<PAGE> 1
As filed with the Securities and Exchange Commission on December 31, 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. 47
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
|X|
Amendment No. 49
(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
X 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)
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 Com-
pany Act of 1940. The Registrant's Rule 24f-2 Notice for the year ended Decem-
ber 31, 1997 was filed on February 26, 1998.
<PAGE> 2
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
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. B.C. Ziegler and Company 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 B.C. Ziegler and Com-
pany 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.
================================================================================
The date of this Prospectus is January 1, 1999.
1
<PAGE> 3
TABLE OF CONTENTS
PAGE
----
RISK/RETURN SUMMARY...........................................................3
Investment Objective.................................................3
Investment Strategy..................................................3
Investment Risks.....................................................3
Expenses.............................................................4
Example..............................................................4
INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RISKS..........................5
Objective and Strategies.............................................5
Risks................................................................6
MANAGEMENT....................................................................7
Investment Adviser...................................................7
Sub-Adviser..........................................................7
Portfolio Managers...................................................7
HOW TO PURCHASE SHARES........................................................8
General Information..................................................8
Minimum Purchase Amounts.............................................8
Two Classes of Shares................................................8
Purchasing Class A Shares............................................9
Purchasing Class B Shares...........................................13
Distribution Expenses...............................................14
Methods for Purchasing Shares.......................................15
HOW TO REDEEM SHARES.........................................................17
General Information.................................................17
Redemptions.........................................................17
Receiving Redemption Proceeds.......................................19
Other Information About Redemptions.................................19
EXCHANGING SHARES............................................................21
General Information.................................................21
Sales Charges Applicable to Exchanges...............................21
Rules and Requirements for Exchanges................................22
Methods for Exchanging Shares.......................................23
SHAREHOLDER SERVICES.........................................................24
Systematic Purchase Plan............................................24
Systematic Withdrawal Plan..........................................24
Tax-Sheltered Retirement Plans......................................25
OTHER INFORMATION............................................................25
Determination of Net Asset Value Per Share..........................25
Dividends, Capital Gains Distributions and Reinvestments............25
Tax Status..........................................................26
2
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RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Managed Growth Portfolio's investment objective is long-term
capital appreciation. It pursues this goal by investing in publicly traded
common stocks.
INVESTMENT STRATEGY
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 the Adviser believes their
potential for growth is 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.
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.
INVESTMENT RISKS
Because common stocks fluctuate in price, the value of the Portfolio
will go up and down. Common stock prices tend to rise and fall in tandem with
changes in the stock markets generally. The common stocks held by the Portfolio
also may not fluctuate in the same way as the stock markets generally because
of factors affecting a particular industry or company. Moreover, mid-cap stocks
involve greater risk than large company stocks, especially at the lower end of
the Adviser's capitalization range.
An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or
any other governmental agency.
There is no assurance that the Portfolio will achieve its investment
objective. The Portfolio commenced operations in January 1998 and has no
performance history.
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EXPENSES
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)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------- --------------
<S> <C> <C>
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
<S> <C> <C>
Management Fees Agent(3) 0.75% 0.75%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses(4)
Custodian Fees 0.07% 0.07%
Transfer Agent 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%
</TABLE>
___________________________
(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) 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.
(4) Other Expenses are based on estimated amounts for the current fiscal
year, before applicable fee waivers and expense reimbursements. See
note (3).
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<PAGE> 6
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 $ 646 $ 703 $203
After 3 Years $1,003 $1,128 $734
</TABLE>
INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RISKS
OBJECTIVE AND STRATEGIES
To achieve its objective of long-term capital appreciation, the
Portfolio invests in publicly traded common stocks. The principal strategy of
the Portfolio is to invest in established companies based on their growth
characteristics. 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 (approximately $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 a
"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 in 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 it believes 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
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<PAGE> 7
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 generally engage in market-timing or short-
term trading strategies. However, the Adviser generally will sell some or all
of a company's stock if: (a) the Adviser perceives a major change in the long-
term outlook for the company or its industry, (b) the stock becomes extremely
overvalued based on the Adviser's proprietary valuation model, (c) the market
value of the particular holding represents more than 5% of the Portfolio's total
assets or (d) more than 15% of the Portfolio's total assets are invested in a
single industry.
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, and pending investment in common stocks. Normally, less than 5% of
the Portfolio's assets will be invested in short-term instruments. However, the
Portfolio may invest without limitation in such short-term instruments 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 strategies and make it more difficult for the
Portfolio to achieve its investment objective.
RISKS
The Portfolio's share price (or net asset value) and total return will
increase or decrease, depending on the changes in the value of the common stocks
in its investment portfolio. Common stocks are subject to market risk and
objective risk. Market risk means that stock prices will rise and fall over
short and even extended periods as the securities markets generally rise and
fall. Markets are affected by various factors, including general economic
trends and conditions, interest rate changes and political events. Objective
risk is the risk that the stocks actually 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 securities markets, and a particular stock may increase or
decrease in value more than other companies in that industry. In addition, the
mid-cap stocks in which the Portfolio invests involve greater risk and price
volatility than large company stocks, especially at the lower end of the
Adviser's capitalization range (i.e., under $1.0 billion). Mid-cap companies
may have relatively lower revenues, limited product lines, less management depth
and a lower share of the market for their products or services as compared to
larger companies.
The Portfolio's investment objective may be changed by the Board of
Directors without shareholder approval, although the Board does not plan to do
so.
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<PAGE> 8
MANAGEMENT
INVESTMENT ADVISER
B.C. Ziegler and Company ("Ziegler") is the Portfolio's investment
adviser. In addition to the Portfolio, Ziegler privately manages numerous
customer advisory accounts. As of January 1, 1998, Ziegler managed
approximately $1.6 billion of assets. An affiliate of Ziegler (Ziegler Asset
Management, Inc.) manages the other mutual funds included in the Principal
Preservation family of funds. Ziegler also serves as distributor,
accounting/pricing agent and transfer and dividend disbursing agent to the
Portfolio. Ziegler 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 provides
the Portfolio with overall investment advisory and administrative services. As
compensation for serving as investment adviser to the Portfolio, Ziegler
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's
oversight). 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 December 31, 1998 had approximately $369 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 (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.
