As filed with the Securities and Exchange Commission on March 1, 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.
-------
Post-Effective Amendment No. 32 x
------
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 34 x
------
(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 Treasurer
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)
-----
on (date) pursuant to paragraph (b)
-----
X 60 days after filing pursuant to paragraph (a)(1)
-----
on (date) pursuant to paragraph (a)(1)
-----
75 days after filing pursuant to paragraph (a)(2) of rule
-----
485.
If appropriate, check the following:
this post-effective amendment designates a new
-----
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 27, 1996.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
FORM N-1A
CROSS REFERENCE SHEET
Form N-1A
Item No. Prospectus Heading
- -------- ------------------
PART A
1. Cover Page.................... Cover Page
2. Synopsis...................... Questions and Answers; Expenses
3. Condensed Financial
Information................. Financial Highlights
4. General Description of
Registrant.................. Questions and Answers; Description of
Shares
5. Management of the Fund........ Management; Determination of Net Asset
Value Per Share; Portfolio Transactions
and Brokerage; Other Information
6. Capital Stock and Other
Securities.................. Redemptions; Tax Status; Description of
Shares
7. Purchase of Securities Being
Offered..................... Purchase of Shares; Determination of
Net Asset Value Per Share; Redemptions;
Distribution 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..................... Historical Information
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 -
The Investment Advisors
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
22. Calculation of Performance
Data ....................... Performance Information; Portfolio
Ratings
23. Financial Statements Financial Statements
(PRINCIPAL PRESERVATION LOGO)
May 1, 1996
PROSPECTUS
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
Five portfolios (the ''Portfolios'') of the Principal Preservation Portfolios,
Inc. (''Principal Preservation'') family of mutual funds are offered by this
Prospectus:
GOVERNMENT PORTFOLIO
TAX-EXEMPT PORTFOLIO
S&P 100 PLUS PORTFOLIO
SELECT VALUE PORTFOLIO
DIVIDEND ACHIEVERS PORTFOLIO
The risks and special characteristics of investing in each of the Portfolios
are highlighted in the sections of this Prospectus titled ''Questions and
Answers'' and ''Special Considerations.'' Each Portfolio is managed by Ziegler
Asset Management, Inc. (''Ziegler Asset Management''). PanAgora Asset
Management, Inc. (''PanAgora'') serves as the sub-advisor to the S&P 100 Plus
Portfolio, and Skyline Asset Management, L.P. (''Skyline'') serves as sub-
advisor to the Select Value Portfolio. The investment advisor and relevant sub-
advisor(s) are sometimes referred to together as the ''Advisors'' of the
relevant Portfolio(s). 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 any of the Portfolios. Investors should read
and retain this Prospectus for future reference. A Statement of Additional
Information dated May 1, 1996, containing additional information about Principal
Preservation and the Portfolios 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 Principal Preservation's distributor, B.C. Ziegler and Company (''Ziegler''),
215 North Main Street, West Bend, WI 53095 (telephone 800-826-4600) or from
Selected Dealers that have agreements with respect to the distribution of shares
of the Portfolios.
SHARES OF THE PORTFOLIOS 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 (''FDIC'') 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 MAY 1, 1996.
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. Two additional series of Principal Preservation, the
Cash Reserve Portfolio and the Wisconsin Tax-Exempt Portfolio, are offered by
separate Prospectuses.
WHAT ARE THE BENEFITS FROM INVESTING IN THE PORTFOLIOS?
Economy of Size. The Portfolios are 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 Advisors.
A choice of portfolios. Principal Preservation offers investors five
distinct portfolio choices through this Prospectus:
Government Portfolio
Select Value Portfolio
Dividend Achievers Portfolio
Tax-Exempt Portfolio
S&P 100 Plus Portfolio
Professional management. Each 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.
Portfolio diversification. Mutual funds combine the funds of many investors
to obtain a diversified portfolio. The burden of selecting securities is eased
and the high cost investors would otherwise incur through smaller purchases is
trimmed.
Liquidity. Shares of any Portfolio may be redeemed at any time at their
current net asset value. See ''Redemptions.''
Retirement Plans. The tax-deferred advantages of tax-qualified retirement
plans are open to investors in Principal Preservation. You can invest, with a
$500 minimum investment, through an IRA. Principal Preservation makes certain
prototype plans available to investors. See ''Shareholder Services - Tax
Sheltered Retirement Plans.''Because most of the interest income from the Tax-
Exempt Portfolios is exempt from federal income tax, shares of those Portfolios
are not recommended for purchase by a tax sheltered retirement plan.
WHAT ARE THE PORTFOLIOS' INVESTMENT OBJECTIVES?
Each Portfolio has its own investment objectives and policies. See
''Investment Objectives'' and ''Investment Program'' in this Prospectus and
''Investment Program'' in the Statement of Additional Information. There can be
no assurance that a Portfolio's investment objective will be achieved.
GOVERNMENT PORTFOLIO: to obtain the highest total return consistent with
preservation of principal through investing in a portfolio of instruments and
obligations issued by the U.S. Treasury, or which are backed by the
unconditional full faith and credit of the United States government, its
agencies or instrumentalities (''U.S. Government Securities'').
TAX-EXEMPT PORTFOLIO: to obtain the highest total return consistent with
preservation of principal through investing in high quality municipal bonds with
remaining maturities of two to 20 years.
S&P 100 PLUS PORTFOLIO: to obtain a total return which exceeds that of the
S&P 100 Index by investing in a portfolio of common stocks which approximately
parallels the composition of the S&P 100 Index, and by using options to attempt
to enhance return and hedge protectively against adverse changes in stock market
values.
SELECT VALUE PORTFOLIO: seeks to obtain maximum capital appreciation
primarily through investment in common stocks that the Advisors consider
undervalued relative to earnings, book value, or potential earnings growth. The
Select Value Portfolio pursues its investment objective generally by emphasizing
investments in smaller to medium-sized companies, although the Portfolio is not
restricted to investments in companies of any particular size.
DIVIDEND ACHIEVERS PORTFOLIO: to obtain capital appreciation and income
through investing in a portfolio of common stocks of companies that have
achieved a superior record of dividend growth.
ARE THERE ANY RISKS TO CONSIDER?
Certain securities in which the Portfolios may invest and activities in which
they may engage involve special considerations and risks. For example, the
cyclical nature of the stock market may affect the value of equity securities,
changes in interest rates and average maturities may affect the value of debt
securities, and changes in general economic conditions and in the financial
positions and credit ratings of issuers may affect the value of all types of
securities in which the Portfolios invest.
The Select Value Portfolio is designed for long term investors willing to
accept more investment risk and volatility than the stock market in general, but
with less investment risk and volatility than aggressive capital appreciation
funds. The Select Value Portfolio's net asset value may be subject to above-
average fluctuations than the net asset values of other equity-based investment
companies because greater than average risk will be assumed in investing in
smaller to medium-sized companies for the purpose of seeking to maximize capital
appreciation. See ''Investment Program - Select Value Portfolio.''
Certain hedging strategies and related option transactions in which the S&P
100 Plus and Dividend Achievers Portfolios may engage and futures transactions
in which the S&P 100 Plus Portfolio may engage expose those Portfolios to
special risks. See ''Investment Program - Options and Futures Activities -
Risks Associated With Options and Futures.''
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, such as the Standard & Poor's 100 Index, the Standard & Poor's 500 Index
and the New York Stock Exchange Composite Index. Frequently, the performance of
individual investment managers does not match the performance of such stock
indices.
HOW DO THE PORTFOLIOS DISTRIBUTE INCOME?
Dividends will be declared daily and paid monthly in the Government and Tax-
Exempt Portfolios, and will be declared and paid quarterly in the S&P 100 Plus,
Select Value, and Dividend Achievers Portfolios. Any net realized capital gains
will be declared and paid annually. Investors may receive their income
dividends and capital gain 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.''
WHO MANAGES THE PORTFOLIOS?
Ziegler Asset Management is the investment advisor for each of the
Portfolios. PanAgora is the sub-advisor for the S&P 100 Plus Portfolio and
Skyline is the sub-advisor for the Select Value Portfolio. 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. Shares may be purchased from Ziegler in its capacity
as distributor (the ''Distributor'') of each Portfolio's shares, 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 Portfolios (''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 a 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 any 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 the seven Portfolios offered by this
Prospectus is provided by separate prospectuses, copies of which can be obtained
from the Distributor.
<TABLE>
EXPENSES
<CAPTION>
S&P 100 SELECT DIVIDEND
GOVERNMENT TAX-EXEMPT PLUS VALUE ACHIEVERS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) (1)<F1> 3.5% 3.5% 4.5% 4.5% 4.5%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price) 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage
of original purchase price or
redemption proceeds) 0% 0% 0% 0% 0%
Redemption Fees (as a percentage of
amount redeemed) (2)<F2> 0% 0% 0% 0% 0%
Exchange Fee $5.00 $5.00 $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES -
AFTER WAIVERS AND REIMBURSEMENTS
(as a percentage of average net assets) (3)<F3>
Management Fees (After Waivers) (5)<F5> 0.60% 0.60% 0.59%(6)<F6> 0.37% 0.75%
12b-1 Fees (4)<F4> 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses:
Custodian Fees 0.04% 0.03% 0.04% 0.13% 0.06%
Transfer Agent Fees 0.12% 0.09% 0.14% 0.14% 0.21%
Other Fees (After Reimbursement) (5)<F5> 0.14% 0.18% 0.21% 0.41% 0.03%
----- ----- ----- ----- -----
Total Other Expenses 0.30% 0.30% 0.39% 0.68% 0.30%
Total Fund Operating Expenses
(After Reimbursement) (5)<F5> 1.15% 1.15% 1.23% 1.30% 1.30%
(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 percentages expressing annual operating expenses are based on amounts
actually incurred during the year ended December 31, 1995. Fees paid by all of
the Portfolios for custodian and transfer agent services are determined on a
basis other than a straight percentage of average net assets. For a discussion
of fees associated with these services, see ''Management - The Advisors.''
(4)<F4>Prior to July 1, 1995, fees payable under Principal Preservation's Rule
12b-1 Distribution Plan by the Government, Tax-Exempt, S&P 100 Plus and Dividend
Achievers Portfolios were assessed only on assets held in accounts opened on or
after March 1, 1991. On July 1, 1995, an amendment to Principal Preservation's
Rule 12b-1 Distribution Plan (the ''Rule 12b-1 Distribution Plan Amendment'')
went into effect, and resulted in fees being assessed on all assets of those
four Portfolios. The ''Rule 12b-1 Fees'' shown in the table for those four
Portfolios have been restated to reflect implementation of the Rule 12b-1
Distribution Plan Amendment as though it had been in effect throughout all of
fiscal 1995. The ''12b-1 Fees'' actually paid by the Government, Tax-Exempt,
S&P 100 Plus and Dividend Achievers Portfolios for the year ended December 31,
1995 amounted to 0.19%, 0.14%, 0.18% and 0.18% of the respective Portfolio's
average net assets.
Because the Rule 12b-1 distribution fee is paid quarterly throughout the life
of the investment 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 is
generally 6.25% of new sales plus an interest factor.
(5)<F5>The Advisor has committed to waive advisory fees and/or reimburse
expenses to the Select Value and Dividend Achievers Portfolios so that, for
fiscal 1996, the total operating expenses of those Portfolios will not exceed
1.30% of their average daily net assets. Without giving effect to such waivers
and reimbursements, ''Management Fees,'' ''Other Fees,'' and ''Total Fund
Operating Expenses''for the Dividend Achievers Portfolio would have been 0.75%,
0.75% and 1.50%, respectively of the Portfolio's average net assets, and for the
Select Value Portfolio those ratios would have been 0.75%, 2.55% and 3.30%,
respectively.
In connection with the implementation of the Rule 12b-1 Distribution Plan
Amendment, Ziegler committed to reimburse expenses to each of the Government,
Tax-Exempt, S&P 100 Plus and Dividend Achievers Portfolios so that, on an
annualized basis, their ''Total Fund Operating Expenses'' would not exceed
1.15%, 1.15%, 1.25% and 1.30%, respectively, of their average daily net assets
for fiscal 1996. Without giving effect to this expense reimbursement
commitment, ''Other Fees'' for these four Portfolios would have been 0.19%,
0.19%, 0.21% and 0.31%, respectively, and their ''Total Operating Expenses''
would have been 1.20%, 1.16%, 1.23% and 1.58%, respectively.
(6)<F6>Reflects a May 1, 1996 reduction in the rate of the advisory fee payable
by the S&P 100 Plus Portfolio. See ''Management - The Advisors.''
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment in each Portfolio,
assuming 5% annual return and redemption at the end of each time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Government Portfolio $46 $70 $96 $170
Tax-Exempt Portfolio 46 70 96 170
S&P 100 Plus Portfolio 57 83 109 187
Select Value Portfolio 58 84 113 195
Dividend Achievers Portfolio 58 84 113 195
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.
FINANCIAL HIGHLIGHTS
The following Financial Highlights tables present information relating to a
share of capital stock of each Portfolio outstanding for the periods presented.
This information should be read in conjunction with the financial statements and
related notes thereto contained in Principal Preservation's 1995 Annual Report
to Shareholders, which financial statements are incorporated herein by
reference. The information has been audited by Arthur Andersen LLP, independent
public accountants, whose report thereon is contained in the 1995 Annual Report
to Shareholders, copies of which are available without charge from the
Distributor.
<TABLE>
GOVERNMENT PORTFOLIO
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $8.84 $9.98 $9.64 $9.68 $9.10 $9.11 $8.88 $9.11 $9.71 $9.37
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .61 .61 .63 .67 .73 .76 .75 .75 .73 .80
Net realized and
unrealized gains (losses)
on investments .80 (1.14) .35 (.04) .58 (.01) .23 (.17) (.42) .49
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.41 (.53) .98 .63 1.31 .75 .98 .58 .31 1.29
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.75) (.73) (.83)
Distributions from net
realized gains
on investments - - - - - - - (.06) (.13) (.12)
Distribution of capital - - - - - - - - (.05) -
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.61) (.61) (.64) (.67) (.73) (.76) (.75) (.81) (.91) (.95)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $9.64 $8.84 $9.98 $9.64 $9.68 $9.10 $9.11 $8.88 $ 9.11 $ 9.71
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN*<F7> 16.3% (5.4)% 10.3% 6.8% 15.1% 8.7% 11.5% 6.5% 3.4% 14.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $49,319 $47,324 $54,327 $37,634 $32,737 $29,351 $30,631 $32,950 $31,036 $32,162
Ratio of net expenses to
average net assets 1.1%+ 1.1% 1.0% 1.0% 1.1% 1.2% 1.2%+<F8>1.2%+<F8>1.3%+<F8>0.7%+<F8>
Ratio of net investment
income to average net assets 6.5%+ 6.6% 6.2% 7.0% 8.0% 8.5% 8.4%+<F8>8.3%+<F8>7.8%+<F8>7.8%+<F8>
Portfolio turnover rate 68.2% 106.1% 8.7% 10.0% 62.2% 57.1% 141.8% 36.7% 80.2% 307%
*<F7>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F8>Reflects a voluntary reimbursement of expenses of 0.02% in 1995, 0.1% in
1989, 0.5% in 1988, 0.3% in 1987 and 1.2% in 1986.
</TABLE>
<TABLE>
TAX-EXEMPT PORTFOLIO
<CAPTION>
For the years ended December 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $8.36 $9.41 $8.67 $8.46 $8.19 $8.23 $8.06 $8.14 $8.81 $9.02
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .45 .45 .48 .50 .53 .53 .55 .55 .60 .63
Net realized and
unrealized gains (losses)
on investments 1.03 (1.05) .74 .21 .27 (.04) .17 (.08) (.67) (.21)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.48 (.60) 1.22 .71 .80 .49 .72 .47 (.07) .42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55) (.60) (.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.45) (.45) (.48) (.50) (.53) (.53) (.55) (.55) (.60) (.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $9.39 $8.36 $9.41 $8.67 $8.46 $8.19 $8.23 $8.06 $8.14 $8.81
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN*<F9> 18.1% (6.4)% 14.3% 8.6% 10.0% 6.2% 9.2% 6.0% (0.9)% 5.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $56,443 $55,492 $68,102 $60,171 $63,932 $65,265 $73,333 $85,469 $107,471 $143,635
Ratio of net expenses to
average net assets 1.0%+<F10> 1.0% 0.9% 0.9% 0.9% 0.9% 1.0% 1.2% 1.1% 1.1%
Ratio of net investment
income to average net assets 4.9%+<F10> 5.2% 5.2% 5.9% 6.3% 6.6% 6.7% 6.9% 7.1% 7.2%
Portfolio turnover rate 105.9% 36.1% 56.3% 48.5% 38.3% 40.3% 21.5% 38.8% 18.0% 26.0%
*<F9>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F10>Reflects a voluntary reimbursement of expenses of 0.01% in 1995.
</TABLE>
<TABLE>
S&P 100 PLUS PORTFOLIO
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62 $10.43 $9.42
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .25 .25 .21 .24 .27 .28 .26 .26 .33 .38
Net realized and
unrealized gains (losses)
on investments 5.21 (.09) 1.14 .48 2.93 (.67) 2.17 1.37 .14 1.03
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
TOTAL FROM INVESTMENT
OPERATIONS 5.46 .16 1.35 .72 3.20 (.39) 2.43 1.63 .47 1.41
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
LESS DISTRIBUTIONS:
Dividends from net
investment income (.25) (.25) (.21) (.24) (.27) (.28) (.26) (.26) (.33) (.36)
Distributions from
net realized gains
on investments (.63) - (.11) (.69) (.31) - (.01) (.88) (.95) (.04)
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
TOTAL DISTRIBUTIONS (.88) (.25) (.32) (.93) (.58) (.28) (.27) (1.14) (1.28) (.40)
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
NET ASSET VALUE,
END OF PERIOD $19.53 $14.95 $15.04 $14.01 $14.22 $11.60 $12.27 $10.11 $9.62 $10.43
------ ------ ------ ------ ------ ------ ------ ----- ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN*<F11> 36.7% 1.1% 9.7% 5.2% 27.8% (3.2)% 24.3% 17.1% 4.1% 16.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $57,062 $40,034 $38,944 $30,025 $27,420 $20,413 $20,811 $16,960 $18,752 $9,826
Ratio of net expenses to
average net assets 1.2% 1.2% 1.2% 1.3% 1.3% 1.3%+<F12>1.3%+<F12>1.4%+<F12>0.6%+<F12> -%+<F12>
Ratio of net investment
income to average
net assets 1.4% 1.7% 1.4% 1.7% 2.0% 2.4%+<F12>2.3%+<F12>2.5%+<F12>2.7%+<F12>3.7%+<F12>
Portfolio turnover rate 3.5% 1.0% 2.2% 8.5% 3.1% 1.9% 3.0% 37.5% 54.3% 12.8%
*<F11>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F12>Reflects a voluntary reimbursement of expenses of 0.2% in 1990, 0.4% in
1989, 0.8% in 1988, 1.7% in 1987 and 3.7% in 1986.
</TABLE>
SELECT VALUE PORTFOLIO
FOR THE PERIOD FROM
AUGUST 23, 1994
(COMMENCEMENT OF
FOR THE YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $9.03 $9.55
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .14 .04
Net realized and unrealized gains
(losses) on investments 1.73 (.51)
----- -----
TOTAL FROM INVESTMENT OPERATIONS 1.87 (.47)
----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.14) (.03)
Distributions from net realized
gains on investments (.43) (.01)
Distributions in excess of net
realized gains on investments (.12) -
Book return of capital - (.01)
----- -----
TOTAL DISTRIBUTIONS (.69) (.05)
------ -----
NET ASSET VALUE, END OF PERIOD $10.21 $9.03
------ ------
------ ------
TOTAL RETURN**<F14> 20.8% (5.0)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $3,445 $1,935
Ratio of net expenses to average
net assets 0.8%+<F15> 0.8%*<F13>+<F15>
Ratio of net investment income to average
net assets 1.4%+<F15> 1.1%*<F13>+<F15>
Portfolio turnover rate 124.3% 20.2%
*<F13>Annualized.
**<F14>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F15>Reflects a voluntary reimbursement of expenses of 2.5% in 1995 and 0.4% in
1994.
<TABLE>
DIVIDEND ACHIEVERS PORTFOLIO
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF PERIOD $13.24 $13.40 $14.25 $14.84 $11.50 $11.65 $10.00 $8.99 $9.55
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .18 .18 .14 .14 .25 .25 .28 .28 .28
Net realized and unrealized gains
(losses) on investments 3.99 (.02) (.85) .31 4.14 (.15) 1.65 1.06 (.56)
----- ----- ------ ----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 4.17 .16 (.71) .45 4.39 .10 1.93 1.34 (.28)
----- ----- ------ ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.18) (.18) (.14) (.14) (.25) (.25) (.28) (.27) (.28)
Distributions from net realized gains
on investments (.26) (.14) - (.90) (.80) - - (.06) -
----- ----- ------ ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.44) (.32) (.14) (1.04) (1.05) (.25) (.28) (.33) (.28)
----- ----- ------ ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $16.97 $13.24 $13.40 $14.25 $14.84 $11.50 $11.65 $10.00 $8.99
------ ------ ------ ----- ----- ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN*<F16> 31.7% 1.2% (5.0)% 3.1% 38.5% 1.0% 19.5% 15.0% (3.2)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(to nearest thousand) $25,393 $20,231 $24,928 $27,020 $18,202 $11,468 $12,750 $6,854 $6,796
Ratio of net expenses to average
net assets 1.3%+<F17> 1.5% 1.3%+<F17>1.2%+<F17>1.2%+<F17>1.2%+<F17>1.2%+<F17>1.2%+<F17>0.6%+<F17>
Ratio of net investment income to average
net assets 1.2%+<F17> 1.3% 1.0%+<F17>1.0%+<F17>1.8%+<F17>2.3%+<F17>2.6%+<F17>2.9%+<F17>2.7%+<F17>
Portfolio turnover rate 28.2% 36.5% 92.7% 83.0% 96.5% 47.7% 30.9% 10.1% 10.5%
*<F16>The Fund's sales charge is not reflected in total return as set forth in
the table.
+<F17>Reflects a voluntary reimbursement of expenses of 0.2% in 1995, 0.1% in
1993, 0.1% in 1992, 0.2% in 1991, 0.5% in 1990, 0.7% in 1989, 1.7% in 1988 and
2.3% in 1987.
</TABLE>
INVESTMENT OBJECTIVES
The following is a brief description of the investment objectives and
policies of each Portfolio. 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 any Portfolio will be achieved.
The Statement of Additional Information contains specific investment
restrictions which govern the investments of each Portfolio. Certain of these
restrictions and each Portfolio's investment objective are fundamental policies,
which means that they may not be changed without a majority vote of shareholders
of that Portfolio. All other investment policies and practices may be changed
without shareholder approval. The fundamental restrictions applicable to the
Portfolios include a prohibition on purchasing a security, other than a ''U.S.
Government Security'' (as defined below) or a security necessary to approximate
the composition of an index, if as a result more than 5% of the total assets of
the Portfolio would be invested in the securities of the issuer, or if the
Portfolio would own more than 10% of the outstanding voting securities of the
issuer.
Each Portfolio is subject to a number of additional investment restrictions
which are described in the section of the Statement of Additional Information
entitled ''Investment Restrictions.'' Among these restrictions are that no
Portfolio may borrow money or property except for temporary or emergency
purposes. If a 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). No Portfolio will pledge more than 15% of its net assets
to secure such borrowings. In the event a 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 a Portfolio are
not deemed to be a pledge of assets.
GOVERNMENT PORTFOLIO
The investment objective of this Portfolio is to obtain the highest total
return consistent with preservation of principal through investments in U.S.
Government Securities.
TAX-EXEMPT PORTFOLIO
The investment objective of this Portfolio is to obtain the highest total
return, consistent with the preservation of principal, through investment in
high quality municipal bonds with remaining maturities of two to 20 years. It
is a fundamental policy of the Portfolio to invest at least 90% of its total
assets in tax-exempt municipal securities, under ordinary circumstances.
Substantially all of the Portfolio's interest income is intended to be exempt
from federal income taxes, but may be subject to state and local taxes. Any
capital gain will be subject to federal income tax and may be subject to state
and local taxes. See ''Tax Status.''
S&P 100 PLUS PORTFOLIO
The investment objective of this Portfolio is to obtain a total return from
dividends and unrealized and realized capital gains which exceeds that of the
S&P 100 Index. To achieve this objective, the Portfolio invests in a portfolio
of common stocks which approximately parallels the composition of the S&P 100
Index, and engages in various portfolio strategies from time to time to attempt
to enhance total return and hedge protectively against adverse changes in stock
market values, including overweighting and underweighting the Portfolio's
investments in certain common stocks or categories of common stocks relative to
their representation on the Index, and options and futures strategies. It is
not the Portfolio's intention to replicate the S&P 100 Index at all times.
SELECT VALUE PORTFOLIO
The Select Value Portfolio seeks to obtain maximum capital appreciation
primarily through investments in common stocks that the Advisors consider
undervalued relative to earnings, book value or potential earnings growth. The
Portfolio pursues its investment objective generally by investing in smaller and
medium-sized companies, although the Portfolio is not restricted to investments
in companies of any particular size. Smaller companies have market
capitalizations of less than $400 million, and medium-sized companies have
market capitalizations ranging from $400 million to $2 billion. Market
capitalization is calculated by multiplying the total number of a company's
outstanding common shares by the per share market price of such shares.
DIVIDEND ACHIEVERS PORTFOLIO
The investment objective of this Portfolio is to obtain capital appreciation
and income through investment in a portfolio of common stocks of companies that
have achieved a superior record of dividend growth. Because stocks with a
record of superior dividend growth are frequently accorded a market premium,
they will generally not carry a high yield.
INVESTMENT PROGRAM
OVERVIEW
This section contains a general description of the investment program and
other investment practices of each Portfolio. Further information is contained
in the Statement of Additional Information. Shareholders will be notified prior
to implementation of any material change in a Portfolio's investment program.
GOVERNMENT PORTFOLIO
To achieve its objective of obtaining the highest total return consistent
with preservation of principal, this Portfolio will invest in U.S. Government
Securities. These securities are issued with original maturities of from a few
days to 30 years or more, and with varying coupon rates. Although the Portfolio
is not limited as to the average maturity of its bonds, the Advisors believe
that an average maturity of five to ten years is most consistent with the
Portfolio's investment objective. The Advisors have indicated that the
Portfolio's average maturity will be maintained in this range unless and until
market conditions warrant a change and advance notice has been provided to
shareholders. Under normal conditions, the Portfolio does not intend to
purchase zero coupon bonds. However, to the extent such bonds may be utilized,
they would involve greater price volatility than interest bearing bonds of
comparable maturities and would result in taxable income without actual cash
distributions. Under normal market conditions at least 65% of the Portfolio's
assets will be invested in U.S. Government Securities. This Portfolio may also
enter into forward commitments for the purchase of U.S. Government Securities,
may make short sales of securities already owned to defer realization of a gain
for Federal income tax purposes and may lend its portfolio securities. See
''Lending of Portfolio Securities'' and ''Other Investment Practices'' below.
TAX-EXEMPT PORTFOLIO
This Portfolio will invest primarily in municipal securities rated at the
time of purchase in an ''A'' category or higher by Moody's Investors Service,
Inc. (''Moody's''), Standard & Poor's Corporation (''S&P''), or Fitch Investors
Service, Inc. For a description of such ratings, see ''Description of Ratings
of Certain Fixed Income Securities'' in the Statement of Additional Information.
The Portfolio's bonds will generally consist of municipal securities with
remaining maturities of two to 20 years. The Portfolio may also enter into
forward commitments for the purchase of municipal securities, may make short
sales of securities already owned to defer realization of a gain or loss for
federal income tax purposes and may lend its portfolio securities. See
''Lending of Portfolio Securities'' and ''Other Investment Practices'' below.
S&P 100 PLUS PORTFOLIO
The S&P 100 Index was designed to track closely the S&P 500 Index, which is
designed to be representative of the stock market as a whole. There have been
some significant variances in the correlation between the S&P 100 and S&P 500
Indices and between the S&P 500 Index and the broad market for large
capitalization common stocks. There can be no assurance that any index will
correlate precisely to the stock market as a whole over any specific period of
time, or that the S&P 100 Plus Portfolio's performance will parallel that of
either of these indices or the stock market generally.
