<PAGE> 1
Form 497(c)
File No: 33-12
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
Principal Preservation Portfolios, Inc. ("Principal Preservation") is a
family of mutual funds contained within a single investment company organized in
1984 as a Maryland corporation. This Prospectus describes Class A shares for all
six of the mutual funds (the "Portfolios") of Principal Preservation, listed
below, and also describes Class B shares for the Equity-Oriented Portfolios.
Class B shares presently are not available for the Income-Oriented Portfolios:
INCOME-ORIENTED PORTFOLIOS: EQUITY-ORIENTED PORTFOLIOS:
TAX-EXEMPT PORTFOLIO S&P 100 PLUS PORTFOLIO
GOVERNMENT PORTFOLIO DIVIDEND ACHIEVERS PORTFOLIO
SELECT VALUE PORTFOLIO
PSE TECH 100 INDEX PORTFOLIO
This Prospectus has information you should know before you decide to
invest. Please read it carefully and keep it with your investment records. There
is a Table of Contents on the next page which allows you to quickly find
information about investment strategies, Portfolio managers, buying and selling
shares and other information about the Portfolios.
A supplement to this Prospectus, the Statement of Additional
Information dated July 20, 1998, contains further information about the
Portfolios' investment limitations and policies, as well as other information.
The SAI has been filed with the Securities and Exchange Commission, and its
contents are incorporated by reference into this Prospectus. The Table of
Contents has a section describing many of the items that are contained in the
SAI. A copy of the SAI can be obtained without charge upon telephone request to
Principal Preservation's distributor, B.C. Ziegler and Company ("Ziegler") at
800-826-4600, or from Selected Dealers that have agreements with respect to the
distribution of shares of the Portfolios.
THE PORTFOLIOS' SHARES ARE NOT BANK DEPOSITS AND ARE NOT GUARANTEED
OR INSURED BY THE FEDERAL DEPOSIT INSURANCE COMPANY (FDIC) OR ANY
OTHER AGENCY OF THE U.S. GOVERNMENT. AS WITH ANY INVESTMENT IN
SECURITIES, YOU ASSUME A CERTAIN AMOUNT OF RISK. YOU COULD LOSE MONEY
INVESTING IN ANY OF THE PORTFOLIOS.
================================================================================
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IF
ANYONE TELLS YOU OTHERWISE THEY ARE COMMITTING A CRIME.
================================================================================
THE DATE OF THIS PROSPECTUS IS JULY 20, 1998.
<PAGE> 2
QUICK REFERENCE
THE INVESTMENT CONSIDERATIONS FOR THE PORTFOLIOS:
General investment benefits and risks associated
with the majority of the Portfolios' assets page
Specific investment objectives, program and
expense information for
Tax-Exempt Portfolio pages
Government Portfolio pages
S&P 100 Plus Portfolio pages
Dividend Achievers Portfolio pages
Select Value Portfolio pages
PSE Tech Index 100 Portfolio pages
Additional risks associated with securities of
the Portfolios pages
ACCOUNT INFORMATION, SHAREHOLDER SERVICES AND HOW TO BUY OR SELL
SHARES:
How to buy Portfolio shares (including sales
charges and combined purchase programs) pages
How to redeem Portfolio shares pages
How to exchange between Portfolios pages
How to begin an automatic investment plan pages
How to begin an automatic withdrawal plan pages
IRA and other retirement plan programs pages
PRINCIPAL PRESERVATION PORTFOLIOS' STRUCTURE AND DESCRIPTION OF ITS SERVICE
PROVIDERS:
Structure of Principal Preservation page
Board of Directors page
Investment Advisor page
Distributor page
Service Agents page
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THE FOLLOWING ITEMS ARE CONTAINED IN THE STATEMENT OF ADDITIONAL
INFORMATION.
Description of ratings of certain fixed-income securities.
Further detailed investment strategies and risks involved with securities used
less frequently (usually less than 5% of net assets)
Detailed description of total return and yield calculations of each Portfolio
3
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OVERVIEW
BENEFITS FROM INVESTING IN MUTUAL FUNDS
A Choice of Portfolios. Principal Preservation offers investors eight
distinct mutual funds choices. This prospectus describes the six Portfolios
described below. Two additional mutual funds of Principal Preservation, the Cash
Reserve Portfolio and the Wisconsin Tax-Exempt Portfolio, are offered by
separate prospectuses that can be obtained by calling Ziegler.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVES(1) PRIMARY INVESTMENTS
<S> <C> <C>
Tax-Exempt Portfolio Highest total return, consistent High quality municipal bonds
with preservation of principal with remaining maturities of
two to twenty years
Government Portfolio Highest total return, consistent Instruments and obligations
with preservation of principal issued by the U.S. Treasury, or
which are backed by the unconditional
full faith and credit of the United
States Government, its agencies or
instrumentalities
S&P 100 Plus Portfolio Total return from dividends A portfolio of common stocks
and capital gains which, that approximately parallels the
before operating expenses, composition of the S&P 100
exceeds the total return of the Index
S&P 100 Index
Dividend Achievers Capital growth and current Common stocks of companies
Portfolio income that have achieved a superior
record of dividend growth
Select Value Portfolio Long-term capital growth Common stocks of smaller to
medium-sized companies that
the Advisors consider to be
undervalued relative to
earnings, book value or
potential earnings growth
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVES(1) PRIMARY INVESTMENTS
<S> <C> <C>
PSE Tech 100 Index Total return, before operating The common stocks of all 100
Portfolio expenses, that replicates total companies included in the PSE
return of PSE Technology Technology Index in approximately the
Index. same proportions as those stocks
are represented on the Index
</TABLE>
- -----------------------
(1) There can be no assurance that any of the Portfolios will achieve its
objective.
Liquidity. Shares of any Portfolio may be redeemed at any time at
their current share price, called their net asset value. See "Redeeming
Shares."
Retirement Plans. The tax-deferred advantages of tax-qualified
retirement plans are open to investors in Principal Preservation. You can
invest, with a $500 minimum investment, through an IRA. Principal Preservation
makes certain prototype plans available to investors. See "Shareholder Services
- - Tax Sheltered Retirement Plans." Because most of the interest income from the
Tax-Exempt Portfolio is exempt from federal income tax, shares of that Portfolio
are not recommended for purchase by a tax-sheltered retirement plan.
GENERAL RISKS TO CONSIDER
Certain securities in which the Portfolios invest and activities in
which they engage involve special considerations and risks. The table below
describes some of the general risks associated with fixed-income securities
(such as bonds) and equity securities (such as common stocks) in which the
Portfolios commonly invest.
<TABLE>
<CAPTION>
FIXED INCOME SECURITIES EQUITY SECURITIES
<S> <C>
Interest Rate Risk - Market Risk -
The value of bonds typically Common stock prices overall will
moves in the opposite direction rise and fall over short and even
of interest rates. Bonds of extended periods. The equity markets
longer maturities are affected tend to move in cycles, and a
to a greater degree by changes Portfolio's net asset value will
in interest rates than bonds of fluctuate with these price changes
shorter maturities. and market fluctuations.
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
FIXED INCOME SECURITIES EQUITY SECURITIES
<S> <C>
Credit Risk - The creditworthiness of issuers Objective Risk - Objective risk is the risk
of bonds could deteriorate with general that a Portfolio's equity investments may not
economic conditions, or as a result of fluctuate in the same manner as the stock
developments affecting the industry in markets generally. This is because each of
which the borrower of the bond proceeds the equity-oriented Portfolios selects stocks
operates, or because of developments for investment in accordance with defined
affecting the issuer uniquely. Such a objectives and policies. The Portfolio's
deterioration signals a higher risk of default resulting investment portfolio will focus on
on interest and principal payments, and stocks of specified sizes of companies,
likely would cause the bonds to decline in companies included on certain stock
value, resulting in a corresponding decline indices, companies in certain industries or
in the Portfolio's net asset value. market sectors, or companies meeting other
specified criteria that will not be
representative of the market generally.
</TABLE>
Other risks specific to each Portfolio are discussed in the following
summary information about the individual Portfolios. Risks associated with
special investment strategies and techniques used by some of the Portfolios are
discussed in the Section of this Prospectus called "Additional Investment
Practices and Risks."
INVESTMENT ADVISORS
Each Portfolio is managed by Ziegler Asset Management, Inc. ("Ziegler
Asset Management" or the "Advisor"). Skyline Asset Management, L.P.
("Skyline"; together with the Advisor, the "Advisors") serves as sub-advisor
to the Select Value Portfolio.
EXPENSES
Costs are an important consideration in choosing a mutual fund. That's
because you, as a shareholder, pay the costs of operating a fund, plus any
transaction costs associated with buying, selling, or exchanging shares.
Shareholder transaction expenses are charges you pay when you buy, sell
or exchange shares. In the case of purchases and exchanges, shareholder
transaction expenses reduce the amount of your payment that is invested in
shares of the mutual fund. In the case of sales, shareholder transaction
expenses reduce the amount of the sale proceeds returned to you.
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<PAGE> 7
Annual fund operating expenses, on the other hand, are expenses that a
mutual fund pays to conduct its business, including investment advisory fees and
the costs of maintaining shareholder accounts, administering the fund, providing
shareholder services, and other activities of the mutual fund. Annual fund
operating expenses are deducted from a mutual fund's assets, and therefore
reduce its total return.
TWO CLASSES OF SHARES
This prospectus describes two classes of shares, Class A shares for all
six Portfolios and Class B shares for the S&P 100 Plus, Dividend Achievers,
Select Value and PSE Tech 100 Index Portfolios. You pay a sales charge
immediately when you purchase Class A shares (front-end sales charge). You pay a
sales charge when you redeem Class B shares held for less than six years
(contingent deferred sales charge). In addition, you pay higher "12b-1 fees" for
Class B shares than Class A shares. See "Distribution Expenses."
Whether you should purchase Class A or Class B shares depends on how
long you intend to hold the shares and the size of your investment. If you
intend to own shares for more than six years and have a smaller investment, you
should consider Class B shares. If you plan to redeem shares in less than six
years or have a larger investment, you should consider Class A shares. The
following table shows some of the differences between Class A and Class B
shares:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
<S> <C>
Maximum 5.25% front-end sales charge No front-end sales charge
No contingent deferred sales charge Maximum 5.0% contingent
deferred sales charge
(reducing each year
you own your shares,
and going to zero
after six years)
Lower annual expenses, including the Higher annual expenses, including the 12b-1 fee, than Class A shares
12b-1 fee, than Class B shares
No conversion to Class B shares Automatic conversion to Class A shares
eight years
</TABLE>
You should bear in mind that exchanges of shares among the various
mutual funds included in the Principal Preservation family can be made only for
shares of the same Class, except that Class A shares of any Principal
Preservation mutual fund may be exchanged for Class X (Retail Class) shares of
the Cash Reserve Portfolio, and vice versa. As a result, Class B shares can be
exchanged only for shares of the other Portfolios that offer Class B shares.
PLEASE NOTE: CLASS B SHARES WILL FIRST BE AVAILABLE COMMENCING JULY 27, 1998.
7
<PAGE> 8
TAX-EXEMPT PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio seeks to provide the highest total return, consistent
with preserving principal, by investing in high quality municipal bonds with
remaining maturities of two to twenty years.
INVESTMENT POLICIES AND PROGRAM
Under normal market conditions, the Portfolio invests at least 90% of
its total assets in tax-exempt municipal securities. This investment policy is
fundamental, which means it cannot be changed unless a majority of the
Portfolio's shareholders vote to do so. The Portfolio will invest primarily in
municipal securities rated at the time of purchase in an "A" category or higher
by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings
Services ("S&P"), or Fitch Investors Service, Inc. For a description of such
ratings, see the Statement of Additional Information.
INVESTMENT RISKS
In addition to interest rate risk and credit risk, this Portfolio is
subject to the risk of changes in tax rates. Changes in federal income tax rates
may affect both the net asset value and the Portfolio's taxable equivalent
interest.
ANNUAL ADVISORY FEE
0.60 of 1% on the first $50 million;
0.50 of 1% on the next $200 million in net assets;
0.40 of 1% on average daily net assets in excess of $250 million
PORTFOLIO MANAGER
Mr. Thomas P. Sancomb has served as portfolio manager for the
Tax-Exempt Portfolio since April, 1996. Mr. Sancomb has served with Ziegler and
Ziegler Asset Management in various capacities since March 1975. He has served
on Ziegler's Investment Committee since July, 1984. He is a Vice President of
both Ziegler and Ziegler Asset Management.
8
<PAGE> 9
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A
Shares
-------
<S> <C>
Maximum Front-End Sales Charge (as a percentage of offering 3.5%
price) (1)
Maximum Sales Charge Imposed on Reinvested Dividends None
Contingent Deferred Sales Charge None
Redemption Fees (Ziegler charges $12.00 for each wire None
redemption)
Exchange Fee $5.00
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)(2)
Class A
Shares
-------
Management Fees 0.58%
12b-1 Fees 0.25%
Other Expenses:
Custodian Fees 0.02%
Transfer Agent Fees 0.09%
Other Fees 0.16%
-----
Total Other Expenses 0.27%
Total Fund Operating Expenses 1.10%
- ---------------------
(1) To determine if you qualify for a lower sales charge, see "Purchasing
Shares" and "Shareholder Services."
(2) The percentages expressing annual operating expenses are based on
amounts actually incurred during the year ended December 31, 1997. Fees
paid by the Portfolio for custodian and transfer agent services are
determined on a basis other than a straight percentage of average net
assets. For a discussion of fees associated with these services, see
"Management -The Advisors."
9
<PAGE> 10
EXPENSE EXAMPLE
The following example illustrates the hypothetical expenses that you
would incur on a $1,000 investment in the Tax-Exempt Portfolio over various
periods:
<TABLE>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$46 $69 $93 $164
</TABLE>
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE. FOR MORE
COMPLETE DESCRIPTIONS OF VARIOUS COSTS AND EXPENSES, SEE "MANAGEMENT,"
"PURCHASING SHARES," "REDEEMING SHARES," "EXCHANGING SHARES" AND "SHAREHOLDER
SERVICES."
FINANCIAL HIGHLIGHTS
The following table covers the Tax-Exempt Portfolio for the periods
presented and is based on a share of capital stock outstanding throughout the
applicable period. This information has been audited by Arthur Andersen LLP,
independent accountants. You should read the table in conjunction with the
financial statements and related notes, which are contained in Principal
Preservation's 1997 Annual Report to Shareholders. Copies of the 1997 Annual
Report are available from Ziegler without charge.
10
<PAGE> 11
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA;
NET ASSET VALUE, $9.30 $9.39 $ 8.36 $ 9.41 $ 8.67 $ 8.46
BEGINNING OF
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .41 .43 .45 .45 .48 .50
Net realized and .44 (.09) 1.03 (1.05) .74 .21
unrealized gains (losses) ------ ------- ------- ------- ------- -------
on investments
TOTAL FROM INVESTMENT .85 .34 1.48 (.60) 1.22 .71
OPERATIONS ------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net (.41) (.43) (.45) (.45) (.48) (.50)
investment income
Distributions from net (.22) -- -- -- -- --
realized gains on ------ ------- ------- ------- ------- -------
investments
TOTAL DISTRIBUTIONS (.63) (.43) (.45) (.45) (.48) (.50)
------ ------- ------- ------- ------- -------
NET ASSET VALUE, END $9.52 $9.30 $9.39 $8.36 $9.41 $8.67
OF PERIOD ====== ======= ======= ======= ======= =======
TOTAL RETURN* 9.4% 3.8% 18.1% (6.4)% 14.3% 8.6%
RATIOS/
SUPPLEMENTAL DATA:
Net assets, end of period $60,252 $66,310 $56,443 $55,492 $68,102 $60,171
(to nearest thousand)
Ratio of net expenses to 1.1% 1.1%+ 1.0%+ 1.0% 0.9% 0.9%
average net assets
Ratio of net investment 4.4% 4.7%+ 4.9%+ 5.2% 5.2% 5.9%
income to average net
assets
Portfolio turnover rate 209.2% 163.1% 105.9% 36.1% 56.3% 48.5%
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA;
NET ASSET VALUE, $ 8.19 $ 8.23 $ 8.06 $ 8.14
BEGINNING OF
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .53 .53 .55 .55
Net realized and .27 (.04) .17 (.08)
unrealized gains (losses) ------- ------- ------- -------
on investments
TOTAL FROM INVESTMENT .80 .49 .72 .47
OPERATIONS ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net (.53) (.53) (.55) (.55)
investment income
Distributions from net -- -- -- --
realized gains on ------- ------- ------- -------
investments
TOTAL DISTRIBUTIONS (.53) (.53) (.55) (.55)
------- ------- ------- -------
NET ASSET VALUE, END $8.46 $8.19 $8.23 $8.06
OF PERIOD ======= ======= ======= =======
TOTAL RETURN* 10.0% 6.2% 9.2% 6.0%
RATIOS/
SUPPLEMENTAL DATA:
Net assets, end of period $63,932 $65,265 $73,333 $85,469
(to nearest thousand)
Ratio of net expenses to 0.9% 0.9% 1.0% 1.2%
average net assets
Ratio of net investment 6.3% 6.6% 6.7% 6.9%
income to average net
assets
Portfolio turnover rate 38.3% 40.3% 21.5% 38.8%
</TABLE>
- --------------------
* The front-end sales charge for Class A shares is not reflected in total return
as set forth in the table.
+ Reflects a voluntary reimbursement of expenses of 0.1% in 1996 and 0.01% in
1995.
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<PAGE> 12
GOVERNMENT PORTFOLIO
INVESTMENT OBJECTIVE
The Government Portfolio seeks to obtain the highest total return,
consistent with preserving principal, by investing in a portfolio of instruments
and obligations issued by the U.S. Treasury or which are backed by the
unconditional full faith and credit of the United States government, its
agencies or instrumentalities ("U.S. Government Securities").
INVESTMENT POLICIES AND PROGRAM
Under normal market conditions, at least 65% of the Portfolio's total
assets will be invested in U.S. Government Securities. These securities are
issued with original maturities of from a few days to 30 years or more, and have
varying coupon rates. Although the Portfolio is not limited as to the average
maturity of its bonds, the Advisor believes that an average maturity of five to
ten years is most consistent with the Portfolio's investment objective, and
intends to maintain the Portfolio's average maturity in this range unless and
until market conditions warrant a change.
INVESTMENT RISKS
The Portfolio is subject to interest rate risk. Since the Portfolio's
investments are concentrated in U.S. Government Securities, credit risk is not a
significant consideration for this Portfolio.
