(PRINCIPAL PRESERVATION LOGO)
PSE TECH 100
INDEX PORTFOLIO
JUNE 10, 1996
PROSPECTUS
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
PSE TECH 100 INDEX PORTFOLIO
The PSE Tech 100 Index Portfolio (the "Portfolio") of the Principal
Preservation Portfolios, Inc. ("Principal Preservation") family of mutual funds
is offered by this Prospectus. The Portfolio's investment objective is to
obtain a total return, before operating expenses of the Portfolio, that
replicates the total return of the Pacific Stock Exchange Technology Stock Index
(the "PSE Technology Index" or the "Index"). The Index consists of 100 common
stocks of companies in 15 different industries, including biotechnology,
CAD/CAM, data communications, data storage and processing, diversified computer
manufacturing, electronic equipment, information processing, medical technology,
micro-computer manufacturers, semi-conductor manufacturers, software products,
test, analysis and instrumentation equipment, mini and mainframe computer
manufacturing, office automation equipment and semi-conductor capital equipment
manufacturing. There can be no assurance that the Portfolio will achieve its
investment objective.
The risks and special characteristics of investing in the Portfolio are
highlighted in the sections of this Prospectus titled "Questions and Answers"
and "Risk Factors." The Portfolio is advised by Ziegler Asset Management, Inc.
("ZAMI" or the "Advisor"). Shareholder inquiries should be directed to
Principal Preservation at 215 North Main Street, West Bend, WI 53095; telephone
800-826-4600.
This Prospectus sets forth concisely the information that an investor should
know before investing in shares of the Portfolio. Investors should read and
retain this Prospectus for future reference. A Statement of Additional
Information dated June 10, 1996, containing additional information about
Principal Preservation and the Portfolio has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. A
copy of the Statement of Additional Information can be obtained without charge
upon request to B.C. Ziegler and Company ("Ziegler"), 215 North Main Street,
West Bend, WI 53095 (telephone 800-826-4600) or from Selected Dealers (as
defined herein) that have entered into agreements with respect to the
distribution of shares of the Portfolio.
SHARES OF THE PORTFOLIO ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANKING INSTITUTION, ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 10, 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, and the Portfolio is a diversified
series of Principal Preservation. As a series Company, Principal Preservation's
Board of Directors may establish additional portfolios at any time. Seven other
series of Principal Preservation are offered by separate prospectuses.
WHAT ARE THE BENEFITS FROM INVESTING IN THE PORTFOLIO?
Economy of Size. The Portfolio is designed to provide investors with an
opportunity to pool their money to achieve economies of size and
diversification. This permits investors, whose own securities' portfolios may
not be large enough to obtain individual investment management services on a
cost-effective basis, to take advantage of the professional investment
management expertise of the Advisor.
Professional Management. The Portfolio provides professional management of
your investment. Maintaining records of your investments is made timely and
convenient with detailed statements of your investment activity and account
status.
Pooled Investing. The Portfolio combines the funds of many investors to
obtain a portfolio of numerous different issues of investment securities. This
pooled investing strategy permits an investor to spread his or her risk over a
greater number of issues of investment securities, as compared to the number of
issues in which the investor may be able to invest individually. However,
investors should bear in mind that the Portfolio may from time to time invest a
significant portion of its assets in securities of issuers associated with a
particular industry. See "Risk Factors -- Concentrations."
Liquidity. Shares of the Portfolio may be redeemed at any time at their
current net asset value. See "Redemptions."
WHAT IS THE PORTFOLIO'S INVESTMENT OBJECTIVE?
The Portfolio's investment objective is to obtain a total return, before
operating expenses of the Portfolio, that replicates the total return of the PSE
Technology Index. The PSE Technology Index is widely recognized as a benchmark
for the technology sector of the United States stock market. The PSE Technology
Index consists of 100 common stocks of companies that represents 15 different
industries. Industries represented within the Index range from biotechnology
firms to semiconductor capital equipment manufacturers and include a cross-
section of U.S. companies that are leaders in the following subsectors:
biotechnology, CAD/CAM, data communications, data storage and processing,
diversified computer manufacturing, electronic equipment, information
processing, medical technology, micro-computer manufacturers, semi-conductor
manufacturers, software products, test, analysis and instrumentation equipment,
mini and mainframe computer manufacturing, office automation equipment and semi-
conductor capital equipment manufacturing.
The PSE Technology Index is price weighted, which means that its component
stocks are given a percentage weighting based on their price. Although this
indexing method allows the PSE Technology Index to accurately measure a broad
representation of technology stocks without being dominated by a few large
companies, it may cause the Portfolio to experience higher turnover and
brokerage expenses than if the Index's component stocks were not indexed in this
fashion. A higher percentage of the companies represented on the Index may be
smaller- and medium-sized companies, whose stocks tend to be more volatile and
less liquid than stocks of large companies.
The Portfolio attempts to achieve its objective by investing in all 100
common stocks included in the PSE Technology Index in approximately the same
proportions as they are represented on the Index. The Advisor does not manage
the Portfolio according to traditional methods of active investment management,
which involve the buying and selling of securities based upon economic,
financial, and market analysis and investment judgment. Instead the Portfolio
utilizes a "passive" or "indexing" investment approach, attempting to replicate
the investment performance of the PSE Technology Index through statistical
procedures. The Portfolio is managed without regard to tax ramifications. See
"Investment Objectives" and "Investment Program" in this Prospectus and
"Investment Program" in the Statement of Additional Information. There can be
no assurance that the Portfolio's investment objective will be achieved.
ARE THERE ANY RISKS TO CONSIDER?
The PSE Technology Index includes common stocks of companies which have, or
likely will develop, products, processes, or services that will provide or will
benefit significantly from technological advances and improvements. The PSE
Technology Index therefore is subject to volatility and price fluctuations as
the technology market sector increases and decreases in favor with the investing
public. Notwithstanding its focus on technology, the PSE Technology Index
includes companies in a wide range of industries. This broad industry
representation serves to reduce the volatility of the PSE Technology Index.
An investment in the portfolio may involve an above average degree of risk
because of the significant representation on the Index of common stocks of
smaller- and medium-sized companies, which tend to be more volatile and less
liquid than stocks of large companies.
The Portfolio may invest a portion of it assets in futures contracts and
options traded on recognized stock exchanges. There are special risks
associated with such options and futures instruments. See "Risk Factors."
HOW DOES THE PORTFOLIO DISTRIBUTE INCOME?
Dividends will be declared and paid quarterly. Net realized capital gains
will be declared and paid annually. Investors may receive their income
dividends and capital gains distributions in additional shares of the Portfolio,
in additional shares in another Principal Preservation portfolio, or in cash.
See "Dividends, Capital Gains Distributions and Reinvestments."
WHAT ARE THE ADVANTAGES OF STOCK INDEXING?
Stock indexing allows investors to purchase a package of common stocks, the
value of which moves with the value of the market index it is designed to
follow. Frequently, the performance of individual investment managers, who
attempt to beat the market, does not match the performance of stock indices,
including the PSE Technology Index.
WHO MANAGES THE PORTFOLIO?
ZAMI is the investment Advisor for the Portfolio. ZAMI's principal office is
located at 215 North Main Street, West Bend, Wisconsin 53095; their telephone
number is 800-826-4600. See "Management."
HOW CAN SHARES BE PURCHASED?
Shares may be purchased at the public offering price next determined after
receipt of an order to purchase. The offering price is the net asset value per
share plus a sales charge. Until August 30, 1996, a purchaser (as that term is
defined herein) that makes an initial investment of at least $100,000 in the
Portfolio may purchase shares at net asset value (that is, without a sales
charge). Shares may be purchased from Ziegler in its capacity as distributor of
the Portfolio's shares (the "Distributor"), or from broker-dealers and other
financial institutions or firms that have entered into agreements with the
Distributor with respect to their assistance in distributing shares of the
Portfolio ("Selected Dealers"). See "Purchase of Shares." Ziegler's principal
office is at 215 North Main Street, West Bend, WI 53095; telephone 800-826-
4600.
The minimum initial investment in the Portfolio is $1,000, and the minimum
subsequent investment is $50; provided that, the minimum initial investment for
an IRA account is $500, and the minimum subsequent investment is $25.
HOW CAN YOU REDEEM OR EXCHANGE YOUR SHARES?
Shares may be redeemed by mail or telephone. The redemption value of the
shares is the net asset value per share as of the close of business on the day
the redemption request is received in proper form. Subject to a service charge
(currently $5.00), shares of the Portfolio may be exchanged for shares of any
other Principal Preservation portfolio on the basis of their relative net asset
value after the shares to be exchanged have been held for more than six months.
See "Redemptions" and "Shareholder Services." Information as to Principal
Preservation portfolios other than this Portfolio is provided by separate
prospectuses, copies of which may be obtained from the Distributor.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)(1)<F1> 4.5%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) 0%
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds) 0%
Redemption Fees (as a percentage of amount redeemed)(2)<F2> 0%
Exchange Fee $5.00
ANNUAL FUND OPERATING EXPENSES (AFTER REIMBURSEMENT)(3)<F3>
(AS A PERCENTAGE OF ESTIMATED AVERAGE NET ASSETS OF $10 MILLION)(3)<F3>
Advisory Fees(3)<F3> 0.05%
12b-1 Fee(4)<F4> 0.25%
Other Expenses After Reimbursement(3)<F3>:
Custodian Fees 0.05%
Transfer Agent Fees 0.15%
Other Fees 0.30%
Total Other Expenses 0.50%
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Total Fund Operating Expenses (After Reimbursement) 0.80%
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(1)<F1>Investors may be able to qualify for a lower sales load. See "Purchase
of Shares" and "Shareholder Services."
(2)<F2>Ziegler, in its capacity as transfer agent, charges a fee (presently
$7.50) for redemptions by wire transfer.
(3)<F3>The Advisor has committed to waive advisory fees or reimburse expenses so
that, for the period ending December 31, 1996, total operating expenses (on an
annualized basis) will not exceed 0.80 of 1% of average assets. Without giving
effect to such waivers or reimbursements, management of the Portfolio estimates
that, for the period ending December 31, 1996, "Management Fees," "Other Fees,"
and "Total Fund Operating Expenses" would be 0.50%, 0.85% and 1.80%,
respectively.
(4)<F4>Shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers ("NASD"), which generally is 6.25% of new sales, plus an interest
factor.
EXAMPLE
You would pay the following expenses on a $1,000 investment in the Portfolio,
assuming 5% annual return and redemption at the end of each time period:
1 Year $53.00
3 Year $69.00
The purpose of the table is to assist investors in understanding the various
costs and expenses they will bear directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Management," "Purchase of
Shares," "Redemptions," and "Shareholder Services." THE ABOVE EXAMPLES SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN SHOWN.
INVESTMENT OBJECTIVES AND POLICIES
The following is a brief description of the investment objectives and
policies of the Portfolio. The Portfolio seeks to obtain a total return, before
operating expenses of the Portfolio, that replicates the total return of the PSE
Technology Index. The Portfolio seeks to achieve this objective by investing in
all 100 common stocks included in the PSE Technology Index in approximately the
same proportions as they are represented in the Index.
The Portfolio will attempt to remain fully invested in common stocks. Under
normal circumstances, the Portfolio will invest at least 95% of its assets in
the common stocks included in the PSE Technology Index and futures contracts and
options. The Portfolio may invest in certain short-term, fixed-income
securities as cash reserves, although cash or cash equivalents are normally
expected to represent 5% or less of the Portfolio's assets. The Portfolio may
invest up to 20% of its assets in exchange-traded index futures contracts and
index options in order to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions, or to minimize trading costs, while
still tracking the Index. The Portfolio intends to remain fully invested, to
the extent practicable, in a pool of securities that duplicates the investment
characteristics of the PSE Technology Index. In this regard, as a matter of
policy the Portfolio will maintain at least 90% of its assets in common stocks
traded on the PSE Technology Index, except that the percentage of its assets so
invested temporarily (and in any event for a period of not more than five
trading days) may fall below the 90% mark if the Portfolio receives cash inflows
that cannot practically be invested immediately in units of common stocks that
replicate the Index. Certain instruments and techniques discussed in this
summary are described in greater detail under "Investment Program" in this
Prospectus and in the Statement of Additional Information. There can be no
assurance that the investment objective of the Portfolio will be achieved.
The Portfolio is subject to a number of investment restrictions that are
described in the section of the Statement of Additional Information entitled
"Investment Restrictions." Among these restrictions are that the Portfolio may
not borrow money or property except for temporary or emergency purposes. If the
Portfolio borrows money it will only borrow from banks and in an amount not
exceeding 10% of the market value of its total assets (not including the amount
borrowed). The Portfolio will not pledge more than 15% of its net assets to
secure such borrowings. In the event the Portfolio's borrowing exceeds 5% of
the market value of its total assets, the Portfolio will not invest in any
additional securities until its borrowings are reduced to less than 5% of total
assets. For purposes of these restrictions, collateral arrangements for premium
and margin payments in connection with the hedging activities of the Portfolio
are not deemed to be a pledge of assets.
The Statement of Additional Information contains other specific investment
restrictions that govern the investments of the Portfolio. Certain of these
restrictions and the Portfolio's investment objective are fundamental policies,
which means that they may not be changed without a majority vote of shareholders
of the Portfolio. All other investment policies and practices may be changed
without shareholder approval.
INVESTMENT PROGRAM
OVERVIEW
This section contains a general description of the investment program and
other investment practices of the Portfolio. Further information is contained
in the Statement of Additional Information. Shareholders will be notified prior
to implementation of any material change in the Portfolio's investment program.
The Portfolio attempts to replicate the investment results of the PSE
Technology Index by investing in and holding all 100 common stocks included in
the Index in approximately the same proportions as they are represented on the
Index. This indexing technique is known as "complete replication." The
correlation between the performance of the Portfolio's investments and the PSE
Technology Index that the Portfolio attempts to match is expected to be at least
0.95. The Advisor will monitor the correlation between the Portfolio's
investments and the PSE Technology Index daily. Because the Index is price
weighted, the Advisor will be able to replicate the Index by maintaining in the
Portfolio an equal number of shares of each of the 100 common stocks included in
the Index. The Advisor will attempt to achieve correlation between the Index
and the portion of the Portfolio's assets which from time to time are not
invested in common stocks (which generally will consist of cash and short-term
investments) by utilizing equitizing strategies involving the use of index
futures and options. See "Investment Program -- Index Options and Futures
Strategies." Should the correlation coefficient fall below 0.95, the Advisor
promptly will adjust the Portfolio's investments to more closely replicate the
Index.
In attempting to replicate the performance of the PSE Technology Index, the
Portfolio will incur operating expenses, including management fees, transfer and
dividend disbursing agent fees, depository fees, accounting/pricing agent fees,
distribution fees, operating and brokerage fees, and other transactional fees
incurred in connection with adjusting the composition of the Portfolio to
replicate the composition of the PSE Technology Index, and other administrative
expenses. The total return of the PSE Technology Index does not include any
such operating expense and, accordingly, the total return of the Portfolio is
expected to be somewhat less than the total return of the PSE Technology Index.
Additionally, unlike the Index, the Portfolio retains, from time to time,
certain liquid reserves. The Portfolio will attempt to utilize exchange-traded
index futures contracts and options in connection with such reserves in order to
more closely replicate the Index's performance.
PSE TECHNOLOGY INDEX
The PSE Technology Index comprises 100 common stocks, which are chosen by
Bridge Data Corporation based on its assessment that the issuer thereof is a
company which has, or likely will develop, products, processes, or services that
will provide or will benefit significantly from technological advances and
improvements. The PSE Index offers a broad basket of 100 stocks spanning the
full spectrum of high tech industry groups. Diversity within the Index ranges
from biotechnology firms to semiconductor capital equipment manufacturers and
includes a cross section of U.S. companies that are leaders in 15 technology
subsectors. Of the 100 stocks on the Index, 52 are listed on NASDAQ, 46 on the
New York Stock Exchange, and two on the American Stock Exchange. A full listing
of the companies is attached as Appendix A to this Prospectus. As soon as
practicable after receipt of notification of changes in the PSE Technology Index
(as to the securities comprising the Index), the Advisor will attempt to adjust
the composition of the Portfolio in a similar manner.