The S&P 100 Index was created by the Chicago Board Options Exchange (CBOE) in
1983 with stocks selected from the optionable equities traded on that exchange.
These 100 stocks include many large U.S. corporations. General Electric
Company, American Telephone and Telegraph Company, Exxon Corporation, Coca-Cola
Company, and Merck & Co., Inc. are five of the largest components of the Index.
A complete list of the stocks currently comprising the S&P 100 Index is included
as Appendix A to this Prospectus. The total market value of the stocks which
comprise the S&P 100 Index was approximately % of the market value of the
----
securities traded on the New York Stock Exchange as of December 31, 1995.
The S&P 100 Plus Portfolio invests in the common stocks which make up the S&P
100 Index, in approximately the same relative proportion as the stocks in the
Index comprise the Index. For example, at December 31, 1995, Exxon comprised
approximately 5.2% of the S&P 100 Index, and it is the intention of this
Portfolio generally to invest the same percentage of its common stock interests
in Exxon. The Advisors generally will attempt to match the S&P 100 Index as
closely as is economically feasible, given the higher transaction costs of
trading common stocks in less than 100 share lots. Portfolio purchases in
approximately $4.7 million increments will allow the companies with the lowest
Index weighting to be bought in 100 share lots. The Portfolio does not select
the stocks in the Index, and as the composition of the Index changes, so will
the underlying portfolio of common stocks in the Portfolio. As soon as
practicable after receipt of notification of changes in the S&P 100 Index
(either as to the securities comprising the Index or the percentage of total
composition represented by particular securities), the Advisors will attempt to
adjust the composition of the Portfolio in a similar manner. Under normal
market conditions, at least 65% of this Portfolio's total assets will be
invested in the common stocks which make up the S&P 100 Index.
In the event the Advisors' research and analysis leads them to believe that
certain S&P 100 Index stocks or groups of stocks within related industries or
market sectors likely will underperform and outperform the Index, the Advisors
may overweight or underweight the Portfolio's investments in such common stocks
to take advantage of the anticipated overperformance or protect against the
anticipated underperformance. This strategy relies on the ability of the
Advisor to identify correctly those stocks which will underperform or outperform
the S&P 100 Index. To the extent the Advisors' judgment proves correct, the
performance of the Portfolio will be enhanced as compared to that of the S&P 100
Index. Conversely, if the Advisors' judgment proves incorrect, this
overweighting/ underweighting strategy will detract from the performance of the
Portfolio as compared to the S&P 100 Index.
The S&P 100 Plus Portfolio may write (sell) covered call options and put
options and may purchase call options and put options on individual stocks and
stock indices for the purposes and subject to the limitations described herein.
The Portfolio may seek to enhance its return by writing covered call options or
purchasing put options with respect to some or all of the individual stocks held
in its portfolio. Through the purchase of call and put options with respect to
individual stocks, the Portfolio may at times protectively hedge against an
increase in the price of securities which the Portfolio plans to purchase or
against a decline in the value of securities owned by the Portfolio. Whenever
the Portfolio does not own securities underlying on open option position
sufficient to cover the position, the Portfolio will maintain in a segregated
account with its depository cash or cash equivalents sufficient to cover the
market value of the open position.
The Portfolio may also engage in options transactions on securities indices
as a strategy to hedge against anticipated declines in the S&P 100 Index (and
thereby to hedge against a similar decline in its portfolio) and to enhance the
Portfolio's return through premium income. The success of these strategies and
gains and losses on investments in options depend on the Advisors' ability to
predict correctly the direction of movement in stock prices and other economic
factors. For a more detailed description of the Portfolio's option activities
and strategies, as well as limitations and restrictions applicable thereto, see
''Option and Futures Activities'' below.
At times, the Portfolio may hold uncommitted cash, either to meet anticipated
liquidity needs or pending investment of proceeds derived from sales of the
Portfolio's shares. In order to achieve a return on such uncommitted cash which
approximates the investment performance of the S&P 100 Index, the Advisors may
elect to invest such cash in exchange-traded futures contracts and/or options on
the S&P 500 Index and/or, in the case of index options, on the S&P 100 Index.
This practice is commonly referred to as ''equitizing cash.''
While the Portfolio has open index option positions, it will maintain in a
segregated account with its depository cash or cash equivalents sufficient to
cover the market value of its open positions in accordance with the practices of
the exchanges on which the options are traded. Futures transactions require the
Portfolio to deposit with its custodian a specified amount of cash or cash
equivalents, commonly referred to as initial margin. While the futures position
remains open, the futures contract held by the Portfolio is valued daily at the
official settlement price of the exchange on which it is traded, and the
Portfolio pays or receives variation margin equal to the daily change in value
of the contract. Those practices generally will require that the value of the
open positions be determined daily and that the amount of the segregated account
be adjusted accordingly.
Although such options and futures strategies are intended to reduce
fluctuations in the Portfolio's net asset value, the Portfolio nonetheless
anticipates that its net asset value will fluctuate to some degree, and does not
expect it will outperform the Index at all times. Expenses and losses incurred
as a result of such transactions could reduce the Portfolio's return.
This Portfolio also may make short sales of securities already owned and may
lend its portfolio securities. See ''Lending of Portfolio Securities'' and
''Other Investment Practices'' below.
The S&P 100 Plus Portfolio is not sponsored, endorsed, sold or promoted by
the Standard & Poor's Corporation (''S&P''). S&P makes no representation or
warranty, implied or expressed, to the shareholders 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 S&P Index to
track general stock market performance. S&P's only relationship to this
Portfolio is the licensing of the S&P trademarks and S&P 100 which is
determined, composed and calculated by S&P without regard to this Portfolio.
''Standard & Poor's,'' ''Standard & Poor's 100,'' ''S&P,'' ''S&P 100'' and
''100''in connection with the S&P 100 are trademarks of Standard & Poor's
Corporation.
SELECT VALUE PORTFOLIO
The Portfolio pursues its investment objective generally by investing in
smaller sized companies, having market capitalizations of less than $400
million, and medium-sized companies, having market capitalizations ranging from
$400 million to $2 billion. Although the Portfolio is not restricted to any
particular investments, companies in which the Portfolio invests do business in
a cross-section of industries and generally fall into one of the following three
categories:
1. A company that the Advisors believe will achieve above average growth in
revenues and earnings, but that is selling at a price/earnings ratio at or below
the average for the S&P 500 Index.
2. A company that has experienced problems leading to a depressed stock
price where the Advisors believe that there is a reasonable likelihood that the
company's operations will improve.
3. A company that does not fall into the above categories, but because of
special circumstances appears undervalued and consequently offers potential for
appreciation.
The Portfolio is ordinarily substantially fully invested and, under normal
market conditions, at least 65% of the Portfolio's total assets will be invested
in common stocks of domestic issuers. The Portfolio may also invest up to 5% of
its total assets directly in securities of foreign issuers not publicly traded
in the United States, and may invest without regard to this restriction in
securities of foreign issuers represented by American Depository Receipts
(ADRs), which are receipts issued by an American bank or trust company and
traded on national securities exchange evidencing ownership of the underlying
foreign securities, and equity securities issued by Canadian issuers. The
Portfolio may invest up to 35% of its total assets in high-quality, fixed-income
securities and short-term investments. The Portfolio also may invest up to 5%
of its net assets in warrants for the purchase of equity securities in which the
Portfolio may invest.
The Portfolio employs a value-oriented style of investing, which from time to
time is more or less favored by investors compared to a strategy focusing on
investment in growth-oriented stocks. Although value investing has been less
favored over the past several years, in the Advisors' judgment the advantage of
value-oriented stocks over growth-oriented stocks is greater than usual during
periods of economic recovery. During periods of economic weakness, growth-
oriented stocks may provide solid earnings growth despite the difficult economic
environment, but as the economy improves, many investors are reluctant to pay a
premium for high-priced growth stocks when lower-priced stocks that are also
showing good earnings growth are available.
Smaller and medium-sized company stocks as a group may outperform or
underperform larger capitalization stocks as a group over various periods. For
example, large capitalization stocks generally outperformed smaller
capitalization stocks for most of the mid to late 1980s through 1990. However,
smaller capitalization stocks were the best performing category of equity
securities in 1991, rewarding investors in smaller capitalization stocks for the
greater risk inherent in such stocks. The performance cycle of medium
capitalization stocks tends to mirror that of smaller capitalization stocks, but
with less pronounced peaks and troughs (meaning somewhat lower gains, but also
reduced volatility.)
The performance advantage of smaller capitalization stocks has historically
been greatest in periods of recovery after economic weakness. Comparing stock
performance during and immediately after the last six economic recessions,
smaller capitalization stocks have outperformed larger capitalization stocks by
a margin of nearly two to one. When coupled with a value-oriented investment
strategy, the advantage has historically been even greater.
High-quality, fixed-income securities in which the Portfolio may invest are
limited to those securities which are rated at the time of purchase within the
two highest rating categories assigned by Moody's or S&P, or securities which
are unrated, provided that such securities are judged by the Advisors, at the
time of purchase, to be of comparable quality to securities rated within such
two highest categories. See the Statement of Additional Information for a
description of these securities ratings. General characteristics of fixed-
income securities are described under ''Special Considerations - Debt or Other
Fixed Income Securities''in this Prospectus.
The Portfolio may invest in short-term investments in management of cash
receipts, for liquidity for anticipated redemptions, to meet its cash flow needs
to enable the Portfolio to take advantage of buying opportunities or during
periods when, in the opinion of the Advisors, attractive equity investments are
unavailable. The Portfolio may increase its position in short-term investments
for temporary defensive purposes, such as when the securities markets or
economic conditions are expected to enter a period of decline, but will not
invest more than 35% of its total assets in short-term investments at any one
time. Short-term investments in which the Portfolio may invest are discussed in
more detail under ''Special Considerations - Short-Term Instruments.'' The
Portfolio will only invest in short-term investments which, in the opinion of
the Advisors, present minimal credit and interest rate risk, especially when it
is investing in such securities for temporary defensive purposes.
Other instruments in which the Select Value Portfolio may invest, including
foreign securities, repurchase agreements, loans of portfolio securities and
short sales of securities, as well as, special considerations associated with
those investments, are discussed below. See ''Investment Program - Other
Investment Practices'' and ''Special Considerations.''
DIVIDEND ACHIEVERS PORTFOLIO
The Portfolio invests primarily in common stocks of companies with a superior
record of dividend growth. Such companies typically have strong balance sheets.
In addition to providing an income stream from dividend payments, the Advisors
believe that the market values of these stocks will increase over time because
anticipated future dividend growth is typically reflected in increased market
prices. Generally, the Portfolio limits its investments to the common stocks of
companies that have increased their payment of cash dividends annually for at
least eight of the past ten calendar years, and which have a compound annual
dividend growth of at least 10% per year over that ten-year period. As of
December 31, 1995, approximately 253 companies traded on the New York or
American Stock Exchange or quoted in the NASDAQ National Market System met these
criteria. Depending on the availability of stocks meeting these criteria,
market conditions or portfolio diversification, the Portfolio may invest in the
common stocks of other companies with either a superior record of dividend
growth or that have a demonstrated earnings growth and potential to pay
dividends at a superior rate.
The Portfolio also intends to invest a portion of its assets in liquid
reserves to meet cash flow requirements. Under normal conditions, the Portfolio
anticipates that such reserves will not exceed 20% of total assets. The
Portfolio may increase its reserves for temporary defensive purposes or to
enable it to take advantage of buying opportunities. The Portfolio's reserves
will be invested in money market instruments, including U.S. Government
Securities, certificates of deposit, banker's acceptances, commercial paper and
short-term corporate debt securities.
The Portfolio may seek to enhance income by writing covered call options or
purchasing put options with respect to some or all of its portfolio of common
stocks, but has no present intention to do so. See ''Option Activities'' below.
This Portfolio may also make short sales of securities already owned and lend
its portfolio securities. See ''Lending of Portfolio Securities'' and ''Other
Investment Practices''below.
OPTIONS AND FUTURES ACTIVITIES
General. The financial markets have become increasingly volatile in recent
years. The Advisors believe it is possible to minimize the adverse affects of
those fluctuations and intend to use options on certain stock indices and
individual stocks with respect to the S&P 100 Plus Portfolio. The Advisors also
believe it is possible to enhance the return of the S&P 100 Plus Portfolio
through the use of index options and futures to equitize uncommitted cash.
Options on individual stocks also may be utilized by the Dividend Achievers
Portfolio, but the Advisors have no plans to do so at this time.
Options and Index Futures. The S&P 100 Plus and Dividend Achievers
Portfolios may write (sell) covered call options and buy covered put options on
individual stocks held in their portfolios. The S&P 100 Plus Portfolio may also
engage in similar options transactions on stock indices and short-term
securities, and may purchase call options and write (sell) put options on
individual stocks and stock indices. Put and call options for various stocks
and stock indices are traded on registered securities exchanges. The Advisors
expect to use an index option other than the S&P 100 Index or the S&P 500 Index
only if the exchange on which the S&P options are traded is closed, there is
insufficient liquidity in the options, or if the Portfolio or the Advisors reach
exchange position limits.
Put and call options on a securities index are similar to options on an
individual stock. The principal difference is that an option on a securities
index is settled only in cash. The exercising holder of an index option,
instead of receiving a security, receives the difference between the closing
price of the securities index and the exercise price of the option times a
specified multiple ($100 in the case of the S&P 100 Index).
The S&P 100 Plus Portfolio may invest in exchange-traded futures contracts on
the S&P 500 Index. An index futures contract is an agreement by which one party
agrees to make, and another to take, 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 contract and the price at which the index contract is
originally written (which typically is the value of the index on the date the
contract is entered into). Although the value of the index underlying the
futures contract will be a function of the value of the securities comprising
the index, no physical delivery of those securities is made.
Risks Associated With Options and Futures. The options and futures
activities in which the S&P 100 Plus Portfolio may engage and the options
activities in which the Dividend Achievers Portfolio may engage expose those
Portfolios to certain risks described below. To minimize these risks, each
Portfolio will limit such activities so that no more than 5% of its net assets
will be invested at any time in premiums and margins associated with its open
option and futures positions. Additionally, whenever a Portfolio does not own
securities underlying an open option position sufficient to cover the position,
the Portfolio will maintain in a segregated account with its depository cash or
cash equivalents sufficient to cover the market value of its open option
positions.
The ability of a Portfolio to engage in options or futures activities may be
limited by certain income tax considerations. For example, the limitation on
the percentage of gross income which a Portfolio may realize from transactions
in securities held for less than three months may restrict the Portfolio's
ability to effect transactions in securities held for less than that period.
Therefore, risks may result from changes in market conditions which differ
substantially from those anticipated by the Advisors when option or futures
positions are established, and a Portfolio's ability to adjust its securities
holdings to react to such changes may be limited.
Options and futures activities involve transaction costs consisting of
brokerage commissions, premiums and margin deposits. These costs will reduce
the yield of a Portfolio.
Options transactions by a Portfolio involve the risks that the Portfolio may
be unable at times to close out its positions, that transactions may not
accomplish their purpose because of imperfect market correlations, that, in
hedging transactions, the price movements in the securities underlying the
options may not follow the price movements of the portfolio securities subject
to the hedge, or that the market will move in a direction that makes the option
positions unprofitable.
The effective use of options and futures transactions is dependent, among
other things, on the Portfolio's ability to close out its positions at times
when the Advisors deem it desirable to do so. Although a Portfolio will enter
into options and/or futures positions only if the Advisors believe that a liquid
secondary market exists for such instruments, there is no assurance that a
Portfolio will be able to effect closing transactions at any particular time or
at an acceptable price. A Portfolio generally expects that its options and
futures transactions will be conducted on registered securities exchanges. It
is impossible to predict the amount of trading interest that may exist in
various types of options. No Portfolio will engage in options or futures
transactions for leveraging purposes.
The securities exchanges have established limitations governing the maximum
number of options and futures which may be utilized by an investor or group of
investors acting in concert. It is possible that the Portfolios and other
clients of the Advisors may be considered to be such a group. Also, some
exchanges on which futures are traded impose limitations on the daily
fluctuations permitted in certain futures contract prices. These position
limits may at times restrict a Portfolio's ability to purchase or sell options
and futures on a particular security or index.
Price movements in the S&P 100 Plus Portfolio likely will not correlate
perfectly with movements in the level of the S&P 100 Index because of the
potential inability of the Portfolio to match the weightings of its securities
precisely to the Index, because the Portfolio's securities may at times vary
substantially in terms of issuers and/or weightings from those reflected in the
Index, and because of the transaction costs which accompany purchases and sales
of actual stock positions and options and futures.
LENDING OF PORTFOLIO SECURITIES
Each 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,
a 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, a 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.
A lending 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 Advisors' 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 lending
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 lending 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 Advisors evaluate and continually monitor the creditworthiness of the
institutional borrowers to which the lending Portfolio lends its securities.
To minimize the foregoing risks, each Portfolio's securities lending
practices are subject to the following conditions and restrictions: (1) no
Portfolio may make such loans in excess of 33% of the value of its total assets;
(2) the lending 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 lending Portfolio must have the right to terminate the loan
at any time; (5) the lending 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
lending Portfolio may not pay any more than reasonable custodian fees in
connection with the loan.
OTHER INVESTMENT PRACTICES
To earn additional income, any of the Portfolios may make short sales of
already owned securities, certain of the Portfolios may enter into forward
commitments and the Select Value Portfolio may enter into repurchase agreements.
Short Sales ''Against-the-Box.'' The Portfolios 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. It is the present intention of
management to make such sales only to defer realization of gain or loss for
federal income tax purposes.
Forward Commitments. The Tax-Exempt Portfolio and the Government Portfolio
may purchase securities for future delivery, which may increase the Portfolio's
overall investment exposure if the value of the securities declines. The
Portfolios plan not to engage in forward commitment transactions if, after such
purchase, more than 5% of the Portfolio's net assets would consist of such
securities. See ''When-Issued and Delayed Delivery Transactions'' in the
Statement of Additional Information.
Repurchase Agreements. The Select Value Portfolio may enter into repurchase
agreements, however the Advisors do not intend to invest more than 5% of the
total assets of the Portfolio in such instruments. Repurchase agreements
involve the acquisition by the Portfolio of an underlying debt instrument,
subject to the obligation of the seller (a bank or securities dealer) to
repurchase, and the Portfolio to sell, the security at the same price plus an
amount equal to an agreed upon interest rate within a specified time, usually
less than one week. The Select Value Portfolio may, on occasion, invest in
repurchase agreements with maturities in excess of seven days. The Portfolio
could suffer a loss and increased expense in connection with the sale of the
underlying security if the seller does not repurchase the security in accordance
with the terms of the repurchase agreement. To minimize the risk of loss, the
Select Value Portfolio will require continual maintenance of collateral (in cash
or U.S. Government Securities) held by the Portfolio's depository in an amount
equal to, or in excess of, the market value of the securities which are subject
to the repurchase agreement.
SPECIAL CONSIDERATIONS
COMMON STOCKS
As discussed above, some of the Portfolios will invest a portion of their
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 Select Value Portfolio may involve an above average
degree of risk because of its concentration in common stocks of smaller and
medium-sized companies, which tend to be more volatile and less liquid than
stocks of large 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. However, an attempt is made to minimize the
risk through portfolio diversification and the use of a stock selection strategy
that emphasizes undervalued stocks, many of which have already declined in
price.
Securities owned by the Select Value Portfolio may be traded in the over-the-
counter market or on a regional securities exchange and may not be traded every
day or in the volume typical of securities traded on a national securities
exchange. As a result, disposition by the Select Value Portfolio of portfolio
securities to meet redemptions by shareholders or otherwise may require the
Portfolio to sell these securities at a discount from market prices, to sell
during periods when such disposition is not desirable, or to make many small
sales over a lengthy period of time.
DEBT OR OTHER FIXED INCOME SECURITIES
The total return earned on a Portfolio's debt or other fixed income
securities will consist of the change in the net asset value per share of the
Portfolio attributable to changes in the market value of such securities,
together with the per share income generated by those securities. The net asset
value of fixed income securities will be affected primarily by changes in
interest rates, average maturities and the investment and credit quality of the
securities in the Portfolio.
A bond's yield reflects the fixed annual interest as a percent of its current
price (the same concept is true for other debt and fixed income securities).
This price (the bond's market value) must increase or decrease in order to
adjust the bond's yield to current interest rate levels. Therefore, bond prices
generally move in the opposite direction of interest rates. As a result,
interest rate fluctuations will affect the net asset value of the fixed income
securities held by a Portfolio, but will not affect the income received by the
Portfolio from its existing fixed income securities. However, changes in
prevailing interest rates will affect the yield on shares subsequently issued by
the Portfolio. In addition, such fluctuations would affect the income received
on any variable rate demand notes or other variable rate securities held by the
Portfolio.
Movements in interest rates typically have a greater effect on the prices of
longer term bonds than those with shorter maturities. The following table
illustrates the effect of a 1% change in interest rates on a $1,000 bond with a
7% coupon.
PRINCIPAL VALUE IF RATES:
--------------------------
MATURITY INCREASE 1% DECREASE 1%
-------- ----------- -----------
Intermediate Bond 5 years $959 $1,043
Long-Term Bond 20 years $901 $1,116
The Advisors will manage the debt securities in each Portfolio according to
their assessment of the interest rate outlook. During periods of rising
interest rates, the Advisors will likely attempt to shorten the average maturity
of the Portfolio to cushion the effect of falling bond prices on the Portfolio's
share prices. When interest rates are falling and bond prices are increasing,
on the other hand, the Advisors will likely seek to lengthen the average
maturity.
SHORT-TERM INSTRUMENTS
Short-term instruments in which the Select Value Portfolio may invest include
U.S. Treasury bills or other U.S. Government or Governmental agency or
instrumentality obligations; certificates of deposit; banker's acceptances and
time deposits; high quality commercial paper, variable rate demand notes,
repurchase agreements and other short-term high grade corporate obligations; and
shares of money market mutual funds.
A variable rate demand note is issued pursuant to a written agreement between
the issuer and the holder, its amount may from time to time be increased by the
holder (subject to an agreed maximum), or decreased by the holder or the issuer,
the rate of interest payable on the security varies with an agreed formula and
the security is typically rated by a rating agency. Transfer of such notes is
usually restricted by the issuer, and there is no secondary trading market for
such notes. The Select Value Portfolio will purchase such variable rate demand
notes unless, at the time of purchase, the issuer has unsecured debt securities
outstanding that are ranked within the two highest categories by a Nationally
Recognized Statistical Rating Organization or, if rated, the notes fall within
such categories.
To the extent the Select Value 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 Select Value 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.
FOREIGN SECURITIES
The Select Value Portfolio may invest a portion of its assets in securities
of foreign issuers not publicly traded in the United States, as well as ADRs and
securities of Canadian issuers. Investments in foreign securities involve
certain inherent risks, such as exchange rate fluctuations, political, social or
economic instability of the country of issue, adverse diplomatic developments,
the possible imposition of exchange controls, confiscatory taxes or
expropriation, decreased liquidity, greater price volatility, less publicly
available information and lack of uniformity in accounting, auditing and
financial reporting standards. Currency fluctuations will affect the net asset
value of foreign securities held by the Select Value Portfolio irrespective of
the performance of the underlying asset or investment.
PORTFOLIO TURNOVER
The Portfolios have not established a limit to their portfolio turnover rate.
Although no Portfolio can predict its portfolio turnover rate, it is not
expected that any of the Portfolios, other than the Government and Select Value
Portfolios, will have a portfolio turnover rate in excess of 100%. The
portfolio turnover rates for the Government and Select Value Portfolios are not
expected to exceed 200%. A high rate of portfolio turnover (in excess of 100%)
involves correspondingly greater brokerage expenses or other trading costs as
compared to a lower turnover rate, which expense must be borne by the trading
Portfolio and its shareholders. High portfolio turnover rates also may result
in the realization of substantial net short-term gains, and any distributions
resulting from such gains will be ordinary income for federal income tax
purposes. The portfolio turnover rates for each Portfolio are included in the
tables under the section of this Prospectus captioned ''Financial Highlights.''
OPTION ACTIVITIES
For a description of certain risks associated with option activities in which
the S&P 100 Plus and Dividend Achievers Portfolios may engage, see ''Investment
Program - Options and Futures Activities - Risks Associated With Options and
Futures.''
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 Advisors are responsible for each Portfolio's investment
management, and Principal Preservation's officers are responsible for each
Portfolio's and Principal Preservation's overall operations.
THE ADVISORS
Each Portfolio is managed by Ziegler Asset Management, 215 North Main Street,
West Bend, Wisconsin 53095, as investment advisor, pursuant to the terms of two
Investment Advisory Agreements (together the ''Advisory Agreements''), one
relating to the Government, Tax-Exempt, S&P 100 Plus and Select Value
Portfolios, and the other relating to the Dividend Achievers Portfolio.
PanAgora, 260 Franklin Street, Boston, Massachusetts 02110, assists, as sub-
advisor, with the management of the S&P 100 Plus Portfolio pursuant to the terms
of a Sub-Advisory Agreement (''PanAgora Agreement'') by and among Principal
Preservation, Ziegler Asset Management and PanAgora. Skyline, 311 South Wacker
Drive, Suite 4500, Chicago, Illinois 60606, assists, as sub-advisor, with the
management of the Select Value Portfolio pursuant to the terms of a sub-advisory
agreement (''Skyline Agreement'') by and among Principal Preservation, Ziegler
Asset Management and Skyline. The PanAgora and Skyline Agreements are sometimes
referred to collectively as the ''Sub-Advisory Agreements.''
Ziegler Asset Management is registered with the Securities and Exchange
Commission as an investment advisor. On December 31, 1995, it had more than
$500 million under discretionary management. Ziegler Asset Management is a
wholly-owned subsidiary of The Ziegler Companies, Inc.
PanAgora is also registered with the Securities and Exchange Commission as an
investment advisor. On December 31, 1995, PanAgora had more than $12.4 billion
under discretionary management and $1.1 billion under non-discretionary
management. Fifty percent of the outstanding voting stock of PanAgora is owned
by Nippon Life Insurance Company; the remaining 50% is owned by Lehman Brothers,
Inc.
Prior to August 31, 1995, Mesirow Asset Management, Inc. (''Mesirow'') served
as sub-advisor for the Select Value Portfolio. On that date, Mesirow and its
parent company, Mesirow Financial Holdings, Inc., sold most of Mesirow's
institutional business to Skyline Asset Management, L.P., a Delaware limited
partnership. Skyline is registered with the SEC as an investment advisor and
its principal offices are located at 311 South Wacker Drive, Suite 4500,
Chicago, Illinois 60606. Skyline's general partner is Affiliated Managers
Group, Inc. (''AMG'') and its limited partners are corporations owned by four
former management employees of Mesirow, Messrs. Dutton, Kailin, Lutz and
Maloney. AMG is a Boston-based private holding company that makes equity
investments in investment management firms.
AMG is a Delaware corporation with principal executive offices located at One
International Place, Boston, Massachusetts 02110. AMG may be deemed to be
controlled by Advent VII, L.P., a Delaware limited partnership, because Advent
VII, L.P. owns more than fifty percent 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 Delaware limited partnership, which in turn may be
deemed to be controlled by its sole general partner, TA Associates, Inc., a
Delaware corporation. The address of each 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.
Registration with the Securities and Exchange Commission does not constitute
an approval or recommendation of any of the foregoing firms.
The Advisors provide the Portfolios with overall investment advisory and
administrative services. Subject to such policies as the Board of Directors may
determine, the Advisors make investment decisions on behalf of each Portfolio,
make available research and statistical data in connection therewith, and
supervise the acquisition and disposition of investments by each Portfolio,
including the selection of broker-dealers to carry out portfolio transactions.
Each of the Advisors bears all of its own expenses of providing services
under the Advisory and Sub-Advisory Agreements and pays all salaries, fees and
expenses of the officers and Directors of Principal Preservation who are
affiliated with them. The Portfolios bear 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 any of the Advisors; interest
expenses; fees and expenses of the Distributor, Depository, Transfer Agent and
Dividend Disbursing 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 Portfolio are prorated
among them based on their total assets.