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<PAGE> 9
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 INFORMATION
You may buy Class A shares or Class B shares of the Portfolio through
Principal Preservation's distributor, B.C. Ziegler and Company (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
minimum initial investment amount is $1,000 and additional investment amount is
$50. However, for IRAs, Keogh plans, self-directed retirement accounts and
custodial accounts under the Uniform Gifts/Transfers to Minors Act, the minimum
initial investment amount is $500 and the minimum additional investment amount
is $25. The minimums are also reduced for purchases through the Systematic
Purchase Plan. See "Shareholder Services - Systematic Purchase Plan" below.
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; (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.
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).
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<PAGE> 10
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:
<TABLE>
<CAPTION>
<S> <C>
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 12b-1 Higher annual expenses, including the 12b-1
fee, than Class B shares fee, than Class A shares
No conversion to Class B shares Automatic conversion to Class A shares after
eight years
</TABLE>
You should bear in mind that exchanges of shares among the various
mutual funds included in the Principal Preservation family can be made only for
shares of the same Class, except that Class A shares of any Principal
Preservation mutual fund may be exchanged for Class X (Retail Class) shares of
the Cash Reserve Portfolio, and vice versa. As a result, Class B shares can be
exchanged only for shares of the other Portfolios that offer Class B shares.
PURCHASING CLASS A SHARES
Front-End Sales Charge. You may purchase Class A shares of the
Portfolio at the public offering price, which is the net asset value plus a
maximum front-end sales charge of 5.25%. 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.
9
<PAGE> 11
<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. This definition
allows persons to aggregate their investment with others under certain
circumstances.
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
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<PAGE> 12
Portfolios which have a sales charge. If the purchases are completed during
that period, each purchase will be at a sales charge applicable to the aggregate
of the shareholder's intended purchases. Under terms set forth in the statement
of intention, shares valued at 5% of the amount of the intended purchases are
escrowed and will be redeemed to cover the additional sales charge payable if
the intended purchases are 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, you must inform
Principal Preservation, the Distributor or the Selected Dealer that you qualify
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 without a
sales charge by a purchaser buying 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.
Employee Benefit Plans Any pension, profit sharing or other
employee benefit plan qualified under
Section 401 of the Internal Revenue Code
that purchased shares of any Principal
Preservation mutual fund prior to July 1,
1998 may purchase Class A shares without
a sales charge.
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<PAGE> 13
State and Municipal Class A shares of the Portfolio also may
Governments and be purchased without a sales charge by
Charities 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
From Unrelated Load without a sales charge when payment for
Funds those shares represents the proceeds from
the redemption of shares of another
mutual fund which charges a sales charge
and which is not part of Principal
Preservation. However, the redemption of
those shares must have occurred no more
than 90 days prior to the purchase of
shares of the Portfolio.
Persons Associated with Class A shares may be purchased without a
Principal Preservation sales charge by: Directors and officers
and Its Service Providers of Principal Preservation (including
shares purchased jointly with or
individually by any such person's spouse
and shares purchased by any such person's
children or grandchildren under age 21);
employees of the 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.
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
Investment Vehicles of distributions from various unit
Sponsored by Ziegler investment trusts sponsored by 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.
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<PAGE> 14
Purchases Through Class A shares may be purchased without a
Certain Investment sales charge through an asset allocation
Programs 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 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 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
13
<PAGE> 15
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 net asset value of your Class B shares at the time of purchase or
at the time of redemption, whichever is less.
<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.
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
14
<PAGE> 16
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.
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 (less the applicable sales charge for Class A shares) computed
for the 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 (less the applicable sales charge for Class A shares) determined for the
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.
15
<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 1. Complete the Account 1. Complete the Additional
DELIVERY Application included in this Investment form included
prospectus. with your account
Personally deliver or statement. Alternatively,
send by First Class or 2. Make your check or money you may write a note
Express Mail or Private order payable to: "Principal indicating your account
Delivery Service to: Preservation." number.
Principal Preservation Note: The amount of your 2. Make your check payable to
215 N. Main Street purchase must meet the "Principal Preservation."
West Bend WI 53095 applicable minimum initial
investment account. See 3. Personally deliver or mail
"Purchasing Shares -- Minimum the Additional Investment
Purchase Amounts." Form (or note) and your
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>
16
<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 Add to an account by exchanging
exchanging funds from an existing funds from another Principal
Principal Preservation account. See Preservation account. See
"Exchanging Shares." "Exchanging Shares."
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES You may purchase shares in the Portfolio You may purchase additional shares
FIRMS through a broker-dealer or other financial in the Portfolio through a broker-
service firm that may charge a dealer or other financial services
transaction fee. firm that may charge a transaction
fee.
Principal Preservation may accept
requests to purchase shares into a Principal Preservation may accept
broker-dealer street name account only requests to purchase additional
from the broker-dealer. shares into a 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 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.
17
<PAGE> 19
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ------ ---------------
<S> <C>
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 the
215 N. Main Street registered owner(s) of the shares, exactly as the
West Bend WI 53095 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
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, complete, sign and return a Telephone
Redemption Authorization Form.
</TABLE>
18
<PAGE> 20
METHOD STEPS TO FOLLOW
- ------ ---------------
SYSTEMATIC WITHDRAWAL PLAN You can set up an automatic systematic
withdrawal plan from any of your Principal
Preservation accounts. To establish the
systematic withdrawal plan, complete the
appropriate section of the Account
Application or call, write or stop by
Principal Preservation and request a
Systematic Withdrawal Plan Application Form
and complete, sign and return the Form to
Principal Preservation. See "Shareholder
Services - Systematic Withdrawal Plan."
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. Please note that payment of your redemption
proceeds may be delayed for up to 15 days from the date of purchase to allow the
purchase to clear.
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
19
<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, the Transfer Agent, Principal Preservation and their
employees will not 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
20
<PAGE> 22
Portfolio(s) to sell its securities or to calculate the fair value of its net
assets; or (3) the Securities and Exchange Commission may permit for the
protection of the shareholders of the Portfolio(s).
Redemptions In Other Than Cash. It is possible that conditions may
arise in the future which would, in the opinion of the Board of Directors of
Principal Preservation, make it undesirable for 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 the Portfolio may be exchanged for shares of the same Class of any
other Principal Preservation mutual fund, and vice versa. Additionally, Class A
shares of the Portfolio 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
21
<PAGE> 23
Portfolio for Class A shares of the Portfolio, you would pay a front-end sales
charge on the exchange in an amount equal to the difference between: (a) the
front-end sales charge you paid when you purchased your 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 prior to the close of
regular trading on the New York Stock Exchange on that day (4:00 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 12 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 the 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).
