SUPPLEMENT DATED SEPTEMBER 1, 1998
TO THE PROSPECTUS DATED MAY 1, 1998, AS REVISED
SEPTEMBER 1, 1998 OF
WEISS, PECK & GREER, L.L.C.
MUTUAL FUNDS
WPG Government Money Market Fund
WPG Tax Free Money Market Fund
WPG Intermediate Municipal Bond Fund
WPG Core Bond Fund
WPG Growth and Income Fund
WPG Tudor Fund
Weiss, Peck & Greer International Fund
WPG Growth Fund
WPG Quantitative Equity Fund
------------------------------------------------
Weiss, Peck & Greer, L.L.C. ("WPG"), the investment adviser to the
above-referenced funds (the "Funds"), has entered into an agreement pursuant to
which Robeco Groep N.V., a Dutch public limited liability company ("Robeco"),
will acquire all of the outstanding equity interests of WPG from its prior
owners (the "Acquisition"). In connection with the Acquisition, a majority of
the outstanding voting securities of each Fund approved a new investment
advisory agreement with WPG at a joint meeting of shareholders held on July 29,
1998. At the same meeting, a majority of the outstanding voting securities of
Weiss, Peck & Greer International Fund approved a new investment subadvisory
agreement with that Fund's subadviser, Hill Samuel Asset Management Limited.
Although the Acquisition is not expected to be consummated until September 9,
1998, the attached Prospectus describes the Acquisition as consummated.
Accordingly, the following changes are made to the Prospectus until the
Acquisition is consummated:
The following disclosure replaces the second paragraph of the section
titled "OVERVIEW" on page 9 of the Prospectus:
WPG is a privately held limited liability company with over 28 years'
experience as an investment adviser to individual and institutional
clients. WPG seeks to maintain a balance between being large enough to
offer a fully diversified range of investment alternatives and small
enough to focus on providing the quality investment advice and services
needed to achieve each client's investment objectives. WPG is a member
firm of the New York Stock Exchange and, together with its affiliates,
has approximately $16 billion under management.
<PAGE>
The following disclosure replaces the first paragraph of the section
titled "MANAGEMENT OF THE FUNDS" on page 24 of the Prospectus:
INVESTMENT ADVISER AND ADMINISTRATOR. As noted above, WPG, One New York
Plaza, New York, New York 10004, serves as the investment adviser to
each Fund. HSAM serves as subadviser to the International Fund pursuant
to a Subadvisory Agreement with the International Fund and WPG. HSAM is
a wholly-owned indirect subsidiary of Lloyds TSB Group plc, London,
England.
<PAGE>
WEISS, PECK & GREER
MUTUAL FUNDS
PROSPECTUS
PROSPECTUS DATED MAY 1, 1998
AS REVISED SEPTEMBER 1, 1998
<PAGE>
WEISS, PECK & GREER, L.L.C.
MUTUAL FUNDS
NO-LOAD OPEN-END FUNDS
One New York Plaza
New York, New York 10004
1-800-223-3332
WPG GOVERNMENT MONEY MARKET FUND
WPG TAX FREE MONEY MARKET FUND
WPG INTERMEDIATE MUNICIPAL BOND FUND
WPG CORE BOND FUND
WPG GROWTH AND INCOME FUND
WPG TUDOR FUND
WEISS, PECK & GREER INTERNATIONAL FUND
WPG GROWTH FUND
WPG QUANTITATIVE EQUITY FUND
ALTHOUGH THE GOVERNMENT MONEY MARKET FUND AND THE TAX FREE MONEY MARKET
FUND ARE MONEY MARKET FUNDS AND ATTEMPT TO MAINTAIN A STABLE $1.00 NET ASSET
VALUE PER SHARE, INVESTMENT IN THESE FUNDS IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT EITHER FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information that a prospective investor
should know before investing in any of the Funds. It should be retained for
future reference. A combined Statement of Additional Information ("SAI") about
each Fund, dated May 1, 1998, as revised September 1, 1998, has been filed with
the Securities and Exchange Commission ("SEC") and is available, without charge,
by writing to the Funds at the address for the Funds shown above. The SAI is
incorporated by reference into this Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI and other information regarding the
Funds.
All of the Funds are open-end management investment companies registered under
the Investment Company Act of 1940, as amended ("1940 Act"). All the Funds are
no-load mutual funds, which means you pay no sales commission or other
transaction charges when you purchase or redeem shares of the Funds.
PROSPECTUS DATED MAY 1, 1998, AS REVISED SEPTEMBER 1, 1998
<PAGE>
WPG GOVERNMENT MONEY MARKET FUND (THE "GOVERNMENT MONEY MARKET FUND") is a money
market fund that seeks to provide high current income, consistent with
preservation of capital and liquidity, through investment primarily in a
portfolio of short-term securities issued or guaranteed by the U.S. Government,
its agencies, or instrumentalities and repurchase agreements collateralized by
such securities.
WPG TAX FREE MONEY MARKET FUND (THE "TAX FREE MONEY MARKET FUND") seeks to
provide high current income exempt from regular federal income tax, consistent
with preservation of capital and liquidity, through investment primarily in high
quality, tax-exempt money market instruments.
WPG INTERMEDIATE MUNICIPAL BOND FUND (THE "MUNICIPAL BOND FUND") seeks to
provide a high level of
current income exempt from regular federal income tax, consistent with relative
stability of principal, through investment primarily in a diversified portfolio
of investment grade municipal securities.
WPG CORE BOND FUND (THE "CORE BOND FUND") seeks to provide high current income
consistent with capital preservation, through investment primarily in investment
grade bonds of all types that are quoted or denominated in U.S.
dollars.
WPG GROWTH AND INCOME FUND (THE "GROWTH AND INCOME FUND") seeks long-term growth
of capital, a reasonable level of current income, and an increase in future
income through investment primarily in a diversified portfolio of
income-producing equity securities that have prospects for growth of capital and
increasing dividends.
WPG TUDOR FUND (THE "TUDOR FUND") seeks capital appreciation through investment
primarily in a diversified portfolio of common stocks, securities convertible
into common stocks of small and medium capitalization companies, and "special
situations."
WEISS, PECK & GREER INTERNATIONAL FUND (THE "INTERNATIONAL FUND") seeks
long-term capital growth through investment primarily in a diversified portfolio
of non-U.S. equity securities. Current income is a secondary objective.
WPG GROWTH FUND (THE "GROWTH FUND") seeks maximum capital appreciation through a
diversified portfolio that emphasizes investments in common stocks and
securities convertible into common stocks of small and medium capitalization
companies with superior growth potential and "special situations."
WPG QUANTITATIVE EQUITY FUND (THE "QUANTITATIVE EQUITY FUND") seeks to provide
investment results that exceed the performance of publicly traded common stocks
in the aggregate, as represented by the Capitalization Weighted Standard &
Poor's 500 Composite Stock Price Index.
- 2 -
<PAGE>
TABLE OF CONTENTS
PAGE
----
Expense Information............................................. 4
Financial Highlights............................................ 5
Overview........................................................ 9
Description of the Funds........................................ 9
How to Purchase Shares.......................................... 17
Shareholder Services............................................ 19
How Each Fund's Net Asset Value is Determined................... 22
How to Redeem Shares............................................ 23
Management of the Funds......................................... 24
Dividends, Distributions and Taxes.............................. 29
Portfolio Brokerage............................................. 31
Organization and Capitalization................................. 32
Risk Considerations and Other Investment Practices and
Policies of the Funds........................................ 33
The Funds' Investment Performance............................... 44
- 3 -
<PAGE>
EXPENSE INFORMATION
The Table and Examples below are included in this Prospectus to assist your
understanding of all the fees and expenses to which an investment in each Fund
would be subject. Shown below are all fees and expenses incurred by each Fund
during its most recently completed fiscal year as revised to reflect any current
expense limitations. Actual fees and expenses for the Funds in the future may be
greater or less than those shown below. A more complete description of all fees
and expenses for the Funds is included in this Prospectus under "Management of
the Funds."
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
TAX
GOVERNMENT FREE GROWTH
MONEY MONEY MUNICIPAL CORE AND INTER- QUANTITATIVE
MARKET MARKET BOND BOND INCOME TUDOR NATIONAL GROWTH EQUITY
FUND FUND FUND FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales Load Imposed
on Purchase None None None None None None None None None
Sales Load Imposed
on Reinvested
Dividends None None None None None None None None None
Deferred Sales Load
Imposed on
Redemptions None None None None None None None None None
Redemption Fee (1) None None None None None None None None None
Exchange Fee None None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.50% 0.50% 0.19%(2) 0.24%(2) 0.75% 0.90% 0.50% 0.75% 0.75%
Rule 12b-1 Fees 0.00% 0.00% 0.00% 0.00%(3) 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.31% 0.24% 0.66%(2) 0.26%(2) 0.31% 0.34% 1.39% 0.37% 0.28%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses 0.81% 0.74% 0.85%(2) 0.50%(2) 1.06% 1.24% 1.89% 1.12% 1.03%
===== ===== ===== ======== ===== ===== ===== ===== =====
<FN>
- ------------------
(1) There are no charges imposed upon redemption, although the Transfer Agent
will charge a fee (currently $9.00) for transfers of redemption proceeds by
wire. For further information regarding wire fees, please call toll free
1-800-223-3332.
(2) After expense limitation. Weiss, Peck & Greer, L.L.C. ("WPG" or the
"Adviser") voluntarily agreed to limit certain other expenses. These
agreements are voluntary and temporary and may be revised or terminated by
WPG at any time although it has no current intention to do so. Absent any
expense limitation, Management Fees, Other Expenses and Total Fund
Operating Expense ratios for the fiscal year ended December 31, 1997 would
have been 0.46%, 0.69% and 1.15%, respectively, for the Municipal Bond Fund
and 0.60%, 0.26% and 0.86%, respectively, for the Core Bond Fund. See
"Management of the Funds."
(3) Rule 12b-1 fees paid by Core Bond Fund represented less than 0.01% of
average daily net assets for the fiscal year ended December 31, 1997.
</FN>
</TABLE>
- 4 -
<PAGE>
EXAMPLES: An investor in each Fund would pay the following expenses on a
hypothetical $1,0001 investment, assuming (1) 5% annual return and (2)
redemption at the end of each future time period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Government Money Market $ 9 $26 $ 45 $100
Tax Free Money Market $ 8 $24 $ 41 $ 92
Municipal Bond $ 8 $27 $ 47 $105
Core Bond $ 9 $27 $ 48 $106
Growth and Income $11 $34 $ 58 $129
Tudor $13 $39 $ 68 $150
Growth $11 $36 $ 62 $136
International $19 $59 $ 102 $220
Quantitative Equity $11 $33 $ 57 $126
<FN>
- ------------------
(1) Unless waived by the Funds, the minimum initial investment required for
each Fund is $2,500, except for the Core Bond Fund and the Growth Fund whose
minimum initial investments are $25,000 and $250,000, respectively.
</FN>
</TABLE>
These examples should not be considered a representation of past or future
expenses for any Fund. Actual expenses may be greater or less than those shown
above. Similarly, the annual rate of return assumed in the examples is not an
indication or guarantee of future investment performance. The payment of Rule
12b- 1 fees by Core Bond Fund and International Fund may result in a long-term
shareholder paying more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
FINANCIAL HIGHLIGHTS
The following tables represent a condensed financial history for each Fund
and use each Fund's taxable year (which ends on December 31 except for certain
periods for the International Fund as noted below). The tables express the
information for each of the Funds in terms of a single share for the Fund
outstanding throughout each period. This condensed financial information has
been derived from the Funds' financial statements, which have been audited by
the Funds' independent auditors, KPMG Peat Marwick LLP, independent certified
public accountants, whose unqualified reports thereon are incorporated by
reference into the Funds' Statement of Additional Information. The Funds' 1997
Annual Report includes more information about the Funds' performance and is
available free of charge by writing to the Funds at the address shown on the
cover of this Prospectus.
- 5 -
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
$ PER SHARE
- -----------------------------------------------------------------------------------------------------------------------------
Net Total
Realized Income/(Loss)
Net and From Dividends Distri- Net Net
Asset Net Unrealized invest- From butions Tax Asset Assets at
Value at Invest- Gains or ment Net From Return Total Contri- Value at End of
Beginning ment (Losses) on Opera- Investment Capital of Distri- butions to End of Total Period
of Period Income Securities tions Income Gains Capital butions Capital Period Return ($000's)
--------- ------ ---------- ----- ------ ----- ------- ------- ------- ------ ------ --------
GOVERNMENT MONEY MARKET
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $1.00 $0.05 $0.00 $0.05 $(0.05) $0.00 $0.00 $(0.05) $0.00 $1.00 4.76% $207,817
1996 1.00 0.04 0.00 0.04 (0.04) 0.00 0.00 (0.04) 0.00 1.00 4.56 152,786
1995 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 (0.05) 0.00 1.00 5.16 131,210
1994 1.00 0.04 (0.01) 0.03 (0.04) 0.00 0.00 (0.04) 0.01 1.00 3.58 188,197
1993 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 (0.03) 0.00 1.00 2.80 140,926
1992 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 (0.03) 0.00 1.00 2.95 103,109
1991 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 (0.05) 0.00 1.00 5.33 94,553
1990 1.00 0.07 0.00 0.07 (0.07) 0.00 0.00 (0.07) 0.00 1.00 7.74 129,076
1989 1.00 0.09 0.00 0.09 (0.09) 0.00 0.00 (0.09) 0.00 1.00 8.84 112,626
1988(a) 1.00 0.06 0.00 0.06 (0.06) 0.00 0.00 (0.06) 0.00 1.00 6.56 80,230
TAX FREE MONEY MARKET
1997 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 (0.03) 0.00 1.00 3.23 130,083
1996 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 (0.03) 0.00 1.00 3.14 117,423
1995 1.00 0.04 0.00 0.04 (0.04) 0.00 0.00 (0.04) 0.00 1.00 3.63 121,754
1994 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 (0.03) 0.00 1.00 2.61 152,501
1993 1.00 0.02 0.00 0.02 (0.02) 0.00 0.00 (0.02) 0.00 1.00 2.32 136,889
1992 1.00 0.03 0.00 0.03 (0.03) 0.00 0.00 (0.03) 0.00 1.00 2.95 125,622
1991 1.00 0.05 0.00 0.05 (0.05) 0.00 0.00 (0.05) 0.00 1.00 4.63 106,512
1990 1.00 0.06 0.00 0.06 (0.06) 0.00 0.00 (0.06) 0.00 1.00 5.70 96,912
1989 1.00 0.06 0.00 0.06 (0.06) 0.00 0.00 (0.06) 0.00 1.00 6.23 74,620
1988(a) 1.00 0.04 0.00 0.04 (0.04) 0.00 0.00 (0.04) 0.00 1.00 4.17 17,053
INTERMEDIATE MUNICIPAL BOND
1997 10.14 0.47 0.31 0.78 (0.47) 0.00 0.00 (0.47) 0.00 10.45 7.85 23,508
1996 10.20 0.48 (0.06) 0.42 (0.48) 0.00 0.00 (0.48) 0.00 10.14 4.20 15,214
1995 9.51 0.44 0.69 1.13 (0.44) 0.00 0.00 (0.44) 0.00 10.20 12.05 12,730
1994 10.15 0.41 (0.64) (0.23) (0.41) 0.00 0.00 (0.41) 0.00 9.51 (2.29) 14,005
1993(c) 10.00 0.19 0.15 0.34 (0.19) 0.00 0.00 (0.19) 0.00 10.15 3.48 12,334
CORE BOND
1997 9.19 0.51 0.15 0.66 (0.51) 0.00 0.00 (0.51) 0.00 9.34 7.37 108,443
1996 9.38 0.64 (0.29) 0.35 (0.54) 0.00 0.00 (0.54) 0.00 9.19 3.85 120,804
1995 8.83 0.60 0.54 1.14 (0.59) 0.00 0.00 (0.59) 0.00 9.38 13.25 171,578
1994 10.37 0.68 (1.56) (0.88) (0.64) (0.02) 0.00 (0.66) 0.00 8.83 (8.70) 216,364
1993 10.38 0.79 0.14 0.93 (0.79) (0.15) 0.00 (0.94) 0.00 10.37 8.96 334,904
1992 10.54 0.70 0.01 0.71 (0.70) (0.17) 0.00 (0.87) 0.00 10.38 7.90 263,407
1991 10.22 0.80 0.57 1.37 (0.80) (0.25) 0.00 (1.05) 0.00 10.54 13.96 193,616
1990 10.18 0.82 0.04 0.86 (0.82) 0.00 0.00 (0.82) 0.00 10.22 8.95 130,897
1989 9.74 0.86 0.44 1.30 (0.86) 0.00 0.00 (0.86) 0.00 10.18 13.94 90,778
1988 9.77 0.78 (0.03) 0.75 (0.78) 0.00 0.00 (0.78) 0.00 9.74 7.90 79,254
GROWTH AND INCOME
1997 29.32 0.24 10.30 10.54 (0.24) (4.51) 0.00 (4.75) 0.00 35.11 36.27 117,146
1996 26.02 0.24 6.11 6.35 (0.39) (2.66) 0.00 (3.05) 0.00 29.32 24.42 82,937
1995 21.36 0.51 6.44 6.95 (0.53) (1.76) 0.00 (2.29) 0.00 26.02 32.73 67,357
1994 23.34 0.56 (1.83) (1.27) (0.62) (0.09) 0.00 (0.71) 0.00 21.36 (5.47) 61,045
1993 23.89 0.56 1.71 2.27 (0.89) (1.93) 0.00 (2.82) 0.00 23.34 9.53 62,714
1992 24.07 0.45 2.82 3.27 (0.43) (3.02) 0.00 (3.45) 0.00 23.89 13.80 49,304
1991 18.53 0.29 7.23 7.52 (0.31) (1.67) 0.00 (1.98) 0.00 24.07 40.72 41,538
1990 22.05 0.26 (2.51) (2.25) (0.33) (0.94) 0.00 (1.27) 0.00 18.53 (10.38) 29,948
1989 19.95 0.25 5.25 5.50 (0.24) (3.16) 0.00 (3.40) 0.00 22.05 27.64 33,410
1988 18.73 0.17 1.70 1.87 (0.17) (0.48) 0.00 (0.65) 0.00 19.95 8.89 34,115
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Ratio of Ratio of Average
Expenses Net Income Portfolio Commission
To Average To Average Turnover Per
Net Assets Net Assets Rate Share
---------- ---------- ---- -----
GOVERNMENT MONEY MARKET
<S> <C> <C> <C> <C>
1997 0.81% 4.68% N/A N/A
1996 0.83 4.48 N/A N/A
1995 0.82 5.06 N/A N/A
1994 0.80 3.54 N/A N/A
1993 0.81 2.75 N/A N/A
1992 0.92 2.92 N/A N/A
1991 0.88 5.35 N/A N/A
1990 0.75 7.47 N/A N/A
1989 0.76 8.46 N/A N/A
1988(a) 0.82(b) 6.78(b) N/A N/A
TAX FREE MONEY MARKET
1997 0.74 3.17 N/A N/A
1996 0.72 3.10 N/A N/A
1995 0.76 3.56 N/A N/A
1994 0.73 2.59 N/A N/A
1993 0.74 2.29 N/A N/A
1992 0.76 2.92 N/A N/A
1991 0.78 4.52 N/A N/A
1990 0.75 5.56 N/A N/A
1989 0.68 6.20 N/A N/A
1988(a) 1.01(b) 4.44(b) N/A N/A
INTERMEDIATE MUNICIPAL BOND
1997 0.85 4.55 39.8% N/A
1996 0.85 4.72 44.4 N/A
1995 0.85 4.38 51.2 N/A
1994 0.85 4.20 30.9 N/A
1993(c) 0.84(b) 3.86(b) 17.0(b) N/A
CORE BOND
1997 0.86* 5.56 330.3 N/A
1996 0.81 5.87 333.1 N/A
1995 0.82 6.52 375.0 N/A
1994 0.80 7.18 115.9 N/A
1993 0.81 7.43 97.5 N/A
1992 0.78 7.36 137.2 N/A
1991 0.81 7.64 189.8 N/A
1990 0.75 8.13 183.6 N/A
1989 0.76 8.64 158.7 N/A
1988 0.82 7.97 130.3 N/A
GROWTH AND INCOME
1997 1.06 0.88 69.6 $0.062
1996 1.15 1.50 75.8 0.062
1995 1.22 2.10 79.4 N/A
1994 1.23 2.49 71.9 N/A
1993 1.26 2.15 86.4 N/A
1992 1.34 1.79 75.5 N/A
1991 1.48 1.28 88.6 N/A
1990 1.56 1.21 91.0 N/A
1989 1.41 1.04 66.6 N/A
1988 1.53 0.82 42.2 N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
$ PER SHARE
- -----------------------------------------------------------------------------------------------------------------------------
Net Total
Realized Income/(Loss)
Net and From Dividends Distri- Net Net
Asset Net Unrealized invest- From butions Tax Asset Assets at
Value at Invest- Gains or ment Net From Return Total Contri- Value at End of
Beginning ment (Losses) on Opera- Investment Capital of Distri- butions to End of Total Period
of Period Income Securities tions Income Gains Capital butions Capital Period Return ($000's)
--------- ------ ---------- ----- ------ ----- ------- ------- ------- ------ ------ --------
TUDOR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $23.28 $0.06 $2.46 $2.52 $0.00 $(3.90) $0.00 $(3.90) $0.00 $21.90 11.11% $166,459
1996 22.95 (0.14) 4.41 4.27 0.00 (3.94) 0.00 (3.94) 0.00 23.28 18.82 181,370
1995 19.34 (0.10) 8.03 7.93 0.00 (4.32) 0.00 (4.32) 0.00 22.95 41.18 165,534
1994 23.40 (0.13) (2.14) (2.27) 0.00 (1.79) 0.00 (1.79) 0.00 19.34 (9.81) 144,207
1993 24.85 (0.22) 3.51 3.29 0.00 (4.74) 0.00 (4.74) 0.00 23.40 13.38 242,067
1992 24.76 (0.16) 1.40 1.24 0.00 (1.15) 0.00 (1.15) 0.00 24.85 5.13 273,394
1991 17.85 (0.02) 8.14 8.12 (0.23) (0.98) 0.00 (1.21) 0.00 24.76 45.84 263,703
1990 22.21 0.21 (1.32) (1.11) (0.21) (3.04) 0.00 (3.25) 0.00 17.85 (5.16) 162,202
1989 20.90 0.18 5.07 5.25 (0.19) (3.75) 0.00 (3.94) 0.00 22.21 25.05 156,551
1988 18.82 0.04 2.82 2.86 (0.03) (0.75) 0.00 (0.78) 0.00 20.90 15.11 157,293
INTERNATIONAL
1997 10.29 0.01 0.29 0.30 (0.01) (0.43) 0.00 (0.44) 0.00 10.15 2.89 8,555
1996 11.01 (0.07) 0.57 0.50 (0.04) (1.18) 0.00 (1.22) 0.00 10.29 4.64 13,161
1995 10.93 0.04 1.15 1.19 (0.15) (0.96) 0.00 (1.11) 0.00 11.01 10.92 14,194
1994 11.72 0.01 (0.75) (0.74) 0.00 (0.05) 0.00 (0.05) 0.00 10.93 (6.32) 17,102
1993 8.54 (0.02) 3.20 3.18 0.00 0.00 0.00 0.00 0.00 11.72 37.24 15,996
1992 9.04 0.07 (0.57) (0.50) 0.00 0.00 0.00 0.00 0.00 8.54 (5.53) 8,311
1991 8.99 0.06 0.02 0.08 0.00 0.00 (0.03) (0.03) 0.00 9.04 0.90 9,443
1990(g) 9.53 0.02 (0.40) (0.38) (0.06) (0.10) 0.00 (0.16) 0.00 8.99 (4.04) 11,751
1990(f) 10.40 0.05 (0.61) (0.56) (0.03) (0.28) 0.00 (0.31) 0.00 9.53 (5.48) 14,064
1989(e) 10.00 (0.01) 0.41 0.40 0.00 0.00 0.00 0.00 0.00 10.40 4.00 11,288
GROWTH
1997 118.47 0.54 10.73 11.27 0.00 (16.00) 0.00 (16.00) 0.00 113.74 9.67 46,557
1996 125.17 (10.76) 22.90 22.14 0.00 (28.84) 0.00 (28.84) 0.00 118.47 17.99 62,839
1995 94.45 (0.22) 37.70 37.48 0.00 (6.76) 0.00 (6.76) 0.00 125.17 39.72 60,453
1994 116.62 (0.29) (15.96) (16.25) 0.00 (5.92) 0.00 (5.92) 0.00 94.45 (14.03) 87,942
1993 126.68 (0.78) 19.42 18.64 0.00 (28.70) 0.00 (28.70) 0.00 116.62 14.87 169,302
1992 132.06 (0.47) 8.24 7.77 (0.02) (13.13) 0.00 (13.15) 0.00 126.68 6.27 208,384
1991 95.28 0.00 54.03 54.03 0.00 (17.25) 0.00 (17.25) 0.00 132.06 56.80 160,586
1990 111.13 0.61 (14.76) (14.15) (0.68) (1.02) 0.00 (1.70) 0.00 95.28 (12.80) 117,847
1989 93.79 0.13 23.25 23.38 (0.59) (5.45) 0.00 (6.04) 0.00 111.13 24.95 130,148
1988 83.91 0.16 9.83 9.99 (0.10) (0.01) 0.00 (0.11) 0.00 93.79 11.50 117,894
QUANTITATIVE EQUITY
1997 5.89 0.08 1.42 1.50 (0.08) (1.47) 0.00 (1.55) 0.00 5.84 25.47 96,055
1996 6.85 0.16 1.13 1.29 (0.15) (2.10) 0.00 (2.25) 0.00 5.89 18.51 102,450
1995 5.44 0.13 1.70 1.83 (0.12) (0.30) 0.00 (0.42) 0.00 6.85 33.37 133,201
1994 5.58 0.13 (0.11) 0.02 (0.11) (0.05) 0.00 (0.16) 0.00 5.44 0.34 73,484
1993 5.00 0.08 0.62 0.70 (0.08) (0.04) 0.00 (0.12) 0.00 5.58 13.90 46,921
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Ratio of Ratio of Average
Expenses Net Income Portfolio Commission
To Average To Average Turnover Per
Net Assets Net Assets Rate Share
---------- ---------- ---- -----
TUDOR
<S> <C> <C> <C> <C>
1997 1.24% (0.44%) 106.3% $ 0.060
1996 1.25 (0.57) 105.4 0.058
1995 1.30 (0.47) 123.1 N/A
1994 1.28 (0.62) 109.1 N/A
1993 1.25 (0.76) 118.2 N/A
1992 1.21 (0.71) 88.8 N/A
1991 1.17 (0.11) 89.8 N/A
1990 1.11 0.84 73.2 N/A
1989 1.10 0.76 93.9 N/A
1988 1.14 0.22 89.2 N/A
INTERNATIONAL
1997 1.89 0.02 55.1 $ 0.027
1996 1.71 0.31 85.2 0.019
1995 1.74 0.39 55.9 N/A
1994 1.95 0.12 69.8 N/A
1993 2.12 (0.13) 75.9 N/A
1992 2.28 0.71 96.8 N/A
1991 2.38 0.58 76.5 N/A
1990(g) 2.56(b) 0.99(b) 47.1(b) N/A
1990(f) 2.28 0.52 74.7 N/A
1989(e) 2.74(b) (0.17)(b) 38.9(b) N/A
GROWTH
1997 1.12 (0.12) 84.3 0.054
1996 1.08 (0.07) 122.4 0.064
1995 1.07 (0.21) 119.0 N/A
1994 0.95 (0.27) 99.3 N/A
1993 0.98 (0.54) 126.6 N/A
1992 0.95 (0.57) 84.3 N/A
1991 0.96 0.00 83.6 N/A
1990 1.05 0.55 81.6 N/A
1989 1.00 0.50 91.3 N/A
1988 1.05 0.16 90.3 N/A
QUANTITATIVE EQUITY
1997 1.03 1.03 77.7 $ 0.054
1996 0.95 1.52 60.8 0.034
1995 1.00 2.00 26.1 N/A
1994 1.14 2.36 46.8 N/A
1993 1.32 2.01 20.6 N/A
<FN>
* Effective January 1, 1998 WPG has voluntarily agreed to limit the total
expenses of the Core Bond Fund to 0.50% of average daily net assets.