Under the Advisory Agreements, each Portfolio pays Ziegler Asset Management
an annual fee, in monthly installments, based on the average daily net assets of
the Portfolio. Pursuant to the terms of the Sub-Advisory Agreements, Ziegler
Asset Management pays PanAgora or Skyline, as the case may be, a portion of the
advisory fee it receives from each Portfolio. While the advisory fees of the
Select Value and Dividend Achievers Portfolios are higher than the fees paid by
most mutual funds, Principal Preservation's Board of Directors believes they are
consistent with the fees paid by funds with investment characteristics and
objectives similar to those Portfolios. The chart below sets forth the rates of
the advisory and sub-advisory fees.
ADVISORY FEES
PAID BY THE SUB-ADVISORY
PORTFOLIO TO FEES PAID BY
ZIEGLER ASSET ZIEGLER ASSET
PORTFOLIOS AND NET ASSETS MANAGEMENT MANAGEMENT (1)<F20>
- ------------------------- ------------- --------------
Government and Tax-Exempt Portfolios:
a. First $50 million in net assets 0.60 of 1%
b. Next $200 million in net assets 0.50 of 1%
c. Net assets in excess of $250 million 0.40 of 1%
S&P 100 Plus Portfolio:
a. First $20 million in net assets 0.575 of 1% 0.200 of 1%
b. Next $30 million in net assets 0.450 of 1% 0.200 of 1%
c. Next $50 million in net assets 0.400 of 1% 0.200 of 1%
d. Next $400 million in net assets 0.350 of 1% 0.175 of 1%
e. Net assets in excess of $500 million0.300 of 1% 0.150 of 1%
Select Value Portfolio:
a. First $250 million in net assets 0.75 of 1% 0.375 of 1%
b. Net assets in excess of $250 million 0.65 of 1% 0.325 of 1%
Dividend Achievers Portfolio:
a. First $250 million in net assets 0.75 of 1%
b. Second $250 million in net assets 0.70 of 1%
c. Net assets in excess of $500 million 0.65 of 1%
(1)<F20>Sub-Advisory fees relating to the S&P 100 Plus and Select Value
Portfolios are paid to PanAgora and Skyline, respectively.
THE DISTRIBUTOR, CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
B.C. Ziegler and Company (''Ziegler'') serves as the Distributor of the shares
of each Portfolio pursuant to a Distribution Agreement; provides accounting and
other administrative services, including daily valuation of the shares of each
Portfolio, pursuant to an Accounting/Pricing Agreement; provides depository and
custodial services with respect to the portfolio securities of each Portfolio
pursuant to a Depository Contract; and provides transfer agent services pursuant
to a Transfer and Dividend Disbursing Agency Agreement. Ziegler is registered
with the Securities and Exchange Commission as a securities broker-dealer and is
a member of the National Association of Securities Dealers. Ziegler has been
engaged in the underwriting of debt securities for more than 75 years. Like
Ziegler Asset Management, Ziegler is a wholly-owned subsidiary of The Ziegler
Companies, Inc., and its principal executive offices are located at 215 North
Main Street, West Bend, Wisconsin 53095. Ziegler Thrift Trading, Inc., another
affiliate of Ziegler Asset Management which is a registered broker-dealer, may
effect portfolio securities transactions as agent for the Portfolios and in that
capacity receives brokerage commissions from the Portfolio. See ''Portfolio
Transactions and Brokerage.''
The Distribution Agreement appointing Ziegler as Principal Preservation's
Distributor provides that Ziegler is entitled to receive a commission on its
sales of the shares of each Portfolio at the rate disclosed in Principal
Preservation's current Prospectus (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 by a 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 Principal Preservation'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 a Portfolio's total assets of $30 million but less than $100 million, 02 of
1% of a Portfolio's total assets of $100 million but less than $250 million and
.01 of 1% of a 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 set at $13.50 per account for the Tax-Exempt and Government Portfolios
and $8.50 per account for the S&P 100 Plus, Select Value and Dividend Achievers
Portfolios. Principal Preservation also reimburses Ziegler for all out-of-
pocket expenses incurred in providing such services. As Transfer and Dividend
Disbursing Agent, Ziegler may also collect certain fees from shareholders as
disclosed in this Prospectus.
THE PORTFOLIO MANAGERS
Mr. Vern C. VanVooren, who managed the investment of the assets of the Tax-
Exempt and Government Portfolios since their inceptions in July, 1984 and
December, 1985, respectively, retired effective March 29, 1996. Mr. Thomas P.
Sancomb stepped in as portfolio manager for the Tax-Exempt Portfolio, and a
committee of advisory personnel of Ziegler Asset Management has assumed
responsibility for the management of the assets of the Government Portfolio.
Mr. Sancomb has served with Ziegler and Ziegler Asset Management in various
capacities since March, 1975. He has served on Ziegler's Investment Committee
since July, 1984. He is a Vice President of both Ziegler and Ziegler Asset
Management. Mr. Sancomb has assisted Mr. VanVooren with the management of the
Government and Tax-Exempt Portfolios in the past.
Mr. William G. Zink has managed the investment of the assets of the S&P 100
Plus Portfolio since May, 1991. Mr. Zink is a Senior Equity Manager with
PanAgora, and has served in this capacity since PanAgora's origin in 1991.
Investment decisions for the Select Value Portfolio are made by a team of
investment professionals and analysts employed by Skyline. Skyline and its
predecessor, Mesirow, have served as sub-advisor to the Portfolio since the
commencement of its operations in August, 1994. The team responsible for the
Select Value Portfolio is headed by Mr. Kenneth S. Kailin, the portfolio
manager. Mr. Kailin is an officer of Skyline, having joined the firm's
predecessor in 1987. Mr. Kailin also serves as portfolio manager of another
registered investment company which has an investment objective, policies and
restrictions similar to those of the Select Value Portfolio. Mr. Kailin's
investment team includes Mr. William M. Dutton, President and Chief Executive
Officer of Skyline.
Since January, 1992, Mr. R. Douglas Ziegler has managed the investment of the
assets of the Dividend Achievers Portfolio. Mr. Ziegler is the Chairman of the
Board of both Ziegler and Ziegler Asset Management, and also is a director and
the President of Principal Preservation.
DETERMINATION OF NET ASSET VALUE PER SHARE
Net asset value per share of each 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 S&P 100 Plus, Select
Value and Dividend Achievers Portfolios, 2:30 p.m. New York time for the Tax-
Exempt Portfolio, and 3:00 p.m. New York time for the Government 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. Except as described below, the minimum
initial investment is $1,000, and the minimum additional investment is $50.
Exchanges between Portfolios, reinvestments of distributions from a Portfolio or
distributions from various unit investment trusts sponsored by Ziegler,
reinvestments of interest and/or principal payments on bonds issued by Ziegler
Mortgage Securities, Inc. II and reinvestments of interest payments on bonds
underwritten by Ziegler are not subject to the $50 minimum additional investment
requirement. The minimum initial investment for individual retirement accounts
(IRAs), Keogh plans, self-directed retirement plan accounts and custodial
accounts under the Uniform Gifts/Transfers to Minors Act is $500 and the minimum
additional investment is $25. For minimum requirements for investments made
through an automatic investment plan, see ''Shareholder Services - Systematic
Purchase Plan.''
Shares may be purchased by investors at net asset value plus a sales charge
as set forth below. None of the Portfolios will 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, along with a completed account
application, or through a Selected Dealer.
Shares may be purchased by investors at net asset value plus a sales charge
(expressed as a percentage of the offering price and of the net amount invested)
as follows:
PUBLIC OFFERING NET AMOUNT SELECTED DEALER
SIZE OF INVESTMENT PRICE INVESTED REALLOWANCE*<F21>
------------------ --------------- --------- ---------------
FOR THE S&P 100 PLUS, SELECT VALUE AND
DIVIDEND ACHIEVERS PORTFOLIOS:
Less than $50,000 4.50% 4.71% 4.00%
$50,000 but less than $100,000 4.00% 4.17% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.60%
$500,000 but less than $1,000,000 2.50% 2.56% 2.20%
$1,000,000 or more 0.00% 0.00% 0.00%
FOR THE GOVERNMENT AND TAX-EXEMPT PORTFOLIOS:
Less than $25,000 3.50% 3.63% 3.00%
$25,000 but less than $50,000 3.00% 3.09% 2.75%
$50,000 but less than $100,000 2.50% 2.56% 2.25%
$100,000 but less than $250,000 2.00% 2.04% 1.75%
$250,000 but less than $500,000 1.50% 1.52% 1.25%
$500,000 but less than $1,000,000 1.00% 1.01% 1.00%
$1,000,000 or more 0.00% 0.00% 0.00%
*<F21>In addition to the Selected Dealer Reallowance shown above, the
Distributor may pay an additional commission to participating dealers and
participating financial institutions acting as agent for their customers in
an amount up to the difference between the sales charge and the Selected
Dealer Reallowance in respect of the shares sold. No reallowance applies
to purchases of $1 million or more. 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
Reallowance in respect of shares sold by the qualifying registered
representative. Selected Dealers who receive a concession may be deemed to
be ''underwriters'' 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 any 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 shares of any Portfolio, 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. Investors should be aware that the
shares of the Portfolios 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, (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 Portfolios 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 in the S&P 100 Plus,
Select Value and Dividend Achievers Portfolios, and 2.00% in the Government and
Tax-Exempt Portfolios. A shareholder's holdings in all Portfolios which have a
sales charge will be aggregated in determining the break-point at which he is
entitled to purchase in any 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 who 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.
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 any of the Portfolios 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 shares 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 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 officers
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 Ziegler, Selected
Dealers, PanAgora and Skyline, 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.
Shares may also be purchased without a sales charge upon the reinvestment of
distributions from any 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 (the ''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 services. 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(s). However, none of the Transfer Agent, Principal
Preservation or any of their employees will be liable for losses suffered by a
shareholder which result from following 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 which specify a particular date for redemption or which
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 been changed within the past thirty (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
which 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 which 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 a 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 of one or more
of the Portfolios 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(s) 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 shareholders of the Portfolio(s).
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 a 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 a Portfolio.
However, the Portfolios have 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. The minimum subsequent investment is also reduced to $50 for
all other accounts with balances of $1,000 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 receive 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 charge, 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 in any state where the
exchange legally may 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
from the Distributor 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 the Transfer Agent (currently
$5.00).
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
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 the bonds
underwritten by Ziegler, as the case may be. Unit holders and bondholders
desiring to participate in this plan should contact the Distributor for further
information.
Tax Sheltered Retirement Plans. Shares of the Portfolios 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 daily and paid monthly
in the Government and Tax-Exempt Portfolios, and will be declared and paid
quarterly in the S&P 100 Plus, Select Value and Dividend Achievers Portfolios.
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 an
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 relevant Portfolio.
Capital gains distributions, if any, in all Portfolios will be declared
annually and normally will be paid within 45 days after the end of the fiscal
year.
TAX STATUS
Each 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, each Portfolio must satisfy a number of requirements, including the
requirement that at least 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 30% of a 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.
Each Portfolio will distribute substantially all of its net income and
capital gains. Regulated investment companies, in most instances, pay a
nondeductible four percent 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 which will avoid the excise tax. The federal income tax status of all
distributions will be reported to shareholders annually. That part of the Tax-
Exempt Portfolio's net investment income which is attributable to interest from
tax-exempt securities and which is distributed to shareholders will be
designated as an ''exempt-interest dividend'' under the Code. 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.
The exemption of exempt-interest dividends for federal income tax purposes
does not necessarily result in exemption under the tax laws of any state or
local taxing authority which vary with respect to the taxation of such dividend
income. It is possible that some states will exempt from tax that portion of
the exempt-interest dividend which represents interest received by the Tax-
Exempt Portfolio on that state's securities. Therefore, the Tax-Exempt
Portfolio will report annually to its shareholders the percentage of interest
income received on a state-by-state basis. You should consult with your tax
adviser regarding the extent, if any, to which exempt-interest dividends are
exempt under state laws applicable to your dividend distributions.
A portion of the net investment income of the Government, S&P 100 Plus, and
Dividend Achievers Portfolios will qualify for the 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 Principal Preservation's separate portfolios are not
combined.
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 seven series: Government Portfolio, Tax-Exempt Portfolio,
S&P 100 Plus Portfolio, Select Value Portfolio, Dividend Achievers Portfolio,
Wisconsin Tax-Exempt Portfolio and Cash Reserve Portfolio, consisting of 50
million shares in each of the first six Portfolios and 400 million in the Cash
Reserve Portfolio. Shares of the Cash Reserve Portfolio are further divided
into two separate classes, Class X Common Stock (the Retail Class) and Class Y
Common Stock (the Institutional Class), consisting of 200 million shares each.
The Board of Directors of Principal Preservation may authorize the issuance of
additional series and, within each series, individual classes, and may increase
or decrease the number of shares in each series or class.
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
any 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
each of the Portfolios) 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 deemed appropriate by the Board
of Directors. However, 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 an 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 a series (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 who charge a
commission for their services. Purchases and sales of securities traded over-
the-counter may be 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 Advisors 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 Advisors in their 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 various
series 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, each
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 each Portfolio to the Distributor to reimburse it
for expenditures incurred by it in connection with the distribution of each
Portfolio's shares to investors. These payments include, but are not limited
to, 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 each of the
Portfolios. 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, payments presently may not exceed an amount computed at an
annual rate of 0.25 of 1% of the average daily net assets of any Portfolio.
Prior to July 1, 1995, net assets allocated to accounts opened before March 1,
1991 in the Government Portfolio, Tax-Exempt Portfolio, S&P 100 Plus Portfolio
and Dividend Achievers Portfolio were excluded from the fee calculation
(including assets contributed to such accounts on or after March 1, 1991,
provided the account was opened before March 1, 1991). On April 27, 1995, the
shareholders of those four Portfolios approved an amendment to the Plan (the
''Plan Amendment'') which provided that, commencing July 1, 1995, the fee
payable by those Portfolios under the Plan would be assessed on the Portfolio's
total net assets, including net assets allocated to accounts opened before March
1, 1991. As a phase-in measure, the Advisor committed that it would reimburse
expenses to each of those Portfolios as necessary so that, for the period
commencing July 1, 1995 and continuing through December 31, 1996, the annualized
operating expenses of those Portfolios would not exceed the folowing amounts,
stated as a percentage of the relevant Portfolio's average daily net assets:
Government Portfolio - 1.15%; Tax-Exempt Portfolio - 1.15%; S&P 100 Plus
Portfolio - 1.25%; and Dividend Achievers Portfolio - 1.30%.
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 any of the Advisors. 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 confirmations at
least quarterly regarding their transactions and reports at least semiannually
setting forth various financial and other information related to the Portfolios.
Shareholder Inquiries. Shareholder inquiries may be directed 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 Portfolios may advertise
their ''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 a 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 a Portfolio refers
to the average annual total return for one, five and ten year periods (or so
much thereof as a Portfolio has been in existence). Total return is the change
in redemption value of shares purchased with an initial $10,000 investment,
assuming the reinvestment of dividends and capital gains distributions, after
giving effect to the maximum applicable sales charge. In addition, the Tax-
Exempt Portfolio may advertise its ''tax equivalent yield,'' which is computed
by dividing that portion of the Portfolio's yield which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield of the Portfolio which is not tax-exempt. Performance information
should be considered in light of the Portfolios' investment objectives and
policies, characteristics and quality of the Portfolios 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 Portfolios 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.
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
Choose the Portfolio(s) in which you wish to open an account and indicate the
amount you wish to invest in each. Minimum initial investment is $1,000 ($500
for IRAs, Keogh Plans, Self-Directed Retirement Plan Accounts and Custodial
Accounts under the Uniform Gifts/Transfers to Minors Act).
Government Portfolio Dividend Achievers Portfolio
--------- --------
Tax-Exempt Portfolio I'm interested in the Cash Reserve
-------
Portfolio. Please send me a Prospectus.
S&P 100 Plus Portfolio I'm interested in the Wisconsin
-------
Tax-Exempt Portfolio.
Select Value 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 the 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 and
select one Portfolio under Portfolio Selection. I hereby authorize Principal
Preservation 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
- ---------
following 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:
- ------------------------------------------------------------------------------
Bank or Payee's Name
- ------------------------------------------------------------------------------
Account Number
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Street Address
- ------------------------------------------------------------------------------
City State Zip
If you request payments to be made other than to the registered shareholder, you
must obtain a Signature Guarantee (below).
- ------------------------------------------------------------------------------
SIGNATURE (This section must be filled out by new accounts.)
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
Application, and the person or persons, if any, signing on behalf of the
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,
or the Internal Revenue Service has notified me that I am no longer subject to
backup withholding.''
ONLY INDIVIDUALS FILL IN
X X
-----------------------------------------------------------------------------
Signature of Applicant Date Signature of Joint Registrant, if any
- ------------------------------------------------------------------------------
Social Security Number Print Name of Taxpayer Whose Number Appears at Left
OR
ONLY CORPORATIONS, PARTNERSHIPS, TRUSTS INSTITUTIONS FILL IN
- ------------------------------------------------------------------------------
Firm Name
- ------------------------------------------------------------------------------
Date Signature and Title
- ------------------------------------------------------------------------------
Taxpayer Identification Number Date Signature and Title
- ------------------------------------------------------------------------------
SIGNATURE GUARANTEE (Required for Telephone Redemptions or Systematic Withdrawal
Payment options, if chosen above.) Signature(s) Guaranteed by commercial bank,
trust company, savings and loan association, credit union or member firm of a
national stock exchange.
By:
- ------------------------------------------------------------------------------
(Authorized Signature) Name of bank, association or firm
- ------------------------------------------------------------------------------
DEALER IDENTIFICATION
B.C. Ziegler and Company (the ''Distributor''), acts as agent in all purchases
by the investor of Principal Preservation shares. 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 Principal
Preservation shares by the investor, whether the payment is received from the
Distributor, the authorized dealer or directly from the investor, and to confirm
such purchases on their behalf.
- ------------------------------------------------------------------------------
Dealer's Name
- ------------------------------------------------------------------------------
Home Office Address City State Zip Code
By
- ------------------------------------------------------------------------------
Authorized Signature of Dealer Address of Office Servicing Account
- ------------------------------------------------------------------------------
Branch No. Salesman's No. Salesman's Last Name Dealer No.
APPENDIX A
COMPOSITION OF THE S&P 100 INDEX*<F22>
(AS OF DECEMBER 31, 1995)
PERCENT OF
TOTAL
COMPANY NAME COMPOSITION
- ------------ -----------
Aluminum Company of America 0.48
American Electric Power Company, Inc. 0.39
American Express Company 1.05
American General Corporation 0.37
American International Group, Inc. 2.28
American Telephone and Telegraph Company 5.32
Ameritech Corporation 1.70
Amoco Corporation 1.85
AMP Incorporated 0.42
Atlantic Richfield Company 0.92
Avon Products, Inc. 0.28
Baker-Hughes Incorporated 0.18
BankAmerica Corporation 1.25
Baxter International Inc. 0.60
Bell Atlantic Corporation 1.51
Bethlehem Steel Corporation 0.08
Black & Decker Corporation 0.15
The Boeing Company 1.38
Boise Cascade Corporation 0.08
Bristol-Meyers Squibb Company 2.30
Brunswick Corporation 0.12
Burlington Northern Santa Fe Corporation 0.57
Capital Cities/ABC, Inc. 1.00
Ceridian Corporation 0.14
Champion International 0.21
Chrysler Corporation 1.10
CIGNA Corporation 0.39
Citicorp 1.48
Coastal Corporation 0.20
Coca-Cola Company 4.88
Colgate-Palmolive Company 0.53
Computer Sciences Corporation 0.18
Delta Air Lines, Inc. 0.19
Digital Equipment Corporation 0.49
Walt Disney Company 1.58
Dow Chemical Company 0.96
DuPont (E.I.) de Nemours and Company 1.99
Eastman Kodak Company 1.18
Entergy Corporation 0.35
Exxon Corporation 5.16
Federal Express Corporation 0.21
First Chicago NBD Corporation 0.65
First Fidelity Bancorporation 0.31
First Interstate Bancorp 0.59
Fluor Corporation 0.29
Ford Motor Company 1.61
General Dynamics Corporation 0.20
General Electric Company 6.23
General Motors Corporation 2.06
Great Western Financial Corporation 0.17
Halliburton Company 0.30
Harrah's Entertainment, Inc. 0.13
Harris Corporation 0.11
Heinz (H.J.) Company 0.63
Hewlett-Packard Company 2.20
Homestake Mining Company 0.11
Honeywell Inc. 0.34
Intel Corporation 2.45
International Business Machines Corporation 2.71
International Flavors & Fragrances Inc. 0.28
International Paper Company 0.48
ITT Hartford Group, Inc. 0.29
Johnson & Johnson 2.86
Kmart Corporation 0.17
Limited (The), Inc. 0.33
Mallinckrodt Group Inc. 0.14
May Department Stores Company 0.55
McDonald's Corporation 1.64
MCI Communications Corporation 0.92
Merck & Co., Inc. 4.22
Merrill Lynch & Co., Inc. 0.47
Minnesota Mining & Manufacturing Company 1.46
Mobil Corporation 2.31
Monsanto Company 0.76
National Semiconductor Corporation 0.14
Norfolk Southern Corporation 0.57
Northern Telecom Limited 0.56
NYNEX Corporation 1.20
Occidental Petroleum Corporation 0.35
PepsiCo, Inc. 2.30
Pharmacia &Upjohn, Inc. 1.01
Polaroid Corporation 0.12
Ralston Purina Group 0.34
Raytheon Company 0.59
Rockwell International Corporation 0.61
Schlumberger Limited 0.87
Sears, Roebuck & Co. 0.78
Southern Company 0.85
Tandy Corporation 0.16
Tektronix, Inc. 0.07
Teledyne, Inc. 0.07
Texas Instruments Inc. 0.49
Toys ''R'' Us, Inc. 0.31
Unicom Corporation 0.36
Unisys Corporation 0.05
United Technologies Corporation 0.62
Wal-Mart Stores, Inc. 2.67
Weyerhaeuser Company 0.46
Williams Companies, Inc. 0.23
Xerox Corporation 0.73
*<F22>''Standard & Poor's'', ''Standard & Poor's 100'', ''S&P'', ''S&P 100'' and
''100'' are registered trademarks of Standard & Poor's Corporation.
TABLE OF CONTENTS
PAGE
----
Questions and Answers 2
Expenses 5
Financial Highlights 7
Investment Objectives 12
Investment Program 13
Special Considerations 20
Management 22
Determination of Net Asset Value Per Share 25
Purchase of Shares 26
Redemptions 29
Shareholder Services 30
Dividends, Capital Gains Distributions
and Reinvestments 32
Tax Status 32
Description of Shares 33
Portfolio Transactions and Brokerage 34
Distribution Expenses 34
Other Information 35
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISORS
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Skyline Asset Management, L.P.
311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606
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
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PP800-5/96
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1996
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
800-826-4600
Five portfolios (the "Portfolios") of the Principal
Preservation Portfolios, Inc. ("Principal Preservation") family
of funds are described in this Statement of Additional Informa-
tion and the Prospectus to which it relates: the Government
Portfolio, Tax-Exempt Portfolio, S&P 100 Plus Portfolio, Select
Value Portfolio, and Dividend Achievers Portfolio.
Each Portfolio has distinct investment objectives and
policies, and there can be no assurance that these investment
objectives will be achieved. Each shareholder's interest is
limited to the particular Portfolio in which their shares are
owned.
Statement of Additional Information
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 May 1, 1996 for more complete informa-
tion, 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
STATEMENT OF ADDITIONAL INFORMATION........................... 1
HISTORICAL INFORMATION........................................ 2
INVESTMENT PROGRAM............................................ 2
INVESTMENT RESTRICTIONS....................................... 16
MANAGEMENT OF PRINCIPAL PRESERVATION.......................... 21
PERFORMANCE INFORMATION....................................... 28
DETERMINATION OF NET ASSET VALUE PER SHARE.................... 33
PURCHASE OF SHARES............................................ 34
TAX STATUS.................................................... 35
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........... 36
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................... 36
DISTRIBUTION EXPENSES......................................... 37
CUSTODIAN..................................................... 40
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS.................... 41
EXPERTS....................................................... 41
PORTFOLIO RATINGS............................................. 41
DESCRIPTION OF RATINGS OF CERTAIN SECURITIES.................. 41
FINANCIAL STATEMENTS.......................................... 49
HISTORICAL INFORMATION
The Tax-Exempt Portfolio was originally operated as a
separate investment company known as Principal Preservation
Tax-Exempt Fund, Inc.
This Fund was merged into a separate series of Principal
Preservation Portfolios, Inc. (the "Fund") in 1987. Prior to
April 27, 1989, the Tax-Exempt Portfolio was known as the Tax-
Exempt Plus Portfolio, and prior to March 29, 1988 it was known
as the Hedged Tax-Exempt Portfolio. These name changes were made in
connection with changes in the investment objectives and programs
of the Portfolio, involving a discontinuance of hedging strategies
involving options and futures contracts.
INVESTMENT PROGRAM
The Prospectus describes the investment objectives and
policies of each Portfolio. Certain instruments and techniques
discussed in the Prospectus are described in greater detail
below.
Information Regarding Tax-Exempt Investments
--------------------------------------------
Before investing in a particular Portfolio, an investor may
wish to determine which investment -- tax-free or taxable -- will
provide a higher after-tax return. To make such a comparison,
the yields should be viewed on a comparable basis. The table
below illustrates, at the tax brackets provided in the Internal
Revenue Code of 1986, as amended, the yield an investor would
have to obtain from taxable investments to equal tax-free yields
ranging from 6% to 9%. An investor can determine from the
following table the taxable return necessary to match the yield
from a tax-free investment by locating the tax bracket applicable
to the investor, and then reading across to the yield column
which is closest to the yield applicable to the investor's
investment. This presentation illustrates current tax rates, and
will be modified to reflect any changes in such tax rates.
TAX-FREE V. TAXABLE INCOME
Assumed Tax-Free Yields
Taxable Income 6.00% 6.50% 7.00% 7.50% 8.00%
- --------------------------- -------------------------------------
Federal
Single Return Joint Return Tax Rate Equivalent Taxable Yields*<F1>
- --------------------------------------------------------------------------------
Up to $22,1000 Up to $38,000 15.00% 7.06% 7.65% 8.24% 8.82% 9.41%
$22,100-55,100 $38,000-91,850 28.00% 8.33% 9.03% 9.72% 10.42% 11.11%
$55,100-115,000 $91,850-140,000 31.00% 8.70% 9.42% 10.14% 10.87% 11.59%
$115,000-250,000 $140,000-250,000 36.00% 9.38% 10.16% 10.94% 11.72% 12.50%
over $250,000 over $250,000 39.60% 9.93% 10.76% 11.59% 12.42% 13.25%
*<F1>The Equivalent taxable yields are calculated based on the
maximum marginal tax rate at each tax bracket. These rates
and brackets are subject to change. The table is based on
tax rates in effect as of March 31, 1996. You should
consult your tax advisor regarding more recent tax
legislation and how tax laws affect your personal financial
circumstances.
The Tax-Exempt Portfolio seeks to attain its objective by
investing primarily in municipal securities, such as general
obligation, revenue and industrial development bonds, rated at
the time of purchase in an "A" category or higher by Moody's
Investors Service, Inc., Standard & Poor's Corporation or by
Fitch Investors Service, Inc. This Portfolio may also invest in
certain temporary short-term investments, money market fund
investments, U.S. Government Securities, or securities
collateralized by U.S. Government Securities. A description of
the ratings is included in this Statement of Additional
Information under the caption "Description of Ratings of Certain
Fixed Income Securities."
For illustrative purposes, the Tax-Exempt Portfolio may
include in its supplemental sales literature from time to time a
Bond Buyer Index line graph which shows the yield obtained on
twenty (20) long-term municipal bonds from December 1980 through
December 1995. The presentation consists of a line graph with
yield (presented as a percentage) reflected along a vertical axis
and the relevant time of inquiry reflected along a horizontal
axis. This line graph is for illustrative purposes only and is
not meant to be indicative of any Portfolio's total return.
Information as to actual yield and total return is set forth
under "Performance Information."