Similar to the Dow Jones Industrial Average, the PSE Technology Index is
price weighted, meaning the component stocks are given a percentage weighting
based on their price. The PSE Technology Index is calculated by adding the
closing prices of the component stocks and using a divisor that is adjusted for
splits and stock dividends equal to 10% or more of the market value of an issue.
Although this indexing method allows the PSE Technology Index to accurately
measure a broad representation of technology stocks without being dominated by a
few large companies, it results in smaller- and mid-sized companies representing
a more significant portion of the Index than is the case for indexes such as the
S&P 500 Index, which are weighted by the market value of the companies
represented on the index. This factor may result in the Portfolio experiencing
more price fluctuation, less liquidity, and higher brokerage fees than certain
other index funds. See "Risk Factors."
Bridge Data Corporation performs both the calculation and dissemination of
the Index. As the composition of the PSE Technology Index changes, so will the
underlying portfolio of common stocks in the Portfolio. The PSE Technology
Index Portfolio is not sponsored, endorsed, sold, or promoted by the PSE
Technology Index (PSESM, Pacific Stock ExchangeSM, PSE Technology IndexSM, and
PSE Tech 100SM are servicemarks of the Pacific Stock Exchange Incorporated) or
the Bridge Data Corporation.
INDEX OPTIONS AND FUTURES STRATEGIES
Options and Futures Strategy. The Portfolio may utilize exchange-traded
index futures contracts and options on stock indices to a limited extent. Such
futures contracts and options may be used for several reasons: to simulate
investment in the underlying index while retaining a cash balance for fund
management purposes (commonly referred to as equitizing cash), to facilitate
trading, to reduce transaction costs, or to seek higher investment returns when
such a futures contract or option thereon is priced more attractively than the
underlying index. For example, cash maintained by the Portfolio for liquidity
purposes and/or cash received by the Portfolio in connection with sales of
Portfolio shares may, pending investment in common stocks in the PSE Technology
Index, be invested in exchange-traded index futures contracts or index options,
thereby generating a return on such cash proceeds that approximates the return
on the underlying index.
On February 29, 1996, the U.S. Commodity Futures Trading Commission
designated the New York Futures Exchange, Inc. a contract market in futures and
futures options on the PSE Technology Index. The New York Futures Exchange,
Inc. began trading futures and options on this Index in April, 1996. The
Advisor plans to utilize options and futures on the PSE Technology Index traded
on that exchange. The Advisor also may utilize futures and options on the S&P
500 Index to implement these strategies. S&P 500 Index options and futures are
routinely traded on The Chicago Mercantile Exchange. Since the S&P 500 Index
cannot be expected, at all times, to move in parallel with the PSE Technology
Index, the Portfolio's utilization of futures and options on the S&P 500 Index
may reduce the correlation between the performance of the Portfolio and the
performance of the PSE Technology Index.
The Portfolio will not use these instruments for leverage purposes and may
enter into such futures contracts and options only if, after giving effect
thereto, not more than 5% of the Portfolio's assets are required as margin
deposits for all of the Portfolio's open futures contracts and options
positions, and provided further that not more than 20% of the Portfolio's assets
are invested in futures and options at any one time.
Risks Associated with Index Options and Futures. The risk of loss associated
with index futures contracts and index options in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in options and futures pricing. As a result, a
relatively small price movement in an index option or an index futures contract
may result in an immediate and substantial loss or gain. However, the Portfolio
will not use options and futures contracts for speculative purposes or to
leverage its net assets. The primary risks associated with the Portfolio's
intended use of such options and futures contracts are: (a) imperfect
correlation between the change in market value of the PSE Technology Index and
the prices of the futures contracts and options; (b) imperfect correlation
between the price movement in the index underlying the futures contract or
option agreement, such as the S&P 500 Index, and the PSE Technology Index which
the Portfolio seeks to replicate; and (c) possible lack of a liquid secondary
market for a futures contract or option and the resulting inability to close a
position prior to its maturity date. The risk of imperfect correlation will be
minimized by investing only in those futures contracts and options whose
behavior is expected to resemble that of the Portfolio's underlying securities.
The risk that the Portfolio will be unable to close out a futures position will
be minimized by entering into such transactions on an exchange with an active
and liquid secondary market.
OTHER INVESTMENT PRACTICES
Short-Term, Fixed-Income Securities and Lending of Portfolio Securities.
Although the Portfolio normally seeks to remain substantially fully invested in
common stocks, the Portfolio may invest temporarily in certain short-term,
fixed-income securities. Such securities may be used to invest uncommitted cash
balances or to maintain liquidity to meet shareholder redemptions. These
securities include: obligations of the United States Government and its
agencies or instrumentalities; commercial paper, short-term notes, variable rate
demand notes, bank certificates of deposit, and bankers' acceptances; and
repurchase agreements collateralized by these securities and shares of money
market mutual funds. To the extent the Portfolio invests in shares of money
market mutual funds, investment management and administrative fees, distribution
costs, and other operating expenses incurred by those funds would be duplicative
of those incurred by the Portfolio and would reduce the return received by the
Portfolio on assets so invested. The Portfolio may not invest more than 10% of
its total assets in securities of other investment companies. See "Investment
Program -- Investments in Other Investment Companies" in the Statement of
Additional Information. The Portfolio may lend its portfolio securities to
brokers, dealers, and other institutional investors, but has no present
intention to do so. See "Investment Program -- Lending of Portfolio Securities"
in the Statement of Additional Information.
Portfolio Turnover. Although the Portfolio generally seeks to invest for the
long term, the Portfolio retains the right to sell securities irrespective of
how long they have been held. However, because of the passive investment
management approach of the Portfolio, its portfolio turnover rate is expected to
be under 50%. Notwithstanding the passive investment management approach, the
fact that the PSE Technology Index is "price weighted" may cause higher turnover
and brokerage expenses than if the Index's component stocks were not given a
percentage weighting based on price. A portfolio turnover rate of 50% would
occur if one-half of the Portfolio's securities were sold within one year.
Ordinarily, the Portfolio will sell securities only to reflect certain
administrative changes in the PSE Technology Index (including mergers or changes
in the composition of the Index) or to accommodate cash flows into and out of
the Portfolio while maintaining the similarity of the Portfolio to the PSE
Technology Index. Upon notice of a change in the composition of the Index, the
Portfolio intends to adjust its investments as soon as reasonably practicable to
more closely replicate the Index.
Short Sales "Against-the-Box." The Portfolio may make short sales of
securities or maintain a short position, provided that at all times when a short
position is open the Portfolio owns and maintains in a segregated collateral
account 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.
RISK FACTORS
CONCENTRATIONS
A significant portion of the Portfolio's investments will consist of
technology-based issues, which exposes the Portfolio to risks associated with
economic conditions in that market sector. Due to competition, a less
diversified product line, and other factors, companies that develop and/or rely
on technology could become increasingly sensitive to down swings in the economy.
However, the companies whose common stocks are included in the PSE Technology
Index comprise a fairly broad range of industries. This broad industry
representation likely will soften volatility associated with economic and
political developments that disproportionately affect specific industries
represented within the Index. Nonetheless, the Portfolio intends to maintain a
complete replication investment philosophy even during periods when one or more
industries may be over-represented on the PSE Technology Index, which may expose
the Portfolio during such periods to risks associated with industry
concentration. See "Investment Program -- Industry Concentration" and "Industry
Concentration Factors" in the Statement of Additional Information.
COMMON STOCKS
As discussed above, the Portfolio will invest substantially all of its assets
in common stock and securities convertible into common stocks. The market for
such securities tends to be cyclical, with alternating periods of rising and
falling market prices.
An investment in the Portfolio may involve an above average degree of risk
because of the significant representation on the PSE Technology Index of common
stocks of smaller- and medium-sized companies. Smaller- and medium-sized
companies, as compared to larger companies, may have shorter histories of
operations, may not have as great an ability to raise additional capital, may
have a less diversified product line making them susceptible to market pressure,
and may have a smaller public market for their shares, causing stocks of these
companies to be more volatile and less liquid than stocks of larger companies.
Because the Portfolio's investments will tend to mirror the Index, the Portfolio
can be expected to experience some volatility and, with respect to certain
issues, reduced liquidity that could make it more difficult to purchase and sell
such common stocks at favorable prices. Also, because of the price weighted
aspect of the Index, the stocks comprising the Index may change with some
frequency, which would tend to increase the Portfolio's turnover rate and
increase brokerage commissions, thereby reducing the Portfolio's total return
when compared with the Index.
MANAGEMENT
DIRECTORS AND OFFICERS
The Board of Directors of Principal Preservation is responsible for
management of Principal Preservation and provides broad supervision over its
affairs. The Advisor is responsible for the Portfolio's investment management
and Principal Preservation's officers are responsible for the Portfolio and
Principal Preservation's overall operations.
ZIEGLER ASSET MANAGEMENT, INC.
The Advisor of the Portfolio is Ziegler Asset Management, Inc., 215 North
Main Street, West Bend, Wisconsin 53095. The Advisor is registered with the
Securities and Exchange Commission as an investment advisor and is a member of
the National Association of Securities Dealers. In addition to the Portfolio,
the Advisor serves as investment advisor to seven other mutual fund series of
Principal Preservation and privately manages numerous customer advisory
accounts. On December 31, 1995, the Advisor had more than $500 million dollars
under discretionary management. The Advisor is a wholly-owned subsidiary of The
Ziegler Companies, Inc. The Ziegler Companies, Inc. is a publicly-owned
financial services holding company.
B.C. Ziegler and Company ("Ziegler"), another wholly-owned subsidiary of The
Ziegler Companies, Inc., currently serves as Distributor, Transfer and Dividend
Disbursing Agent, and Depository and Accounting/Pricing Agent for the Portfolio.
Ziegler is registered with the Securities and Exchange Commission as an
investment advisor and securities broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
Pursuant to the terms of an Investment Advisory Agreement (the "Advisory
Agreement"), the Advisor provides the Portfolio with overall investment advisory
and administrative services. Subject to such policies as the Board of Directors
may determine, the Advisor makes investment decisions on behalf of the
Portfolio, makes available research and statistical data in connection
therewith, and supervises the acquisition and disposition of investments by the
Portfolio, including the selection of broker-dealers to carry out portfolio
transactions. The Advisor bears all of its own expenses of providing services
under the Advisory Agreement and pays all salaries, fees, and expenses of the
officers and Directors of Principal Preservation who are affiliated with the
Advisor. The Portfolio bears all other expenses including, but not limited to,
necessary office space, telephone and other communications facilities, and
personnel competent to perform administrative, clerical, and shareholder
relations functions; salary, fees, and expenses (including legal fees) of those
Directors, officers, and employees of Principal Preservation who are not
officers, directors, or employees of the Advisor; interest expenses; fees and
expenses of the Depository, Transfer, and Dividend Disbursing Agent, Distributor
and Accounting/Pricing Agent; administrative expenses; taxes and governmental
fees; brokerage commissions and other expenses incurred in acquiring or
disposing of portfolio securities, expenses of registering and qualifying shares
for sale with the Securities and Exchange Commission and with various state
securities commissions; accounting and legal costs; insurance premiums; expenses
of maintaining Principal Preservation's legal existence and of shareholders'
meetings; expenses of preparation and distribution to existing shareholders of
reports, proxies, and prospectuses; and fees and expenses of membership in
industry organizations. Fees common to more than one Principal Preservation
portfolio are prorated among them based on their total assets.
Under the Advisory Agreement, the Portfolio pays the Advisor a fee, in
monthly installments, at an annual rate equal to 0.50 of 1% of the average daily
net assets of the Portfolio up to $50 million, 0.30 of 1% of the next $200
million in net assets, 0.25 of 1% of the next $250 million in net assets, and
0.20 of 1% of net assets in excess of $500 million.
B.C. ZIEGLER AND COMPANY
Ziegler serves as the Distributor of the shares of the Portfolio pursuant to
a Distribution Agreement; provides accounting and other administrative services,
including daily valuation of the shares of the Portfolio, pursuant to an
Accounting/Pricing Agreement; provides depository and custodial services with
respect to the portfolio securities of the Portfolio pursuant to a Depository
Contract; and provides transfer agent services pursuant to a Transfer and
Dividend Disbursing Agency Agreement. In addition, Ziegler Thrift Trading,
Inc., an affiliate of Ziegler which is a registered broker-dealer may effect
portfolio securities transactions as agent for the Portfolio and, in that
capacity, receives brokerage commissions from the Portfolio. See "Portfolio
Transactions and Brokerage."
The Distribution Agreement appointing Ziegler as Distributor for the various
portfolios of Principal Preservation (including the Portfolio) provides that
Ziegler is entitled to receive a commission on its sales of shares of the
Portfolio at the rate disclosed in Principal Preservation's current prospectus
relating to the relevant portfolio (see "Purchase of Shares"). Out of these
commissions, Ziegler allows Selected Dealer discounts (which are alike for all
Selected Dealers) from the applicable public offering price. The Distribution
Agreement continues from year to year if it is approved annually by Principal
Preservation's Board of Directors, including a majority of those Directors who
are not interested persons of Principal Preservation or of the Distributor, or
by vote of the holders of a majority of the outstanding shares. The
Distribution Agreement may be terminated at any time by either party on 60 days
written notice and will automatically terminate if assigned. Principal
Preservation also reimburses Ziegler for certain expenditures incurred by it in
connection with the distribution of the Portfolio's shares pursuant to a
Distribution Plan adopted under Rule 12b-1 of the 1940 Act. See "Distribution
Expenses."
The Accounting/Pricing Agreement provides that Ziegler is entitled to receive
a fee for accounting services provided thereunder at an annual rate of .03 of 1%
of the Portfolio's total assets of $30 million but less than $100 million, .02
of 1% of the Portfolio's total assets of $100 million but less than $250
million, and .01 of 1% of the Portfolio's total assets of $250 million or more,
with a minimum fee of $19,000 per portfolio per year, plus expenses. The
Depository Contract provides that Ziegler is entitled to receive compensation
deemed reasonable by the Board of Directors of Principal Preservation for
services provided thereunder. The rate of compensation is currently set at .055
of 1% of the first $10 million of Principal Preservation's assets, .03 of 1% of
the next $40 million of Principal Preservation's assets, .016 of 1% of the next
$200 million of assets, and .015 of 1% of assets in excess of $250 million. The
Transfer and Dividend Disbursing Agency Agreement provides that Ziegler is
entitled to receive compensation deemed reasonable by the Board of Directors of
Principal Preservation for services provided thereunder. The rate of
compensation is currently at $13.50 per account for the Portfolio. Principal
Preservation also reimburses Ziegler for all out-of-pocket expenses incurred in
providing such services.
THE PORTFOLIO MANAGER
Mr. Jay Ferrara has been with Principal Preservation for one year, and
currently serves as Treasurer for the mutual fund family. Mr. Ferrara brings to
Principal Preservation more than 10 years of experience in the mutual fund
industry. Prior to coming to Principal Preservation, Mr. Ferrara served as
Senior Portfolio Accountant for Wells Fargo Nikko Investment Advisors and, from
1993 to 1994, as Controller of the California Investment Trust.
In addition to serving as Treasurer of Principal Preservation, Mr. Ferrara
presently oversees the transfer agent operations for the Principal Preservation
and assists with the overall daily operations of the portfolios. Mr. Ferrara
attended Brown University where he earned a BA in Management and a BA in
Political Science. In addition to previously attending the University of San
Francisco, Mr. Ferrara is currently completing his MBA in Finance from Marquette
University.
DETERMINATION OF NET ASSET VALUE PER SHARE
Net asset value per share of the Portfolio is determined by subtracting the
Portfolio's liabilities (including accrued expenses and dividends payable) from
the Portfolio's total assets (the value of the securities the Portfolio holds
plus cash or other assets, including interest accrued but not yet received) and
dividing the result by the total number of shares outstanding. The net asset
value per share will be calculated every week day, Monday through Friday, except
on customary national business holidays which result in closing of the New York
Stock Exchange (the "Exchange"). The calculation is as of the close of trading
on the Exchange, 4:00 p.m. New York time for the Portfolio.