(a) From January 22, 1988 (commencement of operations) to December 31, 1988.
(b) Annualized
(c) The Fund commenced operations on July 1, 1993.
(e) From June 1, 1989 (commencement of operations) to October 31, 1989.
(f) From November 1, 1989 to October 31, 1990.
(g) Effective November 1, 1990 the International Fund changed its fiscal year
end from October 31 to December 31. The data presented are for the
resulting two month fiscal period ending December 31, 1990.
</FN>
</TABLE>
<PAGE>
The Adviser agreed to limit other operating expenses and not to impose its full
fee for certain periods. Had the Adviser not so agreed, and had the Funds not
received a custody fee earnings credit, the total return would have been lower
and the ratio of operating expenses to average net assets and the ratio of net
income to average net assets would have been:
RATIO OF
OPERATING NET
EXPENSES INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
---------- ----------
GOVERNMENT MONEY MARKET
1988 0.84%A 6.75%A
TAX FREE MONEY MARKET
1989 0.83% 6.05%
1988 1.28%A 4.17%A
INTERMEDIATE MUNICIPAL BOND
1997 1.15% 4.25%
1996 1.01% 4.56%
1995 0.97% 4.25%
1994 1.45% 3.60%
1993** 2.00%A 2.70%A
GROWTH AND INCOME
1988 1.56% (0.79%)
GROWTH
1995 1.08% (0.21%)
TUDOR
1990 1.13% 0.82%
1988 1.17% 0.19%
INTERNATIONAL
1997 1.92% (0.01%)
1996 1.76% 0.26%
1995 1.76% 0.39%
1994 2.35% (0.28%)
1993 2.89% (0.64%)
1992 3.23% (0.24%)
1991 3.02% (0.06%)
1990+ 3.22% A 0.33%)A
1990++ 3.05% (0.25%)
1989* 3.74% A (1.17%)A
QUANTITATIVE EQUITY
1993 1.41% 1.92%
For the Tudor, Growth and Income, Quantitative Equity, Core Bond, Intermediate
Municipal Bond, Government Money Market and Tax Free Money Market Funds the
custody fee earnings credit had an effect of less than 0.01% per share on the
above ratios.
Notes:
+ Two month period ended December 31, 1990
++ For the year ended October 31, 1990
* From June 1, 1989 (commencement of operations) to December 31, 1989
** From July 1, 1993 (commencement of operations) to December 31, 1993
A Annualized
- 8 -
<PAGE>
OVERVIEW
Weiss, Peck & Greer, L.L.C. ("WPG" or the "Adviser") serves as investment
adviser to the Funds.
WPG is an indirect wholly-owned subsidiary of Robeco Groep N.V., a Dutch
public limited liability company ("Robeco"). Founded in 1929, Robeco is one of
the world's oldest asset management organizations. As of the date of this
Prospectus, Robeco had approximately $67 billion in assets under management,
including $16 billion managed directly by WPG. WPG, which has over 28 years
experience as an investment adviser to institutional and individual clients, is
a member firm of the New York Stock Exchange.
DESCRIPTION OF THE FUNDS
GOVERNMENT MONEY MARKET FUND INVESTMENT OBJECTIVE. The Government Money Market
Fund is a money market fund that seeks to provide high current income,
consistent with preservation of capital and liquidity, through investment
primarily in a diversified portfolio of short-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and repur-
chase agreements collateralized by such securities.
INVESTMENT PROGRAM. To seek to achieve its objective, the Government Money
Market Fund invests, under normal circumstances, at least 65% of its total
assets in short-term obligations of the U.S. Government, its agencies (such as
the Government National Mortgage Association) and instrumentalities (such as
the Federal National Mortgage Association). See "U.S. Government Securities" in
this Prospectus for a more complete description of these securities. All of the
Fund's investments consist of U.S. dollar-denominated money market instruments
that present minimal credit risks and that at the time of acquisition are
eligible securities. Eligible securities are securities rated in one of the two
highest rating categories for short-term debt obligations by any two nationally
recognized statistical rating organizations ("NRSROs") or by one NRSRO if only
one has rated the securities ("Requisite NRSROs") or, if unrated, are determined
to be of equivalent investment quality. The Fund invests at least 95% of its
total assets in eligible securities that are rated in the highest rating
category for short-term debt obligations by the Requisite NRSROs or unrated
securities of equivalent investment quality.
In addition, the Fund may invest up to 35% of its total assets in other
securities, including the following types of eligible money market instruments:
(1) Short-term obligations, including certificates of deposit, loan
participations, bankers' acceptances and time deposits of banks and savings
and loan associations whose deposits are federally insured and that have
total assets in excess of $1 billion (except that obligations of smaller
institutions may be held in amounts not exceeding federal insurance
coverage);
(2) Short-term corporate obligations, including notes and bonds with remaining
actual or effective maturities of 13 months or less;
(3) Commercial paper (unsecured promissory notes having maturities of nine
months or less) issued by corporations and finance companies;
(4) Repurchase agreements;
(5) U.S. dollar-denominated obligations of foreign issuers. Up to 20% of the
Fund's assets may be invested in obligations of foreign branches of U.S.
banks (Eurodollar obligations) and U.S. branches of foreign banks (Yankee
dollar obligations), if in the opinion of WPG such obligations are of
comparable quality to obligations of domestic banks the Fund may purchase;
and
(6) Privately issued obligations collateralized by a portfolio of U.S.
Government securities or by a portfolio of privately issued asset-backed
securities.
Certain of these money market securities may have adjustable or floating
rates of interest or periodic demand features. The Fund may lend its portfolio
securities and purchase securities on a when-issued or forward commitment basis.
For further information concerning the securities in which the Fund may invest
and the Fund's investment techniques, policies and risks, see "Risk
Considerations and Other Investment Practices and Policies of the Funds" in this
Prospectus.
-9-
<PAGE>
MATURITY. The Fund invests in eligible money market securities with remaining
actual or effective maturities of 13 months or less and maintains a
dollar-weighted average portfolio maturity of 90 days or less. These practices
are designed to minimize any price fluctuation in the Fund's portfolio
securities.
PRICE. The Fund seeks to maintain a constant net asset value of $1.00 per share.
The Fund uses the amortized cost method of valuing its portfolio securities.
PORTFOLIO MANAGEMENT. WPG actively manages the Fund, adjusting the composition
of investments and the average maturity of the Fund's portfolio according to
its outlook for short-term interest rates.
TAX FREE MONEY MARKET FUND
INVESTMENT OBJECTIVE. The Tax Free Money Market Fund seeks to provide high
current income exempt from regular federal income taxes, consistent with
preservation of capital and liquidity, through investment primarily in a
diversified portfolio of high quality money market instruments, the interest on
which is not included in gross in come for federal income tax purposes and may
be exempt from state income taxes in certain cases ("tax-exempt money market
instruments").
INVESTMENT PROGRAM. To seek to achieve its objective, the Tax Free Money Market
Fund invests, under normal market conditions, at least 80% of its net assets in
a diversified portfolio of tax-exempt money market instruments. All of the
Fund's investments consist of instruments that present minimal credit risks and
that at the time of acquisition are eligible securities. Eligible securities are
securities rated in one of the two highest rating categories by the Requisite
NRSROs or, if unrated, determined to be of equivalent investment quality. The
Tax Free Money Market Fund intends to satisfy certain federal tax requirements
so that the dividends it pays to its shareholders that are attributable to
inter- est income on such tax-exempt securities will be exempt from regular
federal income tax, but such dividends may be subject to state or local taxes.
The eligible tax-exempt money market securities in which the Fund may invest
include:
(1) Short-term municipal debt obligations issued by or on behalf of states,
territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities.
Such municipal debt securities include: (a) municipal notes such as tax
anticipation notes, revenue anticipation notes, bond anticipation notes and
construction loan notes, and (b) short-term municipal bonds such as (i)
general obligation bonds, which are secured by the issuer's pledge of its
faith, credit and taxing power for payment of principal and interest, (ii)
revenue bonds, which are paid from the revenues of a particular facility, a
specific tax or other sources, and (iii) pre-refunded tax-exempt bonds and
escrowed tax-exempt bonds;
(2) Tax-exempt commercial paper; and
(3) Variable or floating rate tax-exempt instruments.
Although it has no current intention of doing so, the Tax Free Money Market
Fund may, under normal market circumstances, invest up to 20% of its net assets
in obligations the interest on which is subject to regular federal income tax.
To the extent the Fund invests in these securities, a portion of the income the
Fund receives and distributes to share holders would be subject to regular
federal, as well as state and local, income tax. The Fund's distributions from
its tax-exempt interest income may also be subject to alternative minimum tax
and/or state and local income taxes. See "Dividends, Distributions and Taxes"
for additional information. Such taxable short-term obligations will be of the
same type as are permissible investments for the Government Money Market Fund.
The Fund may also enter into repurchase agreements, purchase securities on a
when-issued or forward commitment basis and lend its portfolio securities. For
further information concerning the securities in which the Fund may invest and
the Fund's investment techniques, policies and risks, see "Risk Considerations
and Other Investment Practices and Policies of the Funds" in this Prospectus.
MATURITY. The Fund invests in eligible money
-10-
<PAGE>
market securities with remaining actual or effective maturities of 13 months or
less and maintains a dollar-weighted average portfolio maturity of 90 days or
less. These practices are designed to minimize any price fluctuation in the
Fund's portfolio securities.
PRICE. The Fund seeks to maintain a constant net asset value of $1.00 per share.
The Fund uses the amortized cost method of valuing its portfolio securities.
PORTFOLIO MANAGEMENT. WPG actively manages the Fund, adjusting the composition
of investments and the average maturity of the Fund's portfolio according to
its outlook for short-term interest rates.
MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE. The Municipal Bond Fund seeks to provide a high level of
current income exempt from regular federal income tax, consistent with relative
stability of principal, through investment primarily in a diversified portfolio
of investment grade municipal securities.
INVESTMENT PROGRAM. To seek to achieve its objective, the Municipal Bond Fund
invests primarily in investment grade municipal securities. Municipal securities
include bonds, notes and other instruments issued by or on behalf of the
states, territories and possessions of the U.S. (including the District of
Columbia) and their political subdivisions, agencies and municipalities. These
securities may be issued in a number of forms, including general obligation and
revenue bonds, tax exempt commercial paper, variable and floating rate
instruments (including variable rate demand obligations), auction rate
securities, tender option bonds, zero coupon and capital appreciation bonds, and
municipal leases and participations therein, pre-refunded tax-exempt and
escrowed tax-exempt bonds. The Fund may also invest in other types of municipal
securities that currently exist or which may be developed in the future, the
interest on which is, or will be, in the opinion of counsel (when available)
excluded from gross income for federal income tax purposes, i.e., exempt from
regular federal income tax; provided that investing in such securities is
otherwise consistent with the Fund's investment objective and policies. See
"Municipal Securities" in this Prospectus for a more complete description of
these securities and their risks.
The average dollar-weighted effective maturity of the Fund's portfolio will
generally range between four and ten years. When, in the opinion of WPG, market
conditions warrant, the Fund's average effective portfolio maturity may be
shorter than four years. As a matter of fundamental policy, the Municipal Bond
Fund invests, under normal circumstances, at least 80% of its net assets in
securities whose interest income is exempt from regular federal income tax. See
"Dividends, Distributions and Taxes."
As a temporary defensive measure during times of adverse market conditions,
the Fund may invest up to 50% of its assets in (a) corporate commercial paper
and other short-term commercial obligations rated Prime-1 or MIG by Moody's
Investors Service, Inc. ("Moody's") or A-1 or AAA by Standard & Poors Ratings
Group ("S&P"); (b) obligations of banks (including certificates of deposit,
bankers' acceptances and repurchase agreements) with $1 billion or more of
assets; (c) U.S. Government securities; and (d) other taxable investment grade
securities. Distributions from the income earned on those investments would be
taxable to shareholders.
QUALITY OF INVESTMENTS. The Municipal Bond Fund's investments in municipal
securities are limited to securities of "investment grade" quality, at the time
of investment, as rated by any NRSRO or, if not rated, judged to be of
comparable credit quality by WPG. Investment grade municipal securities eligible
for purchase by the Fund include (i) municipal bonds rated BBB or higher by S&P
or Baa or higher by Moody's, (ii) municipal notes (including variable rate
demand obligations) rated SP-2/A-2 or higher by S&P or MIG-2/VMIG-2 or higher by
Moody's and (iii) tax-exempt commercial paper rated A-2 or higher by S&P or
Prime-2 or higher by Moody's. Comparable ratings by other NRSROs may be used. If
a security is rated differently by two or more NRSROs, WPG uses the highest
rating to determine the securities rating category.
Obligations in the lowest investment grade (I.E., BBB or Baa), referred to
as "medium grade"
-11-
<PAGE>
obligations, have speculative characteristics, and changes in economic
conditions and other factors are more likely to lead to weakened capacity to
make interest payments and repay principal on these obligations than is the case
for higher rated securities. In the event that a municipal security purchased by
the Fund is subsequently downgraded below investment grade, WPG will consider
such event in its determination of whether the Fund should continue to hold the
security. However, at no time may the Fund have more than 5% of its net assets
invested in securities rated below investment grade as a result of such
downgrades.
To seek to enhance the liquidity, stability or quality of a municipal
obligation, the Fund may acquire the right to sell the security to another party
for a guaranteed price and term. These rights are commonly referred to as puts,
demand features or standby commitments. In addition, the Municipal Bond Fund may
lend portfolio securities, enter into repurchase agreements, purchase securities
on a forward commitment or when-issued basis and invest in money market funds
which invest in municipal securities.
There are market risks inherent in all investments in securities, and the
value of the Fund's investments and, consequently, of an investment in the Fund
will fluctuate over time. Generally, the value of the Fund's investments varies
inversely with changes in interest rates. For example, as interest rates rise,
the value of the Fund's investments will tend to decline and, as interest rates
fall, the value of the Fund's investments will tend to increase. For further
information concerning the securities in which the Fund may invest and the
Fund's investment techniques, policies and risks, see "Risk Considerations and
Other Investment Practices and Policies of the Funds" in this Prospectus.
CORE BOND FUND
INVESTMENT OBJECTIVE. The Core Bond Fund seeks to provide high current income,
consistent with capital preservation.
INVESTMENT PROGRAM. To seek to achieve its objective, the Core Bond Fund invests
under normal market conditions substantially all, and at least 80%, of its total
assets in bonds. Bonds include debt obligations of all types, such as: notes,
bills, bonds, commercial paper, mortgage-backed securities, asset-backed
securities, convertible securities, and money market instruments. These
securities may be issued by the U.S. Government, its agencies or
instrumentalities or by corporate issuers. The Fund will only invest in
securities that are denominated or quoted in U.S. dollars. The bonds in which
the Fund will invest may pay interest on a fixed, variable, floating, deferred,
contingent or in-kind basis.
WPG intends to allocate the Fund's investments among corporate securities,
U.S. Treasury securities, U.S. Government agency securities, mortgage-backed
securities and asset-backed securities in a manner similar to the allocations by
its benchmark index, the Lehman Brothers Aggregate Index, among those classes
of securities. As of December 31, 1997, the Lehman Brothers Aggregate Index
allocations (which change from time to time) were as follows: 43% -- U.S.
Treasury securities; 7% -- U.S. Government agency securities; 30% --
mortgage-backed securities; 19% -- corporate securities; and 1% -- asset-backed
securities. The Fund is not, however, an "index" fund and the Fund's investments
may vary significantly from such allocations when, in the WPG's opinion, the
potential return on a particular class or classes of securities outweighs the
potential return on the other classes of securities.
There are market risks inherent in all investments in securities, and the
value of the Core Bond Fund's investments and, consequently, of an investment
in the Fund will fluctuate over time. Generally, the value of the Fund's
investments varies inversely with changes in interest rates. For example, as
interest rates rise, the value of the Fund's investments will tend to decline
and, as interest rates fall, the value of the Fund's investments will tend to
increase. In addition, the potential for appreciation in the event of a decline
in interest rates may be limited or negated by increased principal payments
with respect to certain mortgage-backed securities in which the Fund may invest
(e.g.., obligations issued or guaranteed by the Government National Mortgage
Association ("Ginnie Mae")). Prepayment of high interest rate mortgage-backed
securities during times of declining interest rates will generally tend to lower
the return of the Fund, and may even result in losses to the Fund, if some
securities were acquired at a premium.
-12-
<PAGE>
To seek to enhance current income or reduce market interest rate risks, the
Fund may engage in a variety of strategies involving the use of options and
futures contracts. For example, the Fund may (i) purchase and sell call and put
options on securities and securities indices, (ii) purchase and sell interest
rate futures contracts and (iii) purchase and sell call and put options on
interest rate futures contracts. In addition, the Fund may lend portfolio
securities, enter into repurchase agreements, enter into mortgage dollar roll
transactions, purchase securities on a forward commitment or when-issued basis
and invest in other investment companies and in illiquid securities. For further
information concerning the securities in which the Fund may invest and the
Fund's investment techniques, policies and risks, see "Risk Considerations and
Other Investment Practices and Policies of the Funds" in this Prospectus.
QUALITY OF INVESTMENTS. The securities in which the Core Bond Fund invests will,
at the time of investment, be rated investment grade (i.e., at least Baa by
Moody's, BBB by S&P or comparable ratings of other NRSROs) or, if unrated, are
deter mined by WPG to be of comparable credit quality. If a security is rated
differently by two or more NRSROs, the Adviser uses the highest rating to
determine the security's rating category.
Obligations in the lowest investment grade (I.E., Baa or BBB), referred to
as "medium grade" obligations, have speculative characteristics, and changes in
economic conditions and other factors are more likely to lead to weakened
capacity to make interest payments and repay principal on these obligations than
is the case for higher rated investment grade securities. If a security is down
graded below investment grade, WPG will deter mine whether to retain that
security in the Fund's portfolio.
DURATION. Under normal market conditions, the average dollar-weighted duration
of the Core Bond Fund's portfolio will vary from three to seven years. Duration
of an individual portfolio security is a measure of the security's price
sensitivity taking into account expected cash flow and prepayments under a wide
range of interest rate scenarios.