ANNUAL ADVISORY FEE
0.60 of 1% on the first $50 million;
0.50 of 1% on the next $200 million;
0.40 of 1% on average daily net assets of excess of $250 million
PORTFOLIO MANAGER
An investment team consisting of advisory personnel of Ziegler Asset
Management has been responsible for managing the assets of the Government
Portfolio since April 1996. Mr. Brian K. Andrew has been the team leader since
May 1997. Mr. Andrew joined Ziegler Asset Management in September 1994 and is a
portfolio manager and member of its Investment Committee. Mr. Andrew previously
served as Executive Vice President of GSC Capital Corp., an investment advisor,
and Assistant Vice President of Bank One Wisconsin Trust Company. Mr. Andrew is
a chartered financial analyst and received a B.S. in Finance from the University
of Minnesota in 1991. The investment team also includes Thomas P. Sancomb
(described above under "Tax-Exempt Portfolios") and Craig Vanucci, a chartered
financial analyst, portfolio manager and member of the Investment Committee of
Ziegler Asset Management
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<PAGE> 13
since August 1994. Mr. Vanucci is also the portfolio manager for the Cash
Reserve Portfolio of Principal Preservation.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
Class A
Shares
-------
<S> <C>
Maximum Front-End Sales Charge (as a percentage of offering 3.5%
price) (1)
Maximum Sales Charge Imposed on Reinvested Dividends None
Contingent Deferred Sales Charge None
Redemption Fees (Ziegler charges $12.00 for each wire None
redemption)
Exchange Fee $5.00
</TABLE>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSET)(2)
<TABLE>
<CAPTION>
Class A
Shares
-------
<S> <C>
Management Fees 0.60%
12b-1 Fees 0.25%
Other Expenses:
Custodian Fees 0.02%
Transfer Agent Fees 0.12%
Other Fees 0.19%
-----
Total Other Expenses 0.33%
Total Fund Operating Expenses 1.18%
</TABLE>
- ---------------------
(1) To determine if you qualify for a lower sales charge, see "Purchasing
Shares" and "Shareholder Services"
(2) The percentages expressing annual operating expenses are based on
amounts actually incurred during the year ended December 31, 1997. Fees
paid the Portfolio for custodian and transfer agent services are
determined on a basis other than a straight percentage of average net
assets. For a discussion of fees associated with these services, see
"Management -The Advisors."
13
<PAGE> 14
EXPENSE EXAMPLE
The following example illustrates the hypothetical expenses that you
would incur on a $1,000 investment in the Government Portfolio over various
periods:
<TABLE>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$47 $71 $98 $173
</TABLE>
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE. FOR MORE
COMPLETE DESCRIPTIONS OF VARIOUS COSTS AND EXPENSES, SEE "MANAGEMENT,"
"PURCHASING SHARES," "REDEEMING SHARES," "EXCHANGING SHARES" AND "SHAREHOLDER
SERVICES."
FINANCIAL HIGHLIGHTS
The following table covers the Government Portfolio for the periods
presented and is based on a share of capital stock outstanding throughout the
applicable period. This information has been audited by Arthur Andersen LLP,
independent accountants. You should read the table in conjunction with the
financial statements and related notes, which are contained in Principal
Preservation's 1997 Annual Report to Shareholders. Copies of the 1997 Annual
Report are available from Ziegler without charge.
14
<PAGE> 15
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF
PERIOD $9.20 $9.64 $ 8.84 $ 9.98 $ 9.64 $ 9.68
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .63 .64 .61 .61 .63 .67
Net realized and
unrealized gains
(losses) on investments .08 (.44) .80 (1.14) .35 (.04)
--- ----- -------- ------- ----- -------
TOTAL FROM INVESTMENT
OPERATIONS .71 .20 1.41 (.53) .98 .63
--- ----- ------- ------- ----- ------
LESS
DISTRIBUTIONS:
Dividends from net
investment income (.63) (.64) (.61) (.61) (.64) (.67)
Distributions from net
realized gains on
investments --- --- --- --- --- ---
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (.63) (.64) (.61) (.61) (.64) (.67)
----- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 9.28 $ 9.20 $ 9.64 $ 8.84 $ 9.98 $ 9.64
====== ====== ====== ====== ====== ======
TOTAL RETURN* 8.1% 2.3% 16.3% (5.4)% 10.3% 6.8%
RATIOS/SUPPLEMENT-
AL DATA:
Net assets, end of
period (to nearest
thousand) $40,683 $44,920 $49,319 $47,324 $54,327 $37,634
Ratio of net expenses
to average net assets 1.1% + 1.1%+ 1.1%+ 1.1% 1.0% 1.0%
Ratio of net investment
income to average net
assets 7.0% + 7.0%+ 6.5%+ 6.6% 6.2% 7.0%
Portfolio turnover rate 78.6% 36.9% 68.2% 106.1% 8.7% 10.0%
<CAPTION>
-----------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 9.10 $ 9.11 $ 8.88 $ 9.11
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .73 .76 .75 .75
Net realized and
unrealized gains
(losses) on investments .58 (.01) .23 (.17)
----- ------- ---- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.31 .75 .98 .58
----- ----- ---- -----
LESS
DISTRIBUTIONS:
Dividends from net
investment income (.73) (.76) (.75) (.75)
Distributions from net
realized gains on
investments --- --- --- (.06)
------- ------- ------- -------
TOTAL DISTRIBUTIONS (.73) (.76) (.75) (.81)
------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 9.68 $ 9.10 $ 9.11 $ 8.88
====== ====== ====== ======
TOTAL RETURN* 15.1% 8.7% 11.5% 6.5%
RATIOS/SUPPLEMENT-
AL DATA:
Net assets, end of
period (to nearest
thousand) $32,737 $29,351 $30,631 $32,950
Ratio of net expenses
to average net assets 1.1% 1.2% 1.2% + 1.2%+
Ratio of net investment
income to average net
assets 8.0% 8.5% 8.4% + 8.3$+
Portfolio turnover rate 62.2% 57.1% 141.8% 36.7%
</TABLE>
* The front-end sales charge for Class A shares is not reflected in total return
as set forth in the table.
+ Reflects a voluntary reimbursement of expenses of 0.04% in each of 1997 and
1996, 0.02% in 1995, 0.1% in 1989, and 0.5% in 1988.
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<PAGE> 16
S&P 100 PLUS PORTFOLIO
INVESTMENT OBJECTIVE
The S&P 100 Plus Portfolio seeks to obtain a total return from
dividends and capital gains which, before deducting the Portfolio's operating
expenses, exceeds the total return of the S&P 100 Index. The S&P 100 Index is
designed to be representative of the stock market as a whole, and consists of
100 common stocks of many large U.S. corporations across a broad spectrum of
industries. The Portfolio attempts to achieve its objective by investing in a
portfolio of common stocks that approximately parallels the composition of the
S&P 100 Index, but it does not intend to replicate the Index at all times.
INVESTMENT POLICIES AND PROGRAM
The S&P 100 Plus Portfolio invests in the common stocks which make up
the S&P 100 Index, in approximately the same proportion as they are held in the
Index. Whenever the Advisor receives notification of a change in the
composition of the Index, the Advisor will make a corresponding change in the
composition of the Portfolio as soon as practicable. At times, the Advisor may
underweight or overweight the Portfolio's investments in certain stocks that it
believes will under perform or outperform the Index. The Advisor will limit
these overweighing/underweighing strategies to not more than 10% of the
Portfolio's total assets. Under normal market conditions, at least 65% of this
Portfolio's total assets will be invested in the common stocks which make up
the Index.
At times, the Portfolio will hold uncommitted cash, which will be
invested in short-term, money market instruments. In order to achieve a return
on such uncommitted cash which approximates the investment performance of the
S&P 100 Index, the Advisor may elect to invest such cash in exchange-traded
futures contracts and options on the S&P 500 Index and/or the S&P 100 Index.
This practice is commonly referred to as "equitizing cash." For a discussion of
these options and futures instruments and the risks associated with their use by
the Portfolios, see "Additional Investment Practices and Risks - Options and
Futures Activities."
INVESTMENT RISKS
Market and Objective Risks. The Portfolio is subject to market risk,
and to objective risk insofar as large capitalization stocks included in the S&P
100 Plus Index may trail returns from the overall stock market for short or even
extended periods.
Overweighting/Underweighting Strategies. Overweighting/underweighting
strategies involve the risk that the Advisor will incorrectly identify those
stocks that will either under perform or outperform the Index. If the Advisor's
judgment proves correct, the Portfolio's performance will improve relative to
the S&P 100 Index. Conversely, if the Advisor's judgment proves incorrect, the
Portfolio's performance will decline relative to the Index.
16
<PAGE> 17
Imperfect Correlation. The Portfolio's performance will not precisely
track that of the S&P 100 Plus Portfolio. In addition to the effects of the
Advisor's overweighting/ underweighting strategies, instruments used by the
Advisor to equitize cash may not perform the same as the Index under all market
conditions. Unlike the Index, the Portfolio must incur transaction costs (e.g.,
brokerage commissions, etc.) in order to maintain a portfolio of securities that
closely mirrors the composition of the Index, and also incurs other fees and
operating expenses.
ANNUAL ADVISORY FEE
0.575 of 1% on the first $20 million;
0.450 of 1% on the next $30 million;
0.400 of 1% on the next $50 million;
0.350 of 1% on the next $400 million;
0.300 of 1% on average daily net assets in excess of $500 million
PORTFOLIO MANAGER
An investment team lead by Jay Ferrara manages the assets of the S&P
100 Plus Portfolio. Mr. Ferrara is Vice President - Portfolio Manager and
Analyst for Ziegler Asset Management and Assistant Vice President of Ziegler. He
has more than 12 years of experience in the mutual fund industry. Prior to
joining 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. Mr. Ferrara's investment team for
the S&P 100 Plus Portfolio includes Marc Dion, a chartered financial analyst and
Vice President and Chief Investment Officer of the Advisor, with more than 10
years of investment experience, and Ralph Patek, also a chartered financial
analyst and Vice President of Ziegler Asset Management with more than 30 years
of investment experience.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
Maximum Front-End Sales Charge 5.25% None
(as a percentage of offering price)(1)
Maximum Sales Charge Imposed on None None
Reinvested Dividends
Contingent Deferred Sales Charge None 5.00%
(as a percentage of original purchase
price or redemption proceeds,
whichever is less)(1)
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
Redemption Fees (Ziegler charges None None
$12.00 for each wire redemption)
Exchange Fee $5.00 $5.00
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES -
AFTER WAIVERS AND REIMBURSEMENTS
(AS A PERCENTAGE OF AVERAGE NET ASSET)(2) CLASS A SHARES CLASS B SHARES
- -------------------------------------- -------------- --------------
<S> <C> <C>
Management Fees (After Waivers)(3) 0.35% 0.35%
12-b-1 Fees 0.25% 1.00%
Other Expenses
Custodian Fees 0.03% 0.03%
Transfer Agent Fees 0.10% 0.10%
Other Fees (After Reimbursement)(3) 0.12% 0.12%
----- -----
Total Other Expenses 0.25% 0.25%
Total Fund Operating Expenses (After 0.85% 1.60%
Waivers and Reimbursements)(3)
</TABLE>
- -----------------------
(1) You may qualify for a lower front-end sales charge on your purchases of
Class A shares. Moreover, the contingent deferred sales charge is
reduced for each year that the Class B shares are owned, and is
eliminated after six years. See "Purchasing Shares" and "Shareholder
Services."
(2) The percentages expressing annual operating expenses are based on
amounts actually incurred during the year ended December 31, 1997, net
of applicable fee waivers and expense reimbursements in effect for the
current year. See note (3). Fees paid by the Portfolio for custodian
and transfer agent services are determined on a basis other than a
straight percentage of average net assets. For a discussion of fees
associated with these services, see "Management -The Advisors."
(3) The Advisor has committed to waive advisory fees and or reimburse
expenses to the S&P 100 Plus Portfolio so that, for fiscal year 1998,
the total operating expenses for Class A and Class B shares of the
Portfolio will not exceed 0.85% and 1.60% of the
18
<PAGE> 19
Portfolio's average daily net assets, respectively. Without giving
effect to such waivers and reimbursements, "Management Fees," "Other
Fees," and "Total Fund Operating Expenses" as a percentage of the
Portfolio's average daily net assets would be: 0.44%, 0.12% and 0.94%,
respectively, for Class A shares, and 0.44%, 0.12% and 1.69%,
respectively, for Class B shares.
EXPENSE EXAMPLE
The following example illustrates the hypothetical expenses that you
would incur on a $1,000 investment over various periods:
<TABLE>
<CAPTION>
CLASS B SHARES
WITHOUT
CLASS A SHARES CLASS B SHARES REDEMPTION
-------------- -------------- ----------
<S> <C> <C> <C>
After 1 year $61 $66 $16
AFTER 3 YEARS $78 $80 $50
AFTER 5 YEARS $97 $97 $87
AFTER 10 YEARS $152 $170* $170*
</TABLE>
- --------------------
* Class B shares automatically convert to Class A shares after eight
years.
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A
REPRESENTATION OF THE PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR
FUTURE. FOR MORE COMPLETE DESCRIPTIONS OF VARIOUS COSTS AND EXPENSES, SEE
"MANAGEMENT," "PURCHASING SHARES," "REDEEMING SHARES," "EXCHANGING SHARES" AND
"SHAREHOLDER SERVICES."
FINANCIAL HIGHLIGHTS
The following table covers the S&P 100 Plus Portfolio for the periods
presented. The information is based on a Class A share outstanding throughout
the applicable period. This information has been audited by Arthur Andersen
LLP, independent accountants. You should read the table in conjunction with the
financial statements and related notes, which are contained in Principal
Preservation's 1997 Annual Report to Shareholders. Copies of the 1997 Annual
Report are available from the Distributor without charge. Since Class B shares
are first being offered by this Prospectus, no financial highlights are
presented for Class B shares.
19
<PAGE> 20
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF
PERIOD $22.08 $19.53 $14.95 $ 15.04 $ 14.01 $ 14.22
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .26 .29 .25 .25 .21 .24
Net realized and
unrealized gains
(losses) on investments 5.63 4.07 5.21 (.09) 1.14 .48
---- ------ ------ ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS 5.89 4.36 5.46 .16 1.35 .72
---- ------ ------ ------- ------- -------
LESS
DISTRIBUTIONS:
Dividends from net
investment income (.26) (.29) (.25) (.25) (.21) (.24)
Distributions from net
realized gains on
investments (.65) (1.52) (.63) --- (.11) (.69)
Distributions in excess
of net realized gains (.02) -- -- -- -- --
---- ------ ------ ------- ------- -------
TOTAL DISTRIBUTIONS (.93) (1.81) (.88) (.25) (.32) (.93)
---- ------ ------ ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $27.04 $22.08 $19.53 $ 14.95 $ 15.04 $14.01
====== ====== ====== ======= ======= =======
TOTAL RETURN* 26.8% 22.4% 36.7% 1.1% 9.7% 5.2%
RATIOS/
SUPPLEMENTAL
DATA:
Net assets, end of
period (to nearest
thousand) $105,738 $77,517 $57,062 $40,034 $38,944 $30,025
Ratio of net expenses
to average net assets 0.9%+ 1.0%+ 1.2% 1.2% 1.2% 1.3%
Ratio of net investment
income to average net
assets 1.0%+ 1.4%+ 1.4% 1.7% 1.4% 1.7
Portfolio turnover rate 17.0% 8.0% 3.5% 1.0% 2.2% 8.5%
Average commission $0.0235 $0.0348 ---- ------- ------- -------
paid per share+
<CAPTION>
-------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF
PERIOD $11.60 $12.27 $10.11 $ 9.62
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .27 .28 .26 .26
Net realized and
unrealized gains
(losses) on investments 2.93 (.67) 2.17 1.37
----- ------- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 3.20 (.39) 2.43 1.63
----- ------- ---- -----
LESS
DISTRIBUTIONS:
Dividends from net
investment income (.27) (.28) (.26) (.26)
Distributions from net
realized gains on
investments (.31) --- (.01) (.88)
Distributions in excess
of net realized gains -- -- --- --
------ -------- ------- -------
TOTAL DISTRIBUTIONS (.58) (.28) (.27) (1.14)
------ ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $14.22 $11.60 $12.27 $10.11
====== ====== ====== ======
TOTAL RETURN* 27.8% (3.2)% 24.3% 17.1%
RATIOS/
SUPPLEMENTAL
DATA:
Net assets, end of
period (to nearest
thousand) $27,420 $20,413 $20,811 $16,960
Ratio of net expenses
to average net assets 1.3% 1.3%+ 1.3% + 1.4%+
Ratio of net investment
income to average net
assets 2.0% 2.4%+ 2.3% + 2.5%+
Portfolio turnover rate 3.1% 1.9% 3.0% 37.5%
Average commission --- --- --- ---
paid per share+
</TABLE>
- --------------------
* The front-end sales charge for Class A shares is not reflected in total return
as set forth in the table.
+ Reflects a voluntary reimbursement of expenses of 0.11% in 1997, 0.01%
in 1996, 0.20% in 1990, 0.40% in 1989, and 0.80% in 1988.
+ Average commission rate paid per share for purchases and sales of
securities during this period. Presentation of the rate is required
only for fiscal years beginning after September 1, 1995.
20
<PAGE> 21
DIVIDEND ACHIEVERS PORTFOLIO
INVESTMENT OBJECTIVE
The Dividend Achievers Portfolio seeks to obtain capital appreciation
and income by investing in a portfolio of common stocks of companies that have
achieved a superior record of dividend growth.
INVESTMENT POLICIES AND PROGRAM
The Portfolio invests primarily in common stocks of companies which:
(a) have market capitalizations in excess of $2 billion; (b) have increased
their payment of cash dividends annually for at least four of the past five
calendar years; and (c) have a five-year average dividend growth rate which
exceeds that of the S&P 500 Index by at least 20%. As of December 31, 1997,
approximately 210 companies traded on the New York or American Stock Exchange or
listed on the Nasdaq Stock Market met these criteria. Such companies typically
have strong balance sheets. In addition to providing an income stream from
dividend payments, the Advisor believes that the market values of these stocks
will increase over time, because anticipated future dividend growth typically is
reflected in increased market prices.
INVESTMENT RISKS
Market and Objective Risks. The Portfolio is subject to market risk,
and to objective risk insofar as the returns from mid to large capitalization
stocks of the type in which the Portfolio invests, or those within its specified
universe in particular, may trail returns as compared to the overall stock
market.
Stock Selection Risk. The Portfolio will not hold all of the stocks
that meet its investment criteria. Rather, the Advisor will select from that
universe the stocks that it believes will best help the Portfolio to reach its
objective. Accordingly, the Portfolio's performance may be better or worse than
the performance of the universe of stocks which meet the Portfolio's investment
criteria.
ANNUAL ADVISORY FEE
0.75 of 1% on the first $250 million in net assets;
0.70 of 1% on the next $250 million;
0.65 of 1% on average daily net assets in excess of $500 million.
PORTFOLIO MANAGER
Since May 1, 1998, the Portfolio has been managed jointly by Jay
Ferrara and Marc Dion, each of whom also participates in the management of the
S&P 100 Plus Portfolio. See "S&P 100 Plus Portfolio - Portfolio Manager."