PURCHASE OF SHARES
Orders received by the Distributor or a Selected Dealer prior to the close of
business on the Exchange will be invested at the net asset value computed on
that day. Orders received after the close of trading on the Exchange will be
invested at the net asset value determined as of the close of trading on the
Exchange on the next business day. The minimum initial investment is $1,000 and
the minimum additional investment (except for exchanges between portfolios, the
reinvestment of distributions from the Portfolio or distributions from various
unit investment trusts sponsored by Ziegler, contributions for various
retirement plans, and the reinvestment of interest payments on bonds issued by
Ziegler Mortgage Securities, Inc. II) is $50. However, an initial investment of
$500 is permitted if made pursuant to an automatic investment plan providing for
subsequent automatic investments of at least $25. See "Shareholder Services --
Systematic Purchase Plan."
Shares may be purchased by investors at net asset value plus a sales charge
as set forth below. The Portfolio will not issue shares for consideration other
than cash except in the case of a bona fide reorganization or statutory merger
or in certain other acquisitions of Portfolio securities which meet certain
criteria in accordance with state securities laws. See "Purchase of Shares" in
the Statement of Additional Information. Shares may be purchased by sending a
check payable to Principal Preservation Portfolios, Inc., 215 North Main Street,
West Bend, Wisconsin 53095.
Shares may be purchased by investors at net asset value plus a sales charge
as follows:
PUBLIC OFFERING NET AMOUNT SELECTED DEALER
SIZE OF INVESTMENT PRICE*<F5> INVESTED REALLOWANCE
------------------ ------------------------------------
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%
*<F5>In addition to the Selected Dealer Reallowance shown above, the
Distributor may offer additional compensation in the form of trips, merchandise,
or entertainment as sales incentives to Selected Dealers. The Distributor's
sales representatives may not qualify to participate in some of these incentive
compensation programs and the Distributor may offer similar incentive
compensation programs in which only its own sales representatives qualify to
participate. In addition to the amount paid to Selected Dealers, the
Distributor may from time to time pay an additional concession to a Selected
Dealer which employs a registered representative who sells, during a specific
period, a minimum dollar amount of shares, or may pay an additional concession
to Selected Dealers on such terms and conditions as the Distributor determines.
Such additional concession paid by the Distributor to the Selected Dealer may at
times exceed the difference between the sales charge and the Selected Dealer's
allowance in respect of shares sold by the qualifying registered representative.
The amount of the excess of such additional concession over the difference
between the sales charge and the Selected Dealer's allowance may not exceed 0.5
of 1% of the amount invested, and will be paid by the Distributor out of its own
funds. Selected Dealers which receive a concession may be deemed to be an
"underwriter" in connection with sales by them of such shares and in that
capacity they may be subject to the applicable provisions of the Securities Act
of 1933.
Banks, acting as agents for their customers and not for the Portfolio or the
Distributor, from time to time may purchase Portfolio shares for the accounts of
such customers. Generally, the Glass-Steagall Act prohibits banks from engaging
in the business of underwriting, selling, or distributing securities. Should
the activities of any bank, acting as agent for its customers in connection with
the purchase of the Portfolio's shares, be deemed to violate the Glass-Steagall
Act, management will take whatever action, if any, is appropriate in order to
provide efficient services for the Portfolio. Management does not believe that
a termination in the relationship with a bank would result in any material
adverse consequences to the Portfolio. In addition, state securities laws on
this issue may differ and banks and financial institutions may be required to
register as dealers pursuant to state law. The Portfolio shares are not
deposits or obligations of, or guaranteed or endorsed by, any bank and are not
insured or guaranteed by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other federal agency.
Reduced Sales Charges. There are several ways to pay a lower sales charge.
One is to increase the initial investment to reach a higher discount level. The
above scale is applicable to initial purchases of Principal Preservation shares
by any "purchaser." The term "purchaser" includes (1) an individual, (2) an
individual, his or her spouse, and their children under the age of 21 purchasing
shares for his or her own accounts, (3) a trustee or other fiduciary purchasing
shares for a single trust estate or single fiduciary account, (4) a pension,
profit-sharing, or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code (the "Code"), (5) tax-exempt
organizations enumerated in Section 501(c)(3) or (13) of the Code, (6) employee
benefit plans qualified under Section 401 of the Code of a single employer or
employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act, or (7) any other organized group of persons,
whether incorporated or not, provided the organization has been in existence for
at least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount.
Another way to pay a lower sales charge is for a "purchaser" to add to his
investment so that the current offering price value of his shares plus the new
investment, reach a higher discount level. For example, if the current offering
price value of the shares held by a shareholder in the Portfolio equals
$100,000, the shareholder will pay a reduced sales charge on additional
purchases of shares. If the shareholder invested an additional $100,000, the
sales charge would be 3.5% on that additional investment. A shareholder's
holdings in all portfolios that have a sales charge will be aggregated in
determining the break-point at which he or she is entitled to purchase in the
Portfolio or in any other Principal Preservation portfolio.
A third way is for a "purchaser" to sign a non-binding letter of intent 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 letter of intent, 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 letter of intent is not completed. Any remaining
shares held in escrow will be released to the purchaser. A purchaser will
continue to earn dividends and capital gains distributions declared by a
portfolio with respect to shares held in escrow.
Group Purchases. A reduced sales charge is also available to members of a
qualified group. The sales charge for such persons is calculated by taking into
account the aggregate dollar value of shares of all Principal Preservation
shares sold subject to a sales charge being purchased or currently held by all
members of the group. Further information on group purchases is contained in
"Purchase of Shares" in the Statement of Additional Information.
To receive the benefit of the reduced sales charge, the shareholder must
inform Principal Preservation, Ziegler, or the Selected Dealer that the
shareholder qualifies for such a discount.
PURCHASES AT NET ASSET VALUE
Shares may be purchased at net asset value (that is, without a sales charge)
by a purchaser purchasing at least $1 million of shares or the value of whose
account at the time of purchase is at least $1 million if the purchase is made
through a Selected Dealer that has executed a dealer agreement with the
Distributor. The term "purchaser" has the meaning described in "Reduced Sales
Charges," above. The Distributor may make a payment or payments, out of its own
funds, to the Selected Dealer in an amount not to exceed 0.75 of 1% of the
amount invested. All or a part of such payment may be conditioned on the monies
remaining invested with Principal Preservation for a minimum period of time.
Until August 30, 1996, a purchaser that makes an initial investment of at
least $100,000 in the Portfolio may purchase shares at net asset value. The
Distributor may make a payment or payments, out of its own funds, to the
Selected Dealer in an amount not to exceed 0.75 of 1% of the amount invested.
Any pension, profit sharing, or other employee benefit plan qualified under
Section 401 of the Internal Revenue Code may also purchase shares at net asset
value. If such a plan purchases shares of the Portfolio through a Selected
Dealer, the Distributor may make a payment or payments out of its own funds, to
the Selected Dealer, in an amount not to exceed 0.75 of 1% of the amount
invested.
Shares of the Portfolio also may be purchased at net asset value without a
sales charge by any state, county or city, or any instrumentality, department,
authority or agency thereof, and by any nonprofit organization operated for
religious, charitable, scientific, literary, educational or other benevolent
purpose which is exempt from federal income tax pursuant to Section 501(c)(3) of
the Internal Revenue Code; provided that any such purchaser must purchase at
least $500,000 of shares of the Portfolio, or the value of such purchasers'
share account in the Portfolio at the time of purchase must be at least
$500,000.
Shares may also be purchased at net asset value when payment for those shares
represents the proceeds from the redemption of shares of another mutual fund
which charges a front end sales charge and which is not part of Principal
Preservation. A purchase of shares of Principal Preservation may be made at net
asset value under this provision regardless of whether the sales charge was paid
on the shares redeemed in the unrelated fund, but the redemption of those shares
must have occurred no more than 60 days prior to the purchase of shares of
Principal Preservation. The Distributor may make a payment or payments, out of
its own funds, to Selected Dealers effecting such exchanges, in an amount not to
exceed 0.50 of 1% of the amount invested. All or a part of such payment may be
conditioned upon the monies remaining invested with Principal Preservation for a
minimum period of time. Shares of Principal Preservation in addition to those
qualifying for purchase at net asset value under this provision may be purchased
at net asset value plus the normal sales charge.
Shares may also be purchased at net asset value by: Directors and offices of
Principal Preservation (including shares purchased jointly with or individually
by any such person's spouse and shares purchased by any such person's children
or grandchildren under age 21); employees of the Advisor, Ziegler, Selected
Dealers, Panagora Asset Management, Inc. (which serves as the sub-Advisor to
Principal Preservation's S&P 100 Plus Portfolio), and Skyline Asset Management,
LLP (which serves as sub-Advisor to Principal Preservation's Select Value
Portfolio), and the trustee or custodian under any pension or profit-sharing
plan established for the benefit of the employees of any of the foregoing. The
term "employee" includes an employee's spouse (including the surviving spouse of
a deceased employee), parents, children, and grandchildren under age 21, and
retired employees. Shares may also be purchased with a reduced sales charge of
0.50 of 1% by directors of The Ziegler Companies, Inc. who are not also
employees of Ziegler.
Additionally, shares may be purchased without a sales charge upon the
reinvestment of distributions from the Portfolio or any other Principal
Preservation portfolio, or investment of distributions from various unit
investment trusts sponsored by Ziegler; the reinvestment of principal or
interest payments on bonds issued by Ziegler Mortgage Securities, Inc. II; or
the reinvestment of interest payments on bonds underwritten by Ziegler.
Shares of the Portfolio also may be purchased without a sales charge by
certain authorized brokers, dealers, registered investment advisors and other
financial institutions that have entered into an agreement with Ziegler, in
accordance with certain standards approved by Ziegler, providing specifically
for the use of Principal Preservation shares (including shares of the Portfolio
as well as shares of other mutual funds offered by Principal Preservation) in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisors and other financial
institutions.
REDEMPTIONS
You may have any or all of your shares redeemed as described below on any day
Principal Preservation is open for business at the net asset value next
determined. See "Determination of Net Asset Value Per Share." If the order is
received prior to the close of the Exchange the redemption will be at the net
asset value calculated that day. If not, you will receive the net asset value
calculated as of the close of trading on the next business day.
By Telephone. If you have completed the Telephone Redemption Authorization
and signature guarantee sections of the account application, you may redeem
shares by calling Principal Preservation at 800-826-4600. This authorization
must be on file at least five days prior to the first telephone redemption.
This authorization requires a signature guarantee. At your request, redemption
will be made by wire to the bank account designated on the account application
or a check will be sent to you at the registered address for your account on the
business day following the redemption. See "Redemptions -- Sending Redemption
Proceeds -- By Wire."
You cannot redeem shares by telephone if you hold stock certificates for
those shares. Additionally, shares paid for by personal, corporate, or
government check cannot normally be redeemed before the 15th day after the
purchase date or until the check clears.
By establishing the telephone redemption service, you authorize Ziegler, as
Principal Preservation's transfer agent, to: (1) act upon the instruction of
any person by telephone to redeem shares from the account for which such
services have been authorized and (2) honor any written instructions for a
change of address if accompanied by a signature guarantee. You assume some risk
for unauthorized transactions by establishing the telephone redemption service.
The Transfer Agent has implemented procedures designed to reasonably assure that
telephone instructions are genuine. These procedures include recording
telephone conversations, requesting verification of various pieces of personal
information, and providing written confirmation of such transactions. If the
Transfer Agent, Principal Preservation, or any of their employees fails to abide
by these procedures, Principal Preservation may be liable to a shareholder for
losses the shareholder suffers from any resulting unauthorized transaction.
However, neither the Transfer Agent, Principal Preservation, nor any of their
employees will be liable for losses suffered by a shareholder that results from
borrowing telephone instructions reasonably believed to be genuine after
verification pursuant to these procedures. This service may be changed,
modified, or terminated at any time. There is currently no charge for telephone
redemptions, although a charge may be imposed in the future.
By Mail. To redeem shares by mail, send the following information to the
Transfer Agent: (1) a written request for redemption signed by the registered
owner(s) of the shares, exactly as the account is registered, together with the
shareholder's account number; (2) the stock certificates for the shares being
redeemed, if the certificates are held by the shareholders; (3) any required
signature guarantees (see "Signature Guarantees" below); and (4) any additional
documents which might be required for redemptions by corporations, executors,
administrators, trustees, guardians, or other similar entities.
The Transfer Agent will redeem shares when it has received all necessary
documents. You will be notified promptly by the Transfer Agent if your
redemption request cannot be accepted. The Transfer Agent cannot accept
redemption requests that specify a particular date for redemption or that
specify any special conditions. Questions concerning redemption procedures
should be directed to the Transfer Agent at 800-826-4600.
Signature Guarantees. To protect you, the Transfer Agent, and Principal
Preservation from fraud, signature guarantees are required for certain
redemptions. Signature guarantees enable the Transfer Agent to be sure that you
are the person who has authorized a redemption from your account. Signature
guarantees are required for: (1) any redemptions by mail if the proceeds are to
be paid to someone else or are to be sent to an address other than your address
as shown on Principal Preservation's records; (2) any redemptions by mail which
request that the proceeds be wired to a bank, unless you designated the bank as
an authorized recipient of the wire on your account application or subsequent
authorization form and such application or authorization includes a signature
guarantee; (3) any redemptions by mail if the proceeds are to be sent to an
address for the shareholder that has changed within the past 30 days; (4)
authorizations to redeem by telephone; and (5) requests to transfer the
registration of shares to another owner. These requirements may be waived by
Principal Preservation in certain instances.
The Transfer Agent will accept signature guarantees from all institutions
that are eligible to provide them under federal or state law. Institutions
which typically are eligible to provide signature guarantees include commercial
banks, trust companies, brokers, dealers, national securities exchanges, savings
and loan associations, and credit unions. A signature guarantee is not the same
as a notarized signature.
Sending Redemption Proceeds. The Transfer Agent will not send redemption
proceeds until all payments for the shares being redeemed have cleared, which
may take up to 15 days from the purchase date of the shares.
By Mail. The Transfer Agent mails checks for redemption proceeds typically
within one or two days, but not later than seven days, after it receives the
request and all necessary documents.
By Wire. The Transfer Agent will normally wire redemption proceeds to your
bank the next business day after receiving the redemption request and all
necessary documents. The signatures on any written request for a wire
redemption must be guaranteed. The Transfer Agent currently deducts a $7.50
wire charge from the redemption proceeds. This charge is subject to change.
You will be responsible for any charges that your bank may make for receiving
wires.
Redemption through Securities Brokers. Shares can also be redeemed through a
securities dealer, who may charge a fee.
Conditions on Redemptions. If, due to redemption, your account in the
Portfolio drops below $500 for three months or more, the Portfolio has the right
to redeem your account, after giving 60 days' written notice, unless you make
additional investments to bring the account value to $1,000 or more.
Principal Preservation may suspend the right to redeem shares for any period
during which: (1) the Exchange is closed or the Securities and Exchange
Commission determines that trading on the Exchange is restricted; (2) there is
an emergency as a result of which it is not reasonably practical for the
Portfolio to sell its securities or to calculate the fair value of its net
assets; or (3) the Securities and Exchange Commission may permit for the
protection of the Portfolio's shareholders.
It is possible that conditions may arise in the future which would, in the
opinion of the Board of Directors of Principal Preservation, make it undesirable
for the Portfolio to pay for all redemptions in cash. In such cases, the Board
may authorize payment to be made in securities or other property of the
Portfolio. However, the Portfolio has obligated themselves under the 1940 Act
to redeem for cash all shares presented for redemption by any one shareholder up
to $250,000 (or 1% of a Portfolio's net assets if that is less) in any 90-day
period. Securities delivered in payment of redemptions would be valued at the
same value assigned to them in computing the net asset value per share. Persons
receiving such securities would incur brokerage costs when these securities are
sold.
SHAREHOLDER SERVICES
Principal Preservation offers a number of shareholder services designed to
facilitate investment in Portfolio shares. Full details of each of the
services, copies of the various plans described below, and instructions as to
how to participate in the various services or plans can be obtained from
Principal Preservation or the Distributor.
