<PAGE> 1
As filed with the Securities and Exchange Commission on October 15, 1998
1933 Act Registration No. 33-12
1940 Act File No. 811-4401
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 46
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 48
(Check appropriate box or boxes)
-------------------
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
(Exact name of registrant as specified in charter)
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (414) 334-5521
ROBERT J. TUSZYNSKI
President and Director
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
(Name and Address of Agent for Service)
Copy to:
CONRAD G. GOODKIND, ESQ.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Approximate Date of Proposed Public Offerings: As soon as practicable
following the effective date of this amendment to the registration statement.
It is proposed that this filing will become effective
___ immediately upon filing pursuant to paragraph (b)
___ on (Date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2) of rule 485.
___
If appropriate, check the following:
___ this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment
-------------------
Registrant has elected to register an indefinite number of shares of
Common Stock, $0.001 par value, pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Registrant's Rule 24f-2 Notice for the year ended
December 31, 1997 was filed on February 26, 1998.
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<PAGE> 2
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
PROSPECTUS - JANUARY 1, 1999
This Prospectus has information about the Managed Growth Portfolio (the
"Portfolio"), a mutual fund within the Principal Preservation Portfolios, Inc.
family of funds.
The investment objective of the Managed Growth Portfolio is long-term
capital appreciation. The Portfolio invests in publicly traded common stocks
based on their growth characteristics. The Portfolio's focus is on established
U.S. companies whose market capitalizations are within the S&P Midcap 400 Index
capitalization range. Ziegler Asset Management, Inc. is the Portfolio's
investment adviser, and Geneva Capital Management Ltd. is its sub-adviser,
primarily responsible for the day-to-day management of the Portfolio's
investments. As used in this Prospectus, the "Adviser" collectively means
Ziegler Asset Management, Inc. and Geneva Capital Management Ltd.
You can buy either Class A or Class B shares of the Portfolio. You pay a
sales charge when you buy Class A shares (a front-end sales load). You pay a
sales charge when you sell (redeem) Class B shares that you have held for less
than six years (a contingent deferred sales load).
===============================================================================
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
===============================================================================
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PORTFOLIO SUMMARY ....................................................... 1
Investment Objective/Goal/Strategies ........................... 1
Risks ......................................................... 2
Expenses ....................................................... 2
MANAGEMENT ............................................................. 4
Investment Adviser ............................................. 4
Sub-Adviser .................................................... 4
Portfolio Managers ............................................. 5
HOW TO PURCHASE SHARES .................................................. 5
General ....................................................... 5
Minimum Purchase Amounts ...................................... 5
Two Classes of Shares .......................................... 7
Purchasing Class A Shares ..................................... 7
Purchasing Class B Shares ...................................... 11
Distribution Expenses ......................................... 12
Methods for Purchasing Shares .................................. 13
HOW TO REDEEM SHARES ................................................... 15
General Information ........................................... 15
Redemptions .................................................... 15
Receiving Redemption Proceeds .................................. 17
Other Information About Redemptions ........................... 17
EXCHANGING SHARES ....................................................... 19
General Information ........................................... 19
Sales Charges Applicable to Exchanges ......................... 19
Rules and Requirements for Exchanges ......................... 20
Methods for Exchanging Shares ................................. 21
SHAREHOLDER SERVICES ................................................... 22
Systematic Purchase Plan ...................................... 22
Systematic Withdrawal Plan .................................... 22
Reinvestment of Distributions or Interest Payments ............. 22
Tax-Sheltered Retirement Plans ................................. 23
Shareholder Statements and Reports ............................. 23
OTHER INFORMATION ....................................................... 23
Determination of Net Asset Value Per Share ..................... 23
Dividends, Capital Gains Distributions and Reinvestments ....... 23
Tax Status ..................................................... 24
Principal Preservation Portfolios ............................. 24
</TABLE>
ToC-1
<PAGE> 4
PORTFOLIO SUMMARY
INVESTMENT OBJECTIVE/GOAL/STRATEGIES
The Managed Growth Portfolio's investment objective is long-term capital
appreciation. It pursues this goal by investing in publicly traded common
stocks. The principal investment strategy of the Portfolio is to invest in
established companies based on their growth characteristics. Companies with
consistent records of performance, experienced management and accelerated
earnings history are selected for investment if their potential for growth is
believed to be superior to the broader securities markets and others in their
industries. The Portfolio's investment focus is on U.S. companies whose market
values are within the market capitalization range of the companies comprising
the S&P Midcap 400 Index (currently $500 million to $20 billion), although the
Portfolio may invest in companies outside this range. The Adviser believes that
these middle market capitalization (mid-cap) stocks provide better long-term
returns than large company stocks and lower risk than small company stocks.
In selecting growth stocks for the Portfolio, the Adviser emphasizes
"bottom-up" fundamental analysis (i.e., developing an understanding of the
specific company through research, meetings with management and analysis of its
financial statements and public disclosures). The Adviser's "bottom up" approach
is supplemented by "top down" considerations (i.e., reviewing general economic
conditions and analyzing their effect on various industries). The Adviser also
screens out high risk ideas such as securities that are not traded on U.S.
exchanges, turnaround stories, initial public offerings and companies that have
less than three years of operating history or do not have earnings. The Adviser
then focuses on companies that are outperforming or growing faster than others
in their industry, and applies a proprietary valuation model to determine their
values compared to the broader securities markets. Stocks that meet the above
criteria are reviewed and approved by the portfolio management team before they
are purchased for the Portfolio. The Adviser also seeks industry diversification
in its investment approach, and invests in companies that have leading positions
in industries that offer growth potential.
The Adviser buys stocks for the Portfolio with the intent of holding them
for the long term. It does not engage in market-timing or short-term trading
strategies. As a result, the portfolio turnover rate for the Portfolio is
generally expected to be under 50%. More frequent trading would lead to
increased brokerage commissions and other transaction costs and possibly greater
capital gains or losses which would pass through to the Portfolio's
shareholders. The Adviser generally will sell some or all of a company's stock
if the Adviser perceives a major change in the long-term outlook for the company
or its industry, if the stock becomes extremely overvalued based on the
Adviser's proprietary valuation model, if the market value of the particular
holding represents more than 5% of the Portfolio's total assets or if more than
15% of the Portfolio's total assets are invested in a single industry (based on
SIC code).
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The Portfolio may, from time to time, invest in short-term instruments such
as U.S. Treasury bills, certificates of deposit, high quality commercial paper
and money market funds, to maintain liquidity to meet anticipated redemptions,
pending investment in common stocks, and for temporary defensive purposes in
response to adverse market, economic, political or other conditions. These
temporary defensive positions are inconsistent with the Portfolio's principal
investment strategies and make it more difficult for the Portfolio to achieve
its investment objective of long-term capital appreciation.
RISKS
Common stocks fluctuate in price. The value of the Portfolio will,
therefore, go up and down, which means you could lose money by investing in the
Portfolio. Common stocks are subject to market risk and objective risk. Market
risk means that stock prices tend to rise and fall over short and even extended
periods in tandem with changes in the securities markets generally. Markets move
in cycles based on various economic factors, and your shares in the Portfolio
will increase or decrease in value depending on general market conditions.
Objective risk is the risk that the stocks held by the Portfolio may not
fluctuate in the same way as the securities markets generally. This is because
the Portfolio selects stocks for investment according to defined objectives and
strategies. Stocks in a particular industry or market sector may perform better
or worse than the stock markets, and a particular stock may increase or decrease
in value more than other companies in that industry. Moreover, mid-cap stocks
have historically increased in value over the long term more than large company
stocks and are less risky than small company stocks. However, mid-cap stocks
involve greater risk than large company stocks, especially at the lower end of
the Adviser's capitalization range.
The Portfolio is designed for investors who want to invest in mid-cap
growth stocks, can assume greater than average risk and have a long-term
investment horizon.
An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
There is no assurance that the Portfolio will achieve its investment
objective.
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 fees are charges you pay when you buy, sell or exchange shares
of the Portfolio. In the case of purchases and exchanges, shareholder fees
reduce the amount of your payment that is invested in shares of the mutual fund.
In the case of sales, shareholder fees reduce the amount of the sale proceeds
returned to you.
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
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<PAGE> 6
activities of the mutual fund. Annual fund operating expenses are deducted from
a mutual fund's assets, and therefore reduce its total return.
THE FOLLOWING TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU
BUY, HOLD, SELL OR EXCHANGE CLASS A OR CLASS B SHARES OF THE PORTFOLIO.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A SHARES CLASS B SHARES
-------------- --------------
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of
offering price)(1)
5.25% None
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends None None
Contingent Deferred Sales Charge
(Load) (as a percentage of original
purchase price or redemption proceeds,
whichever is less)(2)
None 5.00%
Redemption Fees ($12.00 charge for each
wire redemption) None None
Exchange Fee $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO
ASSETS)(3)
CLASS A SHARES CLASS B SHARES
-------------- --------------
Management Fees(4) 0.75% 0.75%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses(3)
Custodian Fees 0.07% 0.07%
Transfer Fees 0.03% 0.03%
Other Fees 0.65% 0.65%
---- ----
Total Other Expenses 0.75% 0.75%
Annual Fund Operating Expenses(3) 1.75% 2.50%
==== ====
- ---------------------------
(1) You may qualify for a lower front-end sales charge on your purchases of
Class A shares. See "How to Purchase Shares" and "Shareholder Services."
(2) The contingent deferred sales charge is reduced for each year that the
Class B shares are owned, and is eliminated after six years. See "How to
Purchase Shares" and "Shareholder Services."
(3) Annual Fund Operating Expenses, particularly Other Expenses, are based
on estimated amounts for the current fiscal year, before applicable fee
waivers and expense reimbursements. See note (4).
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(4) The Adviser has committed to waive management fees for 1999 so that the
total operating expenses for the Class A and Class B shares of the
Portfolio will not exceed 1.25% and 2.00%, respectively, of the
Portfolio's average daily net assets.
EXAMPLE
THE FOLLOWING EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF
INVESTING IN THE PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE
EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE PORTFOLIO FOR THE TIME PERIODS
INDICATED AND THEN REDEEMED ALL OF YOUR SHARES AT THE END OF THOSE PERIODS
(OTHER THAN THE LAST COLUMN WHICH ASSUMES YOU DO NOT REDEEM YOUR SHARES). THE
EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE
PORTFOLIO'S OPERATING EXPENSES REMAIN THE SAME. THE EXAMPLE IS FOR COMPARISON
PURPOSES ONLY, BECAUSE ACTUAL RETURNS AND COSTS MAY BE DIFFERENT.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS B SHARES WITHOUT REDEMPTION
-------------- -------------- ---------------------------------
<S> <C> <C> <C>
After 1 Year $ 694 $ 753 $ 253
After 3 Years $ 1,048 $ 1,079 $ 779
</TABLE>
MANAGEMENT
INVESTMENT ADVISER
Ziegler Asset Management, Inc. is the Portfolio's investment adviser. It
serves as investment adviser to all nine mutual funds included in the Principal
Preservation family of funds, and privately manages numerous customer advisory
accounts. As of June 30, 1998, Ziegler Asset Management had approximately
$ 1.2 billion of assets under its discretionary management. Ziegler Asset
Management is a wholly-owned subsidiary of The Ziegler Companies, Inc., a
publicly-owned financial services holding company. Its address is 215 North Main
Street, West Bend, Wisconsin 53095.
Under the terms of the Investment Advisory agreement, Ziegler Asset
Management provides the Portfolio with overall investment advisory and
administrative services. As compensation for serving as investment adviser to
the Portfolio, Ziegler Asset Management receives an annual advisory fee, payable
in monthly installments, equal to 0.75% on the first $250 million of the
Portfolio's average daily net assets, 0.70% on the next $250 million, and 0.65%
on average daily net assets in excess of $500 million.
SUB-ADVISER
Geneva Capital Management Ltd. ("Geneva") serves as sub-adviser to the
Portfolio and is responsible for managing its assets (subject to Ziegler Asset
Management's oversight).
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<PAGE> 8
Under the terms of the Sub-Advisory Agreement, Geneva makes investment decisions
for the Portfolio and supervises the acquisition and disposition of the
Portfolio's investments. In addition to managing the Portfolio, Geneva manages
numerous customer accounts as an investment adviser, and at June 30, 1998, had
over $350 million under discretionary management. Geneva's investment team
focuses primarily on mid-capitalization growth stocks. Its portfolio managers
average almost 20 years in the investment business. Geneva receives a
sub-advisory fee which is paid by Ziegler Asset Management (and not by the
Portfolio) out of its advisory fee. Geneva's address is 250 East Wisconsin
Avenue, Suite 1050, Milwaukee, Wisconsin 53202.
PORTFOLIO MANAGERS
An investment team, consisting of William A. Priebe, Amy S. Croen and John
J. O'Hare II, all of whom are officers of Geneva and chartered financial
analysts (CFAs), is primarily responsible for the day-to-day management of the
Portfolio's investments. The team selects securities for investment after
thorough discussion and approval by its members. No stock may be bought or sold
without prior team approval. Mr. Priebe has been Principal and President of
Geneva since 1987 after having managed assets for First Wisconsin Trust Co. Mr.
Priebe received an MBA from the University of Chicago in 1977, an MA in Finance
from Northern Illinois University in 1968 and a BA from Northern Illinois
University in 1965. Ms. Croen has been Principal and Executive Vice President of
Geneva since 1987, after serving as a securities analyst for First Wisconsin
Trust Co. for six years. Ms. Croen received an MBA from Columbia University in
1979 and a BA from Princeton University in 1975. Mr. O'Hare has been Vice
President of Geneva since 1997. From 1992 to 1997, he was a senior analyst at
The Nicholas Funds. Before then he was a securities analyst for Barrington
Research and Kemper Securities. Mr. O'Hare received a BA from the University of
Wisconsin-Whitewater in 1981.
HOW TO PURCHASE SHARES
GENERAL
You may buy Class A shares or Class B shares of the Portfolio through
Principal Preservation's distributor, B.C. Ziegler and Company ("Ziegler" or the
"Distributor") and Selected Dealers (including banks) who have agreements with
respect to the distribution of shares of the Portfolio. 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
advisers, financial institutions and certain other service providers, provided
the program meets certain standards established from time to time by the
Distributor.
MINIMUM PURCHASE AMOUNTS
The Portfolio has established minimum amounts that a person must invest to
open an account initially, and to add to the account at later times. The
Portfolio has established these
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minimum investment amounts in order to help control its operating expenses. The
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 the
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 the Portfolio for various types of
investors.
MINIMUM INITIAL MINIMUM ADDITIONAL
TYPE OF INVESTOR INVESTMENT AMOUNT INVESTMENT AMOUNT(1)
- ---------------- ----------------- --------------------
All investors, except special $1,000 $50
investors listed below
IRAs, Keogh plans, self-directed $500 $25
retirement accounts and custodial
accounts under the Uniform
Gifts/Transfers to Minors Act
(see "Shareholder Services")
Purchases through Systematic $100 $100(2)
Purchase Plans (see "Shareholder
Services-Systematic Purchase Plan")
- ---------------------------
(1) There is no minimum additional investment requirement for purchases of
shares of the Portfolio 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 the Distributor; (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 the Distributor.
(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.
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TWO CLASSES OF SHARES
This Prospectus describes two classes of shares, Class A shares and Class B
shares. 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" and thus higher annual operating expenses for Class
B shares than Class A shares.
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:
CLASS A SHARES CLASS B SHARES
- -------------- --------------
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
12b-1 fee, than Class B shares the 12b-1 fee, than Class A shares
No conversion to Class B shares Automatic conversion to Class A
shares after eight years
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.
PURCHASING CLASS A SHARES
Front-End Sales Charge. You may purchase Class A shares of the Portfolio at
net asset value plus a maximum front-end sales charge of 5.25% of the public
offering price (which includes the sales load). 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) in
effect for purchases of Class A shares of the Portfolio.
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<TABLE>
<CAPTION>
PUBLIC OFFERING NET AMOUNT
SIZE OF INVESTMENT PRICE INVESTED
------------------ --------------- ----------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
$25,000 but less than $50,000 5.00% 5.26%
$50,000 but less than $100,000 4.75% 4.98%
$100,000 but less than $250,000 3.75% 3.40%
$250,000 but less than $500,000 3.00% 3.09%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 or more None None
</TABLE>
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 Portfolio 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 Portfolio equals
$100,000, the shareholder will pay a reduced sales charge on additional
purchases of shares. If the shareholder invested an additional $100,000, the
sales charge would be 3.75% on that additional investment. Your holdings of
Class A and Class B shares in all Principal Preservation Portfolios which have a
sales charge will be aggregated in determining the break-point at which you are
entitled to purchase in the 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
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<PAGE> 12
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 the
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 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 the Distributor.
To receive the benefit of the reduced sales charge, the shareholder must
inform Principal Preservation, the Distributor or the Selected Dealer that the
shareholder qualifies for such a discount.
Purchases Without a Front-End Sales Charge. Class A shares of the Portfolio
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, if the purchase
is made through a Selected Dealer who has
executed a dealer agreement with the
Distributor. The term "purchaser" has the
meaning described in "Reduced 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
may purchase Class A shares at net asset
value. If such a plan purchases shares of
any of the Portfolio through a Selected
Dealer, the Distributor may make a payment
or payments, out of its own funds, to the
Selected Dealer in an amount not to exceed
0.75 of 1% of the amount invested.
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<PAGE> 13
State and Municipal Class A shares of the Portfolio also may
Governments and be purchased at net asset value without a
Charities 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 Class A shares may also be purchased at
From Unrelated Load at net asset value when payment for those
Funds 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 the
Portfolio 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 the Portfolio. 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 asset value by: Directors and Preservation
and Its Service Providers and Its Service officers of Principal
Preservation (including shares purchased
jointly with Providers or individually by
any such person's spouse and shares
purchased by any such person's children or
grandchildren under age 21); employees of
the Distributor, Selected Dealers, Skyline
Asset Management, L.P. (the sub-adviser to
the Select Value Portfolio) and Geneva,
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> 14
Reinvestments of Class A shares may be purchased without a
Distributions From sales charge upon the reinvestment of
Principal Preservation distributions from any Principal
Mutual Funds and Other Preservation mutual fund, or investment of
Investment Vehicles distributions from various unit investment
Sponsored by Ziegler trusts sponsored by the Sponsored the
Distributor; 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 the Distributor.
Purchases Through Class A shares may be purchased without a
Certain Investment sales charge through an asset Investment
Programs Programs allocation program, wrap fee
program or similar program of services
offered or administered by a
broker-dealer, investment adviser,
financial institution or other service
provider, provided the program meets
certain standards established from time to
time by the Distributor. You should read
the program materials provided by the
service provider, including information
related to fees, in conjunction with this
Prospectus. Certain features of the
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 the Distributor 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
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.
PURCHASING CLASS B SHARES
You may purchase Class B Shares at net asset value with no front-end sales
charge. However, you pay a contingent deferred sales charge (expressed as a
percent of the lesser of the current net asset value or original cost) if you
redeem your Class B shares within six years
11
<PAGE> 15
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 the 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 or for mandatory or hardship distributions from retirement plans,
IRAs and 403(b) plans or to meet certain retirement plan requirements.