21
<PAGE> 22
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
<S> <C> <C>
Maximum Front-End Sales Charge 5.25% None
(as a percentage of offering price)(1)
Maximum Sales Charge Imposed on None None
Reinvested Dividends
Contingent Deferred Sales Charge None 5.00%
(as a percentage of original purchase
price or redemption proceeds,
whichever is less)(1)
Redemption Fees (Ziegler charges None None
$12.00 for each wire redemption)
Exchange Fee $5.00 $5.00
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES -
AFTER WAIVERS AND REIMBURSEMENTS
(AS A PERCENTAGE OF AVERAGE NET ASSET)(2) CLASS A SHARES CLASS B SHARES
- -------------------------------------- -------------- --------------
<S> <C> <C>
Management Fees (After Waivers)(3) 0.72% 0.72%
12b-1 Fees 0.25% 1.00%
Other Expenses
Custodian Fees 0.03% 0.03%
Transfer Agent Fees 0.11% 0.11%
Other Fees (After Reimbursement)(3) 0.19% 0.19%
----- -----
Total Other Expenses 0.33% 0.33%
Total Fund Operating Expenses (After 1.30% 2.05%
Waivers and Reimbursements)(3)
</TABLE>
<PAGE> 23
- -----------------------
(1) You may qualify for a lower front-end sales charge on your purchases of
Class A shares. Moreover, the contingent deferred sales charge is
reduced for each year that the Class B shares are owned, and is
eliminated after six years. See "Purchasing Shares" and "Shareholder
Services."
(2) The percentages expressing annual operating expenses are based on
amounts actually incurred during the year ended December 31, 1997, net
of applicable fee waivers and expense reimbursements in effect for the
current year. See note (3). Fees paid by the Portfolio for custodian
and transfer agent services are determined on a basis other than a
straight percentage of average net assets. For a discussion of fees
associated with these services, see "Management -The Advisors."
(3) The Advisor has committed to waive advisory fees with respect to the
Portfolio so that for fiscal year 1998 the total operating expenses
for Class A and Class B shares of the Portfolio will not exceed 1.30%
and 2.05% of the Portfolio's average daily net assets, respectively.
Without giving effect to such waivers and reimbursements, "Management
Fees," "Other Fees," and "Total Fund Operating Expenses" as a
percentage of the Portfolio's average daily net assets would be:
0.75%, 0.19% and 1.33%, respectively, for Class A shares, and 0.75%,
0.19% and 2.08%, respectively, for Class B shares.
EXPENSE EXAMPLE
The following example illustrates the hypothetical expenses that you
would incur on a $1,000 investment over various periods:
<TABLE>
<CAPTION>
CLASS B SHARES
WITHOUT
CLASS A SHARES CLASS B SHARES REDEMPTION
<S> <C> <C> <C>
After 1 year $65 $71 $21
AFTER 3 YEARS $92 $94 $64
AFTER 5 YEARS $120 $120 $110
AFTER 10 YEARS $201 $218* $218*
</TABLE>
- --------------------
* CLASS B SHARES AUTOMATICALLY CONVERT TO CLASS A SHARES AFTER EIGHT
YEARS.
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A
REPRESENTATION OF THE PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR
FUTURE. FOR MORE COMPLETE DESCRIPTIONS OF VARIOUS COSTS AND EXPENSES, SEE
"MANAGEMENT," "PURCHASING SHARES," "REDEEMING SHARES," "EXCHANGING SHARES" AND
"SHAREHOLDER SERVICES."
23
<PAGE> 24
FINANCIAL HIGHLIGHTS
The following table covers the Dividend Achievers Portfolio for the
periods presented. The information is based on a Class A share outstanding
throughout the applicable period. The information has been audited by Arthur
Andersen LLP, independent accountants. You should read the table in
conjunction with the financial statements and related notes, which are
contained in Principal Preservation's 1997 Annual Report to Shareholders.
Copies of the 1997 Annual Report are available from the Distributor without
charge. Since Class B shares are first being offered by this Prospectus, no
financial highlights are presented for Class B shares.
24
<PAGE> 25
<TABLE>
<CAPTION>
----------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF
PERIOD $20.01 $16.97 $13.24 $13.40 $14.25 $14.84
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .13 .14 .18 .18 .14 .14
Net realized and
unrealized gains
(losses) on investments 5.43 3.54 3.99 (.02 ) (.85) .31
----- ----- ------- ------- ------- --------
TOTAL FROM INVESTMENT
OPERATIONS 5.56 3.68 4.17 .16 (.71) .45
----- ----- ------- ------- ------- --------
LESS
DISTRIBUTIONS:
Dividends from net
investment income (.13) (.14) (.18) (.18 ) (.14) (.14 )
Distributions from net
realized gains on
investments (.31) (.50) (.26) (.14 ) --- (.90 )
----- ----- ------- ------- ------- --------
TOTAL DISTRIBUTIONS (.44) (.64) (.44) (.32) (.14) (1.04)
----- ----- ------- ------- ------- --------
NET ASSET VALUE,
END OF PERIOD $25.13 $20.01 $16.97 $13.24 $13.40 $14.25
===== ====== ====== ======= ======== ========
TOTAL RETURN* 27.9% 21.8% 31.7% 1.2% (5.0)% 3.1%
RATIOS/
SUPPLEMENTAL
DATA:
Net assets, end of
period (to nearest
thousand) $39,565 $30,504 $25,393 $20,231 $24,928 $27,020
Ratio of net expenses
to average net assets 1.2% + 1.2%+ 1.3%+ 1.5% 1.3%+ 1.2% +
Ratio of net investment
income to average net
assets 0.6% + 0.8%+ 1.2%+ 1.3% 1.0%+ 1.0%+
Portfolio turnover rate 11.9% 13.1% 28.2% 36.5% 92.7% 83.0%
Average commission $0.0484 $0.0609 --- --- --- ---
paid per share+
<CAPTION>
---------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE,
BEGINNING OF
PERIOD $11.50 $11.65 $10.00 $ 8.99
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income .25 .25 .28 .28
Net realized and
unrealized gains
(losses) on investments 4.14 (.15) 1.65 1.06
------ ------- ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 4.39 .10 1.93 1.34
------ ------ ------ ------
LESS
DISTRIBUTIONS:
Dividends from net
investment income (.25) (.25) (.28) (.27
Distributions from net
realized gains on
investments (.80) --- --- (.06)
------- ------- ------- ------
TOTAL DISTRIBUTIONS (1.05) (.25) (.28) (.33)
-------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $14.84 $11.50 $11.65 $10.00
====== ====== ====== ======
TOTAL RETURN* 38.5% 1.0% 19.5% 15.0%
RATIOS/
SUPPLEMENTAL
DATA:
Net assets, end of
period (to nearest
thousand) $18,202 $11,468 $12,750 $6,854
Ratio of net expenses
to average net assets 1.2%+ 1.2%+ 1.2% + 1.2%+
Ratio of net investment
income to average net
assets 1.8%+ 2.3%+ 2.6% + 2.9%+
Portfolio turnover rate 96.5% 47.7% 30.9% 10.1%
Average commission --- --- -- ---
paid per share+
</TABLE>
- --------------------
* The front-end sales charge for Class A shares is not reflected in total return
as set forth in the table.
+ Reflects voluntary reimbursements of expenses as shown below:
1997 - 0.1% 1991 - 0.2%
1996 - 0.1% 1990 - 0.5%
1995 - 0.2% 1989 - 0.7%
1993 - 0.1% 1988 - 1.7%
1992 - 0.1%
+ Average commission rate paid per share for purchases and sales of
securities during this period. Presentation of the rate is required
only for fiscal years beginning after September 1, 1995.
25
<PAGE> 26
SELECT VALUE PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio seeks to obtain maximum capital appreciation by investing
primarily in common stocks that the Advisors consider undervalued relative to
earnings, book value, or potential earnings growth.
INVESTMENT POLICIES AND PROGRAM
The Portfolio pursues its investment objective generally by investing
in smaller-sized companies having market capitalizations ranging from $400
million to $2 billion, although the Portfolio is not restricted to investments
in companies of any particular size. Under normal market conditions, at least
65% of the Portfolio's total assets will be invested in common stocks of
domestic issuers. The Portfolio uses a value-oriented style of investing,
emphasizing companies with relatively low price/earnings ratios, reasonable
financial strength and strong cash flows. These companies tend to be out of
favor with investors.
The Portfolio may invest up to 35% of its total assets in high-quality,
fixed-income securities and short-term investments. High-quality, fixed-income
securities in which the Portfolio may invest are limited to those securities
which are rated at the time of purchase within the two highest rating categories
assigned by Moody's or S&P, or securities which are unrated, provided that such
securities are judged by the Advisors, at the time of purchase, to be of
comparable quality to securities rated within such two highest categories.
The Portfolio may also invest up to 5% of its total assets directly in
securities of foreign issuers not publicly traded in the United States, and may
invest without regard to this restriction in securities of foreign issuers
represented by American Depository Receipts (ADRs). ADRs are receipts issued by
an American bank or trust company and traded on national securities exchange
evidencing ownership of the underlying foreign securities, and equity securities
issued by Canadian issuers.
INVESTMENT RISKS
Market and Objective Risk. The Portfolio is subject to market risk, and
also to objective risk insofar as the returns from the types of stocks held by
the Portfolio (attractively priced or "value" stocks) may trail returns from the
overall stock market. As a group, value stocks tend to go through cycles of
relative under performance and out performance in comparison to common stocks
generally. Also, stocks of smaller to medium sized companies, such as those in
which the Select Value Portfolio invests, historically have experienced more
price volatility than larger capitalization stocks. The value of the Portfolio's
investments therefore may tend to increase and decrease substantially more than
the stock market in general, as measured by broad based indices such as the S&P
500 Index.
26
<PAGE> 27
Stock Selection Risk. The value-oriented style of investing used by the
Portfolio depends on the ability of the Advisors to select stocks that perform
well. The Portfolio is subject to the risk that the Advisors' stock selections
may not achieve the desired appreciation in value, or may even decline in value.
WHO SHOULD INVEST IN THE PORTFOLIO
The Select Value Portfolio is designed for long-term investors who
characterize their investment temperament as "moderately aggressive," and is not
appropriate for market timers or other short-term investors. Value funds
generally emphasize companies that - considering their assets and earnings
history - have relatively low stock prices. Such funds are appropriate for
investors who want the potential for capital gains but are less tolerant of the
share price fluctuations found in more aggressive investments, for example,
growth funds.
ANNUAL ADVISORY FEE
0.75 of 1% on the first $250 million;
0.65 of 1% on average daily net assets in excess of $250 million.
Sub-Advisory fees are paid by the Advisor to Skyline at the following
rates:
0.375 of 1% of the first $250 million of the Portfolio's average daily
net assets;
0.350 of 1% on the next $250 million;
0.325 of 1% of average daily net assets in excess of $500 million.
PORTFOLIO MANAGER
Investment decisions for the Select Value Portfolio are made by a team
of investment professionals and analysts. The team is headed by Mr. Kenneth
S. Kailin. Mr. Kailin is an officer of Skyline who joined the firm's predecessor
in 1987. Mr. Kailin also serves as portfolio manager for another registered
investment company which has an investment objective, policies and restrictions
similar to those of the Select Value Portfolio. Mr. Kailin's investment team
includes Mr. William M. Dutton, President and Chief Executive Officer of
Skyline.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
Maximum Front-End Sales Charge 5.25% None
(as a percentage of offering price)(1)
Maximum Sales Charge Imposed on None None
Reinvested Dividends
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
Contingent Deferred Sales Charge None 5.00%
(as a percentage of original purchase
price or redemption proceeds,
whichever is less)(1)
Redemption Fees (Ziegler charges None None
$12.00 for each wire redemption)
Exchange Fee $5.00 $5.00
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES -
AFTER WAIVERS AND REIMBURSEMENTS
(AS A PERCENTAGE OF AVERAGE NET ASSET)(2) CLASS A SHARES CLASS B SHARES
- -------------------------------------- -------------- --------------
<S> <C> <C>
Management Fees (After Waivers)(3) 0.37% 0.37%
12b-1 Fees 0.25% 1.00%
Other Expenses
Custodian Fees 0.03% 0.03%
Transfer Agent Fees 0.12% 0.12%
Other Fees (After Reimbursement)(3) 0.53% 0.53%
----- -----
Total Other Expenses 0.68% 0.68%
Total Fund Operating Expenses (After 1.30% 2.05%
Waivers and Reimbursements)(3)
</TABLE>
- -----------------------
(1) You may qualify for a lower front-end sales charge on your purchases of
Class A shares. Moreover, the contingent deferred sales charge is
reduced for each year that the Class B shares are owned, and is
eliminated after six years. See "Purchasing Shares" and "Shareholder
Services."
(2) The percentages expressing annual operating expenses are based on
amounts actually incurred during the year ended December 31, 1997, net
of applicable fee waivers and expense reimbursements in effect for the
current year. See note (3). Fees paid by the Portfolio for custodian
and transfer agent services are determined on a basis other than a
straight percentage of average net assets. For a discussion of fees
associated with these services, see "Management-The Advisors."
28
<PAGE> 29
(3) The Advisor has committed to waive advisory fees and/or reimburse
expenses to the Select Value Portfolio so that for fiscal year 1998
the total operating expenses for Class A and Class B shares of the
Portfolio will not exceed 1.30% and 2.05% of the Portfolio's average
daily net assets, respectively. Without giving effect to such
waivers and reimbursements, "Management Fees," "Other Fees," and
"Total Fund Operating Expenses" as a percentage of the Portfolio's
average daily net assets would be: 0.75%, 0.59% and 1.74%,
respectively, for Class A shares, and 0.75%, 0.59% and 2.49%,
respectively, for Class B shares.
EXPENSE EXAMPLE
The following example illustrates the hypothetical expenses that you
would incur on a $1,000 investment over various periods:
<TABLE>
<CAPTION>
CLASS B SHARES
WITHOUT
CLASS A SHARES CLASS B SHARES REDEMPTION
-------------- --------------- ----------
<S> <C> <C> <C>
After 1 year $65 $71 $21
After 3 years $92 $94 $64
After 5 years $120 $120 $110
After 10 years $201 $218* $218*
</TABLE>
- --------------------
* Class B shares automatically convert to Class A shares after eight
years.
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A
REPRESENTATION OF THE PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR
FUTURE. FOR MORE COMPLETE DESCRIPTIONS OF VARIOUS COSTS AND EXPENSES, SEE
"MANAGEMENT," "PURCHASING SHARES," "REDEEMING SHARES," "EXCHANGING SHARES" AND
"SHAREHOLDER SERVICES."
FINANCIAL HIGHLIGHTS
The following table covers the Select Value Portfolio for the periods
presented. The information is based on a Class A share outstanding throughout
the applicable period. The information has been audited by Arthur Andersen
LLP, independent accountants. You should read the table in conjunction with
the financial statements and related notes, which are contained in Principal
Preservation's 1997 Annual Report to Shareholders. Copies of the 1997 Annual
Report are available from the Distributor without charge. Since Class B shares
are first being offered by this Prospectus, no financial highlights are
presented for Class B shares.
29
<PAGE> 30
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
AUGUST 23, 1994
FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF OPERATIONS)
----------------------------------------------- TO DECEMBER 31, 1994
1997 1996 1995 ---------------------
---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.97 $10.21 $ 9.03 $9.55
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .01 .04 .14 .04
Net realized and unrealized gains (losses)
on investments 2.93 2.68 1.73 (.51)
---- ----- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.94 2.72 1.87 (.47)
---- ----- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) (.04) (.14) (.03)
Distributions from net realized gains on investments (1.83) (1.92) (.43) (.01)
Distributions in excess of net realized gains on
investments -- -- (.12) --
Book return of capital -- -- -- (.01)
----- ----- ------- ------
TOTAL DISTRIBUTIONS (1.84) (1.96) (.69) (.05)
------ ------ ------- ------
NET ASSET VALUE, END OF PERIOD $12.07 $10.97 $10.21 $ 9.03
====== ====== ====== ======
TOTAL RETURN** 27.2% 26.7% 20.8% (5.0)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $8,497 $4,829 $3,445 $1,935
Ratio of net expenses to average net assets 1.1%+ 1.0%+ 0.8%+ 0.8%*+
Ratio of net investment income to average
net assets 0.1%+ 0.3%+ 1.4%+ 1.1%*+
Portfolio turnover rate 82.5% 122.2% 124.3% 20.2%
Average commission paid per share+ $0.0467 $0.0611 --- ---
</TABLE>
- --------------------
* Annualized.
** The front-end sales charge for Class A shares is not reflected in total
return as set forth in the table.
+ Reflects a voluntary reimbursement of expenses of 1.0% in 1997, 1.4% in
1996, 2.5% in 1995 and 0.4% in 1994.
+ Average commission rate paid per share for purchases and sales of securities
during this period. Presentation of the rate is required only for fiscal
years beginning after September 1, 1995.
30
<PAGE> 31
PSE TECH 100 INDEX PORTFOLIO
INVESTMENT OBJECTIVE
The PSE Tech 100 Index Portfolio seeks to obtain a total return, before
operating expenses of the Portfolio are deducted, that replicates the total
return of the Pacific Stock Exchange Technology Stock Index (the "PSE Technology
Index"). The PSE Technology Index, which consists of common stocks of 100
technology companies, is widely recognized as a benchmark for the technology
sector of the United States stock market.
INVESTMENT POLICIES
The Portfolio seeks 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 in the Index. The Portfolio attempts to
remain fully invested in common stocks. Under normal market conditions, 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
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.
From time to time up to 5% of the Portfolio's assets may be held in
cash, cash equivalents or certain short-term, fixed-income securities. These
investments will not perform the same as the PSE Technology Index. In order to
help the performance of the Portfolio more closely replicate the performance of
the PSE Technology Index, the Portfolio may equitize its cash position by
investing up to 20% of its assets in exchange-traded index futures contracts and
index options. For a more detailed explanation of these instruments and certain
risks associated with their use, see "Additional Investment Practices and Risks
- - Options and Futures Activities."
INVESTMENT RISKS
Market and Objective Risk. The PSE Technology Index is subject to
market risk. Also, the technology market sector (in which the Portfolio focuses
its investments) increases and decreases in favor with the investing public
relative to the stock market generally. As a result, the Portfolio's share price
is subject to volatility. Moreover, because the PSE Technology Index is
price-weighted, its performance, and the corresponding performance of the
Portfolio, will be more sensitive to price movements in higher-priced stocks
than in lower-priced stocks. Additionally, the PSE Technology Index incudes
common stocks of many small to medium sized companies, which historically have
been more volatile and less liquid than stocks of larger companies. For these
reasons, the Portfolio may experience more volatility and greater
31
<PAGE> 32
price swings as compared to the stock market generally. See "Additional
Investment Practices and Risks."