Systematic Purchase Plan. A Systematic Purchase Plan ("SPP") may be
established at any time with a minimum initial investment of $100 and minimum
subsequent monthly investments of $100. The minimum subsequent monthly
investment is reduced to $50 for IRAs, Keogh plans, self-directed retirement
plan accounts, and custodial accounts under the Uniform Gifts/Transfers to
Minors Act until your account balance reaches $500, after which the minimum is
further reduced to $25. Also, the minimum subsequent investment is reduced to
$50 for all other accounts with balances of $100 or more. By participating in
the SPP, you may automatically make purchases of Principal Preservation shares
on a regular, convenient basis. Under the SPP, your bank or other financial
institution honors preauthorized debits of a selected amount drawn on your
account each month and applied to the purchase of Principal Preservation shares.
The SPP can be implemented with any financial institution that will accept the
debits. There is no service fee for participating in the SPP. An application
and instructions on establishing the SPP are available from your registered
representative, the Distributor, or Principal Preservation.
Periodic Withdrawal Plan. You may establish a periodic withdrawal plan if
you own or purchase shares having a current offering price value of at least
$10,000 in a single Portfolio (except no such minimum applies for distributions
from an IRA). The periodic withdrawal plan involves the planned redemption of
shares on a periodic basis by receiving either fixed or variable amounts at
periodic intervals. The minimum amount you may receiver under a periodic
withdrawal plan is $150 per month. Normally, you would not make regular
investments at the same time you are receiving periodic withdrawal payments
because it is not in your interest to pay a sales charge on new investments
when, in effect, a portion of your new investment is soon withdrawn. The
minimum investment accepted while a withdrawal plan is in effect is $1,000. You
may terminate your periodic withdrawal plan at any time by written notice to
Principal Preservation or the Transfer Agent.
Reinvestment Privilege. If you redeem shares, you may reinvest all or part
of the redemption proceeds in the same Portfolio, without a sales charges, if
you send written notice to Principal Preservation or the Transfer Agent not more
than 30 days after the shares are redeemed. Your redemption proceeds will be
reinvested on the basis of net asset value of the shares in effect immediately
after receipt of the written request. You may exercise this reinvestment
privilege only once upon redemption of your shares. Any capital gains tax you
incur on the redemption of your shares is not altered by your subsequent
exercise of this privilege. If the redemption resulted in a loss and
reinvestment is made in shares, the loss will not be recognized.
Exchange Privilege. Subject to compliance with applicable minimum investment
requirements, shares of any Principal Preservation portfolio may be exchanged
for shares of any other Principal Preservation portfolio at their respective net
asset values without a sales charge, in states where the exchange may legally be
made. The standard sales commission applicable to purchases of shares of the
Principal Preservation portfolio into which the exchange is being made (as
disclosed in the then current prospectus for that Principal Preservation
portfolio) will be charged in connection with the exchange, less any sales
commission previously paid by the shareholder with respect to the shares being
exchanged. However, if a front-end sales commission was previously paid with
respect to the shares being exchanged and the investment represented by such
shares has been held in one or more Principal Preservation portfolios
continuously for at least six months prior to the proposed exchange, then no
additional sales commission will be charged in connection with the exchange.
Before engaging in any such exchange, a shareholder should obtain and carefully
read the current prospectus relating to the Principal Preservation portfolio
into which he or she intends to exchange. Such exchanges may be subject to a
service charge by Ziegler (currently $5.00). Instruction must be received prior
to 3:00 p.m. Eastern Standard Time to qualify for an exchange on any business
day. In order to exercise this service, you must obtain a copy of the
prospectus by which the other Principal Preservation portfolio is offered prior
to opening an account for the other Principal Preservation portfolio and you
must have completed an exchange authorization form.
In order to effect an exchange on a particular business day, the Transfer
Agent must receive a completed exchange authorization form or other written
instructions, signed by all account holders, no later than 3:00 p.m. Eastern
Standard Time. Exchange authorization forms may be obtained from, and should be
returned to, the Transfer Agent at 215 North Main Street, West Bend, Wisconsin
53095. The Transfer Agent may accept instructions from Selected Dealers,
subject to certain conditions and requirements, by wire or telephone, for the
exchange of shares held in an investor's account. Principal Preservation may
amend, suspend, or revoke this exchange privilege at any time, but will provide
shareholders at least 60 days' prior notice of any change that adversely affects
their rights under this exchange privilege. Exchanges are subject to the
conditions described above under "Redemptions -- Conditions on Redemptions."
An exchange of shares is considered a sale for tax purposes and you will
realize a gain or loss for federal income tax purposes.
An excessive number of exchanges may be disadvantageous to Principal
Preservation. Therefore, Principal Preservation, in addition to its right to
reject any exchange, reserves the right to terminate the exchange privilege of
any shareholder who makes more than three exchanges of shares in 12 months or
more than one exchange per calendar quarter.
Reinvestment of Distributions or Interest Payments. Unit holders of Ziegler
sponsored unit investment trusts, holders of Ziegler Mortgage Securities, Inc.
II bonds, and holders of bonds underwritten by Ziegler may purchase shares of
Principal Preservation by automatically reinvesting distributions from their
unit investment trust, reinvesting principal or interest from their Ziegler
Mortgage Securities, Inc. II bonds, or reinvesting interest from bonds
underwritten by Ziegler, as the case may be. Unit holders and bondholders
desiring to participate in this plan should contact Ziegler for further
information.
Tax Sheltered Retirement Plans. Shares of the Portfolio are available for
purchase in connection with the following tax-sheltered plans: (1) Individual
Retirement Accounts; (2) Keogh plans; (3) 401(k) Plans; and (4) 403(b) Plans for
employees of most nonprofit organizations. Detailed information concerning
these plans and prototypes of these plans and other information are available
from the Distributor. They should be carefully reviewed and considered with
your tax or financial adviser. IRA investors do not receive the benefits of
long-term capital gains treatment when funds are distributed from their account.
For further information regarding plan administration, custodial fees and
other details, investors should contact the Distributor.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND REINVESTMENTS
Dividends from net investment income will be declared and paid quarterly in
the Portfolio. Dividends may be taken in cash or additional shares at net asset
value (without a sales charge). You may also direct the Transfer Agent to
invest the dividends in shares of any other Principal Preservation portfolio for
which you have any account. The investment occurs on the same day as the
dividend distribution date. Unless you have elected in writing to the Transfer
Agent to receive dividends and capital gain distributions in cash, they will be
automatically reinvested in additional shares of the Portfolio.
Capital gains distributions in the Portfolio will be declared annually and
normally will be paid within 45 days after the end of the fiscal year.
TAX STATUS
The Portfolio is treated as a separate entity for federal income tax
purposes. The Portfolio intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). In order
to so qualify, the Portfolio must satisfy a number of requirements, including
the requirement that at least ninety percent (90%) of the Portfolio's gross
income be derived from dividends, interest, and gains from the sale or other
disposition of stock or other securities. Another requirement is that less than
thirty percent (30%) of the Portfolio's gross income be derived from the sale or
other disposition of securities held for less than three months (netting gains
and losses which are parts of designated hedges). In determining these gross
income requirements, a loss from the sale or other disposition of securities
does not enter into the computation.
The Portfolio will distribute substantially all of its net income and capital
gains. Regulated investment companies, in most instances, pay a non-deductible
four percent (4%) excise tax on the amount, if any, by which actual
distributions of investment income and capital gains are less than distributions
required by the Code. Principal Preservation intends to make distributions in a
manner that will avoid the excise tax. The federal income tax status of all
distributions will be reported to shareholders annually. A portfolio's
distributions are taxable when they are paid, whether a shareholder takes them
in cash or reinvests them in additional shares, except that distributions
declared in December and paid in January each year are taxable as if paid on
December 31 of the earlier year.
A portion of the net investment income of the Portfolio will qualify for the
seventy percent (70%) dividends received deduction for corporations.
Each series of a series company, such as Principal Preservation, is treated
as a separate entity for federal income tax purposes so that the net realized
capital gains and losses of the Portfolio are not combined with those of
Principal Preservation's other portfolios, nor vice versa.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Portfolio and its shareholders. This discussion is not
intended as a substitute for careful tax planning. You are urged to consult
your tax advisor with specific reference to your own tax situation.
DESCRIPTION OF SHARES
The authorized common stock of Principal Preservation consists of one billion
shares, par value of $0.001 per share. The shares of Principal Preservation are
presently divided into eight series: The PSE Tech 100 Index Portfolio,
Wisconsin Tax-Exempt Portfolio, Government Portfolio, Tax-Exempt Portfolio, S&P
100 Plus Portfolio, Select Value Portfolio, Dividend Achievers Portfolio, and
Cash Reserve Portfolio. Presently, 50 million shares of Principal
Preservation's common stock are allocated to each of the Portfolios, except that
there are allocated to the Cash Reserve Portfolio 400 million shares of common
stock, 200 million shares of which are designated as Class X Common Stock (the
Retail Class) and 200 million of which are designated as Class Y Common Stock
(the Institutional Class). The Board of Directors of Principal Preservation may
authorize the issuance of additional series and may increase or decrease the
number of shares in each series.
Each share of Principal Preservation has one vote and, when issued and paid
for in accordance with the terms of the offering, will be fully paid and
nonassessable. Each share of a series is entitled to participate pro rata in
dividends or other distributions declared by the Board of Directors of Principal
Preservation with respect to that series, and all shares of a series have equal
rights in the event of liquidation of that series. Shares of stock are
redeemable at net asset value, at the option of the shareholder. Shares have no
preemptive, subscription, or conversion rights and are freely transferable.
Shares can be issued as full shares or fractions of shares. A fraction of a
share has the same kind of rights and privileges as a full share.
Each share of each series of Principal Preservation (including each share of
the Portfolio) is entitled to one vote on each matter presented to shareholders
of that series. As a Maryland corporation, Principal Preservation is not
required to hold, and in the future does not plan to hold, annual shareholder
meetings unless required by law or otherwise deemed appropriate by the Board of
Directors. Special meetings may be called for purposes such as electing or
removing Directors, changing fundamental policies, or approving an investment
advisory contract. On matters affecting the individual series (such as approval
of advisory or sub-advisory contracts and changes in fundamental policies of a
series) a separate vote of the shares of that series is required. Shares of a
series are not entitled to vote on any matter not affecting that series. All
shares of each series vote together in the election of Directors. Shares do not
have cumulative voting rights.
As used in the Prospectus, the phrase "majority vote" of the outstanding
shares of the Portfolio (or of Principal Preservation) means the vote of the
lesser of: (1) 67% of the shares of the Portfolio (or Principal Preservation)
present at the meeting if the holders of more than 50% of the outstanding shares
are present in person or by proxy or (2) more than 50% of the outstanding shares
of the Portfolio (or Principal Preservation).
PORTFOLIO TRANSACTIONS AND BROKERAGE
Purchase and sale orders for Portfolio securities may be effected through
brokers, although it is expected that transactions in debt securities will
generally be conducted with dealers acting as principals. Purchases and sales
of securities on a stock exchange are effected through brokers or dealers.
Brokerage commissions on securities and options are subject to negotiation
between Principal Preservation and the broker.
Principal Preservation will not deal with Ziegler or its affiliates in any
transaction in which they act as a principal, but to the extent and in the
manner permitted by the 1940 Act may effect brokerage transactions through them.
The Advisor may utilize the services of Ziegler or an affiliate as a broker if
the commissions, fees, or other remuneration received by them are reasonable and
fair compared to the commissions, fees, and other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. See "Portfolio Transactions and Brokerage" in the Statement of Additional
Information.
Allocation of transactions, including their frequency, to various dealers is
determined by the Advisor in its best judgment and in a manner deemed fair and
reasonable to shareholders. The primary consideration is prompt and efficient
execution of orders in an effective manner at the most favorable price.
Principal Preservation may also consider sales of shares of its portfolios as a
factor in the selection of broker-dealers, subject to the policy of obtaining
best price and execution.
DISTRIBUTION EXPENSES
In addition to the sales charge deducted at the time of purchase, the
Portfolio is authorized under a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act to use a portion of its assets to finance certain
activities relating to the distribution of its shares to investors. The Plan
permits payments to be made by the Portfolio to the Distributor to reimburse it
for expenditures incurred by it in connection with the distribution of the
Portfolio's shares to investors. These payments include, but are not limited
to, the payments to selling representatives or brokers as a service fee,
advertising, preparation and distribution of sales literature and prospectuses
to prospective investors, implementing and operating the Plan, and performing
other promotional or administrative activities on behalf of the Portfolio. Plan
payments may also be made to reimburse the Distributor for its overhead expenses
related to distribution of the Portfolio's shares. No reimbursement may be made
under the Plan for expenses of the past fiscal years or in contemplation of
expenses for future fiscal years.
Under the Plan, the payments may not exceed an amount computed at an annual
rate of 0.25 of 1% of the average daily net assets of the Portfolio. The
Distribution Plan continues in effect, if not sooner terminated, for successive
one-year periods, provided that its continuance is specifically approved by the
vote of the Directors, including a majority of the Directors who are not
interested persons of the Advisor. For further information regarding the
Distribution Plan, see "Distribution Expenses" in the Statement of Additional
Information.
OTHER INFORMATION
Transfer and Dividend Disbursing Agent. B.C. Ziegler and Company, 215 North
Main Street, West Bend, Wisconsin 53095, acts as Transfer and Dividend
Disbursing Agent.
Shareholder Statements and Reports. Shareholders receive confirmation at
least quarterly regarding their transactions and reports at least semiannually
setting forth various financial and other information related to the Portfolio.
Shareholder Inquiries. Shareholder inquiries may be direct to Principal
Preservation at 215 North Main Street, West Bend, Wisconsin 53095; or by
telephone at (800) 826-4600.
Performance Information. From time to time the Portfolio may advertise its
"yield" and "total return." Yield is based on historical earnings and total
return is based on historical distributions; neither is intended to indicate
future performance. The "yield" of the Portfolio refers to the income generated
by an investment in that Portfolio over a one-month period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during the month is assumed to be
generated each month over a 12-month period and is shown as a percentage of the
investment. "Total return" of the Portfolio refers to the average annual total
return for one, five, and ten-year periods (or so much thereof as the Portfolio
has been in existence). Total return is the change in redemption value of
shares purchased with an initial $1,000 investment, assuming the reinvestment of
dividends and capital gains distributions, after giving effect to the maximum
applicable sales charge. Performance information should be considered in light
of the Portfolio's investment objectives and policies, characteristics and
quality of the Portfolio, and the market conditions during the time period, and
should not be considered as a representation of what may be achieved in the
future. Further information is contained in the Statement of Additional
Information.
Portfolio Rating. From time to time the Portfolio may obtain and use a
rating from a nationally recognized statistical rating organization. For a
description of such ratings, see "Portfolio Ratings" in the Statement of
Additional Information.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
TERMS AND CONDITIONS OF GENERAL APPLICATION FORM
ADDITIONAL INVESTMENTS
After a Shareholder account is established, additional investments in the
amount of $50 or more ($25 or more for IRAs, Keogh Plans, Self-Directed
Retirement Plan Accounts, and Custodial Accounts under the Uniform
Gifts/Transfers to Minors Act) may be made to that existing account at any time.
Additional investments will be applied to the purchase of full and fractional
shares of the specified Portfolio at the public offering price. These
investments should be accompanied by an investment transmittal stub (attached to
any previously received shareholder confirmation) and mailed directly to B.C.
Ziegler and Company, 215 North Main Street, West Bend, Wisconsin 53095 (the
Transfer Agent). Additional investments can also be made through your dealer.
INFORMATION PERTAINING TO THE
LETTER OF INTENT
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 Letter of Intent, however, shall remain unchanged. Each
separate purchase made pursuant to the Letter of Intent 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
Letter of Intent in placing each future order for shares while this Letter of
Intent 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 Letter of Intent. 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 Letter of Intent
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 Letter of Intent 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 Letter of Intent 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
Indicate the amount you wish to invest in the PSE Technology Index Portfolio.
Minimum initial investment is as indicated.
___PSE Techn 100 Index Portfolio_____________________________________.
(minimum $1,000)
___I'm interested in any or all of the Principal Preservation Government, Tax-
Exempt, S&P 100 Plus, Select Value and/or Dividend Achievers Portfolios. Please
send me the combined Prospectus for these Portfolios.
___I'm interested in the Wisconsin Tax-Exempt Portfolio. Please send me a
Prospectus.