22
<PAGE> 24
The amount of your exchange must meet the minimum initial or
minimum additional investment amount of the Principal
Preservation mutual fund into which you are exchanging.
If the shares being exchanged are represented by a share
certificate, you must sign the certificate(s), have your
signature guaranteed and return the certificate(s) with your
Exchange Authorization Form.
METHODS FOR EXCHANGING SHARES
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.
Personally deliver or send by Please Note: Principal Preservation must
first class or express mail or receive your exchange order no later than
private delivery addressed to: 4:00 p.m. Eastern Time in order to effect
the exchange on 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
1-800-826-4600 the 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.
23
<PAGE> 25
METHOD STEPS TO FOLLOW
- ------ ---------------
Financial Services Firms You may exchange shares
through a broker-dealer or other financial
services firm, which may charge a transaction
fee.
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
Portfolio 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 Portfolio
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. The SPP
may take up to 30 days to commence after receipt of your SPP application. 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 the
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.
24
<PAGE> 26
You may terminate your systematic withdrawal plan at any time by written notice
to Principal Preservation or the Transfer Agent.
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.
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. 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. Dividends and capital gains distributions may be taken in cash or
additional shares at net asset value (without a sales charge). The investment
occurs on the same day as the dividend distribution date. Unless you have
elected in writing to the Transfer Agent to receive dividends and capital gain
distributions in cash, they will be automatically reinvested in additional
shares of the Portfolio. 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.
25
<PAGE> 27
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.
26
<PAGE> 28
<TABLE>
<CAPTION>
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
215 NORTH MAIN STREET
WEST BEND, WISCONSIN 53095
<S> <C> <C>
INVESTMENT ADVISER SUB-ADVISER DISTRIBUTOR, ACCOUNTING/PRICING AGENT, AND
B.C. Ziegler and Company 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 Bank Milwaukee, N.A. 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>
<PAGE> 29
PRINCIPAL PRESENTATION PORTFOLIOS, INC
MANAGED GROWTH PORTFOLIO
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, or
- Write to: Principal Preservation Portfolios
215 North Main Street
West Bend, Wisconsin 53095
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), the SEC's website at http://www.sec.gov, or by
sending your request and a fee for duplications to the SEC's Public Reference
Section, Washington, D.C. 20549-6009.
SEC File No. 811-4401
27
<PAGE> 30
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 B.C. Ziegler and Company 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 ("Ziegler" or 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
PAGE
----
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........................................................20
DETERMINATION OF NET ASSET VALUE PER SHARE...................................23
PERFORMANCE INFORMATION......................................................23
TAX STATUS...................................................................27
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................28
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................28
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS...................................29
<PAGE> 31
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
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<PAGE> 32
series (such as approval of advisory or sub-advisory contracts and changes in
fundamental policies of a series) a separate vote of the shares of that series
is required. On matters that uniquely affect a particular class of shares (such
as an increase in 12b-1 fees for that class), a separate vote by the
shareholders of that class of shares is required. Shares of a series or class
are not entitled to vote on any matter 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 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,
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<PAGE> 33
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 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 up to 10%
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
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<PAGE> 34
in the countries in which the principal offices of the issuers of the various
securities are located, if that is the best available market. Foreign exchanges
and markets may be more volatile than those in the United States, and foreign
securities may be less liquid than domestic securities. Moreover, settlement
practices for transactions in foreign markets may differ from those in United
States markets, and may include delays beyond periods customary in the United
States.
Legal and Regulatory Matters. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
Taxes. Dividends and interest payable on the 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 conditions 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
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<PAGE> 35
definite period of time and earn a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange normally drawn by an importer or exporter
to pay for specific merchandise, which are "accepted" by a bank, meaning in
effect that the bank unconditionally agrees to pay the face value of the
instrument on maturity. Certificates of deposit and bankers' acceptances
acquired by the Portfolio will be dollar-denominated obligations of domestic
banks or financial institutions which at the time of purchase have capital,
surplus and undivided profits in excess of $100 million, based on latest
published reports, or less than $100 million if the principal amount of such
bank obligations are fully insured by the U.S. Government.
In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under its investment objective and
policies, the Portfolio may make interest-bearing time or other interest-bearing
deposits in commercial or savings banks. Time deposits are non-negotiable
deposits maintained at a banking institution for a specified period of time at a
specified interest rate.
SAVINGS ASSOCIATION OBLIGATIONS. The Portfolio may invest in
certificates of deposit (interest-bearing time deposits) issued by savings banks
or savings and loan associations that have capital and undivided profits in
excess of $100 million, based on latest published reports, or less than $100
million if the principal amount of such obligations is fully insured by the U.S.
Government.
COMMERCIAL PAPER, SHORT-TERM NOTES, VARIABLE RATE DEMAND NOTES,
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
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<PAGE> 36
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.
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 Portfolio should invest in
short-term money market instruments and that the rates available on repurchase
agreements are favorable as compared to the rates available on other short-term
money market instruments or money market mutual funds. The Advisers do not
currently intend to invest the assets of the Portfolio
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<PAGE> 37
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 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 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
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<PAGE> 38
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.
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
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<PAGE> 39
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.
(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 (other than futures contracts and options
thereon).
(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.
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<PAGE> 40
(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.
(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.
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<PAGE> 41
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.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS PRESERVATION PAST FIVE YEARS
- --------------------- -------------- -----------------
<S> <C> <C>
Richard J. Glaisner,* 55 Director Senior Managing Director -- Ziegler Investment
Ziegler Division, B.C. Ziegler and Company since
January 1999; President and Chief Executive
GS2 Officer of GS2 Securities, Inc., a subsidiary
of The Ziegler Companies, Inc., from July 1997
to December 1998; 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 Director Senior Vice President, B.C. Ziegler and
Company, since 1996; prior thereto, 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 investment companies) from 1994
to 1996.