Contingent Deferred Sales Charge. The table below shows the contingent
deferred sales charge applicable to Class B shares 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 they have
been held for eight years.
DISTRIBUTION EXPENSES
In addition to the front-end or contingent deferred sales charges that
apply to the purchase of shares, the Portfolio has adopted a Distribution Plan
(the "Plan") under Rule 12b-1 that allows the Portfolio to pay distribution and
other fees for the sale of its shares and for services provided to shareholders.
The Plan permits payments to be made by the Portfolio to the Distributor to
reimburse it for expenditures incurred by it in connection with the distribution
of the Portfolio's shares to investors, 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
12
<PAGE> 16
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, the Portfolio pays 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 Portfolio pays 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.
Because the distribution and service fees are paid out of the Portfolio's
assets on an on-going basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
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.
13
<PAGE> 17
<TABLE>
<CAPTION>
==================================================================================================================================
TO ADD TO
METHOD OF PURCHASE TO OPEN A NEW ACCOUNT AN EXISTING ACCOUNT
==================================================================================================================================
<S> <C> <C>
BY MAIL OR PERSONAL DELIVERY 1. Complete the Account Application included 1. Complete the Additional Investment form
in this prospectus. included with your account statement.
Personally deliver or send Alternatively, you may write a note
by First Class or Express 2. Make your check or money order payable to: indicating your account number.
Mail or Private Delivery "Principal Preservation."
Service to: 2. Make your check payable to "Principal
Note: The amount of your purchase must meet Preservation."
Principal Preservation the applicable minimum initial investment
215 N. Main Street account. See "Purchasing Shares - Minimum 3. Personally deliver or mail the
West Bend WI 53095 Purchase Amounts." Additional Investment Form (or note) and
and our check or money order.
3. Personally deliver or mail the completed
Account Application and 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.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
==================================================================================================================================
TO ADD TO
METHOD OF PURCHASE TO OPEN A NEW ACCOUNT AN EXISTING ACCOUNT
==================================================================================================================================
<S> <C> <C>
TELEPHONE BY EXCHANGE BY EXCHANGE
1-800-826-4600 Call to establish a new account by exchanging Add to an account by exchanging funds from another
funds from an existing Principal Preservation Principal Preservation. See "Redeeming and
account. See "Redeeming and Exchanging Shares - Exchanging Shares - Exchanging Shares."
Exchanging Shares - Exchanging Shares."
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES FIRMS You may purchase shares in the Portfolio through You may purchase additional shares in the Portfolio
a broker-dealer or other financial service firm through a broker-dealer or other financial services
that may charge a transaction fee. firm that may charge a transaction fee.
Principal Preservation may accept requests to Principal Preservation may accept to requests to
purchase shares into a broker-dealer street name purchase additional shares into a broker-dealer
account only from the broker-dealer. street name account only from the broker-dealer.
====================================================================================================================================
</TABLE>
HOW TO REDEEM 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.
15
<PAGE> 19
METHOD STEPS TO FOLLOW
- ------ ---------------
BY MAIL To redeem shares by mail, send the following
information to the Transfer Agent:
Address to:
- -----------
Principal Preservation - A written request for redemption signed by
215 N. Main Street the registered owner(s) of the shares,
West Bend WI 53095 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.
BY TELEPHONE If you have completed the Telephone Redemption
1-800-826-4600 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,
return a Telephone Redemption Authorization Form.
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.
16
<PAGE> 20
METHOD STEPS TO FOLLOW
- ------ ---------------
SYSTEMATIC WITHDRAWAL You can set up an automatic systematic withdrawal
PLAN 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."
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.
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.
METHOD STEPS TO FOLLOW
- ------ ---------------
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.
OTHER INFORMATION ABOUT REDEMPTIONS
Telephone Redemptions. By establishing the telephone redemption service,
you authorize B.C. Ziegler and Company, 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
17
<PAGE> 21
for a change of address if accompanied by a signature guarantee. You assume some
risk for unauthorized transactions by establishing the telephone redemption
services. The Transfer Agent has implemented procedures designed to reasonably
assure that telephone instructions are genuine. These procedures include
recording telephone conversations, requesting verification of various pieces of
personal information and providing written confirmation of such transactions. If
the Transfer Agent, Principal Preservation, or any of their employees fails to
abide by these procedures, Principal Preservation may be liable to a shareholder
for losses the shareholder suffers from any resulting unauthorized
transaction(s). However, none of the Transfer Agent, Principal Preservation or
any of their employees will be liable for losses suffered by a shareholder which
result from following telephone instructions reasonably believed to be genuine
after verification pursuant to these procedures. This service may be changed,
modified or terminated at any time. There is currently no charge for telephone
redemptions, although a charge may be imposed in the future.
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 the
Portfolio drops below $500 for three months or more, the Portfolio has the right
to redeem your account, after giving 60 days' written notice, unless you make
additional investments to bring the account value to $1,000 or more.
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
18
<PAGE> 22
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 the Portfolio to pay for all redemptions
in cash. In such cases, the Board may authorize payment to be made in securities
or other property of the Portfolio. However, the Portfolio is obligated under
the 1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to $250,000 (or 1% of the 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 the Portfolio) 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 Portfolio, you would pay a
front-end sales charge on the
19
<PAGE> 23
exchange in an amount equal to the difference between: (a) the front-end sales
charge you paid when you purchased your 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 the Portfolio
only for Class B shares of another Principal Preservation mutual fund. You will
not pay a contingent deferred sales charge on any such exchange. 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 that 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.
20
<PAGE> 24
- 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
When you open an account with Principal Preservation, you automatically
receive exchange privileges. Set forth below is a description of the different
ways you can exchange shares and procedures you should follow when doing so.
METHOD STEPS TO FOLLOW
- ------ ----------------
BY MAIL OR PERSONAL DELIVERY Mail your exchange order.
Please Note: Principal Preservation must
Personally deliver or send by receive your exchange order no later than
first class or express mail 3:00 p.m. in order to effect an exchange on
private delivery addressed to: that business day.
Principal Preservation,
215 N. 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 Account
Application Form when you open an 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 a
broker-dealer or other financial services
firm, which may charge a transaction fee.
21
<PAGE> 25
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 preauthorized debits of a
selected amount drawn on your account each month and applied to the purchase of
Principal Preservation shares. The SPP can be implemented with any financial
institution that will accept the debits. There is no service fee for
participating in the SPP. An application and instructions on establishing the
SPP are available from your registered representative, the Distributor or
Principal Preservation.
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
22
<PAGE> 26
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 semiannually 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 at 1-800-826-4600.
OTHER INFORMATION
DETERMINATION OF NET ASSET VALUE PER SHARE
The price of Portfolio shares is based on their net asset value. Net
asset value per share of the Portfolio is determined by adding up the total
market 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).
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND REINVESTMENTS
Dividends from the Portfolio's net investment income are declared and
paid quarterly. 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 mutual fund 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
23
<PAGE> 27
to receive dividends and capital gain distributions in cash, they will be
automatically reinvested in additional shares of the Portfolio.
Capital gains distributions, if any, in the Portfolio will be declared
annually and normally will be paid within 45 days after the end of the fiscal
year.
TAX STATUS
The Portfolio distributes substantially all of its net income and
capital gains. The federal income tax status of all distributions are reported
to shareholders annually. The 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.
Distributions may be taxed as ordinary income and capital gains (which
may be taxable at different rates depending on how long the Portfolio holds its
assets). Given its investment objective and strategies, the Portfolio expects
most of its distribution to consist of capital gains.
The foregoing is only a summary of some of the more important tax
considerations generally affecting the Portfolio and its shareholders. This
discussion is not intended as a substitute for careful tax planning. You are
urged to consult your tax adviser with specific reference to your own tax
situation.
PRINCIPAL PRESERVATION PORTFOLIOS
The Principal Preservation family of funds consists of the following
mutual funds in addition to the Portfolio: S&P 100 Plus Portfolio, Dividend
Achievers Portfolio, Select Value Portfolio, PSE Tech 100 Index Portfolio,
Tax-Exempt Portfolio, Wisconsin Tax-Exempt Portfolio, Government Portfolio and
Cash Reserve Portfolio. These other funds are offered by separate prospectuses.
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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 purpose other than the purchase of redeemable securities of a
registered investment company
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at a discount. In order for this cumulative quantity discount to be made
available, the shareholder or his securities dealer must notify B.C. Ziegler and
Company of the total holdings in all series of Principal Preservation each time
an order is placed.
TELEPHONE REDEMPTIONS
If you elect to redeem by telephone, a signature guarantee must be
included with the application. This authorizes and directs Principal
Preservation and the Transfer Agent, acting as your attorneys-in-fact, to redeem
any or all shares of Principal Preservation pursuant to instructions received by
telephone from you or any other person and to wire the proceeds to the bank
account designated in your application. You agree that any telephone
instructions may be recorded.
DEALER AUTHORIZATION
The dealer, in signing the Authorization, authorizes B.C. Ziegler and
Company, as its agent and on its behalf, to purchase from time to time shares of
Principal Preservation necessary for the shareholder who has signed the
Authorization. B.C. Ziegler and Company is authorized and directed where
necessary to cause the shares to be transferred to the name of the shareholder
on the books of Principal Preservation to retain and to account to the dealer
for the dealer's sales charge due on each purchase, to confirm each direct sale
to the shareholder on behalf of the dealer, and to transmit to the shareholder
each new Prospectus of Principal Preservation or supplement thereto delivered to
it for that purpose. The dealer guarantees the genuineness of the signature(s)
on the Authorization and represents that each person who has signed the
Authorization is of legal age and not under legal disability. The dealer also
represents that it is a duly licensed and registered dealer and that it may
lawfully sell the specified securities in the state designated as the investor's
mailing address. It further represents, if the sale has been made within the
United States, that it is a member of the NASD and has entered into a soliciting
dealer agreement with B.C. Ziegler and Company with respect to such shares.
TERMS AND CONDITIONS FOR ESTABLISHING SYSTEMATIC PURCHASE PLAN
1. OPENING A SYSTEMATIC PURCHASE PLAN ("SPP"). An SPP may be
established at any time by submitting the information requested above to the
Transfer Agent. Depending on the date you elect to have automatic investments
made, the SPP may take up to 30 days to commence after receipt of the SPP
request by the Transfer Agent. There is a minimum initial investment of $100.00
for accounts opened under the SPP, and for subsequent investments ($50 or more
for IRAs, Keogh Plans, Self-Directed Retirement Plan Accounts, and Custodial
Accounts under the Uniform Gifts/Transfers to Minors Act, until your account
balance reaches $500, after which investments can be made in increments of $25
or more). The additional investment amount drops to $50 for SPP participants
whose accounts exceed $1,000.
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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>
<CAPTION>
<S> <C> <C>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
215 North Main Street
West Bend, Wisconsin 53095
SEC File No. 811-4401
INVESTMENT ADVISER SUB-ADVISER DISTRIBUTOR, ACCOUNTING/PRICING AGENT, AND
Ziegler Asset Management, Inc. Geneva Capital Management Ltd. TRANSFER AND DIVIDEND DISBURSING AGENT
215 North Main Street 250 East Wisconsin Avenue B.C. Ziegler and Company
West Bend, Wisconsin 53095 Suite 1050 215 North Main Street
Milwaukee, Wisconsin 53202 West Bend, Wisconsin 53095
CUSTODIAN COUNSEL INDEPENDENT PUBLIC ACCOUNTANTS
Firstar Trust Company Quarles & Brady LLP Arthur Andersen LLP
777 East Wisconsin Avenue 411 East Wisconsin Avenue 100 East Wisconsin Avenue
Milwaukee, WI 53202 Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
</TABLE>
A supplement to the Prospectus, called the Statement of Additional Information
(the "SAI"), contains more detailed information about the Managed Growth
Portfolio. The SAI is on file with the Securities and Exchange Commission (the
"SEC") and is legally part of the Prospectus. The SAI may be obtained for free
by calling 1-800-826-4600 or from Selected Dealers through whom Portfolio shares
may be bought or sold.
For more information about the Portfolio, you can:
- Call 1-800-826-4600,
- Write to Principal Preservation Portfolios, 215 North Main Street,
West Bend, Wisconsin 53095, or
- Visit the SEC's website at http://www.sec.gov
You can also obtain copies of documents about the Portfolio that are on file
with the SEC by visiting the SEC's Public Reference Room in Washington, D.C.
(telephone 1-800-SEC-0330) or by sending your request and a fee for duplications
to the SEC's Public Reference Section, Washington, D.C. 20549-6009.
<PAGE> 33
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 1, 1999
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
215 North Main Street
West Bend, Wisconsin 53095
This Statement of Additional Information contains detailed information
about the Managed Growth Portfolio (the "Portfolio"), a mutual fund series of
Principal Preservation Portfolios, Inc. ("Principal Preservation"). The
investment objective of the Portfolio is long-term capital appreciation. The
Portfolio is managed by Ziegler Asset Management, Inc. as investment adviser and
Geneva Capital Management Ltd. as sub-adviser (collectively, the "Adviser").
Portfolio shares may be purchased, and the Portfolio's Prospectus may
be obtained, directly from B.C. Ziegler and Company (the "Distributor"), 215
North Main Street, West Bend, Wisconsin 53095, telephone 800-826-4600, or from
Selected Dealers (see the Prospectus dated January 1, 1999 for more complete
information, including an account application.) This Statement of Additional
Information is not a prospectus, and should be read in conjunction with the
Portfolio's Prospectus. This Statement of Additional Information provides
details about the Portfolio that are not required to be put into the Prospectus,
and should be viewed as a supplement to, and not as a substitute for, the
Prospectus. Capitalized terms not otherwise defined in this Statement of
Additional Information have the meanings ascribed to them in the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION.....................................1
FUND HISTORY AND CAPITAL STOCK..........................................2
INVESTMENT PROGRAM......................................................3
INVESTMENT RESTRICTIONS.................................................9
MANAGEMENT OF PRINCIPAL PRESERVATION...................................11
PURCHASE OF SHARES.....................................................18
DISTRIBUTION EXPENSES..................................................19
DETERMINATION OF NET ASSET VALUE PER SHARE.............................22
PERFORMANCE INFORMATION................................................22
TAX STATUS.............................................................26
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES....................27
PORTFOLIO TRANSACTIONS AND BROKERAGE...................................27
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS.............................28
</TABLE>
<PAGE> 34
FUND HISTORY AND CAPITAL STOCK
The Portfolio commenced operations on January 1, 1999. The Portfolio is
a series of Principal Preservation Portfolios, Inc. Principal Preservation is a
diversified, open-end management investment company, and was organized in 1984
as a Maryland corporation.
The authorized common stock of Principal Preservation consists of one
billion shares, with a par value of $.001 per share. Shares of Principal
Preservation are divided into nine mutual fund series, each with distinct
investment objectives and strategies: Tax-Exempt Portfolio, Government
Portfolio, S&P 100 Plus Portfolio, Dividend Achievers Portfolio, Select Value
Portfolio, Managed Growth Portfolio, PSE Tech 100 Index Portfolio, Wisconsin
Tax-Exempt Portfolio and Cash Reserve Portfolio. The Portfolio consists of 50
million shares. Shares of the Portfolio are divided into Class A and Class B
shares. Class A shares have a front-end sales load (a sales charge imposed on
their purchase), which is a maximum of 5.25% of the offering price. Class B
shares have a contingent deferred sales load (a sales charge imposed on their
redemption), which is a maximum of 5% but reduces each year you own the shares
and goes to zero after six years.
The Board of Directors of Principal Preservation may authorize the
issuance of additional series and, within each series, individual classes, and
may increase or decrease the number of shares in each series or class.
The Portfolio's two 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 the Portfolio bears its separate distribution and shareholder servicing
expenses and has a different sales load. 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 Portfolio. Each Principal
Preservation mutual fund 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
asset value of the particular fund.
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
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<PAGE> 35
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
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.
INVESTMENT PROGRAM
The Prospectus describes the investment objective and principal
investment strategies of the Portfolio. Certain other investment strategies and
policies of the Portfolio are described in greater detail below.
COMMON STOCKS
The Portfolio seeks to achieve its investment objective by primarily
investing in common stocks traded on the primary U.S. exchanges - the New York
Stock Exchange, American Stock Exchange and Nasdaq Stock Market. The Portfolio
invests mostly in U.S. companies, but may also invest in securities of foreign
issuers that are traded on the primary U.S. exchanges.
The focus of the Portfolio is on mid-cap stocks, which the Adviser
defines as companies with market capitalizations that are within the market
capitalization range of the companies comprising the S&P Midcap 400 Index. That
range is currently approximately $500 million to $20 billion. However, the
Portfolio may invest without limitation in companies that are above or below
this range. Companies with market capitalizations below this range are small-cap
stocks, and companies with market capitalizations above this range are large-cap
stocks.
Investments in small-cap stocks involve more risk than investments in
larger companies. The prices of small-cap stocks are typically more volatile
than those of larger companies, small-cap stocks may have less market liquidity
than mid-cap or large-cap stocks, and smaller companies may be more likely to be
adversely affected by poor market or economic conditions. Small and mid-sized
companies may have relatively lower revenues, limited
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<PAGE> 36
product lines, less management depth and a lower share of the market for their
products or services than larger companies.
Under normal market conditions, the Portfolio will be 90% to 95%
invested in common stocks.
FOREIGN INVESTMENTS
The Portfolio will not invest in foreign securities which are not
publicly traded on U.S. exchanges. However, the Portfolio may invest a portion
of its assets in American Depository Receipts ("ADRs") and other securities of
foreign issuers that are traded on one of the three primary U.S. exchanges. ADRs
are receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade on the Nasdaq Stock Market. ADR prices
are denominated in United States dollars, although the underlying security may
be denominated in a foreign currency.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in securities of
foreign issuers (including ADRs) involve certain inherent risks, including the
following:
Political and Economic Factors. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. Governments in certain foreign countries also continue to participate
to a significant degree, through ownership interest or regulation, in their
respective economies. Action by these governments could include restrictions on
foreign investment, nationalization, expropriation of goods or imposition of
taxes, and could have a significant effect on market prices of securities and
payment of interest. The economies of many foreign countries are heavily
dependent upon international trade and are accordingly affected by the trade
policies and economic conditions of their trading partners. Enactment by these
trading partners of protectionist trade legislation could have a significant
adverse effect upon the securities markets of such countries.
Currency Fluctuations. A change in the value of a foreign currency
against the U.S. dollar may affect the value of the foreign securities held by
the Portfolio. The value of the Portfolio's assets invested in securities of
foreign issuers may also be affected significantly by currency restrictions and
exchange control regulations enacted from time to time.
Market Characteristics. The Adviser expects that most foreign
securities in which the Portfolio may invest will be purchased in
over-the-counter markets or on exchanges located in the countries in which the
principal offices of the issuers of the various securities are located, if that
is the best available market. Foreign exchanges and markets may be more volatile
than those in the United States, and foreign securities may be less liquid than
domestic securities. Moreover, settlement practices for transactions in foreign
markets may differ from
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<PAGE> 37
those in United States markets, and may include delays beyond periods customary
in the United States.