___I'm interested in the Cash Reserve Portfolio. Please send me a Prospectus.
- ------------------------------------------------------------------------------
METHOD OF PAYMENT
Shares purchased by personal or corporate check may not be
redeemed by telephone or otherwise until 15 days after invest-
ment date or until the check clears.
Personal Check or Other (specify)
-----------------
- ------------------------------------------------------------------------------
DIVIDEND AND DISTRIBUTION OPTIONS
Until I advise you to the contrary, I elect to:
Reinvest all dividends and capital Receive dividends in cash and
gain distributions. reinvest capital gains.
(If no box is checked, all dividends and
capital gainb distributions will be Receive all distributions in cash.
reinvested in additional shares.)
- ------------------------------------------------------------------------------
LETTER OF INTENT
Effective Date
-----------------------------------
(Not more than 90 days prior to date of signature)
The investor intends, but shall be under no obligation, to invest over a 13-
month period from the date of purchase an aggregate amount in any of the
Portfolios having a sales charge equal to at least:
$25,000-$49,999 $250,000-$499,999
$50,000-$99,999 $500,000-$999,999
$100,000-$249,999 $1,000,000 or more
Each purchase will be made at the public offering price applicable to a single
purchase of the dollar amount designated above, as described in the Prospectus
(see ''PURCHASE OF SHARES'').
- ------------------------------------------------------------------------------
RIGHTS OF ACCUMULATION
I qualify for Rights of Accumulation as described in a Principal
Preservation Prospectus. Listed
below are all the accounts from the different Portfolios of Principal
Preservation sold subject to a sales charge which should be credited toward the
reduced sales charge.
Account Number Account Number
----------------------- --------------------
Account Number Account Number
----------------------- --------------------
- ------------------------------------------------------------------------------
TELEPHONE EXCHANGE
I authorize telephone exchange privileges.
If you request the telephone exchange option, you must obtain a Signature
Guarantee on back.
- ------------------------------------------------------------------------------
SYSTEMATIC PURCHASE PLAN (''SPP'')
If you select this option please review the terms and conditions in the
Prospectus. New accounts please fill in information in account registration.
I hereby authorize the Portfolio to withdraw from my checking account:
$ (see Terms and
--------
Conditions) on or about the 5th or 20th of each month.
An account must be previously established or a check in the amount of at least
must accompany application to be used to purchase shares of the
- ---------
PSE Tech 100 Index Portfolio through the financial institution as follows:
- ------------------------------------------------------------------------------
Name of Financial Institution Branch Name and Number
- ------------------------------------------------------------------------------
Address of Financial Institution
Please attach an unsigned and voided check from the checking account you wish to
use for the Systematic Purchase Plan. Write ''Void'' across the face of the
check. Your check must be imprinted with all name(s) on your bank account and
carry your financial institution's magnetic ink coding numbers across the
bottom.
Signature Signature Date
- ------------------------------------------------------------------------------
(If your checking account is held by more than one person, all account holders
must sign this application.)
- ------------------------------------------------------------------------------
TELEPHONE REDEMPTIONS - By wire to: or By mail to registered owner's
address of record.
- ------------------------------------------------------------------------------
Bank Name and Your Bank ABA Routing Number
- ------------------------------------------------------------------------------
Bank Address - Street Name of Bank Account
- ------------------------------------------------------------------------------
City State Zip Your Bank Account Number
If you request Telephone Redemptions, you must obtain a Signature Guarantee
(below).
- ------------------------------------------------------------------------------
SYSTEMATIC 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. The Distributor and the
authorized dealer, if any, named below each authorizes and appoints B.C. Ziegler
and Company to act as its agent to execute the purchase of shares of Principal
Preservation 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
COMPANIES ON PACIFIC STOCK EXCHANGE INDEX
TICKER SYMBOL COMPANY NAME
- ------------- ------------
COMS 3Com Corp
ACN Acuson Corp
ADPT Adaptec Inc
ADCT ADC Telecom Inc
ADBE Adobe Systems Inc
AMD Advanced Micro Devices
AMH Amdahl Corp
AMER America Online
AMGN Amgen Inc
AMP AMP Inc
ADI Analog Devices
AAPL Apple Computer Inc
APM Applied Magnetic
AMAT Applied Material
ASTA AST Research Inc
ACAD Autodesk Inc
AUD Automatic Data
BAY Bay Networks Inc
BGEN Biogen Inc
BMET Biomet Inc
BMCS BMC Software Inc
BORL Borland International
BSX Boston Scientific
CS Cabletron Systems
CDN Cadence Design
CNTO Centocor Inc
CEN Ceridian Corp
CHPS Chips & Tech Inc
CHIR Chiron Corp
CSCO Cisco Systems
COHR Coherent Inc
CPQ Compaq Computer
CA Computer Associates
CSC Computer Science
CQ Comsat Corp
CYR Cray Research
CU CUC International Inc
CY Cypress Semiconductor
DGN Data General
DELL Dell Computer
DEC Digital Equipment
DIGI DSC Communications Corp
ESCC Evans & Suther
EXBT Exabyte Corp
GATE Gateway 2000 Inc
GSX General Signal Corp
GNE Genentech Inc
GENZ Genzyme Corp
HRS Harris Corp
HWP Hewlett-Packard
HON Honeywell Inc
IMNX Immunex Corp
IFMX Informix Corp
INTC Intel Corp
INGR Intergraph Corp
IBM International Business Machines
KLAC KLA Instruments
KMAG Komag, Inc. (replaces Conner-CNR)
KLIC Kulicke & Soffa
MX Measurex Corp
MDT Medtronic Inc
MENT Mentor Graphics
MU Micron Technology
MSFT Microsoft Corp
MIL Millipore Corp
MOT Motorola Inc
NSM National Semiconductor
NN Newbridge Network
NOVL Novell Inc
NVLS Novellus Systems
OCTL Octel Communications Corp
ORCL Oracle Corp
PKN Perkin-Elmer
AQM QMS Inc
QNTM Quantum Corp
SFA Scientific Atlanta
SEG Seagate Techology Inc
SRM Sensormatic Elec
SMED Shared Medical Systems
SGI Silicon Graphics
STJM St Jude Medical
SMSC Standard Microsystems
STK Storage Tech
SRA Stratus Computer
SUNW Sun Microsystems
SYBS Sybase Inc
SYMC Symantec Corp
SBL Symbol Tech Inc
SSAX System Software
TDM Tandem Computers
TEK Tektronix Inc
TLAB Tellabs Inc
TER Teradyne Inc
TXN Texas Instruments
THI Thermo Inst Systems
UIS Unisys Corp
VAR Varian Associates Inc
XRX Xerox Corp
XLNX Xilinx Inc
XOMA Xoma Corp
TABLE OF CONTENTS
PAGE
-----
Questions and Answers 2
Expenses 4
Investment Objectives and Policies 5
Investment Program 5
Risk Factors 8
Management 9
Determination of Net Asset Value Per Share 10
Purchase of Shares 11
Redemptions 14
Shareholder Services 15
Dividends, Capital Gains
Distributions and Reinvestments 17
Tax Status 17
Description of Shares 18
Portfolio Transactions and Brokerage 19
Distribution Expenses 19
Other Information 19
PRINCIPAL PRESERVATION
PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISOR
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
DISTRIBUTOR, TRANSFER AND DIVIDEND DISBURSING AGENT,
DEPOSITORY, AND ACCOUNTING/PRICING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PP859-6/96
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 10, 1996
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECH 100 INDEX PORTFOLIO
215 North Main Street
West Bend, Wisconsin 53095
800-826-4600
This Statement of Additional Information and the Prospectus
to which it relates describe the Principal Preservation PSE
Tech 100 Index Portfolio (the "Portfolio"). The Portfolio
operates as a separate, diversified mutual fund series of Principal
Preservation Portfolios, Inc. ("Principal Preservation").
Principal Preservation offers other mutual funds by separate
prospectuses and statements of additional information.
Statement of Additional Information
The objective of the Portfolio is to obtain a total return,
before operating expenses of the Portfolio, that replicates the
total return of the Pacific Stock Exchange Technology Index (the
"PSE Technology Index" or the "Index"). The Advisor does not
manage the Portfolio according to traditional methods of active
investment management, which involve the buying and selling of
securities based upon economic, financial, and market analysis
and investment judgment. Instead the Portfolio utilizes a
"passive" or "indexing" investment approach, attempting to
replicate the investment performance of the PSE Technology Index
through statistical procedures. There can be no assurance that
this investment objective will be achieved.
Shares may be purchased, and a Prospectus may be obtained,
directly from the Distributor, 215 North Main Street, West Bend,
Wisconsin 53095, telephone 800-826-4600, or from Selected Dealers
(see the Prospectus dated June 10, 1996 for more complete
information, including an account application). This Statement
of Additional Information is not a Prospectus, and should be read
in conjunction with the Prospectus. Capitalized terms not
otherwise defined in this Statement of Additional Information
have the meanings ascribed thereto in the Prospectus.
TABLE OF CONTENTS
Page
----
Statement of Additional Information........................... 1
INVESTMENT PROGRAM............................................ 3
INVESTMENT RESTRICTION....................................... 9
INDUSTRY CONCENTRATION FACTORS................................ 11
MANAGEMENT OF PRINCIPAL PRESERVATION.......................... 12
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........... 16
PERFORMANCE INFORMATION....................................... 16
DETERMINATION OF NET ASSET VALUE PER SHARE.................... 19
PURCHASE OF SHARES............................................ 19
TAX STATUS.................................................... 20
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................... 21
DISTRIBUTION EXPENSES......................................... 21
CUSTODIAN..................................................... 23
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS.................... 24
PORTFOLIO RATINGS............................................. 24
DESCRIPTION OF RATINGS OF CERTAIN SECURITIES.................. 24
INVESTMENT PROGRAM
The Prospectus describes the investment objective and
policies of the Portfolio. Certain instruments and techniques
discussed in the Prospectus are described in greater detail
below.
Options
-------
To the extent consistent with its investment objective, the
Portfolio's Advisor may employ options strategies designed to
hedge protectively against any anticipated adverse movements in
the market values of its portfolio securities or securities it
intends to purchase and to enhance return. The Portfolio may
write (sell) covered call options and put options, and may
purchase call options and put options on stock indices for the
purposes and subject to the limitations outlined in "Investment
Program" in the Prospectus. See "Investment Program" in the
Prospectus.
An option on an index is a contract that gives the holder of
the option, in return for payment of a premium, the right to
demand from the seller (call) delivery of cash in an amount equal
to the value of the index at a specified exercise price at any
time during the term of the option. Upon exercise, the writer of
an option on an index is obligated to pay the difference between
the cash value of the index and the exercise price multiplied by
the specified multiplier for the index option.
A call option on an index is considered to be covered if the
writer (seller) maintains with its custodian cash or cash
equivalents equal to the contract value. A call option is also
covered if the writer holds a call on the same index as the call
written where the exercise price of the call purchased is equal
to or less than the exercised price of the call written.
A put option gives the purchaser of the option the right to
sell, and the writer (seller) of the option the obligation to
buy, the cash value of the index at any time during the option
period. The Portfolio will only purchase put options on indices,
which, in the opinion of the Advisor, have investment
characteristics similar to those of securities in the Portfolio
or an index on the securities. A put option is covered if a
writer holds a put on the same index as the put written where the
exercised price of the put held is (i) equal to or greater than
the exercise price of the put written, or (ii) less than the
exercise price of the put written, provided the difference is
maintained by the writer in cash or cash equivalents in a
segregated account with its custodian.
Futures
-------
The Portfolio may purchase and sell exchange-traded index
futures contracts on the PSE Technology Index or the S&P 500
Index for the purposes and strategies described in the
Prospectus. A futures contract on an index is an agreement by
which one party agrees to accept delivery of, and the other party
agrees to make delivery of, an amount of cash equal to the
difference between the value of the underlying index at the close
of the last trading day of the futures contract and the price at
which the contract originally was written. Although the value of
an index might be a function of the value of certain specified
securities, no physical delivery of those securities is made.
Futures contracts covering the PSE Technology Index and the
S&P 500 Index presently are traded on the New York Futures
Exchange and the Chicago Mercantile Exchange, respectively. The
Portfolio also may engage in transactions involving futures
contracts on other indices presently traded or in the future
created and traded on national stock exchanges if, in the opinion
of the Board of Directors of Principal Preservation, such futures
contracts are appropriate instruments to help the Advisor achieve
the Portfolio's objective.
When a purchase or sale of a futures contract is made by the
Portfolio, the Portfolio is required to deposit with its
custodian (or broker, if legally permitted) a specified amount of
cash or U.S. Government Securities ("initial margin"). The
margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term
of the contract. The initial margin is in the nature of a
performance bond or good faith deposit on the futures contract
which is returned to the Portfolio upon termination of the
contract, assuming all contractural obligations have been
satisfied. The Portfolio expects to earn interest income on its
initial margin deposits. A futures contract held by the
Portfolio is valued daily at the official settlement price of the
exchange on which it is traded. Each day the Portfolio pays or
receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known
as "marking to market." Variation margin does not represent a
borrowing or loan by the Portfolio, but is instead a settlement
between the Portfolio and the broker of the amount one would owe
the other if the futures contract expired. In computing daily
net asset value, the Portfolio will mark to market all of its
open futures positions.
While the Portfolio maintains an open futures position,
the Portfolio must maintain with its Custodian, in a segregated
account, assets with a market value sufficient to cover the
Portfolio's exposure on the position (less the amount of the
margin deposit associated with the position). The Portfolio's
exposure on a futures contract is equal to the amount paid
for the contract by the Portfolio.
Index futures contracts in which the Portfolio will invest
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying index,
and delivery month), or in cash. If an offsetting purchase price
is less than the original sale price, the Portfolio would realize
a capital gain, or if it is more, the Portfolio would realize a
capital loss. Conversely, if an offsetting sale price is more
than the original purchase price, the Portfolio would realize a
capital gain, or if it is less, the Portfolio would realize a
capital loss. The transaction costs must also be included in
these calculations.
There are several risks associated with the use of futures
contracts in the manner intended by the Portfolio. A purchase or
sale of a futures contract may result in losses in excess of the
amount invested in the futures contract. There can be no
guarantee that there will be a correlation between the price
movements in the underlying index and in the portfolio securities
being hedged or the Index being simulated, as the case may be.
In addition, there are significant differences between the
securities and futures markets that could result in an imperfect
correlation between the markets, causing a given strategy not to
achieve its objective. The degree of imperfection of correlation
depends on circumstances such as: variations in speculative
market demand for futures and differences between the financial
instruments being hedged or replicated and the instruments
underlying the standard contracts available for trading.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of the futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price
movements during a particular trading day and, therefore, does
not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures
prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of positions and subjecting some
holders of futures contracts to substantial losses. There can be
no assurance that a liquid market will exist at a time when the
Portfolio seeks to close out a futures position and the Portfolio
would continue to be required to meet margin requirements until
the position is closed.
To minimize such risks, the Portfolio will not enter into a
futures contract if, immediately after such transaction, the
initial margin deposits for futures contracts held by the
Portfolio would exceed 5% of the Portfolio's total assets.
Additionally, the Portfolio may not maintain open short positions
in futures contracts or call options written on indices if, in
the aggregate, the market value of all such open positions
exceeds the current value of the securities in the Portfolio's
investment portfolio, plus or minus unrealized gains and losses
on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions.
Taxation of Options and Futures
-------------------------------
If the Portfolio exercises a call or put option it owns, the
difference between the cash paid at exercise and the premium
received is a capital gain or loss. Entry into a closing purchase
transaction will result in capital gain or loss. A futures
contract held until delivery results in capital gain or loss
equal to the difference between the price at which the futures
contract was entered into and the settlement price on the earlier
of the delivery notice date or the expiration date. Should the
Portfolio ever deliver securities under a futures contract (which
is not expected to occur), the Portfolio will realize a capital
gain or loss on those securities.
For federal income tax purposes, a Portfolio generally is
required to recognize as income for each taxable year its net
unrealized gains and losses as of the end of the year on options
and futures positions ("year-end mark to market"). Generally,
any gain or loss recognized with respect to such positions
(either by year-end mark to market or by actually closing of the
positions) is considered to be 60% long term and 40% short term,
without regard to the holding periods of the contracts.
