agreement supersedes all prior negotiations, agreements and
undertakings between the parties with respect to such subject matter.
H. Enforceability. The invalidity or unenforceability of any provision hereof
--------------
shall not affect or impair any other provisions.
I. Scope of Agreement. If the scope of any of the provisions of this
------------------
Agreement is too broad in any respect whatsoever, to prevent enforcement to its
full extent, then such provisions shall be enforced to the maximum extent
permitted by law, and the parties hereto consent and agree that such scope may
be judicially modified accordingly and that the whole of such provisions of this
Agreement shall not hereby fail, but that the scope of such provisions shall be
curtailed only to the extent necessary to conform to the law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
By: /s/ R. D. Ziegler
------------------------------
R. D. Ziegler, President
B. C. ZIEGLER AND COMPANY
By: /s/ Peter D. Ziegler
------------------------------
Peter D. Ziegler, President
SCHEDULE A
Services to be performed by Ziegler:
1. Calculate daily net asset value per share.
2. Maintain original entry documents and books of record and general ledgers.
3. Post cash receipts and disbursements.
4. Reconcile bank account balances monthly.
5. Record purchases and sales based upon portfolio manager communications.
6. Prepare monthly and annual summaries to assist in the preparation of
financial statements of, and regulatory reports for, the Fund.
SCHEDULE B
B. C. Ziegler Accounting/Pricing
Fee Schedule
For: Principal Preservation Portfolios, Inc.
Stand Alone Portfolios, Except for Cash Reserve Portfolio
- ---------------------------------------------------------
Minimum - $19,000 Annually per Portfolio
Asset Charge - Assets of $30 million but less than
$100 million - .03 of 1%
Assets of $100 million but less than
$250 million - .02 of 1%
Assets of $250 million or more - .01 of 1%
Plus: Out of Pocket Expenses
Pricing valuations - by outside pricing sources
Paper, phone and other miscellaneous expenses
Fees will be billed monthly
Cash Reserve Portfolio
- ----------------------
Minimum - $15,000 Annually
Maximum - $125,000 Annually
Asset Charge - Average Daily Net Assets of $50 million but less
than $100 million - 0.04 of 1%
Average Daily Net Assets of $100 million but less than
$200 million - 0.03 of 1%
Average Daily Net Assets of $200 million or more - 0.01 of 1%
Plus: Out of Pocket Expenses - Pricing valuations (by outside
pricing sources), paper, phone and other miscellaneous
expenses
SCHEDULE C
Stand Alone Portfolios
----------------------
1. Government Portfolio (Effective 5/1/93)
2. Insured Tax-Exempt Portfolio (Effective 5/1/93)
3. Tax-Exempt Portfolio (Effective 5/1/93)
4. Balanced Portfolio (Effective 5/1/93)
5. S&P 100 Plus Portfolio (Effective 5/1/93)
6. Dividend Achievers Portfolio (Effective 5/1/93)
7. Wisconsin Tax-Exempt Portfolio (Effective 6/13/94)
8. Select Value Portfolio (Effective 8/24/94)
9. Cash Reserve Portfolio, including Class X and Class Y Common Stock
Combined (Effective January 1, 1996)
10. PSE Technology Stock Index (as of effective date of Post-Effective
Amendment No. 33 to Registration Statement of Form N-1A)
EXHIBIT 15
Rule 12b-1 Distribution Plan
----------------------------
The Plan, except for the Addendum that follows, was previously filed as
Exhibit 15 to the Post-Effective Amendment No. 32 to this Registration
Statement, and is incorporated into this Exhibit by this reference.
Addendum
Dated January 15, 1996
To Distribution Plan of
Principal Preservation Portfolios
The Board of Directors of Principal Preservation Portfolios, by unanimous
vote, including all of the non-interested directors, on January 15, 1996 hereby
adopts the Distribution Plan of the Fund for the PSE Technology Stock Index.