The Tax-Exempt Portfolio also sometimes presents in supple-
mental sales literature a line graph that displays the difference
in the growth in $10,000 placed in a tax-free investment as
compared to the growth of the same amount placed in a taxable
investment. This graph assumes $10,000 of principal is invested
at a nominal annual rate of 6% compounded monthly (6.17%
equivalent effective yield). The value of the investment is
shown on the vertical axis with the time period (0-20 years) over
which the investment has been held being reflected along the
horizontal axis. This graph is for illustrative purposes only
and is not meant to be indicative of the Tax-Exempt Portfolio's
actual return. An investor is assumed to pay annual federal
income tax at a 33% rate on the total amount of interest credited
to the account. The presentation illustrates current tax rates,
and will be modified to reflect any changes in such tax rates.
Municipal Securities
--------------------
Municipal securities include obligations issued by or on
behalf of states, territories, and possessions of the United
States and the District of Columbia, and their political subdivi-
sions, agencies, and instrumentalities, the interest of which is
exempt from Federal income tax. The tax-exempt status of the
municipal security is determined under Federal tax laws and is
usually opined upon by the issuer's bond counsel at the time of
the issuance of the security.
The two principal classifications of municipal securities
are notes and bonds. Municipal notes are generally used to
provide short-term working capital needs and typically have
maturities of one year or less. Municipal notes include Project
Notes, Tax Anticipation Notes, Bond Anticipation Notes and Tax-
Exempt Commercial Paper, and other similar short-term obliga-
tions.
Municipal bonds are issued to obtain funds for various
public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets, water and sewer
works, and gas and electric utilities. Municipal bonds may also
be issued in connection with the refunding of similar outstanding
obligations, or obtaining funds to lend to other public institu-
tions, or for general operating expenses. Industrial development
bonds, which are considered municipal bonds if the interest paid
thereon is exempt from Federal income tax, are issued by or on
behalf of public authorities to obtain funds to provide various
privately-operated facilities for business and manufacturing,
housing, sports, pollution control, and for airport, mass
transit, port, and parking facilities.
The two principal classifications of municipal bonds are
"general obligation" and "revenue." General obligation bonds are
secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue
bonds are payable only from the revenues derived from a particu-
lar facility or class of facilities or, in some cases from the
proceeds of a special tax or other specific revenue source.
Although industrial development bonds are issued by municipal
authorities, they are generally secured by specific facilities
financed by the proceeds and, payable only from the revenues
derived from the industrial user of those facilities. Payment of
principal and interest on industrial revenue bonds generally
depends on the ability of such user to meet its financial obli-
gations, or, in case of default, upon the amount realizable upon
the disposition of property pledged as security for payment of
the user's obligation.
Obligations of issuers of municipal securities are subject
to the provisions of bankruptcy, insolvency, and other laws
affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Reform Act of 1978. In addition, the obliga-
tions of such issuers may become subject to laws enacted in the
future by Congress, state legislatures, or referenda extending
the time for payment of principal and/or interest, or imposing
other constraints upon enforcement of such obligations or upon
the issuer's ability to generate tax revenues. There is also the
possibility that, as a result of litigation or other conditions,
the authority or ability of an issuer to pay, when due, the
principal of and interest on its municipal securities may be
materially affected.
Government Securities
---------------------
Direct obligations issued by the U.S. Treasury include
bills, notes and bonds which differ from each other only as to
interest rate, maturity and time of issuance. Treasury Bills
have a maturity of one year or less, Treasury Notes have maturi-
ties of one to ten years and Treasury Bonds generally have
maturities of greater than ten years.
In addition to direct obligations issued by the U.S.
Treasury, the Portfolios may also invest in obligations issued by
agencies or instrumentalities of the U.S. Government; provided
that with respect to the Government Portfolio, such obligations
are backed by the unconditional full faith and credit of the U.S.
government, its agencies or instrumentalities.
Options
-------
To the extent consistent with its investment objective, the
S&P 100 Plus Portfolio's Advisors will 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. Options
on individual stocks may also be utilized by the Dividend
Achievers Portfolio, but the Advisor has no plans to do so at
this time.
Listed options are traded on each of the stocks in the S&P
100 Index, and the S&P 100 Plus Portfolio may write (sell)
covered call options and put options, and may purchase call
options and put options on individual stocks as well as on stock
indices for the purposes and subject to the limitations outlined
in "Investment Program -- S&P 100 Plus Portfolio" in the
Prospectus. This flexibility to use options on specific
components of the index as well as the index itself provides an
opportunity to increase total return, but also exposes the
Portfolio to additional risk. See "Investment Program -- Options
and Futures Activities" in the Prospectus.
A call option gives the purchaser of the option the right to
buy, and the writer (seller) of the option the obligation to
sell, the underlying security at the exercise price at any time
during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option
contract. A call option written (sold) by a Portfolio exposes
the Portfolio during the term of the option to possible loss of
an opportunity to realize appreciation in the market price of the
related portfolio security, or to possible continued holding of a
security which might otherwise have been sold to protect against
depreciation in the market price of the security.
A call option is considered to be covered if: (i) the
writer (seller) thereof owns the security underlying the call or
has an absolute and immediate right to acquire that security
without payment of additional cash consideration (or for
additional cash consideration held in a segregated account by its
Depository) upon conversion or exchange of other securities; (ii)
the writer holds on a unit-for-unit basis a call on the same
security as the call written, and the exercise price of the call
purchased is equal to or less than the exercise price of the call
written, or greater than the exercise price of the call written
if the difference is maintained by the Portfolio in cash or cash
equivalents in a segregated account with its Depository; or (iii)
the writer maintains in a segregated account with its Depository
cash or cash equivalents sufficient to cover the market value of
the open position.
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 underlying security at the exercise price at any time
during the option period. A Portfolio will only purchase put
options on individual securities held in the Portfolio, or, in
the case of the S&P 100 Plus Portfolio on indices, which, in the
opinion of the Advisors, have investment characteristics similar
to those of securities in the Portfolio or an index on the
securities. Whenever a Portfolio does not own securities
underlying an open option position sufficient to cover the
position, or whenever a Portfolio has written (sold) a put, the
Portfolio will maintain in a segregated account with its
Depository cash or cash equivalents sufficient to cover the
exercise price or, with respect to index options, the market
value of the open position. The purchase of a put option may be
intended to protect the Portfolio from the risk of a decline in
the value of a security below the exercise price of the option.
The Portfolio may ultimately sell the option in a closing sale
transaction, exercise it or permit it to expire.
Futures
-------
The S&P 100 Plus Portfolio may purchase and sell exchange-
traded index futures contracts on 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 S&P 500 Index presently are
traded on the Chicago Mercantile Exchange.
The S&P 100 Plus 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 Advisors achieve the S&P 100 Plus
Portfolio's objective.
As long as it is required by regulatory authorities having
jurisdiction over the S&P 100 Plus Portfolio, the Portfolio will
limit its use of futures contracts to hedging transactions. For
example, the S&P 100 Plus Portfolio might use futures contracts
to equitize uncommitted cash or to hedge against anticipated
declines in the cash value of the S&P 100 Index. The Portfolio
also may sell futures contracts to hedge against anticipated
declines in common stocks presently owned and may purchase
futures contracts to hedge against anticipated increases in
common stocks the Portfolio intends to purchase. The success of
any hedging technique depends on the ability of the Advisors
correctly to predict changes in the level and direction of
movement in the underlying index. Should these predictions prove
incorrect, the S&P 100 Plus Portfolio's return might have been
better had hedging not been attempted; however, in the absence of
the ability to hedge, the Advisors might have taken portfolio
actions in anticipation of the same market movements with similar
investment results but, presumably, at greater transaction costs.
The S&P 100 Plus Portfolio will only enter into futures contracts
which are standardized and traded on a U.S. exchange, board of
trade, or similar entity, or quoted on an automated quotation
system.
When a purchase or sale of a futures contract is made by the
S&P 100 Plus 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 S&P 100 Plus 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 S&P 100 Plus
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 S&P 100 Plus 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 S&P 100 Plus
Portfolio will mark to market all of its open futures positions.
Index futures contracts in which the S&P 100 Plus 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 off-
setting purchase price is less than the original sale price, the
S&P 100 Plus 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 S&P 100 Plus 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 S&P 100 Plus 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 S&P 100 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
S&P 100 Plus 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 S&P 100 Plus Portfolio will not
enter into a futures contract if, immediately after such trans-
action, the initial margin deposits for futures contracts held by
the Portfolio would exceed 5% of the S&P 100 Plus 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 S&P
100 Plus 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. For this purpose, to the extent
the S&P 100 Plus Portfolio has written call options on specific
securities in its investment portfolio, the value of those
securities will be deducted from the current market value of the
securities portfolio.
Taxation of Options and Futures
-------------------------------
If a Portfolio exercises a call or put option it owns, the
premium paid for the option is added to the cost of the security
purchased (call) or deducted from the proceeds of the sale (put).
For cash settlement options, the difference between the cash
received at exercise and the premium paid is a capital gain or
loss. If a call or put option written by a Portfolio is
exercised, the premium is included in the proceeds of the sale of
the underlying security (call) or reduces the cost of the
security purchased (put). For cash settlement options, 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. If an option
was "in the money" at the time it was written and the security
covering the option was held for more than one year prior to the
writing of the option, any loss realized as a result of a closing
purchase transaction will be long-term for federal tax purposes.
The holding period of the securities covering an "in the money"
option will not include the period of time the option was
outstanding.
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 S&P 100 Plus 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. However, in the
case of positions classified as part of a "mixed straddle," the
recognition of losses on certain positions (including options and
futures positions, the related securities positions and certain
successor positions thereto) may be deferred to a later taxable
year. Sales of futures contracts or writing of call options or
buying put options which are intended to hedge against a change
in the value of securities held by a Portfolio may affect the
holding period of the hedged securities.
Each 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.
S&P 100 Index
-------------
For illustrative purposes, the S&P 100 Plus Portfolio
sometimes includes in its supplemental sales literature a line
graph showing the similarity of the price patterns of the S&P 100
and the S&P 500 stock indices over the past decade. The presen-
tation displays superimposed line graphs of annual prices of the
S&P 100 and the S&P 500 stock indices over approximately a 10-
year period, with prices reflected on the vertical axis and years
reflected on the horizontal axis. Standard & Poor's Corporation
publishes the chart.
The S&P 100 Index is based upon stocks which are all listed
on the NYSE and all have equity options trading on the CBOE. The
S&P 100 Index was also the first stock index listed for options
trading. The S&P 100 Index was designed to track closely the S&P
500 Index, which is designed to be representative of the stock
market as a whole. The S&P 100 stocks are all included in the
S&P 500 Index. The graph indicates that there have been some
modest discrepancies between the stock prices in the S&P 100
Index and the S&P 500 Index in recent years, as compared to the
very high price correlation observed between those indices in
earlier years. Historical prices are not necessarily indicative
of the future prices of either of these indices, or of the
performance of the S&P 100 Plus Portfolio or the ability of that
Portfolio to match the performance of either of those indices or
of the broad stock market generally.
The S&P 100 Plus Portfolio also sometimes presents in its
supplemental sales materials charts that compare the growth in
value of a share of the S&P 100 Plus Portfolio from commencement
of its operations through December 31, 1995 to the growth of the
S&P 100 Index over the same period. One chart presents the
comparison on a total yield basis, and another on a gross dollar
basis. Each presentation assumes the reinvestment of all
dividends.
This Portfolio is not sponsored, endorsed, sold or promoted
by Standard & Poor's Corporation ("S&P"). S&P makes no repre-
sentation or warranty, implied or expressed, to the purchasers of
the Portfolio or any member of the public regarding the advis-
ability of investing in index funds generally, or in this Port-
folio particularly, or the ability of the S&P Index to track
general stock market performance. S&P's only relationship to
this Portfolio is the licensing of the S&P trademarks and S&P 100
which is determined, composed and calculated by S&P without
regard to this Portfolio. "Standard & Poor's", "Standard &
Poor's 100", "S&P", "S&P 100" and "100" in connection with the
S&P 100 are trademarks of Standard & Poor's Corporation.
Repurchase Agreements
---------------------
The Select Value Portfolio may from time to time enter into
repurchase agreements. Repurchase agreements involve the sale of
securities to the Select Value Portfolio with the concurrent
agreement of the seller to repurchase the securities at the same
price plus an amount equal to an agreed upon interest rate within
a specified time, usually less than one week, but on occasion for
a longer period. The Portfolio may enter into repurchase
agreements with broker-dealers and with banks. At the time the
Portfolio enters into a repurchase agreement, the value of the
underlying security, including accrued interest, will be equal to
or exceed the value of the repurchase agreement and, in the case
of repurchase agreements exceeding one day, the seller will agree
that the value of the underlying security, including accrued
interest, will at all times be equal to or exceed the value of
the repurchase agreement. The Portfolio will require continual
maintenance of cash or cash equivalents held by its depository in
an amount equal to, or in excess of, the market value of the
securities which are subject to the agreement.
In the event the seller of the repurchase agreement becomes
the subject of a bankruptcy or insolvency proceeding, or in the
event of the failure of the seller to repurchase the underlying
security as agreed, the Select Value Portfolio could experience
losses that include: (1) possible decline in the value of the
underlying security during the period that the Portfolio seeks to
enforce its rights with respect thereto, and possible delay in
the enforcement of such rights; (2) possible loss of all or a
part of the income or proceeds of the repurchase; (3) additional
expenses to the Portfolio in connection with enforcing those
rights; and (4) possible delay in the disposition of the
underlying security pending court action or possible loss of
rights in such securities. The Advisors intend to cause the
Select Value Portfolio to invest in repurchase agreements only
when they determine that the Portfolio should invest in short-
term money market instruments and that the rates available on
repurchase agreements are favorable as compared to the rates
available on other short-term money market instruments or money
market mutual funds. The Advisors do not currently intend to
invest the assets of the Select Value Portfolio in repurchase
agreements if, after doing so, more than 5% of the Portfolio's
net assets would be invested in repurchase agreements.
When-Issued and Delayed Delivery Transactions
---------------------------------------------
The Tax-Exempt Portfolio and the Government Portfolio may
purchase or sell securities in when-issued or delayed delivery
transactions. In such transactions, instruments are bought or
sold with payment and delivery taking place in the future in
order to secure what is considered to be an advantageous yield or
price to the purchasing Portfolio at the time of entering into
the transactions. The payment obligations and the interest rate
are fixed at the time the buyer enters into the commitment,
although no interest accrues to the purchaser prior to settlement
of the transaction. Consistent with the requirements of the 1940
Act, securities purchased on a when-issued basis are recorded as
an asset (with the purchase price being recorded as a liability)
and are subject to changes in value based upon changes in the
general level of interest rates. At the time of delivery of the
security, the value may be more or less than the transaction
price. At the time a purchasing Portfolio enters into a binding
obligation to purchase securities on a when-issued basis, liquid
assets of the Portfolio having a value at least as great as the
purchase price of the securities to be purchased are identified
on the books of the Portfolio and held by the Portfolio's deposi-
tory throughout the period of the obligation. The use of these
investment strategies may increase net asset value fluctuations.
The purchasing Portfolio will only make commitments to
purchase securities on a when-issued basis with the intention of
actually acquiring the securities, and not for the purpose of
investment leverage, but the Portfolio reserves the right to sell
the securities before the settlement date if it is deemed ad-
visable. Any gains from such sales will be subject to federal
income tax to the extent not offset by losses on other trans-
actions. The above Portfolios do not currently intend to
purchase securities in when-issued transactions if, after such
purchase, more than 5% of the Portfolio's net assets would
consist of when-issued securities.
Short-Term Investments
----------------------
The Select Value 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 Select Value 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 Select Value 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, REPURCHASE AGREEMENTS AND OTHER CORPORATE OBLIGATIONS.
The Select Value 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 Advisors
to be of comparable quality. These rating symbols are described
below under "Description of Ratings of Certain Securities."
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 Select Value 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. The investment policies of the Select
Value Portfolio permit the purchase of variable rate demand notes
only if, at the time of purchase, the notes are rated in the two
highest rating categories by a Nationally Recognized Statistical
Rating Organization, or, if unrated, the issuer has unsecured
debt securities outstanding of an equivalent rating.
The Select Value Portfolio also may invest in repurchase
agreements as short-term instruments. See "Investment Program -
Repurchase Agreements" above.
Investments in Other Investment Companies
-----------------------------------------
An investment by a Portfolio in another investment company
may cause the investing Portfolio to incur duplicate and/or
increased administration and distribution expenses. Such
investments are limited by investment restriction (5). See
"Investment Restrictions" in this Statement of Additional
Information.
Foreign Investments
-------------------
The Select Value Portfolio may invest up to 5% of its assets
in securities of foreign issuers that are not publicly traded in
the United States, excluding American Depository Receipts
("ADRs") in which the Portfolio also may invest. ADRs are
receipts issued by an American bank or trust company evidencing
ownership of underlying securities issued by a foreign issuer.
ADRs may be listed on a national securities exchange or may trade
in the over-the-counter market. ADR prices are denominated in
United States dollars; the underlying security may be denominated
in a foreign currency, although the underlying security may be
subject to foreign government taxes which would reduce the yield
on such securities.
RISKS IF INVESTING IN FOREIGN SECURITIES. Investments in
foreign securities involve certain inherent risks, including the
following:
Political and Economic Factors. Individual foreign
economies of certain countries may differ favorably or
unfavorably from the United States' economy in such respects as
growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and
balance of payments position. Governments in certain foreign
countries also continue to participate to a significant degree,
through ownership interest or regulation, in their respective
economies. Action by these governments could include
restrictions on foreign investment, nationalization,
expropriation of goods or imposition of taxes, and could have a
significant effect on market prices of securities and payment of
interest. The economies of many foreign countries are heavily
dependent upon international trade and are accordingly affected
by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist
trade legislation could have a significant adverse effect upon
the securities markets of such countries.
Currency Fluctuations. The Select Value Portfolio may
invest in securities denominated in foreign currencies.
Accordingly, a change in the value of any such currency against
the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the Portfolio's assets denominated in that
foreign currency. The value of the Portfolio's assets may also
be affected significantly by currency restrictions and exchange
control regulations enacted from time to time.
Market Characteristics. The Advisors expect that most
foreign securities in which the Select Value Portfolio may invest
will be purchased in over-the-counter markets or on exchanges
located in the countries in which the principal offices of the
issuers of the various securities are located, if that is the
best available market. Foreign exchanges and markets may be more
volatile than those in the United States, and foreign securities
may be less liquid than domestic securities. Moreover,
settlement practices for transactions in foreign markets may
differ from those in United States markets, and may include
delays beyond periods customary in the United States.
Legal and Regulatory Matters. Certain foreign countries may
have less supervision of securities markets, brokers and issuers
of securities, and less financial information available to
issuers, than is available in the United States.
Taxes. Dividends and interest payable on the Select Value
Portfolio's foreign portfolio securities may be subject to
foreign withholding taxes, thus reducing the net amount of income
available for distribution to the Portfolio's shareholders.
In considering whether to invest in the securities of a
foreign company, the Advisors consider such factors as the
characteristics of the particular company, differences between
economic trends and the performance of securities markets within
the U.S. and those within other countries, and also factors
relating to the general economic, governmental and social con-
ditions of the country or countries where the company is located.
The extent to which the Select Value Portfolio will be invested
in foreign companies and countries and ADRs will fluctuate from
time to time within the limitations imposed above, depending on
the Advisors' assessment of prevailing market, economic and other
conditions.
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. The
portfolio turnover rates of the various Portfolios are presented
in the tables included in the Section of the Portfolios' combined
Prospectus captioned "Financial Highlights."
INVESTMENT RESTRICTIONS
Restrictions for All Portfolios Other Than Select Value Portfolio
-----------------------------------------------------------------
Each Portfolio, other than the Select Value Portfolio, has
adopted the following fundamental investment restrictions and
policies which cannot be changed without a majority vote of
shareholders of that Portfolio, except that the policies and
restrictions set forth in paragraphs 4, 10, 11, 12, 14, and 15
are not fundamental with respect to the Balanced Portfolio, and
the restriction set forth in paragraph 16 is not fundamental with
respect to any of the Portfolios. Policies that are not "funda-
mental 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, a Portfolio. A
Portfolio may not:
(1) Invest more than 5% of the fair market value of its
assets in securities of any one issuer, except for U.S.
Government Securities, which may be purchased without limitation;
and, with respect to the S&P 100 Plus Portfolio, except as
necessary to parallel the composition of the S&P 100 stock index.
For the purposes of this limitation, the Tax-Exempt Portfolio
will regard the entity which has the ultimate responsibility for
payment of principal and interest as the issuer.
(2) Purchase more than 10% of the outstanding voting
securities of an issuer, or invest in a company to get control or
manage it.
(3) Invest 25% or more of its total assets, based on
current market value at the time of purchase, in securities of
issuers in any single industry; provided that there shall be no
limitation on the purchase of U.S. Government Securities or on
municipal securities.
(4) Invest more than 5% of its total assets in securities
of companies which, including any predecessors, have a record of
less than three years of continuous operations.
(5) Invest in securities of other investment companies,
except by purchases as a result of which not more than 10% of the
Portfolio's total assets (taken at current value) would be
invested in such securities, or except as they may be acquired as
part of a merger, consolidation, reorganization or acquisition of
assets.
(6) Buy or sell real estate, real estate investment trusts,
interests in real estate limited partnerships, oil, gas and
mineral interests, or oil, gas and mineral leases, but this shall
not prevent the Tax-Exempt Portfolio from investing in municipal
securities secured by real estate or interests therein.
(7) Borrow money or property except for temporary or emer-
gency purposes. If a 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 a Portfolio's
borrowing exceeds 5% of the market value of its total assets the
Portfolio will not invest in any additional 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 a Portfolio's
hedging activities are not to be deemed to be a pledge of assets.
(8) Make loans, except that a Portfolio may lend its
portfolio securities, subject to the conditions and limitations
established in the Prospectus. See "Investment Program --
Lending of Portfolio Securities" in the Prospectus. 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.
(9) Underwrite the securities of other issuers, except that
the Tax-Exempt Portfolio may bid, separately or as part of a
group, for the purchase of municipal securities directly from an
issuer for its own portfolio in order to take advantage of the
lower purchase price available.
(10) Purchase securities with legal or contractual restric-
tions on resale.
(11) Issue senior securities.
(12) Purchase securities on margin, make short sales or
write or purchase put and call options, except for the purposes
and subject to the conditions and limitations described in the
Prospectus. See "Investment Program" in the Prospectus.
(13) Buy or sell commodities or commodity contracts.
(14) Invest in illiquid securities.
(15) Purchase warrants, valued at lower of cost or market,
in excess of 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.
(16) Purchase or retain the securities of an issuer if those
officers or Directors of Principal Preservation or the Advisors
(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.
In addition to the investment restrictions above, the Tax-
Exempt Portfolio also is subject to a fundamental investment
restriction that it will invest at least 90% of its total assets
in tax-exempt municipal securities, under normal circumstances.
Each Portfolio also is subject to certain nonfundamental
investment restrictions described below. See "Investment
Restrictions - Nonfundamental Investment Restrictions Common to
All Portfolios" below.
Restrictions for Select Value Portfolio
---------------------------------------
The Select Value Portfolio has adopted the following funda-
mental investment restrictions:
(A) Invest more than 5% of the fair market value of its
assets in securities of any one issuer, except for U.S.
Government securities or bank certificates of deposit and
bankers' acceptances, which may be purchased without such
limitation.
(B) Acquire securities of any one issuer which at the time
of investment (i) represent more than 10% of the outstanding
voting securities of such issuer, or (ii) have a value greater
than 10% of the value of the outstanding voting securities of
such issuer.
(C) Invest 25% or more of its total assets, based on
current market value at the time of purchase, in securities of
issuers in any single industry; provided that there shall be no
limitation on the purchase of securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities.
(D) Invest more than 5% of its total assets in securities
of companies which, including any predecessors, have a record of
less than three years of continuous operations.
(E) Purchase securities on margin or effect short sales of
securities (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).
(F) Buy or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein, except that it may not invest over 10% of the
value of its assets in real estate investment trusts).
(G) Borrow money or property except for temporary or emer-
gency purposes and in connection with transactions in options,
futures or futures options. 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.
(H) Make loans to other persons. 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.
(I) 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.
(J) Issue senior securities (other than the borrowings
permitted above).
In accordance with the following nonfundamental policies,
which may be changed without shareholder approval, the Select
Value Portfolio may not:
(AA) Invest in companies for the purpose of exercising
control or management.
(BB) Invest in securities of other open-end investment
companies (other than money market funds which are subject to
restrictions described below. See "Investment Restrictions -
Nonfundamental Investment Restrictions Common to All
Portfolios").
(CC) Mortgage, hypothecate, or in any manner transfer
as security for any indebtedness, any securities owned or held by
the Portfolio, except that this restriction does not apply to
borrowings permitted above.
(DD) Purchase or retain the securities of an issuer if
those officers or Directors of Principal Preservation or the
Advisors (as defined under the caption "Management of Principal
Preservation --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.
(EE) Invest more than 5% of its assets (valued at the
time of investment) in restricted securities or securities which
are not readily marketable, including (i) securities subject to
legal or contractual restrictions on resale; (ii) securities for
which market quotations are not readily available; or (iii)
repurchase agreements which expire in excess of seven days.
(FF) Purchase warrants, valued at lower of cost or
market, in excess of 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, or on the NASDAQ
National Market System. Warrants acquired by the Portfolio in
units or attached to securities shall be deemed to be without
value for the purposes of this restriction.
(GG) Buy or sell commodities or commodity contracts or
invest in financial futures, options or options on financial
futures.
(HH) Invest less than 65% of its total assets in common
stocks.
(II) Invest over 5% of its total assets in repurchase
agreements.
(KK) Invest in oil, gas or other mineral exploration or
development programs, except that the Portfolio may invest in
marketable securities of enterprises engaged in oil, gas or
mineral exploration.
Nonfundamental Investment Restrictions Common to All Portfolios
---------------------------------------------------------------
In addition to the investment restrictions listed above, as
long as shares of the Portfolio are qualified for sale in the
State of Texas, the Portfolio will not: (i) purchase or sell
limited partnership interests in real property; or (ii) invest in
oil, gas or mineral leases.
Also, the 1940 Act currently places further restrictions on
certain of each Portfolio's investments, including: (I) subject
to certain exceptions, the 1940 Act currently prohibits a
Portfolio from investing more than 5% of its total assets in
securities of another investment company or purchasing more than
3% of the total outstanding voting stock of another investment
company, except that this restriction does not apply to a
purchase of investment company securities as a part of a merger,
consolidation, reorganization or acquisition of assets; and (ii)
the 1940 Act's current usual limit on aggregate holdings of
illiquid securities or securities with restrictions on resale is
15% of a Portfolio's net assets. The SEC presently is reviewing
a proposal to decrease this percentage.
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 Advisors are responsible for
each Portfolio's investment management, and Principal
Preservation's officers are responsible for each Portfolio's
operations.
The directors and officers of Principal Preservation and
their principal occupations during the past five years are set
forth below. Their titles may have varied during that period.
Unless otherwise indicated, the address of each director and
officer of Principal Preservation is 215 North Main Street, West
Bend, Wisconsin, 53095. Asterisks indicate those Directors of
Principal Preservation who are "interested persons" (as defined
in the 1940 Act) of any of the Advisors or an affiliate of any of
the Advisors.
Position with Principal
Principal Occupation During
Name and Address Preservation Past Five Years
---------------- ------------ ---------------
R. D. Ziegler*<F2> 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 Asset Management,
Inc.; Director, Johnson Controls,
Inc. (manufacturing).
Robert J. Vice Director of Mutual Funds,
Tuszynski*<F2> 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 Ave. Southeastern Wisconsin, Inc.
Milwaukee, WI 53223
Augustine J. English Director Retired; President,
1724 Lake Roberts Court Tupperware North America from
Windermere, FL 34786 1990 to 1994 (manufacturing);
prior to 1990, President, The
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 Ranch Road Cos. (mutual life insurance
Dillon, CO 80435 company); prior to 1991,
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
Advisors. 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. Each Portfolio, together with Principal Preservation's
other series, pays a proportionate amount of these expenses based
on its total assets.
The table below shows fees paid to Directors of Principal
Preservation for the year ended December 31, 1995. Each series
of Principal Preservation 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 nine series of Principal
Preservation. Principal Preservation made no payments to its
officers or directors who are affiliated with any investment
advisor to Principal Preservation.