The Portfolio distributes to shareholders annually any net
capital gains which have been recognized for federal income tax
purposes (including year-end mark to market gains) on options and
futures transactions. Such distributions are combined with
distributions of capital gains realized on the Portfolio's other
investments and shareholders are advised of the nature of the
payments.
PSE Technology Index
--------------------
For illustrative purposes, the Portfolio may include in its
supplemental sales literature a line graph showing the price
patterns of the PSE Technology Index over the past decade.
The presentation displays superimposed line graphs of
annual prices of the Index over approximately a 10-year
period, with prices reflected on the vertical axis and years
reflected on the horizontal axis.
Historical prices are not necessarily indicative of the
future prices of the Index, or of the performance of the
Portfolio or the ability of that Portfolio to match the
performance of the Index or of the stock market generally.
This Portfolio is not sponsored, endorsed, sold or promoted
by the Pacific Stock Exchange, Incorporated. The Pacific Stock
Exchange, Incorporated makes no representation or warranty,
implied or expressed, to the purchasers of the Portfolio or any
member of the public regarding the advisability of investing in
index funds generally, or in this Portfolio particularly, or the
ability of the Index to track stock market performance.
Short-Term Investments
----------------------
The Portfolio may invest in any of the following securities
and instruments in management of cash receipts, for liquidity for
anticipated redemptions, to meet cash flow needs to enable the
Portfolio to take advantage of buying opportunities, during
periods when attractive investments are unavailable and for
temporary defensive purposes.
BANK CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME
DEPOSITS. The Portfolio may acquire certificates of deposit,
bankers' acceptances, and time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a
commercial bank for a definite period of time and earn a
specified return. Bankers' acceptances are negotiable drafts or
bills of exchange normally drawn by an importer or exporter to
pay for specific merchandise, which are "accepted" by a bank,
meaning in effect that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Certificates of
deposit and bankers' acceptances acquired by the Portfolio will
be dollar-denominated obligations of domestic banks or financial
institutions which at the time of purchase have capital, surplus,
and undivided profits in excess of $100 million, based on latest
published reports, or less than $100 million if the principal
amount of such bank obligations are fully insured by the U.S.
Government.
In addition to purchasing certificates of deposit and
bankers' acceptances, to the extent permitted under its
investment objective and policies, the Portfolio may make
interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified
period of time at a specified interest rate.
SAVINGS ASSOCIATION OBLIGATIONS. The Portfolio may invest
in certificates of deposit (interest-bearing time deposits)
issued by savings banks or savings and loan associations that
have capital and undivided profits in excess of $100 million,
based on latest published reports, or less than $100 million if
the principal amount of such obligations is fully insured by the
U.S. Government.
COMMERCIAL PAPER, SHORT-TERM NOTES, VARIABLE RATE DEMAND
NOTES, AND OTHER CORPORATE OBLIGATIONS. The Portfolio may invest
a portion of its assets in commercial paper and short-term notes,
including variable rate demand notes. Commercial paper consists
of unsecured promissory notes issued by corporations. Issues of
commercial paper and short-term notes will normally have
maturities of less than nine months and fixed rates of return,
although such instruments may have maturities of up to one year.
Commercial paper and short-term notes will consist of issues
rated at the time of purchase "A-2" or higher by S&P, "Prime-1"
or "Prime-2" by Moody's, or similarly rated by another
organization or, if unrated, will be determined by the Advisor to
be of comparable quality. These rating symbols are described
below under "Portfolio Ratings."
Corporate obligations include bonds and notes issued by
corporations to finance longer-term credit needs than supported
by commercial paper. While such obligations generally have
maturities of ten years or more, the Portfolio may purchase
corporate obligations which have remaining maturities of one year
or less from the date of purchase and which are rated "AA" or
higher by S&P or "Aa" or higher by Moody's.
The Portfolio also may purchase corporate obligations known
as variable rate demand notes. Variable rate demand notes are
unsecured instruments that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate.
Although the notes are not normally traded and there may be no
secondary market in the notes, the Portfolio may demand payment
of principal and accrued interest at any time.
Lending of Portfolio Securities
-------------------------------
The Portfolio may lend its portfolio securities to brokers,
dealers, and other institutional investors, provided the
Portfolio receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current
market value of the securities loaned. For the purposes of this
policy, the Portfolio considers collateral consisting of U.S.
Government Securities or irrevocable letters of credit issued by
banks whose securities meet the standards for investment by the
Portfolio to be the equivalent of cash. During the term of the
loan, the Portfolio is entitled to receive interest and other
distributions paid on the loaned securities, as well as any
appreciation in the market value. The Portfolio is also entitled
to receive interest from the institutional borrower based on the
value of the securities loaned. The Portfolio seeks to increase
its income by investing the cash collateral received on the loan.
From time to time, the Portfolio may return to the borrower,
and/or a third party which is unaffiliated with Principal
Preservation and which is acting as a "placing broker," a part of
the interest earned from the investment of the collateral
received for securities loaned.
The Portfolio does not have the right to vote the securities
loaned during the existence of the loan, but can call the loan to
permit voting of the securities, if, in the Advisor's judgment, a
material event requiring a shareholder vote would otherwise occur
before the loan is repaid. In the event of bankruptcy or other
default of the borrowing institution, the Portfolio could
experience delays in liquidating the loan collateral or
recovering the loaned securities, and incur risk of loss
including: (1) possible decline in the value of the collateral or
in the value of the securities loaned during the period while the
Portfolio seeks to enforce its rights thereto; (2) possible
subnormal levels of income and lack of access to income during
this period; and (3) expenses of enforcing its rights. To
minimize these risks, the Advisor evaluates and continually
monitors the creditworthiness of the institutional borrowers to
which the Portfolio lends its securities.
To minimize the foregoing risks, the Portfolio's securities
lending practices are subject to the following conditions and
restrictions: (1) the Portfolio may not make such loans in
excess of 33% of the value of its total assets; (2) the Portfolio
must receive cash collateral in an amount at least equal to 100%
of the value of the securities loaned; (3) the institutional
borrower must be required to increase the amount of the cash
collateral whenever the market value of the loaned securities
rises above the amount of the collateral; (4) the Portfolio must
have the right to terminate the loan at any time; (5) the
Portfolio must receive reasonable interest on the loan, as well
as any interest or other distributions on the loaned securities
and any increase in the market value of the loaned securities;
and (6) the Portfolio may not pay any more than reasonable
custodian fees in connection with the loan.
Investments in Other Investment Companies
-----------------------------------------
An investment by the Portfolio in another investment company
may cause the Portfolio to incur increased administration and
distribution expenses. Such investments are limited by the
Portfolio's investment restrictions. See "Investment
Restrictions" in this Statement of Additional Information.
Industry Concentration
----------------------
There may be periods of time during which the issuers
represented in the PSE Technology Index are concentrated in
one or more industries. Notwithstanding the occurrence of
such industry concentrations, the Portfolio intends to
maintain its investments so as to replicate the Index.
As a result, a relatively high percentage of the
Portfolio's assets may be concentrated from time to time in
stocks of issuers within a single industry. Such issuers may be
subject to the same economic trends. Securities held by the
Portfolio may therefore be more susceptible to any single
economic, political, or regulatory occurrence than the portfolio
securities of many other investment companies.
Portfolio Turnover
------------------
Principal Preservation has not established a limit to its
portfolio turnover rates, nor will it attempt to achieve or be
limited to predetermined rates of portfolio turnover. Rather,
its portfolio turnover rate will be driven by changes in the
composition of the PSE Technology Index. As a result, the
Portfolio cannot predict its portfolio turnover rates,
although it is not expected to exceed 50%.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following fundamental
investment restrictions and policies which cannot be changed
without the approval of the holders of the lesser of (i) a
majority of the outstanding shares of the Portfolio or (ii) 67%
of the shares represented at a meeting of shareholders at which
the holders of 50% or more of the outstanding shares of the
Portfolio are represented. Policies that are not "fundamental
policies" are subject to change by the Board of Directors without
shareholder approval. Any investment restriction which involves
a maximum percentage of securities or assets will not be
considered to be violated unless an excess over the percentage
occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Portfolio. The
Portfolio may not:
(1) Purchase more than 10% of the outstanding voting
securities of an issuer, or invest in a company
to get control or manage it.
(2) Borrow money or property except for temporary or emer-
gency purposes. If the Portfolio ever should borrow money it
would only borrow from banks and in an amount not exceeding 10%
of the market value of its total assets (not including the amount
borrowed). The Portfolio will not pledge more than 15% of its
net assets to secure such borrowings. In the event the
Portfolio's borrowing exceeds 5% of the market value of its total
assets, the Portfolio will not invest in any portfolio securities
until its borrowings are reduced to below 5% of its total assets.
For purposes of these restrictions, collateral arrangements for
premium and margin payments in connection with hedging
activities, if any, are not to be deemed to be a pledge of
assets.
(3) Make loans, except that it may lend its portfolio
securities, For the purposes of this restriction, investments in
publicly-traded debt securities or debt securities of the type
customarily purchased by institutional investors and investments in
repurchase agreements are not considered loans.
(4) Underwrite the securities of other issuers, except
where it might technically be deemed to be an underwriter for
purposes of the Securities Act of 1933 upon the disposition of
certain securities.
(5) Issue senior securities.
(6) Purchase a security if, as a result, more than 10% of
the value of the Portfolio's net assets would be invested in:
(i) securities with legal or contractual restrictions on resale
(other than investments and repurchase agreements); (ii)
securities for which market quotations are not readily available;
and (iii) repurchase agreements which do not provide for payment
within 7 days.
(7) Invest in commodities, but the Portfolio may invest in
futures contracts and options.
(8) Purchase securities on margin or effect short sales of
securities, except short sales "against the box" (but the
Portfolio may obtain such short-term credits as may be necessary
for the clearance of transactions and may make margin payments in
connection with transactions in options and futures
transactions.
(9) Buy or sell real estate, real estate investment trusts,
real estate limited partnerships, or oil and gas interests or
leases.
In accordance with the following non-fundamental policies,
which may be changed without shareholder approval, the Portfolio
may not:
(1) Invest more than 5% of its total assets in securities
of companies which, including any predecessors, have a record of
less than 3 years of continuous operations.
(2) Purchase warrants, except that the Portfolio may
purchase warrants which, when valued at lower of cost or market,
do not exceed 5% of the value of the Portfolio's net assets;
included within the 5%, but not to exceed 2% of the Portfolio's
net assets, may be warrants which are not listed on the New York
or American Stock Exchange.
(3) Purchase or retain the securities of an issuer if those
officers or Directors of Principal Preservation or the Advisor
(as defined under the caption "Management of Principal Preserva-
tion -- The Investment Advisors" in this Statement of Additional
Information) who individually own beneficially more than 0.5 of
1% of the outstanding securities of such issuer together own
beneficially more than 5% of such outstanding securities;
provided that no officer or director shall be deemed to own
beneficially securities held in other accounts managed by such
person or held in employee or similar plans for which such person
acts as trustee.
(4) Purchase securities of other investment companies if
the purchase would cause more than 10% of the value of the total
assets of the Portfolio to be invested in investment company
securities, provided that: (i) no investment will be made in the
securities of any single investment company if, immediately after
such investment, more than 3% of the outstanding voting
securities of such investment company would be owned by the
Portfolio or more than 5% of the value of the total assets of the
Portfolio would be invested in such investment company; and (ii)
no such restrictions shall apply to a purchase of investment
company securities as a part of a merger, consolidation,
reorganization or acquisition of assets.
With respect to fundamental investment restriction (6)
above, Portfolio securities are classified by the Advisor as
liquid or illiquid under the supervision of, and pursuant to
guidelines established by, the Board of Directors of
Principal Preservation. It is possible that the 10%
limitation on illiquid securities could be exceeded as a
result of a security which, although liquid at the time of
purchase, later is classified by the Advisor as illiquid as a
result of market conditions or developments with respect to
the issuer. Under such circumstances the Board of Directors
would investigate and consider all of the surrounding
circumstances, would evaluate all available alternatives to
bring the Portfolio back into compliance with the 10%
limitation as soon as reasonably practicable, and would take
appropriate action. However, the Portfolio would not
necessarily be required immediately to dispose of illiquid
securities until the 10% limitation is met if, in the
judgment of the Board of Directors, it would not be in the
best interests of the shareholders to do so. Disposing of
illiquid investments potentially may involve time-consuming
negotiation and legal expenses, and it may be difficult or
impossible for the Portfolio to sell an illiquid security
promptly at an acceptable price. The absence of a trading
market can make it difficult to ascertain the market value
for illiquid investments, and could require the Portfolio to
employ special pricing procedures. Because the stocks
included in the PSE Technology Index are listed on NASDAQ,
the New York Stock Exchange or the American Stock Exchange,
the Portfolio does not anticipate any difficulty in
maintaining adequate liquidity under normal market
conditions. See "Investment Program - PSE Technology Index"
in the Prospectus.
INDUSTRY CONCENTRATION FACTORS
As discussed in the Portfolio's Prospectus (see "Special
Considerations -- Concentrations" in the Prospectus), a
significant portion of the Portfolio's investments will consist
of technology-based issues, which exposes the Portfolio to risks
associated with economic conditions in that industry.
Due to competition, a more concentrated and interrelated
product line, and other factors, companies that develop and/or
rely on technology could become increasingly sensitive to down swings
in the economy and competitive factors. However, the companies whose
common stocks are included in the PSE Technology Index comprise a
fairly broad range of industries. This broad industry
representation likely will soften volatility associated with economic
and political developments that disproportionately affect specific
industries. The Portfolio intends to maintain its investments
in a manner designed to replicate the PSE Technology Index
even during peroids of industry concentration in the Index,
should they occur. See "Investment Program - Industry
Concentration."
MANAGEMENT OF PRINCIPAL PRESERVATION
Directors and Officers
----------------------
Under applicable law, the Board of Directors is responsible
for management of Principal Preservation, and provides broad
supervision over its affairs. The Advisor is responsible for the
Portfolio's investment management and Principal Preservation's
officers are responsible for the Portfolio's operations.
The Directors and officers of Principal Preservation and
their principal occupations during the past five years are listed
below. Their titles may have varied during that period.
Asterisks indicate those Directors who are "interested persons"
(as defined in the 1940 Act) of Principal Preservation. Unless
otherwise indicated, the address of each Director and officer of
Principal Preservation is 215 North Main Street, West Bend,
Wisconsin 53095.
Position with Principal
Principal Occupation During
Name and Address Preservation Past Five Years
---------------- ------------ ---------------
R. D. Ziegler*<F6> Chairman and Since 1973 Chairman and
Director Director and, prior to 1990,
Chief Executive Officer, and
prior to 1986, President, The
Ziegler Companies, Inc. and
B.C. Ziegler and Company;
Chairman and Director,
Ziegler Asset Management,
Inc.; Director, Johnson
Controls, Inc.
(manufacturing).
Robert J. Vice Senior Vice President,
Tuszynski*<F6> President and B.C. Ziegler and Company,
Director since 1996; prior thereto,
Director of Mutual Funds,
B.C. Ziegler and Company;
Trustee, Chairman
of the Board and President,
Prospect Hill Trust and The
Prime Portfolios (registered
investment companies) from
1994 to 1996.
Richard H. Aster, Director President and Director of
M.D. Research, The Blood Center of
1701 W. Wisconsin Southeastern Wisconsin, Inc.
Ave.
Milwaukee, WI 53223
Augustine J. Director Retired; President,
English Tupperware North America from
1724 Lake Roberts 1990 to 1994 (manufacturing);
Court prior to 1990, President, The
Windermere, FL 34786 West Bend Company (manu-
facturing), a division of
Dart Industries, a subsidiary
of Premark International,
Inc., of which Mr. English
was a Group Vice President.
Ralph J. Eckert Director Chairman, Trustmark Insurance
2059 Keystone Cos. (mutual life insurance
Ranch Road company); prior to 1991,
Dillon, CO 80435 Chairman, President and Chief
Executive Officer, Trustmark
Insurance Cos. since 1971;
Trustee of the Board of
Pensions of the Evangelical
Lutheran Church of America
since 1989; Trustee of the
Board of Pensions for the
Lutheran Church of America
from 1987-1989; and Trustee
of The Prime Portfolios (a
registered investment
company) from 1993 to 1996.