</TABLE>
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<PAGE> 42
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
PRINCIPAL OCCUPATION DURING
NAME, AGE AND ADDRESS PRESERVATION PAST FIVE YEARS
- ------------------------------------------- ------------------------ -----------------------------------------------
<S> <C> <C>
Richard H. Aster, M.D., 67 Director Since June 1996, Senior Investigator and
8727 W. Watertown Plank Rd. Professor of Medicine, Medical College of
Milwaukee, WI 53226 Wisconsin; prior thereto, President and
Director of Research, The Blood Center of
Southeastern Wisconsin, Inc.
Augustine J. English, 68 Director Retired; President, Tupperware North America
1724 Lake Roberts Court from 1990 to 1994 (manufacturing); prior to
FL 34786 Windermere, 1990, President, The West Bend
Company (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 and Director, Trustmark
2059 Keystone Ranch Road Insurance Cos. (Mutual Life Insurance
Dillon, CO 80435 Company) since April 1997; from 1991 to 1997,
Chairman, 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, 35 Vice President - Wholesaler, B.C. Ziegler and Company since
Director of Marketing 1991; prior thereto, Marketing Account
Executive, The Patten Company.
</TABLE>
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<PAGE> 43
<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,
Officer and Treasurer B.C. Ziegler and Company since 1996; prior
thereto, Vice President, Fixed Income
Department, Firstar Bank.
Marc J. Dion, 40 Vice President Vice President - Portfolio Manager and Chief
Investment Officer, Ziegler Asset Management,
Inc.
S. Charles O'Meara, 47 Secretary Senior Vice President, General Counsel and
Corporate Secretary, B.C. Ziegler and Company.
</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> 44
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
BENEFITS ACCRUED COMPENSATION
NAME OF PERSON AND AGGREGATE AS PART OF FROM PRINCIPAL
POSITION WITH COMPENSATION PRINCIPAL ESTIMATED ANNUAL PRESERVATION AND
PRINCIPAL FROM PRINCIPAL PRESERVATION'S BENEFITS UPON FUND COMPLEX
PRESERVATION PRESERVATION EXPENSES RETIREMENT PAID 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-
Director (2)
Robert J. Tuszynski, -0- -0- -0- -0-
President and Director
Richard H. Aster, $ 14,250 -0- -0- $ 14,250
Director
Augustine J. English, $ 14,250 -0- -0- $ 14,250
Director
Ralph J. Eckert $ 14,250 -0- -0- $ 14,250
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
B.C. Ziegler and Company ("Ziegler"), the Portfolio's investment
adviser, is a wholly-owned subsidiary of The Ziegler Companies, Inc., a
publicly-held financial services holding company. Robert J. Tuszynski,
President of Principal Preservation, is a Senior Vice President
15
<PAGE> 45
of Ziegler; Richard J. Glaisner, a Director of Principal Preservation, is
Senior Managing Director - Ziegler Investment Division of Ziegler; and S.
Charles O'Meara, Secretary of Principal Preservation, is a Senior Vice
President, General Counsel and Corporate Secretary of Ziegler. No other
officer or director of Principal Preservation is an officer or director of
Ziegler or Geneva Capital Management Ltd.
Pursuant to the terms of the Investment Advisory Agreement, Ziegler
provides the Portfolio with overall investment advisory and administrative
services. Subject to such policies the Principal Preservation Board of Directors
may determine, Ziegler 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 has retained Geneva
Capital Management Ltd. as sub-adviser to the Portfolio.
For its advisory services to the Portfolio, Ziegler 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 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, 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.
ADMINISTRATIVE SERVICES
Ziegler provides certain administrative, accounting and pricing
services to Principal Preservation, including calculating daily net asset value
per share; maintaining original entry documents and books of record and general
ledgers; posting cash receipts and disbursements; reconciling bank account
balances monthly; recording purchases and sales based upon portfolio manager
communications; and preparing monthly and annual summaries to assist in the
preparation of financial statements of, and regulatory reports for, Principal
Preservation. Ziegler has agreed to provide these services pursuant to the terms
of an Accounting/Pricing Agreement 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
16
<PAGE> 46
million or more, with a minimum fee of $19,000 per portfolio per year, plus
expenses. The Accounting/Pricing Agreement will continue in effect from year to
year, as long as it is approved at least annually by Principal Preservation's
Board of Directors or by a vote of the outstanding voting securities of
Principal Preservation and in either case by a majority of the Directors who are
not parties to the Accounting/Pricing Agreement or interested persons of any
such party. The Accounting/Pricing Agreement terminates automatically if
assigned and may be terminated without penalty by either party on 60 days
notice. The Accounting/Pricing Agreement provides that neither Ziegler nor their
personnel shall be liable for any error of judgment or mistake of law or for any
loss arising out of any act or omission in the execution and the discharge of
its obligations under the Accounting/Pricing Agreement, except for willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties under the
Accounting/Pricing Agreement, and in no case shall their liability exceed one
year's fee income received by them under such Agreement.
CUSTODIAN SERVICES
Firstar Bank Milwaukee, N.A. serves as the custodian of Principal
Preservation's assets, pursuant to a Custodian Servicing Agreement. The
Custodian Servicing Agreement provides that Firstar Bank Milwaukee, N.A. 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.
17
<PAGE> 47
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.
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 Distributor 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 10 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.
18
<PAGE> 48
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:
<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 Aunderwriters@ 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.
19
<PAGE> 49
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.
The Distributor may make the following payments, out of its own funds,
to Selected Dealers when Class A shares are purchased without a front-end sales
charge as follows:
. Up to 0.75% of the amount invested through the
Selected Dealer when at least $1 million of shares
are purchased. . Up to 0.75% of the amount
invested through the Selected Dealer by a pension,
profit sharing or other employee benefit plan
qualified under Section 401 of the Internal Revenue
that also purchased shares of a Principal
Preservation mutual fund prior to July 1, 1998.
. Up to 0.50% of the amount invested through the
Selected Dealer when the shares are purchased
with the proceeds of a redemption, within the past
90 days, of a mutual fund which is not related to
Principal Preservation and which imposes a sales
charge. All or a part of such payment may be
conditioned upon the monies remaining invested with
Principal Preservation for a minimum period of time.
DISTRIBUTION EXPENSES
Principal Preservation's Distribution Plan (the "Plan") is its
written plan contemplated by Rule 12b-1 (the "Rule") under the 1940 Act.