GROWTH AND INCOME FUND
INVESTMENT OBJECTIVE. The Growth and Income Fund seeks long-term growth of
capital, a reason able level of current income and an increase in future income
through investment primarily in a diversified portfolio of income-producing
equity securities that have prospects for growth of capital and increasing
dividends.
INVESTMENT PROGRAM. To seek to achieve its objective, the Growth and Income Fund
invests, under normal circumstances, in common stocks and other equity-related
securities (including preferred stocks, securities convertible into or
exchangeable for common stocks, warrants and shares of real estate investment
trusts) that offer the prospect of capital appreciation and growth of income,
while paying current income. The common stocks and equity-related securities
selected by WPG will typically be those of companies believed by WPG either (i)
to possess better than average prospects for long-term growth of capital or (ii)
to be growing faster than the U.S. economy at the time of purchase. While WPG's
selection of equity securities emphasizes current income, the Fund may purchase
equity securities that do not pay current dividends but offer prospects for
growth of capital and future income.
Although the Growth and Income Fund will ordinarily invest in common stocks
and equity-related securities, the Fund may also (i) invest in other
securities, including corporate debt and U.S. Government securities (including
U.S. Treasury bonds and notes), asset-backed securities, and structured or
hybrid notes, (ii) write call options on securities and securities indices and
enter into closing purchase transactions on such options, (iii) invest in
securities of non-U.S. issuers and to the extent it so invests, engage in
forward foreign currency exchange transactions, (iv) invest in domestic and
U.S. dollar-denominated foreign money market investments (including repurchase
agreements and Eurodollar and Yankee Dollar obligations) and (v) invest in
securities of other investment companies.
The Fund may invest up to 35% of its total assets in debt obligations rated
as low as BB or B (or their equivalent) by any NRSRO or, if unrated, of
equivalent investment quality as determined by
-13-
<PAGE>
WPG. Such securities, commonly referred to as "junk bonds," are regarded as
predominantly speculative with respect to the issuer's capacity to make
interest payments and repay principal in accordance with the terms of the
obligation. The Fund may also lend its portfolio securities and purchase
securities on a forward commitment or when-issued basis. For temporary or
defensive purposes, the Growth and Income Fund may invest in money market
instruments and U.S. Government securities without limitation. For further
information concerning the securities in which the Fund may invest and the
Fund's investment techniques, policies and risks, see "Risk Considerations and
Other Investment Practices and Policies of the Funds" in this Prospectus.
TUDOR FUND
INVESTMENT OBJECTIVE. The Tudor Fund seeks capital appreciation through
investment in a diversified portfolio of common stocks, securities convertible
into common stocks and special situations. The Fund intends to focus its
investments in common stocks of small and medium capitalization companies with
market capitalizations of less than $2 billion.
INVESTMENT PROGRAM. To seek to achieve its investment objective, the Tudor Fund
invests, under normal circumstances, in common stocks or equity-related
securities (including preferred stocks, securities convertible into or
exchangeable for common stocks, shares of real estate investment trusts,
warrants and rights) of companies believed by WPG to offer the potential for
capital appreciation. In selecting securities for the Fund's portfolio, WPG's
primary focus is companies with prospects for sustainable above average growth
in earnings per share, revenues, cash flow, asset value and/or other appropriate
measures.
In addition, the Fund may invest in "special situations." Special
situations refer to unusual and possibly unique developments for a company which
may create a special opportunity for significant returns. Developments that may
be considered special situations include: significant technological improvements
or important discoveries; a reorganization, recapitalization, or other
significant security exchange or conversion; a merger, liquidation, or
distribution of cash, securities, or other assets; a breakup or workout of a
holding company; litigation which, if resolved favorably, would enhance the
value of the company's stock; a new or changed management; or material changes
in management policies. The Fund may also invest up to 5% of its total assets in
debt securities rated as low as B or its equivalent by any NRSRO or, if unrated,
of equivalent investment quality as deter mined by WPG.
Although the Tudor Fund will invest primarily in common stocks and
equity-related securities, the Fund may also utilize other investment practices
and invest in other securities, including: (i) purchasing and selling call or
put options on securities and stock indices, (ii) investing in securities of
non-U.S. issuers; and (iii) investing in domestic and U.S. dollar-denominated
foreign money market instruments. To a limited extent the Fund may also purchase
and sell futures contracts on securities and securities indices, purchase and
sell options on such futures contracts and engage in forward foreign currency
exchange contracts. The Fund may also lend its portfolio securities, enter into
repurchase agreements, invest in securities of other investment companies and
purchase securities on a forward commitment or when-issued basis. For temporary
or defensive purposes the Fund may invest in money market instruments without
limitation. For further information concerning the securities in which the Fund
may invest and the Fund's investment techniques, policies and risks, see "Risk
Considerations and Other Investment Practices and Policies of the Funds" in this
Prospectus.
Because the Fund selects portfolio securities on the basis of their
potential for capital appreciation, no consideration is given to possible
dividend or interest income and, therefore, the Fund may realize little, if any,
such income. The Fund is not intended as a complete investment program and is
not suitable for those investors whose objective is income or preservation of
capital.
INTERNATIONAL FUND
INVESTMENT OBJECTIVES. The International Fund seeks long-term capital growth
primarily through investment in a diversified portfolio of non-U.S. equity
securities. Current income is a secondary objective.
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INVESTMENT PROGRAM. To seek to achieve its investment objectives, the
International Fund invests, under normal circumstances, at least 65% of its
total assets in common stocks and equity-related securities (I.E., securities
convertible into or exchangeable for common stocks, preferred stocks, rights and
warrants) of issuers, wherever organized, which do business primarily outside
the U.S. and whose securities are traded primarily in non-U.S. markets. In
analyzing equity investments, WPG, or the Fund's subadviser, Hill Samuel Asset
Management Limited ("HSAM"), 10 Fleet Place, London, England, generally
consider the following factors, among others: the company's overall growth pros-
pects, strong competitive advantages, management strength, earnings growth,
government regulations which may favorably affect the company, and the company's
overall financial strength and capital resources. Investments in preferred stock
and convertible and fixed income securities will be selected on the basis of a
consistent record of payment of dividends or interest. Although the Fund invests
principally in securities of established larger capitalization companies, the
Fund may also purchase securities of medium and small capitalization companies
when, in the judgment of WPG or HSAM, such securities offer above-average
appreciation potential. The Fund generally invests in equity securities listed
on non-U.S. stock ex changes or in established non-U.S. over-the-counter
markets. The Fund may invest in equity securities of non-U.S. issuers through
the purchase of American Depository Receipts ("ADRs"), European Depository
Receipts ("EDRs"), Global Depository Receipts ("GDRs") and International
Depository Receipts ("IDRs"), or other similar securities representing
interests in or convertible into securities of foreign issuers.
The Fund intends to diversify its holdings with respect to the number of
issuers, the industries of such issuers, and the number of countries in which
the Fund invests. Under normal circumstances, the Fund has at least three
countries other than the U.S. represented in its portfolio. The Fund may also
invest in emerging countries if, in WPG's or HSAM's opinion, the opportunities
presented by such investments outweigh the related risks, taking into account
the quality of those securities markets and other factors relevant generally to
such investments.
Although the Fund intends to invest primarily in non-U.S. equity
securities, the Fund may also invest in other securities and instruments. For
example, the Fund may (i) invest in equity securities of U.S. issuers and in
investment grade debt securities of the U.S. and foreign governments and U.S.
and foreign corporations; (ii) invest in securities of other investment
companies; (iii) invest in domestic and foreign money market securities; and
(iv) purchase and sell call and put options on securities and stock indices.
For temporary or defensive purposes, the Fund may invest in money market
instruments without limitation. To a limited extent the Fund may also purchase
and sell futures contracts on securities and securities indices and may
purchase options on such futures. The Fund may also lend its portfolio
securities and purchase securities on a forward commitment or when-issued basis.
In addition, to seek to reduce risks associated with currency fluctuations, the
Fund may (i) enter into currency futures contracts and forward currency
contracts to purchase or sell selected currencies; and (ii) purchase and sell
call and put options on currencies and currency futures contracts. For further
information concerning the securities in which the Fund may invest and the
Fund's investment techniques, policies and risks, see "Risk Considerations and
Other Investment Practices and Policies of the Funds" in this Prospectus.
GROWTH FUND
INVESTMENT OBJECTIVE. The Growth Fund seeks maximum capital appreciation by
emphasizing investments in common stocks and securities convertible into common
stocks of small and medium capitalization companies with prospects for
sustainable above average growth in earnings per share, revenues, cash flow,
asset value and/or other appropriate measures. The Fund also invests in special
situations. The Fund is designed especially for institutional investors.
INVESTMENT PROGRAM. To seek to achieve its objective, the Growth Fund invests,
under normal circumstances, at least 65% of its total assets in common stocks
and equity-related securities (including preferred stocks, securities
convertible into or ex changeable for common stocks, shares of real estate
investment trusts, warrants and rights) of small and
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medium capitalization companies (i.e., $2 billion or less) with superior growth
prospects and less well-known companies, or companies that have been in business
for a relatively short time and offer superior growth potential. Special
situations refer to unusual and possibly unique developments for a company which
may create a special opportunity for significant returns. Developments that may
be considered special situations include: significant technological improvements
or important discoveries; a reorganization, recapitalization, or other
significant security exchange or conversion; a merger, liquidation, or
distribution of cash, securities or other assets; a breakup or workout of a
holding company; litigation which, if resolved favorably, would enhance the
value of the company's stock; a new or changed management; or material changes
in management policies.
While the Growth Fund invests primarily in common stocks and equity-related
securities of small and medium capitalization companies and special situations,
the Fund may also invest in other securities and instruments. For example, the
Fund may (i) invest in common stocks and equity-related securities of relatively
established, better-known companies in growth industries which, in the opinion
of WPG, have superior products, management, or other advantages over other
companies in those industries; (ii) invest in securities of non-U.S. issuers and
to the extent it so invests, engage in forward foreign currency exchange
transactions; (iii) purchase and sell call and put options on securities and
indices; and (iv) invest in high-quality domestic and U.S. dollar-denominated
foreign money market instruments rated within the two highest rating categories
assigned by any NRSRO or, if unrated, of equivalent investment quality as
determined by WPG. To a limited extent, the Fund may purchase and sell futures
contracts on securities and securities indices and may purchase and sell options
on such futures. The Fund may also lend its portfolio securities, enter into
repurchase agreements, invest in securities of other investment companies, and
purchase securities on a forward commitment or when-issued basis. The Fund may
also invest up to 5% of its net assets in debt securities rated as low as B or
its equivalent by any NRSRO or, if unrated, of equivalent investment quality as
determined by WPG.
For temporary or defensive purposes the Growth Fund may invest in money
market instruments without limitation. For further information concerning the
securities in which the Fund may invest and the Fund's investment techniques,
policies and risks, see "Risk Considerations and Other Investment Practices and
Policies of the Funds" in this Prospectus.
Current income is considered an incidental factor in the selection of
portfolio securities and, accordingly, the Fund may realize little, if any,
income from its investments. The Fund is not intended as a complete investment
program. In addition, there may be a greater degree of risk involved with an
investment in the Fund, as compared to investments in other mutual funds whose
investment programs seek capital appreciation, but who invest in better-known or
larger companies, and do not invest in special situations.
QUANTITATIVE EQUITY FUND
INVESTMENT OBJECTIVE. The Quantitative Equity Fund seeks to provide investment
results that exceed the performance of publicly traded common stocks in the
aggregate, as represented by the capitalization weighted Standard & Poor's 500
Composite Stock Price Index (the "S&P 500 Index").
INVESTMENT PROGRAM. To seek to achieve its investment objective, the
Quantitative Equity Fund invests, under normal market conditions, in a portfolio
of stocks that is considered by WPG to be more "efficient" than the S&P 500
Index. An efficient portfolio is one that has the maximum expected return for
any level of risk. The efficient mix of such a portfolio's investments is
established quantitatively, taking into account the expected return and
volatility of returns for each security in a given universe.
To implement this strategy, WPG compiles the historical market data for
over 1,000 stocks, comprised of the S&P 500 Index and 500 other large
capitalization stocks. WPG then derives expected returns for each stock and
seeks to maximize the expected return for a given level of risk.
Using a sophisticated software program incorporating risk reduction
techniques that have been
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developed by investment professionals of WPG, a portfolio is constructed that is
believed to have optimized risk/reward ratio. WPG selects the combination of
stocks, together with their appropriate weightings, that WPG believes will
comprise the optimal portfolio for the Fund.
It is expected that the Fund's optimal portfolio will consist of between
100 and 180 stocks. This optimal portfolio is designed to have a return greater
than, but highly correlated to, the return of the S&P 500 Index.
After the optimal portfolio is constructed, the portfolio will be
rebalanced from time to time to maintain the optimal risk/reward trade-off. WPG
continually assesses each stock's changing characteristics relative to its
contribution to portfolio risk.
The S&P 500 Index is a market weighted compilation of 500 common stocks
selected on a statistical basis by S&P. The S&P 500 Index is typically composed
of issues in the following sectors: industrial, financial, public utilities and
transportation. Most of the stocks that comprise the Index are traded on the New
York Stock Exchange, although some are traded on the American Stock Exchange and
in the over-the-counter market.
While the Quantitative Equity Fund will generally be substantially fully
invested in equity securities, it may invest up to 35% of its total assets in
fixed income obligations maturing in one year or less that are rated at least AA
by S&P or Aa by Moody's, or their equivalents, or unrated securities determined
by WPG to be of comparable quality. The Fund may also purchase and sell futures
contracts on securities and securities indices and options on such futures
contracts, as well as purchase and sell (write) put and call options on
securities and securities indices. The Fund also may lend its portfolio
securities to generate additional income, enter into repurchase agreements,
invest in securities of other investment companies, warrants and ADRs, and
purchase securities on a forward commitment or when-issued basis. The
realization of current income is not a significant part of the Fund's investment
strategy, and any income generated will be incidental to the Fund's objective of
out performing the S&P 500 Index.
WPG's research personnel will monitor and occasionally make changes in the
way the portfolio is constructed or traded. Such changes may include:
determining better ways to derive expected returns, improving the manner in
which each stock's contribution to risk is determined, altering constraints in
the optimization process, and effecting changes in trading procedure (to reduce
transaction costs or enhance the effects of rebalancing). Any such changes are
intended to be consistent with the Fund's basic philosophy of seeking higher
returns than those that could be obtained by investing directly in all of the
stocks in the S&P 500 Index. There can be no assurance that the Fund will
achieve its investment objective. For further information concerning the
securities in which the Fund may invest and the Fund's investment techniques,
policies and risks, see "Risk Considerations and Other Investment Practices and
Policies of the Funds" in this Prospectus.
HOW TO PURCHASE SHARES
INITIAL INVESTMENT MINIMUM: $2,500 PER FUND ($250 FOR RETIREMENT ACCOUNTS AND
UNIFORM GIFTS TO MINORS); $25,000 FOR THE CORE BOND FUND; $250,000 FOR THE
GROWTH FUND. The Funds may waive the minimum for initial investment in their
discretion.
OPENING AN ACCOUNT. You may make an initial purchase of shares of any Fund
by mail, by wire, or through any authorized securities dealer. Shares of the
Funds may be purchased on any day on which the New York Stock Exchange is open
for business.
YOU WILL FIND AN APPLICATION INCLUDED WITH THIS PROSPECTUS. A COMPLETED
AND SIGNED APPLICATION IS REQUIRED FOR EACH NEW ACCOUNT YOU OPEN WITH ANY FUND
REGARDLESS OF HOW YOU CHOOSE TO MAKE YOUR INITIAL PURCHASE.
BY MAIL. You may purchase shares of the Funds by mailing the completed
Application, with your check(s) or money order(s) made payable to the particular
Fund(s) in which you have chosen to invest, to the Funds' Transfer Agent, First
Data Investor Services Group, Inc., Attention: WPG Mutual Funds, 4400 Computer
Drive, Westboro, Massachusetts 01581-5120.
BY WIRE. You may also purchase shares of a Fund by wiring funds to the wire
bank account for such Fund with the Fund's Custodian. Before wiring funds,
please call WPG toll free at 1-800-223-3332
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to receive instructions as to how and where to wire your investment. Please
remember to return your completed Application to First Data Investor Services
Group, Inc., as described in the prior paragraph.
THROUGH AN AUTHORIZED SECURITIES DEALER. Securities dealers approved by WPG
are authorized to sell you shares of the Funds. You also may obtain copies of
the Application from any such authorized securities dealer. Shares purchased
through such securities dealers may be subject to transaction fees, no part of
which will be received by the Funds or WPG.
WPG, at its own expense, provides compensation to Charles Schwab & Co.,
Inc. whose customers become shareholders of the Municipal Bond Fund or
Quantitative Equity Fund for introducing such customers to the Funds and
responding to certain customer inquiries. Such compensation is paid at the
annual rate of 0.10% of the average daily net assets of the Equity Funds and the
Income Funds, respectively (as defined in "Share Price" below) attributable to
shares held by such customers. Such compensation does not represent an
additional expense to any Fund or its shareholders, since it will be paid from
the assets of WPG or its affiliates, including amounts received by WPG under its
Investment Advisory Agreements with the Funds.
SUBSEQUENT INVESTMENT MINIMUM: $100 PER FUND; $5,000 FOR THE CORE BOND
FUND; $25,000 FOR THE GROWTH FUND. Subsequent purchases of shares of the Funds
may be made by mail, wire, through an authorized securities dealer, or by means
of certain services available to shareholders of the Funds, such as the Exchange
Privilege and Automatic Investment Plan described below under "Shareholder
Services." The minimum subsequent investment under the Automatic Investment Plan
is $50 per Fund (not available for the Growth Fund or the Quantitative Equity
Fund) The Funds may waive the subsequent investment minimum in their discretion.
SHARE PRICE. Your shares in each Fund will be priced at the net asset value
per share of that Fund next determined after your purchase order has been re-
ceived in good order by the Fund or its agents.
With respect to the Government Money Market Fund, the Tax Free Money Market
Fund, the Core Bond Fund and the Municipal Bond Fund (the "WPG Income Funds"),
if your purchase payment is transmitted by federal funds wire, the purchase
order will be considered in good order upon receipt of the wire payment by
Boston Safe Deposit and Trust Company, the Funds' Custodian. If your purchase
payment as transmitted to the Funds' Transfer Agent is not in federal funds
(I.E., monies credited to the Funds' Custodian by a Federal Reserve Bank), your
payment must first be converted to federal funds before your purchase order
will be considered in "good order." If your purchase payment is by a check drawn
on a member bank of the Federal Reserve System, conversion to federal funds
usually occurs within one business day after the check is deposited by the
Funds' Custodian. Checks drawn on banks which are not members of the Federal
Reserve System may take longer to convert into federal funds. During the period
prior to receipt of federal funds by the Funds' Custodian, your money will not
be invested in the WPG In come Funds. You will begin to earn dividends on the
business day following the date on which your purchase order is converted to
federal funds (I.E., the trade date). With respect to Government Money Market
Fund and Tax Free Money Market Fund, for a purchase by federal funds wire, you
may qualify for a dividend on the date the purchase order is received if your
federal funds wire is received prior to 12:00 noon Eastern Time.
With respect to the other Funds in the WPG family of funds (the "WPG Equity
Funds"), receipt of federal funds by the Funds' Custodian is not necessary for a
purchase order to be considered in good order when received by the Funds'
Transfer Agent.
If you purchase shares through an authorized securities dealer, the dealer
must receive your order before the close of regular trading on the New York
Stock Exchange and transmit it to the Fund(s) or their agents by 4:00 p.m.
Eastern Time to receive that day's net asset value. (Each Fund's per share net
asset value is computed as described under "How Each Fund's Net Asset Value is
Determined" in this Prospectus.)
CONDITIONS OF YOUR PURCHASE. Each Fund reserves the right to reject any
purchase for any reason and to cancel any purchase due to nonpayment. Purchase
orders are not binding on the Funds
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nor considered received until such purchase orders are received in good order as
described above. All purchases must be made in U.S. dollars and, to avoid fees
and delays, all checks must be drawn only on U.S. banks. No cash will be
accepted. As a condition of this offering, if your purchase is cancelled due to
nonpayment or because your check does not clear (and, therefore, your account is
required to be redeemed), you will be responsible for any loss incurred by the
Fund(s) affected.
SHARE CERTIFICATES. The Government Money Market Fund, Tax Free Money Market
Fund, Municipal Bond Fund, Core Bond Fund and Quantitative Equity Fund will not
issue share certificates. With respect to the other Funds, share certificates
will not be issued for shares unless you have been a shareholder of the Fund in
question for at least 30 days and you specifically request share certificates in
writing. The Funds will issue certificates only for full shares. Most
shareholders elect not to receive share certificates. If you lose a share
certificate you may incur an expense to replace it.
RETIREMENT PLAN ACCOUNTS. If you are a participant in a corporate or
institutional retirement plan account (including any deferred compensation
plan), you must contact your Plan Administrator regarding purchase and
redemption procedures, including limitations thereon, contained in your
retirement plan. Requests for redemptions from retirement plan accounts must be
in writing.
IN-KIND PURCHASES. Shares of the Funds may be purchased in whole or in part
by delivering to the Funds' Custodian securities determined by WPG to be
suitable for that Fund's portfolio. Investors interested in making "in-kind"
purchases should refer to the SAI for the terms, conditions and tax consequences
of these transactions.
SHAREHOLDER SERVICES
SHAREHOLDER INQUIRIES AND SERVICES OFFERED. If you have any questions about
the Funds or the shareholder services described below, please call the Funds at
1-800-223-3332. Written inquiries should be sent to First Data Investor Services
Group, Inc., Attention: WPG Mutual Funds, 4400 Computer Drive, Westboro,
Massachusetts 01581- 5120. The Funds reserve the right to amend the shareholder
services described below or to change the terms or conditions relating to such
services upon 60 days' notice to shareholders. You may discontinue any service
you select, provided that with respect to the Automatic Investment and
Systematic Withdrawal Plans described below, the Funds' Transfer Agent receives
your notification to discontinue such service(s) at least ten days before the
next scheduled investment or withdrawal date.
CONFIRMATIONS, SHAREHOLDER STATEMENTS, AND REPORTS. Each time you buy or
sell shares you will receive a confirmation statement with respect to such
transaction. In addition, following each distribution for each Fund in which
you are a share holder, you will receive a shareholder statement reflecting any
reinvestment of a dividend or distribution in the Fund including your current
share balance with the Fund. These statements will be sent to you monthly if you
are a shareholder in a WPG Income Fund. The Funds also will send you shareholder
reports no less frequently than semi-annually. You also will receive year-end
tax information about your account(s) with each Fund.
TELEPHONE EXCHANGE PRIVILEGE. For your convenience, the Funds provide a
Telephone Ex change Privilege that enables you by telephone to authorize the
exchange of shares from your account in one Fund for shares in any other WPG
Mutual Fund described in this Prospectus provided all accounts are identically
registered.