Correlation Risk. Although the Advisor will attempt to replicate the
performance of the PSE Technology Index, there can be no assurance that it will
be able to do so in all market conditions. For example, the index options and
futures used by the Advisor to equitize the Portfolio's cash positions and
short-term investments may not precisely track the performance of the PSE
Technology Index. Also, the Portfolio will incur brokerage commissions and other
transaction costs in order to maintain investments that mirror the PSE
Technology Index, and will incur advisory and other service fees and operating
costs and expenses that will reduce the total return of the Portfolio as
compared to that of the PSE Technology Index.
ANNUAL ADVISORY FEE
0.50 of 1% on the first $50 million of the Portfolio's average daily
net assets;
0.30 of 1% on the next $200 million;
0.25 of 1% on the next $250 million;
0.20 of 1% on average daily net assets in excess of $500 million
PORTFOLIO MANAGER
Mr. Jay Ferrara has been the portfolio manager for the PSE Tech 100
Index Portfolio since its inception June, 1996. For information about
Mr. Ferrara, see "S&P 100 Plus Portfolio - Portfolio Manager."
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
Maximum Front-End Sales Charge 5.25% None
(as a percentage of offering price)(1)
Maximum Sales Charge Imposed on None None
Reinvested Dividends
Contingent Deferred Sales Charge None 5.00%
(as a percentage of original purchase
price or redemption proceeds,
whichever is less)(1)
Redemption Fees (Ziegler charges None None
$12.00 for each wire redemption)
Exchange Fee $5.00 $5.00
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES -
AFTER WAIVERS AND REIMBURSEMENTS
(AS A PERCENTAGE OF AVERAGE NET ASSET)(2) CLASS A SHARES CLASS B SHARES
- -------------------------------------- -------------- --------------
<S> <C> <C>
Management Fees (After Waivers)(3) 0.00% 0.00%
12b-1 Fees 0.25% 1.00%
Other Expenses
Custodian Fees 0.08% 0.08%
Transfer Agent Fees 0.17% 0.17%
Other Fees (After Reimbursement)(3) 0.20% 0.20%
----- -----
Total Other Expenses 0.45% 0.45%
Total Fund Operating Expenses (After 0.70% 1.45%
Waivers and Reimbursements)(3)
</TABLE>
- -----------------------
(1) You may qualify for a lower front-end sales charge on your purchases of
Class A shares. Moreover, the contingent deferred sales charge is
reduced for each year that the Class B shares are owned, and is
eliminated after six years. See "Purchasing Shares" and "Shareholder
Services."
(2) The percentages expressing annual operating expenses are based on
amounts actually incurred during the year ended December 31, 1997, net
of applicable fee waivers and expense reimbursements in effect for the
current year. See note (3). Fees paid by the Portfolio for custodian
and transfer agent services are determined on a basis other than a
straight percentage of average net assets. For a discussion of fees
associated with these services, see "Management-The Advisors."
(3) The Advisor has committed to waive advisory fees and/or reimburse
expenses to the Portfolio so that for fiscal year 1998 the total
operating expenses for Class A and Class B shares of the Portfolio will
not exceed 0.70% and 1.45%, respectively, of the Portfolio's average
daily net assets. Without giving effect to such waivers and
reimbursements, "Management Fees," "Other Fees," and "Total Fund
Operating Expenses" as a percentage of the Portfolio's average daily
net assets would be: 0.50%, 0.22% and 1.22%, respectively, for Class A
shares and 0.50%, 0.22% and 1.97%, respectively, for Class B shares.
33
<PAGE> 34
EXPENSE EXAMPLE
The following example illustrates the hypothetical expenses that you
would incur on a $1,000 investment over various periods:
<TABLE>
<CAPTION>
CLASS B SHARES
WITHOUT
CLASS A SHARES CLASS B SHARES REDEMPTION
-------------- ------------- --------------
<S> <C> <C> <C>
After 1 year $59 $65 $15
After 3 years $74 $76 $46
After 5 years $89 $89 $79
After 10 years $135 $153* $153*
</TABLE>
- --------------------
* Class B shares automatically convert to Class A shares after eight
years.
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A
REPRESENTATION OF THE PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR
FUTURE. FOR MORE COMPLETE DESCRIPTIONS OF VARIOUS COSTS AND EXPENSES, SEE
"MANAGEMENT," "PURCHASING SHARES," "REDEEMING SHARES," "EXCHANGING SHARES" AND
"SHAREHOLDER SERVICES."
FINANCIAL HIGHLIGHTS
The following table covers the PSE Tech 100 Index Portfolio for the
periods presented. The information is based on a Class A share outstanding
throughout the applicable period. The information has been audited by Arthur
Andersen LLP, independent accountants. You should read the table in conjunction
with the financial statements and related notes, which are contained in
Principal Preservation's 1997 Annual Report to Shareholders. Copies of the 1997
Annual Report are available from the Distributor without charge. Since Class B
shares are first being offered by this Prospectus, no financial highlights are
presented for Class B shares.
34
<PAGE> 35
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JUNE 10, 1996
(COMMENCEMENT
FOR YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ------------------
<S> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.76 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment Income .04 .03
Net realized and unrealized gains on investments 2.04 1.03
---- ----
TOTAL FROM INVESTMENT OPERATIONS 2.08 1.06
---- ----
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.03)
Distributions from net realized gains on investments (.38) (.24)
Distributions in excess of net realized gains (.03) (.03)
---- ----
TOTAL DISTRIBUTIONS (.45) (.30)
---- ----
NET ASSET VALUE, END OF PERIOD $12.39 $10.76
====== ======
TOTAL RETURN** 19.4% 10.7%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (to nearest thousand) $27,144 $6,004
Ratio of net expenses to average net asset 0.2%+ 0.0%+
Ratio of net investment income to average net assets 0.3%+ 0.7%+
Portfolio turnover rate 22.0% 3.0%
Average commission paid per share $0.0544 $0.0634
</TABLE>
- -----------------------------------
* Annualized.
** The front-end sales charge for Class A shares is not reflected in
total return as set forth in the table.
+ Reflects a voluntary reimbursement of expenses of 1.1% in 1997 and
3.3% in 1996.
35
<PAGE> 36
ADDITIONAL INVESTMENT PRACTICES AND RISKS
DEBT AND OTHER FIXED INCOME SECURITIES
A bond's yield reflects the fixed annual interest as a percent of its
current price. This price (the bond's market value) must increase or decrease in
order to adjust the bond's yield to current interest rate levels. Therefore,
bond prices generally move in the opposite direction of interest rates. As a
result, interest rate fluctuations will affect the net asset value of the fixed
income securities held by a Portfolio, but will not affect the income received
by the Portfolio from its existing fixed income securities. However, changes in
prevailing interest rates will affect the yield on shares subsequently issued by
the Portfolio. In addition, such fluctuations would affect the income received
on any variable rate demand notes or other variable rate securities held by the
Portfolio.
Movements in interest rates typically have a greater effect on the
prices of longer-term bonds than those with shorter maturities. The following
table illustrates the effect of a 1% change in interest rates on a $1,000 bond
with a 7% coupon.
<TABLE>
<CAPTION>
PRINCIPAL VALUE IF RATES:
-------------------------
MATURITY INCREASE 1% DECREASE 1%
-------- ----------- -----------
<S> <C> <C> <C>
Intermediate Bond 5 years $959 $1,043
Long-Term Bond 20 years $901 $1,116
</TABLE>
The Advisors will manage the debt securities in the Tax-Exempt and
Government Portfolios according to their assessment of the interest rate
outlook. During periods of rising interest rates, the Advisors will likely
attempt to shorten the average maturity of the Portfolio to cushion the effect
of falling bond prices on the Portfolio's share prices. When interest rates are
falling and bond prices are increasing, on the other hand, the Advisors will
likely seek to lengthen the average maturity.
STOCK INDEXING
Index funds, such as the S&P 100 Plus and PSE Tech 100 Index
Portfolios, are "passively managed," meaning they try to match, as closely as
possible, the performance of a target securities index by holding each stock
found in the index in roughly the same proportion as represented in the index
itself. For example, if 5% of the S&P 100 Index were made up of the assets of a
specific company, the S&P 100 Plus Portfolio would invest 5% of its assets in
that company.
Indexing appeals to many investors for a number of reasons, including
its simplicity (indexing is a straightforward marketing-matching strategy);
diversification (indices generally cover a wide variety of companies and
industries); relative performance predictability (an
36
<PAGE> 37
index fund is expected to move in the same direction - up or down - as its
target index); and comparatively low cost (index funds do not have many of the
expenses of an actively-managed mutual fund, such as research and company
visits). Also, assuming the composition of the relevant index remains fairly
stable, index funds may experience lower portfolio turnover rates, which would
result in reduced transaction costs (brokerage commissions, etc.) and capital
gains. With respect to the PSE Tech 100 Index Portfolio, investors should bear
in mind that this latter benefit may not hold true. The PSE Technology Index has
experienced rather rapid changeover at times, as a result of the volatility of
the technology industry generally and of specific companies included in the
Index from time to time.
The performance of an index fund generally will trail the performance
of the index it attempts to replicate. This is because the mutual fund and its
investors incur operating costs and expenses that are not shared by an index.
For example, investors may pay sales charges which result in less than all of
the price they pay for their mutual fund shares being invested in common stocks
of companies included in the index. With respect to the S&P 100 Index and PSE
Tech 100 Index Portfolios, investors pay a front-end sales charge for Class A
shares at the time of purchase, and a contingent deferred sales charge for Class
B shares at the time of redemption (if redeemed less than six years after the
date of purchase). These sales charges reduce the total return on the
shareholder's mutual fund shares, as compared to a direct investment in stocks.
Additionally, when a mutual fund invests the cash proceeds it receives
from investors in common stocks of companies included in the index, the mutual
fund must pay brokerage commissions, which further reduce the amount invested.
As the composition of the index changes, the mutual fund must make corresponding
adjustments in its holdings, which gives rise to additional brokerage
commissions. Finally, mutual funds incur other operating expenses, including
investment management fees, custodial and transfer agent fees, legal and
accounting fees and possibly 12b-1 service and distribution fees, all of which
reduce the mutual fund's total return. No such fees affect the total return of
the index.
Finally, because of liquidity needs and other constraints under which
mutual funds operate, index funds generally cannot invest their assets so that
they correlate 100% at all times with the common stocks of the index. Although
many index funds attempt to use options and futures strategies to generate
returns on these assets which replicate the return on the index, these
strategies are imperfect and give rise to additional transaction costs.
For these reasons, investors should expect that the performance of an
index mutual fund will lag that of the index it attempts to replicate. In
recognition of this disparity, the S&P 100 Plus and PSE Tech 100 Index
Portfolios compare their gross returns (returns before deducting the
Portfolios' operating expenses) to their respective benchmark indices.
S&P 100 Index. The S&P 100 Index was created by the Chicago Board
Options Exchange (CBOE) in 1983 with stocks selected from the optionable
equities traded on that exchange. The 100 stocks on the Index include many
large U.S. corporations. General
37
<PAGE> 38
Electric Company, Exxon Corporation, Coca-Cola Company, Microsoft Corporation
and Merck & Co., Inc. are five of the largest components of the Index. A
complete list of the stocks comprising the S&P 100 Index at May 29, 1998 is
included as Appendix A to this Prospectus.
The S&P 100 Index was designed to track closely the S&P 500 Index,
which is in turn designed to be representative of the stock market as a whole.
There have been some significant variances in the correlation between the S&P
100 and S&P 500 Indices, and between the S&P 500 Index and the broad market for
large capitalization common stocks. There can be no assurance that any index
will correlate precisely to the stock market as a whole over any specific period
of time, or that the S&P 100 Plus Portfolio's performance will parallel that of
either of these indices or the stock market generally.
The S&P 100 Plus Portfolio is not sponsored, endorsed, sold or promoted
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P
makes no representation or warranty, implied or expressed, to the shareholders
of the Portfolio, or any member of the public regarding the advisability of
investing in index funds generally, or in this Portfolio in particular, or the
ability of the S&P 100 Index to track general stock market performance. S&P's
only relationship to this Portfolio is the licensing of the S&P trademarks and
the S&P 100 Index which is determined, composed and calculated by S&P without
regard to this Portfolio. "Standard & Poor's," "Standard & Poor's 100," "S&P,"
"S&P 100" and "100" in connection with the S&P 100 are trademarks of S&P.
PSE Technology Index. The PSE Technology Index consists of 100 common
stocks, which are chosen by Pacific Exchange Incorporated based on its
assessment that the issuer 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 Technology
Index offers a broad basket of 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, 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. A full listing of the companies
included in the PSE Technology Index as of May 29, 1998 is attached as Appendix
B to this Prospectus. Of those 100 stocks, 53 were listed on the Nasdaq Stock
Market, 46 on the New York Stock Exchange, and one on the American Stock
Exchange.
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. 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
38
<PAGE> 39
companies, it results in smaller- and mid-sized companies representing a more
significant portion of the Index than is the case for indices such as the S&P
100 Index, which are weighted by the market value of the companies represented
on the index. See "Additional Investment Practices and Risks - Investments in
Small to Mid-Sized Companies."
The PSE Tech 100 Index Portfolio is not sponsored, endorsed, sold, or
promoted by the PSE Technology Index (PSE(SM), Pacific Stock Exchange(SM), PSE
Technology Index(SM), and PSE Tech 100(SM) are service marks of the Pacific
Exchange Incorporated).
INDUSTRY CONCENTRATIONS
A significant portion of the PSE Tech 100 Index 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 downswings 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 PSE Tech 100 Index 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 "Industry Concentration Factors" in
the Statement of Additional Information.
INVESTMENTS IN SMALL TO MID-SIZED COMPANIES
The investment program and strategies of the Select Value Portfolio and
PSE Tech 100 Index Portfolio may cause those Portfolios to invest a greater
portion of their assets in small to mid-sized companies. These companies may
have relatively lower revenues, limited product lines, less management depth and
a lower share of the market for their products or services as compared to larger
companies. Historically, small and mid-sized capitalization stocks have
experienced more price volatility than large capitalization stocks. Some factors
contributing to this greater volatility include: (a) less certain growth
prospects of small and mid-sized companies, as compared to larger companies; (b)
less liquidity in the trading markets for their stocks, in part because of fewer
shares trading in the market and in part because of a low public profile which
reduces the interest level of financial analysts and the investing public; and
(c) greater sensitivity to changing economic conditions. For these reasons, the
net asset value of the Select Value and PSE Tech 100 Index Portfolios may
increase and decrease substantially more than the stock market in general, as
measured by broad-based indices such as the S&P 500 Index.
39
<PAGE> 40
VALUE INVESTING
The value-oriented style of investing used by the Select Value
Portfolio emphasizes companies with relatively low price/earnings ratios,
reasonable financial strength and strong cash flows. These companies tend to be
out of favor with investors. As a group, value stocks tend to go through cycles
of relative under performance and outperformance in comparison to common stocks
generally. Although value investing has been less favored in the recent past,
the Advisors believe that the advantage of value-oriented stocks over
growth-oriented stocks is greater than usual during periods of economic
recovery. During periods of economic weakness, growth-oriented stocks may
provide solid earnings growth despite the difficult economic environment, but as
the economy improves, many investors are reluctant to pay a premium for
high-priced growth stocks when lower-priced stocks are available that also are
showing good earnings growth. The performance of the Select Value Portfolio is
dependent on the ability of the Advisors successfully to select stocks that
outperform the market.
OPTIONS AND FUTURES ACTIVITIES
The S&P 100 Plus and PSE Tech 100 Index Portfolios may use exchange-
traded index futures contracts and options on stock indices for the following
purposes: (1) to equitize their cash and other liquid investments so as to more
nearly simulate full investment in stocks; (2) to make it easier to trade; and
(3) to reduce costs by buying futures instead of actual stocks when futures are
cheaper. The S&P 100 Plus and Dividend Achievers Portfolios may also use
options on individual stocks, but the Advisor has no plans to do so at this
time.
Index Futures and Options. The S&P 100 Plus and PSE Tech 100 Index
Portfolios may write (sell) and purchase covered call options and put options on
stock indices. Put and call options for various stock indices are traded on
registered securities exchanges. The S&P 100 Plus Portfolio will generally use
futures contracts on the S&P 500 Index and index options on the S&P 100 Index or
the S&P 500 Index, but may use other index options if the exchange on which the
S&P options are traded is closed, there is insufficient liquidity in the
options, or if the Portfolio or the Advisor reaches exchange position limits.
The PSE Tech 100 Index Portfolio plans to use options and futures on both the
PSE Technology Index and the S&P 500 Index.
Put and call options on a securities index are similar to options on an
individual stock. The principal difference is that an option on a securities
index is settled only in cash. The exercising holder of an index option, instead
of receiving a security, receives the difference between the closing price of
the securities index and the exercise price of the option times a specified
multiple ($100 in the case of the S&P 100 Index).
An index futures contract is a contract to buy or sell units of a
particular index at an agreed price on a specified future date. Depending on the
change in value of the index between the time a Portfolio enters into and
terminates an index futures transaction, the Portfolio may realize a gain or a
loss.
40
<PAGE> 41
Risks Associated with Options and Futures. Losses involving index
futures contracts and index options can sometimes be substantial, in part
because a relatively small price movement in an index option or an index futures
contract may result in an immediate and substantial loss or gain for a
Portfolio. The Portfolios will not use futures and options contracts for
speculative purposes or as leveraged investments that magnify the gains or
losses on an investment. Rather, each relevant Portfolio will keep separate cash
or cash-equivalent securities in the amount of the obligation underlying the
futures contract. Only a limited percentage of a Portfolio's assets - up to 5%
if required for deposit and no more than 20% of total assets - may be committed
to such contracts.
Additional risks associated with the intended use by the S&P 100 Plus
and PSE Tech 100 Index Portfolios of index futures contracts and index options
include the following:
(1) An imperfect correlation between movements in prices
of options and futures contracts and movements in the
value of the stock index that the instrument is
designed to simulate;
(2) An imperfect correlation between the price movement
in the index underlying the futures contract or
option agreement and the price movement in the index
which the relevant Portfolio seeks to match; and
(3) The possibility of no liquid secondary market for a
futures contract or option and the resulting
inability to close a position prior to its maturity
date.
A Portfolio will seek to minimize the risk of imperfect correlation by investing
only in those futures contracts and options whose behavior is expected to
resemble that of the Portfolio's underlying securities. A Portfolio will also
seek to reduce the risk of being unable to close out a futures position by
entering into such transactions on registered securities exchanges with an
active and liquid secondary market.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each Portfolio may lend its
portfolio securities to brokers, dealers and other institutional investors,
provided the Portfolio receives cash collateral which at all times is maintained
in an amount equal to at least 100% of the current market value of the
securities loaned. By reinvesting the collateral it receives in these
transactions, a Portfolio could magnify any gain or loss it realizes on the
underlying investment. If the borrower fails to return the securities and the
collateral is insufficient to cover the loss, the Portfolio could lose money.