Legal and Regulatory Matters. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
Taxes. Dividends and interest payable on the Portfolio's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to the Portfolio's
shareholders.
In considering whether to invest in the securities of a foreign
company, the Adviser considers such factors as the characteristics of the
particular company, differences between economic trends and the performance of
securities markets within the U.S. and those within other countries, and also
factors relating to the general economic, governmental and social con ditions of
the country or countries where the company is located. The extent to which the
Portfolio will be invested in ADRs will fluctuate from time to time within the
limitations imposed above, depending on the Advisers' assessment of prevailing
market, economic and other conditions.
SHORT-TERM INVESTMENTS
The Portfolio may invest in any of the following securities and
instruments in management of cash receipts, for liquidity for anticipated
redemptions, to meet cash flow needs to enable the Portfolio to take advantage
of buying opportunities, during periods when attractive investments are
unavailable and for temporary defensive purposes. Normally, the Portfolio will
invest less than 10% of its total assets in short-term investments.
GOVERNMENT SECURITIES. The Portfolio may acquire U.S. Treasury
obligations. Direct obligations issued by the U.S. Treasury include bills, notes
and bonds which differ from each other only as to interest rate, maturity and
time of issuance. Treasury Bills have a maturity of one year or less, Treasury
Notes have maturities of one to ten years and Treasury Bonds generally have
maturities of greater than ten years. In addition to direct obligations issued
by the U.S. Treasury, the Portfolio may also invest in obligations issued by
agencies or instrumentalities of the U.S. Government.
BANK CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS.
The Portfolio may acquire certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earn a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Portfolio will
be dollar-denominated obligations of domestic banks or financial institutions
which at the time of purchase have capital, surplus and
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<PAGE> 38
undivided profits in excess of $100 million, based on latest published reports,
or less than $100 million if the principal amount of such bank obligations are
fully insured by the U.S. Government.
In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under its investment objective and
policies, the Portfolio may make interest-bearing time or other interest-bearing
deposits in commercial or savings banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified period of time at a
specified interest rate.
SAVINGS ASSOCIATION OBLIGATIONS. The Portfolio may invest in
certificates of deposit (interest-bearing time deposits) issued by savings banks
or savings and loan associations that have capital and undivided profits in
excess of $100 million, based on latest published reports, or less than $100
million if the principal amount of such obligations is fully insured by the U.S.
Government.
COMMERCIAL PAPER, SHORT-TERM NOTES, VARIABLE RATE DEMAND NOTES,
REPURCHASE AGREEMENTS AND OTHER CORPORATE OBLIGATIONS. The Portfolio may invest
a portion of its assets in high quality commercial paper and short-term notes,
including variable rate demand notes. Commercial paper consists of unsecured
promissory notes issued by corporations. Issues of commercial paper and
short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Corporate obligations include bonds and notes issued by corporations to
finance longer-term credit needs than supported by commercial paper. While such
obligations generally have maturities of ten years or more, the Portfolio may
purchase high quality corporate obligations which have remaining maturities of
one year or less from the date of purchase.
The Portfolio also may purchase corporate obligations known as variable
rate demand notes. Variable rate demand notes are unsecured instruments that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate. Although the notes are not normally traded and there may
be no secondary market in the notes, the Portfolio may demand payment of
principal and accrued interest at any time. The investment policies of the
Portfolio permit the purchase of variable rate demand notes only if, at the time
of purchase, the notes are rated in the two highest rating categories by a
Nationally Recognized Statistical Rating Organization, or, if unrated, the
issuer has unsecured debt securities outstanding of an equivalent rating.
The Portfolio also may invest in repurchase agreements as short-term
instruments. See "Investment Program - Repurchase Agreements" below.
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<PAGE> 39
MONEY MARKET FUNDS. The Portfolio may invest in money market mutual
funds. An investment by the Portfolio in a money market mutual fund may cause
the Portfolio to incur duplicate and/or increased administration and
distribution expenses. Such investments are limited under the 1940 Act and by
applicable investment restrictions. See "Investment Restrictions" in this
Statement of Additional Information.
REPURCHASE AGREEMENTS
The Portfolio may from time to time enter into repurchase agreements.
The Portfolio will not invest more than 5% of its total assets in repurchase
agreements. Repurchase agreements involve the sale of securities to the
purchasing Portfolio with the concurrent agreement of the seller to repurchase
the securities at the same price plus an amount equal to an agreed upon interest
rate within a specified time, usually less than one week, but on occasion for a
longer period. The Portfolio may enter into repurchase agreements with
broker-dealers and with banks. At the time the Portfolio enters into a
repurchase agreement, the value of the underlying security, including accrued
interest, will be equal to or exceed the value of the repurchase agreement and,
in the case of repurchase agreements exceeding one day, the seller will agree
that the value of the underlying security, including accrued interest, will at
all times be equal to or exceed the value of the repurchase agreement. The
Portfolio will require continual maintenance of cash or cash equivalents held by
its depository in an amount equal to, or in excess of, the market value of the
securities which are subject to the agreement.
In the event the seller of the repurchase agreement becomes the subject
of a bankruptcy or insolvency proceeding, or in the event of the failure of the
seller to repurchase the underlying security as agreed, the Portfolio could
experience losses that include: (1) possible decline in the value of the
underlying security during the period that the Portfolio seeks to enforce its
rights with respect thereto, and possible delay in the enforcement of such
rights; (2) possible loss of all or a part of the income or proceeds of the
repurchase; (3) additional expenses to the Portfolio in connection with
enforcing those rights; and (4) possible delay in the disposition of the
underlying security pending court action or possible loss of rights in such
securities. The Advisers intend to cause the Portfolio to invest in repurchase
agreements only when they determine that the market instruments and that the
rates available on repurchase agreements are favorable as compared to the rates
available on other short-term money market instruments or money market mutual
funds. The Advisers do not currently intend to invest the assets of the
Portfolio in repurchase agreements if, after doing so, more than 5% of the
Portfolio's net assets would be invested in repurchase agreements.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Portfolio may lend its
portfolio securities to brokers, dealers and other institutional investors,
provided the Portfolio receives cash collateral which at all times is maintained
in an amount equal to at least 100% of the current market value of the
securities loaned. By reinvesting the collateral it receives in these
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<PAGE> 40
transactions, the 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, the Portfolio considers collateral consisting
of U.S. Government securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Portfolio to be the
equivalent of cash. During the term of the loan, the Portfolio is entitled to
receive interest and other distributions paid on the loaned securities, as well
as any appreciation in the market value. The Portfolio is also entitled to
receive interest from the institutional borrower based on the value of the
securities loaned. From time to time, the Portfolio may return to the borrower,
and/or a third party which is unaffiliated with Principal Preservation and which
is acting as a "placing broker," a part of the interest earned from the
investment of the collateral received for securities loaned.
The Portfolio does not have the right to vote the securities loaned
during the existence of the loan, but can call the loan to permit voting of the
securities if, in the Advisers' judgment, a material event requiring a
shareholder vote would otherwise occur before the loan is repaid. In the event
of bankruptcy or other default of the borrowing institution, the Portfolio could
experience delays in liquidating the loan collateral or recovering the loan
securities, and incur risk of loss including: (1) possible decline in the value
of the collateral or in the value of the securities loaned during the period
while the Portfolio seeks to enforce its rights thereto; (2) possible subnormal
levels of income and lack of access to income during this period; and (3)
expenses of enforcing its rights. To minimize these risks, the Adviser evaluates
and continually monitors the creditworthiness of the institutional borrowers to
which the Portfolio lends its securities.
To minimize the foregoing risks, the Portfolio's securities lending
practices are subject to the following conditions and restrictions: (1)
Portfolio may not make such loans in excess of 33% of the value of its total
assets; (2) the Portfolio must receive cash collateral in an amount at least
equal to 100% of the value of the securities loaned; (3) the institutional
borrower must be required to increase the amounts of the cash collateral
whenever the market value of the loaned securities rises above the amount of the
collateral; (4) the Portfolio must have the right to terminate the loan at any
time; (5) the Portfolio must receive reasonable interest on the loan, as well as
any interest or other distributions on the loaned securities and any increase in
the market value of the loaned securities; and (6) the Portfolio may not pay any
more than reasonable custodian fees in connection with the loan.
PORTFOLIO TURNOVER
Principal Preservation has not established a limit to its portfolio
turnover rates, nor will it attempt to achieve or be limited to predetermined
rates of portfolio turnover. The annual portfolio turnover rate of the Portfolio
is generally expected to be under 50%, given the fact that the Adviser makes
investments for their long-term growth potential and does not engage in
market-timing and short-term trading strategies.
8
<PAGE> 41
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following fundamental investment
restrictions and policies which cannot be changed without a majority vote of
shareholders of the Portfolio. Policies that are not "fundamental policies" are
subject to change by the Board of Directors without shareholder approval. As a
fundamental policy, the Portfolio may not:
(1) Invest more than 5% of the fair market value of its assets in
securities of any one issuer, except for U.S. Government securities or bank
certificates of deposit and bankers' acceptances, which may be purchased without
such limitation.
(2) Acquire securities of any one issuer which at the time of
investment (i) represent more than 10% of the outstanding voting securities of
such issuer, or (ii) have a value greater than 10% of the value of the
outstanding voting securities of such issuer.
(3) Invest 25% or more of its total assets, based on current market
value at the time of purchase, in securities of issuers in any single industry;
provided that there shall be no limitation on the purchase of securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
(4) Invest more than 5% of its total assets in securities of companies
which, including any predecessors, have a record of less than three years of
continuous operations.
(5) Buy or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
which invest in real estate or interests therein, except that it may not invest
more than 5% of the value of its assets in real estate investment trusts).
(6) Borrow money or property except for temporary or emergency
purposes and in connection with transactions in options, futures or futures
options. If the Portfolio ever should borrow money it would only borrow from
banks and in an amount not exceeding 10% of the market value of its total assets
(not including the amount borrowed). The Portfolio will not pledge more than 15%
of its net assets to secure such borrowings. In the event the Portfolio's
borrowing exceeds 5% of the market value of its total assets, the Portfolio will
not invest in any portfolio securities until its borrowings are reduced to below
5% of its total assets.
(7) Make loans to other persons, except that the Portfolio may lend
its portfolio securities subject to the conditions and limitations set forth in
this Statement of Additional Information under "Investment Program - Lending of
Portfolio Securities." For the purposes of this restriction, investments in
publicly-traded debt securities or debt securities of the type customarily
purchased by institutional investors and investments in repurchase agreements
are not considered loans.
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<PAGE> 42
(8) Underwrite the securities of other issuers except where it might
technically be deemed to be an underwriter for purposes of the Securities Act of
1933 upon the disposition of certain securities.
(9) Issue senior securities (other than the borrowings permitted
above).
(10) Buy or sell commodities.
(11) Invest more than 10% of its total assets in securities of other
investment companies, invest more than 5% of its total assets in securities of
any particular investment company or purchase more than 3% of the total
outstanding voting stock of another investment company, except that this
restriction does not apply to a purchase of investment company securities as
part of a merger, consolidation, reorganization or acquisition of assets.
In accordance with the following non-fundamental policies, which may be
changed without shareholder approval, the Portfolio may not:
(A) Invest in companies for the purpose of exercising control or
management.
(B) Invest in securities of other open-end investment companies (other
than money market mutual funds which are subject to restrictions described
above).
(C) Mortgage, hypothecate, or in any manner transfer as security for
any indebtedness, any securities owned or held by the Portfolio, except that
this restriction does not apply to borrowings permitted above.
(D) Purchase securities on margin, effect short sales of securities,
write or sell put or call options, or engage in futures transactions.
(E) Purchase or retain the securities of an issuer if those officers or
Directors of Principal Preservation or the Adviser (as defined under the caption
"Management of Principal Preservation - The Investment Advisers" in this
Statement of Additional Information) who individually own beneficially more than
0.5 of 1% of the outstanding securities of such issuer together own beneficially
more than 5% of such outstanding securities.
(F) Invest in restricted securities, securities which are not readily
marketable or other illiquid securities, including (i) securities subject to
legal or contractual restrictions on resale; (ii) securities for which market
quotations are not readily available; or (iii) repurchase agreements which
expire in excess of seven days.
(G) Purchase warrants.
(H) Invest less than 80% of its total assets in common stocks.
(I) Invest over 5% of its total assets in repurchase agreements.
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<PAGE> 43
(J) Invest in oil, gas or other mineral exploration or development
programs, except that the Portfolio may invest in marketable securities of
enterprises engaged in oil, gas or mineral exploration.
A fundamental investment restriction or policy cannot be changed
without a majority vote of shareholders of the Portfolio, which means the
approval of the holders of the lesser of (i) a majority of the outstanding
shares of the Portfolio or (ii) 67% of the shares represented at a meeting of
shareholders at which the holders of 50% or more of the outstanding shares of
the Portfolio are represented. Policies that are not "fundamental policies" are
subject to change by the Board of Directors without shareholder approval. Any
investment restriction which involves a maximum of securities or assets will not
be considered to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition of securities or assets of,
or borrowing by, the Portfolio.
MANAGEMENT OF PRINCIPAL PRESERVATION
DIRECTORS AND OFFICERS
Under applicable law, the Board of Directors is responsible for
management of Principal Preservation, and provides broad supervision over its
affairs. The Adviser is responsible for the Portfolio's investment management,
and Principal Preservation's officers are responsible for the Portfolio's
operations.
The directors and officers of Principal Preservation and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Unless otherwise indicated, the
address of each director and officer of Principal Preservation is 215 North Main
Street, West Bend, Wisconsin, 53095. Asterisks indicate those Directors of
Principal Preservation who are "interested persons" (as defined in the 1940 Act)
of the Adviser or an affiliate of the Adviser.
11
<PAGE> 44
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS PRESERVATION PAST FIVE YEARS
- --------------------- ------------ -----------------
<S> <C> <C>
Richard J. Glaisner,*55 Director President and Chief Executive Officer of GS(2) Securities, Inc., a
subsidiary of The Ziegler Companies, Inc., since July 1997; from 1993 to
1997, President and Chief Executive Officer of Glaisner, Schilffarth,
Grande & Schnoll, Ltd., an investment management and investment banking
firm acquired by The Ziegler Companies, Inc. in 1997; prior thereto,
Managing Director, Kidder Peabody and Company in New York (investment
banking), and prior to that, Executive Vice President, Kemper Securities
Group (securities brokerage and investment banking).
Robert J. Tuszynski,*39 President and Senior Vice President, B.C Ziegler and Company since 1996; prior thereto,
39 Director Vice President, Director of Mutual Funds, B.C. Ziegler and Company from
1987 to 1996; Trustee, Chairman of the Board and President, Prospect Hill
Trust and The Prime Portfolios (registered in vestment companies) from 1994
to 1996.
Richard H. Aster, M.D., 67 Director Since June 1996, Senior Investigator and Professor of Medicine, Medical
8727 W. Watertown Plank Rd. College of Wisconsin; prior thereto, President and Director of Research,
Milwaukee, WI 53226 The Blood Center of Southeastern Wisconsin, Inc.
</TABLE>
12
<PAGE> 45
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS PRESERVATION PAST FIVE YEARS
- --------------------- ------------ -----------------
<S> <C> <C>
Augustine J. English, 68 Director Retired; President, Tupperware North America from 1990 to 1994
1724 Lake Roberts Court (manufacturing); prior to 1990, President, The West Bend Company
Windermere, FL 34786 (manufacturing), a division of Dart Industries, a subsidiary of Premark
International, Inc., of which Mr. English was a Group Vice President.
Ralph J. Eckert, 69 Director Chairman Emeritus an Director, Trustmark Insurance Cos. (Mutual Life
2059 Keystone Ranch Road Insurance Company) since April, 1997; from 1991 to 1997, Chairman,
Dillon, CO 80435 Trustmark Insurance Cos; prior to 1991, Chairman, President and Chief
Executive Officer, Trustmark Insurance Cos; Trustee of the Board of
Pensions of the Evangelical Lutheran Church in America from 1991 to 1997,
and Chairman of the Board from 1993 to 1997; Trustee of the Board of
Pensions for the Lutheran Church in America from 1987 to 1989; and Trustee
of The Prime Portfolios (registered investment company) from 1993 to 1996.
John H. Lauderdale, 32 Vice President - Wholesaler, B.C. Ziegler and Company since 1991; prior thereto, Marketing
Director of Marketing Account Executive, The Patten Company.
</TABLE>
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<PAGE> 46
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS PRESERVATION PAST FIVE YEARS
- --------------------- ------------ -----------------
<S> <C> <C>
Franklin P. Ciano, 46 Chief Financial Manager of Principal Preservation Operations, B.C. Ziegler and Company
Officer and since 1996, prior thereto, Vice President, Fixed Income Department,
Treasurer Firstar Bank
Marc J. Dion, 40 Vice President Vice President - Portfolio Manager and Chief Investment Officer, Ziegler
Asset Management, Inc. since 1993; prior thereto, Vice President, Ziegler
Asset Management, Inc.
S. Charles O'Meara, 47 Secretary Senior Vice President and General Counsel, B.C. Ziegler and Company since
1993; prior thereto, Partner, O'Meara, Eckert, Pourus & Gonring (law firm).
</TABLE>
Principal Preservation pays the compensation of the three Directors who
are not officers, directors or employees of the Adviser. Principal Preservation
pays each of these Directors an annual fee of $12,000 and an additional $450 for
each Board or committee meeting he attends. Principal Preservation may also
retain consultants, who will be paid a fee, to provide the Board with advice and
research on investment matters. The Portfolio, together with Principal
Preservation's other series, pays a proportionate amount of these expenses based
on its total assets.
The table below shows fees paid to Directors of Principal Preservation
for the year ended December 31, 1998. Each series of Principal Preservation pays
a proportionate share of these expenses based on the ratio such series' total
assets bear to the aggregate of the total assets of all nine series of Principal
Preservation. Principal Preservation made no payments to its officers or
directors who are affiliated with any investment adviser to Principal
Preservation.
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<PAGE> 47
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM
BENEFITS ACCRUED PRINCIPAL
NAME OF PERSON AND AGGREGATE AS PART OF PRESERVATION
POSITION WITH COMPENSATION PRINCIPAL ESTIMATED ANNUAL AND FUND
PRINCIPAL FROM PRINCIPAL PRESERVATION'S BENEFITS UPON COMPLEX PAID
PRESERVATION PRESERVATION EXPENSES RETIREMENT TO DIRECTORS
------------ -------------- -------- ---------- -------------
<S> <C> <C> <C> <C>
R. D. Ziegler, -0- -0- -0- -0-
President and
Director (1)
Richard J. Glaisner -0- -0- -0- -0-
(2)
Robert J. Tuszynski, -0- -0- -0- -0-
President and
Director
Richard H. Aster, 14,700 -0- -0- 14,700
Director
Augustine J. 14,700 -0- -0- 14,700
English,
Director
Ralph J. Eckert 14,700 -0- -0- 14,700
Director
</TABLE>
- -----------------
(1) Mr. Ziegler retired from his position as Director effective May 15, 1998.
(2) At a special meeting held on May 15, 1998, Mr. Glaisner was elected by
shareholders as a Director to fill the vacancy created by Mr. Ziegler's
retirement.