In addition, certain qualified retirement plans (I.E., 401(k) and 403(b)
plans and other plans but NOT Individual Retirement Accounts) may exchange their
Fund shares for shares of the Tomorrow Funds, consisting of Tomorrow Long-Term
Retirement Fund, Tomorrow Medium-Term Retirement Fund and Tomorrow Short-Term
Retirement Fund. Please call 1-800-223-3332 to obtain a free copy of the
Tomorrow Funds' prospectus, including fees and expenses. You should read the
prospectus carefully before requesting any exchange into the Tomorrow Funds.
The telephone exchange privilege is not avail able to shareholders
automatically; to authorize this Telephone Exchange Privilege, please mark the
appropriate boxes on the Application and supply us with the information
required. To exchange shares by telephone, simply call 1-800-223-3332 between
9:00 a.m. and 4:00 p.m. Eastern Time on any day that the Funds are open. Shares
exchanged will be
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valued at their respective net asset values next determined after the telephone
exchange request is received. Telephone exchange requests made after 4:00 p.m.
Eastern Time will not be accepted. At the time of any telephone exchange
request, please notify the Funds of all current shareholder service privileges
you wish to continue to utilize in any new account opened. To confirm that
telephone exchange requests are genuine, the Funds will employ reasonable
procedures such as providing written confirmation of telephone exchange trans
actions and tape recording of telephone exchange requests. If a Fund does not
employ such reasonable procedures, it may be liable for any loss incurred by a
shareholder due to a fraudulent or other unauthorized telephone exchange
request. Otherwise, neither the Funds nor their agents will be liable for any
loss incurred by a shareholder as a result of following instructions
communicated by telephone that they reasonably believe to be genuine. The Funds
reserve the right to refuse any request made by telephone and may limit the
amount involved or the numbers of telephone requests made by any shareholder.
(Such exchange requests may, however, be made in writing in accordance with
procedures described in this Prospectus.) During periods of extreme economic
conditions or market changes, requests by telephone may be difficult to make due
to heavy volume. During such times, please consider placing your order by mail.
The telephone exchange privilege is not avail able with respect to (i)
shares for which certificates have been issued or (ii) redemptions for accounts
requiring supporting legal documents. See "Written Exchange Privilege" below for
further information concerning exchanges and "Excessive Trading" below for
information concerning the Funds' policy limiting excessive exchanges and pur-
chase/redemption transactions.
WRITTEN EXCHANGE PRIVILEGE. The Written Ex change Privilege is a convenient
way to change your investment mix in the WPG Mutual Funds in order to respond to
changes in your investment goals or market conditions. In addition to using the
Telephone Exchange Privilege described above, shareholders in any of the Funds
may exchange their shares for shares in any other Fund by submitting a written
request, in proper form, to the Transfer Agent. Such shares exchanged will be
valued at their respective net asset values next determined after the receipt of
the written exchange request. When making a written exchange request, please
provide your current Fund's name, your account name(s) and number(s), and the
dollar or share amount you wish to exchange, and specify all current plans or
shareholder service privileges you wish to continue to utilize in your new
account (e.g. Automatic Investment Plans). For written exchange requests, the
signatures of all registered owners (or executed powers of attorney) are
required. Signature guarantees are also required if the account in the Fund
whose shares are being purchased will not be identically registered. See "How to
Redeem Shares" below for a discussion of acceptable signature guarantors. If
share certificates were issued for the shares being exchanged, such
certificates, properly endorsed, must accompany the written ex change request.
No sales charge is imposed on exchanges. Please note that an exchange involves a
redemption of the shares exchanged and may therefore result in a tax liability
for you. Unless waived by the Funds, the minimum initial investment in each
Fund, whether by exchange or purchase, is $2,500 for each Fund ($25,000 for the
Core Bond Fund; $250,000 for the Growth Fund). Unless waived by the Funds, all
subsequent amounts exchanged must be a minimum of $100 for each Fund ($5,000 for
the Core Bond Fund; $25,000 for the Growth Fund). Exchange requests will not be
accepted for shares purchased by check within 15 days of the request. The
exchange privilege is available to shareholders in all states where it is
legally permitted. Currently all states permit such exchanges. See "Excessive
Trading" below for information concerning the Funds' policy limiting excessive
exchanges and purchase/redemption transactions.
CHECKWRITING SERVICE. Checkwriting is avail able for shareholders of the
Government Money Market Fund and Tax Free Money Market Fund. There is no charge
for this service. The minimum amount of each check must be $500. The
checkwriting service may not be used for a complete redemption of your account.
If the amount of the check is greater than the value of your account, the check
will be returned unpaid. In addition,
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checks written on amounts subject to the 15-day check clearing period, described
below under "How to Redeem Shares," also will be returned unpaid. The
Application for this service is included with this Prospectus. All notices with
respect to checks must be given to the Funds' Transfer Agent. The checkwriting
service is not available for Individual Retirement Accounts or other retirement
accounts.
AUTOMATIC INVESTMENT AND SYSTEMATIC WITHDRAWAL PLANS. For your
convenience, the Funds provide plans that enable you to add to your investment
or withdraw from your account(s) with a minimum of paperwork. The Application
for these plans is included with this Prospectus.
(1) AUTOMATIC INVESTMENT PLAN. The Automatic
Investment Plan is a convenient way for you
to purchase shares of the Funds at regular monthly or quarterly intervals
selected by you. The Automatic Investment Plan enables you to achieve
dollar-cost averaging with respect to investments in Funds with fluctuating
net asset values through regular purchases of a fixed dollar amount of
shares in the Funds. Dollar-cost averaging brings discipline to your
investing. Dollar-cost averaging results in more shares being purchased
when a Fund's net asset value is relatively low and fewer shares being
purchased when a Fund's net asset value is relatively high, thereby helping
to decrease the average price of your shares. Through the Automatic
Investment Plan, Fund shares are purchased by transferring funds (minimum
of $50 per transaction per Fund) from your designated checking, NOW, or
bank account. Your automatic investment in the Fund(s) designated by you
will be processed on a regular basis beginning on or about the first
business day of the month or quarter you select. This Plan is not available
to shareholders of the Growth Fund or the Quantitative Equity Fund.
(2) SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan provides a
convenient way for you to receive regular cash payments while maintaining
an investment in the Funds. The Systematic Withdrawal Plan permits you
to have payments of $50 or more automatically transferred from your
account(s) in the Fund(s) to you or your designated bank account on a
monthly or quarterly basis. In order to start this Plan, you must have a
minimum balance of $15,000 in any Fund account utilizing this feature. Your
systematic withdrawals will be processed on a regular basis beginning on or
about the first business day of the month or quarter you select.
SWEEP PROGRAM. The Sweep Program is a convenient way for you to invest
automatically excess credit balances in any of your brokerage accounts with WPG
in shares of the Government Money Market Fund or the Tax Free Money Market Fund.
Under the Sweep Program, if you have a brokerage account with WPG you may elect
to have credit balances automatically invested in shares of the Government Money
Market Fund or Tax Free Money Market Fund. WPG will transmit orders for the
purchase of a Fund's shares on the same day that excess credit balances are
available in your broker age account. To obtain further information concerning
this service, please call 1-800-223-3332.
TAX-SHELTERED RETIREMENT PLANS. Investors in the Funds (other than the
Growth Fund, the Tax Free Money Market Fund and the Municipal Bond Fund) may
make use of a variety of retirement plans, including Individual Retirement
Accounts, simplified employee pension plans, money purchase pension and profit
sharing plans, and 401(k) Plans.
(1) INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"), ROTH INDIVIDUAL RETIREMENT
ACCOUNTS ("ROTH IRAS") AND SIMPLIFIED EMPLOYEE PENSION PLANS ("SEP-IRAS").
You may save for your retirement and shelter your investment income from
current taxes by either: (i) establishing a new IRA; or (ii) "rolling-
over" or transferring to an IRA invested in the Funds monies from other IRA
accounts or qualified distributions from a plan. An IRA is an attractive
retirement-savings vehicle for qualified individuals. Using your IRA, you
can invest, on a tax-favored basis,
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up to $2,000 per year in the Funds. Up to $2,000 per year may also be
invested for your spouse, subject to certain limits and conditions. If you
satisfy certain requirements, you may be eligible to contribute to a Roth
IRA. A Roth IRA, like a Traditional IRA, is a retirement program in which
you may obtain certain income tax benefits by accumulating funds to provide
retirement income. Unlike a Traditional IRA, contributions to a Roth IRA
are never deductible. However, the Roth IRA is a tax-sheltered account and,
if certain conditions are met, distributions from the Roth IRA will be
tax-free. In addition, your employer may (i) establish new SEP-IRAs for its
employees that can be used to invest on a tax-favored basis in the Funds or
(ii) use the Funds as additional funding vehicles for existing SEP-IRAs.
(2) PROTOTYPE RETIREMENT PLANS. Both a prototype money purchase pension plan
and a profit sharing plan, which may be used alone or in combination, are
available to sole proprietors, partnerships and corporations to provide
retirement benefits for individuals and employees.
(3) 401(K) PLANS. Through the establishment of a 401(k) Plan by your company,
your employees can invest a portion of their wages in the Funds on a
tax-deferred basis for their retirement needs.
OTHER ACCOUNTS. The Funds also offer special services to meet the needs of
investors.
(1) UNIFORM GIFT TO MINORS. By establishing a Uniform Gift to Minors Account
with the Funds, you can build a fund for your children's education or a
nest egg for their future and, at the same time, potentially reduce your
own income taxes. (Not available for the Growth Fund.)
(2) CUSTODIAL AND FIDUCIARY ACCOUNTS. The Funds provide a convenient means of
establishing custodial and fiduciary accounts for investors with fiduciary
responsibilities.
For further information regarding any of the above retirement plans and
accounts, please call toll free at 1-800-223-3332. Retirement investors should
consult with their own tax counsel or adviser.
HOW EACH FUND'S NET ASSET
VALUE IS DETERMINED
The net asset value per share of the Funds is calculated as of the close of
regular trading on the New York Stock Exchange ("Exchange"), normally 4:00 p.m.
Eastern Time, every day the Exchange is open for regular trading. In addition,
Government Money Market Fund and Tax Free Money Market Fund calculate their net
asset value per share as of 12:00 p.m. Eastern Time on those days on which the
Exchange is open for regular trading and on which a purchase order for Fund
shares and related federal funds wire is received prior to 12:00 p.m. Eastern
Time. The per share net asset value, calculated as described below, is
effective for all orders received in good order (as previously described) by the
Funds or their agents prior to the close of regular trading on the Exchange for
that day. Orders received by the Funds or their agents after the close of
regular trading on the Exchange or on a day when the Exchange is not open for
business will be priced at the net asset value per share next computed.
The net asset value of each Fund's shares is determined by adding the value
of all securities, cash and other assets of the Fund, subtracting liabilities
(including accrued expenses and dividends payable), and dividing the result by
the total number of outstanding shares in the Fund.
For purposes of calculating the net asset value per share of the Government
Money Market Fund and the Tax Free Money Market Fund, portfolio securities are
valued on the basis of amortized cost, which method does not take into account
unrealized gains or losses on the Funds' portfolio securities. Amortized cost
valuation involves initially valuing a security at its cost, and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which the value of a security, as determined by amortized
cost, may be higher or lower than the price the Government
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<PAGE>
Money Market Fund or the Tax Free Money Market Fund would receive if the Fund
sold the security. The Board of Trustees has established procedures to monitor
any such deviation between amortized cost and market value and to take
corrective action should the deviation exceed specified amounts.
For purposes of calculating each other Fund's net asset value per share,
portfolio securities (other than certain money market instruments) are valued
primarily based on market quotations, or, if market quotations are not
available, by a valuation committee as appointed by the Board of Trustees. In
accordance with procedures approved by the Board of Trustees for each Fund, the
Funds may use pricing services to value bonds and other fixed income investments
of the Funds. Money market instruments with a remaining maturity of 60 days or
less at the time of purchase are generally valued at amortized cost.
HOW TO REDEEM SHARES
Subject to the restrictions outlined below, shareholders have the right to
redeem all or any part of their shares in the Funds at a price equal to the net
asset value of such shares next computed following receipt and acceptance of
the redemption request by the Funds or their agents, I.E., the Transfer Agent.
A redemption is a taxable transaction that may result in a tax liability for
you. In order to re deem shares of the Funds, a written request in "proper form"
(as explained below) must be sent directly to First Data Investor Services
Group, Inc., Attention: WPG Mutual Funds, 4400 Computer Drive, Westboro, MA
01581-5120. No charge is imposed on any redemption request processed by the
Funds' Transfer Agent or WPG. You may also, of course, transmit your redemption
request to the Funds through your broker-dealer, who may charge you a
transaction fee for such services. Please note that you cannot redeem shares by
telephone or telegram. In addition, the Funds cannot accept requests which
specify a particular date or price for redemption or which specify any other
special conditions.
PROPER FORM FOR ALL REDEMPTION REQUESTS. Your redemption request must be in
proper form. To be in proper form, your request must include: (1) your share
certificates, if any, endorsed by all shareholders for the account exactly as
the shares are registered or accompanied by executed power(s) of attorney and
the signature(s) must be guaranteed, as described below; (2) for written
redemption re quests, a "letter of instruction," which is a letter specifying
the name of the Fund, the number of shares to be sold, the name(s) in which the
account is registered, and your account number. The letter of instruction must
be signed by all registered shareholders for the account using the exact names
in which the account is registered or accompanied by executed power(s) of
attorney; (3) any signature guarantees that are required as described above in
(1), or required by the Funds if the redemption proceeds are to be sent to an
address other than the address of record or to a person other than the
registered shareholder(s) for the account; and (4) other supporting legal
documents, as may be necessary, for redemption requests by corporations,
estates, trusts, guardianships, custodianships, partnerships, and pension and
profit sharing plans. Signature guarantees, when required, must be obtained from
any one of the following institutions, provided that such institution meets
credit standards established by the Funds' Transfer Agent: (i) a bank; (ii) a
securities broker or dealer, including a government or municipal securities
broker or dealer, that is a member of a clearing corporation or has net capital
of at least $100,000; (iii) a credit union having authority to issue signature
guarantees; (iv) a savings and loan association, a building and loan
association, a cooperative bank, or a federal savings bank or association; or
(v) a national securities exchange, a registered securities exchange or a
clearing agency.
YOUR REQUEST FOR REDEMPTION WILL NOT BE PROCESSED UNLESS IT IS IN PROPER
FORM, AS DESCRIBED ABOVE.
RECEIVING YOUR REDEMPTION PAYMENT. Except under certain emergency
conditions, your redemption payment will be sent to you (net of any required
withholding taxes) within three business days after receipt of your written
redemption request in proper form by the Funds or their agents, I.E., Transfer
Agent. If you wish to have your redemption proceeds wired to your checking or
bank account, you may so elect. Currently, the Transfer Agent for the Funds
charges a fee for wire transfers. If you make a redemption request within 15
days of the date you
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<PAGE>
purchased shares by means of a personal, corporate or government check, the
redemption payment will be held until the purchase check has cleared (up to 15
days). Nevertheless, the shares redeemed will be priced for redemption at the
price next determined after receipt of your redemption request. You can avoid
the inconvenience of this check clearing period by purchasing shares with a
certified, treasurer's or cashier's check, or with a federal funds or bank wire.
MINIMUM ACCOUNT SIZE. Due to the relatively high cost of maintaining
smaller accounts, the Funds reserve the right to redeem shares in any account
if, as the result of redemptions, the value of that account drops below $100
($15,000 for the Core Bond Fund and the Growth Fund.) You will be allowed at
least 60 days, after written notice by the Funds, to make an additional
investment to bring your account value up to at least the specified minimum
before the redemption is processed.
EXCESSIVE TRADING. To prevent excessive transaction activity and to protect
shareholders, the Funds have adopted a policy ("Trading Policy") to limit the
number of exchanges and purchase/redemption transactions (as described below)
by any one shareholder account (or group of accounts under common management)
to a total of six such transactions per year. This Trading Policy applies to:
(i) exchanges into or out of any Fund described in this Prospectus (other than
between WPG Income Funds), and (ii) any pair of transactions involving a
purchase of shares of any one Fund followed by a redemption of an offsetting or
substantially equivalent dollar amount of shares of that same Fund. THIS TRADING
POLICY DOES NOT APPLY TO TRANSACTIONS SOLELY AMONG OR SOLELY INVOLVING THE WPG
INCOME FUNDS. If you violate this Trading Policy, your future purchases of, or
exchanges into, the Funds may be permanently refused. This Trading Policy does
not prohibit you from redeeming shares of any Fund. WPG reserves the right to
waive the Trading Policy in its discretion.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER AND ADMINISTRATOR. As noted above, WPG, One New York
Plaza, New York, New York 10004, serves as the investment adviser to each Fund.
WPG is an indirect wholly-owned subsidiary of Robeco. Robeco is 50% owned by
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland, which
is a cooperative bank owned by a large number of local banks in the Netherlands.
The remaining 50% interest in Robeco is owned indirectly by the shareholders in
various investment funds advised by Robeco. HSAM serves as subadviser to the
International Fund pursuant to a Subadvisory Agreement with the International
Fund and WPG. HSAM is a wholly-owned indirect subsidiary of Lloyds TSB Group
plc, London, England.
Under the investment advisory agreements with the Funds, WPG manages the
Funds' portfolios. Subject to the general supervision of the Funds' Boards of
Trustees, WPG is responsible for the selection and management of all portfolio
investments of each Fund (other than as described below for the International
Fund) in accordance with each Fund's investment objective, investment program,
policies and restrictions.
With respect to the International Fund, WPG (i) is responsible for the
selection and management of the International Fund's U.S. securities, (ii)
oversees and assists in the management of the International Fund's assets by
HSAM and monitors on a continuous basis HSAM's selection and management of the
Fund's investments in non-U.S. securities, and (iii) deter mines, in
consultation with HSAM, the percentage allocation of the International Fund's
assets between U.S. and non-U.S. securities.
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<PAGE>
Each Fund pays WPG a fee equal on an annual basis to a percentage of such
Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
ACTUAL RATE
PAID FOR THE
PRESENT YEAR ENDED
ANNUAL DECEMBER 31,
FUND FEE RATE 1997
---- -------- ----
<S> <C> <C>
Government Money Market Fund 0.50% of net assets up to $500 million 0.50%
and 0.45% of net assets $500 million to $1 billion
Tax-Free Money Market Fund 0.40% of net assets $1 billion to $1.5 billion
0.35% of net assets in excess of $1.5 billion
Municipal Bond Fund 0.00% of average daily net assets while net assets 0.19%
are less than $17 million and
0.50% of average daily net assets while net assets
are $17 million or more
Core Bond Fund 0.60% of net assets up to $300 million 0.60%1
0.55% of net assets $300 million to $500 million
0.50% of net assets in excess of $500 million
Growth and Income Fund 0.75% of net assets 0.75%
Tudor Fund 0.90% of net assets up to $300 million 0.90%
0.80% of net assets $300 million to $500 million
0.75% of net assets in excess of $500 million
International Fund2 0.50% of average daily net assets when net assets 0.50%
are less than $15 million
0.85% of average daily net assets when net
assets are $15 million or more but are
less than $20 million
1.00% of average daily net assets when net
assets are $20 million or more
Growth Fund 0.75% of net assets 0.75%
Quantitative Equity Fund 0.75% of net assets 0.75%
<FN>
- ------------------
(1)Although the Core Bond Fund paid investment advisory fees at the rate of
0.60% for the year ended December 31, 1997, WPG has voluntarily agreed,
effective January 1, 1998, to limit total operating expenses (including
investment advisory fees but excluding litigation, indemnification and other
extraordinary expenses) of the Core Bond Fund to 0.50% of average daily net
assets. See "Expenses" below.
(2) Pursuant to the International Fund's Subadvisory Agreement, WPG pays
HSAM, on a quarterly basis, a subadvisory fee equal on an annual basis to 40% of
the advisory fee actually received by WPG. The International Fund has no
responsibility to pay such subadvisory fee and pays only the advisory fee at the
rate set forth above.
</FN>
</TABLE>
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<PAGE>
Pursuant to separate administration agreements, WPG also acts as the
administrator of each Fund. As administrator, WPG provides personnel for
supervisory, administrative, accounting, shareholder services and clerical
functions; oversees the performance of administrative and professional services
to the Funds by others; provides office facilities, furnishings and office
equipment; and prepares, but does not pay for, reports to shareholders, the SEC
and other regulatory authorities. For all administrative services and
facilities provided by WPG under each administration agreement, WPG receives a
fee, computed daily and payable monthly, at an annual rate based on the average
net assets of each Fund as shown as follows: Tudor 0.05%, Growth and Income
0.06%, Growth 0.15%, Quantitative Equity 0.06%, International 0.00% while net
assets are $25 million and below, and 0.06% while assets exceed $25 million,
Core Bond 0.05%, Municipal Bond 0.00% while net assets are $50 million and
below, and 0.12% while assets exceed $50 million, Government Money Market 0.04%,
Tax Free Money Market 0.05%. See the SAI for the rates and amounts at which
administration fees were paid for the fiscal year ended December 31, 1997. The
administrative fee of each Fund is reviewed and approved annually by the Board
of Trustees.
PORTFOLIO MANAGERS. The following is a list of the portfolio managers of the
Funds and their business experience during the past five years. Each portfolio
manager is responsible for the day-to-day management of his or her Fund.
WPG GOVERNMENT MONEY MARKET FUND. Daniel S. Vandivort and Thomas J. Girard are
co-portfolio managers of the Fund. Mr. Vandivort has been a Managing Director of
WPG since November 1994. From 1989 to 1994, Mr. Vandivort served in various
capacities with CS First Boston Investment Management, including Managing
Director and Head of U.S. Fixed Income and Senior Portfolio Manager and
Director, Global Product Development and Marketing. Mr. Girard has been a
Principal of WPG since March, 1996. From 1994 to 1996, Mr. Girard served as a
Vice President and portfolio manager with Bankers Trust Company and was a Vice
President of J.P. Morgan-Morgan Guaranty Trust Company prior thereto. WPG TAX
FREE MONEY MARKET FUND. Janet A. Fiorenza has been a portfolio manager of the
Fund since its inception. Ms. Fiorenza is a Managing Director of WPG.
WPG INTERMEDIATE MUNICIPAL BOND FUND. S. Blake Miller has been a portfolio
manager of the Fund since its inception. Mr. Miller is a Principal of WPG.
WPG CORE BOND FUND. Daniel S. Vandivort and Sid Bakst serve as the Fund's
co-portfolio managers. Mr. Vandivort has been the portfolio manager of the Fund
since February 1995. Please see "WPG Government Money Market Fund" above for a
description of Mr. Vandivort's business experience during the past five years.
Mr. Bakst has been a portfolio manager to the Fund since January 1998 and has
been a Principal of WPG since 1997. Prior thereto, Mr. Bakst served as vice
president and portfolio manager for New York Life Asset Management with respect
to corporate bonds for annuity and insurance products.
WPG GROWTH AND INCOME FUND. A. Roy Knutsen has been the portfolio manager of the
Fund since 1992. Mr. Knutsen has been a Managing Director of WPG for over 5
years.
WPG TUDOR FUND. Adam Starr, who has 20 years of investment experience, has been
the portfolio manager of the Fund since December 1997. Mr. Starr has been a
Managing Director and research analyst for the Large Cap Growth and Small Cap
Growth Divisions of WPG since 1996. Mr. Starr was an analyst and portfolio
manager for the Farber Fund from 1993 to 1996.