For the purposes of this policy, a Portfolio considers collateral consisting of
U.S. Government Securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Portfolio to be the
equivalent of cash. During the term of the loan, the Portfolio is entitled to
receive interest and other distributions paid on the loaned securities, as well
as any appreciation in the market
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<PAGE> 42
value. The Portfolio is also entitled to receive interest from the institutional
borrower based on the value of the securities loaned. From time to time, a
Portfolio may return to the borrower, and/or a third party which is unaffiliated
with Principal Preservation and which is acting as a "placing broker," a part of
the interest earned from the investment of the collateral received for
securities loaned.
A lending Portfolio does not have the right to vote the securities
loaned during the existence of the loan, but can call the loan to permit voting
of the securities if, in the Advisors' judgment, a material event requiring a
shareholder vote would otherwise occur before the loan is repaid. In the event
of bankruptcy or other default of the borrowing institution, the lending
Portfolio could experience delays in liquidating the loan collateral or
recovering the loaned securities, and incur risk of loss including: (1) possible
decline in the value of the collateral or in the value of the securities loaned
during the period while the lending Portfolio seeks to enforce its rights
thereto; (2) possible subnormal levels of income and lack of access to income
during this period; and (3) expenses of enforcing its rights. To minimize these
risks, the Advisors evaluate and continually monitor the creditworthiness of the
institutional borrowers to which the lending Portfolio lends its securities.
To minimize the foregoing risks, each Portfolio's securities lending
practices are subject to the following conditions and restrictions: (1) no
Portfolio may make such loans in excess of 33% of the value of its total assets;
(2) the lending Portfolio must receive cash collateral in an amount at least
equal to 100% of the value of the securities loaned; (3) the institutional
borrower must be required to increase the amount of the cash collateral whenever
the market value of the loaned securities rises above the amount of the
collateral; (4) the lending Portfolio must have the right to terminate the loan
at any time; (5) the lending Portfolio must receive reasonable interest on the
loan, as well as any interest or other distributions on the loaned securities
and any increase in the market value of the loaned securities; and (6) the
lending Portfolio may not pay any more than reasonable custodian fees in
connection with the loan.
FOREIGN SECURITIES
The Select Value Portfolio may invest a portion of its assets in
securities of foreign issuers not publicly traded in the United States, as well
as ADRs and securities of Canadian issuers. Foreign securities are more volatile
than their domestic counterparts, in part because of higher political and
economic risks, lack of reliable information, and fluctuations in currency
exchange rates. These risks are usually higher in less developed countries.
Currency fluctuations will affect the net asset value of foreign securities held
by the Select Value Portfolio regardless of the performance of the underlying
asset or investment.
OTHER INVESTMENT PRACTICES
In addition to the investment policies and programs described above,
any of the Portfolios may make short sales of already owned securities, the
Select Value and PSE Tech 100 Index Portfolios may invest temporarily in
short-term, fixed-income securities, the Tax-
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<PAGE> 43
Exempt and Government Portfolios may enter into forward commitments, and the
Select Value Portfolio may enter into repurchase agreements.
Short Sales "Against-the-Box." Any of the Portfolios may make short
sales of securities or maintain a short position, provided that at all times
when a short position is open the Portfolio owns an equal amount of such
securities of the same issue as, and equal in amount to, the securities sold
short, and that not more than 10% of the Portfolio's net assets (determined at
the time of short sale) may be held as collateral for such sales. A Portfolio
may make such short sales "against-the-box", for example, to defer the
realization of a gain for federal income tax purposes.
Short-Term Investments. Each Portfolio may have uncommitted cash
positions which result from: (1) the temporary holding of proceeds from sales of
Portfolio shares pending investment; (2) maintaining liquidity for anticipated
redemptions; or (3) temporary defensive strategies, such as when the securities
markets or economic conditions are expected to enter a period of decline. Under
normal conditions, a Portfolio's liquid assets will be limited to 5% of the
Portfolio's total assets, although the Advisors have discretion to increase a
Portfolio's cash position without limit for temporary defensive purposes.
The Portfolios will invest such uncommitted cash in short-term, money
market instruments, including U.S. Treasury bills or other U.S. Government
Securities; certificates of deposit; banker's acceptances and time deposits;
high quality commercial paper, variable rate demand notes, repurchase agreements
and other short-term high grade corporate obligations; and shares of money
market mutual funds.
A variable rate demand note is issued pursuant to a written agreement
between the issuer and the holder. Its amount may from time to time be increased
by the holder (subject to an agreed maximum), or decreased by the holder or the
issuer. The rate of interest payable on the security varies with an agreed
formula and the security is typically rated by a rating agency. Transfer of such
notes is usually restricted by the issuer, and there is no secondary trading
market for such notes. A Portfolio will not purchase such a variable rate demand
note unless, at the time of purchase, the issuer has unsecured debt securities
outstanding that are ranked within the two highest categories by a Nationally
Recognized Statistical Rating Organization or, if the note is itself rated, its
ratings fall within such category(ies).
To the extent a 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. No Portfolio may 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.
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<PAGE> 44
Repurchase Agreements. Each Portfolio may buy securities with the
understanding that the seller will buy them back with interest at a later date.
The Advisors do not intend to invest more than 5% of the total assets of any
Portfolio in such instruments. A repurchase agreement is an agreement between a
seller and a buyer, whereby the seller agrees to repurchase the security sold at
an agreed upon price and, usually, at a stated time.
Repurchase agreements carry several risks. For instance, if the seller
is unable to repurchase the securities as promised, the Portfolio may experience
a loss when trying to sell the securities itself. Or, if the seller becomes
insolvent, a bankruptcy court may determine that the securities do not belong to
the Portfolio and order the securities to be sold to pay off the seller's debts.
To minimize the risk of loss, a Portfolio will segregate as collateral readily
marketable securities (generally cash or U.S. Government Securities) with a
market value equal to, or in excess of, the market value of the securities which
are subject to the repurchase agreement.
Forward Commitments. The Tax-Exempt and Government Portfolios may
purchase securities for future delivery, which may increase the Portfolios'
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. The Portfolios do not plan to
engage in forward commitment transactions if, after such purchase, more than 5%
of the Portfolio's net assets would consist of such securities. See "When-Issued
and Delayed Delivery Transactions" in the Statement of Additional Information.
PORTFOLIO TURNOVER
In general, the greater the volume of buying and selling by a mutual
fund, the greater the impact that brokerage commissions and other transaction
costs will have on its return. A mutual fund with turnover in excess of 100%
engages in a high volume of buying and selling, and likely will pay more
brokerage commissions and realize more taxable gains than a mutual fund with
less turnover.
High portfolio turnover rates also may result in the realization of
substantial net short-term gains, and any distributions resulting from such
gains will be ordinary income for federal income tax purposes. All of the
Portfolios are expected to have portfolio turnover rates below 100%, except that
the turnover rates for the Government and Select Value Portfolios are expected
to be between 100% and 200%. The portfolio turnover rates for each Portfolio are
included in its Financial Highlights Table in this prospectus.
The portfolio turnover rates for the S&P 100 Plus and PSE Tech 100
Index Portfolios are expected to be under 50%, because of their passive
investment management approach. However, because the PSE Technology Index is
"price weighted," higher turnover and brokerage expenses may occur than if the
Index's component stocks were not given a percentage weighting based on price.
Ordinarily, the S&P 100 Plus and PSE Tech 100 Index Portfolios will sell
securities only to reflect certain administrative changes in their respective
Indices (including mergers or changes in the composition of the Index) or to
accommodate
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<PAGE> 45
cash flows into and out of the Portfolio while maintaining the similarity of the
Portfolio to their respective Indices. Upon notice of a change in the
composition of respective Indices, each Portfolio intends to adjust its
investments as soon as reasonably practicable to more closely replicate its
Index. The S&P 100 Plus Portfolio also anticipates some trading activity related
to its over/underweighting strategies, separate and apart from changes in the
Indices.
INVESTMENT RESTRICTIONS
GENERAL
In attempting to achieve its individual investment objective, each
Portfolio follows an investment program, practices and strategies which are
subject to numerous limitations and restrictions. Each Portfolio's investment
objective is fundamental, meaning it cannot be changed unless the Portfolio's
shareholders approve the change. However, except as expressly denoted as
fundamental, a Portfolio's investment program and its limitations and
restrictions are nonfundamental, meaning they can be altered or eliminated by
Principal Preservation's Board of Directors without shareholder approval.
SPECIFIC RESTRICTIONS
In addition to the limitations and restrictions that apply to each
Portfolio's investment program described in this Prospectus, each Portfolio also
is subject to a number of additional fundamental investment restrictions which
are described in the Statement of Additional Information under the Section
titled "Investment Restrictions." Among these restrictions is a prohibition on
purchasing a security, other than a U.S. Government Security (and, in the case
of the S&P 100 Plus and PSE Tech 100 Index Portfolios, a security necessary to
approximate the composition of an index), if, as a result, more than 5% of the
total assets of the Portfolio would be invested in the securities of the issuer,
or if the Portfolio would own more than 10% of the outstanding voting securities
of the issuer.
Another fundamental restriction provides that no Portfolio may borrow
money or property except for temporary or emergency purposes. If a Portfolio
borrows money it will only borrow from banks and in an amount not exceeding 10%
of the market value of its total assets (not including the amount borrowed). No
Portfolio may pledge more than 15% of its net assets to secure such borrowings.
In the event a Portfolio's borrowing exceeds 5% of the market value of its
total assets, the Portfolio will not purchase securities until its borrowings
are reduced to less than 5% of total assets. For purposes of these
restrictions, collateral arrangements for premium and margin payments in
connection with the hedging activities of a Portfolio are not deemed to be a
pledge of assets.
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<PAGE> 46
MANAGEMENT
DIRECTORS AND OFFICERS
The Board of Directors of Principal Preservation is responsible for
management of Principal Preservation and provides broad supervision over its
affairs. The Advisors are responsible for each Portfolio's investment
management, and Principal Preservation's officers are responsible for each
Portfolio's and Principal Preservation's overall operations.
THE ADVISORS
Each Portfolio is managed by Ziegler Asset Management pursuant to the
terms of one of two Investment Advisory Agreements (together the "Advisory
Agreements"). One Advisory Agreement relates to the Government, Tax-Exempt, S&P
100 Plus, Select Value and PSE Tech 100 Index Portfolios, and the other relates
to the Dividend Achievers Portfolio. Skyline assists, as sub-advisor, with the
management of the Select Value Portfolio pursuant to the terms of a sub-advisory
agreement (the "Sub-Advisory Agreement") by and among Principal Preservation,
Ziegler Asset Management and Skyline.
Ziegler Asset Management had approximately $1.2 billion under
discretionary management as of December 31, 1997. Ziegler Asset Management
serves as investment advisor to all eight mutual funds included in the Principal
Preservation family of funds, and privately manages numerous customer advisory
accounts. Ziegler Asset Management is a wholly-owned subsidiary of The Ziegler
Companies, Inc., a publicly-owned financial services holding company.
Skyline is a Delaware limited partnership. Skyline's general partner is
Affiliated Managers Group, Inc. ("AMG") and its limited partners are
corporations owned by five Skyline officers, William M. Dutton, Kenneth S.
Kailin, Stephen F. Kendall, Geoffrey F. Lutz and Michael Maloney. AMG is a
Boston-based private holding company that makes equity investments in
investment management firms.
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<PAGE> 47
AMG is a Delaware corporation which is publicly traded on the New York
Stock Exchange. It is an asset management holding company that acquires
interests in investment management firms. Since its founding in December, 1993,
AMG has grown to ten investment management firms with over $40.0 billion in
assets under management. The executive offices of AMG are located at Two
International Place, 23rd Floor, Boston, Massachusetts 02110.
Pursuant to the terms of the Advisory Agreements, the Advisors provide
the Portfolios with overall investment advisory and administrative services.
Subject to such policies as the Board of Directors may determine, the Advisors
make investment decisions on behalf of each Portfolio, make available research
and statistical data in connection therewith, and supervise the acquisition and
disposition of investments by each Portfolio, including the selection of
broker-dealers to carry out portfolio transactions. The Advisors bear all of
their own expenses of providing services under the Advisory Agreement and
Sub-Advisory Agreement and pays all salaries, fees and expenses of the officers
and Directors of Principal Preservation who are affiliated with them. The
Portfolios bear all other expenses including, but not limited to, necessary
office space, telephone and other communications facilities and personnel
competent to perform administrative, clerical and shareholder relations
functions; salary, fees and expenses (including legal fees) of those Directors,
officers and employees of Principal Preservation who are not officers, directors
or employees of the Advisors; interest expenses; fees and expenses of the
Distributor, Custodian, Transfer Agent and Dividend Disbursing Agent;
administrative expenses; taxes and governmental fees; brokerage commissions and
other expenses incurred in acquiring or disposing of portfolio securities,
expenses of registering and qualifying shares for sale with the SEC and with
various state securities commissions; accounting and legal costs; insurance
premiums; expenses of maintaining Principal Preservation's legal existence and
of shareholders' meetings; expenses of preparation and distribution to existing
shareholders of reports, proxies and Prospectuses; and fees and expenses of
membership in industry organizations. Fees common to more than one Portfolio are
prorated among them based on their total assets.
Under the Advisory Agreements, each Portfolio pays Ziegler Asset
Management an annual fee, in monthly installments, based on the average daily
net assets of the Portfolio. Pursuant to the terms of the Sub-Advisory
Agreement, Ziegler Asset Management pays Skyline a portion of the advisory fee
it receives from the Select Value Portfolio. The Select Value Portfolio is not
responsible for making any payments to Skyline. While the advisory fees of the
Select Value and Dividend Achievers Portfolios are higher than the fees paid by
most mutual funds, Principal Preservation's Board of Directors believes they are
consistent with the fees paid by funds with investment characteristics and
objectives similar to those Portfolios.
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<PAGE> 48
THE DISTRIBUTOR, CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
B.C. Ziegler and Company ("Ziegler") serves as the Distributor of the
shares of each Portfolio pursuant to a Distribution Agreement; provides
accounting and other administrative services, including daily valuation of the
shares of each Portfolio, pursuant to an Accounting/Pricing Agreement; and
provides transfer agent services pursuant to a Transfer and Dividend Disbursing
Agency Agreement. Ziegler is registered with the SEC as a securities
broker-dealer and is a member of the National Association of Securities Dealers.
Ziegler has been engaged in the underwriting of debt securities for more than 75
years. Like Ziegler Asset Management, Ziegler is a wholly-owned subsidiary of
The Ziegler Companies, Inc., and its principal executive offices are located at
215 North Main Street, West Bend, Wisconsin 53095. Ziegler Thrift Trading, Inc.,
another affiliate of Ziegler Asset Management which is a registered
broker-dealer, may effect portfolio securities transactions as agent for the
Portfolios and in that capacity receives brokerage commissions from the
Portfolio. See "Portfolio Transactions and Brokerage."
The Distribution Agreement appointing Ziegler as Principal
Preservation's Distributor provides that Ziegler is entitled to receive a
commission on its sales of the shares of each Portfolio at the rate disclosed in
Principal Preservation's current Prospectus (see "Purchase of Shares"). When
Ziegler sells Class A shares, it is entitled to a commission equal to the amount
of the front-end sales charge, if any, paid by the investor. When Ziegler sells
Class B shares, Ziegler receives no commission at the time of the sale. However,
if the investor redeems the Class B shares at a time when they remain subject to
a contingent redeferred sales charge, Ziegler is entitled to receive the
contingent deferred sales charge. If an investor purchases shares of a Portfolio
through a Selected Dealer that has entered into a selling agreement with
Ziegler, Ziegler will pay a commission to the Selected Dealer. See "Purchasing
Shares." Principal Preservation also reimburses Ziegler for certain expenditures
incurred by it in connection with the distribution of Principal Preservation's
shares pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940 Act.
See "Distribution Expenses."
The Distribution Agreement continues from year to year if it is
approved annually by Principal Preservation's Board of Directors, including a
majority of those Directors who are not interested persons of Principal
Preservation, or by a vote of the holders of a majority of the outstanding
shares. The Distribution Agreement may be terminated at any time by either party
on 60 days written notice and will automatically terminate if assigned.
The Accounting/Pricing Agreement provides that Ziegler is entitled to
receive a fee for its accounting services at an annual rate of .03 of 1% of a
Portfolio's total assets of $30 million but less than $100 million, .02 of 1% of
a Portfolio's total assets of $100 million but less than $250 million and .01 of
1% of a Portfolio's total assets of $250 million or more, with a minimum fee of
$19,000 per Portfolio per year, plus expenses. The Transfer and Dividend
Disbursing Agency Agreement provides that Ziegler is entitled to receive
compensation deemed reasonable by the Board of Directors of Principal
Preservation for services provided thereunder. The rate of compensation is
currently set at $13.50 per account for the
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<PAGE> 49
Tax-Exempt, Government and PSE Tech 100 Index Portfolios and $8.50 per account
for the S&P 100 Plus, Select Value and Dividend Achievers Portfolios. Principal
Preservation also reimburses Ziegler for all out-of-pocket expenses incurred in
providing such services. As Transfer and Dividend Disbursing Agent, Ziegler may
also collect certain fees from shareholders as disclosed in this Prospectus.
Firstar Trust Company serves as the custodian of each Portfolio's
assets, pursuant to a Custodian Servicing Agreement.
PURCHASING SHARES
GENERAL INFORMATION
You may buy Class A shares of any of the Portfolios and Class B shares
of the S&P 100 Plus, Dividend Achievers, Select Value and PSE Tech 100 Index
Portfolios through Ziegler and Selected Dealers. You also may purchase shares in
connection with asset allocation programs, wrap free programs and other programs
of services offered or administered by broker-dealers, investment advisors,
financial institutions and certain other service providers, provided the program
meets certain standards established from time to time by Ziegler.
Banks, acting as agents for their customers and not for any Portfolio
or the Distributor, from time to time may purchase Portfolio shares for the
accounts of such customers. Generally, the Glass-Steagall Act prohibits banks
from engaging in the business of underwriting, selling or distributing
securities. Should the activities of any bank, acting as agent for its customers
in connection with the purchase of the shares of any Portfolio, be deemed to
violate the Glass-Steagall Act, management will take whatever action, if any, is
appropriate in order to provide efficient services for the Portfolio. Management
does not believe that a termination in the relationship with a bank would result
in any material adverse consequences to the Portfolio. In addition, state
securities laws on this issue may differ, and banks and financial institutions
may be required to register as dealers pursuant to state law. Investors should
be aware that the shares of the Portfolios are not deposits or obligations of,
or guaranteed or endorsed by, any bank, and are not insured or guaranteed by the
U.S. Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other federal agency.
Principal Preservation will issue share certificates only if you so
request in writing, and then only for full shares. You must make a new written
request for a share certificate each time you purchase shares. Principal
Preservation does not charge a fee to issue a share certificate. You cannot use
certain shareholder services, including telephone redemptions and exchanges and
any systematic withdrawal, for certificated shares. Before you can redeem,
transfer or exchange shares held in certificate form, you must deliver the share
certificate to
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<PAGE> 50
the Transfer Agent in negotiable form (with a signature guarantee). Share
certificates may not be available for some retirement accounts.