John H. Vice Wholesaler, B.C. Ziegler and
Lauderdale President - Company since 1991; prior
Director of thereto, Account Executive,
Marketing The Patten Company.
Jay Ferrara Chief Financial Assistant Vice President,
Officer and B.C. Ziegler and Company
Treasurer since 1994; Controller,
California Investment Trust
from 1993 to 1994; prior
thereto, Senior Portfolio
Accountant, Wells Fargo Nikko
Investment Advisors.
Marc J. Dion Vice President Vice President - Portfolio
Manager and Chief
Investment Officer, Ziegler
Asset Management, Inc.
since 1993; prior thereto,
Vice President Ziegler,
Asset Management, Inc.
S. Charles Secretary Senior Vice President and
O'Meara General Counsel, B.C. Ziegler
and Company, since 1993;
prior thereto, Partner,
O'Meara, Eckert, Pouros &
Gonring (law firm).
Principal Preservation pays the compensation of the three
Directors who are not officers, directors or employees of the
Advisor. Principal Preservation will pay each of these Directors
an annual fee of $12,000 and an additional $450 for each Board or
committee meeting he attends. Principal Preservation may also
retain consultants, who will be paid a fee, to provide the Board
with advice and research on investment matters.
The table below shows fees paid to Directors of Principal
Preservation for the year ended December 31, 1995. Each series
of Principal Preservation, including the Portfolio, pays a
proportionate share of these expenses based on the ratio such
series' total assets bear to the aggregate of the total assets of
all ten series of Principal Preservation. Principal Preservation
made no payments to its officers or directors who are affiliated
with any investment advisor to Principal Preservation.
Pension or Total
Retirement Compensation
Name of Person Benefits Accrued From Principal
and Aggregate As Part of Estimated Preservation and
Position with Compensation Principal Annual Fund Complex of
Principal from Principal Preservation's Benefits Which Principal
Preservation Preservation Expenses Upon Retirement Preservation
- ------------ ------------- ------------ ------------- Is a Part(1)<F7>
--------------
R. D. Ziegler, -0- -0- -0- -0-
President and
Director
Robert J. -0- -0- -0- -0-
Tuszynski,
Vice President
and Director
Richard H. $13,800 -0- -0- $13,800
Aster, M.D.
Director
Augustine J. $13,800 -0- -0- $13,800
English,
Director
Stephen A. $13,800 -0- -0- $13,800
Roell,
Director
Ralph J. -0- -0- -0- $14,500
Eckert
Director
(1)<F7>Prior to December 29, 1995, Principal Preservation was a
part of a fund complex that included two other registered
investment companies. The operations of those other two
companies were discontinued at the close of business on that
date. Mr. Eckert, who became a Director of Principal
Preservation on January 19, 1996, previously served on the
board of trustees of one of the other companies in that
complex.
Investment Advisor
------------------
The Advisor, Ziegler Asset Management, Inc. ("ZAMI"),
manages the assets of the Portfolio pursuant to an Investment
Advisory Agreement (the "Advisory Agreement") and the investment
policies described herein. Subject to such further policies as
the Board of Directors may determine, the Advisor makes
investment decisions for the Portfolio. The Advisor furnishes,
at its own expense, all services, facilities and personnel
necessary in connection with managing the Portfolio's investments
and effecting securities transactions for the Portfolio.
The Advisory Agreement provides that the Advisor may render
services to others. The Advisory Agreement is terminable without
penalty on not more than sixty (60) days' nor less than thirty
(30) days' written notice by the Portfolio when authorized either
by majority vote of the investors in the Portfolio (with the vote
of each being in proportion to the amount of their investment) or
by vote of a majority of the Board of Directors, or by the
Advisor on not more than sixty (60) days' or nor less than thirty
(30) days' written notice, and will automatically terminate in
the event of its assignment. The Advisory Agreement provides
that neither the Advisor nor its personnel shall be liable for
any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution
of security transactions for the Portfolio, except for willful
misfeasance, bad faith, gross negligence or reckless disregard of
its or their obligations and duties under the Advisory Agreement.
For its services under the Advisory Agreement, the Advisor
receives from the Portfolio a fee accrued daily and paid monthly
at an annual rate equal to 0.50 of 1% of the average daily net
assets of the Portfolio up to $50 million, 0.30 of 1% of the next
$200 million in net assets, 0.25 of 1% of the next $250 million
in net assets, and 0.20 of 1% of net assets in excess of $500
million.
Administrative Services
-----------------------
B.C. Ziegler and Company ("Ziegler") also provides certain
administrative, accounting, and pricing services to Principal
Preservation, including calculating daily net asset value per
share; maintaining original entry documents and books of record
and general ledgers; posting cash receipts and disbursements;
reconciling bank account balances monthly; recording purchases
and sales based upon portfolio manager communications; and
preparing monthly and annual summaries to assist in the
preparation of financial statements of, and regulatory reports
for, Principal Preservation. Ziegler has agreed to provide these
services pursuant to the terms of an Accounting/Pricing Agreement
(the "Accounting/Pricing Agreement") at rates found by the Board
of Directors to be fair and reasonable in light of the usual and
customary charges made by unaffiliated vendors for similar
services. The current rate of payment for these services per
year is .03% of 1% of the Portfolio's total assets of $30 million
but less than $100 million, .02% of 1% of the Portfolio's total
assets of $100 million but less than $250 million and .01% of 1%
of the Portfolio's total assets of $250 million or more, with a
minimum fee of $19,000 per Portfolio per year, plus expenses.
The Accounting/Pricing Agreement will continue in effect from
year to year, as long as it is approved at least annually by
Principal Preservation's Board of Directors or by a vote of the
outstanding voting securities of Principal Preservation and, in
either case, by a majority of the Directors who are not parties
to the Accounting/Pricing Agreement or interested persons of any
such party. The Accounting/Pricing Agreement terminates
automatically if assigned and may be terminated without penalty
by either party on 60 days notice. The Accounting/Pricing
Agreement provides that neither Ziegler nor their personnel shall
be liable for any error of judgment or mistake of law or for any
loss arising out of any act or omission in the execution and the
discharge of its obligations under the Accounting/Pricing Agree-
ment, except for willful misfeasance, bad faith or gross negli-
gence in the performance of their duties or by reason of reckless
disregard of their obligations and duties under the
Accounting/Pricing Agreement, and in no case shall their
liability exceed one year's fee income received by them under
such Agreement.
Depository Services
-------------------
The Portfolio's portfolio securities are held by Ziegler as
depository ("Depository") pursuant to the terms of a Depository
Contract. Ziegler also provides certain administrative, clearing
and record keeping functions for the Portfolio pursuant to the
Depository Contract. Under the terms of the Depository Contract,
Ziegler is entitled to reasonable compensation for its services
and expenses as Depository, as agreed upon from time to time
between it and the Board of Directors of Principal Preservation.
The current rate of compensation for these services is .055 of
1% of the first $10 million of the Portfolio's assets, .03 of 1%
of the next $40 million of assets, and .016 of 1% of the next
$200 million of assets and .015 of 1% of assets in excess of $250
million. The Depository Contract will continue in effect until
terminated, and may be terminated by either party without cause
on 30 days' prior written notice. The Depository Contract
provides that Ziegler shall not be liable to Principal
Preservation or the Portfolio for any action taken or omitted by
it in good faith without negligence.
Other Services
--------------
In addition to the foregoing, Ziegler also serves as the
principal Distributor of the Portfolio's shares and receives
commissions on sales of Portfolio shares. See "Purchase of
Shares." Ziegler also receives reimbursement from the Portfolio
for certain expenses Ziegler incurs in connection with
distributing the Portfolio's shares pursuant to the Distribution
Plan adopted by the Portfolio under Rule 12b-1 of the 1940 Act.
See "Distribution Expenses."
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1996, no person was known to the Fund to
be the "beneficial owner" (determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934) of more than 5%
of the outstanding shares of the Fund's common stock.
PERFORMANCE INFORMATION
From time to time the Portfolio may advertise its "yield"
and "total return." Yield is based on historical earnings and
-----------------------------------------
total return is based on historical distributions; neither is
-------------------------------------------------------------
intended to indicate future performance. The "yield" of the
---------------------------------------
Portfolio refers to the income generated by an investment in the
Portfolio over a one-month period (which period will be stated in
the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during the month
is assumed to be generated each month over a 12-month period and
is shown as a percentage of the investment. "Total return" of
the Portfolio refers to the average annual total return for 1, 5,
and 10-year periods (or so much thereof as the Portfolio has been
in existence). Total return is the change in redemption value of
shares purchased with an initial $1,000 investment, assuming the
reinvestment of dividends and capital gain distributions, after
giving effect to the maximum applicable sales charge.
Performance information should be considered in light of the
Portfolio's investment objectives and policies, characteristics
and quality of its portfolio securities and the market conditions
during the time period, and should not be considered as a
representation of what may be achieved in the future. Investors
should consider these factors and possible differences in the
methods used in calculating performance information when
comparing the Portfolio's performance to performance figures
published for other investment vehicles.
Average annual total return is computed by finding the
average annual compounded rates of return over the 1, 5, and 10-
year periods (or so much thereof as the Portfolio has been in
existence) ended on the date of the balance sheet that would
equate the initial amount invested to the ending redeemable
value, according to the following formula:
n
P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10-year periods at
the end of the 1, 5, or 10 year periods (or fractional
portion thereof).
In some circumstances the Portfolio may advertise its total
return for a 1, 2, or 3-year period, or the total return since
the Portfolio commenced operations. In such circumstances the
Portfolio will adjust the values used in computing return to
correspond to the time period for which the information is
provided.
Yield quotations are based on a 30-day (or one-month)
period, and are computed by dividing the net investment income
per share earned during the period by the maximum offering price
per share on the last day of the period, according to the
following formula:
6
Yield = 2 [(a-b + 1) - 1]
---
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Performance information for the Portfolios may be compared
to various unmanaged indices as well as indices of similar mutual
funds. The Portfolio's advertising may also quote rankings
published by other recognized statistical services or publishers
such as Lipper Analytical Services, Inc., or Weisenberger
Investment Companies Service, among others.
An illustration may be used comparing the growth in value of
an initial investment in the Portfolio compared to a fixed rate
of return compounded on a monthly basis. This illustration will
reflect the effect of the Portfolio's sales charge and
fluctuations in net asset value, and will assume all income and
capital gain distributions are reinvested. The fixed rate of
return will be clearly stated and presented as a monthly
compounded figure, and therefore will not reflect any market
fluctuation.
In advertising and sales literature, the performance of the
Portfolio may be compared with that of other mutual funds,
indexes or averages of other mutual funds, indexes of related
financial assets or data (and in particular the PSE Technology
Index), and other competing investment and deposit products
available from or through other financial institutions. The
composition of these indexes, averages or accounts differ from
that of the Portfolio. Comparison of the Portfolio to an
alternative investment will consider differences in features and
expected performance.
All of the indexes and averages noted below will be obtained
from the indicated sources or reporting services, which Principal
Preservation generally believes to be accurate. A Portfolio may
also note its mention (including performance or other comparative
rankings) in newspapers, magazines, or other media from time to
time. However, Principal Preservation assumes no responsibility
for the accuracy of such data. Newspapers and magazines which
might mention the Portfolio or Principal Preservation include,
but are not limited to, the following:
The Business Journal Milwaukee Journal/Sentinel
Business Week Money
Changing Times Mutual Fund Letter
Chicago Tribune Mutual Fund Values
Chicago Sun-Times (Morningstar)
Crain's Chicago Newsweek
Business The New York Times
Consumer Reports Pension and Investments
Consumer Digest Personal Investor
Financial World Stanger Reports
Forbes Time
Fortune USA Today
Investor's Daily U.S. News and World Reports
Los Angeles Times The Wall Street Journal
When a newspaper, magazine or other publication mentions
Principal Preservation or the Portfolio, such mention may
include: (i) listings of some or all of the Portfolio's
holdings; (ii) descriptions of characteristics of some or all of
the securities held by the Portfolio, including price-earnings
ratios, earnings, growth rates and other statistical information,
and comparisons of that information or similar statistics for the
securities comprising any of the indexes or averages listed
above; and (iii) descriptions of Principal Preservation or the
Portfolio manager's economic and market outlook, general and for
the Portfolio.
The Portfolio may compare its performance to the Consumer
Price Index (All Urban), a widely recognized measure of
inflation.
DETERMINATION OF NET ASSET VALUE PER SHARE
Shares are sold at their net asset value per share plus the
applicable sales charge. See "Purchase of Shares." Net asset
value per share of the Portfolio is determined by subtracting the
Portfolio's liabilities (including accrued expenses and dividends
payable) from the Portfolio's total assets (the value of the
securities the portfolio holds plus cash or other assets,
including interest accrued but not yet received) and dividing the
result by the total number of shares outstanding.
The net asset value per share will be calculated as of the
close of trading on the New York Stock Exchange (the "Exchange")
at least once every weekday, Monday through Friday, except on
customary national business holidays which result in the closing
of the Exchange (including New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day).
Hedging instruments will be valued at their last sale price
prior to the close of the Exchange, unless there have been no
trades on that day and the last sale price is below the bid, or
above the asked, price. If the last prior sale price is below
the bid, instruments will be valued at the bid price at the close
of the Exchange; if the last prior sale price is above the asked,
the instrument will be valued at the asked price at the close of
the Exchange. Securities for which market quotations are readily
available will be valued in the same manner as for hedging
instruments. Securities and other assets for which quotations
are not readily available will be valued at their fair value on a
consistent basis using valuation methods determined by the Board
of Directors. The Portfolio intends to determine fair value for
such securities based in part upon the information supplied by
pricing services approved by the Board of Directors. Valuations
of portfolio securities furnished by the pricing service will be
based upon a computerized matrix system and/or appraisals by the
pricing service in each case in reliance upon information con-
cerning market transactions and quotations from recognized
securities dealers.
PURCHASE OF SHARES
Ziegler acts as the principal Distributor for the Portfolio.
Ziegler will allow Selected Dealer discounts (which are alike
for all Selected Dealers) from the applicable public offering
price. Neither Ziegler nor Selected Dealers are permitted to
withhold placing orders to benefit themselves by a price change.
The Distribution Agreement between Principal Preservation and
Ziegler will continue from year to year if it is approved
annually by Principal Preservation's Board of Directors,
including a majority of those Directors who are not interested
persons, or by a vote of the holders of a majority of the
outstanding shares. The Agreement may be terminated at any time
by either party on 60 days' notice and will automatically
terminate if assigned.
Shares of the Portfolio may be purchased by certain classes
of persons without a sales charge, or a reduced sales charge, as
described in the Prospectus. The Board of Directors believes
this is appropriate because of the minimal sales effort needed to
accommodate these classes of persons.
Because sales to members of qualified groups result in
economies of sales efforts and sales related expenses, the Dis-
tributor is able to offer a reduced sales charge to such persons.
A "qualified group" is one which: (1) has been in existence for
more than six months; (2) has a purpose other than acquiring
shares at a discount; and (3) has more than ten members, is
available to arrange for group meetings between representatives
of the Distributor or Selected Dealers distributing shares of the
Portfolio, and agrees to include sales and other materials
related to Principal Preservation in its mailings to members at
reduced or no cost to the Distributor or Selected Dealers. See
"Purchase of Shares -- Group Purchases" in the Prospectus.
TAX STATUS
Each series of a series company, such as Principal
Preservation, is treated as a single entity for Federal income
tax purposes so that the net realized capital gains and losses of
the various portfolios in one fund are not combined.
The Portfolio intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986 (the "Code").
In order to qualify as a regulated investment company, the
Portfolio must satisfy a number of requirements. Among such
requirements is the requirement that at least 90 percent of the
Portfolio's gross income must be derived from dividends, interest
and gains from the sale or other disposition of stock or other
securities. Another requirement is that less than 30 percent of
the Portfolio's gross income be derived from the sale or other
disposition of securities (net of losses on designated hedges)
held for less than three months. In determining these gross
income requirements, a loss from the sale or other disposition of
securities does not enter into the computation.
Gain or loss on the sale of U.S. government securities held
by the Portfolio for more than six months will generally be long-
term capital gain or loss. Gain or loss on the sale of U.S.
government securities held for six months or less will be short-
term capital gain or loss. Gain or loss on the sale, exchange,
lapse, or termination of an option on securities will generally
be treated as a gain or loss from the sale of securities.