The Plan authorizes the Distributor to make certain payments to any
qualified recipient, as defined in the Plan, that has rendered assistance in the
distribution of Principal Preservation's shares (such as sale or placement of
Principal Preservation's shares, or administrative assistance, such as
maintenance of sub-accounting or other records). Qualified recipients include
banks and other financial institutions. The Plan also authorizes the Distributor
to purchase advertising for shares of the Portfolio, to pay for sales literature
and other promotional material, and to make payments to its sales personnel. The
Plan also entitles the Distributor to receive a fee of .25 of 1% on an annual
basis of the average daily net assets of Portfolio shares that are owned of
record by the Distributor as nominee for the Distributor's customers or which
are owned by those customers of the Distributor whose records, as maintained by
Principal Preservation or its agent, designate the Distributor as the customer's
dealer of record. Any such payments to qualified recipients or expenses will be
reimbursed or paid by Principal Preservation, up to maximum annual amounts
established under the terms of the Plan.
20
<PAGE> 50
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 shareholders; (3) the
costs of preparing, printing and mailing of any proxy statements and proxies,
irrespective of whether any such proxy statement includes any item relating to,
or directed toward, the sale of Principal Preservation's shares; (4) all legal
and accounting fees relating to the preparation of any such reports,
prospectuses, proxies and proxy statements; (5) all fees and expenses relating
to the qualification of Principal Preservation and or their shares under the
securities or "Blue Sky" laws of any jurisdiction; (6) all fees under the 1940
Act and the Securities Act of 1933, including fees in connection with any
application for exemption relating to or directed toward the sale of Principal
Preservation's shares; (7) all fees and assessments of the Investment Company
Institute or any successor organization or industry association irrespective of
whether some of its activities are designed to provide sales assistance; (8) all
costs of preparing and mailing confirmations of shares sold or redeemed or share
certificates and reports of share balances; and (9) all costs of responding to
telephone or mail inquiries of shareholders.
The Plan also states that it is recognized that the costs of
distribution of Principal Preservation's shares are expected to exceed the sum
of permitted payments, permitted
21
<PAGE> 51
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 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.
22
<PAGE> 52
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. 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
23
<PAGE> 53
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:
P(1 + T)n = 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
24
<PAGE> 54
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 fluctuations in net asset value, and will assume all income and
capital gain distributions are reinvested. The fixed rate of return will be
clearly stated and presented as a monthly compounded figure, and therefore will
not reflect any market fluctuation.
In advertising and sales literature, the performance of the Portfolio
may be compared with that of other mutual funds, indexes or averages of other
mutual funds, indexes of related financial assets or data and 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
25
<PAGE> 55
comparisons of that information or similar statistics for the securities
comprising any of the indexes or averages listed above; and (iii) descriptions
of Principal Preservation or the Portfolio manager's economic and market
outlook, general and for the Portfolio.
The Portfolio may compare its performance to the Consumer Price Index
(All Urban), a widely recognized measure of inflation.
The performance of the Portfolio may be compared to any or all of the
following indexes or averages:
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
Standard & Poor's 400 Industrials performance of stock traded in the
Standard & Poor's Mid-Cap 400 Index indicated markets.)
Wilshire 5000
Wilshire 4500
Wilshire 4000
(These indexes are widely recognized
indicators of general U.S. stock market
results.)
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
26
<PAGE> 56
Treasury bill return) from the Portfolio's load-adjusted total return score.
This numerical score is then translated into rating categories, with the top 10%
labeled five star, the next 22.5% labeled four star, the next 35% labeled three
star, the next 22.5% labeled two star and the bottom 10% one star. A high rating
reflects either above-average returns or below-average risks, or both.
To illustrate the historical returns on various types of financial
assets, the 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
27
<PAGE> 57
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 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
28
<PAGE> 58
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.
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.
29
<PAGE> 59
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
215 North Main Street
West Bend, Wisconsin 53095
INVESTMENT ADVISER
B.C. Ziegler and Company
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 Bank Milwaukee, N.A.
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> 60
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
MANAGED GROWTH PORTFOLIO
---------------------------------------
JANUARY 1, 1999
STATEMENT OF ADDITIONAL INFORMATION
---------------------------------------
<PAGE> 61
C-5
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
C-1
<PAGE> 62
merits that such person was not liable by
reason of disabling conduct; or
(2) absent such a decision, a reasonable
determination is made, based upon a review
of the facts, by (i) the vote of a majority
of a quorum of the Directors of the
Corporation who are neither interested
persons of the Corporation as defined in the
Investment Company Act of 1940 nor parties
to the Proceeding, or (ii) if such quorum is
not obtainable, or even if obtainable, if a
majority of a quorum of Directors described
in paragraph (b)(2)(i) above so directs, by
independent legal counsel in a written
opinion, that such person was not liable by
reason of disabling conduct.
Expenses (including attorneys' fees) incurred in defending a Proceeding
will be paid by the Corporation in advance of the final disposition thereof upon
an undertaking by such person to repay such expenses (unless it is ultimately
determined that he is entitled to indemnification), if:
(1) such person shall provide 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) B.C. Ziegler and Company
C-2
<PAGE> 63
B.C. Ziegler and Company is a wholly owned subsidiary of The
Ziegler Companies, Inc. It currently serves as investment adviser to
the Managed Growth Portfolio of Principal Preservation Portfolios,
Inc..
Set forth below is a list of the officers and directors of
B.C. Ziegler and Company as of December 31, 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
B.C. ZIEGLER
NAME AND COMPANY(1) OTHER AFFILIATIONS(2)
- ---- -------------- ---------------------
<S> <C> <C>
Peter D. Ziegler Chairman of the Board, President, Director of West Bend Mutual
Chief Executive Officer and Insurance Company, 1900 S. 18th
Director; Chairman -- Ziegler Avenue, West Bend, WI 53095
Securities (insurance company); Director of
Trustmark Insurance Cos. (mutual life
insurance company)
S. Charles O'Meara Senior Vice President, General Secretary of Principal Preservation
Counsel, Corporate Secretary and Portfolios, Inc.
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
Michael P. Doyle Senior Vice President -- Ziegler
Investment Division Retail Operations
Robert J. Tuszynski Senior Vice President -- Ziegler President, Chief Executive Officer
Investment Division and Director of Principal
Preservation Portfolios, Inc.
Richard J. Glaisner Senior Managing Director -- Ziegler Director of Principal Preservation
Investment Division Portfolios, Inc.