MINIMUM PURCHASE AMOUNTS
The Portfolios have established minimum amounts that a person must
invest to open an account initially, and to add to the account at later times.
The Portfolios have established these minimum investment amounts in order to
help control their operating expenses. Each Portfolio incurs certain fixed costs
with the opening and maintaining of every account and the acceptance of every
additional investment, regardless of the amount of the investment involved.
Accordingly, the acceptance and maintenance of small shareholder accounts and
small additional investments increases a Portfolio's operating expense ratio,
and adversely affects its total return. The table below shows the minimum
initial investment amounts and additional investment amounts currently in effect
for each of the Portfolios for various types of investors.
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM ADDITIONAL
TYPE OF INVESTOR INVESTMENT AMOUNT INVESTMENT AMOUNT(1)
- ---------------- ----------------- --------------------
<S> <C> <C>
All investors, except special investors listed $1,000 $50
below
IRAs, Keogh plans, self-directed retirement $500 $25
accounts and custodial accounts under the Uniform
Gifts/Transfers to Minors Act (see "Shareholder
Services")
Purchases through Systematic Purchase Plans (see $100 $100(2)
"Shareholder Services - Systematic Purchase Plan")
</TABLE>
- ---------------------------
(1) There is no minimum additional investment requirement for purchases of
shares of any of the Portfolios if: (i) the purchase is made in
connection with an exchange from another mutual fund within the
Principal Preservation family of funds (see "Redeeming and Exchanging
Shares - Exchanging Shares"); (ii) reinvestment of distributions
received from another mutual fund within the Principal Preservation
family of funds or from various unit investment trusts sponsored by
Ziegler; (iii) the reinvestment of interest and/or principal payments
on bonds issued by Ziegler Mortgage Securities, Inc. II; and (iv)
reinvestments of interest payments on bonds underwritten by Ziegler.
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(2) The minimum subsequent monthly investment under a Systematic Purchase
Plan 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 the account balance reaches $500, after which the
minimum additional investment amount is reduced to $25. The minimum
subsequent investment amount also is reduced to $50 for all other
accounts with balances of $1,000 or more.
PURCHASING CLASS A SHARES
Front-End Sales Charge. You may purchase Class A shares of each
Portfolio at net asset value plus a maximum front-end sales charge of 3.50% of
the public offering price for the Tax-Exempt and Government Portfolios, and
5.25% of the public offering price for the S&P 100 Plus, Dividend Achievers,
Select Value and PSE 100 Index Portfolios. The front-end sales charge is reduced
or eliminated on certain purchases, as described below.
The table below shows the front-end sales charges (expressed as a
percentage of the public offering price and of the net amount invested) and
dealer concessions in effect for sales of Class A shares of each of the
Portfolios. None of the Portfolios will issue shares for consideration other
than cash, except in the case of a bonafide reorganization or statutory merger
or in certain other acquisitions of portfolio securities which meet the
requirements of applicable state securities laws. See "Purchase of Shares" in
the Statement of Additional Information.
<TABLE>
<CAPTION>
PUBLIC OFFERING NET AMOUNT SELECTED DEALER
SIZE OF INVESTMENT PRICE INVESTED REALLOWANCE(1)
------------------ ----- -------- --------------
<S> <C> <C> <C>
TAX-EXEMPT AND GOVERNMENT PORTFOLIOS:
Less than $25,000 3.50% 3.63% 3.00%
$25,000 but less than $50,000 3.00% 3.09% 2.75%
$50,000 but less than $100,000 2.50% 2.56% 2.25%
$100,000 but less than $250,000 2.00% 2.04% 1.75%
$250,000 but less than $500,000 1.50% 1.52% 1.25%
$500,000 but less than $1,000,000 1.00% 1.01% 1.00%
$1,000,000 or more None None None
</TABLE>
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<TABLE>
<CAPTION>
SHAREHOLDERS AS OF CLOSE OF BUSINESS ON
SEPTEMBER 5, 1997(2)
S&P 100 PLUS, SELECT ------------------------------------------- -------------------------------------------
VALUE, DIVIDEND PUBLIC SELECTED PUBLIC NET SELECTED
ACHIEVERS AND PSE TECH OFFERING NET AMOUNT DEALER OFFERING AMOUNT DEALER
100 INDEX PORTFOLIOS PRICE INVESTED REALLOWANCE(1) PRICE INVESTED REALLOWANCE(1)
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Less than $25,000 4.50% 4.71% 4.00% 5.25% 5.54% 4.50%
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
$25,000, but less than 4.50% 4.71% 4.00% 5.00% 5.26% 4.25%
$50,000
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
$50,000, but less than 4.00% 4.17% 3.50% 4.75% 4.98% 4.25%
$100,000
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
$100,000, but less than 3.50% 3.63% 3.00% 3.75% 3.40% 3.25%
$250,000
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
$250,000, but less than 3.00% 3.09% 2.60% 3.00% 3.09% 2.50%
$500,000
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
$500,000, but less than 2.00% 2.04% 1.80% 2.00% 2.04% 1.80%
$1,000,000
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
$1,000,000 or more None None 0.50% None None 0.50%
- -------------------------- ------------- ------------- --------------- ------------- ------------ ---------------
</TABLE>
- -----------------
(1) In addition to the Selected Dealer Reallowance shown above, the
Distributor may pay an additional commission to participating dealers
and other participating financial institutions acting as agent for
their customers in an amount up to the difference between the sales
charge and the Selected Dealer Reallowance in respect of the shares
sold. 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 Selected Dealers Reallowances reflected in the table, 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. In no event will such
additional concession paid by the Distributor to the Selected Dealer
exceed the difference between the sales charge and the Selected Dealer
Reallowance in respect of shares sold by the qualifying registered
representatives of the Selected Dealer. Selected Dealers who receive a
concession may be deemed to be "underwriters" in connection with sales
by them of such shares and in that capacity they may be subject to the
applicable provisions of the Securities Act of 1933.
(2) Persons who held shares in any of the S&P 100 Plus, Dividend Achievers,
Select Value or PSE Tech 100 Index Portfolios as of the close of
business on September 5, 1997 may
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<PAGE> 53
purchase Class A shares of the Portfolio(s) in which they held such
shares at these reduced front-end sales charges through December 31,
1998. After that date, these shareholders will pay the same front-end
sales charges for Class A shares as other investors.
Reduced Front-End 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 scale in the table above is applicable to initial purchases
of Principal Preservation shares by any "purchaser." The term "purchaser"
includes (1) an individual, (2) an individual, his or her spouse and their
children under the age of 21 purchasing shares for his or her own accounts, (3)
a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account, (4) a pension, profit-sharing, or other employee
benefit plan qualified or non-qualified under Section 401 of the Internal
Revenue Code, (5) tax-exempt organizations enumerated in Section 501(c)(3) or
(13) of the Code, (6) employee benefit plans qualified under Section 401 of the
Code of a single employer or employers who are "affiliated persons" of each
other within the meaning of Section 2(a)(3)(c) of the Act, or (7) any other
organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase of redeemable securities of a registered investment
company at a discount.
Another way to pay a lower sales charge is for a "purchaser" to add to
his investment so that the current offering price value of his shares, plus the
new investment, reach a higher discount level. For example, if the current
offering price value of the shares held by a shareholder in the Portfolios
equals $100,000, the shareholder will pay a reduced sales charge on additional
purchases of shares. If the shareholder invested an additional $100,000, the
sales charge would be 2.00% in the Government and Tax-Exempt Portfolios on that
additional investment and 3.75% in the S&P 100 Plus, Dividend Achievers, Select
Value and PSE Tech 100 Index Portfolios. Your holdings of Class A and Class B
shares in all Portfolios which have a sales charge will be aggregated in
determining the break-point at which you are entitled to purchase in any
Portfolio.
A third way is for a "purchaser" to sign a non-binding statement of
intention to invest $25,000 or more over a 13 month period in any one or
combination of Principal Preservation Portfolios which have a sales charge. If
the purchases are completed during that period, each purchase will be at a sales
charge applicable to the aggregate of the shareholder's intended purchases.
Under terms set forth in the statement of intention, shares valued at 5% of the
amount of intended purchase are escrowed and will be redeemed to cover the
additional sales charge payable if the statement is not completed. Any remaining
shares held in escrow will be released to the purchaser. A purchaser will
continue to earn dividends and capital gains distributions declared by a
Portfolio with respect to shares held in escrow.
A reduced front-end sales charge is also available on the purchase of
Class A shares by 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
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<PAGE> 54
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.
Finally, Class A shares may 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.
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 Without a Front-End Sales Charge. Class A shares of the
Portfolios may be purchased at net asset value (that is, without a front-end
sales charge) by various types of purchasers as described below.
$1.0 Million Purchases Class A shares may be purchased at net asset
value by a purchaser purchasing at least
$1.0 million of shares or the value of whose
account at the time of purchase is at least
$1.0 million, provided if the purchase is
made through a Selected Dealer who has
executed a dealer agreement with Ziegler.
The term "purchaser" has the meaning
described in "Reduced Front-End 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.
Employee Benefit Plans Any pension, profit sharing or other
employee benefit plan qualified under
Section 401 of the Internal Revenue Code
that purchased shares prior to July 1, 1998
may continue to purchase Class A shares at
net asset value. If such a plan purchases
shares of any of the Portfolios through a
Selected Dealer, the Distributor may make a
payment or payments, out of its own funds,
to the Selected Dealer in an amount not to
exceed 0.75 of 1% of the amount invested.
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<PAGE> 55
State and Municipal Governments Class A shares of the Portfolios also may be
and Charities purchased at net asset value a 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 Class A shares, or the value of
such purchaser's account at the time of
purchase must be at least $500,000.
Investors Transferring From Class A shares may also be purchased at net
Unrelated Load Funds asset value when payment for those shares
represents the proceeds from the redemption
of shares of another mutual fund which
charges a sales charge and which is not part
of Principal Preservation. A purchase of
shares of Principal Preservation may be made
at net asset value under this provision
regardless of whether the sales charge was
paid on the shares redeemed in the unrelated
fund. However, the redemption of those
shares must have occurred no more than 90
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.
Persons Associated with Class A shares may be purchased at net
Principal Preservation and Its asset value by: Directors and officers of
Service Providers Principal Preservation (including shares
purchased jointly with or individually by
any such person's spouse and shares
purchased by any such person's children or
grandchildren under age 21); employees of
Ziegler, Selected Dealers and Skyline, and
the trustee or custodian under any pension
or profit-sharing plan established for the
benefit of the employees of any of the
foregoing. The term "employee" includes an
employee's spouse (including the surviving
spouse of a deceased employee), parents
(including step-parents and in-laws),
children, grandchildren under age 21,
siblings, and retired employees.
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<PAGE> 56
Reinvestments of Distributions Class A shares may be purchased without a
From Principal Preservation sales charge upon the reinvestment of
Mutual Funds and Other Investment distributions from any Principal Preservation
Vehicles Sponsored by Ziegler mutual fund, 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.
Purchases Through Certain Class A shares may be purchased without a
Investment Programs sales charge through an asset allocation
program, wrap fee program or similar program
of services offered or administered by a
broker-dealer, investment advisor, financial
institution or other service provider,
provided the program meets certain standards
established from time to time by Ziegler. You
should read the program materials provided by
the service provider, including information
related to fees, in conjunction with this
Prospectus. Certain features of a Portfolio
may not be available or may be modified in
connection with the program of services. When
shares are purchased this way, the service
provider, rather than you as the service
provider=s customer, may be the shareholder
of record for the shares. The service
provider may charge fees of its own in
connection with your participation in the
program of services. Certain service
providers may receive compensation from
Principal Preservation and/or Ziegler for
providing such services.
Reinvestment Privilege If you redeem Class A shares, you may
reinvest all or part of the redemption
proceeds in Class A shares of the same
Portfolio, without a front-end sales charge,
if you send written notice to Principal
Preservation or the Transfer Agent not more
than 90 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.
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<PAGE> 57
PURCHASING CLASS B SHARES
You may purchase Class B Shares of any of the S&P 100 Plus, Dividend
Achievers, Select Value and PSE Tech 100 Index Portfolios at net asset value
with no front-end sales charge. However, you pay a contingent deferred sales
charge (expressed as a percent of the lessor of the current net asset value
or original cost) if you redeem your Class B shares within six years after
purchase. No contingent deferred sales charge is imposed on any shares that you
acquire through the reinvestment of dividends and capital gains distributions
paid by the Portfolio on your Class B shares. To reduce your cost, when you
redeem shares in a Portfolio, you will redeem either shares that are not subject
to a contingent deferred sales charge (i.e., those purchased through the
reinvestment of dividends and capital gains), if any, or shares with the lowest
contingent deferred sales charge. The contingent deferred sales charge is waived
upon redemption of shares following the death or disability of a shareholder,
for mandatory or hardship distributions from retirement plans, IRAs and 403(b)
plans, to meet certain retirement plan requirements, or for systematic
withdrawal plans not to exceed 10% annually.
Contingent Deferred Sales Charge. The table below shows the contingent
deferred sales charge applicable to Class B shares of the S&P 100 Plus, Dividend
Achievers, Select Value and PSE Tech 100 Index Portfolios based on how long you
hold the shares before redeeming them. The percentages reflected in the table
are based on the lessor of the net asset value of your Class B shares at the
time of purchase or at the time of redemption.
<TABLE>
<CAPTION>
HOLDING CONTINGENT DEFERRED SALES CHARGE
- ------- --------------------------------
<S> <C>
1 Year or less 5.00%
More than 1 Year, but less than 3 Years 4.00%
3 Years, but less than 4 Years 3.00%
4 Years, but less than 5 Years 2.00%
5 Years, but less than 6 Years 1.00%
6 Years or More(1) None
</TABLE>
- -------------------------
(1) Class B shares convert to Class A shares automatically after eight
years.
Selected Dealers who sell Class B shares of a Portfolio receive a
commission from Ziegler in an amount equal to 4.00% of the net asset value of
the shares sold.
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<PAGE> 58
METHODS FOR PURCHASING SHARES
All purchases must be in U.S. dollars and your check must be drawn on a
U.S. bank. Principal Preservation will not accept cash or traveler's checks. If
your check does not clear, your purchase will be canceled and you will be
responsible for any losses and any applicable fees. When you buy shares by any
type of check, wire transfer or automatic investment purchase, you may not be
able to redeem the shares for fifteen days or until your check has cleared,
whichever is later. This does not limit your right to redeem shares. Rather, it
operates to make sure that payment for the shares redeemed has been received by
Principal Preservation.
Your order for the purchase of shares will be deemed to have been
received when it is physically received by the Transfer Agent, the Distributor,
a Selected Dealer or certain other financial services firms that have entered
into an agreement with Principal Preservation appointing the firm as an agent of
Principal Preservation for the purpose of accepting share purchase and
redemption orders. Such financial services firms are authorized under this
agreement to designate other intermediaries to accept share purchase and
redemption orders on their behalf. If your purchase order is received prior to
the close of trading on the New York Stock Exchange, it will be invested at the
net asset value computed for the relevant Portfolio on that day. If your order
is received after the close of trading on the New York Stock Exchange, it will
be invested at the net asset value determined for the relevant Portfolio as of
the close of trading on the New York Stock Exchange on the next business day.
The following describes the different ways in which you may purchase
shares and the procedures you must follow in doing so.
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<PAGE> 59
<TABLE>
<CAPTION>
TO ADD TO
METHOD TO OPEN A NEW ACCOUNT AN EXISTING ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY MAIL OR PERSONAL 1. Complete the Account Application 1. Complete the Additional
DELIVERY included in this prospectus. Investment form included with
your account statement.
Personally deliver or 2. Make your check or money order Alternatively, you may write a
send by First Class or payable to: "Principal Preservation." note indicating your account
Express Mail or Private number.
Delivery Service to: Note: The amount of your purchase
must meet the applicable minimum 2. Make your check payable to
Principal Preservation initial investment account. See "Principal Preservation."
215 N. Main Street "Purchasing Shares - Minimum
West Bend WI 53095 Purchase Amounts." 3. Personally deliver or mail the
Additional Investment Form (or
3. Personally deliver or mail the note) and your check or money
completed Account Application and order.
your check or money order.
- ---------------------------------------------------------------------------------------------------------------------
AUTOMATICALLY Not Applicable USE ONE OF PRINCIPAL PRESERVATION'S
AUTOMATIC INVESTMENT PROGRAMS. Sign up
for these services when you open your
account, or call 1-800-826-4600 for
instructions on how to add them to your
existing account.
SYSTEMATIC PURCHASE PLAN. Make
regular, systematic investments into
your Principal Preservation account(s)
from your bank checking or NOW
account. See "Shareholder Services -
Systematic Purchase Plan."
AUTOMATIC DIVIDEND REINVESTMENT.
Unless you choose otherwise, all of
your dividends and capital gain
distributions automatically will be
reinvested in additional Portfolio
shares. You also may elect to have
your dividends and capital gain
distributions automatically invested in
shares of another Principal
Preservation mutual fund.
- ---------------------------------------------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE BY EXCHANGE
1-800-826-4600 Call to establish a new account by exchanging Add to an account by exchanging funds
funds from an existing Principal Preservation from another Principal Preservation
account. See "Redeeming and Exchanging account. See "Redeeming and Exchanging
Shares - Exchanging Shares." Shares - Exchanging Shares."
====================================================================================================================
</TABLE>
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<PAGE> 60
<TABLE>
<CAPTION>
TO ADD TO
METHOD TO OPEN A NEW ACCOUNT AN EXISTING ACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES You may purchase shares in a Portfolio You may purchase additional shares in a
FIRMS through a broker-dealer or other financial Portfolio through a broker-dealer or
service firm that may charge a transaction other financial services firm that may
fee. charge a transaction fee.
Principal Preservation may accept requests to Principal Preservation may accept
purchase shares into a broker-dealer street requests to purchase additional shares
name account only from the broker-dealer. into a broker-dealer street name
account only from the broker-dealer.
====================================================================================================================
</TABLE>
REDEEMING SHARES
GENERAL INFORMATION
You may have any or all of your shares redeemed as described below on
any day Principal Preservation is open for business. Class A shares will be
redeemed at net asset value. Class B shares will be redeemed at net asset value,
less the amount of the remaining contingent deferred sales charge, if any,
depending on how long you have held the shares. If your redemption order is
received prior to the close of the New York Stock 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 New York Stock
Exchange trading day.
REDEMPTIONS
The following table describes different ways that you may redeem your
shares, and the steps you should follow.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
BY TELEPHONE If you have completed the Telephone
1-800-826-4600 Redemption Authorization and signature
guarantee sections of the Account
Application, you may redeem shares by
calling Principal Preservation. If you did
not sign up for telephone redemptions when
you opened your account and would like to do
so, call, write or stop into Principal
Preservation=s offices and request,
complete, sign and return a Telephone
Redemption Authorization Form.