WPG INTERNATIONAL FUND. Andrew November has been the portfolio manager of the
Fund since February 1998 and has been a fund manager at HSAM since 1996, most
recently on HSAM's Global Strategy Team. Mr. November was a fund manager at
Lazard Brothers Asset Management from 1994 to 1996, and a fund manager for Far
East and Latin American countries at Confederation Life Insurance Company (UK)
prior thereto.
WPG GROWTH FUND. Adam Starr has been the portfolio manager of the Fund since
December
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<PAGE>
1997. Please see "WPG Tudor Fund' above for a description of Mr. Starr's
business experience during the past five years.
WPG QUANTITATIVE EQUITY FUND. Daniel J. Cardell has been the portfolio manager
of the Fund since May 1996. Mr. Cardell has been a Managing Director of WPG
since May 1996. Prior to joining WPG, Mr.Cardell was Senior Vice President and
Director of Equities for the Bank of America.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. First Data Investor Services
Group, Inc., 4400 Computer Drive, Westboro, Massachusetts 01581- 5120 serves as
Transfer Agent and Dividend Disbursing Agent for the Funds. The Funds may also
enter into agreements with and compensate other transfer agents and financial
institutions who process shareholder transactions and maintain share holder
accounts.
PRINCIPAL UNDERWRITER. The principal underwriter for shares of the Funds is
First Data Distributors, Inc. (the "Underwriter"). The principal business
address of the Underwriter is 4400 Computer Drive, Westboro, Massachusetts
01581-5120.
EXPENSES. Each Fund bears all expenses of its operation. In particular, each
Fund pays: investment advisory fees; administration fees; custodian and transfer
agent fees and expenses; legal and accounting fees and expenses; expenses of
preparing, printing, and distributing Prospectuses and SAIs to existing
shareholders, and shareholder communications and reports, except as used to
market its shares; expenses of computing its net asset value per share; federal
and state registration fees and expenses with respect to its shares; proxy and
shareholder meeting expenses; expenses of issuing and redeeming its shares;
independent trustees' fees and expenses; expenses of bond, liability, and other
insurance coverage; brokerage commissions; taxes; trade association fees; and
certain non-recurring and extraordinary expenses. In addition, the expenses of
organizing the Municipal Bond Fund and initially registering and qualifying its
shares under federal and state securities laws are being charged to the Fund's
operations, as an expense, over a period not to exceed 60 months from the Fund's
inception date.
WPG has agreed to limit the total operating expenses (excluding litigation,
indemnification and other extraordinary expenses) of the Municipal Bond Fund and
the Core Bond Fund to 0.85% and 0.50% of the respective Fund's average daily net
assets. These agreements are voluntary and temporary and may be revised or
terminated by WPG at any time although it has no current intention to do so.
ADMINISTRATION AND SERVICE PLANS. Pursuant to Administration and Service Plans
(the "Plans"), the Core Bond Fund and the International Fund may each enter into
contracts ("Servicing Agreements") with banks, trust companies, broker-dealers
or other financial organizations ("Service Organizations") to provide certain
administrative and shareholder services for such Funds. As of the date of this
Prospectus, a Servicing Agreement is in effect with respect to Core Bond Fund.
Administrative and shareholder servicing functions to be provided by the
Service Organizations may include, among other things: processing purchase and
redemption transactions; answering client inquiries regarding the applicable
Fund, assisting clients in changing dividend and distribution options, account
designations and addresses; performing sub-accounting; establishing and main-
taining shareholder accounts and records; investing client cash account balances
automatically in shares in accordance with arrangements made by the client;
providing periodic statements of a client's account balance and integrating such
statements with those of other transactions and balances in the client's other
accounts serviced by the Service Organization; arranging for bank wires; and
such other services as the Funds may request, to the extent permitted by
applicable statute, rule or regulation.
Each Service Organization may receive a fee payable by the applicable Fund,
in respect of shares held by or through such Service Organization for its
customers, for services performed pursuant to the Plans and the applicable
Servicing Agreements. The schedule of fees and the basis upon which such fees
may be paid will be determined by the Trustees, and may be based on a flat fee,
a percentage of the average daily net assets attributable to the shares held by
the customers of the Service Organizations or other reasonable basis. Each Fund
may pay an aggregate amount of up to 0.05% per year of its average daily net
assets to Service Organizations under the Plans. For the fiscal year ended
December 31, 1997, Core Bond Fund paid Service Organizations
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<PAGE>
fees of less than 0.01% of its average daily net assets. International Fund did
not make any payments to service organizations during the fiscal year ended
December 31, 1997. For additional information on the Plans, see the Funds' SAI,
"Investment Adviser-Administration and Service Plans."
Service Organizations may impose certain additional or different conditions
on their clients, such as requiring their clients to invest more than the
minimum initial investment, and may charge their clients a direct fee for
services provided to their customers. These fees would be in addition to any
amounts which might be received from the Funds under the Plans. Shareholders are
urged to consult their Service Organizations to obtain a schedule of any such
fees.
-------------------
The annualized ratios of operating expenses to average net assets for the
Funds for the year ended December 31, 1997 are set forth under the "Financial
Highlights" section.
YEAR 2000 ISSUE. The Funds' operations generally depend on the seemless
functioning of computer systems in the financial service industry, including
those of the Adviser, the Custodian and the Transfer Agent. Many computer
software systems in use today cannot properly process date-related information
after December 31, 1999 because of the method by which dates are encoded and
calculated. This failure, commonly referred to as the "Year 2000 Issue," could
adversely affect the handling of securities trades, pricing and account
servicing for the Funds. The Adviser has made compliance with the Year 2000
Issue a high priority and is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to its computer systems.
The Adviser has also been informed that comparable steps are being taken by the
Funds' other major service providers. The Adviser does not currently anticipate
that the Year 2000 Issue will have a material impact on its ability to continue
to fulfill its duties as investment adviser.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund has qualified and elected to be treated as a "regulated
investment company" ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"), and intends to qualify as such for each taxable year. A Fund which
qualifies as a RIC will not be subject to federal income or excise tax on its
income and gains distributed to its share holders in accordance with the Code's
timing and other requirements. Each Fund intends to distribute all of its net
investment income and net capital gains each year.
Income dividends, if any, will be declared daily and distributed monthly
for the Government Money Market Fund, the Tax Free Money Market Fund, the Core
Bond Fund and the Municipal Bond Fund and at least annually for each other Fund.
Net capital gains of each Fund, if any, realized during the taxable year will be
distributed no less frequently than annually. Income dividends are derived
from each Fund's net investment income (including dividends, interest and
recognized market discount income), net short-term capital gain in excess of net
long-term capital loss, and certain net foreign currency gains received by a
Fund, and are taxable to you as ordinary income for federal income tax purposes,
except for exempt- interest dividends paid by the Tax-Free Money Market Fund and
the Municipal Bond Fund from tax-exempt interest they receive as described
below. Corporate shareholders may be entitled to take the corporate
dividends-received deduction for income dividends received from a Fund that are
attributable to dividends received by that Fund from a domestic corporation,
subject to certain restrictions under the Code. Distributions designated by a
Fund as from its net long-term capital gain in excess of net short-term capital
loss ("capital gain distributions") are taxable to you as capital gain,
regardless of how long you have held your shares. These capital gain
distributions may be taxable at different maximum rates for noncorporate
shareholders, depending usually upon a Fund's holding periods for the assets
that produce the gain. Income dividends and capital gain distributions declared
in October, November or December as of a record date in such a month and paid in
the following January are treated under the Code as if they were received on
December 31 of the year declared. Each Fund in which you are a shareholder will
mail to you tax information by the end of January indicating the federal tax
status of your income dividends and capital gain distributions for that Fund.
Such tax status is not affected by your choice to receive such distributions in
additional shares or in cash.
Provided that the Tax Free Money Market
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<PAGE>
Fund and the Municipal Bond Fund satisfy certain requirements of the Code, each
such Fund may designate its dividends derived from the interest earned on
tax-exempt obligations as "exempt interest dividends," which are not subject to
regular federal income tax. The Tax Free Money Market Fund and the Municipal
Bond Fund anticipate that substantially all of their income dividends will be
exempt from regular federal income tax, although they may be included in the tax
base for determining taxability of Social Security or railroad retirement
benefits and may increase a shareholder's liability, if any, for federal
alternative minimum taxes ("AMT"). Distributions of interest income exempt for
federal income tax purposes may also be exempt under the tax laws of certain
individual states or localities if derived from obligations of such states or
localities. You may wish to consult your tax adviser concerning the status in
your state or locality of income dividends from the Tax Free Money Market Fund
and the Municipal Bond Fund, the impact, if any, of the AMT, and the possible
taxability of exempt-interest dividends for "substantial users" of facilities
financed by industrial revenue or certain private activity bonds.
If, as is anticipated, the International Fund or another Fund pays
withholding or other taxes to any foreign government during the year with
respect to its investment in foreign securities, such taxes paid (net of amounts
to be reclaimed) will reduce the Fund's dividends. If the International Fund
satisfies certain requirements of the Code, it may elect to pass through to you
your proportionate share of such foreign taxes that are treated as income taxes
under the Code, which would then be included in your taxable income. However,
you may be able to claim an offsetting credit or itemized deduction on your tax
return, subject to holding period requirements and certain limitations under
the Code. If this election is made, the Form 1099 you receive will indicate the
amount of foreign tax for which a credit or deduction may be available. Only the
International Fund may qualify to make this election. Please consult your tax
adviser if you have any questions.
If you invest in the Core Bond Fund or the Government Money Market Fund,
you should know that many states and local taxing authorities allow an exemption
from state or local income tax for distributions derived from interest received
by a fund from direct obligations of the U.S. Government, such as U.S. Treasury
obligations, or an exemption from intangible property taxes based on the extent
of a fund's investment in such direct U.S. Government obligations, subject in
some states to satisfaction of minimum holding thresholds and/or reporting
requirements. You may wish to consult your tax adviser concerning the possible
existence of such an exemption in the states and localities where you pay tax.
TAX WITHHOLDING AND CERTIFICATION
INSTRUCTIONS
Each Fund is required by federal law to withhold as "backup withholding"
31% of reportable payments (which may include income dividends (other than
exempt-interest dividends), capital gain distributions and, except for Funds
that maintain a constant net asset value per share, share redemption proceeds)
paid to individuals and other non-exempt shareholders who have not provided the
Fund with their correct social security number or other taxpayer identification
number (TIN) and certain certifications required by the IRS. In order to avoid
such withholding and possible penalties, you must certify under penalties of
perjury on your Application, or on a separate W-9 Form supplied by the Transfer
Agent, that the TIN you provide is your correct TIN (or that you have applied
for such a number and are waiting for it to be issued, in which case backup
withholding may apply until you provide your number and required certifications
to the Fund) and that you are not currently subject to backup withholding, or
you are exempt from backup withholding.
An individual's TIN is generally his social security number. Special rules
apply in determining the TIN an entity, including an exempt recipient, must
provide. Exempt recipients include corporations, tax exempt pension plans and
IRAs, govern mental agencies, financial institutions, registered securities and
commodities dealers and others. If you are unsure of the correct TIN to provide
or whether you are an exempt recipient, consult your tax adviser. A Fund may
nevertheless be required to impose backup withholding if it is notified by the
IRS or a broker that the TIN you have provided is incorrect or that you are
otherwise subject to such withholding. Any tax withheld may be credited against
taxes owed on your federal income tax return. For further information, see
Section 3406 of the Code and consult your tax adviser.
If you are not a U.S. person under the Code,
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<PAGE>
you should provide the Funds with an IRS Form W-8 to avoid backup withholding on
capital gain distributions and, except for Funds that maintain a constant net
asset value per share, redemption proceeds. You should consider the U.S. and
foreign tax consequences of your investment in a Fund, including the possible
applicability of a U.S. with holding tax at rates up to 30% on income dividends
paid to non-U.S. persons.
REINVESTMENT OF INCOME DIVIDENDS AND
CAPITAL GAIN DISTRIBUTIONS
Unless you elect otherwise, as permitted in the Account Application, income
dividends and capital gain distributions with respect to a particular Fund will
be reinvested in additional shares of that Fund and will be credited to your
account with that Fund at the net asset value per share next determined as of
the ex-dividend date. Both income dividends and capital gain distributions are
paid by the Fund on a per share basis. As a result, at the time of such payment,
the net asset value per share of the Funds (except the Core Bond Fund, the
Municipal Bond Fund, Government Money Market Fund and the Tax Free Money Market
Fund) will be reduced by the amount of such payment. Income dividends (other
than exempt-interest dividends of the Tax Free Money Market Fund or the
Municipal Bond Fund) and capital gain distributions are taxable to shareholders
of each Fund that are subject to federal income tax as described above,
regardless of whether they are taken in cash or reinvested in shares of the
Fund, unless the accounts of such shareholders are maintained as qualified
retirement plans, IRAs, SEP-IRAs and other tax-deferred plans or accounts or
such shareholders are otherwise exempt from federal income tax. Participants in
such retirement plans or accounts may be subject to tax on all or a portion of
their distributions from such plans or accounts under complex Code provisions
concerning which a tax adviser should be consulted. If you wish to change the
manner in which you receive income dividends and capital gains distributions,
your written notification of such change must be received by the Funds' Transfer
Agent at least ten days before the next scheduled distribution.
PORTFOLIO BROKERAGE
In effecting securities transactions, the Funds generally seek to obtain
the best price and execution of orders under the circumstances. Commission
rates are a component of price and are considered along with other factors,
including the ability of the broker-dealer to effect the transaction, and the
broker-dealer's facilities, reliability and financial responsibility. Subject to
the foregoing, the Funds intend to utilize WPG as their primary broker in
connection with the purchase and sale of ex change-traded portfolio securities.
As the Funds' primary broker, WPG will receive brokerage commissions from the
Funds, limited to the "usual and customary broker's commission" specified by the
1940 Act. The Funds intend to continue to use WPG as their primary broker-dealer
on exchange-traded securities, provided WPG is able to provide execution at
least as favorable as that provided by other qualified broker-dealers.
With respect to the International Fund, it is also contemplated that Lloyds
Bank Stockbrokers ("LBS"), a broker-dealer and an affiliate of HSAM, may serve
as a broker-dealer with respect to portfolio transactions effected on U.K.
securities ex changes and German securities exchanges, respectively, subject to
the limits specified by the 1940 Act, and provided further that LBS is able to
provide execution at least as favorable as that of other qualified
broker-dealers.
The Board of Trustees for each Fund has developed procedures to limit the
commissions received by WPG and LBS to the standard specified by the 1940 Act.
On a quarterly basis, each Fund's Board of Trustees reviews transactions of each
Fund with WPG and LBS to assure compliance with such procedures.
The Funds will also execute their portfolio transactions through qualified
broker-dealers other than WPG. In selecting such other broker-dealers, WPG will
also consider the quality and reliability of brokerage services, including
execution capability and performance and financial responsibility, and may
consider the research and other investment information provided by such
broker-dealers. Accordingly, the commissions paid to any such broker-dealer may
be greater than the amount another firm might charge, provided WPG deter mines
in good faith that the amount of such commission is reasonable in relation to
the value of the brokerage services and research information provided by such
broker-dealer. Such information may be used by WPG (and its affiliates) in
managing all
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of its accounts and not all of such information may be used by WPG in managing
the Funds. In selecting other broker-dealers for a Fund, WPG may also consider
the sale of shares of the Fund effected through such other broker-dealers as a
factor in the selection, provided the Fund obtains the best price and execution
of orders under the circumstances.
Money market securities and other fixed income securities in which the
Funds may invest are traded primarily in the over-the-counter ("OTC") market.
These securities generally trade on a net basis without the payment of brokerage
commissions but include a mark-up or "spread" by the securities broker-dealer.
For transactions effected in the OTC market, the Funds intend to deal with the
primary market-makers in the securities involved, unless a more favorable result
is obtainable elsewhere.
ORGANIZATION AND CAPITALIZATION
The Funds described in this Prospectus are separately managed investment
portfolios.
The Government Money Market Fund, the Tax Free Money Market Fund, the Core
Bond Fund, the Quantitative Equity Fund and the Municipal Bond Fund are each
separate portfolios of the Weiss, Peck & Greer Funds Trust ("WPG Funds Trust").
Each Fund in WPG Funds Trust represents a separate series of shares in the Trust
having different objectives, programs, policies, and restrictions. WPG Funds
Trust was organized as a business trust under the laws of the Commonwealth of
Massachusetts ("Massachusetts business trust") on September 11, 1985. Prior to
January 20, 1998, the Core Bond Fund was named WPG Government Securities Fund.
Each share of beneficial interest of each of these five Funds represents an
equal proportionate interest in that Fund with each other share in that Fund.
Each share of each of these five Funds is entitled to one vote on all matters
submitted to a vote of all shareholders of WPG Funds Trust, such as the election
of Trustees and ratification of the selection of auditors. Shares of a
particular Fund vote separately on matters affecting only that Fund, including
approval of an investment advisory agreement for a particular Fund and changes
in fundamental policies or restrictions of a particular Fund. WPG Funds Trust
is authorized to issue an unlimited number of full and fractional shares of
beneficial interest, having a par value of $.001 per share, in one or more
portfolios.
The Growth and Income Fund was organized as a Delaware corporation in
December 1966 and reorganized as a Massachusetts business trust on April 29,
1988. The Growth and Income Fund is authorized to issue an unlimited number of
full and fractional shares of beneficial interest, par value $1.00 per share.
The Tudor Fund was organized as a Delaware corporation in June 1968 and
reorganized as a Massachusetts business trust on April 29, 1988. The Tudor Fund
is authorized to issue an unlimited number of full and fractional shares of
beneficial interest, par value $.33 1/3 per share.
The International Fund was organized as a Massachusetts business trust on
January 24, 1989. The International Fund is authorized to issue an unlimited
number of full and fractional shares of beneficial interest, par value $.01 per
share.
The Growth Fund was organized as a Delaware corporation in October 1985 and
reorganized as a Massachusetts business trust on April 29, 1988. The Growth Fund
is authorized to issue an unlimited number of full and fractional shares of
beneficial interest, par value $.001 per share.
Each Fund, including each of the five Funds in WPG Funds Trust offered
through this Prospectus, currently issues one class of shares all of which have
equal rights with regard to voting, redemptions, dividends and distributions.
Each Fund, subject to the authorization by its Board of Trustees, is
authorized to issue multiple classes of shares which may in the future be
marketed to different types of investors. The Boards currently do not intend to
authorize the issuance of multiple classes of shares. In addition, subject to
approval by its Board of Trustees, each Fund may pursue its investment objective
by investing all of its investable assets in a pooled fund. See "Risk
Considerations and Other Investment Practices and Policies of the Funds" below.
Shares in each Fund, when issued, will be fully paid and nonassessable. The
shares in each Fund have no preemptive or conversion rights. In the event of
liquidation of a Fund, shareholders in that Fund are entitled to share pro rata
in that Fund's net assets available for distribution to shareholders.
Each Fund's activities are supervised by the Board of Trustees for that
Fund or, as appropriate, WPG Funds Trust. The Board of Trustees for each Fund
has overall responsibility for the management of the business of each Fund.
Shareholders in each Fund have one vote for each share held on matters
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as to which they are entitled to vote. The Funds are not required to hold and
have no current intention of holding annual shareholder meetings. Nevertheless,
special meetings may be called for purposes such as electing or removing
Trustees, changing fundamental policies, or approving an investment advisory
agreement. Shareholders will be assisted in communicating with other
shareholders in connection with removing a Trustee as if Section 16(c) of the
1940 Act were applicable. At May 31, 1998, Mac & Co., A/C #861-319, P.O. Box
320, Mellon Bank Mutual Funds, Pittsburgh, PA 15230-0320, owned more than 25% of
the then outstanding shares of the Growth Fund and, accordingly, was deemed to
control the Fund.
Although each Fund is offering only its own shares, since the Funds use a
combined Prospectus, it is possible that one Fund (or WPG Funds Trust) might
become liable for a misstatement or omission in this Prospectus regarding
another Fund. The Trustees for each Fund and WPG Funds Trust have considered
this factor in approving the use of a combined Prospectus.
RISK CONSIDERATIONS AND
OTHER INVESTMENT PRACTICES AND
POLICIES OF THE FUNDS
WRITING AND PURCHASING PUT AND CALL OPTIONS ON SECURITIES, STOCK INDICES, AND
CURRENCIES. To seek additional income or to seek to minimize anticipated
declines in the value of its securities, the Core Bond Fund, the Growth and
Income Fund, the Tudor Fund, the International Fund, the Growth Fund and the
Quantitative Equity Fund may each write (i.e., sell) call options on securities
and securities indices. The Core Bond Fund, the International Fund, the Tudor
Fund, the Growth Fund and the Quantitative Equity Fund may also write put
options on securities and securities indices. In addition, to earn additional
income or to seek to reduce risks associated with currency fluctuations, the
International Fund may purchase and sell call and put options on currencies. The
Tudor Fund, the International Fund, the Core Bond Fund, the Growth Fund and the
Quantitative Equity Fund may purchase call and put options on securities and
securities indices. These options may be traded on exchanges or in the OTC
markets.
In general, a call option on a security gives the holder (purchaser) the
right, in return for a premium paid, to buy and obligates the writer (seller) to
sell (if the option is exercised), the underlying security at the exercise price
during the option period. Conversely, a put option on a security gives the
holder the right, in return for a premium paid, to sell and obligates the writer
to purchase (if the option is exercised), the underlying security at the
exercise price during the option period. A call or put option on a currency
operates in a similar manner, except that delivery is made of the particular
currency. A securities index call or put option is, in economic effect, similar
to a call or put option on a security, except that the value of the option
depends on the weighted value of the group of securities comprising the
securities index, rather than a particular security, and settlements are made in
cash rather than by delivery of a particular security.
Although these investment practices will be used to seek to generate
additional income and to seek to reduce the effect of any adverse price move-
ment in the securities or currency subject to the option, they do involve
certain risks that are different in some respects from investment risks associ-
ated with similar funds which do not engage in such activities. These risks
include the following: for writing call options, the inability to effect closing
transactions at favorable prices and the inability to participate in the
appreciation of the underlying securities or currencies above the exercise
price; for writing put options, the inability to effect closing transactions at
favorable prices and the obligation to purchase the specified securities or
currencies or to make a cash settlement on the securities index at prices which
may not reflect current market values or exchange rates; and for purchasing call
and put options-possible loss of the entire premium paid. In addition, the
effectiveness of hedging through the purchase or sale of securities index
options, including options on the S&P 500 Index, will depend upon the extent to
which price movements in the portion of the securities portfolio being hedged
correlate with the price movements in the selected securities index. Perfect
correlation may not be possible because the securities held or to be acquired
by a Fund may not exactly match the composition of the securities index on which
options are written. If the forecasts of WPG or HSAM regarding movements in
securities prices, interest rates or currency exchange rates are incorrect, a
Fund's investment results may have been better without the hedge transactions.
The ability of
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the Funds to terminate OTC options is more limited than with exchange-traded
options and may involve the risk that broker-dealers participating in such
transactions will not fulfill their obligations. A more extensive description of
these investment practices and their associated risks is contained in the Funds'
SAI.