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM PRINCIPAL
BENEFITS ACCRUED PRESERVATION AND
NAME OF PERSON AND AGREGATE AS PART OF FUND COMPLEX OF
POSITION WITH COMPENSATION PRINCIPAL ESTIMATED WHICH PRINCIPAL
PRINCIPAL FROM PRINCIPAL PRESERVATION'S ANNUAL BENEFITS PRESERVATION
PRESERVATION PRESERVATION EXPENSES UPON RETIREMENT WAS A PART(1)<F3>
- ----------------- -------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
R. D. Ziegler, -0- -0- -0- -0-
President and
Director
Robert J. Tuszynski, -0- -0- -0- -0-
Vice President and
Director
Richard H. Aster, 13,800 -0- -0- 13,800
Director
Augustine J. English, 13,800 -0- -0- 13,800
Director
Stephen A. Roell, 13,800 -0- -0- 13,800
Director
Ralph J. Eckert -0- -0- -0- 14,500
Director
(1)<F3>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.
</TABLE>
The executive officers and Directors as a group (9 persons)
owned beneficially, as of January 31, 1996, a total of 30,458 shares
of the S&P 100 Plus Portfolio, 56,602 shares of the Dividend Achievers
Portfolio, and 5,888 shares of the Select Value Portfolio,
representing 1.04%, 3.79% and 1.73%, respectively, of the total
outstanding shares of those Portfolios. This management group's
beneficial ownership of shares of each of the remaining Portfolio's
and of Principal Preservation as a whole amounted to less than 1%
of the outstanding shares of all Portfolios of Principal Preservation.
See also "Control Persons and Principal Holders of Securities."
The Investment Advisors
-----------------------
Basic information as to Ziegler Asset Management, PanAgora
and Skyline and the Advisory and Sub-Advisory Agreements (the
"Agreements") is set forth in the Prospectus under "Management."
Under the Advisory Agreements, Ziegler Asset Management's
fee will be reduced by, or Ziegler Asset Management will
reimburse a Portfolio (up to the amount of its fee), an amount
necessary to prevent the total expenses of a Portfolio (excluding
taxes, interest, brokerage commissions or transaction costs,
distribution fees and extraordinary expenses) from exceeding
limits applicable to the Portfolio in any state in which its
shares are then qualified for sale. With respect to the S&P 100
Plus and Select Value Portfolios, any such reductions and/or
reimbursements will be shared in equal proportions by PanAgora or
Skyline, respectively. Presently the most restrictive expense
ratio limitation imposed by any state is 2-1/2% of the first
$30,000,000 of a Portfolio's average net assets, 2% of the next
$70,000,000 and 1-1/2% of the remaining assets. For the purposes
of these tests, average net assets will be computed in the same
manner as average daily net assets are computed in determining
the investment advisory fee. Such reimbursements would be made
monthly, subject to annual adjustment.
For the years ended December 31, 1995, 1994 and 1993,
Principal Preservation made the following payments under the
Agreements:
Fees Paid Pursuant to Advisory Agreements
-----------------------------------------
Portfolio 1995 1994 1993
--------- ---- ---- ----
Government $295,379 $300,862 $281,993
Tax-Exempt 332,888 355,869 373,276
S&P 100 Plus(1)<F4> 292,466 251,235 234,338
Select Value 21,143 3,122(2)<F5>(3)<F6> --
Dividend Achievers 168,713 163,222 197,213(3)<F6>
(1)<F4>Effective May 1, 1996, the advisory fees for the S&P 100
Plus Portfolio were reduced from 0.75 of 1% to 0.575 of 1%
on the first $20 million in average daily net assets, and
from 0.50 of 1% to 0.45 of 1% on the next million in average
daily net assets. Advisory fees for net assets over $50
million remained unchanged.
(2)<F5>Reflects fees for the period from August 23, 1994 (commence-
ment of operations) through December 31, 1994.
(3)<F6>Does not reflect Ziegler's reimbursements to the Select
Value Portfolio in the amounts of $72,971 and $27,513 for the
year ended December 31,1995 and the period from
August 23, 1994 (commencement of operations) through December 31,
1994, respectively, to the Dividend Achievers Portfolio in
the amounts of $49,439, $13,063 and $26,972 for the years ended
December 31, 1995, 1993 and 1992, respectively, or to the
Tax-Exempt and Government Portfolios in the amounts of $3,6993
and $10,105, respectively, for the year ended December 31, 1995.
.
Administrative Services
-----------------------
Ziegler 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 Portfolio per year is .03 of 1%
of a Portfolio's total assets of $30 million but less than $100
million, .02 of 1% of a Portfolio's total assets of $100 million
but less than $250 million and .01 of 1% of a 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 Agreement, except for
willful misfeasance, bad faith or gross negligence 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
-------------------
Each Portfolio's portfolio securities are held by Ziegler as
depository pursuant to the terms of a Depository Contract.
Ziegler also provides certain administrative, clearing and record
keeping functions for each 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 each Portfolio's assets, .03 of 1% of the
next $40 million of assets, .016 of 1% of the next $200 million
of assets, and 0.015 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 any
Portfolio for any action taken or omitted by it in good faith
without negligence.
Transfer Agent Services
-----------------------
Ziegler provides transfer agent and dividend disbursing
services to each Portfolio pursuant to the terms of a Transfer
and Dividend Disbursing Agency Agreement. Under the terms of the
Transfer and Dividend Disbursing Agency Agreement, Ziegler is
entitled to reasonable compensation for its services and expenses
as agreed upon from time to time between it and the Board of
Directors of Principal Preservation. The annual rate of compen-
sation agreed upon for these services is $13.50 per account for
the Government and Tax-Exempt Portfolios and $8.50 per account
for the S&P 100 Plus, Select Value, and Dividend Achievers
Portfolios. Ziegler is also entitled to reimbursement for all
out of pocket expenses incurred in providing such services.
Ziegler also has the right to retain certain service charges as
described from time to time in the current Prospectus of the
Portfolios. The Transfer and Dividend Disbursing Agency
Agreement will continue in effect until terminated, and may be
terminated by either party without cause on thirty (30) days'
prior written notice. The Transfer and Dividend Disbursing
Agency Agreement provides that Ziegler shall be indemnified by
and not be liable to Principal Preservation or any Portfolio for
any action taken or omitted by Ziegler under such agreement,
except for liability for breach of Ziegler's obligation to
maintain all Principal Preservation records in absolute
confidence.
Other Services
--------------
In addition to the foregoing, Ziegler also serves as the
principal Distributor of each Portfolio's shares and receives
commissions on sales of Portfolio shares. See "Purchase of
Shares." Ziegler also receives reimbursement from each Portfolio
for certain expenses Ziegler incurs in connection with
distributing the Portfolio's shares pursuant to the Distribution
Plan adopted by each Portfolio under Rule 12b-1 of the 1940 Act.
See "Distribution Expenses." Fees paid to Ziegler for services
provided in all of these capacities for the year (or portion
thereof during which the particular Portfolio engaged in
operations) ended December 31, 1995 are shown in the following
table.
COMMISSIONS
ON PORTFOLIO
SHARES TRANSFER AND
AND RULE 12B-1 DIVIDEND
DISTRIBUTION ACCOUNTING/ DEPOSITORY DISBURSING
FEES(1)<F7> PRICING FEES FEES AGENT FEES
Government $76,633 $24,731 $19,319 $55,057
Tax-Exempt 46,341 26,951 20,253 45,055
S&P 100 Plus 177,540 24,213 17,017 64,422
Select Value 18,676 19,000 3,090 3,855
Dividend Achievers 35,089 19,000 9,721 37,897
TOTAL 354,279 113,895 69,400 206,286
(1)<F7>Effective May 1, 1995, the rate of the Rule 12b-1
Distribution Fees payable by the Government, Tax-Exempt, S&P
100 Plus and Dividend Achievers Portfolios was effectively
increased. See "Distribution Expenses" in this Statement of
Additional Information.
PERFORMANCE INFORMATION
From time to time the Portfolios may advertise their "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 a Port-
---------------------------------------
folio 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 a 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 distribu-
tions, after giving effect to the maximum applicable sales
charge. In addition, the Tax-Exempt Portfolio may advertise its
"tax equivalent yield," which is computed by dividing that
portion of the Portfolio's yield which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion,
if any, of the yield of the Portfolio which is not tax-exempt.
Performance information should be considered in light of the
Portfolio's investment objectives and policies, characteristics
and quality of the portfolios 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 a 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 a Portfolio has been in
existence) ended on the date of the balance sheet of the respec-
tive Portfolio, each of which has been incorporated by reference
into this Statement of Additional Information, 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 a 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.
The average annual total returns for each Portfolio for the
1, 5 and 10-year periods ended December 31, 1995 are set forth in
the table below. The total returns for the Government and Tax-
Exempt Portfolios have been restated to reflect the May 1, 1995
reduction in the maximum sales loads for those Portfolios from
4.5% to 3.5%.
FROM
COMMENCEMENT
1 YEAR 5 YEAR 10 YEAR OF OPERATION
------ ------ ------- ------------
Government Portfolio 12.27% 7.57% 8.19% 8.17%
Tax-Exempt Portfolio 13.92 7.81 6.42 6.16
S&P 100 Plus Portfolio 30.56 14.24 12.70 12.66
Dividend Achievers 25.76 11.54 NA 9.80
Portfolio
Select Value Portfolio 15.37 NA NA 7.01
For illustrative purposes, each Portfolio may include in its
supplemental sales literature from time to time a mountain graph
that advertises the Portfolio's total return by depicting the
growth in the value of an initial investment of $10,000 that a
shareholder would have experienced in the relevant Portfolio
since the commencement of the Portfolio's operations to the
present. The presentation consists of a line graph shaded
underneath with the value of the amount invested reflected along
a vertical axis and the time period from the commencement of the
Portfolio's operations through December 31, 1995 reflected along
a horizontal axis.
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.
The yields for certain of the Portfolios for the month ended
December 31, 1995 were: 4.35% for the Tax-Exempt Portfolio, and
4.37% for the Government Portfolio. These yields reflect the May
1, 1995 reduction in the maximum sales loads for these
portfolios. When advertising yield, a Portfolio will not
advertise a one-month or 30-day period which ends more than 45
days before the date the advertisement is published.
A tax equivalent yield is based on a 30-day (or one-month)
period, and is computed by dividing that portion of the yield of
the Tax-Exempt Portfolio (as computed in accordance with the
description above) by one minus a stated income tax rate and
adding the products to that portion, if any, of the yield of the
Portfolio that is not tax-exempt.
The tax equivalent yield, assuming a 33% marginal tax rate,
for the month ended December 31, 1995 was 6.49% for the Tax-
Exempt Portfolio, giving effect to the May 1, 1995 reduction in
the maximum sales loads for that Portfolio.
Performance information for the Portfolios may be compared
to various unmanaged indices, such as the S&P 500, 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.
An illustration may be used comparing the growth in value of
an initial investment in a 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 fluctua-
tions 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 a
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 other competing investment and
deposit products available from or through other financial
institutions. The composition of these indexes, averages or
accounts differs from that of a Portfolio. Comparison of a
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 a Portfolio or Principal Preservation include, but
are not limited to, the following:
The Business Journal Milwaukee Journal
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
Milwaukee Sentinel
When a newspaper, magazine or other publication mentions
Principal Preservation or a 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 com-
prising 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.
A Portfolio may compare its performance to the Consumer
Price Index (All Urban), a widely recognized measure of
inflation.
The performance of the Select Value Portfolio may be
compared to any or all of the following indexes or averages:
Dow-Jones Industrial Average New York Stock Exchange
Russell 2000 Small Stock Index Composite Index
Russell Mid-Cap Stock Index American Stock Exchange
Standard & Poor's 500 Stock Composite Index
Index NASDAQ Composite
Standard & Poor's 400 NASDAQ Industrials
Industrials (These indexes generally
Standard & Poor's Mid-Cap 400 reflect the performance of
Index stock traded in the indicated
Wilshire 5000 markets.)
Wilshire 4500
Wilshire 4000
(These indexes are widely
recognized indicators of
general U.S. stock market
results.)
The performance of the Select Value Portfolio may also be
compared to the following mutual fund industry indexes or
averages: Value Line Index; Lipper Capital Appreciation Fund
Average; Lipper Growth Funds Average; Lipper Small Company Growth
Funds Average; Lipper General Equity Funds Average; Lipper Equity
Funds Average; Lipper Small Company Growth Fund Index;
Morningstar Growth Average; Morningstar Aggressive Growth
Average; Morningstar U.S. Diversified Average; Morningstar Equity
Fund Average; Morningstar Hybrid Average; Morningstar All Equity
Funds Average; and Morningstar General Equity Average.
Lipper Small Growth Fund Index reflects the net asset value
weighted total return of the largest thirty growth funds as
calculated and published by Lipper Analytical Services, Inc.
("Lipper"), an independent service that monitors the performance
of more than 1,000 funds.
The Lipper and Morningstar averages are unweighted averages
of total return performance of mutual funds as classified,
calculated and published by Lipper and by Morningstar, Inc.
("Morningstar"), respectively. The Select Value Portfolio may
also use comparative performance as computed in a ranking by
Lipper or category averages and rankings provided by another
independent service. Should Lipper or another service reclassify
the Select Value Portfolio to a different category or develop
(and place the Portfolio into) a new category, the Portfolio may
compare its performance or ranking against other funds in the
newly assigned category, as published by the service. Moreover,
the Select Portfolio may compare its performance or ranking
against all funds tracked by Lipper or another independent
service, and may cite its rating, recognition or other mention by
Morningstar or any other entity. Morningstar's rating system is
based on risk-adjusted total return performance and is expressed
in a star-rating format. The risk-adjusted number is computed by
subtracting the Portfolio's risk score (which is a function of
the Portfolio's monthly returns less the 3-month Treasury bill
return) from the Portfolio's load-adjusted total return score.
This numerical score is then translated into rating categories,
with the top 10% labeled five star, the next 22.5% labeled four
star, the next 35% labeled three star, the next 22.5% labeled two
star and the bottom 10% one star. A high rating reflects either
above-average returns or below-average risks, or both.
To illustrate the historical returns on various types of
financial assets, the Select Value Portfolio may use historical
data provided by Ibbotson Associates, Inc. ("Ibbotson"), a
Chicago-based investment firm. Ibbotson constructs (or obtains)
very long-term (since 1926) total return data (including, for
example, total return indexes, total return percentages, average
annual total returns and standard deviations of such returns) for
the following asset types: common stocks, small company stocks,
long-term corporate bonds, long-term government bonds,
intermediate-term government bonds, U.S. Treasury bills and
Consumer Price Index. The Portfolio may also use historical data
compiled by Prudential Securities, Inc., or by other similar
sources believed by Principal Preservation to be accurate,
illustrating the past performance of small-capitalization stocks,
large-capitalization stocks, common stocks, equity securities,
growth stocks (small-capitalization, large-capitalization, or
both) and value stock (small-capitalization, large-
capitalization, or both).
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 each 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). The calculation is as of the close of
trading on the Exchange for the S&P 100 Plus, Select Value, and
Dividend Achievers Portfolios, 2:30 p.m. New York time for the
Tax-Exempt Portfolio, and 3:00 p.m. New York time for the
Government Portfolio.
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. The municipal securities in which the Portfolios
will invest are traded primarily in the over-the-counter market.
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. Each 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 each of the
Portfolios. 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.
For the fiscal years ended December 31, 1995, 1994 and 1993
(or the portion of such year during which the relevant Portfolio
was in operation), commissions earned on sales of shares of all
of the Portfolios aggregated $503,000, $533,000 and $1,020,000,
respectively.
Commissions and Rule 12b-1 Fees Earned by
Ziegler on Sales of Portfolio Shares for
Year Ended December 31,
------------------------------------------
Portfolio 1995 1994 1993
--------- ---- ---- ----
Government $76,633 $166,452 $263,326
Tax-Exempt 46,341 84,955 181,460
S&P 100 Plus 177,540 49,291 275,254
Select Value 18,676 26,161(1)<F8> --
Dividend Achievers 35,089 37,309 140,313
------- -------- -------
TOTAL $354,279 $519,799 $1,008,988
------- -------- ----------
------- -------- ----------
(1)<F8>Reflects commissions earned on sales of shares of the Select
Value Portfolio for the period from August 31, 1994
(commencement of operations) through December 31, 1994.
Shares of a 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 of one or more of the Portfolios 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 Portfolios, 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.
Each 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, each
Portfolio must satisfy a number of requirements. Among such
requirements is the requirement that at least 90 percent of a
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
a 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 a Portfolio for more than six months will generally be long-
term capital gain or loss.
For information on federal taxation of options and futures,
see "Investment Program - Federal Taxation of Options and
Futures."
A portion of each Portfolio's (other than the Tax-Exempt
Portfolio) net investment income will qualify for the 70% divi-
dends received deduction for corporations. The aggregate amount
eligible for the dividends received deduction may not exceed the
aggregate qualifying dividends received by the Portfolio for the
year. If less than 100% of the Portfolio's gross income consti-
tutes dividend income, then only a portion of distributions by
the Portfolio will be treated as dividend income for purposes of
computing the dividends received deduction for corporations.
Dividends and other distributions paid to individuals and
other non-exempt payees are subject to a 31% backup Federal
withholding tax if the Transfer Agent is not provided with the
shareholder's correct taxpayer identification number or cer-
tification that the shareholder is not subject to such backup
withholding or if one of the Portfolios is notified that the
shareholder has underreported income in the past. In addition,
such backup withholding tax will apply to the proceeds of redemp-
tion 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 the Transfer Agent with such number and the required
certifications by completing and sending the Transfer Agent
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 a Portfolio's
shares.
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, or of any
of the Portfolios, except that: (i) Ottawa County, #28, P.O. Box
705, 414 Washington, Grand Haven, Michigan owns beneficially
366,239 shares of the Government Portfolio, or approximately 7%
of all outstanding shares of that Portfolio; (ii) Ziegler Growth
Retirement Plan, 215 North Main Street, West Bend, Wisconsin owns
beneficially 48,728 shares of Select Value Portfolio, or
approximately 28.4% of all outstanding shares of that Portfolio;
and (iii) B. C. Ziegler and ompany, 215 North Main Street, West
Bend, Wisconsin owns beneficially 44,420 of the Select Value
Portfolio, or approximately 12.8% of all outstanding shares of
that Portfolio. Information as to beneficial ownership was
obtained from information on file with the Securities and
Exchange Commission or furnished by the specified person or the
transfer agent.
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 or another
affiliate of an Advisor is utilized as a broker by Principal
Preservation, and other clients of such Advisor are considering
the same types of transactions simultaneously, the Advisor will
allocate the transactions and securities in which they are made
in a manner deemed by it to be equitable, taking into account
size, timing and amounts. This may affect the price and avail-
ability of securities to a Portfolio.
During the fiscal years ended December 31, 1995, 1994 and
1993 (or the portion of such year during which the relevant
Portfolio was in operation), the aggregate brokerage commissions
paid by each Portfolio to Ziegler or an affiliate of Ziegler were
as follows:
Brokerage Commissions Paid to Ziegler or
Its Affiliates for Year Ended December 31,
------------------------------------------
Portfolio 1995 1994 1993
--------- ---- ---- ----
Government $-0- $ -0- $ -0-
Tax-Exempt -0- -0- -0-
S&P 100 Plus -0- -0- -0-
Select Value -0- -0- --
Dividend Achievers 17,596 28,505 60,730
------ -------- -------
TOTAL $17,596 $28,505 $60,730
------- -------- -------
------- -------- -------
The amount received by Ziegler or other affiliates of an
Advisor during the year ended December 31, 1995 constituted 60%
of the aggregate brokerage commissions paid by Principal
Preservation during that year, and the brokerage commissions
earned by Ziegler or other affiliates of an Advisor during that
year were earned on approximately 56% of the total dollar amount
of portfolio transactions of Principal Preservation which
involved the payment of commissions. The difference in these
percentages is attributable to the fact that commissions on
equity and index options in which the S&P 100 Plus Portfolio
invests, the trading of which is not directed to an affiliate of
any Advisor, are based upon the number of contracts rather than
the underlying value of the contracts. Therefore, there is an
artificial difference between the percentage of brokerage
commissions paid to such affiliates compared to the percentage of
aggregate dollar amount of portfolio transactions.
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 Portfolios, to pay for sales literature and other
promotional material, and to make payments to its sales
personnel. Any such payments to qualified recipients or expenses
will be reimbursed or paid by Principal Preservation, up to
maximum annual amounts established under the terms of the Plan.
The maximum amount of fees payable under the Plan by any
Portfolio during any calendar year may not exceed an amount equal
to 0.25 of 1% of the average daily net assets of the Portfolio
over the relevant year. Prior to July 1, 1995, Rule 12b-1
distribution fees for the Government Portfolio, Tax-Exempt
Portfolio, S&P 100 Plus Portfolio and Dividend Achievers
Portfolio, were not assessed on net assets of those Portfolios
allocated to accounts opened prior to March 1, 1991 (and net
assets allocated to accounts in any of those Portfolios opened on
or after March 1, 1991, provided the account was opened in
connection with an exchange from another one of those
Portfolios). Pursuant to an amendment to the Plan (the "Plan
Amendment") approved by the shareholders of each of those
Portfolios on April 27, 1995, effective July 1, 1995, net assets
allocated to such accounts no longer are excluded from the
calculation of the fee payable by those Portfolios under the
Plan. Rather, like all of the other Portfolios, the maximum fees
payable under the Plan by each of those Portfolios during any
fiscal year is equal to 0.25 of 1% of the Portfolio's total
-----
average daily net assets.
As a phase-in measure in connection with implementation of
the Plan Amendment, the Advisor committed that it would reimburse
expenses to each of the Government, Tax-Exempt, S&P 100 Plus and
Dividend Achievers Portfolios as necessary so that, for the
period commencing July 1, 1995 and continuing through December
31, 1996, the annualized operating expenses of those Portfolios
will not exceed the following amounts, stated as a percentage of
the relevant Portfolio's average daily net assets: Government
Portfolio - 1.15%; Tax-Exempt Portfolio - 1.15%; S&P 100 Plus
Portfolio - 1.25%; and Dividend Achievers Portfolio - 1.30%.
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. Payments under the Plan to
the Distributor for the year ended December 31, 1995 for each
Portfolio are shown in the table under "Management of Principal
Preservation -- Other Services" above.
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 prospectuses 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 Advisors are dependent primarily on
the advisory fees paid by Principal Preservation to Ziegler. 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 each 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 each Portfolio. For such services, Ziegler
is compensated at the rate of .055 of 1% of the first $10 million
of each Portfolio's assets, .03 of 1% of the next $40 million of
assets, .016 of 1% of the next $200 million of assets, and 0.015
of 1% of assets in excess of $250 million. Fees paid to Ziegler
for providing these services to each Portfolio for the year ended
December 31, 1995 are shown in the table under the section of
this Statement of Additional Information entitled "Management of
Principal Preservation -- Other 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.
EXPERTS
The audited financial statements of the Portfolios incor-
porated by reference into the Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated
in their report with respect thereto and incorporated by
reference into the Prospectus in reliance upon the authority of
said firm as experts in accounting and auditing in giving said
report.
PORTFOLIO RATINGS
A 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 a 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.
FINANCIAL STATEMENTS
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
The following audited financial statements and footnotes
thereto of Principal Preservation Portfolios, Inc., including the
Government, Tax-Exempt, S&P 100 Plus, Select Value and Dividend
Achievers Portfolios, and the Report of the Independent Public
Accountants thereon, are incorporated herein by reference from
Principal Preservation's 1995 Annual Report to Shareholders.
(1) Balance Sheets of each Portfolio dated December 31,
1995.
(2) Statements of Changes in Net Assets of each Portfolio
for the years ended December 31, 1995 and 1994 (except
that this Statement of the Select Value Portfolio
covers the period from August 23, 1994 (commencement of
operations) through December 31, 1994, as well as the
year ended December 31, 1995).
(3) Statements of Operations of each Portfolio for the year
ended December 31, 1995.
A copy of the Annual Report may be obtained free of charge
by writing to Principal Preservation, 215 North Main Street, West
Bend, Wisconsin 53095.
Principal Preservation Portfolios, Inc.
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISORS
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Skyline Asset Management, Inc.
311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606
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
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MAY 1, 1996
STATEMENT OF ADDITIONAL INFORMATION
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:
(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 2480
S&P 100 Plus Portfolio 4424
Tax-Exempt Portfolio 1967
Select Value Portfolio 298
Dividend Achievers Portfolio 2256
Wisconsin Tax-Exempt Portfolio 842
Cash Reserve Portfolio
Class X Common Stock 64
Class Y Common Stock 64
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)<F1>
---- --------------- --------------------
R. D. Ziegler Chairman and Chairman and Director, B.C.
Director Ziegler and Company
Director, Johnson Controls, Inc.
5757 N. Green Bay Avenue, Milwaukee,
WI 53201 (manufacturing)
Geoffrey G. Maclay, President and President and Chief Executive Officer,
Jr. Chief Ziegler Asset Management, Inc.
Executive Officer
P. D. Ziegler Senior Vice President, Chief Executive
President and Officer and Director,
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 Manager and Chief Investment
and Chief Officer, Ziegler Asset
Investment Officer Management, Inc.
R.F. Patek Vice President- Vice President-Portfolio
Portfolio Manager Manager, Ziegler Asset Management, Inc.
D.R. Wyatt Vice President- Vice President, B.C. Ziegler
Market 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
<F1>Note (1): 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):
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.
(11/12/9 1251 Avenue of the Life Insurance Company
3) 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
Morishig (Vice Management, Inc., 260 PanAgora Asset
(5/9/95) Chairman) Franklin Street, 22nd Management, Inc.
Floor, Boston, MA 02110 Boston, MA
USA
Rudolph S. Director Lehman Brothers
Petralla Holdings, Inc.
(7/17/95) 3 World Financial Center
New York, NY 10265
USA
Bruce E. Director PanAgora Asset President and Chief
Clarke and Management, Inc. Executive Officer,
(10/7/94) President 260 Franklin Street PanAgora Asset
22nd Floor Management, Inc.
Boston, MA 02110 Boston, MA
USA
Richard Director Lehman Brothers Chairman and Chief
S. Fuld, Jr. Holdings, Inc. Executive Officer
(11/12/93) 3 World Financial Lehman Brothers
Center New York, NY Holdings, Inc.
10285 New York, NY
USA
Bruce R. Director Lehman Brothers Chairman and CEO-
Lakefield (Chairman) International Europe
(4/08/94) One Broadgate Lehman Brother
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. DeVivo Management, Inc. Compliance Officer
(9/20/91) 260 Franklin Street PanAgora Asset
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): Certain of the indicated persons are officers or directors, or both,
of 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
Asset Management, L.P.
----------------------
Name 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
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
Name B.C. Ziegler Company Position with Principal Preservation
---- -------------------- ------------------------------------
R. Douglas Ziegler Chairman of the Board Chairman of the Board and President
and Director
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--Director Vice President and Director
of Mutual 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 President-- Treasurer
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 for the S&P 100 Plus Portfolio.
(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 furnish a copy of the Registrant's latest
Annual Report to Shareholders, upon request and without charge, to
each person to whom a Prospectus is delivered.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has caused this Amendment 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 29th
day of February, 1996.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By: /s/ R. D. Ziegler
-----------------------------------
R. D. Ziegler, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed on this 29th day of February,
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*<F2> Director
- ------------------------------
Richard H. Aster
August J. English*<F2> Director
- ------------------------------
August J. English
Ralph J. Eckert*<F2> Director
- -----------------------------
Ralph J. Eckert
*<F2>By:/s/ Robert J. Tuszynski
---------------------------------------
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 Registration Statement on
Form N-1A (Registration No. 33-12 under the Securities Act of 1933; File No.
811-4401 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*<F3>
1(b) December 29, 1995 Articles Supplementary(2)<F5> NA
2(a) By-Laws*<F3> NA
2(b) Amendment to Bylaws Adopted By Board NA
of Directors on January 20, 1995*<F3>
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)<F6>
5(a) Investment Advisory Agreement
pertaining to assets of Dividend
Achievers Portfolio
5(b) Investment Advisory Agreement
pertaining to the assets of
Tax-Exempt, S&P 100 Plus,
Government, Wisconsin Tax-Exempt
and Select Value Portfolios
5(c) Sub-Advisory Agreement with PanAgora
Asset Management, Inc., including
form of amendment reducing fees
effective May 1, 1996
5(d) Sub-Advisory Agreement with Skyline
Asset Management, L.P.