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
Please note: You may not 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 MAIL To redeem shares by mail, send the following
information to the Transfer Agent:
Address to:
- ----------
Principal Preservation - A written request for redemption
215 N. Main Street signed by the registered
West Bend WI 53095 owner(s) of the shares, exactly as
the account is registered,
together with the shareholder's
account number;
- The certificates for the shares
being redeemed, if any;
- Any required signature guarantees
(see "Other Information about
Redemptions" below); and
- Any additional documents which might
be required for redemptions by
corporations, executors,
administrators, trustees, guardians,
or other similar entities.
The Transfer Agent will redeem shares when it
has received all necessary documents. You
will be notified promptly by the Transfer
Agent if your redemption request cannot be
accepted. The Transfer Agent cannot accept
redemption requests which specify a
particular date for redemption or which
specify any special conditions.
SYSTEMATIC WITHDRAWAL PLAN You can set up an automatic systematic
withdrawal plan from any of your Principal
Preservation accounts. To establish
the systematic withdrawal plan, complete the
appropriate section of the Account
Application or call, write or stop by
Principal Preservation and request a
Systematic Withdrawal Plan Application Form
and complete, sign and return the Form to
Principal Preservation. See "Shareholder
Services - Systematic Withdrawal Plan."
</TABLE>
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<PAGE> 62
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
FINANCIAL SERVICES FIRMS You also may redeem shares through
broker-dealers, financial advisory
firms and other financial institutions, which
may charge a commission or other transaction
fee in connection with the redemption.
</TABLE>
RECEIVING REDEMPTION PROCEEDS
You may request to receive your redemption proceeds by mail or wire.
Follow the steps outlined below. 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.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
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. There is no charge for
this service.
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 $12.00 wire charge
from the redemption proceeds. This charge
is subject to change. You will be
responsible for any charges which your bank
may make for receiving wires.
</TABLE>
OTHER INFORMATION ABOUT REDEMPTIONS
Telephone Redemptions. By establishing the telephone redemption
service, you authorize Ziegler, as Principal Preservation's transfer agent (the
"Transfer Agent"), to: (1) act upon the instruction of any person by telephone
to redeem shares from the account for which such services have been authorized;
and (2) honor any written instructions for a change of address if accompanied by
a signature guarantee. You assume some risk for unauthorized transactions by
establishing the telephone redemption services. The Transfer Agent has
implemented procedures designed to reasonably assure that telephone instructions
are genuine. These procedures include recording telephone conversations,
requesting verification of various pieces of personal information and providing
written confirmation of such transactions. If the Transfer Agent, Principal
Preservation, or any of their employees fails to abide by these procedures,
Principal Preservation may be liable to a shareholder for losses the shareholder
suffers from any resulting unauthorized transaction(s). However, none of the
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<PAGE> 63
Transfer Agent, Principal Preservation or any of their employees will be liable
for losses suffered by a shareholder which result from following telephone
instructions reasonably believed to be genuine after verification pursuant to
these procedures. This service may be changed, modified or terminated at any
time. There is currently no charge for telephone redemptions, although a charge
may be imposed in the future.
Signature Guarantees. To protect you, the Transfer Agent and Principal
Preservation from fraud, signature guarantees are required for certain
redemptions. Signature guarantees enable the Transfer Agent to be sure that you
are the person who has authorized a redemption from your account. Signature
guarantees are required for: (1) any redemptions by mail if the proceeds are to
be paid to someone else or are to be sent to an address other than your address
as shown on Principal Preservation's records; (2) any redemptions by mail which
request that the proceeds be wired to a bank, unless you designated the bank as
an authorized recipient of the wire on your account application or subsequent
authorization form and such application or authorization includes a signature
guarantee; (3) any redemptions by mail if the proceeds are to be sent to an
address for the shareholder that has been changed within the past thirty (30)
days; (4) authorizations to redeem by telephone; and (5) requests to transfer
the registration of shares to another owner. These requirements may be waived by
Principal Preservation in certain instances.
The Transfer Agent will accept signature guarantees from all
institutions which are eligible to provide them under federal or state law.
Institutions which typically are eligible to provide signature guarantees
include commercial banks, trust companies, brokers, dealers, national securities
exchanges, savings and loan associations and credit unions. A signature
guarantee is not the same as a notarized signature.
Closing Small Accounts. If, due to redemption, your account in a
Portfolio drops below $500 for three months or more, the Portfolio has the right
to redeem your account, after giving 60 days' written notice, unless you make
additional investments to bring the account value to $1,000 or more.
Suspension of Redemptions. Principal Preservation may suspend the right
to redeem shares of one or more of the Portfolios for any period during which:
(1) the Exchange is closed or the Securities and Exchange Commission determines
that trading on the Exchange is restricted; (2) there is an emergency as a
result of which it is not reasonably practical for the Portfolio(s) to sell its
securities or to calculate the fair value of its net assets; or (3) the
Securities and Exchange Commission may permit for the protection of the
shareholders of the Portfolio(s).
Redemptions In Other Than Cash. It is possible that conditions may
arise in the future which would, in the opinion of the Board of Directors of
Principal Preservation, make it undesirable for a Portfolio to pay for all
redemptions in cash. In such cases, the Board may authorize payment to be made
in securities or other property of a Portfolio. However, the Portfolios have
obligated themselves under the 1940 Act to redeem for cash all shares
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<PAGE> 64
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.
EXCHANGING SHARES
GENERAL INFORMATION
Subject to compliance with applicable minimum investment requirements,
shares of any Principal Preservation mutual fund (including any of the
Portfolios) may be exchanged for shares of the same Class of any other
Principal Preservation mutual fund in any state where the exchange legally
may be made. Additionally, Class A shares of any Principal Preservation mutual
fund (including any of the Portfolios) may be exchanged for Class X (Retail
Class) shares of the Cash Reserve Portfolio, and vice versa. Before engaging in
any exchange, you should obtain from Principal Preservation and read the
current prospectus for the mutual fund into which you intend to exchange.
Principal Preservation charges a $5.00 administrative fee for all exchanges.
An exchange of shares is considered a redemption of the shares of the
Principal Preservation mutual fund from which you are exchanging, and a purchase
of shares of the Principal Preservation mutual fund into which you are
exchanging. Accordingly, you must comply with all of the conditions on
redemptions for the shares being exchanged, and with all of the conditions on
purchases for the shares you receive in the exchange. Moreover, for tax purposes
you will be considered to have sold the shares exchanged, and you will realize a
gain or loss for federal income tax purposes on that sale.
SALES CHARGES APPLICABLE TO EXCHANGES
Exchanging Class A Shares. If the exchange involves Class A shares,
the standard front-end sales charge applicable to purchases of Class A
shares of the Principal Preservation mutual fund into which the exchange is
being made (as disclosed in the then current prospectus for that Principal
Preservation mutual fund) will be charged in connection with the exchange, less
any front-end sales charge previously paid by the shareholder with respect to
the shares being exchanged, if any. For example, if you were exchanging Class A
shares of the Tax-Exempt Portfolio for Class A shares of the S&P 100 Plus
Portfolio, you would pay a front-end sales charge on the exchange in an amount
equal to the difference between: (a) the front-end sales charge you paid when
you purchased your S&P 100 Plus Portfolio shares (a maximum of 5.25%); minus (b)
the front-end sales charge applicable to your purchase of Class A shares of the
Tax-Exempt Portfolio (a maximum of 3.50%), or a maximum of 1.75%. However, if
the shares you are exchanging represent an investment held for at least six
months in any one or more Principal Preservation mutual funds (other than the
Cash Reserve Portfolio), then Principal Preservation will not charge any
additional front-end sales charge in connection with the exchange.
Exchanging Class B Shares. You may exchange Class B shares in a
Portfolio only for Class B shares of another Portfolio. You will not pay a
contingent deferred sales charge on any such exchange.
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<PAGE> 65
However, the new Class B shares you receive in the exchange will remain subject
to a contingent deferred sales charge based on the period of time for which you
held the Class B shares you are exchanging.
RULES AND REQUIREMENTS FOR EXCHANGES
In order to effect an exchange on a particular business day,
Principal Preservation must receive an exchange order in good form no later
than 3:00 p.m. Eastern Time. 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 at adversely affects their rights
under this exchange privilege.
An excessive number of exchanges may be disadvantageous to Principal
Preservation. Therefore, Principal Preservation reserves the right to terminate
the exchange privilege of any shareholder who makes more than three exchanges in
any twelve consecutive month period or who makes more than one exchange during
any calendar quarter.
The following additional rules and requirements apply to all exchanges:
- The shares you receive in the exchange must be of the same
Class as the shares you are exchanging, except that Class A
shares of any Portfolio may be exchanged for Class X shares of
the Cash Reserve Portfolio and vice versa.
- The account into which you wish to exchange must be identical
to the account from which you are exchanging (meaning the
account into which you are exchanging must be of the same type
as the account from which you are exchanging, and the
registered owner(s) of the account into which you are
exchanging must have the same name(s), address and taxpayer
identification or social security number as the registered
owner(s) on the account from which you are exchanging).
- The amount of your exchange must meet the minimum initial or
minimum additional investment amount of the Principal
Preservation mutual fund into which you are exchanging.
- If the shares being exchanged are represented by a share
certificate, you must sign the certificate(s), have your
signature guaranteed and return the certificate(s) with your
Exchange Authorization Form.
Methods for Exchanging Shares. Set forth below is a description of the
different ways you can exchange shares of Principal Preservation mutual funds
and procedures you should follow when doing so.
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<PAGE> 66
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
BY MAIL OR PERSONAL DELIVERY Mail your exchange order to Principal
Preservation.
Personally deliver or send by
first class or express mail or
private delivery addressed to:
Please Note: Principal Preservation must
receive your exchange order no later than
3:00 p.m. Eastern Time in order to effect
Principal Preservation, 215 N. an exchange on that business day.
Main Street, West Bend, WI
53095
BY TELEPHONE You receive telephone exchange privileges
when you open your account. To decline the
1-800-826-4600 telephone exchange privilege, you must check
the appropriate box on the Application Form
when you open your account.
Call Principal Preservation to order the
desired exchange and, if required, to
establish a new account for the Principal
Preservation mutual fund into which you wish
to exchange.
Telephone exchanges are not available if you
have certificated shares.
FINANCIAL SERVICES FIRMS You may exchange shares through your
broker-dealer or other financial services
firm, which may charge a transaction fee.
</TABLE>
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 by calling
Principal Preservation at 1-800-826-4600.
Systematic Purchase Plan. A Systematic Purchase Plan ("SPP") may be
established at any time with a minimum initial investment of $100 and minimum
subsequent monthly investments of $100. The minimum subsequent monthly
investment is reduced to $50 for IRAs, Keogh plans, self-directed retirement
plan accounts and custodial accounts under the Uniform Gifts/Transfers to Minors
Act until your account balance reaches $500, after which the minimum is further
reduced to $25. The minimum subsequent investment is also reduced to $50 for all
other accounts with balances of $1,000 or more. By participating in the SPP, you
may automatically make purchases of Principal Preservation shares on a regular,
convenient basis. Under the SPP, your bank or other financial institution honors
pre-
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authorized 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.
Systematic Withdrawal Plan. You may establish a systematic 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 systematic withdrawal plan involves the planned
redemption of shares on a periodic basis by receiving either fixed or variable
amounts at periodic intervals. The minimum amount you may receive under a
systematic withdrawal plan is $150 per month. Normally, you would not make
regular investments at the same time you are receiving systematic 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 systematic withdrawal plan at any time by written notice
to Principal Preservation or the Transfer Agent.
Reinvestment of Distributions or Interest Payments. Unit holders of
Ziegler-sponsored unit investment trusts, holders of Ziegler Mortgage
Securities, Inc. II bonds and holders of bonds underwritten by Ziegler may
purchase shares of Principal Preservation by automatically reinvesting
distributions from their unit investment trust, reinvesting principal or
interest from their Ziegler Mortgage Securities, Inc. II bonds, or reinvesting
interest from the bonds underwritten by Ziegler, as the case may be. Unit
holders and bondholders desiring to participate in this plan should contact the
Distributor for further information.
Tax-Sheltered Retirement Plans. Shares of the Portfolios are available
for purchase in connection with the following tax-sheltered plans: (1)
Individual Retirement Accounts (including Education IRAs, Roth IRAs, Simplified
Employee Pension Plan Accounts (SEP-IRAs) and Savings Incentive Match Plan for
Employees Accounts (SIMPLE-IRAs)); (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. Conventional IRA investors do not receive
the benefits of long-term capital gains treatment when funds are distributed
from their account.
Shareholder Statements and Reports. Shareholders receive confirmations
at least quarterly regarding their transactions and reports at least semi-
annually setting forth various financial and other information related to
the Portfolios.
For further information regarding plan administration, custodial fees
and other details, investors should contact the Distributor.
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OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE PER SHARE
Net asset value per share of each Portfolio is determined by adding up
the total value of the Portfolio's investments and other assets and subtracting
any of its liabilities, or debts, and then dividing by the number of outstanding
shares of the Portfolio. The net asset value per share is calculated each
business 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 regular trading on the
Exchange (4:00 p.m. Eastern time) for the S&P 100 Plus, Dividend Achievers,
Select Value and PSE Tech 100 Index Portfolios, 2:30 p.m. Eastern time for the
Tax-Exempt Portfolio, and 3:00 p.m. Eastern time for the Government Portfolio.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND REINVESTMENTS
Dividends from net investment income will be declared daily and paid
monthly in the Government and Tax-Exempt Portfolios, and will be declared and
paid quarterly in the S&P 100 Plus, Select Value, Dividend Achievers and PSE
Tech 100 Index Portfolios. Dividends may be taken in cash or additional shares
at net asset value (without a sales charge). You may also direct the Transfer
Agent to invest the dividends in shares of any other Principal Preservation
portfolio for which you have an account. The investment occurs on the same day
as the dividend distribution date. Unless you have elected in writing to the
Transfer Agent to receive dividends and capital gain distributions in cash, they
will be automatically reinvested in additional shares of the relevant Portfolio.
Capital gains distributions, if any, in all Portfolios will be declared
annually and normally will be paid within 45 days after the end of the fiscal
year.
TAX STATUS
Each Portfolio intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). In order
to so qualify, each Portfolio must satisfy a number of requirements, including
the requirement that at least 90% of the Portfolio's gross income be derived
from dividends, interest and gains from the sale or other disposition of stock
or other securities. In determining these gross income requirements, a loss from
the sale or other disposition of securities does not enter into the computation.
Each Portfolio will distribute substantially all of its net income and
capital gains. Regulated investment companies, in most instances, pay a
nondeductible four percent excise tax on the amount, if any, by which actual
distributions of investment income and capital gains are less than distributions
required by the Code. Principal Preservation intends to make distributions in a
manner which will avoid the excise tax. The federal income tax status of all
distributions will be reported to shareholders annually. That part of the
Tax-Exempt Portfolio's
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net investment income which is attributable to interest from tax-exempt
securities and which is distributed to shareholders will be designated as an
"exempt-interest dividend" under the Code. A Portfolio's distributions are
taxable when they are paid, whether a shareholder takes them in cash or
reinvests them in additional shares, except that distributions declared in
December and paid in January each year are taxable as if paid on December 31 of
the earlier year.
The exemption of exempt-interest dividends for federal income tax
purposes does not necessarily result in exemption under the tax laws of any
state or local taxing authority which vary with respect to the taxation of such
dividend income. It is possible that some states will exempt from tax that
portion of the exempt-interest dividend which represents interest received by
the Tax-Exempt Portfolio on that state's securities. Therefore, the Tax-Exempt
Portfolio will report annually to its shareholders the percentage of interest
income received on a state-by-state basis. You should consult with your tax
adviser regarding the extent, if any, to which exempt-interest dividends are
exempt under state laws applicable to your dividend distributions.
A portion of the net investment income of the Government, S&P 100 Plus,
Dividend Achievers and PSE Tech 100 Index Portfolios will qualify for the 70%
dividends received deduction for corporations.
Each series of a series company, such as Principal Preservation, is
treated as a separate entity for federal income tax purposes so that the net
realized capital gains and losses of Principal Preservation's separate
portfolios are not combined.
The foregoing is only a summary of some of the more important tax
considerations generally affecting the Portfolios and their 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: Tax-Exempt Portfolio,
Government Portfolio, S&P 100 Plus Portfolio, Dividend Achievers Portfolio,
Select Value Portfolio, PSE Tech 100 Index Portfolio, Wisconsin Tax-Exempt
Portfolio and Cash Reserve Portfolio, consisting of 50 million shares in each of
the first six Portfolios and 400 million in the Cash Reserve Portfolio. The
Tax-Exempt and Government Portfolios offer only Class A shares. Shares of the
S&P 100 Plus, Dividend Achievers, Select Value and PSE Tech 100 Index Portfolios
are divided into Class A shares and Class B shares. Shares of the Cash Reserve
Portfolio also are divided into two separate classes, Class X Common Stock (the
Retail Class) and Class Y Common Stock (the Institutional Class), consisting of
200 million shares each. The Board of Directors of Principal Preservation may
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authorize the issuance of additional series and, within each series, individual
classes, and may increase or decrease the number of shares in each series or
class.
Each Portfolio's Classes of shares represent interests in the assets of
the Portfolio and have identical dividend, liquidation and other rights. The
separate share Classes have the same terms and conditions, except each Class
within a Portfolio bears its separate distribution and shareholder servicing
expenses. At the discretion of Principal Preservation's Board of Directors, each
class may pay a different share of other expenses, not including advisory or
custodial fees or other expenses related to the management of the Portfolio=s
assets, if each class incurs the expenses in different amounts, or if a class
receives services of a different kind or to a different degree than the other
class within the relevant Portfolio. Each Portfolio allocates all other expenses
to each class of its shares on the basis of the net asset value of that class in
relation to the net asst value of the particular Portfolio.
Each share of Principal Preservation, when issued and paid for in
accordance with the terms of the offering, will be fully paid and nonassessable.
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 Principal Preservation has one vote on each matter
presented to shareholders. All shares of Principal Preservation vote together on
matters that affect all shareholders uniformly, such as in the election of
directors. On matters affecting an individual series (such as approval of
advisory or sub-advisory contracts and changes in fundamental policies of a
series) a separate vote of the shares of that series is required. On matters
that uniquely affect a particular class of shares (such as an increase in 12b-1
fees for that Class), a separate vote by the shareholders of that Class of
shares is required. Shares of a series or class are not entitled to vote on any
matter not that does not affect it.
As used in the Prospectus, the phrase "majority vote" of the
outstanding shares of a Class, Portfolio or Principal Preservation means the
vote of the lesser of: (1) 67% of the shares of the Class, Portfolio or
Principal Preservation, as the case may be, 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 Class, Portfolio or
Principal Preservation, as the case may be.