Dividends and other distributions paid to individuals and
other non-exempt payees are subject to a 31% backup Federal
withholding tax if Principal Preservation or Ziegler is not
provided with the shareholder's correct taxpayer identification
number or certification that the shareholder is not subject to
such backup withholding or if the Portfolio is notified that the
shareholder has underreported income in the past. In addition,
such backup withholding tax will apply to the proceeds of
redemption or repurchase of shares from a shareholder account for
which the correct taxpayer identification number has not been
furnished. For most individual taxpayers, the taxpayer identifi-
cation number is the social security number. An investor may
furnish Ziegler with such number and the required certifications
by completing and sending Ziegler either the Account Application
form attached to the Prospectus or IRS Form W-9.
Interest on indebtedness incurred (directly or indirectly)
by shareholders to purchase or carry shares will not be
deductible for Federal income tax purposes. Further, persons who
are "substantial users" (or persons related thereto) of
facilities financed by industrial development bonds should con-
sult their own tax advisor before purchasing the Portfolio's
shares.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Basic information with respect to portfolio transactions and
brokerage is set forth in the Prospectus under "Portfolio Trans-
actions and Brokerage." In addition to the conditions and limi-
tations there described, in the event Ziegler is utilized as a
broker by Principal Preservation and other Ziegler clients are
considering the same types of transactions simultaneously,
Ziegler will allocate the transactions and securities in which
they are made in a manner deemed by Ziegler to be equitable,
taking into account size, timing, and amounts. This may affect
the price and availability of securities to the Portfolio.
DISTRIBUTION EXPENSES
Principal Preservation's Distribution Plan (the "Plan") is
its written plan contemplated by Rule 12b-1 (the "Rule") under
the 1940 Act.
The Plan authorizes the Distributor to make certain payments
to any qualified recipient, as defined in the Plan, that has
rendered assistance in the distribution of Principal
Preservation's shares (such as sale or placement of Principal
Preservation's shares, or administrative assistance, such as
maintenance of sub-accounting or other records). Qualified
recipients include banks and other financial institutions. The
Plan also authorizes the Distributor to purchase advertising for
shares of the Portfolio, to pay for sales literature and other
promotional material, and to make payments to its sales
personnel. The Plan also entitles the Distributor to receive a
fee of .25 of 1% on an annual basis of the average daily net
assets of portfolio shares that are owned of record by the
Distributor as nominee for the Distributor's customers or which
are owned by those customers of the Distributor whose records, as
maintained by Principal Preservation or its agent, designate the
Distributor as the customer's dealer of record. Any such
payments to qualified recipients or expenses will be reimbursed
or paid by Principal Preservation, up to a limit of 0.25 of 1% of
the average net assets of the Portfolio. The Distributor bears
its expenses of distribution above the foregoing amounts. No
reimbursement or payment may be made for expenses of past fiscal
years or in contemplation of expenses for future fiscal years
under the Plan.
The Plan states that if and to the extent that any of the
payments by Principal Preservation listed below are considered to
be "primarily intended to result in the sale of shares" issued by
a portfolio within the meaning of the Rule, such payments by
Principal Preservation are authorized without limit under the
Plan and shall not be included in the limitations contained in
the Plan: (1) the costs of the preparation, printing, and
mailing of all required reports and notices to shareholders,
irrespective of whether such reports or notices contain or are
accompanied by material intended to result in the sale of shares
of Principal Preservation or other funds or other investments;
(2) the costs of preparing, printing, and mailing of all prospec-
tuses to shareholders; (3) the costs of preparing, printing, and
mailing of any proxy statements and proxies, irrespective of
whether any such proxy statement includes any item relating to,
or directed toward, the sale of Principal Preservation's shares;
(4) all legal and accounting fees relating to the preparation of
any such reports, prospectuses, proxies, and proxy statements;
(5) all fees and expenses relating to the qualification of
Principal Preservation and or their shares under the securities
or "Blue Sky" laws of any jurisdiction; (6) all fees under the
1940 Act and the Securities Act of 1933, including fees in
connection with any application for exemption relating to or
directed toward the sale of Principal Preservation's shares; (7)
all fees and assessments of the Investment Company Institute or
any successor organization or industry association irrespective
of whether some of its activities are designed to provide sales
assistance; (8) all costs of preparing and mailing confirmations
of shares sold or redeemed or share certificates and reports of
share balances; and (9) all costs of responding to telephone or
mail inquiries of shareholders.
The Plan also states that it is recognized that the costs of
distribution of Principal Preservation's shares are expected to
exceed the sum of permitted payments, permitted expenses, and the
portion of the sales charge retained by the Distributor, and that
the profits, if any, of the Advisor are dependent primarily on
the advisory fees paid by Principal Preservation to ZAMI. If and
to the extent that any investment advisory fees paid by Principal
Preservation might, in view of any excess distribution costs, be
considered as indirectly financing any activity which is
primarily intended to result in the sale of shares issued by
Principal Preservation, the payment of such fees is nonetheless
authorized under the Plan. The Plan states that in taking any
action contemplated by Section 15 of the 1940 Act as to any
investment advisory contract to which Principal Preservation is a
party, the Board of Directors including its Directors who are not
"interested persons" as defined in the 1940 Act, and who have no
direct or indirect financial interest in the operation of the
Plan or any agreements related to the Plan ("Qualified
Directors"), shall, in acting on the terms of any such contract,
apply the "fiduciary duty" standard contained in Sections 36(a)
and (b) of the 1940 Act.
Under the Plan, Principal Preservation is obligated to pay
distribution fees only to the extent of expenses actually
incurred by the Distributor for the current year, and thus there
will be no carry-over expenses from the previous years. The
Plan permits the Distributor to pay a portion of the distribution
fee to authorized broker-dealers, which may include banks or
other financial institutions, and to make payments to such
persons based on either or both of the following: (1) as
reimbursement for direct expenses incurred in the course of
distributing Principal Preservation's shares or providing
administrative assistance to Principal Preservation or its
shareholders, including, but not limited to, advertising,
printing and mailing promotional material, telephone calls and
lines, computer terminals and personnel (including commissions
and other compensation paid to such personnel); and/or (2) at a
specified percentage of the average value of certain qualifying
accounts of customers of such persons.
The Plan requires that while it is in effect the Distributor
shall report in writing at least quarterly to the Directors, and
the Directors shall review, the following: (1) the amounts of
all payments, the identity of recipients of each such payment,
the basis on which each such recipient was chosen and the basis
on which the amount of the payment was made; (2) the amounts of
expenses and the purpose of each such expense; and (3) all costs
of the other payments specified in the Plan (making estimates of
such costs where necessary or desirable) in each case during the
preceding calendar or fiscal quarter.
The Plan will continue in effect from year to year only so
long as such continuance is specifically approved at least
annually by the Board of Directors and its Qualified Directors
cast in person at a meeting called for the purpose of voting on
such continuance. The Plan may be terminated any time without
penalty by a vote of a majority of the Qualified Directors or by
the vote of the holders of a majority of the outstanding voting
securities of Principal Preservation (or with respect to any
Portfolio, by the vote of a majority of the outstanding shares of
such Portfolio). The Plan may not be amended to increase
materially the amount of payments to be made without shareholder
approval. While the Plan is in effect, the selection and
nomination of those Directors who are not interested persons of
Principal Preservation is committed to the discretion of such
disinterested Directors. Nothing in the Plan will prevent the
involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved
by a majority of such disinterested Directors.
CUSTODIAN
Principal Preservation serves as its own Custodian. The
securities of the Portfolio are held by Ziegler, an affiliated
person of Principal Preservation, as Depository. In addition,
Ziegler performs certain administrative, clearing, and record
keeping functions for the Portfolio. See "Management of
Principal Preservation -- Depository Services."
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Quarles & Brady, as counsel to Principal Preservation, has
rendered its opinion as to certain legal matters regarding the
due authorization and valid issuance of the shares of common
stock being sold pursuant to the Prospectus. Arthur Andersen
LLP, independent public accountants, are the auditors of
Principal Preservation.
PORTFOLIO RATINGS
The Portfolio may obtain and use a rating from a nationally
recognized statistical rating organization. A rating on the
shares of an investment company is a current assessment of
creditworthiness with respect to the investments held by such
fund. This assessment takes into consideration the financial
capacity of the issuers and of any guarantors, insurers, lessees,
or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which the Port-
folio's expenses or portfolio asset sales for less than the
Portfolio's purchase price will reduce yield or return. In
addition, the rating is not a recommendation to purchase, sell,
or hold units, inasmuch as the rating does not comment as to
market price of the shares or suitability for a particular
investor.
DESCRIPTION OF RATINGS OF CERTAIN SECURITIES
As set forth in the Prospectus under the captions
"Investment Objectives" and "Investment Program," generally, each
Portfolio will limit its investment in debt securities to those
which are rated in one of certain specified categories by a
Nationally Recognized Statistical Rating Organization or are U.S.
Government Securities. The following is a brief description of
the rating systems used by three of these organizations.
CORPORATE AND MUNICIPAL BOND RATINGS
Standard & Poor's Corporation
-----------------------------
An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obliga-
tion. This assessment may take into consideration obligors such
as guarantors, insurers or lessees.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repay-
ment of principal in accordance with the terms of the
obligation;
II. Nature of and provisions of the obligation; and
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization
or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
S&P's four highest rating categories are as follows:
AAA. Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is
extremely strong.
AA. Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the
higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in the
higher rated categories.
BBB. Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas
they normally exhibit adequate protective parameters,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category
than for bonds in the higher-rated categories.
Moody's Investors Service, Inc.
-------------------------------
The purpose of Moody's Ratings is to provide investors with
a simple system of gradation by which the relative investment
qualities of bonds may be noted. Moody's four highest rating
categories are as follows:
Aaa. Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa. Bonds which are Aa are judged to be of high quality by
all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be
of greater amplitude, or there may be other elements
present which make the long term risks appear somewhat
larger than in Aaa securities.
A. Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium
grade obligations: i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Fitch Investors Service, Inc.
-----------------------------
Fitch investment grade bond ratings provide a guide to
investors in determining the credit risk associated with a
particular security. The ratings represent Fitch's assessment of
the issuer's ability to meet the obligations of a specific debt
issue or class of debt in a timely manner. Fitch's four highest
rating categories are:
AAA. Bonds considered to be investment grade and of the
highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by
reasonably foreseeable events.
AA. Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay
interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is
generally rated F-1+.
A. Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest
and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher
ratings.
BBB. Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse
impact on these bonds and therefore impair timely
payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than
for bonds with higher ratings.
General
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The S&P and Fitch "AA", "A" and "BBB" ratings may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
The letter "p" following an S&P rating indicates the rating
is provisional. A provisional rating assumes the successful
completion of the project being financed by the issuance of the
bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion, makes
no comment on the likelihood of, or the risk of default upon
failure of, such completion. Accordingly, the investor should
exercise his or her own judgment with respect to such likelihood
and risk.
The word "Conditional" following a Fitch rating indicates
the rating is conditional and is premised on the successful
completion of a project or the occurrence of a specific event.
Moody's security rating symbols may contain numerical
modifiers of a generic rating classification. The modifier 1
indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
The symbol "Con" in a rating by Moody's indicates a pro-
visional rating given to bonds for which the security depends
upon the completion of some act of the fulfillment of some
condition. These are bonds secured by: (1) earnings of projects
under construction; (2) earnings of projects unseasoned in
operating experience; (3) rentals which begin when facilities are
completed; or (4) payments to which some other limiting condition
attaches. A parenthetical rating denotes probable credit stature
upon completion of construction or elimination of basis of
condition.
MUNICIPAL NOTE RATINGS
Moody's Investors Service, Inc.
-------------------------------
MIG 1. This designation denotes best quality. There is
present strong protection by established cash
flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of
protection are ample although not so large as in
the preceding group.
MIG 3. This designation denotes favorable quality. All
security elements are accounted for but there is
lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely
to be less well established.
MIG 4. This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and although not
distinctly or predominantly speculative, there is
specific risk.
Standard & Poor's Corporation
-----------------------------
SP-1. Notes rated SP-1 have very strong or strong capa-
city to pay principal and interest. Those issues
determined to possess overwhelming safety charac-
teristics are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay
principal and interest.
Notes due in three years or less normally receive a note
rating. Notes maturing beyond three years normally receive a
bond rating, although the following criteria are used in making
that assessment:
-Amortization schedule (the larger the final maturity
relative to other maturities, the more likely the issue will be
rated as a note.)
-Source of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be rated as a
note.)
Fitch Investors Service, Inc.
-----------------------------
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to
three years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes.
F-1+. Exceptionally Strong Credit Quality. Issues assigned
-----------------------------------
this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1. Very Strong Credit Quality. Issues assigned this
--------------------------
rating reflect an assurance of timely payment only
slightly less in degree than issues rated "F-1+."
F-2. Good Credit Quality. Issues assigned this rating
-------------------
have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as
for issues assigned "F-1+" and "F-1" ratings.
F-3. Fair Credit Quality. Issues assigned this rating
-------------------
have characteristics suggesting that the degree of
assurance for timely payment is adequate; however,
near-term adverse changes could cause these
securities to be rated below investment grade.
Fitch also uses the symbol "LOC" which indicates that the
rating is based on a letter of credit issued by a commercial
bank.
RATINGS OF COMMERCIAL PAPER
Standard & Poor's Corporation
-----------------------------
S&P ratings are a current assessment of the likelihood of
timely payment of debt having an original maturity of no more
than 365 days. The ratings are based on current information
furnished to S&P by the issuer and obtained by S&P from other
sources it considers reliable. Ratings are graded into four
categories, ranging from "A" for the highest quality obligations
to "D" for the lowest. Issues within the "A" category are
delineated with the numbers 1, 2, and 3 to indicate the relative
degree of safety, as follows:
A-1. This designation indicates the degree of safety
regarding timely payment is overwhelming or very
strong. Those issuers determined to possess
overwhelming safety characteristics are denoted with
a "plus" (+) designation.
A-2. Capacity for timely payment on issues with this
designation is strong. However, the relative degree
of safety is not as overwhelming as for issues
designated A-1.
A-3. Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however,
somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying
the higher designations.
B. Issues rated "B" are regarded as having only an
adequate capacity for timely payment. However, such
capacity may be damaged by changing conditions or
short-term adversities.
C. Issues rated "C" are regarded as having a doubtful
capacity for payment.
D. Issues rated "D" are in payment default.
Moody's Investors Service, Inc.
-------------------------------
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually their promissory obligations not
having an original maturity in excess of nine months. Moody's
employs the following designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated
issuers:
Prime-1. Issuers (or related supporting institutions) rated
Prime-1 have a superior capacity for repayment or
short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following
characteristics: (a) leading market positions in well-
established industries; (b) high rates of return on
funds employed; (c) conservative capitalization struc-
tures with moderate reliance on debt and ample asset
protection; (d) broad margins in earnings coverage of
fixed financial charges and high internal cash genera-
tion; and (e) well-established access to a range of
financial markets and assured sources of alternate
liquidity.
Prime-2. Issuers (or related supporting institutions) rated
Prime-2 have a strong capacity for repayment of short-
term promissory obligations. This will normally be
evidenced by many of the characteristics cited above in
the Prime-1 category but to a lesser degree. Earning
trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is
maintained.
Prime-3. Issuers (or related supporting institutions) rated
Prime-3 have an acceptable capacity for repayment of
short-term promissory obligations. The effect of
industry characteristics and market composition may be
more pronounced. Variability in earnings and profita-
bility may result in changes in the level of debt
protection measurements and the requirement for
relatively high financial leverage. Adequate alternate
liquidity is maintained.
The ratings of S&P, Moody's and Fitch represent their
opinions as to the quality of the instruments rated by them. It
should be emphasized that such ratings, which are subject to
revision or withdrawal, are general and are not absolute
standards of quality.
Principal Preservation Portfolios, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Investment Advisor
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Distributor, Depository Accounting/
Pricing Agent and Transfer and
Dividend Disbursing Agent
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
Counsel
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Auditor
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
PSE TECH 100 INDEX PORTFOLIO
June 10, 1996
STATEMENT OF ADDITIONAL INFORMATION