5(e) Investment Advisory Agreement with NA
Ziegler Asset Management, Inc. with
respect to the Cash Reserve Portfolio(1)<F4>
6(a) Distribution Agreement*<F3> NA
6(b) Form of Selected Dealers Agreement*<F3> NA
7 N/A
8 Depository Contract*<F3> NA
9(a) Transfer and Dividend Disbursing Agent NA
Agreement*<F3>
9(b) License Agreement with Standard & Poor's NA
Corporation*<F3>
9(c) Accounting/Pricing Agreement between NA
Registrant and B.C. Ziegler and Company(1)<F4>
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*<F3>
9(e) Administrative Services Agreement with NA
Ziegler Asset Management, Inc. with
respect to the Cash Reserve Portfolio(1)<F4>
10 Opinion of Counsel*<F3> NA
11(a) Consent of Independent Accountants
11(b) Consent of Counsel (contained in NA
Exhibit 10)
12 N/A
14 Model Retirement Plan*<F3> NA
15 Rule 12b-1 Distribution Plan, as amended
16 Schedule for Computation of Performance NA
Quotations* <F3>
17 Financial Data Schedule (Included
as Exhibit 27) NA
18 See Exhibit 4 NA
27 Financial Data Schedule
*<F3>Denotes previously filed as part of Registrant's Registration statement or
an amendment thereto, and incorporated herein by reference.
(1)<F4>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)<F5>Denotes previously filed as part of Registrant's Registration Statement
on Form N-14 (Reg. No. 33- ) filed with the Commission on
-------
February 20, 1996.
(3)<F6>Denotes previously filed as part of Post-Effective Amendment No. 31 to
this Registration Statement filed with the Commission on December 29, 1995.
EXHIBIT 5(A)
Investment Advisory Agreement
-----------------------------
(Dividend Achievers Portfolio)
ASSIGNMENT AND CONSENT
THIS ASSIGNMENT AND CONSENT ("Assignment") is made as of this 31st day of
January, 1996 by and among PRINCIPAL PRESERVATION PORTFOLIOS, INC. ("Principal
Preservation"), a Maryland corporation which is a series, open-end, management
investment company registered under the Investment Company Act of 1940, B.C.
ZIEGLER AND COMPANY ("B.C. Ziegler"), a registered investment adviser which
presently serves as the investment adviser to Principal Preservation, and
ZIEGLER ASSET MANAGEMENT, INC. ("ZAMI"), a registered investment adviser which
presently serves as the sub-adviser of Principal Preservation.
RECITALS
WHEREAS, B.C. Ziegler and ZAMI are each wholly-owned subsidiaries of The
Ziegler Companies, Inc.;
WHEREAS, B.C. Ziegler presently serves as investment adviser to Principal
Preservation's Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government
Portfolio, S&P 100 Plus Portfolio, Balanced Portfolio, Wisconsin Tax-Exempt
Portfolio and Select Value Portfolio pursuant to the terms of a May 1, 1989
Investment Advisory Agreement by and between Principal Preservation and B.C.
Ziegler, and also presently serves as investment adviser to Principal
Preservation's Dividend Achievers Portfolio pursuant to the terms of a December
15, 1986 Investment Advisory Agreement by and between Principal Preservation and
B.C. Ziegler, (together "the Investment Advisory Agreements");
WHEREAS, pursuant to the terms of a Sub-Advisory Agreement, dated May 1,
1992, by and among Principal Preservation, B.C. Ziegler and ZAMI (the "Sub-
Advisory Agreement"), ZAMI presently serves as sub-adviser to Principal
Preservation's Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government
Portfolio, Dividend Achievers Portfolio, Balanced Portfolio and Wisconsin Tax-
Exempt Portfolio;
WHEREAS, in connection with a restructuring and realignment, The Ziegler
Companies, Inc. desires to house all of its investment advisory services within
ZAMI, and therefore desires to transfer and assign the Investment Advisory
Agreements from B.C. Ziegler to ZAMI without otherwise affecting any of the
terms and conditions pursuant to which, or the manner in which, investment
advisory services presently are provided to Principal Preservation;
WHEREAS, in order to effect this realignment, it is necessary for B.C.
Ziegler to assign to ZAMI each of the Investment Advisory Agreements, and for
ZAMI to agree to assume and perform all of B.C. Ziegler's duties and obligations
under the Investment Advisory Agreement;
WHEREAS, upon such assignment and assumption, the Sub-Advisory Agreement
will become superfluous and of no utility, and therefore should be terminated;
WHEREAS, all of the parties hereto agree and consent to the assignment of
the Investment Advisory Agreements and to the related termination of the Sub-
Advisory Agreement, subject to the terms and conditions of this Assignment;
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by all parties hereto, the parties hereto
agree as follows:
1. ASSIGNMENT OF INVESTMENT ADVISORY AGREEMENTS. Effective at the close
of business on January 31, 1996, B.C. Ziegler hereby assigns, conveys, and
transfers all of its rights, duties and obligations under the Investment
Advisory Agreements, and ZAMI agrees to become bound by the terms and conditions
of each of the Investment Advisory Agreements and to assume, discharge, perform
and become liable for the performance of all of B.C. Ziegler's duties and
obligations under such Investment Advisory Agreements. Principal Preservation
hereby consents to such assignment and assumption. Accordingly, from and after
the close of business on January 31, 1996, the Investment Advisory Agreements
shall continue in full force and effect with all duties and obligations of B.C.
Ziegler thereunder being deemed duties and obligations of ZAMI as though
Principal Preservation had executed such Investment Advisory Agreements with
ZAMI, and all rights of B.C. Ziegler under such Investment Advisory Agreements
shall be deemed rights of ZAMI enforceable by ZAMI. In short, ZAMI shall become
the principal investment adviser to each of Principal Preservation's Tax-Exempt,
Insured Tax-Exempt, Government, S&P 100 Plus, Dividend Achievers, Balanced,
Select Value and Wisconsin Tax-Exempt Portfolios under the terms of the
Investment Advisory Agreements, and each and every reference to B.C. Ziegler in
the Investment Advisory Agreements shall be deemed instead a reference to ZAMI.
2. EFFECT OF ASSIGNMENTS. The parties acknowledge and intend that,
because (among other factors) B.C. Ziegler and ZAMI are under the common control
of The Ziegler Companies, Inc., this Assignment and Consent does not result in
an "assignment" (as that term is defined in the Investment Company Act of 1940)
of the Investment Advisory Agreements which would bring about their automatic
termination.
3. TERMINATION OF SUB-ADVISORY AGREEMENT. From and after the close of
business on January 31, 1996, the parties hereto agree that the Sub-Advisory
Agreement shall be terminated and of no further force and effect.
Notwithstanding such termination, each party to the Sub-Advisory Agreement shall
be responsible to the other parties thereto for performance of its obligations
thereunder up to and through the effective time of such termination.
IN WITNESS WHEREOF, each of the parties hereto has caused this Assignment
to be executed on its behalf by its duly authorized officer as of the date and
year written above.
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
ZIEGLER ASSET MANAGEMENT, INC.
By: /s/ Geoff Maclay
--------------------------------------
Geoff Maclay, President and CEO
INVESTMENT ADVISORY AGREEMENT
AMONG
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
B. C. ZIEGLER AND COMPANY
AND
M&I INVESTMENT MANAGEMENT CORP.
INVESTMENT ADVISORY AGREEMENT, made as of the 15th day of December, 1986,
by and between Principal Preservation Portfolios, Inc., a corporation organized
and existing under the laws of the State of Maryland (the "Fund"), B. C. Ziegler
and Company, a corporation organized and existing under the laws of the State of
Wisconsin (the "Advisor"), and M&l Investment Management Corp., a wholly-owned
subsidiary of the Marshall & Ilsley Corporation, organized and existing under
the laws of the State of Wisconsin ("M&I") (collectively, M&l and the Advisor
are referred to as the Advisors).
W I T N E S S E T H
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered as such under the federal Investment
Company Act of 1940, as amended (the "Act") and its shares of common stock are
registered under the federal Securities Act of 1933, as amended (the "'33 Act");
and
WHEREAS, the Advisors are engaged in the business of rendering investment
supervisory services and are registered as investment advisors under the federal
Investment Advisors Act of 1940, as amended; and
WHEREAS, the Fund is authorized to issue shares in separate classes (the
"Series") with each such class representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund desires the Advisors to render investment supervisory
services to the Fund in the manner and on the terms and conditions hereinafter
set forth with respect to the Fund's investment activities relating to assets of
the Fund allocated to the Series of its common stock identified on Schedule A
attached hereto, as modified from time to time by the mutual consent of the
parties hereto (the "Schedule A Portfolios");
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. DUTIES AND RESPONSIBILITIES OF ADVISOR.
A. Investment Advisory Services. The Advisors shall act as investment
advisor with respect to, and shall supervise and direct the investments of the
Fund relating to Fund assets allocated to any of the Schedule A Portfolios in
accordance with each such Portfolio's investment objectives, program and
restrictions as provided in the Fund's Prospectus, as amended from time to time,
and such other limitations as the Fund may impose by notice in writing to the
Advisors. The Advisor shall obtain and evaluate such information relating to
the economy, industries, businesses, securities markets and securities as it may
deem necessary or useful in the discharge of its obligations hereunder and shall
formulate and implement a continuing program for the management of the assets
and resources of the Fund in a manner consistent with its investment objective.
As to Fund activities which constitute Hedging Activities as defined in the
Prospectus and to manage the Fund's investments, the Advisor may rely on advice
and services of M&I. In furtherance of this duty, the Advisors, as agent and
attorney-in-fact with respect to the Fund, are authorized, in their discretion
and without prior consultation with the Fund, to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets, including any and all
securities described in the Fund's then current Prospectus and all hedging
instruments described therein;
(ii) borrow on behalf of and in the name of the Fund, but only for
the purposes and to the extent described in the Fund's then current
Prospectus; and
(iii) place orders and negotiate the commissions (if any) for the
execution of transactions in securities with or through such brokers,
dealers, underwriters or issuers as the Advisors may select.
B. Financial, Accounting, and Administrative Services. The Advisor shall
maintain the corporate existence and corporate records of the Fund; maintain the
registrations and qualifications of Fund shares under Federal and state law;
monitor the financial, accounting, and administrative functions of the Fund;
maintain liaison with the various agents employed by the Fund (including the
Fund's transfer agent, custodian, independent accountants and legal counsel) and
assist in the coordination of their activities on behalf of the Fund.
C. Reports to Fund. The Advisor shall furnish to or place at the
disposal of the Fund such information, reports, evaluations, analyses and
opinions as the Fund may, at any time or from time to time, reasonably request
or as the Advisor may deem helpful to the Fund.
D. Reports and Other Communications to Fund Shareholders. The Advisor
shall assist the Fund in developing all general shareholder communications,
including regular shareholder reports.
E. Fund Personnel. The Advisors agree to permit individuals who are
officers or employees of either to serve (if duly elected or appointed) as
officers, directors, members of any committee of directors, members of any
advisory board, or members of any other committee of the Fund, without
remuneration from or other cost to the Fund.
F. Personnel, Office Space, and Facilities of Advisor. The Advisors at
their own expense shall furnish or provide and pay the cost of such office
space, office equipment, office personnel, and office services as they require
in the performance of its investment advisory and other obligations under this
Agreement.
2. ALLOCATION OF EXPENSES.
A. Expenses Paid by Advisors.
(1) Salaries and Fees of Officers. The Advisors shall pay all
salaries, expenses, and fees of the officers and directors of the Fund who
are affiliated with the Advisors.
(2) Assumption of Fund Expenses by Advisors. The payment or
assumption by the Advisors of any expense of the Fund that the Advisors are
not required by this Agreement to pay or assume shall not obligate the
Advisors to pay or assume the same or any similar expense of the Fund on
any subsequent occasion.
B. Expenses Paid by Fund. The Fund shall bear all expenses of its
organization, operations, and business not specifically assumed or agreed to be
paid by the Advisors as provided in this Agreement. In particular, but without
limiting the generality of the foregoing, the Fund shall pay:
(1) Custody and Accounting Services. All expenses of the transfer,
receipt, safekeeping, servicing and accounting for the Fund's cash,
securities, and other property, including all charges of depositories,
custodians, and other agents, if any;
(2) Shareholder Servicing. All expenses of maintaining and servicing
shareholder accounts, including all charges of the Fund's transfer,
shareholder recordkeeping, dividend disbursing, redemption, and other
agents, if any;
(3) Shareholder Communications. All expenses of preparing, setting
in type, printing, and distributing reports and other communications to
shareholders;
(4) Shareholder Meetings. All expenses incidental to holding
meetings of Fund shareholders, including the printing of notices and proxy
material, and proxy solicitation therefor;
(5) Prospectuses. All expenses of preparing, setting in type, and
printing of annual or more frequent revisions of the Fund's Prospectus and
of mailing them to shareholders;
(6) Pricing. All expenses of computing the Fund's net asset value
per share for each Series offered, including the cost of any equipment or
services used for obtaining price quotations;
(7) Communication Equipment. All charges for equipment or services
used for communication between the Advisor or the Fund and the custodian,
transfer agent or any other agent selected by the Fund;
(8) Legal and Accounting Fees and Expenses. All charges for services
and expenses of the Fund's legal counsel and independent auditors;
(9) Directors' Fees and Expenses. All compensation of directors,
other than those affiliated with the Advisors, and all expenses incurred in
connection with their service;
(10) Federal Registration Fees. All fees and expenses of registering
and maintaining the registration of the Fund under the Act and the
registration of the Fund's shares under the '33 Act, including all fees and
expenses incurred in connection with the preparation, setting in type,
printing, and filing of any registration statement and prospectus under the
'33 Act or the Act, and any amendments or supplements that may be made from
time to time;
(11) State Registration Fees. All fees and expenses of qualifying and
maintaining qualification of the Fund and of the Fund's shares for sale
under securities laws of various states or jurisdictions, and of registra-
tion and qualification of the Fund under all other laws applicable to the
Fund or its business activities;
(12) Issue and Redemption of Fund Shares. All expenses incurred in
connection with the issue, redemption, and transfer of Fund shares,
including the expense of confirming all share transactions, and of
preparing and transmitting the Fund's stock certificates;
(13) Bonding and Insurance. All expenses of bond, liability, and
other insurance coverage required by law or deemed advisable by the Fund's
Board of Directors.
(14) Brokerage Commissions. All brokers' commissions and other
charges incident to the purchase, sale, or lending of the Fund's portfolio
securities;
(15) Taxes. All taxes or governmental fees payable by or with respect
of the Fund to Federal, state, or other governmental agencies, domestic or
foreign, including stamp or other transfer taxes;
(16) Trade Association Fees. All fees, dues, and other expenses
incurred in connection with the Fund's membership in any trade association
or other investment organization; and
(17) Nonrecurring and Extraordinary Expenses. Such nonrecurring
expenses as may arise, including the costs of actions, suits, or
proceedings to which the Fund is a party and the expenses the Fund may
incur as a result of its legal obligation to provide indemnification to its
officers, directors, and agents.
3. ADVISORY FEES. The Fund shall pay the Advisor a fee computed as
described below, based on the value of the net assets of the Fund. Fifty
percent remaining after the payment of expenses incurred by the Advisor on
behalf of the Fund of such fee shall be paid to M&I.
A. Fee Rate. The fee shall be payable in monthly installments, based on
average daily net assets of each of the Schedule A Portfolios as follows: at
the rate of .75% of the first $250 million of each such Portfolio's average
daily net assets, reducing .05% on each $250 million thereafter, down to .65% on
assets over $500 million.
B. Method of Computation. The fee shall be accrued for each calendar day
and the sum of the daily fee accruals shall be paid monthly to the Advisor
(which shall thereupon make required payments to M&I) on the first business day
of the next succeeding calendar month. The daily fee accruals will be computed
by multiplying the fraction of one over the number of calendar days in the year
by the applicable annual rate described in subparagraph (a) of this Paragraph 3,
and multiplying this product by the net assets of the appropriate Schedule A
Portfolio as determined in accordance with the Fund's Prospectus as of the close
of business on the previous business day on which the Fund was open for
business.
C. Expense Limitation. To the extent that the aggregate expenses of
every character incurred by a Schedule A Portfolio in any fiscal year, including
but not limited to fees of the Advisor computed as hereinabove set forth, but
excluding interest, taxes, brokerage, and other expenditures which are
capitalized in accordance with generally accepted accounting principles and
extraordinary expenses, shall exceed the limit ("State Expense Limit")
prescribed by any state in which that Portfolio's shares are qualified for sale,
such excess amount shall be the liability of the Advisor and M&l (in equal
proportions) to pay in the manner specified below. To determine the Advisors'
liability for the expenses of a Schedule A Portfolio, the expenses of the
Portfolio shall be annualized monthly as of the last day of the month. If the
annualized expenses for any month exceed the State Expense Limit, the payment of
the advisory fee for such month (if there be any) shall be reduced by such
excess ("Excess Amount") and in the event the Excess Amount exceeds the amount
due as the advisory fee, the Advisors shall remit to the Fund the difference
between the Excess Amount and the amount due as the advisory fee; provided,
however, that an adjustment shall be made on or before the last day of the first
month of the next succeeding fiscal year if the aggregate expenses for the
fiscal year do not exceed the State Expense Limit.
D. Proration of Fee. If this Agreement becomes effective or terminates
before the end of any month, the fee for the period from the effective date to
the end of such month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the proportion
which such period bears to the full month in which such effectiveness or
termination occurs.
4. BROKERAGE.
Subject to the approval of the Board of Directors of the Fund, the
Advisors, in carrying out their duties under Paragraph 1.A, may cause the Fund
to pay a broker-dealer which furnishes brokerage or research services as such
services are defined under Section 28(e) of the Securities Exchange Act of 1934,
as amended (the "'34 Act") a higher commission than that which might be charged
by another broker-dealer which does not furnish brokerage or research services
or which furnishes brokerage or research services deemed to be of lesser value,
if such commission is deemed reasonable in relation to the brokerage and
research services provided by the broker-dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Advisor or M&I
with respect to the accounts as to which it exercises investment discretion (as
such term is defined under Section 3(a)(35) of the '34 Act). The Fund may
allocate brokerage transactions through the Advisor or its affiliates on the
terms and subject to the conditions described in the Fund's most recent
Prospectus.
5. ADVISORS' USE OF THE SERVICES OF OTHERS.
The Advisors may (at their cost except as contemplated by Paragraph 4
of this Agreement) employ, retain or otherwise avail themselves of the services
or facilities of other persons or organizations for the purpose of providing
either of them or the Fund with such statistical and other factual information,
such advice regarding economic factors and trends, such advice as to occasional
transactions in specific securities or such other information, advice or
assistance as they may deem necessary, appropriate or convenient for the
discharge of their obligations hereunder or otherwise helpful to the Fund, or in
the discharge of their overall responsibilities with respect to the other
accounts which they serve as investment advisor.
6. 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 Act and maintained and preserved
by the Advisor on behalf of the Fund are the property of the Fund and will be
surrendered by the Advisor promptly on request by the Fund.
7. REPORTS TO ADVISOR.
The Fund shall furnish or otherwise make available to the Advisor such
prospectuses, financial statements, proxy statements, reports, and other
information relating to the business and affairs of the Fund as the Advisor may,
at any time or from time to time, reasonably require in order to discharge its
obligations under this Agreement.
8. SERVICES TO OTHER CLIENTS.
Nothing herein contained shall limit the freedom of the Advisors or
any affiliated person of either to render investment supervisory and 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; but so long as this Agreement or any
extension, renewal or amendment hereof shall remain in effect or until the
Advisor shall otherwise consent, the Advisor shall be an investment advisor to
the Fund with respect to each Series offered by the Fund.
9. LIMITATION OF LIABILITY OF ADVISOR AND M&I.
Neither the Advisor, M&I, nor any of their officers, directors, or
employees, nor any person performing executive, administrative, trading, or
other functions for the Fund (at the direction or request of the Advisor or M&I)
or the Advisor or M&I in connection with the Advisor's or M&I's discharge of
their 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 the Advisors or any such person of the
duties of the Advisors under this Agreement. The Advisor agrees to indemnify
and hold M&l harmless from any loss, damage or liability incurred as a result of
any act or omission of the Advisor, and M&l agrees to indemnify and hold the
Advisor harmless from any loss, damage or liability incurred as a result of any
act or omission of the M&I.
10. TERM OF AGREEMENT.
The term of this Agreement shall begin on the date first above written, and
unless sooner terminated as hereinafter provided, this Agreement shall be
submitted for approval by shareholders of each of the Schedule A Portfolios at
the first meeting of shareholders of the Fund occurring after the effective date
of Post-Effective Amendment No. 3 to the Fund's registration statement. The
Agreement, if approved at that meeting by a majority of the shares of each of
the Schedule A Portfolios, will continue in effect from year to year as it
pertains to each such Portfolio, subject to the termination provisions and all
other terms and conditions hereof, so long as: (a) 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 each 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
each 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; and (b) the Advisors shall not have notified the
Fund, in writing, at least 60 days prior to December 31, 1986 or prior to
December 31 of any year thereafter, that it does not desire such continuation.
The Advisors 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.
11. AMENDMENT AND ASSIGNMENT OF AGREEMENT.
This Agreement may not be amended or assigned either as it pertains
generally to all of the Schedule A Portfolios or as it pertains to a particular
Schedule A Portfolio without the affirmative vote of a majority of the
outstanding voting securities of each Schedule A Portfolio affected by such
amendment, and this Agreement shall automatically and immediately terminate in
the event of its assignment.
12. TERMINATION OF AGREEMENT.
This Agreement may be terminated by any party hereto either as it pertains
generally to all of the Schedule A Portfolios or as it pertains to a particular
Schedule A Portfolio, 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 resolution 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 Schedule A Portfolio affected by such termination.
13. 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. Specifically, the terms "vote of a majority of the
outstanding voting securities," "interested person," "assignment," and
"affiliated person," as used in Paragraphs 2, 8, 10, 11, and 12 hereof, shall
have the meanings assigned to them by Section 2(a) of 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
Attest: PRINCIPAL PRESERVATION PORTFOLIOS,
INC.
By:
- ------------------------------------ ---------------------------------
William D. Gehl, Secretary R. D. Ziegler, President
Attest: B. C. ZIEGLER AND COMPANY
By:
- ------------------------------------ ---------------------------------
Alice M. Braeger, Secretary R. D. Ziegler, President
Attest: M&I INVESTMENT MANAGEMENT CORP.
By:
- ------------------------------------ ---------------------------------
Title: Title:
------------------------ ------------------------
SCHEDULE A
The investment advisory services to be provided under this Investment
Advisory Agreement by and between the undersigned parties shall pertain to the
Fund's investment activities relating to the assets allocated to the following
Series of the Fund's shares.
1. DIVIDEND ACHIEVERS PORTFOLIO
Attest: PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
- ------------------------------------
William D. Gehl, Secretary By:
---------------------------
R. D. Ziegler, President
Date:
-------------------------------
Attest:
B. C. ZIEGLER AND COMPANY
- ------------------------------------
Alice M. Braeger, Secretary By:
---------------------------
R. D. Ziegler, President
Date:
-------------------------------
Attest:
M&I INVESTMENT MANAGEMENT CORP.
- ------------------------------------
By:
---------------------------
Title:
------------------------------
Title:
------------------------
Date:
-------------------------------
EXHIBIT 5(B)
Investment Advisory Agreement
-----------------------------
(Tax-Exempt Portfolio)
(S&P 100 Plus Portfolio)
(Government Portfolio)
(Wisconsin Tax-Exempt Portfolio)
(Select Value Portfolio)
ASSIGNMENT AND CONSENT
THIS ASSIGNMENT AND CONSENT ("Assignment") is made as of this 31st day of
January, 1996 by and among PRINCIPAL PRESERVATION PORTFOLIOS, INC. ("Principal
Preservation"), a Maryland corporation which is a series, open-end, management
investment company registered under the Investment Company Act of 1940, B.C.
ZIEGLER AND COMPANY ("B.C. Ziegler"), a registered investment adviser which
presently serves as the investment adviser to Principal Preservation, and
ZIEGLER ASSET MANAGEMENT, INC. ("ZAMI"), a registered investment adviser which
presently serves as the sub-adviser of Principal Preservation.
RECITALS
WHEREAS, B.C. Ziegler and ZAMI are each wholly-owned subsidiaries of The
Ziegler Companies, Inc.;
WHEREAS, B.C. Ziegler presently serves as investment adviser to Principal
Preservation's Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government
Portfolio, S&P 100 Plus Portfolio, Balanced Portfolio, Wisconsin Tax-Exempt
Portfolio and Select Value Portfolio pursuant to the terms of a May 1, 1989
Investment Advisory Agreement by and between Principal Preservation and B.C.
Ziegler, and also presently serves as investment adviser to Principal
Preservation's Dividend Achievers Portfolio pursuant to the terms of a December
15, 1986 Investment Advisory Agreement by and between Principal Preservation and
B.C. Ziegler, (together "the Investment Advisory Agreements");
WHEREAS, pursuant to the terms of a Sub-Advisory Agreement, dated May 1,
1992, by and among Principal Preservation, B.C. Ziegler and ZAMI (the "Sub-
Advisory Agreement"), ZAMI presently serves as sub-adviser to Principal
Preservation's Tax-Exempt Portfolio, Insured Tax-Exempt Portfolio, Government
Portfolio, Dividend Achievers Portfolio, Balanced Portfolio and Wisconsin Tax-
Exempt Portfolio;
WHEREAS, in connection with a restructuring and realignment, The Ziegler
Companies, Inc. desires to house all of its investment advisory services within
ZAMI, and therefore desires to transfer and assign the Investment Advisory
Agreements from B.C. Ziegler to ZAMI without otherwise affecting any of the
terms and conditions pursuant to which, or the manner in which, investment
advisory services presently are provided to Principal Preservation;
WHEREAS, in order to effect this realignment, it is necessary for B.C.
Ziegler to assign to ZAMI each of the Investment Advisory Agreements, and for
ZAMI to agree to assume and perform all of B.C. Ziegler's duties and obligations
under the Investment Advisory Agreement;
WHEREAS, upon such assignment and assumption, the Sub-Advisory Agreement
will become superfluous and of no utility, and therefore should be terminated;
WHEREAS, all of the parties hereto agree and consent to the assignment of
the Investment Advisory Agreements and to the related termination of the Sub-
Advisory Agreement, subject to the terms and conditions of this Assignment;
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by all parties hereto, the parties hereto
agree as follows:
1. ASSIGNMENT OF INVESTMENT ADVISORY AGREEMENTS. Effective at the close
of business on January 31, 1996, B.C. Ziegler hereby assigns, conveys, and
transfers all of its rights, duties and obligations under the Investment
Advisory Agreements, and ZAMI agrees to become bound by the terms and conditions
of each of the Investment Advisory Agreements and to assume, discharge, perform
and become liable for the performance of all of B.C. Ziegler's duties and
obligations under such Investment Advisory Agreements. Principal Preservation
hereby consents to such assignment and assumption. Accordingly, from and after
the close of business on January 31, 1996, the Investment Advisory Agreements
shall continue in full force and effect with all duties and obligations of B.C.
Ziegler thereunder being deemed duties and obligations of ZAMI as though
Principal Preservation had executed such Investment Advisory Agreements with
ZAMI, and all rights of B.C. Ziegler under such Investment Advisory Agreements
shall be deemed rights of ZAMI enforceable by ZAMI. In short, ZAMI shall become
the principal investment adviser to each of Principal Preservation's Tax-Exempt,
Insured Tax-Exempt, Government, S&P 100 Plus, Dividend Achievers, Balanced,
Select Value and Wisconsin Tax-Exempt Portfolios under the terms of the
Investment Advisory Agreements, and each and every reference to B.C. Ziegler in
the Investment Advisory Agreements shall be deemed instead a reference to ZAMI.
2. EFFECT OF ASSIGNMENTS. The parties acknowledge and intend that,
because (among other factors) B.C. Ziegler and ZAMI are under the common control
of The Ziegler Companies, Inc., this Assignment and Consent does not result in
an "assignment" (as that term is defined in the Investment Company Act of 1940)
of the Investment Advisory Agreements which would bring about their automatic
termination.