As a Maryland corporation, Principal Preservation is not required to
hold, and in the future does not plan to hold, annual shareholder meetings
unless required by law or deemed appropriate by the Board of Directors. However,
special meetings may be called for purposes such as electing or removing
Directors, changing fundamental policies or approving an investment advisory
contract.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
Purchase and sale orders for portfolio securities may be effected
through brokers, although it is expected that transactions in debt securities
will generally be conducted with dealers acting as principals. Purchases and
sales of securities on a stock exchange are effected through brokers who charge
a commission for their services. Purchases and sales of securities traded
over-the-counter may be effected through brokers or dealers. Brokerage
commissions on securities and options are subject to negotiation between
Principal Preservation and the broker.
Allocation of transactions, including their frequency, to various
dealers is determined by the Advisors in their best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
and efficient execution of orders in an effective manner at the most favorable
price. Principal Preservation may also consider sales of shares of its various
series as a factor in the selection of broker-dealers, subject to the policy of
obtaining best price and execution.
DISTRIBUTION EXPENSES
In addition to the front-end or contingent deferred sales charges that
apply to the purchase of shares, each Portfolio is authorized under a
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act to use
a portion of its assets to finance certain activities relating to the
distribution of its shares to investors. The Plan permits payments to be made
by each Portfolio to the Distributor to reimburse it for expenditures incurred
by it in connection with the distribution of each Portfolio's shares to
investors, and to provide compensation to the Distributor in connection with
sales of Class B shares. The reimbursement payments include, but are not
limited to, payments made by the Distributor to selling representatives or
brokers as a service fee, and costs and expenses incurred by the Distributor for
advertising, preparation and distribution of sales literature and prospectuses
to prospective investors, implementing and operating the Plan and performing
other promotional or administrative activities on behalf of each of the
Portfolios. Plan payments may also be made to reimburse the Distributor for its
overhead expenses related to distribution of the Portfolio's shares. No
reimbursement may be made under the Plan for expenses of the past fiscal years
or in contemplation of expenses for future fiscal years.
Under the Plan, each Portfolio assesses a service fee of up to 0.25 of
1% of the Portfolio's average daily net assets for both Class A and Class B
shares. This shareholder servicing fee is used to reimburse the Distributor
for certain shareholder services as described above. In addition, the Portfolios
that offer Class B shares assess a distribution fee of 0.75 of 1% of the
portion of the Portfolio's average daily net assets represented by its Class B
shares. This distribution fee is compensatory in nature, meaning the
Distributor is entitled to receive the fee regardless of whether its costs and
expenses equal or exceed the fee. Class B shares automatically convert to
Class A shares eight years after purchase, after which time the shares no
longer are subject to this distribution fee but, like all other Class A shares,
remain subject to the service fee.
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The Plan continues in effect, if not sooner terminated, for successive
one-year periods, provided that its continuance is specifically approved by the
vote of the Directors, including a majority of the Directors who are not
interested persons of any of the Advisors. For further information regarding the
Plan, see "Distribution Expenses" in the Statement of Additional Information.
PERFORMANCE INFORMATION
Performance Information. From time to time the Portfolios may advertise
their "yield" and "total return." Yield is based on historical earnings and
total return is based on historical distributions; neither is intended to
indicate future performance. The "yield" of a Portfolio refers to the income
generated by an investment in that Portfolio over a one month period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during the month is
assumed to be generated each month over a 12-month period and is shown as a
percentage of the investment. "Total return" of a Portfolio refers to the
average annual total return for one, five and ten year periods (or so much
thereof as a Portfolio has been in existence). Total return is the change in
redemption value of shares purchased with an initial $10,000 investment,
assuming the reinvestment of dividends and capital gains distributions, after
giving effect to the maximum applicable sales charge. In addition, the
Tax-Exempt Portfolio may advertise its "tax equivalent yield," which is
computed by dividing that portion of the Portfolio's yield which is tax-exempt
by one minus a stated income tax rate and adding the product to that portion,
if any, of the yield of the Portfolio which is not tax-exempt. Performance
information should be considered in light of the Portfolios' investment
objectives and policies, characteristics and quality of the Portfolios and the
market conditions during the time period, and should not be considered as a
representation of what may be achieved in the future. Further information is
contained in the Statement of Additional Information.
PORTFOLIO RATING
From time to time the Portfolios may obtain and use a rating from a
nationally recognized statistical rating organization. For a description of
such ratings, see "Portfolio Ratings" in the Statement of Additional
Information.
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PRINCIPAL PRESERVATION PORTFOLIOS, INC.
TERMS AND CONDITIONS OF GENERAL APPLICATION FORM
ADDITIONAL INVESTMENTS
After a Shareholder account is established, additional investments in
the amount of $50 or more ($25 or more for IRAs, Keogh Plans, Self-Directed
Retirement Plan Accounts, and Custodial Accounts under the Uniform
Gifts/Transfers to Minors Act) may be made to that existing account at any time.
Additional investments will be applied to the purchase of full and fractional
shares of the specified Portfolio at the public offering price. These
investments should be accompanied by an investment transmittal stub (attached to
any previously received shareholder confirmation) and mailed directly to B.C.
Ziegler and Company, 215 North Main Street, West Bend, Wisconsin 53095 (the
Transfer Agent). Additional investments can also be made through your dealer.
INFORMATION PERTAINING TO THE STATEMENT OF INTENTION
Subject to conditions specified below, each purchase during the
13-month period subsequent to the effective date of this application will be
made at the public offering price applicable to a single transaction of the
dollar amount indicated, as described in the then effective Prospectus. The
offering price may be further reduced under the Combined Purchase and Cumulative
Investment Privilege if the Transfer Agent is advised of any shares previously
purchased and still owned. You understand that you may, at any time during the
period, revise upward your stated intention by submitting a written request to
that effect. Such revision shall provide for the escrowing of additional shares.
The original period of the Statement, however, shall remain unchanged. Each
separate purchase made pursuant to the Statement is subject to the terms and
conditions contained in the Prospectus in effect at the time of that particular
purchase. It is understood that you make no commitment to purchase shares, but
that if purchases so made within 13 months from this date do not aggregate the
amount specified, you will pay the increased amounts of sales charge prescribed
in the terms of escrow. You or your dealer must refer to this Statement of
Intention in placing each future order for shares while this Statement is in
effect. It is understood that when remitting funds directly to the Transfer
Agent for investment in your account, specific reference must be made to this
Statement. This cancels and supersedes any previous instructions which you may
have given inconsistent with the above. You have received a copy of the current
Prospectus to which this application relates.
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TERMS OF ESCROW TO THE STATEMENT OF INTENTION
1. To assure compliance with provisions of the Investment Company Act
of 1940, out of the initial purchase (or subsequent purchase if necessary) 5% of
the dollar amount indicated on the reverse side hereof will be held in escrow in
the form of shares (computed to the nearest full share at the applicable public
offering price) registered in your name. These shares will be held by the
Transfer Agent and be subject to the terms of escrow.
2. If total purchases pursuant to this Statement equal the amount of
the specified expected aggregate purchase, escrow shares will be released from
restriction and be deposited to your account.
3. If the total purchases pursuant to this Statement are less than
the amount specified, you shall remit to the Dealer an amount equal to the
difference between the dollar amount of sales charge actually paid and the
amount of sales charge which would have been paid on the total purchases if all
such purchases had been made at a single time. If the Distributor or the dealer,
within 10 business days after request, does not receive this amount, they will
instruct the Transfer Agent to redeem an appropriate number of escrow shares to
realize such difference. If the proceeds from this redemption are inadequate,
you will be liable to the Distributor or the dealer for the difference. The
remaining shares after the redemption will be deposited to your account unless
otherwise instructed.
4. You hereby irrevocably constitute and appoint the Transfer Agent
as attorney to surrender for redemption any or all shares on the books of
Principal Preservation, under the conditions previously outlined, with full
power of substitutions in the premises.
5. Any dividends and capital gain distributions declared by Principal
Preservation with respect to escrowed shares will be added to the escrow
account.
COMBINED PURCHASE AND CUMULATIVE INVESTMENT PRIVILEGE
Shares may be purchased at the offering price applicable to the total
of (a) dollar amount then being purchased plus (b) an amount equal to the value
of the combined holdings of all series of Principal Preservation that have a
sales charge of (1) an individual; (2) an individual, his spouse and their
children under the age of 21 purchasing securities for his or their own account;
(3) a trustee or other fiduciary purchasing for a single trust, estate or single
fiduciary account; (4) a pension, profit sharing or other employee benefit plan
qualified or non-qualified under Section 401 of the Internal Revenue Code (the
"Code"); (5) tax-exempt organizations enumerated in Section 501(c)(3) or (13) of
the Code; (6) employee benefit plans qualified under Section 401 of the Code of
a single employer or of employers who are "affiliated persons" of each other
within the meaning of Section 2(a)(3)(c) of the Securities Act of 1933, as
amended; or (7) any other organized group of persons, whether incorporated or
not, provided the organization has been in existence for at least six months and
has some
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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
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$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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COVER PAGE................................................................ 1
QUICK REFERENCE........................................................... 2
TAX-EXEMPT PORTFOLIO...................................................... 8
GOVERNMENT PORTFOLIO...................................................... 12
S&P 100 PLUS PORTFOLIO.................................................... 16
DIVIDEND ACHIEVERS PORTFOLIO.............................................. 21
SELECT VALUE PORTFOLIO.................................................... 26
PSE TECH 100 INDEX PORTFOLIO.............................................. 31
ADDITIONAL INVESTMENT PRACTICES AND RISKS................................. 36
INVESTMENT RESTRICTIONS................................................... 45
MANAGEMENT................................................................ 46
PURCHASING SHARES......................................................... 49
REDEEMING SHARES.......................................................... 60
EXCHANGING SHARES......................................................... 64
SHAREHOLDER SERVICES...................................................... 66
OTHER INFORMATION......................................................... 68
</TABLE>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISORS
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Skyline Asset Management, L.P.
(Sub-Advisor to Select Value Portfolio)
311 South Wacker Drive
Suite 4500
Chicago, Illinois 60606
DISTRIBUTOR, ACCOUNTING/PRICING AGENT, AND
TRANSFER AND DIVIDEND DISBURSING AGENT
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
CUSTODIAN
Firstar Trust Company
777 East Wisconsin Avenue
Milwaukee, WI 53202
COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
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APPENDIX A
COMPOSITION OF THE S&P 100 INDEX*
(As of May 29, 1998)
<TABLE>
<CAPTION>
PERCENT
TICKER OF TOTAL
SYMBOL COMPANY NAME COMPOSITION
- ------ ------------ -----------
<S> <C> <C>
ALT Allegheny Teledyne Inc. 0.12
AA Aluminum Company of America 0.29
AEP American Electric Power Company, Inc. 0.20
AXP American Express Company 1.30
AGC American General Corporation 0.44
AIG American International Group, Inc. 2.28
T American Telephone and Telegraph Company 2.62
AIT Ameritech Corporation 1.22
AN Amoco Corporation 1.07
AMP AMP Incorporated 0.20
ARC Atlantic Richfield Company 0.64
AVP Avon Products, Inc. 0.27
BHI Baker-Hughes Incorporated 0.16
BAC BankAmerica Corporation 1.90
BAX Baxter International Inc. 0.42
BEL Bell Atlantic Corporation 1.86
BS Bethlehem Steel Corporation 0.03
BDK Black & Decker Corporation 0.13
BA The Boeing Company 1.48
BCC Boise Cascade Corporation 0.04
BMY Bristol-Meyers Squibb Company 2.80
BC Brunswick Corporation 0.07
BNI Burlington Northern Santa Fe Corporation 0.37
CEN Ceridian Corporation 0.09
CHA Champion International 0.11
C Chrysler Corporation 0.95
CI CIGNA Corporation 0.40
CSCO Cisco Systems 2.40
CCI Citicorp 1.76
CGP Coastal Corporation 0.18
KO Coca-Cola Company 4.85
CL Colgate-Palmolive Company 0.65
COL Columbia-HCA Healthcare 0.56
CSC Computer Sciences Corporation 0.21
DAL Delta Air Lines, Inc. 0.20
DEC Digital Equipment Corporation 0.21
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
<S> <C> <C>
DOW Dow Chemical Company 0.53
DD DuPont (E.I.) de Nemours and Company 2.31
EK Eastman Kodak Company 0.60
ETR Entergy Corporation 0.16
XON Exxon Corporation 4.62
FDX FDX Holding Corp. 0.23
FCN First Chicago NBD Corporation 0.67
FLR Fluor Corporation 0.10
F Ford Motor Company 1.65
GD General Dynamics Corporation 0.13
GE General Electric Company 7.27
GM General Motors Corporation 1.14
HAL Halliburton Company 0.34
HET Harrah+s Entertainment 0.06
HRS Harris Corporation 0.09
HIG Hartford Financial Services Group 0.31
HNZ Heinz (H.J.) Company 0.49
HWP Hewlett-Packard Company 1.75
HM Homestake Mining Company 0.06
HON Honeywell Inc. 0.26
IBM International Business Machines Corporation 3.07
IFF International Flavors & Fragrances Inc. 0.13
IP International Paper Company 0.35
INTC Intel Corporation 3.40
JNJ Johnson & Johnson 2.45
KM Kmart Corporation 0.25
LTD Limited (The), Inc. 0.19
MKG Mallinckrodt Group Inc. 0.06
MAY May Department Stores Company 0.38
MCD McDonald+s Corporation 1.18
MCIC MCI Communications Corporation 0.97
MRK Merck & Co., Inc. 3.70
MER Merrill Lynch & Co., Inc. 0.85
MSFT Microsoft Corporation 5.49
MMM Minnesota Mining & Manufacturing Company 0.97
MOB Mobil Corporation 1.84
MTC Monsanto Company 0.85
NSM National Semiconductor Corporation 0.07
NB Nations Bank 2.21
NSC Norfolk Southern Corporation 0.31
NT Northern Telecom Limited 0.88
OXY Occidental Petroleum Corporation 0.24
ORCL Oracle Corp. 0.61
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
PEP PepsiCo, Inc. 1.64
PNU Pharmacia & Upjohn, Inc. 0.58
PRD Polaroid Corporation 0.04
RAL Ralston Purina Group 0.28
RTNB Raytheon Company 0.48
ROK Rockwell International Corporation 0.29
SLB Schlumberger Limited 1.08
S Sears, Roebuck & Co. 0.64
SO Southern Company 0.47
TAN Tandy Corporation 0.11
TEK Tektronix, Inc. 0.05
TXN Texas Instruments Inc. 0.51
DIS The Walt Disney Company 2.02
TOY Toys -R+ Us, Inc. 0.20
UCM Unicom Corporation 0.19
UIS Unisys Corporation 0.15
UTX United Technologies Corporation 0.54
WMT Wal-Mart Stores, Inc. 3.30
WY Weyerhaeuser Company 0.25
WMB Williams Companies, Inc. 0.35
XRX Xerox Corporation 1.13
</TABLE>
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APPENDIX B
COMPOSITION OF THE PSE TECHNOLOGY INDEX
(As of May 29, 1998)
<TABLE>
<CAPTION>
PERCENT
TICKER OF TOTAL
SYMBOL COMPANY NAME COMPOSITION
- ------ ------------ -----------
<S> <C> <C>
COMS 3Com Corp 0.67
ACN Acuson Corp 0.51
ADPT Adaptec Inc 0.40
ADCT ADC Telecom Inc 0.75
ADBE Adobe Systems Inc 1.06
AMD Advanced Micro Devices 0.52
AOL America Online 2.21
AMGN Amgen Inc 1.61
AMP AMP Inc 1.01
ADI Analog Devices 0.66
AAPL Apple Computer Inc 0.71
APM Applied Magnetics 0.15
AMAT Applied Materials 0.85
ASND Ascend Communications 1.15
ADSK Autodesk Inc 1.13
AUD Automatic Data Processing 1.69
BAY Bay Networks Inc 0.73
BGEN Biogen Inc 1.17
BMET Biomet Inc 0.77
BMCS BMC Software Inc 1.22
BORL Borland International 0.22
BSX Boston Scientific 1.69
CS Cabletron Systems 0.34
CDN Cadence Design Systems 0.94
CD Cendant Corp 0.58
CNTO Centocor Inc 1.03
CEN Ceridian Corp 1.43
CHIR Chiron Corp 0.48
CSCO Cisco Systems 2.01
COHR Coherent Inc 0.61
CPQ Compaq Computer 0.73
CA Computer Associates 1.39
CSC Computer Sciences 1.38
CQ Comsat Corp 0.93
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
CY Cypress Semiconductor 0.23
DGN Data General 0.40
DELL Dell Computer 2.19
DEC Digital Equipment 1.46
DIGI DSC Communications Corp 0.45
EDS Electronic Data Systems 0.97
EMC EMC Corp 1.10
ESCC Evans & Sutherland 0.67
EXBT Exabyte Corp 0.26
GTW Gateway 2000 Inc 1.20
GNE Genentech Inc 1.83
GSX General Signal Corp 1.09
GENZ Genzyme Corp 0.73
HRS Harris Corp 1.28
HWP Hewlett-Packard 1.65
HON Honeywell Inc 2.23
IMNX Immunex Corp 1.64
IFMX Informix Corp 0.18
INTC Intel Corp 1.90
INGR Intergraph Corp 0.23
IBM International Business Machines 3.12
KLAC KLA-Tencor Corp 0.90
KMAG Komag Inc 0.26
KLIC Kulicke & Soffa 0.45
LRCX Lam Research 0.63
LLTC Linear Technology 1.86
LU Lucent Technologies 1.88
MDT Medtronic Inc 1.48
MENT Mentor Graphics 0.29
MU Micron Technology 0.63
MSFT Microsoft Corp 2.25
MIL Millipore Corp 0.89
MOT Motorola Inc 1.41
NSM National Semiconductor 0.43
NN Newbridge Networks 0.75
NOVL Novell Inc 0.28
NVLS Novellus Systems 1.00
ORCL Oracle Corp 0.63
PSFT PeopleSoft Inc 1.16
PKN Perkin-Elmer 1.82
AQM QMS Inc 0.12
QNTM Quantum Corp 0.58
SFA Scientific Atlanta 0.59
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SEG Seagate Technology Inc 0.62
SRM Sensormatic Electronics Corp 0.34
SMS Shared Medical Systems 1.93
SGI Silicon Graphics 0.32
STJ St Jude Medical 0.95
SMSC Standard Microsystems 0.29
STK Storage Technology Corp 2.23
SRA Stratus Computer 0.96
SUNW Sun Microsystems 1.06
SYBS Sybase Inc 0.21
SYMC Symantec Corp 0.63
SBL Symbol Technologies Inc 0.93
SSAX System Software 0.19
TEK Tektronix Inc 1.02
TLAB Tellabs Inc 1.82
TER Teradyne Inc 0.82
TXN Texas Instruments 1.36
THI Thermo Instrument Systems 0.74
UIS Unisys Corp 0.65
VAR Varian Associates Inc 1.28
XRX Xerox Corp 2.73
XLNX Xilinx Inc 1.01
XOMA Xoma Corp 0.13
</TABLE>
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