R. R. Poggenburg Senior Vice President -- Ziegler
Investment Division
D. A. Carlson, Jr. President, Chief Executive Officer
and Treasurer -- Ziegler Securities
</TABLE>
C-3
<PAGE> 64
<TABLE>
<CAPTION>
<S> <C>
S. R. Arnold Senior Vice President - TFI
Institutional Sales - 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
M. A. Baumgartner Senior Vice President - Ziegler
Securities
D. J. Hermann Senior Vice President - Ziegler
Securities
J. C. Vredenbregt Vice President - Treasurer and
Controller; Assistant Treasurer -
Ziegler Securities
</TABLE>
(1) Ziegler Investment Division and Ziegler Securities are divisions of
B. C. Ziegler and Company.
(2) 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.
C-4
<PAGE> 65
(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 December 31, 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 President and None
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)
<TABLE>
<CAPTION>
OTHER INVESTMENT COMPANIES FOR WHICH UNDERWRITER ACTS
AS UNDERWRITER, DEPOSITOR OR INVESTMENT ADVISER
-----------------------------------------------------
UNDERWRITER
-----------
<S> <C>
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.
</TABLE>
(b) Set forth below is a list of the officers and directors of
B.C. Ziegler and Company as of December 31, 1998, together
with information as to their positions with B.C. Ziegler and
Company and with Principal Preservation. The address of each
officer and director of B.C. Ziegler and Company is 215 North
Main Street, West Bend, Wisconsin 53095, Telephone (414)
334-5521.
C-5
<PAGE> 66
<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;
Chairman - Ziegler Securities
S. Charles O'Meara Senior Vice President, General Counsel, Secretary
Corporate Secretary 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
J. C. Vredenbregt Vice President - Treasurer and
Controller; Assistant Treasurer -
Ziegler Securities
Michael P. Doyle Senior Vice President - Ziegler
Investment Division Retail Operations
Robert J. Tuszynski Senior Vice President - Ziegler President, Chief Executive Officer
Investment Division and Director
Richard J. Glaisner Senior Managing Director - Ziegler Director
Investment Division
R. R. Poggenburg Senior Vice President - Ziegler
Investment Division
D. A. Carlson, Jr. President, Chief Executive Officer and
Treasurer - Ziegler Securities
S. R. Arnold Senior Vice President - TFI
Institutional Sales - Ziegler
Securities
</TABLE>
C-6
<PAGE> 67
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME B.C. ZIEGLER AND COMPANY(1) PRINCIPAL PRESERVATION
----- --------------------------- ----------------------
<S> <C> <C>
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
M. A. Baumgartner Senior Vice President - Ziegler
Securities
D. J. Hermann 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.
C-7
<PAGE> 68
(b) Geneva Capital Management, Ltd.
250 East Wisconsin Avenue
Suite 1050
Milwaukee, Wisconsin 53202
Transaction journals and confirmations for portfolio
trades for the Managed Growth Portfolio.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-8
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund certifies that it meets all of the requirements for
effectiveness of this Post-Effective Amendment to its Registration Statement on
Form N-1A under Rule 485(b) under the Securities Act and has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
duly authorized, in the City of West Bend, and State of Wisconsin on this 30th
day of December, 1998.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
/s/ ROBERT J. TUSZYNSKI
By: -----------------------------------
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 30th day of December, 1998, by the following persons in the capacities
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Robert J. Tuszynski Director and President (Chief Executive Officer)
- ---------------------------------
Robert J. Tuszynski
/s/ Franklin P. Ciano Chief Financial Officer and Treasurer (Chief
- --------------------------------- Financial and Accounting Officer)
Franklin P. Ciano
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
</TABLE>
C-9
<PAGE> 70
*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-10
<PAGE> 71
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(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(4)
(A)(4) 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) Investment Advisory Agreement pertaining to the assets of 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(10)
(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(10)
(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)
</TABLE>
C-11
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(H)(5) Administrative Services Agreement with Ziegler Asset Management,
Inc. with respect to the Cash Reserve Portfolio(1)
(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(10)
(N) N/A
(O) See Exhibit (C)
- ---------------------
</TABLE>
* 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.
C-12
<PAGE> 73
(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.
(9) Previously filed as part of Post-Effective Amendment No. 43 to this
Registration Statement filed with the Commission on May 1, 1998.
(10) Previously filed as part of Post-Effective Amendment No. 46 to this
Registration Statement filed with the Commission on October 15,
1998.
C-13
<PAGE> 74
EXHIBIT (A)(4)
ARTICLES SUPPLEMENTARY FOR MANAGED GROWTH PORTFOLIO
<PAGE> 75
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 July 31, 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 14 ($.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:
<TABLE>
<CAPTION>
SERIES NO. OF SHARES
------ -------------
<S> <C>
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
</TABLE>
<PAGE> 76
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.
/s/ Robert J. Tuszynski
By: ------------------------------
Robert J. Tuszynski, President
Attest:
/s/ S. Charles O'Meara
By: -----------------------------
S. Charles O'Meara, Secretary
STATE OF WISCONSIN )
) SS
COUNTY OF WASHINGTON )
On this 23rd day of December, 1998, 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] /s/ Charles M. Weber
--------------------------------
Notary Public
My Commission expires: permanent
2
<PAGE> 77
EXHIBIT (D)(3)
INVESTMENT ADVISORY AGREEMENT
PERTAINING TO MANAGED GROWTH PORTFOLIO
<PAGE> 78
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 31st day of December, 1998, by and between
PRINCIPAL PRESERVATION PORTFOLIOS, INC., a Maryland corporation (the "Fund"),
and B.C. ZIEGLER AND COMPANY, a Wisconsin corporation (the "Advisor").
W I T N E S S E T H:
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
1. In General
The Fund hereby appoints the Advisor to act as investment
advisor with respect to each series of its common stock listed on Exhibit A
attached hereto. Each series is referred to herein as a "Portfolio," and
collectively as the "Portfolios." The Advisor agrees to provide professional
investment management with respect to the investment of the assets of each
Portfolio and to supervise and arrange the purchase and sale of securities held
in the portfolio of each Portfolio and generally administer the affairs of the
Fund. The advisor may engage, on behalf of the Fund or any Portfolio and with
the required consent of the shareholders thereof, the services of a Sub-Advisor,
subject to any limitations imposed by the Investment Company Act of 1940 (the
"Act"). It is understood that the Fund may create one or more additional series
of shares and that, if it does so, this Agreement may be amended to include
additional series under the terms of this Agreement.