ELIMINATION OF SALES LOADS FOR AFFILIATES
Class A shares of the Portfolio may be purchased at net asset value
(that is, without a front-end sales charge) by directors and officers of
Principal Preservation (including shares purchased by any such person's spouse,
children or grandchildren under age 21, and by employees of B.C. Ziegler and
Company, Geneva Capital Management Ltd. (the Portfolio's sub-adviser) and
Skyline Asset Management, L.P. (the Select Value Portfolio's sub-adviser), and
the trustee or custodian under any pension or profit-sharing plan established
for the benefit of any such employees. The term "employees" 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. Principal Preservation permits such persons
to purchase Class A shares of the Portfolio without a sales charge because of
the minimum sales effort to accommodate these persons. The elimination of the
sales load for these affiliates also encourages them to invest in Principal
Preservation and rewards them for their services to Principal Preservation.
THE INVESTMENT ADVISERS
Ziegler Asset Management, Inc., the Portfolio's investment adviser, is
a wholly-owned subsidiary of The Ziegler Companies, Inc., a publicly-held
financial services holding company. Marc J. Dion, Vice President of Principal
Preservation, is Vice President-Portfolio Manager and Chief Investment Officer
of Ziegler Asset Management, Inc. No other officer or director of Principal
Preservation is an officer or director of Ziegler Asset Management, Inc. or
Geneva Capital Management Ltd.
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<PAGE> 48
Pursuant to the terms of the Investment Advisory Agreement, Ziegler
Asset Management provides the Portfolio with overall investment advisory and
administrative services. Subject to such policies the Principal Preservation
Board of Directors may determine, Ziegler Asset Management makes investment
decisions on behalf of the Portfolio, makes available research and statistical
data in connection therewith, and supervises the acquisitions and disposition of
investments by the Portfolio. As permitted by the Investment Advisory Agreement,
Ziegler Asset Management has claimed Geneva Capital Management Ltd. as
sub-adviser to the Portfolio.
For its advisory services to the Portfolio, Ziegler Asset Management,
Inc. receives an annual advisory fee, payable monthly, equal to 0.75% of the
first $250 million of average daily net assets, 0.70% of the next $250 million,
and 0.65% of average daily net assets in excess of $500 million. However,
Ziegler Asset Management, Inc. has agreed to waive its advisory fee so that the
Portfolio's annual operating expenses for 1999 do not exceed 1.25% for Class A
shares and 2.00% for Class B shares.
Geneva Capital Management, the Portfolio's sub-adviser, is controlled
by William A. Priebe, its President, Amy S. Croen, its Executive Vice President,
and William F. Schneider, a retired surgeon who is not actively involved in the
business. Geneva receives an annual sub-advisory fee from Ziegler Asset
Management, Inc., payable monthly, equal to 0.375% of the first $250 million of
the Portfolio's average daily net assets, 0.350% of the next $250 million, and
0.325% of average daily net assets in excess of $500 million. The Portfolio is
not responsible for paying any of these fees to Geneva. Under the terms of the
Sub- Advisory Agreement, Geneva is responsible for the day-to-day management of
the Portfolio's investments, subject to the oversight of Ziegler Asset
Management.
ADMINISTRATIVE SERVICES
B.C. Ziegler and Company ("Ziegler") provides certain administrative,
accounting and pricing services to Principal Preservation, including calculating
daily net asset value per share; maintaining original entry documents and books
of record and general ledgers; posting cash receipts and disbursements;
reconciling bank account balances monthly; recording purchases and sales based
upon portfolio manager communications; and preparing monthly and annual
summaries to assist in the preparation of financial statements of, and
regulatory reports for, Principal Preservation. Ziegler has agreed to provide
these services pursuant to the terms of an Accounting/Pricing Agreement at rates
found by the Board of Directors to be fair and reasonable in light of the usual
and customary charges made by unaffiliated vendors for similar services. The
current rate of payment for these services per Portfolio per year is .03 of 1%
of the Portfolio's total assets of $30 million but less than $100 million, .02
of 1% of the Portfolio's total assets of $100 million but less than $250 million
and .01 of 1% of the Portfolio's total assets of $250 million or more, with a
minimum fee of $19,000 per portfolio per year, plus expenses. The
Accounting/Pricing Agreement will continue in effect from year to year, as long
as it is approved at least annually by Principal Preservation's Board of
Directors or by a vote of the outstanding voting securities of Principal
Preservation and in either case by a majority of the Directors who are not
parties to the Accounting/Pricing
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<PAGE> 49
Agreement or interested persons of any such party. The Accounting/Pricing
Agreement terminates automatically if assigned and may be terminated without
penalty by either party on 60 days notice. The Accounting/Pricing Agreement
provides that neither Ziegler nor their personnel shall be liable for any error
of judgment or mistake of law or for any loss arising out of any act or omission
in the execution and the discharge of its obligations under the
Accounting/Pricing Agreement, except for willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of reckless disregard
of their obligations and duties under the Accounting/Pricing Agreement, and in
no case shall their liability exceed one year's fee income received by them
under such Agreement.
CUSTODIAN SERVICES
Firstar Trust Company serves as the custodian of Principal
Preservation's assets, pursuant to a Custodian Servicing Agreement. The
Custodian Servicing Agreement provides that Firstar Trust Company is entitled to
receive an annual fee set at 1% of the first $500 million of Principal
Preservation's assets and 0.75 of 1% of assets in excess of $500 million.
TRANSFER AGENT SERVICES
Ziegler provides transfer agent and dividend disbursing services to the
Portfolio pursuant to the terms of a Transfer and Dividend Disbursing Agency
Agreement. Under the terms of the Transfer and Dividend Disbursing Agency
Agreement, Ziegler is entitled to reasonable compensation for its services and
expenses as agreed upon from time to time between it and the Board of Directors
of Principal Preservation. The annual rate of compensation agreed upon for
these services is $11.00 per account for the Portfolio. Ziegler is also entitled
to reimbursement for all out of pocket expenses incurred in providing such
services. Ziegler also has the right to retain certain service charges as
described from time to time in the current Prospectus of the Portfolio. The
Transfer and Dividend Disbursing Agency Agreement will continue in effect until
terminated, and may be terminated by either party without cause on thirty (30)
days' prior written notice. The Transfer and Dividend Disbursing Agency
Agreement provides that Ziegler shall be indemnified by and not be liable to
Principal Preservation or the Portfolio for any action taken or omitted by
Ziegler under such agreement, except for liability for breach of Ziegler's
obligation to maintain all Principal Preservation records in absolute
confidence.
OTHER SERVICES
Ziegler also serves as the principal Distributor of shares of the
Portfolio and receives commissions on sales of such shares. See "Purchase of
Shares." Ziegler also receives reimbursement from each Portfolio for certain
expenses Ziegler incurs in connection with distributing the Portfolio's shares
pursuant to the Distribution Plan adopted by each Portfolio under Rule 12b-1 of
the 1940 Act. See "Distribution Expenses." The offering of Portfolio shares is
continuous.
17
<PAGE> 50
PURCHASE OF SHARES
As the principal Distributor for the Portfolio. Ziegler will allow
Selected Dealer discounts (which are alike for all Selected Dealers) from the
applicable public offering price. Neither Ziegler nor Selected Dealers are
permitted to withhold placing orders to benefit themselves by a price change.
The Distribution Agreement between Principal Preservation and Ziegler will
continue from year to year if it is approved annually by Principal
Preservation's Board of Directors, including a majority of those Directors who
are not interested persons, or by a vote of the holders of a majority of the
outstanding shares. The Distribution Agreement may be terminated at any time by
either party on 60 days notice and will automatically terminate if assigned.
CLASS A SHARES
The public offering price of the Portfolio's Class A shares is the net
asset value plus a maximum front-end sales charge equal to 5.25% of the offering
price.
Class A shares of the Portfolio may be purchased by certain classes of
persons without a sales charge, or a reduced sales charge, as described in the
Prospectus. The Board of Directors believes this is appropriate because of the
minimal sales effort needed to accommodate these classes of persons.
Because sales to members of qualified groups result in economies of
sales efforts and sales related expenses, the Dis tributor is able to offer a
reduced sales charge to such persons. A "qualified group" is one which: (1) has
been in existence for more than six months; (2) has a purpose other than
acquiring shares of one or more of the Portfolio at a discount; and (3) has more
than ten members, is available to arrange for group meetings between
representatives of the Distributor or Selected Dealers distributing shares of
the Portfolio, and agrees to include sales and other materials related to
Principal Preservation in its mailings to members at reduced or no cost to the
Distributor or Selected Dealers. See "Purchasing Shares -- Reduced Front-end
Sales Charge" in the Prospectus.
CLASS B SHARES
You may purchase Class B shares of the Portfolio. The public offering
price of Class B shares is net asset value with no front-end sales charge.
However, you pay a contingent deferred sales charge (expressed as a percent of
the lesser of the current net asset value or original cost) if the Class B
shares are redeemed within six years after purchase (See "How to Purchase
Shares" in the Prospectus).
DEALER REALLOWANCES
The Distributor pays a reallowance to Selected Dealers out of the
front-end sales load it receives on sales of Class A shares of the Portfolio,
which reallowance is equal to the following percentage of the offering price of
such shares:
18
<PAGE> 51
<TABLE>
<CAPTION>
SIZE OF INVESTMENT DEALER REALLOWANCE
------------------ ------------------
<S> <C>
Less than $25,000 4.50%
$25,000 but less than $50,000 4.25%
$50,000 but less than $100,000 4.25%
$100,000 but less than $250,000 3.25%
$250,000 but less than %500,000 2.50%
$500,000 but less than $1,000,000 1.80%
$1,000,000 or more 0.50%
</TABLE>
In addition, the Distributor may pay an additional commission to
participating dealers and participating financial institutions acting as agents
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 Dealer 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.
The Distributor will pay a commission to Selected Dealers who sell
Class B shares of the Portfolio in an amount equal to 4.00% of the net asset
value of the shares sold.
DISTRIBUTION EXPENSES
Principal Preservation's Distribution Plan (the "Plan") is its written
plan contemplated by Rule 12b-1 (the "Rule") under the 1940 Act.
The Plan authorizes the Distributor to make certain payments to any
qualified recipient, as defined in the Plan, that has rendered assistance in the
distribution of Principal Preservation's shares (such as sale or placement of
Principal Preservation's shares, or administrative assistance, such as
maintenance of sub-accounting or other records). Qualified recipients include
banks and other financial institutions. The Plan also authorizes the Distributor
to purchase advertising for shares of the Portfolio, to pay for sales literature
and other promotional material, and to make payments to its sales personnel. The
Plan also
19
<PAGE> 52
entitles the Distributor to receive a fee of .25 of 1% on an annual basis of the
average daily net assets of Portfolio shares that are owned of record by the
Distributor as nominee for the Distributor's customers or which are owned by
those customers of the Distributor whose records, as maintained by Principal
Preservation or its agent, designate the Distributor as the customer's dealer of
record. Any such payments to qualified recipients or expenses will be reimbursed
or paid by Principal Preservation, up to maximum annual amounts established
under the terms of the Plan.
CLASS A SHARES
The maximum amount of fees payable under the Plan during any calendar
year with respect to Class A Shares of the Portfolio may not exceed an amount
equal to 0.25 of 1% of the average daily net assets of the Portfolio over the
relevant year.
CLASS B SHARES
The maximum amount of fees payable under the Plan during any calendar
year by the Portfolio may not exceed an amount equal to 1.00 of 1% of the
average daily net assets of any such Portfolio over the relevant year as a 12b-1
distribution fee. A part of the distribution fee equal to 0.75 of 1% of the
average daily net assets of the Portfolio will be paid to compensate the
Distributor for assuming the costs of brokers' commissions in connection with
the sale of the Class B shares.
The Distributor bears its expenses of distribution above the foregoing
amounts. No reimbursement or payment may be made for expenses of past fiscal
years or in contemplation of expenses for future fiscal years under the Plan.
The Plan states that if and to the extent that any of the payments by
Principal Preservation listed below are considered to be "primarily intended to
result in the sale of shares" issued by the Portfolio within the meaning of the
Rule, such payments by Principal Preservation are authorized without limit under
the Plan and shall not be included in the limitations contained in the Plan: (1)
the costs of the preparation, printing and mailing of all required reports and
notices to shareholders, irrespective of whether such reports or notices contain
or are accompanied by material intended to result in the sale of shares of
Principal Preservation or other funds or other investments; (2) the costs of
preparing, printing and mailing of all prospectuses to share holders; (3) the
costs of preparing, printing and mailing of any proxy statements and proxies,
irrespective of whether any such proxy statement includes any item relating to,
or directed toward, the sale of Principal Preservation's shares; (4) all legal
and accounting fees relating to the preparation of any such reports,
prospectuses, proxies and proxy statements; (5) all fees and expenses relating
to the qualification of Principal Preservation and or their shares under the
securities or "Blue Sky" laws of any jurisdiction; (6) all fees under the 1940
Act and the Securities Act of 1933, including fees in connection with any
application for exemption relating to or directed toward the sale of Principal
Preservation's shares; (7) all fees and assessments of the Investment Company
Institute or any successor organization or industry association irrespective of
whether some of its activities are designed
20
<PAGE> 53
to provide sales assistance; (8) all costs of preparing and mailing
confirmations of shares sold or redeemed or share certificates and reports of
share balances; and (9) all costs of responding to telephone or mail inquiries
of shareholders.
The Plan also states that it is recognized that the costs of
distribution of Principal Preservation's shares are expected to exceed the sum
of permitted payments, permitted expenses, and the portion of the sales charge
retained by the Distributor, and that the profits, if any, of the Advisers are
dependent primarily on the advisory fees paid by Principal Preservation to
Ziegler. If and to the extent that any investment advisory fees paid by
Principal Preservation might, in view of any excess distribution costs, be
considered as indirectly financing any activity which is primarily intended to
result in the sale of shares issued by Principal Preservation, the payment of
such fees is nonetheless authorized under the Plan. The Plan states that in
taking any action contemplated by Section 15 of the 1940 Act as to any
investment advisory contract to which Principal Preservation is a party, the
Board of Directors including its Directors who are not "interested persons" as
defined in the 1940 Act, and who have no direct or indirect financial interest
in the operation of the Plan or any agreements related to the Plan ("Qualified
Directors"), shall, in acting on the terms of any such contract, apply the
"fiduciary duty" standard contained in Sections 36(a) and (b) of the 1940 Act.
Under the Plan, Principal Preservation is obligated to pay distribution
fees only to the extent of expenses actually incurred by the Distributor for the
current year, and thus there will be no carry-over expenses from the previous
years. The Plan permits the Distributor to pay a portion of the distribution fee
to authorized broker dealers, which may include banks or other financial
institutions, and to make payments to such persons based on either or both of
the following: (1) as reimbursement for direct expenses incurred in the course
of distributing Principal Preservation's shares or providing administrative
assistance to Principal Preservation or its shareholders, including, but not
limited to, advertising, printing and mailing promotional material, telephone
calls and lines, computer terminals and personnel (including commissions and
other compensation paid to such personnel); and/or (2) at a specified percentage
of the average value of certain qualifying accounts of customers of such
persons.
The Plan requires that while it is in effect the Distributor shall
report in writing at least quarterly to the Directors, and the Directors shall
review, the following: (1) the amounts of all payments, the identity of
recipients of each such payment, the basis on which each such recipient was
chosen and the basis on which the amount of the payment was made; (2) the
amounts of expenses and the purpose of each such expense; and (3) all costs of
the other payments specified in the Plan (making estimates of such costs where
necessary or desirable) in each case during the preceding calendar or fiscal
quarter.
The Plan will continue in effect from year to year only so long as such
continuance is specifically approved at least annually by the Board of Directors
and its Qualified Directors cast in person at a meeting called for the purpose
of voting on such continuance. The Plan may be terminated any time without
penalty by a vote of a majority of the Qualified Directors or by the vote of the
holders of a majority of the outstanding voting securities of Principal
Preservation (or with respect to any Portfolio, by the vote of a majority of the
outstanding
21
<PAGE> 54
shares of such Portfolio). The Plan may not be amended to increase materially
the amount of payments to be made without shareholder approval. While the Plan
is in effect, the selection and nomination of those Directors who are not
interested persons of Principal Preservation is committed to the discretion of
such disinterested Directors. Nothing in the Plan will prevent the involvement
of others in such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such disinterested
Directors.
DETERMINATION OF NET ASSET VALUE PER SHARE
Shares are sold at their net asset value per share plus the applicable
sales charge, if any. See "Purchase of Shares." Net asset value per share of the
Portfolio is determined by subtracting the Portfolio's liabilities (including
accrued expenses and dividends payable) from the Portfolio's total assets (the
value of the securities the portfolio holds plus cash or other assets, including
interest accrued but not yet received) and dividing the result by the total
number of shares outstanding.
The net asset value per share will be calculated as of the close of
trading on the New York Stock Exchange (the "Exchange") at least once every
weekday, Monday through Friday, except on customary national business holidays
which result in the closing of the Exchange (including New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day).
Securities for which market quotations are readily available will be
valued at their last sale price prior to the close of the Exchange, unless there
have been no trades on that day and the last sale price is below the bid, or
above the asked, price. If the last prior sale price is below the bid,
instruments will be valued at the bid price at the close of the Exchange; if the
last prior sale price is above the asked, the instrument will be valued at the
asked price at the close of the Exchange. Securities and other assets for which
quotations are not readily available will be valued at their fair value on a
consistent basis using valuation methods determined by the Board of Directors.
The Portfolio intends to determine fair value for such securities based in part
upon the information supplied by pricing services approved by the Board of
Directors. Valuations of portfolio securities furnished by the pricing service
will be based upon a computerized matrix system and/or appraisals by the pricing
service in each case in reliance upon information concerning market transactions
and quotations from recognized securities dealers.
PERFORMANCE INFORMATION
From time to time the Portfolio may advertise its "total return."
"Total return" of the Portfolio refers to the average annual total return for
one, five and ten year periods (or so much thereof as the Portfolio has been in
existence). Total return is the change in redemption value of shares purchased
with an initial $1,000 investment, assuming the reinvestment of dividends and
capital gain distributions, after giving effect to the maximum applicable sales
charge.
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<PAGE> 55
Performance information should be considered in light of the Portfolio's
investment objectives and policies, characteristics and quality of the portfolio
and the market conditions during the time period, and should not be considered
as a representation of what may be achieved in the future. Investors should
consider these factors and possible differences in the methods used in
calculating performance information when comparing the Portfolio's performance
to performance figures published for other investment vehicles.
Average annual total return is computed by finding the average annual
compounded rates of return over the 1, 5, and 10 year periods (or so much
thereof as the Portfolio has been in existence) ended on the date of the balance
sheet of the Portfolio that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
(n)
P(1 + T)) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year periods
(or fractional portion thereof).
In some circumstances the Portfolio may advertise its total return for
a 1, 2 or 3-year period, or the total return since the Portfolio commenced
operations. In such circumstances the Portfolio will adjust the values used in
computing return to correspond to the time period for which the information is
provided.