SPECIAL SITUATIONS AND EMERGING GROWTH COMPANIES. The Tudor Fund and Growth
Fund may invest in special situations. Special situations refer to unusual and
possibly unique developments for a company which may create a special
opportunity for significant returns. Smaller, less well-known companies are
often more likely to present special situation investment opportunities;
however, such opportunities may also exist in larger, well-capitalized
companies. Since every special situation involves a departure from past
experience, uncertainties in the appraisal of the particular special situation
company's future value and the risk of possible loss tend to be greater than
with an investment in a well-established company carrying on business according
to long-established patterns. On the other hand, if an investment in a special
situation is made at the appropriate time and the anticipated development does
materialize, greater than average appreciation may be achieved by the Fund.
The Growth Fund may also invest in emerging growth companies. An emerging
growth company may be a smaller company (I.E., normally, a company having a
capitalization of $1 billion or less), a less well-known company, or a company
that has been in business for less than three years and offers superior growth
potential. While investment in emerging growth companies can provide opportu-
nities for rapid capital growth, it may also involve greater risk than is
customarily associated with investment in more established companies. Emerging
growth companies often have limited product lines, and lack established markets,
depth of experienced management, or the ability to generate necessary funds.
The securities of such companies may have limited marketability and may be
subject to greater price volatility than securities of larger companies or the
market averages in general.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To seek to hedge against
changes in interest rates, securities prices or currency exchange rates or for
non-hedging purposes, a Fund, subject to its investment objectives and policies,
may purchase and sell various kinds of futures contracts, and purchase and write
call and put options on any of such futures contracts. A Fund may also enter
into closing purchase and sale transactions with respect to any of such
contracts and options. The futures contracts may be based on various securities
(such as U.S. Government securities), securities indices, foreign currencies and
other financial instruments and indices. A Fund will not enter into futures
contracts or options thereon for non-hedging purposes if, immediately
thereafter, the aggregate initial margin and premiums required to establish
non-hedging positions in futures contracts and options on futures will exceed 5%
of the net asset value of the Fund's portfolio, after taking into account
unrealized profits and losses on any such positions and excluding the amount by
which such options were in-the-money at the time of purchase.
The use of futures contracts entails certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of the Fund's income due to
the use of hedging; possible reduction in value of both the securities hedged
and the hedging instrument; possible lack of liquidity due to daily limits on
price fluctuations; imperfect correlation between the contract and the
securities being hedged; and potential losses in excess of the amount initially
invested in the futures contracts themselves. If the expectations of WPG
regarding movements in securities prices, interest rates or currency exchange
rates are incorrect, the Fund may have experienced better investment results
without hedging. The use of futures contracts and options on futures contracts
requires special skills in addition to those needed to select portfolio
securities. A further discussion of futures contracts and their associated risks
is contained in the Funds' SAI.
SECURITIES OF FOREIGN ISSUERS. Subject to each Fund's investment objective,
investment program, policies and restrictions, each Fund (other than Core Bond
Fund, Municipal Bond Fund and Tax Free Money Market Fund) may invest in certain
types of U.S. dollar-denominated securities of foreign issuers. With respect to
certain foreign securities, the Funds may purchase ADRs, EDRs, GDRs and IDRs.
ADRs are U.S. dollar-denominated certificates issued by a U.S. bank or trust
company and represent the right to receive securities of a foreign
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issuer deposited in a domestic bank or foreign branch of a U.S. bank. EDRs, GDRs
and IDRs are receipts issued in Europe, generally by a non-U.S. bank or trust
company, and evidence ownership of non-U.S. securities. ADRs are traded on
domestic exchanges or in the U.S. OTC market and, generally, are in registered
form. EDRs, GDRs and IDRs are traded on non-U.S. exchanges or in non-U.S. OTC
markets and, generally, are in bearer form. Investments in ADRs have certain
advantages over direct investment in the underlying non-U.S. securities because
(i) ADRs are U.S. dollar-denominated investments which are registered
domestically, easily transferable, and for which market quotations are readily
available, and (ii) issuers whose securities are represented by ADRs are
subject to the same auditing, accounting and financial reporting standards as
domestic issuers. To the extent a Fund acquires ADRs through banks which do not
have a contractual relationship with the foreign issuer of the security
underlying the ADR to issue and service such ADRs, there may be an increased
possibility that the Fund would not become aware of and be able to respond to
corporate actions such as stock splits or rights offerings involving the foreign
issuer in a timely manner.
In addition, the Growth and Income Fund, Tudor Fund, Growth Fund and
International Fund may invest in securities denominated in foreign currencies
("foreign denominated securities") in accordance with their specific investment
objectives, investment programs, policies and restrictions. Investing in foreign
denominated securities may involve advantages and disadvantages not present in
domestic investments. International diversification of a Fund's portfolio may
lower overall risk to the extent that it lessens the portfolio's susceptibility
to adverse conditions unique to domestic markets, while simultaneously expanding
investment opportunities. There may, however, be less publicly available
information about securities not registered domestically, or their issuers, than
is available about domestic issuers or their domestically registered securities.
Stock markets outside the U.S. may not be as developed as domestic markets, and
there may also be less government supervision of foreign exchanges and brokers.
Foreign denominated securities may be less liquid or more volatile than U.S.
securities. Trade settlements may be slower and could possibly be subject to
failure. In addition, brokerage commissions and custodial costs with respect to
foreign denominated securities may be higher than those for domestic
investments. Accounting, auditing, financial reporting, and disclosure
standards for foreign issuers may be different than those applicable to domestic
issuers. Foreign denominated securities may be affected favorably or unfavorably
by changes in currency exchange rates and exchange control regulations
(including currency blockage) and a Fund using such securities may incur costs
in connection with conversions between various currencies. Foreign denominated
securities may also involve risks due to changes in the political or economic
conditions of such foreign countries, the possibility of expropriation of assets
or nationalization, and possible difficulty in obtaining and enforcing
judgments against foreign entities.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Currency transactions may be utilized
by the Growth and Income Fund, Tudor Fund, Growth Fund and International Fund,
in connection with their purchase and sale of foreign currency denominated
securities. Such currency transactions may be either: (i) on the spot (I.E.,
cash) basis at the spot rate prevailing in the foreign exchange market, or (ii)
conducted through the use of forward foreign currency exchange contracts
("forward currency contracts"). A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the forward currency contract as
agreed upon by the parties, at a price set at the time of the contract. Forward
currency contracts are principally traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers and are not guaranteed by a third party. Accordingly, each party to a
forward currency contract is dependent upon the creditworthiness and good faith
of the other party.
The Funds will enter into forward currency contracts only under two
circumstances. First, when a Fund enters into a contract to purchase or sell a
foreign denominated security, the Fund may be able to protect itself against a
possible loss between the trade date and settlement date for such security
resulting from a decline in the U.S. dollar against the foreign currency in
which such security is denominated by entering into a forward currency contract
in U.S. dollars for the purchase or sale of the amount of
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the foreign currency involved in the underlying security transaction. This
practice may limit the potential gains that might result from a positive change
in such currency relationships. Second, if WPG, or HSAM in the case of the
International Fund, believes that the value of currency of a particular foreign
country may depreciate or appreciate substantially relative to the U.S. dollar
(or other currency), each Fund may enter into a forward currency contract to
sell or buy an amount of foreign currency approximating the value of some or all
of that Fund's portfolio securities denominated in such foreign currency. The
forecasting of short-term currency market movements is extremely difficult and
it is uncertain whether such short-term hedging strategies will be successful.
EURODOLLAR AND YANKEE DOLLAR INVESTMENTS. Certain Funds may invest in
obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of
foreign banks (Yankee dollars) as well as foreign branches of foreign banks.
These investments involve risks that are different from investments in
securities of U.S. banks, including potential unfavorable political and
economic developments, different tax provisions, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions which
might affect payment of principal or interest.
MUNICIPAL SECURITIES. Certain Funds, and in particular the Tax Free Money
Market Fund and the Municipal Bond Fund, may invest in municipal securities.
Municipal securities include bonds, notes and other instruments issued by or on
behalf of states, territories and possessions of the United States (including
the District of Columbia) and their political subdivisions, agencies or
instrumentalities, the interest on which is, in the opinion of bond counsel for
the issuers (when available), excluded from gross income for federal income tax
purposes, i.e. exempt from regular federal income tax. The two principal
classifications of municipal bonds are "general obligations" and "revenue
obligations." General obligations are secured by the issuer's pledge of its full
faith and credit for the payment of principal and interest, although the
characteristics and enforcement of general obligations may vary according to the
law applicable to the particular issuer. Revenue obligations are not backed by
the credit and taxing authority of the issuer, but are payable solely from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source. In addition, revenue obligations may be backed by a letter of credit,
guarantee or insurance. Revenue obligations include private activity bonds,
resource recovery bonds, certificates of participation and certain municipal
notes.
A Fund may invest in variable, floating rate and other municipal securities
on which the interest may fluctuate based on changes in market rates. The
interest rates payable on variable rate securities are adjusted at designated
intervals (e.g., daily, monthly, semi-annually) and the interest rates pay able
on floating rate securities are adjusted when ever there is a change in the
market rate of interest on which the interest payable is based. The interest
rate on variable and floating rate securities is ordinarily determined by
reference to or is a percentage of a bank's prime rate, the 90-day U.S. Treasury
bill rate, the rate of return on commercial paper or bank certificates of
deposit, an index of short-term interest rates, or some other objective measure.
The value of floating and variable rate securities generally is more stable
than that of fixed rate securities in response to changes in interest rate
levels. A Fund may consider the maturity of a variable or floating rate
municipal security to be shorter than its ultimate maturity if that Fund has the
right to demand prepayment of its principal at specified intervals prior to the
security's ultimate maturity.
Funds that may invest in municipal securities may invest in municipal
leases and certificates of participation in municipal leases. A municipal lease
is an obligation in the form of a lease or installment purchase which is issued
by a state or local government to acquire equipment and facilities. Certificates
of participation represent undivided interests in municipal leases, installment
purchase agreements or other instruments. The certificates are typically issued
by a trust or other entity which has received an assignment of the payments to
be made by the state or political subdivision under such leases or installment
purchase agreements. The primary risk associated with municipal lease
obligations and certificates of participation is that the governmental lessee
will fail to appropriate funds to enable it to meet its payment obligations
under the lease. Although the obligations may be secured by the leased equipment
or facilities, the disposition of the property in the event of
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nonappropriation or foreclosure might prove difficult, time consuming and
costly, and may result in a delay in recovering, or the failure to fully
recover, the Fund's original investment. To the extent that a Fund invests in
unrated municipal leases or participates in such leases, the Adviser will
monitor on an ongoing basis the credit quality rating and risk of cancellation
of such unrated leases. Certain municipal lease obligations and certificates of
participation may be deemed illiquid for the purposes of the Funds' 15%
limitation on investments in illiquid securities.
ZERO COUPON AND CAPITAL APPRECIATION BONDS. Funds that may invest in debt
securities may invest in zero coupon and capital appreciation bonds. Zero coupon
and capital appreciation bonds are debt securities issued or sold at a discount
from their face value that do not entitle the holder to any payment of interest
prior to maturity or a specified redemption date (or cash payment date). The
amount of the discount varies depending on the time remaining until maturity or
cash payment date, prevailing interest rates, the liquidity of the security and
the perceived credit quality of the issuer. These securities also may take the
form of debt securities that have been stripped of their unmatured interest
coupons, the coupons themselves or receipts or certificates representing
interests in such stripped debt obligations or coupons. A portion of the
discount with respect to stripped tax-exempt securities or their coupons may be
taxable. The market prices of zero coupon and capital appreciation bonds
generally are more volatile than the market prices of interest-bearing
securities and are likely to respond to a greater degree to changes in interest
rates than interest-bearing securities having similar maturities and credit
quality.
A Fund may also invest in municipal securities in the form of notes which
generally are used to provide for short-term capital needs in anticipation of an
issuer's receipt of other revenues or financing, and typically have maturities
of up to three years. Such instruments may include tax anticipation notes,
revenue anticipation notes, bond anticipation notes and construction loan notes.
The obligations of an issuer of municipal notes are generally secured by the
anticipated revenues from taxes, grants or bond financing. An investment in such
instruments, however, presents a risk that the anticipated revenues will not be
received or that such revenues will be insufficient to satisfy the issuer's
payment obligations under the notes or that refinancing will be otherwise
unavailable.
Funds that may invest in municipal securities may invest in "pre-refunded
tax-exempt bonds" and "escrowed tax-exempt bonds." Pre-refunded tax-exempt bonds
and escrowed tax-exempt bonds are issued originally as general obligation or
revenue bonds of governmental entities, but are now secured until the call date
or maturity by an escrow fund consisting entirely of U.S. Government obligations
that are sufficient for paying the bondholders. A new issue of refunding bonds
is brought to the market and the proceeds are placed into an escrow account to
defease and, at a future date, to retire the old issue. The escrow account is
typically invested in direct U.S. Treasury obligations, other U.S. Government
securities or a combination of these securities. The principal and interest flow
through the escrow account to pay the investor the debt service on the refunded
or escrowed municipal bond.
REAL ESTATE INVESTMENT TRUSTS. Certain Funds may invest in shares of real estate
investment trusts ("REITs"). REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Funds, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Code. Funds that invest in REITs will indirectly bear their
proportionate share of any expenses paid by such REITs in addition to the
expenses paid by the Funds.
Investing in REITs involves certain risks: equity REITs may be affected by
changes in the value of the underlying property owned by the REITs, while
mortgage REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified, and are subject to the
risks of financing projects. REITs are subject to heavy cash flow
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dependency, default by borrowers, self-liquidation, and the possibilities of
failing to qualify for the exemption from tax for distributed income under the
Code and failing to maintain their exemptions from the 1940 Act. REITs whose
underlying assets include long-term health care properties, such as nursing,
retirement and assisted living homes, may be impacted by federal regulations
concerning the health care industry.
Investing in REITs may involve risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P 500.
U.S. GOVERNMENT SECURITIES. U.S. Government securities are either (i) backed by
the full faith and credit of the U.S. Government (e.g., U.S. Treasury bills),
(ii) guaranteed by the U.S. Treasury (e.g., Ginnie Mae mortgage-backed
securities), (iii) supported by the issuing agency's or instrumentality's right
to borrow from the U.S. Treasury (e.g., Federal National Mortgage Association
("Fannie Mae") discount notes) or (iv) supported only by the issuing agency's or
instrumentality's own credit (e.g.. securities of each of the Federal Home Loan
Banks). Such guarantees of U.S. Government securities held by a Fund do not, how
ever, guarantee the market value of the shares of the Fund. There is no
guarantee that the U.S. Government will continue to provide support to its
agencies or instrumentalities in the future.
MORTGAGE-BACKED SECURITIES. Certain Funds, and in particular the Government
Money Market Fund and the Core Bond Fund may invest in mortgage pass-through
certificates and multiple-class pass-through securities, such as real estate
mortgage investment conduits ("REMIC") pass-through certificates and
collateralized mortgage obligations ("CMOs").
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and guaranteed by
the U.S. Government or one of its agencies or instrumentalities, including but
not limited to the Ginnie Mae, Fannie Mae and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the U.S. Government for timely payment of principal and
interest on the certificates. Fannie Mae certificates are guaranteed by Fannie
Mae, a federally chartered and privately owned corporation, for full and timely
payment of principal and interest on the certificates. Freddie Mac certificates
are guaranteed by Freddie Mac, a corporate instrumentality of the U.S. Govern-
ment, for timely payment of interest and the ultimate collection of all
principal of the related mortgage loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
lenders. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs
is provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code
and invests in certain mortgages primarily secured by interests in real
property and other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts although the
Funds do not intend to invest in residual interests.
RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed income securities. The major differences typically include
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more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be pre-
dicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities not withstanding any direct or indirect
governmental or agency guarantee. When a Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. Government securities as a means of "locking in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment
rate will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates. The market for certain types of
Mortgage-Backed Securities (I.E., certain CMOs) may not be liquid under all
interest rate scenarios, which may prevent a Fund from selling such securities
held in its portfolio at times or prices that it desires.
RISKS ASSOCIATED WITH SPECIFIC TYPES OF DERIVATIVE DEBT SECURITIES. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage- Backed Securities.
Planned amortization class ("PAC") and target amortization class ("TAC")
CMO bonds involve less exposure to prepayment, extension and interest rate risk
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risk
associated with the underlying mortgage assets.
ASSET-BACKED SECURITIES. Certain Funds, and in particular the Government Money
Market Fund, Core Bond Fund and Growth and Income Fund, may invest in
asset-backed securities, which represent participations in, or are secured by
and payable from, pools of assets such as motor vehicle installment sale
contracts, installment loan contracts, leases of various types of real and
personal property, receivables from revolving credit (credit card) agreements
and other categories of receivables. Asset-backed securities may also be
collateralized by a portfolio of U.S. Government securities, but are not direct
obligations of the U.S. Government, its agencies or instrumentalities. Such
asset pools are securitized through the use of privately-formed trusts or
special purpose corporations. Payments or distributions of principal and
interest on asset-backed securities may be guaranteed up to certain amounts and
for a certain time period by a letter of credit or a pool insurance policy
issued by a financial institution unaffiliated with the trust or corporation, or
other credit enhancements may be present; however privately issued obligations
collateralized by a portfolio of privately issued asset-backed securities do not
involve any government-related guarantee or insurance. In addition to risks
similar to those associated with Mortgage-Backed Securities, asset-backed
securities present further risks that are not presented by Mortgage-Backed
Securities because asset-backed securities generally do not have the benefit of
a security interest in collateral that is comparable to mortgage assets.
CONVERTIBLE SECURITIES AND PREFERRED STOCKS. Certain Funds may invest in debt
securities or preferred stocks that are convertible into or exchangeable for
common stock. Preferred stocks are securities that represent an ownership
interest in a company and provide their owner with claims on the company's
earnings and assets prior to the claims of owners of common stock but after
those of bond owners. Preferred stocks in which the Funds may invest include
sinking fund,
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convertible, perpetual fixed and adjustable rate (including auction rate)
preferred stocks. There is no mini mum credit rating applicable to a Fund's
investment in preferred stocks and securities convertible into or exchangeable
for common stocks.
RISK FACTORS OF LOWER RATED DEBT SECURITIES. The Growth and Income Fund, Growth
Fund and Tudor Fund may invest in debt securities rated as low as B by Moody's
or B by S&P (and comparable unrated securities) (commonly known as "junk
bonds"). These securities are considered speculative and, while generally
providing greater income than investments in higher rated securities, will
involve greater risk of loss of principal and income (including the possibility
of default or bankruptcy of the issuers of such securities) and may involve
greater volatility of price (especially during periods of economic uncertainty
or change) than securities in the higher rating categories. However, since
yields vary over time, no specific level of income can ever be assured. These
lower rated, high yielding debt securities generally tend to be affected by
economic changes and short-term corporate and industry developments to a greater
extent than higher rated securities, which react primarily to fluctuations in
the general level of interest rates. (These lower rated securities are also
affected by changes in interest rates as described below.) These debt securities
will also be affected by the market's perception of their credit quality
(especially during times of adverse publicity) and the outlook for economic
growth. In the past, economic downturns or an increase in interest rates have,
under certain circumstances, caused a higher incidence of default by the issuers
of these securities and may do so in the future, especially in the case of
highly leveraged issuers. The market for these lower rated debt securities may
be less liquid than the market for investment grade fixed income securities.
There fore, judgment may at times play a greater role in valuing these
securities than in the case of investment grade debt securities, and it also
may be more difficult during certain adverse market conditions to sell these
lower rated securities to meet redemption requests or to respond to changes in
the market. The value of fixed-income securities in the Funds' portfolios
generally varies inversely with changes in interest rates.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Fund may purchase
securities on a when-issued, delayed delivery, or forward commitment basis.
When such transactions are negotiated, the price of such securities is fixed at
the time of the commitment, but delivery and payment for the securities may take
place up to 90 days after the date of the commitment to purchase. The securities
so purchased are subject to market fluctuation, and no interest accrues to the
purchaser during this period. When-issued securities or forward commitments
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date. When a Fund purchases securities on a forward
commitment or when-issued basis, the Fund's custodian will maintain in a
segregated account cash or liquid securities having a value (determined daily)
at least equal to the amount of the Fund's purchase commitment. A Fund may
close-out a position in securities purchased on a when-issued, delayed delivery
or forward commitment basis prior to the settlement date.
LENDING OF PORTFOLIO SECURITIES. Subject to its investment policies and
restrictions, each Fund may also seek to increase its income by lending
portfolio securities. Such loans may be made to institutions, such as certain
broker-dealers, and are required to be secured continuously by collateral in
cash, cash equivalents, or U.S. Government securities maintained on a current
basis at an amount at least equal to the market value of the securities loaned.
If WPG determines to make securities loans, the value of the securities loaned
would not exceed 33 1/3% of the value of the total assets of the Fund. A Fund
may experience a loss or delay in the recovery of its securities if the
borrowing institution breaches its agreement with the Fund.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets (10% of
total assets in the case of the Government Money Market Fund and the Tax Free
Money Market Fund) in illiquid investments, which includes repurchase agreements
maturing in more than seven days, securities that are not readily marketable,
certain over-the-counter options and restricted securities, unless the Adviser
determines in accordance with procedures approved by the Board of Trustees that
such restricted securities are liquid. The Board of Trustees has adopted
guidelines and
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delegated to WPG the daily function of determining and monitoring liquidity of
restricted securities. The Board, however, retains sufficient oversight and is
ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how the market for restricted securities sold and
offered under Rule 144A under the Securities Act of 1933 will develop, the Board
of Trustees monitors each Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing
the level of illiquidity in a Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these restricted securities.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Core Bond Fund may enter into mortgage
dollar roll transactions in which the Fund sells securities for delivery in the
current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity), but not identical
securities on a specified future date. During the roll period, the Core Bond
Fund will not receive principal and interest paid on the securities sold.
However, the Fund would benefit to the extent of any difference between the
price received for the securities sold and the lower forward price for the
future purchase (often referred to as the "drop") or fee income plus the
interest on the cash proceeds of the securities sold until the settlement date
of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the Core Bond Fund
compared with what such performance would have been without the use of mortgage
dollar rolls. The Core Bond Fund will hold and maintain in a segregated account
until the settlement date cash or liquid, high grade debt securities in an
amount equal to the forward purchase price. Any benefits derived from the use of
mortgage dollar rolls may depend upon mortgage prepayment assumptions, which
will be affected by changes in interest rates. There is no assurance that
mortgage dollar rolls can be successfully employed.
REPURCHASE AGREEMENTS. Subject to its investment policies and restrictions, each
Fund may utilize repurchase agreements through which the Fund may purchase a
security (the "underlying security") from a domestic securities dealer or bank
that is a member of the Federal Reserve System. Under the agreement, the seller
of the repurchase agreement (I.E., the securities dealer or bank) agrees to
repurchase the underlying security at a mutually agreed upon time and price. In
repurchase transactions, the underlying security, which must be a high-quality
debt security, is held by the Fund's custodian through the federal book-entry
system as collateral and marked-to-market on a daily basis to ensure full
collateralization of the repurchase agreement. For the Government Money Market
Fund and the Tax Free Money Market Fund, the underlying security must be either
a U.S. Government security or a security rated in the highest rating category by
the Requisite NRSROs. In the event of bankruptcy or default of certain sellers
of repurchase agreements, the Funds could experience costs and delays in
liquidating the underlying security held as collateral and might incur a loss if
such collateral declines in value during this period.