2. Duties and Obligations of the Advisor With Respect to
Management of the Fund
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Board
of Directors of the Fund, the Advisor shall:
(i) Decide what securities shall be purchased or
sold by each Portfolio and when; and
(ii) Arrange for the purchase and the sale of
securities held in the portfolio of each
Portfolio by placing purchase and sale
orders for each Portfolio.
1
<PAGE> 79
(b) Any purchases or sales of portfolio securities on
behalf of the Portfolios shall at all times conform
to, and be in accordance with, any requirements
imposed by: (1) the provisions of the Act and of any
rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the
provisions of the Articles of Incorporation and
By-Laws of the Fund as amended from time to time; (4)
any policies and determinations of the Board of
Directors of the Fund; and (5) the fundamental
policies of the Fund, as reflected in its
registration statement under the Act, or as amended
by the shareholders of the Fund.
(c) The Advisor shall also administer the affairs
of the Fund and, in connection therewith, shall
be responsible for (i) maintaining the Fund's books
and records, (other than financial or accounting
books and records maintained by any accounting
services agent and such records maintained by the
Fund's custodian or transfer agent); overseeing the
Fund's insurance relationships; (iii) preparing for
the Fund (or assisting counsel and/or auditors in
the preparation of) all required tax returns, proxy
statements and reports to the Fund's shareholders
and Directors and reports to and other filings with
the Securities and Exchange Commission and other
governmental agency (the Fund agreeing to supply
or cause to be supplied to the Advisor all necessary
financial and other information in connection with
the foregoing); (iv) preparing such applications
and reports as may be necessary to register or
maintain the Fund's registration and/or the
registration of the shares of the Portfolios under
the securities or "blue sky" laws of the various
states selected by the Fund's Distributor (a
Portfolio or Portfolios agreeing to pay all filing
fees or other similar fees in connection therewith);
(v) responding to all inquiries or other
communications of shareholders, if any, which are
directed to the Advisor, or if any such inquiry or
communication is more properly to be responded to
by the Fund's custodian, transfer agent or
accounting services agent, overseeing their response
thereto; (vi) overseeing all relationships between
the Fund and its custodian(s), transfer agent(s) and
accounting services agent(s), including the
negotiation of agreements and the supervision of
the performance of such agreements; and (vii)
authorizing and directing any of the Advisor's
directors, officers and employees who may be
elected as Directors or officers of the Fund to serve
in the capacities in which they are elected. All
services to be furnished by the Advisor under this
Agreement may be furnished through the medium of any
such Directors, officers or employees of the Advisor.
2
<PAGE> 80
(d) The Advisor shall give the fund the benefit of its
best judgment and effort in rendering services
hereunder. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard
of obligations or duties ("disabling conduct")
hereunder on the part of the Advisor (and its
officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity
affiliated with the Advisor) the Advisor shall not be
subject to liability to the Fund or to any
shareholder of the Fund for any act or omission in
the course of, or connected with rendering services
hereunder, including without limitation, any error
of judgment or mistake of law or for any loss
suffered by any of them in connection with the
matters to which this Agreement related, except to
the extent specified in Section 36(b) of the Act
concerning loss resulting from a breach of
fiduciary duty with respect to the receipt of
compensation for services. Except for such
disabling conduct, the Fund shall indemnify the
Advisor (and its officers, directors, agents,
employees, controlling persons, shareholders and
any other person or entity affiliated with the
Advisor) from any liability arising from the
Advisor's conduct under this Agreement to the extent
permitted by the Fund's Articles of Incorporation,
By-Laws and applicable law.
(e) Nothing in this Agreement shall prevent the Advisor
or any affiliated person (as defined in the Act) of
the Advisor from acting as investment adviser or
manager and/or principal underwriter for any other
person, firm or corporation and shall not in any way
limit or restrict the advisor or any such affiliated
person from buying, selling or trading any securities
for its or their own accounts or the accounts of
others for whom it or they may be acting, provided,
however, that the Advisor expressly represents that
it will undertake no activities which, in its
judgment, will adversely affect the performance of
its obligations to the Fund under this Agreement.
(f) It is agreed that the Advisor shall have no
responsibility or liability for the accuracy or
completeness of the Fund's Registration Statement
under the Act or the Securities Act of 1933 except
for information supplied by the Advisor for inclusion
therein.
3. BROKER-DEALER RELATIONSHIPS
In connection with its duties set forth in Section 2(a)(ii) of
this Agreement to arrange for the purchase and the sale of securities held by
each Portfolio by placing purchase and sale orders for the Portfolio, the
Advisor and/or any Sub-Advisor shall select such broker-dealers ("brokers") as
shall, in the Advisor's or Sub-Advisor's judgment, implement the policy
3
<PAGE> 81
of the Fund to achieve "best execution," i.e., prompt and efficient execution at
the most favorable securities price. In making such selection, the Advisor
and/or Sub-Advisor is also authorized to consider whether the broker provides
brokerage and/or research services to the Fund and/or other accounts of the
Advisor or Sub-Advisor. The commissions paid to such brokers may be higher than
another broker would have charged if a good faith determination is made by the
Adviser and/or Sub-Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
Advisor's or the Sub-Advisor's overall responsibilities as to the accounts as to
which it exercises investment discretion. The Advisor and/or Sub-Advisor shall
use its judgment in determining that the amount of commissions paid are
reasonable in relation to the value of brokerage and research services provided
and need not place or attempt to place a specific dollar value on such services
or on the portion of commission rates reflecting such services. To demonstrate
that such determinations were in good faith, and to show the overall
reasonableness of commissions paid, the Advisor and/or Sub-Advisor shall be
prepared to show that commissions paid (i) were for purposes contemplated by
this Agreement; (ii) provide lawful and appropriate assistance to the Advisor
and/or Sub-Advisor in the performance of its decision-making responsibilities;
and (iii) were within a reasonable range as compared to the rates charged by
qualified brokers to other institutional investors as such rates may become
known from available information. The Fund recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty of
the transaction in question. The Advisor and/or Sub-Advisor is also authorized
to consider sales of shares as a factor in the selection of brokers to execute
brokerage and principal transactions, subject to the requirements of "best
execution," as defined above.