For illustrative purposes, the Portfolio may include in its
supplemental sales literature from time to time a mountain graph that advertises
the Portfolio's total return by depicting the growth in the value of an initial
investment of $10,000 that a shareholder would have experienced in the relevant
Portfolio since the commencement of the Portfolio's operations to the present.
The presentation consists of a line graph shaded underneath with the value of
the amount invested reflected along a vertical axis and the time period from the
commencement of the Portfolio's operations through a given date reflected along
a horizontal axis.
In some circumstances the Portfolio may advertise its total return for
a 1, 2 or 3-year period, or the total return since the Portfolio commenced
operations. In such circumstances, the Portfolio will adjust the values used in
computing return to correspond to the time period for which the information is
provided.
Performance information for the Portfolios may be compared to various
unmanaged indices, such as the S&P 500 Stock Index or the S&P Midcap 400 Stock
Index, as well as indices of similar mutual funds. The Portfolio's advertising
may also quote rankings published
23
<PAGE> 56
by other recognized statistical services or publishers such as Lipper Analytical
Services, Inc., or Weisenberger Investment Companies Service.
An illustration may be used comparing the growth in value of an initial
investment in the Portfolio compared to a fixed rate of return compounded on a
monthly basis. This illustration will reflect the effect of the Portfolio's
sales charge and fluctua tions in net asset value, and will assume all income
and capital gain distributions are reinvested. The fixed rate of return will be
clearly stated and presented as a monthly compounded figure, and therefore will
not reflect any market fluctuation.
In advertising and sales literature, the performance of the Portfolio
may be compared with that of other mutual funds, indexes or averages of other
mutual funds, indexes of related financial assets or data and other competing
investment and deposit products available from or through other financial
institutions. The composition of these indexes, averages or accounts differs
from that of the Portfolio. Comparison of the Portfolio to an alternative
investment will consider differences in features and expected performance.
All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which Principal Preservation generally
believes to be accurate. The Portfolio may also note its mention (including
performance or other comparative rankings) in newspapers, magazines, or other
media from time to time. However, Principal Preservation assumes no
responsibility for the accuracy of such data. Newspapers and magazines which
might mention the Portfolio or Principal Preservation include, but are not
limited to, the following:
The Business Journal Milwaukee Journal Sentinel
Business Week Money
Changing Times Mutual Fund Letter
Chicago Tribune Mutual Fund Values
Chicago Sun-Times (Morningstar)
Crain's Chicago Newsweek
Business The New York Times
Consumer Reports Pension and Investments
Consumer Digest Personal Investor
Financial World Stanger Reports
Forbes Time
Fortune USA Today
Investor's Daily U.S. News and World Reports
Los Angeles Times The Wall Street Journal
When a newspaper, magazine or other publication mentions Principal
Preservation or the Portfolio, such mention may include: (i) listings of some or
all of the Portfolio's holdings; (ii) descriptions of characteristics of some or
all of the securities held by the Portfolio, including price-earnings ratios,
earnings, growth rates and other statistical information, and comparisons of
that information or similar statistics for the securities comprising any of the
24
<PAGE> 57
indexes or averages listed above; and (iii) descriptions of Principal
Preservation or the Portfolio manager's economic and market outlook, general and
for the Portfolio.
The Portfolio may compare its performance to the Consumer Price Index
(All Urban), a widely recognized measure of inflation.
The performance of the Portfolio may be compared to any or all of the
following indexes or averages:
<TABLE>
<S> <C>
Dow-Jones Industrial Average New York Stock Exchange Composite Index
Russell 2000 Small Stock Index American Stock Exchange Composite Index
Russell Mid-Cap Stock Index NASDAQ Composite
Russell 2500 Index NASDAQ Industrials
Standard & Poor's 500 Stock Index (These indexes generally reflect the performance
Standard & Poor's 400 Industrials of stock traded in the indicated markets.)
Standard & Poor's Mid-Cap 400 Index
Wilshire 5000
Wilshire 4500
Wilshire 4000
(These indexes are widely recognized
indicators of general U.S. stock
market results.)
</TABLE>
The performance of the Portfolio may also be compared to the following
mutual fund industry indexes or averages: [Value Line Index; Lipper Capital
Appreciation Fund Average; Lipper Growth Funds Average; Lipper Mid-Cap Growth
Funds Average; Lipper General Equity Funds Average; Lipper Equity Funds Average;
Morningstar Growth Average; Morningstar Aggressive Growth Average; Morningstar
U.S. Diversified Average; Morningstar Equity Fund Average; Morningstar Hybrid
Average; Morningstar All Equity Funds Average; and Morningstar General Equity
Average.]
The Lipper and Morningstar averages are unweighted averages of total
return performance of mutual funds as classified, calculated and published by
Lipper Analytical Services, Inc. ("Lipper") and by Morningstar, Inc.
("Morningstar"), respectively. The Portfolio may also use comparative
performance as computed in a ranking by Lipper or category averages and rankings
provided by another independent service. Should Lipper or another service
reclassify the Portfolio to a different category or develop (and place the
Portfolio into) a new category, the Portfolio may compare its performance or
ranking against other funds in the newly assigned category, as published by the
service. Moreover, the Portfolio may compare its performance or ranking against
all funds tracked by Lipper or another independent service, and may cite its
rating, recognition or other mention by Morningstar or any other entity.
Morningstar's rating system is based on risk-adjusted total return performance
and is expressed in a star-rating format. The risk-adjusted number is computed
by subtracting the Portfolio's risk score (which is a function of the
Portfolio's monthly returns less the 3-month Treasury bill return) from the
Portfolio's load-adjusted total return score. This numerical score is then
translated into rating categories, with the top 10% labeled five star, the next
22.5% labeled four star, the next 35% labeled three star, the next 22.5% labeled
two star and the
25
<PAGE> 58
bottom 10% one star. A high rating reflects either above-average returns or
below-average risks, or both.
To illustrate the historical returns on various types of financial
assets, the Portfolio may use historical data provided by Ibbotson Associates,
Inc. ("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or
obtains) very long-term (since 1926) total return data (including, for example,
total return indexes, total return percentages, average annual total returns and
standard deviations of such returns) for the following asset types: common
stocks, small company stocks, long-term corporate bonds, long-term government
bonds, intermediate-term government bonds, U.S. Treasury bills and Consumer
Price Index. The Portfolio may also use historical data compiled by Prudential
Securities, Inc., or by other similar sources believed by Principal Preservation
to be accurate, illustrating the past performance of small-capitalization
stocks, large-capitalization stocks, common stocks, equity securities, growth
stocks (small-capitalization, large-capitalization, or both) and value stock
(small-capitalization, large-capitalization, or both).
TAX STATUS
Each series of a series company, such as Principal Preservation, is
treated as a single entity for Federal income tax purposes so that the net
realized capital gains and losses of the various portfolios in one fund are not
combined.
The Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986 (the "Code"). In order to qualify as a
regulated investment company, the Portfolio must satisfy a number of
requirements. Among such requirements is the requirement that less than 30
percent of the Portfolio's gross income be derived from the sale or other
disposition of securities (net of losses on designated hedges) held for less
than three months. In determining this gross income requirement, a loss from the
sale or other disposition of securities does not enter into the computation. If
Portfolio were to fail to qualify as a regulated investment company under the
Code, it would be treated as a regular corporation whose net taxable income
(including taxable dividends and net capital gains), would be subject to income
tax at the corporate level, and distributions to shareholders would be subject
to a second tax at the shareholder level.
A portion of the Portfolio's net investment income will qualify for the
70% dividends received deduction for corporations. The aggregate amount eligible
for the dividends received deduction may not exceed the aggregate qualifying
dividends received by the Portfolio for the year. If less than 100% of the
Portfolio's gross income constitutes dividend income, then only a portion of
distributions by the Portfolio will be treated as dividend income for purposes
of computing the dividends received deduction for corporations.
Dividends and other distributions paid to individuals and other
non-exempt payees are subject to a 31% backup Federal withholding tax if the
Transfer Agent is not provided with the shareholder's correct taxpayer
identification number or certification that the shareholder is not
26
<PAGE> 59
subject to such backup withholding or if one of the Portfolio is notified that
the shareholder has underreported income in the past. In addition, such backup
withholding tax will apply to the proceeds of redemption or repurchase of
shares from a shareholder account for which the correct taxpayer identification
number has not been furnished. For most individual taxpayers, the taxpayer
identification number is the social security number. An investor may furnish
the Transfer Agent with such number and the required certifications by
completing and sending the Transfer Agent either the Account Application form
attached to the Prospectus or IRS Form W-9.
Interest on indebtedness incurred (directly or indirectly) by
shareholders to purchase or carry shares will not be deductible for Federal
income tax purposes.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
No person controls Principal Preservation or the Portfolio. No person
was known to Principal Preservation to own beneficially more than 5% of the
outstanding shares of Principal Preservation common stock, or of the Portfolio.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Purchase and sale orders for portfolio securities may be affected
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 Advisers 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. In addition, if Ziegler or another affiliate
of an Adviser is utilized as a broker by Principal Preservation, and other
clients of such Adviser are considering the same types of transactions
simultaneously, the Adviser will allocate the transactions and securities in
which they are made in a manner deemed by it to be equitable, taking into
account size, timing and amounts. This may affect the price and availability of
securities to the Portfolio.
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<PAGE> 60
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Quarles & Brady LLP, as counsel to Principal Preservation, has rendered
its opinion as to certain legal matters regarding the due authorization and
valid issuance of the shares of common stock being sold pursuant to the
Prospectus. Arthur Andersen LLP, independent public accountants, are the
auditors of Principal Preservation.
28
<PAGE> 61
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISER
Ziegler Asset Management, Inc.
215 North Main Street
West Bend, Wisconsin 53095
SUB-ADVISER
Geneva Capital Management, Ltd.
250 East Wisconsin Avenue
Suite 1050
Milwaukee, Wisconsin 53202
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, Wisconsin 53202
LEGAL COUNSEL
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
<PAGE> 62
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
---------------------------------------
JANUARY 1, 1999
STATEMENT OF ADDITIONAL INFORMATION
---------------------------------------
<PAGE> 63
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
Part C. Other Information
Item 23. Exhibits
See Exhibit Index following Signature Page, which Exhibit
Index is incorporated herein by this reference.
Item 24. Persons Controlled by or under Common Control with the
Fund
Not applicable.
Item 25. Indemnification
Reference is made to Article IX of Principal Preservation's
Bylaws filed as Exhibit No. 2 to its Registration Statement
with respect to the indemnification of Principal
Preservation's directors and officers, which is set forth
below:
Section 9.1. Indemnification of Officers, Directors, Employees
and Agents. The Corporation shall indemnify each person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that he is or was a
Director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such Proceeding to the fullest extent
permitted by law; provided that:
(a) whether or not there is an adjudication of
liability in such Proceeding, the Corporation shall not
indemnify any person for any liability arising by reason of
such person's willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in
the conduct of his office or under any contract or agreement
with the Corporation ("disabling conduct"); and
(b) the Corporation shall not indemnify any person
unless:
(1) the court or other body before which the
Proceeding was brought (i) dismisses the
Proceeding for insufficiency of evidence of any
disabling conduct, or (ii) reaches a final
decision on the merits that such person was not
liable by reason of disabling conduct; or
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(2) absent such a decision, a reasonable
determination is made, based upon a review of the
facts, by (i) the vote of a majority of a quorum
of the Directors of the Corporation who are
neither interested persons of the Corporation as
defined in the Investment Company Act of 1940 nor
parties to the Proceeding, or (ii) if such quorum
is not obtainable, or even if obtainable, if a
majority of a quorum of Directors described in
paragraph (b)(2)(i) above so directs, by
independent legal counsel in a written opinion,
that such person was not liable by reason of
disabling conduct.
Expenses (including attorneys' fees) incurred in defending a Proceeding
will be paid by the Corporation in advance of the final disposition thereof upon
an undertaking by such person to repay such expenses (unless it is ultimately
determined that he is entitled to indemnification), if:
(1) such person shall provide adequate security for his
undertaking;
(2) the Corporation shall be insured against losses arising by
reason of such advance; or
(3) a majority of a quorum of the Directors of the Corporation
who are neither interested persons of the Corporation as defined in the
Investment Company Act of 1940 nor parties to the Proceeding, or independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts, that there is reason to believe that such person will
be found to be entitled to indemnification.
Section 9.2 Insurance of Officers, Directors, Employees and Agents. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a Director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in or
arising out of his position. However, in no event will the Corporation purchase
insurance to indemnify any such person for any act for which the Corporation
itself is not permitted to indemnify him.
Item 26. Business and Other Connections of Investment Adviser
(a) Ziegler Asset Management, Inc.
Ziegler Asset Management, Inc. is a wholly owned
subsidiary of The Ziegler Companies, Inc. It serves as
investment adviser to all of the Principal Preservation
Portfolios.
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Set forth below is a list of the officers and directors of
Ziegler Asset Management, Inc. as of June 30, 1998, together with
information as to any other business, profession, vocation or
employment of a substantial nature of those officers and directors
during the past two years:
<TABLE>
<CAPTION>
POSITION WITH
ZIEGLER ASSET
NAME MANAGEMENT OTHER AFFILIATIONS(1)
- ---- ------------- ---------------------
<S> <C> <C>
P. D. Ziegler Chairman and Director Chairman of the Board,
President, Chief Executive
Officer and Director, B.C.
Ziegler and Company; Chairman,
Ziegler Securities; Director,
West Bend Mutual Insurance
Company, 1900 S. 18th Avenue,
West Bend, WI 53095 (insurance
company)
Geoffrey G. Maclay, Jr. President and Chief President and Chief Executive
Executive Officer, Ziegler Asset
Officer Management, Inc.
R. D. Ziegler Senior Vice President Chairman and Director, Principal
and Director Preservation Portfolios, Inc.,
Director, Johnson Controls,
Inc., 5757 N. Green Bay Avenue,
Milwaukee, WI 53201
(manufacturing)
Robert J. Tuszynski Vice President Senior Vice President, B.C.
Ziegler and Company; President,
Chief Executive Officer and
Director of Principal
Preservation Portfolios, Inc.
M. J. Dion Vice President - None
Portfolio Manager and
Chief Investment
Officer
R. F. Patek Vice President - None
Portfolio Manager
D. R. Wyatt Vice President - None
Retirement Plan
Services
J. R. Yovanovich Corporate Secretary Corporate Secretary, B.C.
Ziegler and Company
J. C. Vredenbregt Treasurer Vice President - Treasurer and
Controller, B.C. Ziegler and
Company; Assistant Treasures;
Ziegler Securities
D. L. Lauterbach Vice President None
W. E. Hansen Vice President None
J. R. Wyatt Vice President None
Jay Ferrara, Jr. Vice President - None
Portfolio Manager and
Analyst
</TABLE>
- -------------------------
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(1) Certain of the indicated persons are officers or directors, or both, of
B.C. Ziegler and Company's parent, The Ziegler Companies, Inc., and of
other subsidiaries of its parent. Other than these affiliations, and
except as otherwise indicated on the table, the response is none.
(b) Geneva Capital Management Ltd.
Geneva Capital Management Ltd. ("Geneva") is a privately owned
Wisconsin corporation. Set forth below is a list of the officers and
directors of Geneva as of June 30, 1998, together with information as
to any other business, profession, vocation or employment of a
substantial nature of those officers and directors during the past two
years (the business address of all such persons is c/o Geneva Capital
Management L.P., 250 East Wisconsin Avenue, Suite 1050, Milwaukee,
Wisconsin 53202):
<TABLE>
<CAPTION>
NAME POSITION WITH GENEVA OTHER AFFILIATIONS
- ---- -------------------- ------------------
<S> <C> <C>
William A. Priebe President and Director None.
Amy S. Croen Executive Vice None.
President and Director
John J. O'Hare II Vice President Senior Analyst, The Nicholas Funds (registered
investment company), from 1992 to 1997.
William F. Schneider, M.D. Director Retired Surgeon.
</TABLE>
Item 27. Principal Underwriters
(a)
OTHER INVESTMENT COMPANIES FOR WHICH
UNDERWRITER ACTS AS UNDERWRITER,
UNDERWRITER DEPOSITOR OR INVESTMENT ADVISER
----------- ------------------------------------
B.C. Ziegler and Company An underwriter for all of the mutual fund
series of Principal Preservation; American
Tax-Exempt Bond Trust, Series 1 (and
subsequent series); Ziegler U.S.
Government Securities Trust, Series 1 (and
subsequent series); American Income Trust,
Series 1 (and subsequent series); Ziegler
Money Market Trust; The Insured American
Tax-Exempt Bond Trust, Series 1 (and
subsequent series); and principal
underwriter for Portico Funds.
(b) Set forth below is a list of the officers and directors
of B.C. Ziegler and Company as of June 30, 1998,
together with information as to any other business,
profession, vocation or employment of a substantial
nature of those officers and directors during the past
two years. None of the persons identified serves as an
officer or director of Principal Preservation, except
that Robert J.
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Tuszynski serves as President, Chief Executive Officer and a
Director of Principal Preservation, and S. Charles O'Meara
serves as Secretary of Principal Preservation. The address of
each officer and director of B.C. Ziegler and Company is 215
North Main Street, West Bend, Wisconsin 53095, Phone (414)
334-5521.
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME B.C. ZIEGLER AND COMPANY(1) PRINCIPAL PRESERVATION
---- --------------------------- ----------------------
<S> <C> <C>
Peter D. Ziegler Chairman of the Board,
President, Chief Executive
Officer and Director
S. Charles O'Meara Senior Vice President and Secretary
General Counsel and
Director
D.A. Wallstead Senior Vice President -
Chief Financial Officer
John C. Wagner Senior Vice President -
Ziegler Investment Division
Retail Sales and Director
Ronald N. Spears Senior Vice President -
Ziegler Investment Division
Donald A. Carlson, Jr. Senior Vice President
Neil L. Fuerbringer Senior Vice President -
Administration
Michael P. Doyle Senior Vice President -
Ziegler Investment Division
Retail Operations
Robert J. Tuszynski Senior Vice President - President, Chief
Ziegler Investment Division Executive Officer and
Director
Richard J. Glaisner President and Chief
Executive Officer - Ziegler
Investment Division
R. R. Poggenburg Senior Vice President -
Ziegler Investment Division
D. A. Carlson, Jr. President, Chief Executive
Officer and Treasurer -
Ziegler Securities
J. M. Annett Senior Vice President and
National Director of Senior
Living Finance -Ziegler
Securities
S. R. Arnold Senior Vice President - TFI
Institutional Sales -
Ziegler Securities
T. L. DiGaloma Senior Vice President - TFI
Institutional Sales and
Trading - Ziegler
Securities
C. W. Kearns Senior Vice President - Co-
Manager of TFI - Ziegler
Securities
</TABLE>
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<PAGE> 68
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME B.C. ZIEGLER AND COMPANY(1) PRINCIPAL PRESERVATION
---- --------------------------- ----------------------
<S> <C> <C>
L. A. Lekai Senior Vice President - TFI
Institutional Sales and
Trading - Ziegler
Securities
M. P. McDaniel Senior Vice President and
Director of Tax-Exempt
Sales and Trading - Ziegler
Securities
T. R. Paprocki Senior Vice President and
Director of Capital Markets
- Ziegler Securities
P. C. Staaf Senior Vice President - Co-
Manager of TFI - Ziegler
Securities
J. B. Sterns Senior Vice President and
National Director of
Healthcare Finance -
Ziegler Securities
M. A. Baumgartner Senior Vice President -
Ziegler Securities
D. J. Hermann Senior Vice President -
Ziegler Securities
J. J. O'Keefe Senior Vice President -
Ziegler Securities
D. M. Rognerud Senior Vice President -
Ziegler Securities
</TABLE>
- ---------------------------
(1) Ziegler Investment Division and Ziegler Securities are divisions of B.