MARKET CHANGES. The market value of the Funds' investments, and thus the Funds'
net asset values, will change in response to market conditions affecting the
value of its portfolio securities. When interest rates decline, the value of
fixed rate obligations can be expected to rise. Conversely, when interest
rates rise, the value of fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate loans are reset periodically,
yields on investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
DIVERSIFICATION. All the Funds are diversified, as defined in the 1940 Act. As
such, each Fund has a fundamental policy that limits its investments so that,
with respect to 75% of its total assets, (i) no more than 5% of that Fund's
total assets will be invested in the securities of a
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single issuer and (ii) each will purchase no more than 10% of the outstanding
voting securities of a single issuer. These limitations do not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or repurchase agreements collateralized by U.S. Government
securities. In addition, the Government Money Market Fund and the Tax Free Money
Market Fund will limit their investment in any one issuer of securities that has
received less than the highest rating from the Requisite NRSROs (I.E., Second
Tier Securities) to no more than 1% of each Fund's total assets and will comply
with the diversification requirements applicable to money market funds.
PORTFOLIO TURNOVER. Although no Fund purchases securities with a view to rapid
turnover, there are no limitations on the length of time that securities must be
held by any Fund and a Fund's annual portfolio turnover rate may vary
significantly from year to year. A high rate of portfolio turnover (100% or
more) involves correspondingly greater transaction costs which must be borne by
the applicable Fund and its shareholders. The actual portfolio turnover rates
for each Fund for the year ended December 31, 1997 are noted in the "Financial
Highlights" section of this Prospectus.
CERTAIN OTHER POLICIES TO REDUCE RISK. Each Fund has adopted certain fundamental
investment policies in managing its portfolio that are designed to reduce risk.
No Fund will (i) invest more than 25% of its total assets in securities of
companies in the same industry, except that the Government Money Market and Tax
Free Money Market Funds may invest a greater percentage in bank and bank holding
companies and the Quantitative Equity Fund may invest more of its total assets
in securities of issuers in the same industry to the extent that the optimal
portfolio derived from the S&P 500 Index is also so concentrated, (ii) issue
senior securities except as permitted by the 1940 Act or borrow money except for
certain temporary or emergency purposes and then not in excess of 33% of its
assets; (iii) engage in underwriting securities of others except to the extent a
Fund may be deemed to be an underwriter in purchasing and selling portfolio
securities; (iv) purchase real estate except that a Fund may acquire office
space for its principal office and may invest in securities representing
interests in real estate or companies engaged in the real estate business and
Municipal Bond Fund may acquire real estate as a result of ownership of
securities; (v) make loans except that a Fund may lend its portfolio securities
and enter into repurchase agreements; or (vi) invest in commodities or
commodities contracts other than financial futures contracts, options on futures
and forward commitment and when-issued securities. The Municipal Bond Fund will
not invest 25% or more of its total assets in securities issued in any one
state, territory or possession of the United States (except U.S. Government
securities and securities the payment of which is secured by U.S. Government
securities). To the extent that a Fund concentrates its investments in one or
more industries, the Fund may be more susceptible to factors affecting those
industries than are Funds not so concentrated. See the Funds' SAI for further
information concerning its investment policies and restrictions.
OTHER INVESTMENT COMPANIES. The shareholders of each Fund have approved a
fundamental policy authorizing each Fund, subject to authorization by its Board
of Trustees, and notwithstanding any other investment restriction, to invest all
of its assets in the securities of a single open-end investment company (a
"pooled fund"). If authorized by its Board, a Fund would seek to achieve its
investment objective by investing in a pooled fund which would invest in a
portfolio of securities that complies with the Fund's investment objective,
policies and restrictions. The Boards currently do not intend to authorize
investing in pooled funds.
Each Fund (other than Government Money Market Fund and Tax Free Money
Market Fund) may invest up to 10% of its total assets in the securities of other
investment companies. For example, the Quantitative Equity Fund may invest in
Standard & Poor's Depositary Receipts (commonly referred to as "Spiders"),
which are exchange-traded shares of a closed-end investment company that are
designed to replicate the price performance and dividend yield of the Standard &
Poor's 500 Composite Stock Price Index. The Intermediate Municipal Bond Fund
will only invest in investment companies that are money market funds which
invest in municipal obligations. A Fund will indirectly bear its proportionate
share of any management fees and other expenses paid by invest-
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ment companies in which it invests in addition to the advisory and
administration fees paid by the Fund.
FURTHER INFORMATION. Each Fund's investment program is subject to further
restrictions as described in the SAI. Each Fund's investment objectives and
investment program, unless otherwise specified, are not fundamental and may be
changed without shareholder approval by the Board of Trustees of each Fund. If
there is a change in a Fund's investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their current
financial position and needs.
THE FUNDS' INVESTMENT PERFORMANCE
Each Fund may illustrate in advertisements and sales literature its average
annual total return, which is the rate of growth of the Fund that would be
necessary to achieve the ending value of an investment kept in the Fund for the
period specified and is based on the following assumptions: (1) all dividends
and distributions by the Fund are rein vested in shares of the Fund at net asset
value; and (2) all recurring fees are included for applicable periods.
Each Fund may also illustrate in advertisements its cumulative total return
for several time periods throughout the Fund's life based on an assumed initial
investment of $1,000. Any such cumulative total return for each Fund will assume
the rein vestment of all income dividends and capital gains distributions for
the indicated periods and will include all recurring fees.
The Government Money Market Fund and the Tax Free Money Market Fund each
may illustrate in advertisements and sales literature its current yield and
effective yield. Current yield quotations of each of these Funds are based on
that Fund's investment income, less expenses, for a seven-day period. To
calculate the current yield quotations, this income is annualized, by assuming
that the amount of income generated during that seven-day period is generated
each week over a one-year period, and expressed as a percentage of the
investment. The effective yield for each of these Funds is calculated similarly
but, when annualized, income earned from an investment is assumed to be
reinvested. Effective yield for each of these Funds will be slightly higher than
its current yield because of the compounding effect of this assumed
reinvestment. The Tax Free Money Market Fund and the Municipal Bond Fund may
also illustrate a tax equivalent yield that compares the yield on a tax free
investment to the yield on a taxable investment. See the SAI for a sample of tax
able equivalent yields.
The Core Bond Fund and the Municipal Bond Fund each may also illustrate in
advertisements and sales literature its yield and effective yield. Yield for
each of these Funds is based on income generated by an investment in the Fund
during a 30-day (or one-month) period. To calculate yield, this income is
annualized, that is, the amount of income generated during the 30-day (or
one-month) period is assumed to be generated each 30-day (or one-month) period
over a one-year period, and expressed as an annual percentage rate. Effective
yield for these Funds is calculated in a similar manner but, when annualized,
the income earned from an investment is assumed to be reinvested. Effective
yield for each of these Funds will be slightly higher than its current yield
because of the compounding effect of this assumed reinvestment. For additional
information on the WPG Funds or for daily Fund prices, please call
1-800-223-3332.
The following table sets forth the historical total return performance of
all fee paying, domestic core bond portfolios under discretionary management by
the Adviser that have substantially similar investment objectives, policies and
strategies as the Core Bond Fund (the "Core Bond Portfolios") as measured by the
WPG Domestic Core Bond Composite (the "Composite"). As of December 31, 1997,
the composite consisted of 3 portfolios representing approximately $600 million
in assets. The performance data of the Core Bond Portfolios, as represented by
the Composite, has been computed in accordance with the SEC's standardized
formula. Because the gross performance data does not reflect the deduction of
investment advisory fees attributable to the Core Bond Portfolios, the net
performance data may be more relevant to potential investors in the Fund in
their analysis of the historical experience of the Adviser in managing domestic
core bond portfolios with investment objectives, policies and strategies
substantially similar to those of the Fund. The net performance data assumes
that the Core Bond Portfolios incurred fees and
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expenses of 0.50% per year, which exceeds the actual amounts incurred by such
portfolios and is equal to the expense limitation voluntarily agreed to by the
Adviser with respect to the Fund. The fees and expenses paid by the Core Bond
Portfolio generally differ in type and amount to varying extents from the fees
and expenses paid by the Core Bond Fund, which will affect the relevance of the
performance presented in the Composite to investors in the Core Bond Fund.
WPG DOMESTIC CORE BOND
COMPOSITE PERFORMANCE
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1997
THE COMPOSITE 1 YEAR 2.5 YEARS
------------- ------ ---------
Equal Weighted
(Gross) 10.29% 8.16%
Equal Weighted
(Net) 9.79% 7.66%
The performance of the Core Bond Portfolios is not that of the Core Bond
Fund or any other Fund, and is not necessarily indicative of the Core Bond
Fund's future results. (The Core Bond Fund's performance is set forth below.)
The Core Bond Fund's actual total return may vary significantly from the past
and future performance of these Core Bond Portfolios. Although the Adviser has
man aged Core Bond Portfolios for periods prior to June 30, 1995, the Adviser
considers its performance record for Core Bond Portfolios achieved prior to such
date to be of less relevance to potential investors in the Core Bond Fund
because of differences in personnel on the Adviser's domestic core bond
portfolio team. While the Core Bond Portfolios incur inflows and outflows of
cash from clients, they do so less frequently than mutual funds, such as the
Funds. Accordingly, there can be no assurance that the continuous offering of
the Core Bond Fund's shares and the Core Bond Fund's obligation to redeem its
shares will not impact the Core Bond Fund's performance relative to the
Composite's performance. In the opinion of the Adviser, so long as the Core Bond
Fund has at least $25 million in net assets, the relative difference in the size
between the Core Bond Fund and the Core Bond Portfolios should not affect the
relevance of the performance of the Core Bond Portfolios to a potential investor
in the Core Bond Fund. Investment returns and the net asset value of shares of
the Core Bond Fund will fluctuate in response to market and economic conditions
as well as other factors and an investment in the Core Bond Fund involves the
risk of loss.
WPG CORE BOND FUND
PERFORMANCE(1)
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED
DECEMBER 31, 1997
1 YEAR 2.5 YEARS 5 YEARS 10 YEARS
------ --------- ------- --------
7.37% 6.37% 4.67% 7.54%
- ------------------
(1) Prior to January 20, 1998, the Core Bond Fund was subject to different
investment policies than those described in this prospectus which different
policies may affect the Core Bond Fund's performance.
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<PAGE>
THIS PAGE LEFT INTENTIONALLY BLANK.
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SUPPLEMENT DATED SEPTEMBER 1, 1998
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1998, AS REVISED SEPTEMBER 1, 1998, OF
WEISS, PECK & GREER, L.L.C.
MUTUAL FUNDS
WPG Government Money Market Fund
WPG Tax Free Money Market Fund
WPG Intermediate Municipal Bond Fund
WPG Core Bond Fund
WPG Growth and Income Fund
WPG Tudor Fund
Weiss, Peck & Greer International Fund
WPG Growth Fund
WPG Quantitative Equity Fund
------------------------------------------------
Weiss, Peck & Greer, L.L.C. ("WPG"), the investment adviser to the
above-referenced funds (the "Funds"), has entered into an agreement pursuant to
which Robeco Groep N.V., a Dutch public limited liability company ("Robeco"),
will acquire all of the outstanding equity interests of WPG from its prior
owners (the "Acquisition"). In connection with the Acquisition, a majority of
the outstanding voting securities of each Fund approved a new investment
advisory agreement with WPG at a joint meeting of shareholders held on July 29,
1998. At the same meeting, a majority of the outstanding voting securities of
Weiss, Peck & Greer International Fund approved a new investment subadvisory
agreement with that Fund's subadviser, Hill Samuel Asset Management Limited.
Although the Acquisition is not expected to be consummated until September 9,
1998, the attached Statement of Additional Information ("SAI") describes the
Acquisition as consummated. Accordingly, the following changes are made to the
SAI until the Acquisition is consummated:
The following disclosure replaces the second and third paragraph of the
subsection titled "Investment Adviser" of the section titled "ADVISORY,
SUBADVISORY AND ADMINISTRATIVE SERVICES," on pages 32-33 of the SAI:
On April 3, 1995, Weiss, Peck & Greer, the Funds' prior investment
adviser and administrator, was converted from a New York limited
partnership to a limited liability company organized under Delaware
law. The conversion did not result in any changes in the existing
ownership, structure or business of the firm. The conversion did not
involve an increase in the advisory fee paid by any Fund and did not
result in a change in the employees, services and resources utilized in
managing the Funds' investments.
<PAGE>
The Funds' investment advisory agreements (the "Advisory Agreements")
were initially approved by the Boards, including a majority of the
Trustees of the Funds who are not parties to such agreements or
"interested persons" (as such term is defined in the 1940 Act) of any
party thereto (the "non-Interested Trustees"), on January 20, 1993 and
became effective May 1, 1993. On April 22, 1998, the Boards approved
the continuation of the Advisory Agreements until April 30, 1999.
In connection with the Acquisition, the Funds' Boards, including a
majority of the non-Interested Trustees, approved new investment
advisory agreements (the "New Advisory Agreements") for the Funds at a
meeting held on May 19, 1998. The New Advisory Agreements were approved
by a "majority of the outstanding voting securities" (as defined in the
1940 Act) of each Fund at a joint special meeting of shareholders held
on July 29, 1998, and will become effective upon the consummation of
the Acquisition. Except for the dates of execution, effectiveness and
termination, the terms of each Fund's New Advisory Agreement are
substantially identical to the terms of such Fund's investment advisory
agreement which are currently in effect.
The last sentence of the fourth full paragraph on page 35 of the SAI,
also under the section titled "ADVISORY, SUBADVISORY AND ADMINISTRATIVE
SERVICES" and the subsection titled "Investment Adviser," is revised to delete
the phrase, "in addition to being the parent company of WPG."
The following disclosure replaces the second paragraph of the
subsection titled "Subadviser to the International Fund" under the section
titled "ADVISORY, SUBADVISORY AND ADMINISTRATIVE SERVICES," on page 36 of the
SAI:
The Subadvisory Agreement was most recently approved by the Board of
International Fund on April 22, 1998, was approved by the shareholders
of the International Fund on April 21, 1993 and became effective May 1,
1993. In connection with the Acquisition, the International Fund's
Board, including a majority of the non-Interested Trustees, approved a
new subadvisory agreement (the "New Agreement") by and among WPG, Hill
Samuel and the International Fund at a meeting held on May 19, 1998.
The New Agreement was approved by a "majority of the outstanding voting
securities" (as defined in the 1940 Act) at the special meeting of
shareholders held on July 29, 1998, and will become effective upon the
consummation of the Acquisition. Except for the dates of execution,
effectiveness and termination, the terms of the New Agreement are
substantially identical to the terms of the Subadvisory Agreement which
is currently in effect.
The last three sentences of first paragraph under the subsection titled
"Administration and Service Plans" of the section titled "ADVISORY, SUBADVISORY
AND ADMINISTRATIVE SERVICES," on page 41 of the SAI, are replaced in their
entirety with the following:
<PAGE>
In connection with the Acquisition, the Boards of the International
Fund and Funds Trust, including a majority of the non-Interested
Trustees, approved new administration and service plans (the "New
Plans") at a meeting held on May 19, 1998. Each New Plan was approved
by a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the applicable Fund at a joint special meeting held on
July 29, 1998, and will become effective upon the consummation of the
Acquisition. The terms of the New Plans are substantially identical to
the terms of the Plans which are currently in effect.
<PAGE>
May 1, 1998, as revised September 1, 1998
PART B
STATEMENT OF ADDITIONAL INFORMATION
WPG GOVERNMENT MONEY MARKET FUND
WPG TAX FREE MONEY MARKET FUND
WPG INTERMEDIATE MUNICIPAL BOND FUND
WPG CORE BOND FUND
WPG GROWTH AND INCOME FUND
WPG TUDOR FUND
WEISS, PECK & GREER INTERNATIONAL FUND
WPG GROWTH FUND
WPG QUANTITATIVE EQUITY FUND
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
This Combined Statement of Additional Information is not a prospectus, but
expands upon and supplements the information contained in the combined
Prospectus dated May 1, 1998, as revised September 1, 1998, and as amended
and/or supplemented from time to time (the "Prospectus"), of WPG Government
Money Market Fund, WPG Tax Free Money Market Fund, WPG Intermediate Municipal
Bond Fund, WPG Core Bond Fund, WPG Growth and Income Fund, WPG Tudor Fund,
Weiss, Peck & Greer International Fund, WPG Growth Fund, and WPG Quantitative
Equity Fund (each, a "Fund" and collectively, the "Funds"). This Statement of
Additional Information should be read in conjunction with the Prospectus, a copy
of which may be obtained without charge by writing to Weiss, Peck & Greer,
L.L.C., One New York Plaza, New York, NY 10004.
THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
PAGE
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General Information and History.............................................1
The Funds' Investment Objectives, Policies and Techniques...................1
Investment Restrictions ...................................................23
Advisory, Subadvisory and Administrative Services .........................32
Trustees and Officers .................................................... 43
How to Purchase Shares ................................................... 54
Redemption of Shares ..................................................... 56
Net Asset Value .......................................................... 57
Investor Services ........................................................ 59
Dividends, Distributions and Tax Status .................................. 61
Portfolio Brokerage ...................................................... 70
Portfolio Turnover ....................................................... 74
Organization ............................................................. 75
Custodian ................................................................ 76
Transfer Agent ........................................................... 76
Legal Counsel ............................................................ 77
Independent Auditors ..................................................... 77
Calculation of Performance Data .......................................... 77
Financial Statements ..................................................... 82
Appendix A - Bond Ratings and Glossary ...................................A-1
Appendix B - Investors Services...........................................B-1
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GENERAL INFORMATION AND HISTORY
Prior to January 20, 1998, the name of WPG Core Bond Fund, a series of
Weiss, Peck & Greer Funds Trust, was WPG Government Securities Fund.
THE FUNDS' INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES
The WPG Government Money Market Fund (the "Government Money Market
Fund"), WPG Tax Free Money Market Fund (the "Tax Free Money Market Fund"), WPG
Intermediate Municipal Bond Fund (the "Municipal Fund"), WPG Core Bond Fund (the
"Core Bond Fund"), WPG Growth and Income Fund (the "Growth and Income Fund"),
WPG Tudor Fund (the "Tudor Fund"), Weiss, Peck & Greer International Fund (the
"International Fund"), WPG Growth Fund (the "Growth Fund") and WPG Quantitative
Equity Fund (the "Quantitative Fund") each have their own investment objective
and investment policies. Tax Free Money Market Fund and Government Money Market
Fund are sometimes referred to herein as the "Money Market Funds".
Weiss, Peck & Greer, L.L.C. (the "Adviser") serves as each Fund's
investment adviser and administrator.
The investment objectives, policies and restrictions of each Fund may be
changed or altered by the Board of Trustees of their respective Fund (each, a
"Board" and collectively, the "Boards") without shareholder approval, except to
the extent such policies and restrictions have been adopted as fundamental. See
"Investment Restrictions." The securities in which each Fund may invest and
certain other investment policies are further described in the Prospectus. See
"Description of the Funds" and "Risk Considerations and Other Investment
Practices and Policies of the Funds" in the Prospectus. There can be no
assurance that any of the Funds' investment objectives will be achieved.
The Appendix to this Statement of Additional Information contains a
description of the quality categories of corporate bonds and municipal
obligations in which the Funds may invest and a Glossary describing some of the
Funds' investments.
"SPECIAL SITUATIONS"
The Tudor Fund and Growth Fund may invest in "Special Situations" as
defined in, and subject to, their respective fundamental investment restriction
set forth under "Investment Restrictions." Since every Special Situation
involves, to some extent, a break with past experience, the uncertainties in the
appraisal of future value and the risk of possible loss of capital are greater
than in the experienced, well-established companies carrying on business
according to long-established patterns. The market price of a Special Situation
may decline significantly if an anticipated development does not materialize.
For the very same reasons, however, the Tudor Fund and Growth Fund believe that
if a Special Situation is carefully studied by the Adviser and an investment is
made at the appropriate time, maximum appreciation may be achieved.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Subject to its investment restrictions and policies, each Fund may enter
into repurchase agreements with banks, broker-dealers or other financial
institutions in order to generate additional current income. A repurchase
agreement is an agreement under which a Fund acquires a security from a seller
subject to resale to the seller at an agreed upon price and date. The resale
price reflects an agreed upon interest rate effective for the time period the
security is held by a Fund. The repurchase price may be higher than the
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purchase price, the difference being income to the Fund, or the purchase and
repurchase price may be the same, with interest at a stated rate due to the Fund
together with the repurchase price on repurchase. In either case, the income to
the Fund is unrelated to the interest rate on the security. Typically,
repurchase agreements are in effect for one week or less, but may be in effect
for longer periods of time. Repurchase agreements of more than one week's
duration are subject to each Fund's respective limitation on investments in
illiquid securities.
Repurchase agreements are considered by the Securities and Exchange
Commission (the "SEC") to be loans by the purchaser collateralized by the
underlying securities. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Funds will generally enter into repurchase agreements
only with domestic banks with total assets in excess of one billion dollars or
primary U.S. Government securities dealers reporting to the Federal Reserve Bank
of New York, with respect to securities of the type in which the Funds may
invest. The Funds will monitor the value of the underlying securities throughout
the term of the agreement to ensure that their market value always equals or
exceeds the agreed-upon repurchase price to be paid to a Fund. Each Fund will
maintain a segregated account with the Custodian for the securities and other
collateral, if any, acquired under a repurchase agreement with a broker-dealer
for the term of the agreement.
In addition to the risk of the seller's default or a decline in value of
the underlying security (see "Risk Considerations and Other Investment Practices
and Policies of the Funds -- Repurchase Agreements" in the Prospectus), a Fund
also might incur disposition costs in connection with liquidating the underlying
securities. If the seller becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a court may determine
that the underlying security is collateral for a loan by a Fund not within the
control of that Fund and therefore subject to sale by the seller's trustee in
bankruptcy. Finally, it is possible that a Fund may not be able to perfect its
interest in the underlying security and may be deemed an unsecured creditor of
the seller. While the Funds acknowledge these risks, it is expected that they
can be controlled through careful monitoring procedures.
The Core Bond Fund may enter into reverse repurchase agreements with
domestic banks or broker-dealers, subject to its policies and restrictions.
Under a reverse repurchase agreement, the Fund sells a security held by it and
agrees to repurchase the instrument on a specified date at a specified price,
which includes interest. The Fund will use the proceeds of a reverse repurchase
agreement to purchase other securities which either mature at a date
simultaneous with or prior to the expiration of the reverse repurchase agreement
or which are held under an agreement to resell maturing as of that time. The
Core Bond Fund will enter into reverse repurchase agreements only when the
Adviser believes the interest income and fees to be earned from the investment
of the proceeds of the transaction will be greater than the interest expense of
the transaction.
Under the Investment Company Act of 1940, as amended (the "1940 Act"),
reverse repurchase agreements may be considered borrowings by the seller. The
Core Bond Fund may not enter into a reverse repurchase agreement if as a result
its current obligations under such agreements would exceed one-third of the
current market value of its total assets (less its liabilities other than under
reverse repurchase agreements).