4. ALLOCATION OF EXPENSES
The Advisor agrees that it will furnish the Fund, at the
Advisor's expense, with all office space and facilities, and equipment and
clerical personnel necessary for carrying out its duties under this Agreement.
The Advisor will also pay all compensation of all Directors, officers and
employees of the Fund who are affiliated persons of the Advisor. All costs and
expenses not expressly assumed by the Advisor under this Agreement shall be paid
by the Fund, including, but not limited to (i) interest and taxes; (ii)
brokerage commissions; (iii) insurance premiums; (iv) compensation and expenses
of its Directors other than those affiliated with the Advisor; (v) legal and
audit expenses; (vi) fees and expenses of the Fund's custodian, shareholder
servicing or transfer agent and accounting services agent; (vii) expenses
incident to the issuance of its shares, including stock certificates and
issuance of shares on the payment of, or reinvestment of, dividends; (viii) fees
and expenses incident to the registration under Federal or state securities laws
of the Fund or its shares; (ix) expenses of preparing, printing and mailing
reports and notices proxy material and prospectuses to shareholders of the Fund;
(x) all other expenses incidental to holding meetings of the Fund's
shareholders; (xi) dues or assessments of or contributions to the Investment
Company Institute or any successor or other industry association; (xii) such
non-recurring expenses as may arise, including litigation
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<PAGE> 82
affecting the Fund and the legal obligations which the Fund may have to
indemnify its officers and Directors with respect thereto; and (xiii) all
expenses which the Fund or a Portfolio agrees to bear in any distribution
agreement or in any plan adopted by the Fund and/or a Portfolio pursuant to Rule
12b-1 under the Act.
5. COMPENSATION OF THE ADVISOR
(a) The Fund agrees to pay the Advisor and the Advisor
agrees to accept as full compensation for all
services rendered by the Advisor as such, an annual
management fee, payable monthly and computed on the
value of the average daily net asset value of the
Portfolio as shown on Exhibit A attached hereto.
(b) In the event the expenses of a Portfolio (including
the fees of the Advisor and amortization of
organization expenses but excluding interest, taxes,
brokerage commissions, extraordinary expenses and
sales charges and distribution fees) for any fiscal
year exceed the limits set by applicable regulations
of state securities commissions, the Advisor will
reduce its fee by the amount of such excess. Any such
reductions are subject to readjustment during the
year. The payment of the management fee at the end of
any month will be reduced or postponed or, if
necessary, a refund will be made to a Portfolio so
that at any time will there be any accrued but unpaid
liability under this expense limitation.
6. DURATION AND TERMINATION
(a) This Agreement shall go into effect as to each
Portfolio on the date set forth on Exhibit A attached
hereto and shall, unless terminated as hereinafter
provided, continue in effect until December 31,
2000 and thereafter from year to year, but only so
long as such continuance is specifically approved
at least annually by: (i) the vote of a majority
of the Directors who are not parties to this
Agreement or "interested persons" (as defined in
the Act) of any such party case in person at a
meeting called for the purpose of voting on such
approval; and (ii) either by a vote of a majority of
the Board of Directors or by the vote of the holders
of a "majority" (as defined in the Act) of the
outstanding voting securities of the Fund (or with
respect to any Portfolio, by the vote of a
majority of the outstanding shares of such
Portfolio).
(b) This Agreement may be terminated by the Advisor at
any time without penalty upon giving the Fund sixty
(60) days' written notice (which notice may be waived
by the Fund) and may be terminated by the Fund
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<PAGE> 83
at any time without penalty upon giving the Advisor
sixty (60) days' written notice (which notice may be
waived by the Advisor), provided that such
termination by the Fund shall be directed or approved
by the vote of a majority of all of its Directors in
office at the time or by the vote of the holders of a
majority (as defined in the Act) of the voting
securities of the Fund, or with respect to any
Portfolio by the vote of a majority of the
outstanding shares of such Portfolio. This Agreement
shall automatically terminate in the event of its
assignment (as defined in the Act).
6
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
By: /s/ Robert J. Tuszynski
------------------------------
Robert J. Tuszynski, President
B.C. ZIEGLER AND COMPANY
By: /s/ Peter D. Ziegler
-------------------------------
Peter D. Ziegler, President and
Chief Executive Officer
7
<PAGE> 85
EXHIBIT A
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
INVESTMENT ADVISORY AGREEMENT
1. MANAGED GROWTH PORTFOLIO.
a. Effective Date: Effective Date of Post-Effective Amendment No.
47 to Principal Preservation's Registration Statement on Form
N-1A (December 31, 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.
<PAGE> 86
EXHIBIT (D)(6)
SUB-ADVISORY AGREEMENT WITH GENEVA CAPITAL MANAGEMENT LTD.
<PAGE> 87
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"), B.C. ZIEGLER AND COMPANY, 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.
<PAGE> 88
(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 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
2
<PAGE> 89
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 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.
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<PAGE> 90
6. COMPENSATION OF THE SUB-ADVISER
The Adviser agrees to pay the Sub-Adviser, and the Sub-Adviser
agrees to accept as full compensation for all services
rendered by the Sub-Adviser as such, a management fee as
specified on Exhibit A.
7. DURATION AND TERMINATION
(a) This Agreement shall go into effect 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.
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<PAGE> 91
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 B.C. ZIEGLER AND COMPANY
PORTFOLIOS, INC.
/s/ Robert J. Tuszynski /s/ Peter D. Ziegler
By: ------------------------------ By: -------------------------------------
Robert J. Tuszynski, President Peter D. Ziegler, President and Chief
Executive Officer
GENEVA CAPITAL MANAGEMENT LTD.
By: /s/ Amy S. Croen
------------------------
Its: Executive Vice President
5
<PAGE> 92
EXHIBIT A
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
GENEVA CAPITAL MANAGEMENT LTD.
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> 93
EXHIBIT (J)(1)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 94
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
/s/ Arthur Andersen LLP
Milwaukee, Wisconsin
December 30, 1998
<PAGE> 95
EXHIBIT (J)(2)
CONSENT OF LEGAL COUNSEL
<PAGE> 96
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
/s/ Quarles & Brady LLP
Milwaukee, Wisconsin
December 30, 1998