C. Ziegler and Company.
(c) Not applicable.
Item 28. Location of Accounts and Records
(a) B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
General ledger, including subsidiary ledgers;
corporate records and contracts; Portfolio ledger;
and shareholder documents, including IRA documents.
(b) Geneva Capital Management, Ltd.
250 East Wisconsin Avenue
Suite 1050
Milwaukee, Wisconsin 53202
C-6
<PAGE> 69
Transaction journals and confirmations for portfolio
trades for the Managed Growth Portfolio.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-7
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund has caused this Post-Effective Amendment to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, duly authorized, in the City of West Bend, and State of Wisconsin
on this 15th day of October, 1998.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By: /s/ Robert J. Tuszynski
--------------------------------------
Robert J. Tuszynski, President
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment to its Registration Statement on Form N- 1A has been signed below on
this 15th day of October, 1998, by the following persons in the capacities
indicated.
SIGNATURE TITLE
--------- -----
/s/ Robert J. Tuszynski Director and President
- ------------------------------- (Chief Executive Officer)
Robert J. Tuszynski
/s/ Franklin P. Ciano Chief Financial Officer and
- ------------------------------- Treasurer (Chief Financial
Franklin P. Ciano and Accounting Officer)
Richard H. Aster* Director
- -------------------------------
Richard H. Aster
August J. English* Director
- -------------------------------
August J. English
Ralph J. Eckert* Director
- -------------------------------
Ralph J. Eckert
Richard J. Glaisner* Director
- -------------------------------
Richard J. Glaisner
*By: /s/ Robert J. Tuszynski
---------------------------------------------------
Robert J. Tuszynski pursuant to a Power of Attorney
dated May 15, 1998 (filed as part of Post-Effective
Amendment No. 44 to the Fund's Registration
Statement on Form N-1A)
C-8
<PAGE> 71
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
(A)(1) Restated and Amended Articles of Incorporation(7)
(A)(2) December 29, 1995 Articles Supplementary(1)
(A)(3) Articles Supplementary for PSE Tech 100 Index
Portfolio filed June 12, 1996(4)
(A)(4) Form of Articles Supplementary for Managed Growth
Portfolio
(B) By-Laws, as amended through January 20, 1995(7)
(C) The Registrant's Amended and Restated Operating
Plan(8)
(D)(1) Investment Advisory Agreement pertaining to assets
of Dividend Achievers Portfolio(3)
(D)(2) Investment Advisory Agreement pertaining to the
assets of Tax-Exempt, S&P 100 Plus, Government,
Wisconsin Tax-Exempt, Select Value and PSE Tech 100
Index Portfolios(4)
(D)(3) Exhibit A to Investment Advisory Agreement, as
amended to include the Managed Growth Portfolio
(D)(4) Sub-Advisory Agreement with Skyline Asset
Management, L.P.(3)
(D)(5) Investment Advisory Agreement with Ziegler Asset
Management, Inc. with respect to the Cash Reserve
Portfolio(2)
(D)(6) Sub-Advisory Agreement with Geneva Capital
Management Ltd.
(E)(1) Distribution Agreement(4)
(E)(2) Form of Selected Dealers Agreement
(F) N/A
(G) Custodian Agreement with Firstar Trust Company(9)
(H)(1) Transfer and Dividend Disbursing Agent Agreement(4)
(H)(2) License Agreement with Standard & Poor's
Corporation(*)
(H)(3) Accounting/Pricing Agreement between Registrant and
B.C. Ziegler and Company
(H)(4) Shareholder Servicing Agreement by and between B.C.
Ziegler and Company and the Registrant, as amended,
relating to Class X Shares of the Cash Reserve
Portfolio(5)
(H)(5) Administrative Services Agreement with Ziegler
Asset Management, Inc. with respect to the Cash
Reserve Portfolio(1)
C-9
<PAGE> 72
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
(H)(6) License Agreement with Pacific Stock Exchange
Incorporated(6)
(I) Opinion of Counsel(7)
(J)(1) Consent of Independent Public Accountants
(J)(2) Consent of Counsel
(K) N/A
(L) N/A
(M) Amended and Restated Distribution Plan Pursuant to
Rule 12b-1
(N) N/A
(O) See Exhibit (C)
- ---------------------
* Denotes previously filed as part of Registrant's Registration Statement
on Form N-1A or an amendment thereto, and incorporated herein by
reference.
(1) Previously filed as part of Registrant's Registration
Statement on Form N-14 (Reg. No. 33-99010) filed with the
Commission on November 3, 1995.
(2) Previously filed as part of Post-Effective Amendment No. 31 to this
Registration Statement filed with the Commission on December 29, 1995.
(3) Previously filed as part of Post-Effective Amendment No. 32 to this
Registration Statement filed with the Commission on March 1, 1996.
(4) Previously filed as part of Post-Effective Amendment No. 33 to this
Registration Statement filed with the Commission on March 27, 1996.
(5) Previously filed as part of Post-Effective Amendment No. 36 to this
Registration Statement filed with the Commission on December 10, 1996.
(6) Previously filed as part of Post-Effective Amendment No. 37 to this
Registration Statement filed with the Commission on February 28, 1997.
(7) Previously filed as part of Post-Effective Amendment No. 38 to this
Registration Statement filed with the Commission on April 30, 1997.
(8) Previously filed as part of Post-Effective Amendment No. 41 to this
Registration Statement filed with the Commission on April 2, 1998.
C-10
<PAGE> 73
(9) Previously filed as part of Post-Effective Amendment No. 43 to this
Registration Statement filed with the Commission on May 1, 1998.
C-11
<PAGE> 1
EXHIBIT (A)(4)
ARTICLES SUPPLEMENTARY FOR MANAGED GROWTH PORTFOLIO
<PAGE> 2
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
ARTICLES SUPPLEMENTARY
The Board of Directors of Principal Preservation Portfolios, Inc., a
corporation organized and existing under the laws of the State of Maryland, by
Resolution adopted on October __, 1998 by a majority of the Directors of said
corporation, has established and designated 50,000,000 shares of its previously
authorized but unissued common stock, 1/10 of 1(cent) ($.001) par value per
share, as an additional series to be known as the Principal Preservation Managed
Growth Portfolio. Shares of such series shall have the preferences, rights,
voting powers, restrictions, limitations as to dividends, qualifications and
other conditions of redemption as set forth in Section 7.2 of Principal
Preservation Portfolios, Inc.'s Articles of Incorporation. With the addition of
this series, the presently designated series of shares of Principal Preservation
Portfolios, Inc.'s common stock consist of the following:
SERIES NO. OF SHARES
- ------ -------------
Tax-Exempt Portfolio 50 million
Government Portfolio 50 million
Dividend Achievers Portfolio
Class A Common Stock 25 million
Class B Common Stock 25 million
S&P 100 Plus Portfolio
Class A Common Stock 25 million
Class B Common Stock 25 million
Wisconsin Tax-Exempt Portfolio 50 million
Select Value Portfolio
Class A Common Stock 25 million
Class B Common Stock 25 million
Cash Reserve Portfolio
Class X Common Stock 200 million
Class Y Common Stock 200 million
PSE Tech 100 Index Portfolio
Class A Common Stock 25 million
Class B Common Stock 25 million
Managed Growth Portfolio
Class A Common Stock 25 million
Class B Common Stock 25 million
<PAGE> 3
This action does not alter the number of authorized shares of Principal
Preservation, which consists of one billion shares, par value $0.001 per share.
The Board of Directors has taken this action pursuant to the powers conferred
upon it under Section 7.1 of Principal Preservation Portfolios, Inc.'s Articles
of Incorporation and Section 2.208 of the Maryland General Corporation Law.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By:
------------------------------------
Robert J. Tuszynski, President
Attest:
By:
------------------------------------
S. Charles O'Meara, Secretary
STATE OF WISCONSIN )
) SS
COUNTY OF WASHINGTON )
On this ___ day of __________, 199__, before me a Notary Public for the
State and County set forth above, personally came Robert J. Tuszynski, as
President of Principal Preservation Portfolios, Inc., and S. Charles O'Meara,
as Secretary of Principal Preservation Portfolios, Inc., and in their said
capacities each acknowledged the foregoing Articles Supplementary to be the act
and deed of said corporation and further acknowledged that, to the best of
their knowledge, the matters and facts set forth are true in all material
respects under the penalties of perjury.
IN WITNESS WHEREOF, I have signed below in my own hand and attached my
official seal on the day and year set forth above.
[Notary Seal] ----------------------------------
Notary Public
My Commission expires:
------------
2
<PAGE> 1
EXHIBIT (D)(3)
EXHIBIT A TO INVESTMENT ADVISORY AGREEMENT
<PAGE> 2
EXHIBIT A TO THE
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
1. TAX-EXEMPT PORTFOLIO.
a. Effective Date: May 1, 1989
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.60 of 1% of the average daily
net assets of the Portfolio up to $50 million, reducing to 0.50
of 1% for the next $200 million of average daily net assets,
and 0.40 of 1% of average daily net assets in excess of $250
million.
2. GOVERNMENT PORTFOLIO.
a. Effective Date: May 1, 1989.
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.60 of 1% of the average daily
net assets of the Portfolio up to $50 million, reducing to 0.50
of 1% for the next $200 million of average daily net assets,
and 0.40 of 1% of average daily net assets in excess of $250
million.
3. S&P 100 PLUS PORTFOLIO.
a. Effective Date: May 1, 1996.
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.575 of 1% of the average daily
net assets of the Portfolio up to $20 million, 0.45 of 1% on
the next $30 million, 0.40 of 1% on the next $50 million, 0.35
of 1% on the next $400 million and 0.30 of 1% on assets over
$500 million.
4. WISCONSIN TAX-EXEMPT PORTFOLIO.
a. Effective Date: June 13, 1994
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc.
<PAGE> 3
Investment Advisory Agreement, shall be at an annual rate of
0.50 of 1% of the first $250 million of the average daily net
assets of the Portfolio, and 0.40 of 1% on average daily net
assets in excess of $250 million.
5. SELECT VALUE PORTFOLIO.
a. Effective Date: August 24, 1994
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.75 of 1% of the first $250
million of the average daily net assets of the Portfolio, and
0.65 of 1% on average daily net assets in excess of $250
million.
6. PSE TECH 100 INDEX PORTFOLIO.
a. Effective Date: Effective Date for Post-Effective Amendment No.
33 to Principal Preservation's Registration Statement on Form
N-1A.
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.50 of 1% of the first $50
million of the average daily net assets of the Portfolio, 0.30
of 1% of the next $200 million in net assets, 0.25 of 1% of the
next $250 million in next assets, and 0.20 of 1% of net assets
in excess of $500 million.
7. MANAGED GROWTH PORTFOLIO.
a. Effective Date: Effective Date of Post-Effective Amendment No.
46 to Principal Preservation's Registration Statement on Form
N-1A (expected to be January 1, 1998)
b. Management Fee: The management fee for this Portfolio,
calculated in accordance with paragraph 5 of the Principal
Preservation Portfolios, Inc. Investment Advisory Agreement,
shall be at an annual rate of 0.75 of 1% of the first $250
million of the average daily net assets of the Portfolio, and
0.65 of 1% on average daily net assets in excess of $250
million.
2
<PAGE> 1
EXHIBIT (D)(6)
SUB-ADVISORY AGREEMENT WITH GENEVA CAPITAL MANAGEMENT LTD.
<PAGE> 2
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT (this "Agreement") is made as of the 1st day
of January 1999, by and among PRINCIPAL PRESERVATION PORTFOLIOS, INC., a
Maryland corporation (the "Fund"), ZIEGLER ASSET MANAGEMENT, INC., a Wisconsin
corporation (the "Adviser"), and GENEVA CAPITAL MANAGEMENT LTD., a Wisconsin
corporation (the "Sub-Adviser").
W I T N E S S E T H
For good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. IN GENERAL
The Sub-Adviser agrees, as more fully set forth herein, to act
as Sub-Adviser to the Fund with respect to the investment and
reinvestment of the assets of the Managed Growth Portfolio (the
"Portfolio"). The Sub-Adviser agrees to supervise and arrange the
purchase of securities and the sale of securities held in the
investment portfolio of the Portfolio.
2. DUTIES AND OBLIGATIONS OF THE SUB-ADVISER WITH RESPECT TO INVESTMENTS
OF ASSETS OF THE PORTFOLIO
(a) Subject to the succeeding provisions of this section and
subject to the oversight and review of the Adviser and the direction
and control of the Board of Directors of the Fund, the Sub-Adviser
shall:
(i) Determine what securities shall be purchased or sold
by Portfolio;
(ii) Arrange for the purchase and the sale of securities
held in the Portfolio; and
(iii) Provide the Adviser and the Directors with such
reports as may reasonably be requested in connection with the
discharge of the foregoing responsibilities and the discharge
of the Adviser's responsibilities under its Investment Advisory
Agreement with the Fund and those of B.C. Ziegler and Company
(the "Distributor") under its Distribution Agreement with the
Fund.
(b) Any investment purchases or sales made by the Sub-Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the provisions of
the Investment Company Act
<PAGE> 3
of 1940 (the "Act") and of any rules or regulations in force
thereunder; and (2) the provisions of the Articles of Incorporation
and By-Laws of the Fund as amended from time to time; (3) any
policies and determinations of the Board of Directors of the Fund;
and (4) the fundamental policies of the Portfolio, as reflected in
the Fund's registration statement (or post-effective amendments
thereto) under the Act and the Securities Act of 1933 (including the
Portfolio's current Prospectus and Statement of Additional
Information), or as amended by the shareholders of the Portfolio;
provided that copies of the items referred to in clauses (2), (3)
and (4) shall have been furnished to the Sub-Adviser.
(c) The Sub-Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder. In the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties ("disabling conduct")
hereunder on the part of the Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Sub-Adviser) the
Sub-Adviser shall not be subject to liability to the Fund or to any
shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder, including without
limitation any error of judgment or mistake of law or for any loss
suffered by any of them in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b)
of the Act concerning loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services. Except
for such disabling conduct, the Fund shall indemnify the Sub-Adviser
(and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with
the Sub-Adviser) against any liability arising from the
Sub-Adviser's conduct under this Agreement to the extent permitted
by the Fund's Articles of Incorporation, By-Laws and applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or
any affiliated person (as defined in the Act) of the Sub-Adviser
from acting as investment advisor or manager for any other person,
firm or corporation and shall not in any way limit or restrict the
Sub-Adviser or any such affiliated person from buying, selling or
trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided,
however, that the Sub-Adviser expressly represents that it will
undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Fund under this
Agreement or under the Act. It is agreed that the Sub-Adviser shall
have no responsibility or liability for the accuracy or completeness
of the Fund's Registration Statement under the Act and the
Securities Act of 1933 (and will be indemnified by the Fund for
claims related thereto), except for information supplied by the
Sub-Adviser for inclusion therein. The Sub-Adviser shall be deemed
to be an independent contractor and, unless otherwise expressly
provided or authorized, have no
2
<PAGE> 4
authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
(e) In connection with its duties to arrange for the purchase
and sale of the Portfolio's portfolio securities, the Sub-Adviser
shall follow the principles set forth in any investment advisory
agreement in effect from time to time between the Fund and the
Adviser, provided that a copy of any such agreement shall have been
provided to the Sub-Adviser. The Sub-Adviser will promptly
communicate to the Adviser and to the officers and the Directors of
the Fund such information relating to portfolio transactions as they
may reasonably request.
3. ALLOCATION OF EXPENSES
The Sub-Adviser agrees that it will furnish the Fund, at the
Sub-Adviser's expense, with all office space and facilities,
equipment and clerical personnel that the Sub-Adviser reasonably
deems necessary for carrying out its duties under this Agreement.
Such office space, facilities, equipment and personnel may be used
by the Sub-Adviser for its services to other clients. The
Sub-Adviser will also pay all compensation of those of the Fund's
officers and employees, if any, and of those Directors, if any, who
in each case are affiliated persons of the Sub-Adviser.
4. CERTAIN RECORDS
Any records required to be maintained and preserved pursuant to
the provisions of Rule 31a-1 and Rule 31a-2 under the Act which are
prepared or maintained by the Sub-Adviser on behalf of the Fund are
the property of the Fund and will be surrendered promptly to the
Fund or the Adviser on request.
5. REFERENCE TO THE SUB-ADVISER
Neither the Fund nor the Adviser or any affiliate or agent
thereof shall make reference to or use the name of the Sub-Adviser
or any of its affiliates in any advertising or promotional materials
without the prior approval of the Sub-Adviser, which approval shall
not be unreasonably withheld.
6. COMPENSATION OF THE SUB-ADVISER
The Adviser agrees to pay the Sub-Adviser, and the Sub-Adviser
agrees to accept as full compensation for all services rendered by
the Sub-Adviser as such, a management fee as specified on Exhibit A.
3
<PAGE> 5
7. DURATION AND TERMINATION
(a) This Agreement shall go into effect on the date hereof.
This Agreement shall, unless terminated as hereinafter provided,
continue in effect for a period of two years, and thereafter from
year to year, but only so long as such continuance is specifically
approved at least annually by a majority of the Fund's Board of
Directors, or by the vote of the holders of a "majority" (as defined
in the Act) of the outstanding voting securities of the Portfolio,
and, in either case, a majority of the Directors who are not parties
to this Agreement or "interested persons" (as defined in the Act) of
any such party cast in person at a meeting called for the purpose of
voting on such approval.
(b) This Agreement may be terminated by the Sub-Adviser at any
time without penalty upon giving the Fund and the Adviser sixty (60)
days' written notice (which notice may be waived by the Fund and the
Adviser) and may be terminated by the Fund or the Adviser at any
time without penalty upon giving the Sub-Adviser sixty (60) days'
written notice (which notice may be waived by the Sub-Adviser),
provided that such termination by the Fund shall be directed or
approved by the vote of a majority of all of its Directors in office
at the time or by the vote of the holders of a "majority" (as
defined in the Act) of the voting securities of the Portfolio. This
Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Act). This Agreement will also
automatically terminate in the event that the Investment Advisory
Agreement by and between the Fund and the Adviser is terminated for
any reason.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereto affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION ZIEGLER ASSET MANAGEMENT, INC.
PORTFOLIOS, INC.
<TABLE>
<S> <C>
By: By:
------------------------------ ----------------------------------
Robert J. Tuszynski, President Geoffrey G. Maclay, Jr.,
President and Chief Executive Officer
GENEVA CAPITAL MANAGEMENT LTD.