3. TERMINATION OF SUB-ADVISORY AGREEMENT. From and after the close of
business on January 31, 1996, the parties hereto agree that the Sub-Advisory
Agreement shall be terminated and of no further force and effect.
Notwithstanding such termination, each party to the Sub-Advisory Agreement shall
be responsible to the other parties thereto for performance of its obligations
thereunder up to and through the effective time of such termination.
IN WITNESS WHEREOF, each of the parties hereto has caused this Assignment
to be executed on its behalf by its duly authorized officer as of the date and
year written above.
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
ZIEGLER ASSET MANAGEMENT, INC.
By: /s/ Geoff Maclay
--------------------------------------
Geoff Maclay, President and CEO
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of May, 1989, by and between PRINCIPAL
PRESERVATION PORTFOLIOS, INC. (the "Fund"), a Maryland corporation, and B.C.
ZIEGLER AND COMPANY (the "Advisor").
W I T N E S S E T H:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
1. IN GENERAL
The Fund hereby appoints the Advisor to act as investment advisor with
respect to each series of its common stock listed on Exhibit A attached hereto.
Each series is referred to herein as a "Portfolio," and collectively as the
"Portfolios." The Advisor agrees to provide professional investment management
with respect to the investment of the assets of each Portfolio and to supervise
and arrange the purchase and sale of securities held in the portfolio of each
Portfolio and generally administer the affairs of the Fund. The advisor may
engage, on behalf of the Fund or any Portfolio and with the required consent of
the shareholders thereof, the services of a Sub-Advisor, subject to any
limitations imposed by the Investment Company Act of 1940 (the "Act"). It is
understood that the Fund may create one or more additional series of shares and
that, if it does so, this Agreement may be amended to include additional series
under the terms of this Agreement.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO MANAGEMENT OF THE
FUND
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Directors of the Fund, the
Advisor shall:
(i) Decide what securities shall be purchased or sold by each
Portfolio and when; and
(ii) Arrange for the purchase and the sale of securities held in
the portfolio of each Portfolio by placing purchase and sale
orders for each Portfolio.
(b) Any purchases or sales of portfolio securities on behalf of the
Portfolios shall at all times conform to, and be in accordance with,
any requirements imposed by: (1) the provisions of the Act and of any
rules or regulations in force thereunder; (2) any other applicable
provisions of law; (3) the provisions of the Articles of Incorporation
and By-Laws of the Fund as amended from time to time; (4) any policies
and determinations of the Board of Directors of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its registration
statement under the Act, or as amended by the shareholders of the
Fund.
(c) The Advisor shall also administer the affairs of the Fund and, in
connection therewith, shall be responsible for (i) maintaining the
Fund's books and records, (other than financial or accounting books
and records maintained by any accounting services agent and such
records maintained by the Fund's custodian or transfer agent); (ii)
overseeing the Fund's insurance relationships; (iii) preparing for the
Fund (or assisting counsel and/or auditors in the preparation of) all
required tax returns, proxy statements and reports to the Fund's
shareholders and Directors and reports to and other filings with the
Securities and Exchange Commission and any other governmental agency
(the Fund agreeing to supply or cause to be supplied to the Advisor
all necessary financial and other information in connection with the
foregoing); (iv) preparing such applications and reports as may be
necessary to register or maintain the Fund's registration and/or the
registration of the shares of the Portfolios under the securities or
"blue sky" laws of the various states selected by the Fund's
Distributor (a Portfolio or Portfolios agreeing to pay all filing fees
or other similar fees in connection therewith); (v) responding to all
inquiries or other communications of shareholders, if any, which are
directed to the Advisor, or if any such inquiry or communication is
more properly to be responded to by the Fund's custodian, transfer
agent or accounting services agent, overseeing their response thereto;
(vi) overseeing all relationships between the Fund and its
custodian(s), transfer agent(s) and accounting services agent(s),
including the negotiation of agreements and the supervision of the
performance of such agreements; and (vii) authorizing and directing
any of the Advisor's directors, officers and employees who may be
elected as Directors or officers of the Fund to serve in the
capacities in which they are elected. All services to be furnished by
the Advisor under this Agreement may be furnished through the medium
of any such Directors, officers or employees of the Advisor.
(d) The Advisor shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties ("disabling conduct") hereunder on the part of
the Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Advisor) the Advisor shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with rendering services
hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement related, except to the extent
specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation
for services. Except for such disabling conduct, the Fund shall
indemnify the Advisor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Advisor) from any liability arising from the
Advisor's conduct under this Agreement to the extent permitted by the
Fund's Articles of Incorporation, By-Laws and applicable law.
(e) Nothing in this Agreement shall prevent the Advisor or any affiliated
person (as defined in the Act) of the Advisor from acting as
investment adviser or manager and/or principal underwriter for any
other person, firm or corporation and shall not in any way limit or
restrict the Advisor or any such affiliated person from buying,
selling or trading any securities for its or their own accounts or the
accounts of others for whom it or they may be acting, provided,
however, that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement.
(f) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Fund's Registration
Statement under the Act or the Securities Act of 1933 except for
information supplied by the Advisor for inclusion therein.
3. BROKER-DEALER RELATIONSHIPS
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held by each
Portfolio by placing purchase and sale orders for the Portfolio, the Advisor
and/or any Sub-Advisor shall select such broker-dealers ("brokers") as shall, in
the Advisor's or Sub-Advisor's judgment, implement the policy of the Fund to
achieve "best execution," i.e., prompt and efficient execution at the most
----
favorable securities price. In making such selection, the Advisor and/or Sub-
Advisor is authorized to consider the reliability, integrity and financial
condition of the broker. The Advisor and/or Sub-Advisor is also authorized to
consider whether the broker provides brokerage and/or research services to the
Fund and/or other accounts of the Advisor or Sub-Advisor. The commissions paid
to such brokers may be higher than another broker would have charged if a good
faith determination is made by the Advisor and/or Sub-Advisor that the
commission is reasonable in relation to the services provided, viewed in terms
of either that particular transaction or the Advisor's or Sub-Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion. The Advisor and/or Sub-Advisor shall use its judgment in
determining that the amount of commissions paid are reasonable in relation to
the value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the portion of
commission rates reflecting such services. To demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Advisor and/or Sub-Advisor shall be prepared to show that
commissions paid (i) were for purposes contemplated by this Agreement; (ii)
provide lawful and appropriate assistance to the Advisor and/or Sub-Advisor in
the performance of its decision-making responsibilities; and (iii) were within a
reasonable range as compared to the rates charged by qualified brokers to other
institutional investors as such rates may become known from available
information. The Fund recognizes that, on any particular transaction, a higher
than usual commission may be paid due to the difficulty of the transaction in
question. The Advisor and/or Sub-Advisor is also authorized to consider sales
of shares as a factor in the selection of brokers to execute brokerage and
principal transactions, subject to the requirements of "best execution," as de-
fined above.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Fund, at the Advisor's expense,
with all office space and facilities, and equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Advisor will
also pay all compensation of all Directors, officers and employees of the Fund
who are affiliated persons of the Advisor. All costs and expenses not expressly
assumed by the Advisor under this Agreement shall be paid by the Fund,
including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Directors other than those affiliated with the Advisor; (v) legal and audit
expenses; (vi) fees and expenses of the Fund's custodian, shareholder servicing
or transfer agent and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance of shares on
the payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Fund or its
shares; (ix) expenses of preparing, printing and mailing reports and notices,
proxy material and prospectuses to shareholders of the Fund; (x) all other
expenses incidental to holding meetings of the Fund's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute or any
successor or other industry association; (xii) such non-recurring expenses as
may arise, including litigation affecting the Fund and the legal obligations
which the Fund may have to indemnify its officers and Directors with respect
thereto; and (xiii) all expenses which the Fund or a Portfolio agrees to bear in
any distribution agreement or in any plan adopted by the Fund and/or a Portfolio
pursuant to Rule 12b-1 under the Act.
5. COMPENSATION OF THE ADVISOR
(a) The Trust agrees to pay the Advisor and the Advisor agrees to accept
as full compensation for all services rendered by the Advisor as such,
an annual management fee, payable monthly and computed on the value of
the average daily net asset value of the Portfolio as shown on Exhibit
A attached hereto.
(b) In the event the expenses of a Portfolio (including the fees of the
Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commissions, extraordinary expenses and
sales charges and distribution fees) for any fiscal year exceed the
limits set by applicable regulations of state securities commissions,
the Advisor will reduce its fee by the amount of such excess. Any
such reductions are subject to readjustment during the year. The
payment of the management fee at the end of any month will be reduced
or postponed or, if necessary, a refund will be made to a Portfolio so
that at no time will there be any accrued but unpaid liability under
this expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect as to each Portfolio on the date
set forth on Exhibit A attached hereto and shall, unless terminated as
hereinafter provided, continue in effect until May 1, 1991 and
thereafter from year to year, but only so long as such continuance is
specifically approved at least annually by: (i) the vote of a majority
of the Directors who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party cast in person at a
meeting called for the purpose of voting on such approval; and (ii)
either by a vote of a majority of the Board of Directors or by the
vote of the holders of a "majority" (as defined in the Act) of the
outstanding voting securities of the Fund (or with respect to any
Portfolio, by the vote of a majority of the outstanding shares of such
Portfolio).
(b) This Agreement may be terminated by the Advisor at any time without
penalty upon giving the Fund sixty (60) days' written notice (which
notice may be waived by the Fund) and may be terminated by the Fund at
any time without penalty upon giving the Advisor sixty (60) days'
written notice (which notice may be waived by the Advisor), provided
that such termination by the Fund shall be directed or approved by the
vote of a majority of all of its Directors in office at the time or by
the vote of the holders of a majority (as defined in the Act) of the
voting securities of the Fund, or with respect to any Portfolio by the
vote of a majority of the outstanding shares of such Portfolio. This
Agreement shall automatically terminate in the event of its assignment
(as defined in the Act).
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by duly authorized persons and their seals to be hereunto
affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ R. D. Ziegler
By:
------------------------------------------
R. D. Ziegler, President
B.C. ZIEGLER AND COMPANY
/s/ P. D. Ziegler
By:
------------------------------------------
P. D. Ziegler, President
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.
EXHIBIT 5(C)
PanAgora Sub-Advisory Agreement
-------------------------------
(S&P 100 Plus Portfolio)
PANAGORA ASSET MANAGEMENT SUB-ADVISORY AGREEMENT
ASSIGNMENT AND CONSENT
THIS ASSIGNMENT AND CONSENT ("Assignment") is made as of this 31st day of
January, 1996, by and among PRINCIPAL PRESERVATION PORTFOLIOS, INC. ("Principal
Preservation"), a Maryland corporation which is a series, open-end, management
investment company registered under the Investment Company Act of 1940, B.C.
ZIEGLER AND COMPANY ("B.C. Ziegler"), a registered investment adviser which
presently serves as the investment adviser to Principal Preservation's S&P 100
Plus Portfolio, ZIEGLER ASSET MANAGEMENT, INC. ("ZAMI"), a registered investment
adviser which is an affiliate of B.C. Ziegler, and PANAGORA ASSET MANAGEMENT,
INC. ("PanAgora"), a registered investment adviser which presently serves as
sub-adviser to Principal Preservation's S&P 100 Plus Portfolio.
RECITALS
WHEREAS, B.C. Ziegler and ZAMI are each wholly-owned subsidiaries of The
Ziegler Companies, Inc.;
WHEREAS, B.C. Ziegler presently serves as investment adviser to Principal
Preservation's S&P 100 Plus Portfolio pursuant to the terms of a May 1, 1989
Investment Advisory Agreement by and between Principal Preservation and B.C.
Ziegler (the "Investment Advisory Agreement"), and PanAgora presently serves as
sub-adviser to Principal Preservation's S&P 100 Plus Portfolio pursuant to the
terms of a May 1, 1991 Sub-Advisory Agreement by and among Principal
Preservation (on behalf of the S&P 100 Plus Portfolio), B.C. Ziegler (as
investment adviser to the S&P 100 Plus Portfolio), and PanAgora (the "Sub-
Advisory Agreement");
WHEREAS, in connection with a restructuring and realignment, The Ziegler
Companies, Inc. is consolidating all of its investment advisory operations
within ZAMI, and therefore, by the mutual consent of B.C. Ziegler, ZAMI and
Principal Preservation, the Investment Advisory Agreement this day is being
assigned from B.C. Ziegler to, and is being assumed by, ZAMI;
WHEREAS, in a consistent fashion, the parties to this Assignment wish to
express their intention and consent to the Assignment by B.C. Ziegler of all of
its duties and obligations under the Sub-Advisory Agreement to ZAMI, and for
ZAMI to assume and agree to perform all of B.C. Ziegler's duties and obligations
under the Sub-Advisory Agreement;
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by all parties hereto, the parties hereto
agree as follows:
1. ASSIGNMENT AND ASSUMPTION OF SUB-ADVISORY AGREEMENT. Effective at the
close of business on January 31, 1996, B.C. Ziegler hereby assigns, conveys, and
transfers all of its rights, duties and obligations under the Sub-Advisory
Agreement to ZAMI, and ZAMI agrees to become bound by the terms and conditions
of the Sub-Advisory Agreement and to assume, discharge, perform and become
liable for the performance of all of B.C. Ziegler's duties and obligations under
the Sub-Advisory Agreement. Principal Preservation and PanAgora each hereby
consent to such assignment and assumption. Accordingly, from and after the
close of business on January 31, 1996, the Sub-Advisory Agreement shall continue
in full force and effect with all duties and obligations of B.C. Ziegler
thereunder being deemed duties and obligations of ZAMI as though Principal
Preservation and PanAgora had executed such Sub-Advisory Agreement with ZAMI,
and all rights of B.C. Ziegler under such Sub-Advisory Agreement shall be deemed
rights of ZAMI enforceable by ZAMI. In short, each and every reference to B.C.
Ziegler in the Sub-Advisory Agreement shall be deemed instead a reference to
ZAMI.
2. EFFECT OF ASSIGNMENT. The parties acknowledge and intend that,
because (among other factors) B.C. Ziegler and ZAMI are under the common control
of The Ziegler Companies, Inc., this Assignment and Consent does not result in
an "assignment" (as that term is defined in the Investment Company Act of 1940)
of the Sub-Advisory Agreement which would bring about its automatic termination.
IN WITNESS WHEREOF, each of the parties hereto has caused this Assignment
to be executed on its behalf by its duly authorized officer as of the date and
year written above.
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
ZIEGLER ASSET MANAGEMENT, INC.
By: /s/ Geoff Maclay
-------------------------------------
Geoff Maclay, President and CEO
PANAGORA ASSET MANAGEMENT, INC.
By: /s/ Kathleen DeVivo
-------------------------------------
Kathleen DeVivo, Senior Manager
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of May, 1991, by and among PRINCIPAL
PRESERVATION PORTFOLIOS, INC. (the "Fund"), a Maryland corporation, B.C. ZIEGLER
AND COMPANY (the "Advisor"), and PANAGORA ASSET MANAGEMENT, INC. (the "Sub-
Advisor").
W I T N E S S E T H :
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. IN GENERAL
The Sub-Advisor agrees, as more fully set forth herein, to act as
Sub-Advisor to the Fund with respect to the investment and
reinvestment of the assets of each series of its common stock
specified on Exhibit A hereto. Each series is referred to herein as a
"Portfolio," and collectively as the "Portfolios." The Sub-Advisor
agrees to supervise and arrange the purchase of securities for and the
sale of securities held in the portfolios of each Portfolio specified
on Exhibit A. It is understood that the Fund may create one or more
additional series of shares and that, if it does so, this Agreement
may be amended by the mutual written consent of the parties to include
additional series under the terms of this Agreement.
2. DUTIES AND OBLIGATIONS OF THE SUB-ADVISOR WITH RESPECT TO INVESTMENTS
OF ASSETS OF THE PORTFOLIOS
(a) Subject to the succeeding provisions of this section and
subject to the oversight and review of the Advisor and the direction
and control of the Board of Directors of the Fund, the Sub-Advisor
shall:
(i) Determine what securities shall be purchased or sold by
each Portfolio specified on Exhibit A;
(ii) Arrange for the purchase and the sale of securities
held in each Portfolio specified on Exhibit A; and
(iii) Provide the Advisor and the Directors with such
reports as may reasonably be requested in connection with the
discharge of the foregoing responsibilities and the discharge of
the Advisor's responsibilities under the Investment Advisory
Agreement with the Fund and those of B.C. Ziegler and Company
(the "Distributor") under the Distribution Agreement with the
Fund.
(b) Any investment purchases or sales made by the Sub-Advisor
under this section shall at all times conform to, and be in accordance
with, any requirements imposed by: (1) the provisions of the
Investment Company Act of 1940 (the "Act") and of any rules or
regulations in force thereunder; and (2) the provisions of the
Articles of Incorporation and By-Laws of the Fund as amended from time
to time; (3) any policies and determinations of the Board of Directors
of the Fund; and (4) the fundamental policies of the Fund, as
reflected in its registration statement under the Act, or as amended
by the shareholders of the Fund; provided that copies of the items
referred to in clauses (2), (3) and (4) shall have been furnished to
the Sub-Advisor.
(c) The Sub-Advisor shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder. In the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties ("disabling conduct") hereunder
on the part of the Sub-Advisor (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or
entity affiliated with the Sub-Advisor) the Sub-Advisor shall not be
subject to liability to the Fund or to any shareholder of the Fund for
any act or omission in the course of, or connected with rendering
services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to
the extent specified in Section 36(b) of the Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services. Except for such disabling conduct, the
Fund shall indemnify the Sub-Advisor (and its officers, directors,
agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Sub-Advisor) against any
liability arising from the Sub-Advisor's conduct under this Agreement
to the extent permitted by the Fund's Articles of Incorporation, By-
Laws and applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Advisor or
any affiliated person (as defined in the Act) of the Sub-Advisor from
acting as investment advisor or manager for any other person, firm or
corporation and shall not in any way limit or restrict the Sub-Advisor
or any such affiliated person from buying, selling or trading any
securities for its or their own accounts or for the accounts of others
for whom it or they may be acting, provided, however, that the Sub-
Advisor expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its
obligations to the Fund under this Agreement or under the Act. It is
agreed that the Sub-Advisor shall have no responsibility or liability
for the accuracy or completeness of the Fund's Registration Statement
under the Act and the Securities Act of 1933 except for information
supplied by the Sub-Advisor for inclusion therein. The Sub-Advisor
shall be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(e) In connection with its duties to arrange for the purchase
and sales of the Fund's portfolio securities, the Sub-Advisor shall
follow the principles set forth in any Investment advisory agreement
in effect from time to time between the Fund and the Advisor, provided
that a copy of any such agreement shall have been provided to the Sub-
Advisor. The Sub-Advisor will promptly communicate to the Advisor and
to the officers and the Directors of the Fund such information
relating to portfolio transactions as they may reasonably request.
3. ALLOCATION OF EXPENSES
The Sub-Advisor agrees that it will furnish the Fund, at the Sub-
Advisor's expense, with all office space and facilities, equipment and
clerical personnel necessary for carrying out its duties under this
Agreement. The Sub-Advisor will also pay all compensation of those of
the Fund's officers and employees, if any, and of those Directors, if
any, who in each case are affiliated persons of the Sub-Advisor.
4. CERTAIN RECORDS
Any records required to be maintained and preserved pursuant to
the provisions of Rule 31a-1 and Rule 31a-2 under the Act which are
prepared or maintained by the Sub-Advisor on behalf of the Fund are
the property of the Fund and will be surrendered promptly to the Fund
or the Advisor on request.
5. REFERENCE TO THE SUB-ADVISOR
Neither the Fund, the Advisor or any affiliate or agent thereof
shall make reference to or use the name of the Sub-Advisor or any of
its affiliates in any advertising or promotional materials without the
prior approval of the Sub-Advisor, which approval shall not be
unreasonably withheld.
6. COMPENSATION OF THE SUB-ADVISOR
The Advisor agrees to pay the Sub-Advisor and the Sub-Advisor
agrees to accept as full compensation for all services rendered by the
Sub-Advisor as such, a management fee as specified on Exhibit A.
7. DURATION AND TERMINATION
(a) This Agreement shall go into effect as to each Portfolio on
the date set forth on Exhibit A and shall, unless terminated as
hereinafter provided, continue in effect until May 1, 1993 and
thereafter from year to year, but only so long as such continuance is
specifically approved at least annually by: (i) the vote of a majori-
ty of the Directors who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval;
and (ii) either by a majority of the Board of Directors or by the vote
of the holders of a "majority" (as defined in the Act) of the
outstanding voting securities of the Fund (or with respect to any
Portfolio, by the vote of a majority of the outstanding shares of such
Portfolio).
(b) This Agreement may be terminated by the Sub-Advisor at any
time without penalty upon giving the Fund and the Advisor sixty (60)
days' written notice (which may be waived by the Fund and the Advisor)
and may be terminated by the Fund or the Advisor at any time without
penalty upon giving the Sub-Advisor sixty (60) days' written notice
(which notice may be waived by the Sub-Advisor), provided that such
termination by the Fund shall be directed or approved by the vote of a
majority of all of its Directors in office at the time or by the vote
of the holders of a majority (as defined in the Act) of the voting
securities of the Fund, or with respect to any Portfolio by the vote
of a majority of the outstanding shares of such Portfolio. This
Agreement shall automatically terminate in the event of its assignment
(as defined in the Act). This Agreement win also automatically
terminate in the event that the Investment Advisory Agreement is
terminated for any reason.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be hereto
affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC. B.C. ZIEGLER AND COMPANY
/s/ R. D. Ziegler /s/ P. D. Ziegler
By: By:
--------------------------------- -----------------------------
R. D. Ziegler, President P. D. Ziegler, President
PANAGORA ASSET MANAGEMENT, INC.
/s/ Kathleen DeVivo
By:
--------------------------------------
Kathleen DeVivo, Senior Manager
EXHIBIT A
Sub-Advisory Agreement
----------------------
Pursuant to Section 6 of the Sub-Advisory Agreement to which this Exhibit A
is attached, the parties hereto agree that, effective May 1, 1996, the sub-
advisory fees payable by Ziegler Asset Management, Inc. to PanAgora Asset
Management, Inc. for the latter's services as subadvisor to Principal
Preservation Portfolios, Inc.'s S&P 100 Plus Portfolio (the "Portfolio") shall
be as follows: 0.20 of 1% of the Portfolio's average daily net assets up to $100
million; 0.175 of 1% of the next $400 million of the Portfolio's average daily
net assets; and 0.15 of 1% on the Portfolio's average daily net assets in excess
of $500 million.
IN WITNESS WHEREOF, each of the parties hereto has caused this Exhibit A to
be executed on its behalf by its duly authorized officer as of this day of
---
, 1996.
- -----------
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By:
---------------------------------------
R.D. Ziegler, President
ZIEGLER ASSET MANAGEMENT, INC.
By:
---------------------------------------
Geoffrey G. Maclay, Jr., President and CEO
PANAGORA ASSET MANAGEMENT, INC.
By:
---------------------------------------
Kathleen DeVivo, Senior Manager
EXHIBIT 5(D)
Skyline Sub-Advisory Agreement
------------------------------
(Select Value Portfolio)
SKYLINE ASSET MANAGEMENT SUB-ADVISORY AGREEMENT
ASSIGNMENT AND CONSENT
THIS ASSIGNMENT AND CONSENT ("Assignment") is made as of this 31st day of
January, 1996, by and among PRINCIPAL PRESERVATION PORTFOLIOS, INC. ("Principal
Preservation"), a Maryland corporation which is a series, open-end, management
investment company registered under the Investment Company Act of 1940, B.C.
ZIEGLER AND COMPANY ("B.C. Ziegler"), a registered investment adviser which
presently serves as the investment adviser to Principal Preservation's Select
Value Portfolio, ZIEGLER ASSET MANAGEMENT, INC. ("ZAMI"), a registered
investment adviser which is an affiliate of B.C. Ziegler, and SKYLINE ASSET
MANAGEMENT, L.P. ("Skyline"), a registered investment adviser which presently
serves as sub-adviser to Principal Preservation's Select Value Portfolio.
RECITALS
WHEREAS, B.C. Ziegler and ZAMI are each wholly-owned subsidiaries of The
Ziegler Companies, Inc.;
WHEREAS, B.C. Ziegler presently serves as investment adviser to Principal
Preservation's Select Value Portfolio pursuant to the terms of a May 1, 1989
Investment Advisory Agreement by and between Principal Preservation and B.C.
Ziegler (the "Investment Advisory Agreement"), and Skyline presently serves as
sub-adviser to Principal Preservation's Select Value Portfolio pursuant to the
terms of an August 30, 1995 Sub-Advisory Agreement by and among Principal
Preservation (on behalf of the Select Value Portfolio), B.C. Ziegler (as
investment adviser to the Select Value Portfolio), and Skyline (the "Sub-
Advisory Agreement");
WHEREAS, in connection with a restructuring and realignment, The Ziegler
Companies, Inc. is consolidating all of its investment advisory operations
within ZAMI, and therefore, by the mutual consent of B.C. Ziegler, ZAMI and
Principal Preservation, the Investment Advisory Agreement this day is being
assigned from B.C. Ziegler to, and is being assumed by, ZAMI;
WHEREAS, in a consistent fashion, the parties to this Assignment wish to
express their intention and consent to the Assignment by B.C. Ziegler of all of
its duties and obligations under the Sub-Advisory Agreement to ZAMI, and for
ZAMI to assume and agree to perform all of B.C. Ziegler's duties and obligations
under the Sub-Advisory Agreement;
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by all parties hereto, the parties hereto
agree as follows:
1. ASSIGNMENT AND ASSUMPTION OF SUB-ADVISORY AGREEMENT. Effective at the
close of business on January 31, 1996, B.C. Ziegler hereby assigns, conveys, and
transfers all of its rights, duties and obligations under the Sub-Advisory
Agreement to ZAMI, and ZAMI agrees to become bound by the terms and conditions
of the Sub-Advisory Agreement and to assume, discharge, perform and become
liable for the performance of all of B.C. Ziegler's duties and obligations under
the Sub-Advisory Agreement. Principal Preservation and Skyline each hereby
consent to such assignment and assumption. Accordingly, from and after the
close of business on January 31, 1996, the Sub-Advisory Agreement shall continue
in full force and effect with all duties and obligations of B.C. Ziegler
thereunder being deemed duties and obligations of ZAMI as though Principal
Preservation and Skyline had executed such Sub-Advisory Agreement with ZAMI, and
all rights of B.C. Ziegler under such Sub-Advisory Agreement shall be deemed
rights of ZAMI enforceable by ZAMI. In short, each and every reference to B.C.
Ziegler in the Sub-Advisory Agreement shall be deemed instead a reference to
ZAMI.
2. EFFECT OF ASSIGNMENT. The parties acknowledge and intend that,
because (among other factors) B.C. Ziegler and ZAMI are under the common control
of The Ziegler Companies, Inc., this Assignment and Consent does not result in
an "assignment" (as that term is defined in the Investment Company Act of 1940)
of the Sub-Advisory Agreement which would bring about its automatic termination.
IN WITNESS WHEREOF, each of the parties hereto has caused this Assignment
to be executed on its behalf by its duly authorized officer as of the date and
year written above.
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
ZIEGLER ASSET MANAGEMENT, INC.
By: /s/ Geoff Maclay
-------------------------------------
Geoff Maclay, President and CEO
SKYLINE ASSET MANAGEMENT, L.P.
By: /s/ Geoffrey P. Lutz
--------------------------------------
Geoffrey P. Lutz, Principal, Marketing
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 30th day of August, 1995, by and among PRINCIPAL
PRESERVATION PORTFOLIOS, INC. (the "Fund"), a Maryland corporation, B.C.
ZIEGLER AND COMPANY (the "Adviser"), and SKYLINE ASSET MANAGEMENT, L.P. (the
"Sub-Adviser"), a Delaware limited partnership.