By:
------------------------------------
Its:
------------------------------------
</TABLE>
4
<PAGE> 6
EXHIBIT A
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
SKYLINE ASSET MANAGEMENT, L.P.
SUB-ADVISORY AGREEMENT
Managed Growth Portfolio
Management Fee: computed daily and paid monthly at the annual rate of
0.375% on the Portfolio's first $250 million of average daily net assets,
0.350% on the next $250 million of average daily net assets and 0.325% on
average daily net assets in excess of $500 million.
<PAGE> 1
EXHIBIT (E)(2)
FORM OF SELECTED DEALERS AGREEMENT
<PAGE> 2
'PRINCIPAL PRESERVATION PORTFOLIOS, INC.
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
PARTICIPATING DEALER AGREEMENT
(UNDER RULE 12b-1)
_____________, 19__
Dear Sirs:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a plan of distribution adopted by
Principal Preservation Portfolios, Inc. (the "Fund") pursuant to Rule 12b-1
(the "Plan") under the Investment Company Act of 1940 (the "Act"). The Plan
and this related agreement have been approved by a majority of the Directors of
the Fund including a majority of the Directors who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or any related agreements (the "Qualified Directors"),
cast in person at a meeting called for the purpose of voting thereon. Such
approval included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. This
Agreement shall apply to additional Portfolios of the Fund which approve the
Plan in the manner required by the Act and rules thereunder.
To the extent you provide distribution and marketing services in the
promotion of the Fund's Class A (or Class X with respect to the Cash Reserve
Portfolio) or Class B shares, including furnishing services and assistance to
your customers who invest in and own Fund shares, including, but not limited
to, answering routine inquires regarding the Fund, assisting in changing
distribution options, account designations and addresses, and/or
administrative services, we shall pay you a fee at the maximum rate for the
relevant Portfolio set forth in attached Exhibit A (for Class A or Class X
shares) based upon the average daily net asset value of the shares of that
Portfolio which are owned of record by your firm as nominee for your customers
or which are owned by those customers of your firm whose records, as maintained
by the Fund or its Agent, designate your firm as the Customer's dealer of
record. The fee will be calculated and paid quarterly. No such quarterly fee
will be paid to you with respect to shares purchased by you and redeemed or
repurchased by the Fund or by us as Agent within seven (7) business days after
the date of our confirmation of such purchase. No such quarterly fee will be
paid to you with respect to any of your customers if the amount of such fee
based upon the value of such customer's Fund shares will be less than $1.00.
We reserve the right to increase, decrease or discontinue the fee at any time
in our sole discretion upon written notice to you.
Payment of such quarterly fee shall be made within 45 days after the close
of each quarter for which such fee is payable.
<PAGE> 3
2. You shall furnish us and the Fund with such information as shall
reasonably be requested by the Directors of the Fund with respect to the fees
paid to you pursuant to this Agreement.
3. We shall furnish to the Directors of the Fund, for their review, on a
quarterly basis a written report of the amounts expended under the Plan by us
and the purposes for which such expenditures were made.
4. This Agreement may be terminated for Class A (or Class X) shares of any
Portfolio by the vote of a majority of the Qualified Directors of the Fund or
by a vote of majority of the Fund's outstanding shares on sixty (60) days'
written notice, without payment of any penalty. It will be terminated by any
act which terminates either the Distribution Agreement between the Fund and us
or the Dealer Agreement between your firm and us and shall terminate
immediately in the event of its assignment as that term is defined in the Act.
5. The provisions of the Distribution Agreement between the Fund and us,
insofar as they relate to the Plan, are incorporated herein by reference. This
Agreement shall become effective as of the date hereof on the effective date of
said Distribution Agreement and shall continue in full force and effect so long
as the continuance of the Distribution Agreement and the Plan and this
Agreement are approved at least annually by a vote of a majority of the Fund's
Directors and a majority of the Qualified Directors, cast in person at a
meeting called for the purpose of voting thereon. All communications to us
should be sent to the above address. Any notice to you shall be given if
marked or telegraphed to you at the address specified by you below. This
agreement shall be effective when accepted by you below and shall be construed
under the laws of the State of Wisconsin.
B.C. ZIEGLER AND COMPANY
By:
------------------------------
(Authorized Signature)
Accepted:
- --------------------------------------
(Dealer's Name)
- --------------------------------------
(Street Address)
- --------------------------------------
(City) (State) (Zip)
By:
---------------------------------
(Authorized Signature of Dealer)
2
<PAGE> 4
EXHIBIT A
MAXIMUM FEES FOR CLASS A (OR CLASS X) SHARES
1. Tax-Exempt Portfolio (Class A)
0.25 of 1% of average daily net assets
2. Government Portfolio (Class A)
0.25 of 1% of average daily net assets
3. S&P 100 Plus Portfolio (Class A)
0.25 of 1% of average daily net assets
4. Dividend Achievers Portfolio
0.25 of 1% of average daily net assets
5. Select Value Portfolio (Class A)
0.25 of 1% of average daily net assets
6. PSE Tech 100 Index Portfolio (Class A)
0.25 of 1% of average daily net assets
7. Managed Growth Portfolio (Class A)
0.25 of 1% of average daily net assets
8. Cash Reserve Portfolio (Class X)
0.15 of 1% of average daily net assets
9. Wisconsin Tax-Exempt Portfolio (Class A)
0.25 of 1% of average daily net assets
A-1
<PAGE> 5
EXHIBIT B
MAXIMUM FEES FOR CLASS B SHARES
The fees for Class B shares are not payable during the initial one-year
period following the sale of the shares to an investor.
1. S&P 100 Plus Portfolio
0.25 of 1% of average daily net assets
2. Dividend Achievers Portfolio
0.25 of 1% of average daily net assets
3. Select Value Portfolio
0.25 of 1% of average daily net assets
4. PSE Tech 100 Index Portfolio
0.25 of 1% of average daily net assets
5. Managed Growth Portfolio
0.25 of 1% of average daily net assets
B-1
<PAGE> 1
EXHIBIT (H)(3)
ACCOUNTING/PRICING AGREEMENT
<PAGE> 2
ACCOUNTING/PRICING AGREEMENT
This Accounting/Pricing Agreement is made as of this 1st day of May, 1993
by and between Principal Preservation Portfolios, Inc., a Maryland corporation
(the "Fund") and B. C. Ziegler and Company, a Wisconsin corporation
("Ziegler").
WHEREAS, a majority of the Directors of the Fund and a majority of the
disinterested Directors of the Fund have approved this Agreement between
Ziegler and the Fund, and in so approving the Agreement made the following
findings:
a. the Agreement is in the best interest of the Fund and its
Shareholders;
b. the services to be performed pursuant to the Agreement are
services required for the operation of the Fund;
c. Ziegler can provide services, the nature and quality of which
are at least equal to those provided by others offering the same or
similar services; and
d. the fees for such services are fair and reasonable in light of
the usual and customary charges made by others for services of the
same nature and quality.
WHEREAS, the Fund is authorized to issue shares in separate classes (the
"Portfolios") with each such class representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund desires Ziegler to render the services to the Fund in
the manner and on the terms and conditions hereinafter set forth with respect
to each of the Fund's Portfolios identified on Schedule C attached hereto, as
modified from time to time by the mutual consent of the parties; and
WHEREAS, the Administrative Services Agreement, dated as of August 26,
1988, by and between the Fund and Ziegler, as amended and renamed the
Accounting/Pricing Services Agreement by Amendment No. 1, is terminated and
superseded upon the effectiveness of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Services. The Fund hereby engages Ziegler, and Ziegler accepts such
engagement, to perform accounting and pricing services for the Fund as
described in more detail on Schedule A, as the same may be modified from time
to time by vote of a majority
<PAGE> 3
of the Fund's directors including a majority of those who are not interested
persons of Ziegler, (the "Services"). The Fund agrees that Ziegler shall have
ready access to the Fund's agents, books, records, financial information,
management and resources, at such times and for such periods as Ziegler deems
necessary to perform the Services.
2. Rate of Payment for the Services.
A. Contract Price. The Fund agrees to pay Ziegler for the Services at
such rate, as may be approved annually by a majority of the Fund's directors,
including a majority of directors who are not parties to this Agreement or
interested persons of Ziegler, (the "Contract Price") as stated in Schedule B.
The Fund shall also pay all expenses, as set forth in paragraph B below,
applicable taxes, duties and charges (including sales, use and excise taxes)
levied or assessed as a result of this Agreement. The Contract Price shall be
payable monthly within ten (10) days of the date of invoice. The Contract
Price shall be adjusted annually by mutual agreement.
B. Reimbursement for Expenses. Subject to the Fund's prior approvals,
Ziegler shall be paid by the Fund for actual expenses and costs incurred by
Ziegler in the performance of the Services, including, but not limited to, long
distance telephone calls, postage, computer time, supplies and expenses and
costs stated in Schedule B hereto.
3. Employees. All personnel assigned by Ziegler to perform the Services
will be employees of Ziegler or its affiliates. Ziegler will be considered for
all purposes, an independent contractor, and it will not, directly or
indirectly, act as an agent, servant or employee of the Fund, or make any
commitments or incur any liabilities on behalf of the Fund without its prior
written consent.
4. Ziegler's Use of the Services of Others. Ziegler may (at its cost
except as contemplated by Paragraph 2(B) of this Agreement) employ, retain or
otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing the Fund with such information or
Services as it may deem necessary, appropriate or convenient for the discharge
of its obligations hereunder or otherwise helpful to the Fund, or in the
discharge of its overall responsibilities with respect to the Services to be
provided to the Fund.
5. Ownership of Records. All records required to be maintained and
preserved by the Fund pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the Investment
Company Act of 1940, as amended (the "Act"), and maintained and preserved by
Ziegler on behalf of the Fund are the property of the Fund and will be
surrendered by Ziegler promptly on request by the Fund.
6. Reports to Fund by Ziegler. Ziegler shall provide the Fund, at such
times as the Fund may reasonably require, with reports relating to the Services
provided by Ziegler under
2
<PAGE> 4
this Agreement. Such reports shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund.
7. Services to Other Clients. Nothing herein contained shall limit the
freedom of Ziegler or any affiliated person of Ziegler to render investment
advice or corporate administrative services to other investment companies, to
act as investment advisor or investment counselor to other persons, firms or
corporations, or to engage in other business activities.
8. Limitation of Liability of Ziegler. Neither Ziegler, nor any of its
officers, directors, or employees, nor any person performing administrative or
other functions for the Fund (at the direction or request of Ziegler) or the
Advisor in connection with Ziegler's discharge of its obligations undertaken or
reasonably assumed with respect to this Agreement, shall be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except for loss
resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its or their duties on behalf of the Fund or from reckless
disregard by Ziegler or any such person of the duties of Ziegler under this
Agreement. In no case shall Ziegler's or any such person's liability in
connection with the matters to which this contract relates be greater than one
year's fee income received by Ziegler under performance of this contract.
9. Term of Agreement. The term of this Agreement shall begin, with
respect to any Portfolio of the Fund, on the date agreed upon between the
parties. Once effective with respect to any Portfolio, this Agreement will
continue in effect from year to year with respect to such Portfolio, subject to
the termination provisions and all other terms and conditions hereof, so long
as such continuation shall be specifically approved at least annually by the
board of directors of the Fund or by vote of a majority of the outstanding
voting securities of such Portfolio and, concurrently with such approval by the
board of directors or prior to such approval by the holders of the outstanding
voting securities of such Portfolio, as the case may be, by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the directors of the Fund who are not parties to this Agreement or
interested persons of any such party. Ziegler shall furnish to the Fund,
promptly upon its request, such information as may reasonably be necessary to
evaluate the terms of this Agreement or any extension, renewal or amendment
hereof.
10. Termination of Agreement. This Agreement may be terminated with
respect to each Portfolio by any party hereto without the payment of any
penalty, upon 60 days prior notice in writing to the other party; provided
that, in the case of termination by the Fund, such action shall have been
authorized by resolutions of a majority of the directors of the Fund who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of each Portfolio
affected by such termination. This Agreement shall automatically and
immediately terminate in the event of its assignment.
3
<PAGE> 5
11. Miscellaneous.
A. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
B. Interpretation. Nothing herein contained shall be deemed to require
the Fund to take any action contrary to its Articles of Incorporation or
By-Laws, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the board of
directors of the Fund of its responsibility for and control of the conduct of
the affairs of the Fund.
C. Definitions. Any question of interpretation of any term or provision
of this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision
of the Act and to interpretations thereof, if any, by the United States courts
or, in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission validly issued
pursuant to the Act. In addition, where the effect of a requirement of the Act
reflected in any provision of this Agreement is relaxed by a rule, regulation
or order of the Securities and Exchange Commission, whether of special or of
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation or order.
D. Governing Law. This Agreement shall be construed and governed by the
laws of the state of Wisconsin.
E. Amendment. This Agreement, including the Schedules hereto, may be
amended only by an instrument in writing executed by the parties.
F. Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party or when
deposited in the United States Mail, certified or registered mail, postage
prepaid, return receipt requested, and addressed to the principal place of
business of such party, unless and until any of such parties notifies the
parties in accordance with this section of a change of address.
G. Entire Agreement. This Agreement together with the Schedules hereto
constitutes the entire agreement between the Fund and Ziegler with respect to
the subject matter hereof. There are no restrictions, promises, warranties,
covenants or undertakings other than those expressly set forth herein and
therein. This Agreement supersedes all prior negotiations, agreements and
undertakings between the parties with respect to such subject matter.
4
<PAGE> 6
H. Enforceability. The invalidity or unenforceability of any provision
hereof shall not affect or impair any other provisions.
I. Scope of Agreement. If the scope of any of the provisions of this
Agreement is too broad in any respect whatsoever, to prevent enforcement to its
full extent, then such provisions shall be enforced to the maximum extent
permitted by law, and the parties hereto consent and agree that such scope may
be judicially modified accordingly and that the whole of such provisions of
this Agreement shall not hereby fail, but that the scope of such provisions
shall be curtailed only to the extent necessary to conform to the law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By:
-------------------------------
R. D. Ziegler, President
B. C. ZIEGLER AND COMPANY
By:
-------------------------------
Peter D. Ziegler, President
5
<PAGE> 7
SCHEDULE A
Services to be performed by Ziegler:
1. Calculate daily net asset value per share.
2. Maintain original entry documents and books of record and general
ledgers.
3. Post cash receipts and disbursements.
4. Reconcile bank account balances monthly.
5. Record purchases and sales based upon portfolio manager
communications.
6. Prepare monthly and annual summaries to assist in the preparation
of financial statements of, and regulatory reports for, the Fund.
<PAGE> 8
SCHEDULE B
B. C. ZIEGLER ACCOUNTING/PRICING
FEE SCHEDULE
FOR: PRINCIPAL PRESERVATION PORTFOLIOS, INC.
All Portfolios, Except for Cash Reserve Portfolio
Minimum - $19,000 Annually per Portfolio
Asset Charge - Assets of $30 million but less than $100 million - .03 of 1%
Assets of $100 million but less than $250 million - .02 of 1%
Assets of $250 million or more - .01 of 1%
Plus: Out of Pocket Expenses
Pricing valuations - by outside pricing sources
Paper, phone and other miscellaneous expenses
Fees will be billed monthly
Cash Reserve Portfolio
Minimum - $15,000 Annually
Maximum - $125,000 Annually
Asset Charge - Average Daily Net Assets of $50 million but less than $100
million - 0.04 of 1%
Average Daily Net Assets of $100 million but less than $200
million - 0.03 of 1%
Average Daily Net Assets of $200 million or more - 0.01 of 1%
Plus: Out of Pocket Expenses - Pricing valuations (by outside pricing
sources), paper, phone and other miscellaneous expenses
<PAGE> 9
SCHEDULE C
STAND ALONE PORTFOLIOS
1. Tax-Exempt Portfolio (Effective 5/1/93)
2. Government Portfolio (Effective 5/1/93)
3. S&P 100 Plus Portfolio (Effective 5/1/93)
4. Dividend Achievers Portfolio (Effective 5/1/93)
5. Select Value Portfolio (Effective 8/24/94)
6. PSE Tech 100 Index Portfolio (Effective 6/10/96)
7. Managed Growth Portfolio (Effective 1/1/99)
8. Wisconsin Tax-Exempt Portfolio (Effective 6/13/94)
9. Cash Reserve Portfolio, including Class X (Retail Class) and Class Y
(Institutional Class) (Effective 1/1/96)
<PAGE> 1
EXHIBIT (J)(1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the references to us under the headings "Counsel and
Independent Public Accountants" and "Experts" in the Statement of Additional
Information constituting a part of this Post-Effective Amendment on Form N-1A
of Principal Preservation Portfolios, Inc.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
October 14, 1998
<PAGE> 1
EXHIBIT (J)(2)
CONSENT OF LEGAL COUNSEL
<PAGE> 2
CONSENT OF LEGAL COUNSEL
With regard to this Post-Effective Amendment to the Registration Statement
on Form N-1A of Principal Preservation Portfolios, Inc., we hereby consent to
the reference to our firm in the Prospectus and Statement of Additional
Information constituting parts of such Registration Statement and the
incorporation by reference of our legal opinion to such Registration Statement.
QUARLES & BRADY LLP
Milwaukee, Wisconsin
October 15, 1998
<PAGE> 1
EXHIBIT (M)
AMENDED AND RESTATED DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
<PAGE> 2
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
This Amended and Restated Distribution Plan (the "Plan") is adopted by a
vote of the Board of Directors and of the Qualified Directors (as those terms
are defined herein) of Principal Preservation Portfolios, Inc. (the "Fund") on
May 5, 1998, to redescribe the shares originally detailed in the Plan as "Class
A" shares ("Class X" with respect to the Cash Reserve Portfolio), and to add
"Class B" shares to the Plan as follows:
1. The Plan. This Plan is the written plan of the Fund contemplated by
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the "Act").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Portfolio" shall mean any separate series or mutual fund portfolio
of the Fund.
(b) "Qualified Recipient" shall mean any broker-dealer or other "person"
(as that term is defined in the Act) which (i) has entered into a written
agreement that complies with the Rule (a "related agreement") with the Fund's
Distributor and (ii) has rendered distribution assistance (whether direct,
administrative or both) in the distribution of the Fund's Class A (or Class X)
shares.
(c) "Qualified Holdings" shall mean all Class A (or Class X) shares of
the Fund beneficially owned by (i) a Qualified Recipient, (ii) the customers
(brokerage or other) of a Qualified Recipient, (iii) the clients (investment
advisory or other) of a Qualified Recipient, (iv) the accounts as to which a
Qualified Recipient has a fiduciary or custodial relationship, and (v) the
members of a Qualified Recipient, if such Qualified Recipient is an association
or union; provided that the Qualified Recipient shall have been instrumental in
the purchase of such shares by, or shall have provided administrative
assistance to, such customers, clients, accounts or members in relation
thereto. The Distributor may make final and binding decisions as to all
matters relating to Qualified Holdings and Qualified Recipients, including but
not limited to (i) the identity of Qualified Recipients; (ii) whether or not
any shares are to be considered as Qualified Holdings of any particular
Qualified Recipient; and (iii) what shares, if any, are to be attributed to a
particular Qualified Recipient, to a different Qualified Recipient or to no
Qualified Recipient.