R E C I T A L S
WHEREAS, Mesirow Asset Management, Inc. ("Mesirow") has provided
investment advisory services to the Fund's Select Value Portfolio since the
commencement of its operations on August 23, 1994 pursuant to the terms of a
Sub-Advisory Agreement (the "Present Sub-Advisory Agreement"), dated as of
August 23, 1994, by and among the Fund (on behalf of the Select Value
Portfolio), the Adviser and Mesirow;
WHEREAS, there presently is pending a transaction (the "Transaction") in
which Mesirow would transfer substantially all of the assets of its
institutional business (including its rights and obligations under the Present
Sub-Advisory Agreement) to the Sub-Adviser;
WHEREAS, under the provisions of the Investment Company Act of 1940 (the
"Act"), consummation of the Transaction will cause the Present Sub-Advisory
Agreement to terminate automatically concurrent with such consummation; and
WHEREAS, the parties to the Present Sub-Advisory Agreement desire and
intend for the Sub-Adviser, as the successor to Mesirow's business, to continue
providing investment advisory services to the Select Value Portfolio following
the consummation of the Transaction under the same terms and conditions as
Mesirow presently provides such services, and accordingly desire to enter into
a new sub-advisory agreement on terms and conditions substantively identical
with those of the Present Sub-Advisory Agreement, as set forth herein.
W I T N E S S E T H
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. IN GENERAL
The Sub-Adviser agrees, as more fully set forth herein, to act
as Sub-Adviser to the Fund with respect to the investment and
reinvestment of the assets of the Select Value Portfolio and of any
other series of common stock of the Fund as the parties may mutually
agree and specify from time to time on Exhibit A hereto. The Select
Value Portfolio and each other such series is referred to herein as a
"Portfolio." The Sub-Adviser agrees to supervise and arrange the
purchase of securities and the sale of securities held in the
investment portfolios of each Portfolio specified on Exhibit A. It
is understood that the Fund may create one or more additional series
of shares and that, if it does so, this Agreement may be amended by
the mutual written consent of the parties to include such additional
series under the terms of this Agreement.
2. DUTIES AND OBLIGATIONS OF THE SUB-ADVISER WITH RESPECT TO INVESTMENTS
OF ASSETS OF THE PORTFOLIOS
(a) Subject to the succeeding provisions of this section and
subject to the oversight and review of the Adviser and the direction
and control of the Board of Directors of the Fund, the Sub-Adviser
shall:
(i) Determine what securities shall be purchased or sold by
each Portfolio specified on Exhibit A;
(ii) Arrange for the purchase and the sale of securities
held in each Portfolio specified on Exhibit A; and
(iii) Provide the Adviser and the Directors with such
reports as may reasonably be requested in connection with the
discharge of the foregoing responsibilities and the discharge of
the Adviser's responsibilities under its Investment Advisory
Agreement with the Fund and those of B.C. Ziegler and Company
(the "Distributor") under its Distribution Agreement with the
Fund.
(b) Any investment purchases or sales made by the Sub-Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the provisions of
the Act and of any rules or regulations in force thereunder; and (2)
the provisions of the Articles of Incorporation and By-Laws of the
Fund as amended from time to time; (3) any policies and
determinations of the Board of Directors of the Fund; and (4) the
fundamental policies of the Fund, as reflected in its registration
statement under the Act, or as amended by the shareholders of the
Fund; provided that copies of the items referred to in clauses (2),
(3) and (4) shall have been furnished to the Sub-Adviser.
(c) The Sub-Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder. In the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties ("disabling conduct")
hereunder on the part of the Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Sub-Adviser) the Sub-
Adviser shall not be subject to liability to the Fund or to any
shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder, including without
limitation any error of judgment or mistake of law or for any loss
suffered by any of them in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of
the Act concerning loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services. Except for
such disabling conduct, the Fund shall indemnify the Sub-Adviser (and
its officers, directors, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Sub-
Adviser) against any liability arising from the Sub-Adviser's conduct
under this Agreement to the extent permitted by the Fund's Articles
of Incorporation, By-Laws and applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or
any affiliated person (as defined in the Act) of the Sub-Adviser from
acting as investment advisor or manager for any other person, firm or
corporation and shall not in any way limit or restrict the Sub-
Adviser or any such affiliated person from buying, selling or trading
any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting, provided, however, that the
Sub-Adviser expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its
obligations to the Fund under this Agreement or under the Act. It is
agreed that the Sub-Adviser shall have no responsibility or liability
for the accuracy or completeness of the Fund's Registration Statement
under the Act and the Securities Act of 1933, except for information
supplied by the Sub-Adviser for inclusion therein. The Sub-Adviser
shall be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(e) In connection with its duties to arrange for the purchase
and sale of each Portfolio's portfolio securities, the Sub-Adviser
shall follow the principles set forth in any investment advisory
agreement in effect from time to time between the Fund and the
Adviser, provided that a copy of any such agreement shall have been
provided to the Sub-Adviser. The Sub-Adviser will promptly
communicate to the Adviser and to the officers and the Directors of
the Fund such information relating to portfolio transactions as they
may reasonably request.
3. ALLOCATION OF EXPENSES
The Sub-Adviser agrees that it will furnish the Fund, at the
Sub-Adviser's expense, with all office space and facilities,
equipment and clerical personnel necessary for carrying out the Sub-
Adviser's duties under this Agreement. The Sub-Adviser will also pay
all compensation of those of the Fund's officers and employees, if
any, and of those Directors, if any, who in each case are affiliated
persons of the Sub-Adviser.
4. CERTAIN RECORDS
Any records required to be maintained and preserved pursuant to
the provisions of Rule 31a-1 and Rule 31a-2 under the Act which are
prepared or maintained by the Sub-Adviser on behalf of the Fund are
the property of the Fund and will be surrendered promptly to the Fund
or the Adviser on request.
5. REFERENCE TO THE SUB-ADVISER
Neither the Fund nor the Adviser or any affiliate or agent
thereof shall make reference to or use the name of the Sub-Adviser or
any of its affiliates in any advertising or promotional materials
without the prior approval of the Sub-Adviser, which approval shall
not be unreasonably withheld.
6. COMPENSATION OF THE SUB-ADVISER
The Adviser agrees to pay the Sub-Adviser, and the Sub-Adviser
agrees to accept as full compensation for all services rendered by
the Sub-Adviser as such, a management fee as specified on Exhibit A.
7. DURATION AND TERMINATION
(a) This Agreement shall go into effect with respect to the
Select Value Portfolio and replace the Present Sub-Advisory Agreement
upon the later of: (i) consummation of the Transaction; or (ii) on
the first business day following approval hereof by a vote of a
"majority" (as defined in the Act) of the outstanding voting
securities of the Select Value Portfolio. In the event the
Transaction is not consummated for any reason, then this Agreement
shall terminate automatically without ever having become effective
and shall be considered void and of no further force or effect, and
the Present Sub-Advisory Agreement shall continue in full force and
effect unaffected by this Agreement unless and until terminated in
accordance with its terms. In the event the parties hereto mutually
agree that one or more series of the Fund should be included as
additional "Portfolio(s)" hereunder, this Agreement shall become
effective with respect to each such additional Portfolio on the date
specified on Exhibit A hereto. Once effective with respect to any
Portfolio(s), this Agreement shall, unless terminated as hereinafter
provided, continue in effect for a period of two years with respect
to such Portfolio, and thereafter from year to year, but only so long
as such continuance is specifically approved at least annually by a
majority of the Fund's Board of Directors, or by the vote of the
holders of a "majority" (as defined in the Act) of the outstanding
voting securities of the relevant Portfolio(s), and, in either case,
a majority of the Directors who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast
in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement may be terminated by the Sub-Adviser in its
entirety or with respect to any one or more specifically identified
Portfolios at any time without penalty upon giving the Fund and the
Adviser sixty (60) days' written notice (which notice may be waived
by the Fund and the Adviser) and may be terminated by the Fund or the
Adviser in its entirety or with respect to any one or more
specifically identified Portfolios at any time without penalty upon
giving the Sub-Adviser sixty (60) days' written notice (which notice
may be waived by the Sub-Adviser), provided that such termination by
the Fund shall be directed or approved by the vote of a majority of
all of its Directors in office at the time or by the vote of the
holders of a "majority" (as defined in the Act) of the voting
securities of each Portfolio with respect which the Agreement is to
be terminated. This Agreement shall automatically terminate in the
event of its "assignment" (as defined in the Act). This Agreement
will also automatically terminate in the event that the Investment
Advisory Agreement by and between the Fund and B.C. Ziegler and
Company is terminated for any reason.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereto affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC. B.C. ZIEGLER AND COMPANY
By: /s/ R.D. Ziegler By: /s/ Peter D. Ziegler
------------------------------ -------------------------
R. D. Ziegler, President Peter D. Ziegler, President
SKYLINE ASSET MANAGEMENT, L.P.
By: /s/ William M. Dutton
----------------------------
William M. Dutton, President and
Chief Executive Officer
EXHIBIT A TO THE
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
SKYLINE ASSET MANAGEMENT, L.P.
SUB-ADVISORY AGREEMENT
1. Select Value Portfolio.
a. Determined pursuant to Section 7(a) of this Agreement.
b. Management Fee: computed daily and paid monthly at the annual rate
of 0.375 of one percent on the Select Value Portfolio's first $250
million of average daily net assets, reducing 0.025 of one percent on
each $250 million thereafter, down to an annual rate of 0.325 of one
percent on average daily net assets over $500 million.
EXHIBIT 11(A)
Accountant's Consent
--------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 32 (the "Amendment") to this Registration Statement on Form N-1A
of our report dated January 19, 1996 relating to the financial statements and
financial highlights of the series of Principal Preservation Portfolios, Inc.
known as the Government Portfolio, Tax-Exempt Portfolio, S&P 100 Plus Portfolio,
Dividend Achievers Portfolio and Select Value Portfolio, which financial
statements and financial highlights also are incorporated by reference into the
Amendment from Principal Preservation's 1995 Annual Report to Shareholders. We
also consent to the references to our firm under the heading "Financial
Highlights" in the Prospectus and under the headings "Counsel and Independent
Accountants" and "Experts" in the Statement of Additional Information included
as parts of the Amendment.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 29, 1996
EXHIBIT 15
Rule 12b-1 Distribution Plan
----------------------------
CLARIFICATION OF PRINCIPAL PRESERVATION PORTFOLIOS, INC.
DISTRIBUTION PLAN
PRINCIPAL PRESERVATION PORTFOLIOS, INC. (the "Fund"), a Maryland
corporation and open-end management investment company registered under the
Investment Company Act of 1940, as amended, hereby provides as follows:
WHEREAS, the Fund has previously adopted a plan of distribution pursuant to
Rule 12b-1, as amended (the "Plan") under the Investment Company of 1940
(capitalized terms used herein shall have the meanings ascribed to them in the
Plan).
WHEREAS, the Plan provides that:
[t]he Distributor is authorized, pursuant to this Plan, to
make Permitted Payments to any Qualified Recipient under a
related agreement on either or both of the following bases:
(a) as reimbursement for direct expenses incurred in
the course of distributing Fund shares or providing
administrative assistance to the Fund 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
(b) at a rate specified in the related agreement with
a Qualified Recipient in question based on the average
value of the Qualified Holdings of such Qualified
Recipient.
The Distributor may make Permitted Payments in any amount to
any Qualified Recipient, provided that (i) the total amount
of all Permitted Payments made during a fiscal year of the
Fund to all Qualified Recipients (whether made under (a)
and/or (b) above) does not exceed, in that fiscal year of
the Fund, .25 of 1% of the average net assets of accounts. .
. .
WHEREAS, the Plan further provides that:
[t]he Distributor is authorized, pursuant to this Plan, to
purchase advertising for shares of the Fund, to pay for
sales literature and other promotional material, and to make
payments to sales personnel affiliated with it, in the form
of commissions or other compensation. . . . Any such
expenses ("Permitted Expenses") made during a fiscal year of
any Portfolio shall be reimbursed or paid by that Portfolio,
except that the combined amount of reimbursement or payment
of Permitted Expenses together with the Permitted Payments
made pursuant to Section 3 of this Plan by a Portfolio shall
not, in the aggregate, in that fiscal year of the Portfolio,
exceed .25 of 1% of the average net assets of the Portfolio,
and the Distributor shall bear any such expenses beyond such
limit.
WHEREAS, the Fund's Board of Directors wishes to clarify that, to the
extent consistent with the Plan, the Distributor is entitled to receive from the
Fund a fee of .25 of 1% on an annual basis of the average daily net asset value
of the Fund's shares which 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 the Fund or its agent, designate the
Distributor as the customer's dealer of record.
NOW, THEREFORE, the Board of Directors wish to clarify the Plan as follows:
1. PAYMENT TO DISTRIBUTOR
Distributor is entitled to receive from the Fund a fee of .25 of
1% on an annual basis of the average daily net asset value of the
Fund's shares which 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 the Fund or its agent, designate the Distributor as the
customer's dealer of record and that said fee shall be considered
a Permitted Expense; provided, however, that in no event shall
Permitted Expenses and Permitted Payments, in the aggregate, in
that fiscal year of the Fund exceed .25 of 1% of the average
daily net assets of the Fund, and the Distributor shall bear any
such expense beyond such limit.
2. ITEMIZATION
Said fee shall be calculated and paid quarterly. The Distributor
shall furnish the Fund with such information as shall be
reasonably requested by the Fund with respect to the fees paid to
the Distributor.
3. RATIFICATION
The Plan, as clarified, is hereby ratified and confirmed in all
respects.
IN WITNESS WHEREOF, Principal Preservation Portfolios, Inc. has caused this
Clarification to be executed by its duly authorized officer as of this 19th day
of September, 1996.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ R. D. Ziegler
---------------------------------------
R. D. Ziegler, President
ATTEST:
/s/ S. Charles O'Meara
---------------------------------------
S. Charles O'Meara, Secretary
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
AMENDMENT NO. 1 TO RULE 12B-1 DISTRIBUTION PLAN
WHEREAS, the Board of Directors of Principal Preservation Portfolios, Inc.
determined, at its meeting held on January 20, 1995, that it is in the best
interests of the shareholders of the Government Portfolio, the Insured Tax-
Exempt Portfolio, Tax-Exempt Portfolio, S&P 100 Plus Portfolio and Dividend
Achievers Portfolio (together the "Portfolios") to amend Principal
Preservation's Rule 12b-1 Distribution Plan, effective July 1, 1995, so as to
calculate the fees payable thereunder on the total average net assets of each
Portfolio, and to no longer exclude from that calculation net assets allocated
to accounts opened prior to March 1, 1991;
WHEREAS, the Board of Directors has been advised that B.C. Ziegler and
Company ("Ziegler"), the investment advisor, administrator and distributor for
each of the Portfolios, has agreed that, as a phase-in measure, it will
reimburse expenses to each Portfolio so that, for the period commencing July 1,
1995 and continuing through December 31, 1996, the Portfolios' operating
expenses will not exceed prescribed caps;
WHEREAS, at a meeting held on April 27, 1995, the shareholders of each of
the Portfolios approved this Amendment No. 1 to Principal Preservation's Rule
12b-1 Distribution Plan;
NOW, THEREFORE, effective as of July 1, 1995, Principal Preservation's Rule
12b-1 Distribution Plan shall be, and hereby is, amended in its application to
the Government Portfolio, the Insured Tax-Exempt Portfolio, the Tax-Exempt
Portfolio, the S&P 100 Plus Portfolio and the Dividend Achievers Portfolio to
provide that the maximum fees payable thereunder by each of those Portfolios
during any fiscal year shall be limited to an amount equal to 0.25 of 1% of each
such Portfolios' total average daily net assets, and that net assets allocated
to accounts opened prior to March 1, 1991 no longer will be excluded from the
calculation of such fees. This amendment is subject to, and conditioned on, the
agreement of Ziegler to reimburse expenses to each of the Portfolios so that,
for the period commencing on July 1, 1995 and continuing through December 31,
1996, the operating expenses of each Portfolio on an annualized basis will be
limited to the following amounts, stated as a percentage of the relevant
Portfolio's average daily net assets: Government Portfolio - 1.15%; Insured
Tax-Exempt Portfolio - 1.20%; Tax-Exempt Portfolio - 1.15%; S&P 100 Plus
Portfolio - 1.25%; and Dividend Achievers Portfolio - 1.30%.
IN WITNESS WHEREOF, Principal Preservation has caused this Amendment No. 1
to its Rule 12b-1 Distribution Plan to be executed by its duly authorized
officer as of this 27th day of April, 1995.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ R. D. Ziegler
By:
--------------------------------------
R. D. Ziegler, President
/s/ S. Charles O'Meara
Attest:
----------------------------------
S. Charles O'Meara, Secretary
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
RULE 12B-1 DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is the written plan contemplated by
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the "Act") of
the Principal Preservation Portfolios, Inc. (the "Fund").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Portfolio" shall mean any separate portfolio of the Fund.
(b) "Qualified Recipient" shall mean any broker-dealer or other
"person" (as that term is defined in the Act) which (i) has entered into a
written agreement that complies with the Rule (a "related agreement") with
the Fund's Distributor and (ii) has rendered distribution assistance
(whether direct, administrative or both) in the distribution of the Fund's
shares.
(c) "Qualified Holdings" shall mean all shares of the Fund
beneficially owned by (i) a Qualified Recipient, (ii) the customers
(brokerage or other) of a Qualified Recipient, (iii) the clients
(investment advisory or other) of a Qualified Recipient, (iv) the accounts
as to which a Qualified Recipient has a fiduciary or custodial relation-
ship, and (v) the members of a Qualified Recipient, if such Qualified
Recipient is an association or union; provided (i) that any such account
was opened subsequent to the date of shareholder approval of the Plan; and
(ii) that the Qualified Recipient shall have been instrumental in the
purchase of such shares by, or shall have provided administrative
assistance to, such customers, clients, accounts or members in relation
thereto. The Distributor may make final and binding decisions as to all
matters relating to Qualified Holdings and Qualified Recipients, including
but not limited to (i) the identity of Qualified Recipients; (ii) whether
or not any shares are to be considered as Qualified Holdings of any
particular Qualified Recipient; and (iii) what shares, if any, are to be
attributed to a particular Qualified Recipient, to a different Qualified
Recipient or to no Qualified Recipient.
(d) "Qualified Directors" shall mean the Directors of the Fund who
are not interested persons as defined in the Act of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or
any agreement related to this Plan. While this Plan is in effect, the
selection and nomination of Qualified Directors shall be committed to the
discretion of the Directors who are not interested persons of the Fund.
Nothing herein shall 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.
(e) "Permitted Payments" shall mean payments by the Distributor to
Qualified Recipients as permitted by this Plan.
(f) "Permitted Expenses" shall mean expenses incurred by the
Distributor in connection with the distribution of shares of the Fund as
defined below in Section 4.
(g) Permitted Payments and Permitted Expenses shall not include any
expenses listed in Section 5 below.
3. Payments Authorized. The Distributor is authorized, pursuant to this
Plan, to make Permitted Payments to any Qualified Recipient under a related
agreement on either or both of the following bases:
(a) as reimbursement for direct expenses incurred in the course of
distributing Fund shares or providing administrative assistance to the Fund
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
(b) at a rate specified in the related agreement with the Qualified
Recipient in question based on the average value of the Qualified Holdings
of such Qualified Recipient.
The Distributor may make Permitted Payments in any amount to any Qualified
Recipient, provided that (i) the total amount of all Permitted Payments made
during a fiscal year of the Fund to all Qualified Recipients (whether made under
(a) and/or (b) above) do not exceed, in that fiscal year of the Fund, .25 of 1%
of the average net assets of accounts of: (1) any Portfolio of the Fund opened
on or after March 1, 1991, except for accounts opened through exchange from one
Portfolio to another, where such account was originally opened prior to March 1,
1991, and (2) any other Portfolio of the Fund hereafter established and which
adopts this Plan, respectively; and (ii) a majority of the Fund's Qualified
Directors may at any time decrease or limit the aggregate amount of all
Permitted Payments or decrease or limit the amount payable to any Qualified
Recipient. Each Portfolio will reimburse the Distributor for such Permitted
Payments within such limit, but the Distributor shall bear any Permitted
Payments beyond such limits.
4. Expenses Authorized. The Distributor is authorized, pursuant to this
Plan, to purchase advertising for shares of the Fund, to pay for sales
literature and other promotional material, and to make payments to sales
personnel affiliated with it, in the form of commissions or other compensation.
Any such advertising and sales material may include references to other open-
end investment companies or other investments and any salesmen so paid are not
required to devote their time solely to the sale of Fund shares. Any such
expenses ("Permitted Expenses") made during a fiscal year of any Portfolio shall
be reimbursed or paid by that Portfolio, except that the combined amount of
reimbursement or payment of Permitted Expenses together with the Permitted
Payments made pursuant to Section 3 of this Plan by a Portfolio shall not, in
the aggregate, in that fiscal year of the Portfolio exceed .25 of 1% of the
average net assets of accounts of the Portfolio opened subsequent to the date of
approval of the Plan by shareholders (or approval of such Plan as to
subsequently created Portfolios) and the Distributor shall bear any such
expenses beyond such limit. No such reimbursement may be made for Permitted
Expenses or Permitted Payments for fiscal years prior to the fiscal year in
question or in contemplation of future Permitted Expenses or Permitted Payments.
5. Certain Other Payments Authorized. If and to the extent that any of
the payments by the Fund listed below are considered to be "primarily intended
to result in the sale of shares" issued by the Fund within the meaning of the
Rule, such payments by the Fund are authorized without limit under this Plan and
shall not be included in the limitations contained in this Plan: (i) 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 the Fund or
other funds or other investments; (ii) the costs of preparing, printing and
mailing of all prospectuses to shareholders; (iii) 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 the Fund's shares; (iv) all legal and accounting fees
relating to the preparation of any such reports, prospectuses, proxies and proxy
statements; (v) all fees and expenses relating to the qualification of the Fund,
the Portfolios and/or their shares under the securities or "Blue-Sky" law of any
jurisdiction; (vi) all fees under the Act and the Securities Act of 1933,
including fees in connection with any application for exemption relating to or
directed toward the sale of the Fund's shares; (vii) all fees and assessments of
the Investment Company Institute or any successor organization, irrespective of
whether some of its activities are designed to provide sales assistance; (viii)
all costs of preparing and mailing confirmations of shares sold or redeemed or
share certificates, and reports of share balances; and (ix) all costs of
responding to telephone or mail inquiries of shareholders.
6. Investment Advisory Fees. It is recognized that the costs of
distribution of the Fund's shares are expected to exceed the sum of Permitted
Payments and Permitted Expenses ("Excess Distribution Costs") and that the
profits, if any, of the Fund's Advisor are dependent primarily on the advisory
fees paid by the Fund to the Advisor. If and to the extent that any investment
advisory fees paid by the Fund 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 the Fund, the payment of such fees is
authorized under this Plan. In taking any action contemplated by Section 15 of
the Act as to any investment advisory contract to which the Fund is a party, the
Fund's Board of Directors, including its Directors who are not "interested
persons," as defined in the Act, shall, in acting on the terms of any such
contract, apply the "fiduciary duty" standard contained in Sections 36(a) and
36(b) of the Act.
7. Reports. While this Plan is in effect, the Distributor shall report
in writing at least quarterly to the Fund's Board of Directors, and the Board
shall review the following: (i) the amounts of all Permitted Payments, the
identity of the recipients of each such Payment; the basis on which each such
recipient was chosen as a Qualified Recipient and the basis on which the amount
of the Permitted Payment to such Qualified Recipient was made; (ii) the amounts
of Permitted Expenses and the purpose of each such Expense; and (iii) all costs
of each item specified in Section 5 of the Plan (making estimates of such costs
where necessary or desirable), in each case during the preceding calendar or
fiscal quarter.
8. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved (i) by a vote of a majority of the Board of Directors of the Fund
and of a majority of the Qualified Directors, cast in person at a meeting called
for the purpose of voting on this Plan; and (ii) by a vote of holders of at
least a "majority" (as defined in the Act) of the outstanding voting securities
of each Portfolio to which it shall originally apply (and as to subsequently
created Portfolios, by such a vote at the first Annual Meeting of such
Portfolio). This Plan shall, unless terminated as hereinafter provided,
continue in effect until June 30, 1992 and from year to year thereafter only so
long as such continuance is specifically approved at least annually by a
majority of the Fund's Board of Directors and a majority of its Qualified
Directors cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time as to any Portfolio by a
vote of a majority of the Qualified Directors or by the vote of the holders of a
"majority" (as defined in the Act) of the outstanding voting securities of any
Portfolio. This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii) above,
and all amendments must be approved in the manner set forth under (i) above. In
the event of termination of this Plan, the Distributor shall be reimbursed only
for Permitted Payments and Permitted Expenses incurred to the date of
termination and within the limit set forth in Section 4 above.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
DISTRIBUTION AGREEMENT
(under Rule 12b-1)
, 19
-------------------- --
Dear Sirs:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a plan of distribution adopted by
Principal Preservation Portfolios, Inc. (the "Fund") pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940 (the "Act"). The Plan and this
related agreement have been approved by a majority of the Directors of the Fund
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or any related agreements (the "Qualified Directors"), cast in person at a
meeting called for the purpose of voting thereon. Such approval included a
determination that in the exercise of reasonable business judgment and in light
of their fiduciary duties, there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan has also been approved by a
vote of at least a majority of the outstanding voting securities, as defined in
the Act, of each Portfolio to which it shall originally apply. This Agreement
shall apply to additional Portfolios of the Fund which approve the Plan in the
manner required by the Act and rules thereunder.
1. To the extent you provide distribution and marketing services in the
promotion of the Fund's shares, including furnishing services and assistance to
your customers who invest in and own Fund shares, including, but not limited to,
answering routine inquiries regarding the Fund, assisting in changing
distribution options, account designations and addresses, and/or administrative
services, we shall pay you a fee of up to 0.25% on an annual basis of the net
asset value of Fund shares in accounts opened subsequent to the date of initial
approval of the Plan by shareholders of those Portfolios approving the Plan and
which are owned of record by your firm as nominee for your customers or which
are owned by those customers of your firm whose records, as maintained by the
Fund or its Agent, designate your firm as the Customer's dealer of record. We
shall make the determination of the net asset value of such fund shares on or
about the 45th day of each such quarter. No such quarterly fee will be paid to
you with respect to shares purchased by you and redeemed or repurchased by the
Fund or by us as Agent within seven (7) business days after the date of our
confirmation of such purchase. No such quarterly fee will be paid to you with
respect to any of your customers if the amount of such fee based upon the value
of such customer's Fund shares will be less than $1.00. Payment of such
quarterly fee shall be made within 45 days after the close of each quarter for
which such fee is payable.
2. You shall furnish us and the Fund with such information as shall
reasonably be requested by the Directors of the Fund with respect to the fees
paid to you pursuant to this Agreement.
3. We shall furnish to the Directors of the Fund, for their review, on a
quarterly basis a written report of the amounts expended under the Plan by us
and the purposes for which such expenditures were made.
4. This Agreement may be terminated by the vote of a majority of the
Qualified Directors of the Fund or by a vote of majority of the Fund's
outstanding shares on sixty (60) days' written notice, without payment of any
penalty. It will be terminated by any act which terminates either the
Distribution Agreement between the Fund and us or the Dealer Agreement between
your firm and us and shall terminate immediately in the event of its assignment
as that term is defined in the Act.
5. The provisions of the Distribution Agreement between the Fund and us,
insofar as they relate to the Plan, are incorporated herein by reference. This
Agreement shall become effective on the effective date of said Distribution
Agreement and shall continue in full force and effect so long as the continuance
of the Distribution Agreement and the Plan and this Agreement are approved at
least annually by a vote of a majority of the Fund's Directors and a majority of
the Qualified Directors, cast in person at a meeting called for the purpose of
voting thereon. All communications to us should be sent to the above address.
Any notice to you shall be duly given if marked or telegraphed to you at the
address specified by you below. This Agreement shall be effective when accepted
by you below and shall be construed under the laws of the State of Wisconsin.
B.C. ZIEGLER AND COMPANY
By
--------------------------------------
(Authorized Signature)
Accepted:
- ----------------------------------
(Dealer's Name)
- ----------------------------------
(Street Address)
- ----------------------------------
(City) (State) (Zip)
By:
--------------------------------
(Authorized Signature of Dealer)
ADDENDUM
DATED JANUARY 22, 1993
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 22, 1993 hereby
adopts the Distribution Plan of the Fund, last approved on April 30, 1992 for
the Cash Reserve Portfolio, except that the maximum amount of Permitted Payments
provided in Section 3 of the Distribution Agreement, with respect to the Cash
Reserve Portfolio will be 0.15%.
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