<PAGE> 3
(d) "Qualified Directors" shall mean the Directors of the Fund who are
not interested persons as defined in the Act of the Fund and who have no direct
or indirect financial interest in the operation of this Plan or any agreement
related to this Plan. While this Plan is in effect, the selection and
nomination of Qualified Directors shall be committed to the discretion of the
Directors who are not interested persons of the Fund. Nothing herein shall
prevent the involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a majority of such
disinterested Directors.
(e) "Permitted Payments" shall mean payments by the Distributor to
Qualified Recipients as permitted by this Plan.
(f) "Permitted Expenses" shall mean expenses incurred by the Distributor
in connection with the distribution of Class A (or Class X) shares of the Fund
as defined below in Section 4.
(g) Permitted Payments and Permitted Expenses shall not include any
expenses listed in Section 5 below.
3. Payments Authorized
(a) Class A (or Class X) Shares. The Distributor is authorized,
pursuant to this Plan, to make Permitted Payments to any Qualified Recipient
under a related agreement on either or both of the following bases for Class A
(or Class X) shares:
(i) As reimbursement for direct expenses incurred in the course of
distributing Fund shares or providing administrative assistance to the Fund or
its shareholders, including, but not limited to, advertising, printing and
mailing promotional material, telephone calls and lines, computer terminals and
personnel (including commissions and other compensation paid to such
personnel); and/or
(ii) At a rate specified in the related agreement with the Qualified
Recipient in question based on the average value of the Qualified Holdings of
such Qualified Recipient.
The Distributor may make Permitted Payments in any amount to any Qualified
Recipient, provided that: (A) the total amount of all Permitted Payments made
during a fiscal year of the Fund to all Qualified Recipients (whether made
under (i) and/or (ii) above) do not exceed, in that fiscal year of the Fund,
the amounts for each Portfolio's Class A (or Class X) shares as set forth in
Exhibit A attached hereto; and (B) a majority of the Fund's Qualified Directors
may at any time decrease or limit the aggregate amount of all Permitted
Payments or decrease or limit the amount payable to any Qualified Recipient.
Each Portfolio will
2
<PAGE> 4
reimburse the Distributor for such Permitted Payments within such limit, but
the Distributor shall bear any Permitted Payments beyond such limits.
3
<PAGE> 5
(b) Class B Shares
(i) The Fund wishes to retain, pursuant to the terms of a
distribution agreement (each, a "Distribution Agreement") pursuant to the Plan,
from time to time persons (each such person so acting from time to time, the
"Distributor") to act as principal distributor of the Class B Shares of each
Portfolio of the Fund.
(ii) The Fund shall pay to each Distributor, as compensation for
acting as principal distributor in respect of the Class B Shares of each
Portfolio of the Fund its "Allocable Portion" (as hereinafter defined) of a fee
(the "Distribution Fee") computed at the rate of 0.75% per annum of such
Portfolio's average daily net assets attributable to Class B Shares of such
Portfolio, which Distribution Fee will accrue daily and be payable monthly.
(iii) The Fund shall pay to each Distributor, as compensation for
providing, or arranging for the provision of, shareholder services in respect
of the Class B Shares of each Portfolio of the Fund, a service fee (the
"Service Fee") computed at the rate of 0.25% per annum of the Fund's average
daily net assets attributable to Class B Shares of such Portfolio, which
Service Fee will accrue daily and be paid monthly. The Distributor may allow
all or any portion of the Service Fee to securities dealers for providing such
Shareholder services to particular Class B Shares. If, in lieu of allowing a
portion of the Service Fee relating to a particular Class B Share to a
securities dealer in consideration of such securities dealer providing
shareholder services to such Class B Share for the twelve-month period
following the issuance thereof, the Distributor makes a payment to such
securities dealer on the settlement date for the issuance of such Class B Share
in consideration of such security dealer's commitment to provide such services
for such twelve-month period, without further compensation, the Distributor
will be deemed to have earned the Service Fee that accrues in respect of such
Class B Share during such twelve-month period (the "Earned Service Fee") upon
making such payment to such securities dealer and all of the provisions of
Section 3(b)(iv) hereof shall apply to the Earned Service Fee, in the same
manner as they apply to the Distributor's Allocable Portion of the Distribution
Fee and for this purpose references in Section 3(b)(v) hereof to Distribution
Fees shall be deemed to include Earned Service Fees and references in such
section to the financing of distribution services shall be deemed to include
financing of shareholder services.
(iv) The Distribution Agreement between the Fund and each Distributor
relating to the Class B Shares of each Portfolio shall provide that: (I) the
Distributor will be deemed to have performed all services required to be
performed in order to be entitled to receive its Allocable Portion (as defined
below) of the Distribution Fee payable in respect of the Class B Shares upon
the settlement date of each sale of a "Commission Share" (as defined in the
Allocation Schedule attached to the Distribution Agreement) taken into account
in determining such Distributor's Allocable Portion of such Distribution Fee;
(II) notwithstanding anything to the contrary set forth in this Plan or the
Distribution Agreement, the
4
<PAGE> 6
Fund's obligation to pay such Distributor its Allocable Portion of the
Distribution Fee payable shall not be terminated or modified in any manner
(including without limitation, by change in the auto-conversion arrangements
relating to Class B Shares for which the "Date of Original Issuance" (as
defined below) occurs prior to such action) for any reason (including a
termination of the Distribution Agreement between such Distributor and the
Fund) except to the extent required by a change in the Investment Company Act
of 1940 (the "Act") or the Conduct Rules of the National Association of
Securities Dealers, Inc., (the "NASD") in each case enacted or promulgated
after the date of the Distribution Agreement (or amendment thereof relating to
Class B Shares) with the Distributor, or in connection with a "Complete
Termination" (as hereinafter defined) of this Plan in respect of the Class B
Shares; (III) the Fund will not take any action to waive or change in any
manner (including without limitation, by change in the auto-conversion
arrangements relating to Class B Shares for which the Date of Original Issuance
occurs prior to such action) any contingent deferred sales charge ("CDSC") in
respect of any Class B Shares for which the Date or Original Issuance occurs
prior to such action except as provided in the Fund's prospectus or statement
of additional information as in effect on the date of the Distribution
Agreement (or amendment thereof relating to Class B Shares) with the
Distributor, without the consent of such Distributor and its "Transferees" (as
hereinafter defined); (IV) notwithstanding anything to the contrary set forth
in this Plan or the Distribution Agreement, neither the termination of such
Distributor's role as principal distributor of the Class B Shares in respect of
any Portfolio, nor the termination of such Distribution Agreement nor the
termination of this Plan will terminate such Distributor's right to its
Allocable Portion of the CDSC's; and (V) notwithstanding anything to the
contrary set forth in this Plan or the Distribution Agreement, such Distributor
may assign, sell or pledge (collectively, "Transfer") its rights to its
Allocable Portion of the Distribution Fees and CDSC'S (but not such
Distributor's obligations to the Fund under the Distribution Agreement) to
raise funds to make the expenditures related to the distribution of Class B
Shares, and in connection therewith, upon receipt of notice of such Transfer,
the Fund shall pay to the assignee, purchaser or pledgee (collectively with
their subsequent transferees, "Transferees"), as third party beneficiaries,
such portion of such Distributor's Allocable Portion of the Distribution Fees
or CDSC'S in respect of the Class B Shares so sold or pledged, and except as
provided in (II) above and notwithstanding anything to the contrary set forth
in this Plan or in the Distribution Agreement, to the extent such Distributor
has transferred its right thereto as aforesaid, the Fund's obligation to pay
such Distributor's Allocable Portion of the Distribution Fees and CDSC'S
payable in respect of the Class B Shares shall be absolute and unconditional
and shall not be subject to dispute, offset, counterclaim or any defense
whatsoever, at law or equity, including, without limitation, any of the
foregoing based on the insolvency or bankruptcy of such Distributor (it being
understood that such provision is not a waiver of the Fund's right to pursue
such Distributor and enforce such claims against the assets of such Distributor
other than its right to the Distribution Fees and CDSC'S in respect of the
Class B Shares of the Fund or of any other trust, fund, portfolio or Company,
Distribution Fees and CDSC's in respect of the Class B Shares of which were
transferred in connection with such Transfer). For purposes of this Plan, the
term Allocable Portion of Distribution Fees or CDSC'S
5
<PAGE> 7
payable in respect of the Class B Shares of each Portfolio as applied to any
Distributor shall mean the portion of such Distribution Fees or CDSC'S payable
in respect of such Class B Shares of such Portfolio allocated to such
Distributor in accordance with the Allocation of such Portfolio allocated to
such Distributor in accordance with the Allocation Schedule (attached to the
Distribution Agreement as it relates to the Class B Shares of such Portfolio)
which Allocation Schedule shall be substantially identical in respect of each
such Distribution Agreement. For purposes of this Plan, the term "Date of
Original Issuance" shall have the meaning assigned to such term in such
Allocation Schedule, and the term "Complete Termination" of this Plan in
respect of Class B Shares means a termination of this Plan involving the
complete cessation of the payment of Distribution Fees in respect of all Class
B Shares of the Fund, and the termination of the distribution plans and the
complete cessation of the payment of distribution fees pursuant to every other
Distribution Plan pursuant to Rule 12b-1 in respect of the Class B Shares of
the Fund and any successor trust, fund, portfolio or company or any trust,
fund, portfolio or company acquiring a substantial portion of the assets of the
Fund and for every future class of shares of the Fund or any such other trust,
fund, portfolio or company which has substantially similar characteristics to
the Class B Shares of the Fund taking into account the manner of payment and
amount of sales charge, contingent deferred sales charge or other similar
charges borne directly or indirectly by the holders of such shares.
(c) Payment to Distributor in Respect of Class A (or Class X) Shares.
Distributor is entitled to receive from each Portfolio of the Fund the payment
of Permitted Expenses on an annual basis at the rate specified in Exhibit A
with respect to Class A (or Class X) shares which are owned of record by the
Distributor as nominee for the Distributor's customers or which are owned by
those customers of the Distributor whose records, as maintained by the Fund or
its agent, designate the Distributor as the customer's dealer of record, and
said fee shall be considered a Permitted Expense; provided, however, that in no
event shall Permitted Expenses and Permitted Payments, in the aggregate, in
that fiscal year of the Fund, exceed the amounts set forth in Exhibit A for the
relevant Class of shares and the relevant Portfolio, as the case may be, and
the Distributor shall bear any such expenses beyond such limit.
Said fee shall be calculated and paid quarterly. The Distributor shall
furnish the Fund with such information as shall be reasonably requested by the
Fund with respect to the fees paid to the Distributor.
4. Expenses Authorized. The Distributor is authorized, pursuant to this
Plan, to purchase advertising for Class A (or Class X) shares of the Fund, to
pay for sales literature and other promotional material, and to make payments
to sales personnel affiliated with it, in the form of commissions or other
compensation. Any such advertising and sales material may include references
to other open-end investment companies or other investments and any salesmen so
paid are not required to devote their time solely to the sale of Fund shares.
Any
6
<PAGE> 8
such expenses ("Permitted Expenses") made during a fiscal year of any Portfolio
shall be reimbursed or paid by the Portfolio, except that the combined amount
of reimbursement or payment of Permitted Expenses together with the Permitted
Payments made pursuant to Section 3 of this Plan by a Portfolio shall not, in
the aggregate, in that fiscal year of the Portfolio, exceed the amounts set
forth in Exhibit A attached hereto. The Distributor shall bear any expenses
beyond such limit. No such reimbursement may be made for Permitted Expenses or
Permitted Payments for fiscal years prior to the fiscal year in question or in
contemplation of future Permitted Expenses or Permitted Payments.
5. Certain Other Payments Authorized. If and to the extent that any of
the payments by the Fund listed below are considered to be "primarily intended
to result in the sale of shares" issued by the Fund within the meaning of the
Rule, such payments by the Fund are authorized without limit under this Plan
and shall not be included in the limitations contained in this Plan: (i) the
costs of the preparation, printing and mailing of all required reports and
notices to shareholders, irrespective of whether such reports or notices
contain or are accompanied by material intended to result in the sale of shares
of the Fund or other funds or other investments; (ii) the costs of preparing,
printing and mailing of all prospectuses to shareholders; (iii) the costs of
preparing, printing and mailing of any proxy statements and proxies,
irrespective of whether any such proxy statement includes any item relating to,
or directed toward, the sale of the Fund's shares; (iv) all legal and
accounting fees relating to the preparation of any such reports, prospectuses,
proxies and proxy statements; (v) all fees and expenses relating to the
qualification of the Fund, the Portfolios and/or their shares under the
securities or "Blue Sky" law of any jurisdiction; (vi) all fees under the Act
and the Securities Act of 1933, including fees in connection with any
application for exemption relating to or directed toward the sale of the Fund's
shares; (vii) all fees and assessments of the Investment Company Institute or
any successor organization, irrespective of whether some of its activities are
designed to provide sales assistance; (viii) all costs of preparing and mailing
confirmations of shares sold or redeemed or share certificates, and reports of
share balances; and (ix) all costs of responding to telephone or mail inquiries
of shareholders.
6. Investment Advisory Fees. It is recognized that the costs of
distribution of the Fund's Class A (or Class X) shares are expected to exceed
the sum of Permitted Payments and Permitted Expenses ("Excess Distribution
Costs") and that the profits, if any, of the Fund's Advisor are dependent
primarily on the advisory fees paid by the Fund to the Advisor. If and to the
extent that any investment advisory fees paid by the Fund might, in view of any
Excess Distribution Costs, be considered as indirectly financing any activity
which is primarily intended to result in the sale of shares issued by the Fund,
the payment of such fees is authorized under this Plan. In taking any action
contemplated by Section 15 of the Act as to any investment advisory contract to
which the Fund is a party, the Fund's Board of Directors, including its
Directors who are not "interested persons," as defined in the Act, shall, in
acting on the terms of any such contract, apply its "fiduciary duty" standard
contained in Sections 36(a) and 36(b) of the Act.
7
<PAGE> 9
7. Reports. While this Plan is in effect, the Distributor shall report in
writing at least quarterly to the Fund's Board of Directors, and the Board
shall review the following: (i) the amounts of all Permitted Payments for Class
A (or Class X) shares, the identity of the recipients of each such Payment; the
basis on which each such recipient was chosen as a Qualified Recipient and the
basis on which the amount of the Permitted Payment to such Qualified Recipient
was made; (ii) the amounts of Permitted Expenses and the purpose of each such
Expense; and (iii) all costs of each item specified in Section 5 of the Plan
(making estimates of such costs where necessary or desirable), in each case
during the preceding calendar or fiscal quarter.
8. Effectiveness, Continuation, Termination and Amendment
(a) Class A (or Class X) Shares. This Plan, as applied to Class A (or
Class X) shares, has been approved by a vote of a majority of the Board of
Directors of the Fund and of a majority of the Qualified Directors, cast in
person at a meeting called for the purpose of voting on this Plan. This Plan
shall, unless terminated as hereinafter provided, continue in effect with
respect to Class A (or Class X) shares from year to year only so long as such
continuance is specifically approved at least annually by a majority of the
Fund's Board of Directors and a majority of its Qualified Directors cast in
person at a meeting called for the purpose of voting on such continuance. This
Plan may be terminated with respect to Class A (or Class X) shares at any time
as to any Portfolio by a vote of a majority of the Qualified Directors or by
the vote of the holders of a "majority" (as defined in the Act) of all
outstanding voting securities of any Portfolio. This Plan may not be amended
to increase materially the amount of payments to be made by any Portfolio with
respect to Class A (or Class X) shares except by the vote of the holders of a
"majority" (as defined in the Act) of the outstanding voting securities of that
Portfolio, and all amendments must be approved by a vote of a majority of the
Board of Directors of the Fund and of a majority of the Qualified Directors,
cast in person at a meeting called for the purpose of voting on this Plan. In
the event of a termination of this Plan with respect to Class A (or Class X)
shares of any Portfolio, the Distributor shall be reimbursed only for Permitted
Payments and Permitted Expenses for Class A (or Class X) shares of the relevant
Portfolio incurred to the date of termination and within the limits set forth
in Section 4 above.
(b) Class B Shares. This Plan, as applied to Class B shares, has been
approved by a vote of the Board of Directors of the Fund and of the Qualified
Directors, cast in person at a meeting called for the purpose of voting on this
Plan. This Plan, as applied to Class B shares, shall, unless terminated as
hereinafter provided, continue in effect until June 1, 2000, and thereafter
from year to year only so long as such continuance is specifically approved at
least annually by the Fund's Board of Directors and its Qualified Directors
cast in person at a meeting called for the purpose of voting on such
continuance for Class B shares. This Plan, as applied to Class B shares, may
be terminated at any time with respect to any Portfolio by a vote of a majority
of the Qualified Directors or by the vote of the holders of a
8
<PAGE> 10
"majority" (as defined in the Act) of the outstanding Class B shares of that
Portfolio. This Plan may not be amended to increase materially the amount of
payments to be made for Class B shares of any Portfolio except by a vote of
holders of least a "majority" (as defined in the Act) of the outstanding voting
securities of Class B shares of the relevant Portfolio, and all amendments must
be approved by a vote of the Board of Directors of the Fund and of the
Qualified Directors, cast in person at a meeting called for the purpose of
voting on Class B shares of this Plan.
9
<PAGE> 11
EXHIBIT A
CLASS A (OR CLASS X) SHARES
Rule 12b-1 service fees are expressed as a percentage of the relevant
Portfolio's average daily net assets.
1. Tax-Exempt Portfolio (Class A)
Service Fee: 0.25 of 1%
2. Government Portfolio (Class A)
Service Fee: 0.25 of 1%
3. S&P 100 Plus Portfolio (Class A)
Service Fee: 0.25 of 1%
4. Dividend Achievers Portfolio (Class A)
Service Fee: 0.25 of 1%
5. Select Value Portfolio (Class A)
Service Fee: 0.25 of 1%
6. PSE Tech 100 Index Portfolio (Class A)
Service Fee: 0.25 of 1%
7. Managed Growth Portfolio (Class A)
Service Fee: 0.25 of 1%
8. Cash Reserve Portfolio (Class X)
Service Fee: 0.15 of 1%
9. Wisconsin Tax-Exempt Portfolio (Class A)
Service Fee: 0.25 of 1%
A-1
<PAGE> 12
EXHIBIT B
CLASS B SHARES
Rule 12b-1 service and distribution fees are expressed as a percentage of
the relevant Portfolio's average daily net assets.
1. S&P 100 Plus Portfolio (Class B)
Service Fee: 0.25 of 1%
Distribution Fee: 0.75 of 1%
2. Dividend Achievers Portfolio (Class B)
Service Fee: 0.25 of 1%
Distribution Fee: 0.75 of 1%
3. Select Value Portfolio (Class B)
Service Fee: 0.25 of 1%
Distribution Fee: 0.75 of 1%
4. PSE Tech 100 Index Portfolio (Class B)
Service Fee: 0.25 of 1%
Distribution Fee: 0.75 of 1%
5. Managed Growth Portfolio (Class B)
Service Fee: 0.25 of 1%
Distribution Fee: 0.75 of 1%
B-1