In connection with entering into reverse repurchase agreements, the Fund
will segregate U.S. Government securities, cash or cash equivalents with an
aggregate current value sufficient to repurchase the securities or equal to the
proceeds received upon the sale, plus accrued interest.
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FOREIGN SECURITIES
The International Fund invests primarily, and the Growth and Income Fund,
Tudor Fund and Growth Fund may invest, in securities of foreign issuers. The
Government Money Market Fund and the Core Bond Fund may also invest in
securities of foreign issuers that are denominated in U.S. dollars. Investment
in foreign issuers involves certain special considerations, including those set
forth below, which are not typically associated with investment in U.S. issuers.
Since foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a domestic company.
Foreign stock markets, while growing in volume of trading activity, have
substantially less volume than the New York Stock Exchange, and securities of
some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. Similarly, volume and liquidity in most foreign bond
markets are less than in the United States and, at times, volatility of price
can be greater than in the United States. Although fixed commissions on foreign
stock exchanges are generally higher than negotiated commissions on U.S.
exchanges, the Funds will endeavor to achieve the most favorable net results on
their foreign portfolio transactions.
There is generally less government supervision and regulation of stock
exchanges, brokers and listed companies in foreign countries than in the United
States. In some foreign transactions there may be a greater risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect a Fund's investments
in those countries. Moreover, individual foreign economies may differ favorably
or unfavorably from the U.S. economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. In addition, it may be more
difficult to obtain and enforce a judgment against a foreign issuer or a foreign
custodian. The U.S. dollar value of foreign securities will be favorably or
adversely affected by exchange rate fluctuations between the dollar and the
applicable foreign currency. A Fund will incur costs in converting foreign
currencies into U.S. dollars.
INVESTING IN EMERGING MARKETS
The International Fund may invest in countries with emerging economies or
securities markets.
MARKET CHARACTERISTICS. Debt securities of most emerging markets issuers
may be less liquid and are generally subject to greater price volatility than
securities of issuers in the U.S. and other developed countries. The markets for
securities of emerging markets may have substantially less volume than the
market for similar securities in the U.S. and may not be able to absorb, without
price disruptions, a significant increase in trading volume or trade size.
Additionally, market making and arbitrage activities are generally less
extensive in such markets, which may contribute to increased volatility and
reduced liquidity of such markets. The less liquid the market, the more
difficult it may be for the Fund to accurately price its portfolio securities or
to dispose of such securities at the times determined to be appropriate. The
risks associated with reduced liquidity may be particularly acute to the extent
that the Fund needs cash to meet redemption requests, to pay dividends and other
distributions or to pay its expenses.
Securities markets of emerging markets may also have less efficient
clearance and settlement procedures than U.S. markets, making it difficult to
conduct and complete transactions. Delays in
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settlement could result in temporary periods when a portion of the Fund's assets
is uninvested and no return is earned thereon. Inability to make intended
security purchases could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities could result either
in losses to the Fund due to subsequent declines in value of the portfolio
security or, if the Fund has entered into a contract to sell the security, could
result in possible liability of the Fund to the purchaser.
Transaction costs, including brokerage commissions and dealer mark-ups,
in emerging markets may be higher than in the U.S. and other developed
securities markets. As legal systems in emerging markets develop, foreign
investors may be adversely affected by new or amended laws and regulations. In
circumstances where adequate laws exist, it may not be possible to obtain swift
and equitable enforcement of the law.
ECONOMIC, POLITICAL AND SOCIAL FACTORS. Emerging markets may be subject
to a greater degree of economic, political and social instability that could
significantly disrupt the principal financial markets than are the U.S., Japan
and most Western European countries. Such instability may result from, among
other things: (i) authoritarian governments or military involvement in political
and economic decision-making, including changes or attempted changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved economic, political and social conditions; (iii)
internal insurgencies; (iv) hostile relations with neighboring countries; and
(v) ethnic, religious and racial disaffection and conflict. Many emerging
markets have experienced in the past, and continue to experience, high rates of
inflation. In certain countries inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate environment and
sharply eroding the value of outstanding financial assets in those countries.
The economies of many emerging markets are heavily dependent upon international
trade and are accordingly affected by protective trade barriers and the economic
conditions of their trading partners. In addition, the economies of some
emerging markets may differ unfavorably from the U.S. economy in such respects
as growth of gross domestic product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position.
RESTRICTIONS ON INVESTMENT AND REPATRIATION. Certain emerging markets
require governmental approval prior to investments by foreign persons or limit
investments by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the issuer available for
purchase by nationals. Repatriation of investment income and capital from
certain emerging markets is subject to certain governmental consents. Even where
there is no outright restriction on repatriation of capital, the mechanics of
repatriation may affect the operation of the Fund.
RISK CONSIDERATIONS OF LOWER RATED SECURITIES
The Growth and Income Fund, Tudor Fund and Growth Fund may invest in
fixed income securities that are not investment grade but are rated as low as B
by Moody's Investors Service, Inc. ("Moody's") or B by Standard & Poor's Ratings
Group ("Standard & Poor's") (or their equivalents or, if unrated, determined by
the Adviser to be of comparable credit quality). In the case of a security that
is rated differently by two or more rating services, the higher rating is used
in connection with the foregoing limitation. In the event that the rating on a
security held in a Fund's portfolio is downgraded by a rating service, such
action will be considered by the Adviser in its evaluation of the overall
investment merits of that security, but will not necessarily result in the sale
of the security. The widespread expansion of government, consumer and corporate
debt within the U.S. economy has made the corporate sector, especially
cyclically sensitive industries, more vulnerable to economic downturns or
increased interest rates. An economic downturn could severally disrupt the
market for high yield fixed income securities and adversely affect the value
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of outstanding fixed income securities and the ability of the issuers to repay
principal and interest.
The prices of high yield fixed income securities have been found to be
less sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a fixed income security owned by a Fund defaulted,
the Fund could incur additional expenses to seek recovery. In addition, periods
of economic uncertainty and changes can be expected to result in increased
volatility of market prices of high yield fixed income securities and a Fund's
net asset value, to the extent it holds such securities.
High yield fixed income securities also present risks based on payment
expectations. For example, high yield fixed income securities may contain
redemption or call provisions. If an issuer exercises these provisions in a
declining interest rate market, a Fund may, to the extent it holds such fixed
income securities, have to replace the securities with a lower yielding
security, which may result in a decreased return for investors. Conversely, a
high yield fixed income security's value will decrease in a rising interest rate
market, as will the value of a Fund's assets, to the extent it holds such fixed
income securities.
In addition, to the extent that there is no established retail secondary
market, there may be thin trading of high yield fixed income securities, and
this may have an impact on the Adviser's ability to accurately value such
securities and a Fund's assets and on the Fund's ability to dispose of such
securities. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of high yield fixed
income securities, especially in a thinly traded market.
New laws and proposed new laws may have an impact on the market for high
yield securities. For example, legislation requiring federally-insured savings
and loan associations to divest their investments in high yield securities could
have an adverse effect on a Fund's net asset value and investment practices, to
the extent it holds such securities.
Finally, there are risks involved in applying credit or dividend ratings
as a method for evaluating high yield securities. For example, ratings evaluate
the safety of principal and interest or dividend payments, not market value risk
of high yield securities. Also, since rating agencies may fail to timely change
the credit ratings to reflect subsequent events, a Fund will continuously
monitor the issuers of high yield securities in its portfolio, if any, to
determine if the issuers will have sufficient cash flow and profits to meet
required principal and interest payments, and to assure the security's liquidity
so the Fund can meet redemption requests.
FORWARD COMMITMENT AND WHEN-ISSUED TRANSACTIONS
Each Fund may purchase or sell securities on a when-issued or forward
commitment basis (subject to its investment policies and restrictions). These
transactions involve a commitment by a Fund to purchase or sell securities at a
future date (ordinarily one or two months later). The price of the underlying
securities (usually expressed in terms of yield) and the date when the
securities will be delivered and paid for (the settlement date) are fixed at the
time the transaction is negotiated. When-issued purchases and forward
commitments are negotiated directly with the other party, and such commitments
are not traded on exchanges. A Fund will not enter into such transactions for
the purpose of leverage.
When-issued purchases and forward commitments enable a Fund to lock in
what is believed by the
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Adviser to be an attractive price or yield on a particular security for a period
of time, regardless of future changes in interest rates. For instance, in
periods of rising interest rates and falling prices, a Fund might sell
securities it owns on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising prices, a Fund
might sell securities it owns and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher yields.
The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value are reflected in the
computation of a Fund's net asset value starting on the date of the agreement to
purchase the securities, and the Fund is subject to the rights and risks of
ownership of the securities on that date. A Fund does not earn interest on the
securities it has committed to purchase until they are paid for and delivered on
the settlement date. When a Fund makes a forward commitment to sell securities
it owns, the proceeds to be received upon settlement are included in the Fund's
assets. Fluctuations in the market value of the underlying securities are not
reflected in the Fund's net asset value as long as the commitment to sell
remains in effect. Settlement of when-issued purchases and forward commitment
transactions generally takes place within two months after the date of the
transaction, but a Fund may agree to a longer settlement period.
A Fund will make commitments to purchase securities on a when-issued
basis or to purchase or sell securities on a forward commitment basis only with
the intention of completing the transaction and actually purchasing or selling
the securities. If deemed advisable as a matter of investment strategy, however,
a Fund may dispose of or renegotiate a commitment after it is entered into. A
Fund also may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. A Fund may realize
a capital gain or loss in connection with these transactions, and its
distributions from any net realized capital gains will be taxable to
shareholders.
When a Fund purchases securities on a when-issued or forward commitment
basis, the Fund or the Custodian will maintain in a segregated account cash or
liquid securities having a value (determined daily) at least equal to the amount
of the Fund's purchase commitments. These procedures are designed to ensure that
the Fund will maintain sufficient assets at all times to cover its obligations
under when-issued purchases and forward commitments.
LOANS OF PORTFOLIO SECURITIES
Subject to its investment restrictions, each Fund may seek to increase
its income by lending portfolio securities. Under present regulatory policies,
such loans may be made to financial institutions, such as broker-dealers, and
would be required to be secured continuously by collateral in cash, cash
equivalents or U.S. Government securities maintained on a current basis at an
amount at least equal to the market value of the securities loaned. See "Risk
Considerations and Other Investment Practices and Policies of the Funds --
Lending of Portfolio Securities" in the Prospectus. The rules of the New York
Stock Exchange, Inc. give a Fund the right to call a loan and obtain the
securities loaned at any time on five days' notice. For the duration of a loan,
a Fund would receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned and would also receive compensation from the
investment of the collateral. A Fund would not, however, have the right to vote
any securities having voting rights during the existence of the loan, but the
Fund would call the loan in anticipation of an important vote to be taken among
holders of the securities or of the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the loans would
be made only to firms deemed by the
Adviser to be of good standing, and when, in the judgment of the Adviser, the
consideration which can be
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earned currently from securities loans of this type justifies the attendant
risk.
At the present time the staff of the SEC does not object if an investment
company pays reasonable negotiated fees to its custodian in connection with
loaned securities as long as such fees are pursuant to a contract approved by
the investment company's trustees.
OPTIONS ON SECURITIES AND SECURITIES INDICES
WRITING COVERED OPTIONS. The Core Bond Fund, Growth and Income Fund,
Tudor Fund, International Fund, Growth Fund and Quantitative Fund may each write
covered call and (except Growth and Income Fund) put options on any securities
in which it may invest or on any securities index based on securities in which
it may invest. In addition, International Fund may write call and put options on
currencies. A Fund may purchase and write such options on securities that are
listed on national domestic securities exchanges or foreign securities exchanges
or traded in the over-the-counter market. A call option written by a Fund
obligates the Fund to sell specified securities to the holder of the option at a
specified price if the option is exercised at any time before the expiration
date. All call options written by a Fund are covered, which means that the Fund
will own the securities subject to the option so long as the option is
outstanding or use the other methods described below. The purpose of a Fund in
writing covered call options is to realize greater income than would be realized
in portfolio securities transactions alone. However, in writing covered call
options for additional income, a Fund may forego the opportunity to profit from
an increase in the market price of the underlying security.
A put option written by a Fund obligates the Fund to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date. The purpose of writing such
options is to generate additional income. However, in return for the option
premium, the Fund accepts the risk that it will be required to purchase the
underlying securities at a price in excess of the securities' market value at
the time of purchase.
All call and put options written by a Fund are covered. A written call
option or put option may be covered by (i) maintaining cash or liquid
securities, either of which, in the case of the International Fund, may be
quoted or denominated in any currency, in a segregated account noted on the
Fund's records or maintained by the Fund's custodian with a value at least equal
to the Fund's obligation under the option, (ii) entering into an offsetting
forward commitment and/or (iii) purchasing an offsetting option or any other
option which, by virtue of its exercise price or otherwise, reduces the Fund's
net exposure on its written option position.
A Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
A Fund may also write (sell) covered call and put options on any
securities index composed of securities in which it may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options requires cash settlement payments and does
not involve the actual purchase or sale of securities. In addition, securities
index options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security.
The Funds may cover call options on a securities index by owning
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securities whose price changes are expected to be similar to those of the
underlying index or by having an absolute and immediate right to acquire such
securities without additional cash consideration (or for additional cash
consideration held in a segregated account) upon conversion or exchange of other
securities in its portfolio. A Fund may also cover call and put options on a
securities index by using the other methods described above.
PURCHASING OPTIONS. The Core Bond Fund, Tudor Fund, International Fund,
Growth Fund and Quantitative Fund may each purchase put and call options on any
securities in which it may invest or on any securities index based on securities
in which it may invest, and a Fund may enter into closing sale transactions in
order to realize gains or minimize losses on options it had purchased. In
addition, the International Fund may purchase put and call options on
currencies.
A Fund would normally purchase call options in anticipation of an
increase, or put options in anticipation of a decrease ("protective puts") in
the market value of securities of the type in which it may invest. The purchase
of a call option would entitle a Fund, in return for the premium paid, to
purchase specified securities at a specified price during the option period. A
Fund would ordinarily realize a gain on the purchase of a call option if, during
the option period, the value of such securities exceeded the sum of the exercise
price, the premium paid and transaction costs; otherwise the Fund would realize
either no gain or a loss on the purchase of the call option. The purchase of a
put option would entitle a Fund, in exchange for the premium paid, to sell
specified securities at a specified price during the option period. The purchase
of protective puts is designed to offset or hedge against a decline in the
market value of a Fund's securities. Put options may also be purchased by a Fund
for the purpose of affirmatively benefiting from a decline in the price of
securities which it does not own. A Fund would ordinarily realize a gain if,
during the option period, the value of the underlying securities decreased below
the exercise price sufficiently to cover the premium and transaction costs;
otherwise the Fund would realize either no gain or a loss on the purchase of the
put option. Gains and losses on the purchase of put options may be offset by
countervailing changes in the value of the underlying portfolio securities.
A Fund may purchase put and call options on securities indices for the
same purposes as it may purchase options on securities. Options on securities
indices are similar to options on securities, except that the exercise of
securities index options requires cash payments and does not involve the actual
purchase or sale of securities. In addition, securities index options are
designed to reflect price fluctuations in a group of securities or segment of
the securities market rather than price fluctuations in a single security.
Transactions by a Fund in options on securities and securities indices
will be subject to limitations established by each of the exchanges, boards of
trade or other trading facilities on which such options are traded governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written or purchased on the same or different exchanges, boards
of trade or other trading facilities or are held or written in one or more
accounts or through one or more brokers. Thus, the number of options which a
Fund may write or purchase may be affected by options written or purchased by
other investment advisory clients of the Adviser. An exchange, board of trade or
other trading facility may order the liquidation of positions found to be in
excess of these limits, and it may impose certain other sanctions.
WRITING AND PURCHASING CURRENCY CALL AND PUT OPTIONS. The International
Fund may write covered put and call options and purchase put and call options on
foreign currencies to seek to protect against declines in the dollar value of
portfolio securities and against increases in the dollar cost of securities to
be acquired.
A call option written by the Fund obligates the Fund to sell specified
currency to the holder of the
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option at a specified price if the option is exercised at any time before the
expiration date. A put option written by the Fund obligates the Fund to purchase
specified currency from the option holder at a specified price if the option is
exercised at any time before the expiration date. The writing of currency
options involves a risk that the Fund will, upon exercise of the option, be
required to sell currency subject to a call at a price that is less than the
currency's market value or be required to purchase currency subject to a put at
a price that exceeds the currency's market value.
The Fund may terminate its obligations under a written call or put option
by purchasing an option identical to the one written. Such purchases are
referred to as "closing purchase transactions." The Fund would also be able to
enter into closing sale transactions in order to realize gains or minimize
losses on purchased options.
The Fund would normally purchase call options in anticipation of an
increase in the U.S. dollar value of currency in which securities to be acquired
by the Fund are denominated or quoted. The purchase of a call option would
entitle the Fund, in return for the premium paid, to purchase specified currency
at a specified price during the option period. The Fund would ordinarily realize
a gain if, during the option period, the value of such currency exceeded the sum
of the exercise price, the premium paid and transaction costs; otherwise the
Fund would realize either no gain or a loss on the purchase of the call option.
The Fund would normally purchase put options in anticipation of a decline
in the U.S. dollar value of currency in which securities in its portfolio are
denominated or quoted ("protective puts"). The purchase of a put option would
entitle the Fund, in exchange for the premium paid, to sell specified currency
at a specified price during the option period. The purchase of protective puts
is designed merely to offset or hedge against a decline in the U.S. dollar value
of the Fund's portfolio securities due to currency exchange rate fluctuations.
The Fund would ordinarily realize a gain if, during the option period, the value
of the underlying currency decreased below the exercise price sufficiently to
more than cover the premium and transaction costs; otherwise the Fund would
realize either no gain or a loss on the purchase of the put option. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying currency.
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. There is no assurance that a
liquid secondary market on a domestic or foreign options exchange will exist for
any particular exchange-traded option or at any particular time. If a Fund is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if a Fund is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist although outstanding options on that exchange that had been issued by the
Options Clearing Corporation as a result of trades on that
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exchange would continue to be exercisable in accordance with their terms.
The Fund's ability to terminate over-the-counter options is more limited
than with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will monitor the liquidity of over-the-counter options and, if it
determines that such options are not readily marketable, a Fund's ability to
enter such options will be subject to the Fund's limitation on investments on
illiquid securities.
The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The successful use of options
for hedging purposes depends in part on the Adviser's ability to predict future
price fluctuations and the degree of correlation between the options and
securities markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To seek to increase total return or to hedge against changes in interest
rates, securities prices or, in the case of the International Fund, (but only
for hedging purposes) currency exchange rates, Core Bond Fund, Tudor Fund,
International Fund, Growth Fund and Quantitative Fund may purchase and sell
various kinds of futures contracts, and purchase and write call and put options
on any of such futures contracts. A Fund may also enter into closing purchase
and sale transactions with respect to any of such contracts and options. The
futures contracts may be based on various securities (such as U.S. Government
Securities), securities indices, foreign currencies (in the case of the
International Fund) and any other financial instruments and indices. A Fund will
engage in futures and related options transaction only for bona fide hedging
purposes as defined below or for purposes of seeking to increase total return to
the extent permitted by regulations of the Commodity Futures Trading Commission
("CFTC"). All futures contracts entered into by a Fund are traded on U.S.
exchanges or boards of trade that are licensed and regulated by the CFTC or on
foreign exchanges.
FUTURES CONTRACTS. A futures contract may generally be described as an
agreement between two parties to buy and sell particular financial instruments
or currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
When interest rates are rising or securities prices are falling, a Fund
can seek to offset a decline in the value of its current portfolio securities
through the sale of futures contracts. When interest rates are falling or
securities prices are rising, a Fund, through the purchase of futures contracts,
can attempt to secure better rates or prices than might later be available in
the market when it effects anticipated purchases. The International Fund may
seek to offset anticipated changes in the value of a currency in which its
portfolio securities, or securities that it intends to purchase, are quoted or
denominated by purchasing and selling futures contracts on such currencies.
Positions taken in the futures markets are not normally held to maturity
but are instead liquidated through offsetting transactions which may result in a
profit or a loss. While futures contracts on securities or currency will usually
be liquidated in this manner, a Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
on securities or currency are traded guarantees that, if still open, the sale or
purchase will be performed on the settlement date.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to
establish with more certainty than
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would otherwise be possible the effective price or rate of return on portfolio
securities or securities that a Fund proposes to acquire or the exchange rate of
currencies in which portfolio securities are quoted or denominated. A Fund may,
for example, take a "short" position in the futures market by selling futures
contracts to seek to hedge against an anticipated rise in interest rates or a
decline in market prices or (in the case of the International Fund) foreign
currency rates that would adversely affect the U.S. dollar value of the Fund's
portfolio securities. Such futures contracts may include contracts for the
future delivery of securities held by a Fund or securities with characteristics
similar to those of the Fund's portfolio securities. Similarly, the
International Fund may sell futures contracts on any currencies in which its
portfolio securities are quoted or denominated or in one currency to hedge
against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern of correlation between
the two currencies. If, in the opinion of the Adviser, there is a sufficient
degree of correlation between price trends for a Fund's portfolio securities and
futures contracts based on other financial instruments, securities indices or
other indices, the Fund may also enter into such futures contracts as part of
its hedging strategy. Although under some circumstances prices of securities in
a Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having the Fund enter into a greater or lesser number of futures contracts or
by seeking to achieve only a partial hedge against price changes affecting the
Fund's portfolio securities. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing
futures contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available.
OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call options on
futures contracts will give a Fund the right (but not the obligation) for a
specified price to sell or to purchase, respectively, the underlying futures
contract at any time during the option period. As the purchaser of an option on
a futures contract, a Fund obtains the benefit of the futures position if prices
move in a favorable direction but limits its risk of loss in the event of an
unfavorable price movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium
which may partially offset a decline in the value of a Fund's assets. By writing
a call option, a Fund becomes obligated, in exchange for the premium, (upon
exercise of the option) to sell a futures contract if the option is exercised,
which may have a value higher than the exercise price. Conversely, the writing
of a put option on a futures contract generates a premium which may partially
offset an increase in the price of securities that a Fund intends to purchase.
However, the Fund becomes obligated (upon exercise of the option) to purchase a
futures contract if the option is exercised, which may have a value lower than
the exercise price. Thus, the loss incurred by a Fund in writing options on
futures is potentially unlimited and may exceed the amount of the premium
received. The Funds will incur transaction costs in connection with the writing
of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same financial
instrument. There is no guarantee that such closing transactions can be
effected. A Fund's ability to establish and close out positions on such options
will be subject to the development and maintenance of a liquid market.
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OTHER CONSIDERATIONS. The Funds will engage in futures and related
options transactions only for bona fide hedging or, except for purchases or
sales by the International Fund of futures on currencies, to seek to increase
total return as permitted by the CFTC regulations which permit principals of an
investment company registered under the Act to engage in such transactions
without registering as commodity pool operators. A Fund will determine that the
price fluctuations in the futures contracts and options on futures used for
hedging purposes are substantially related to price fluctuations in securities
held by the Fund or securities or instruments which it expects to purchase.
Except as stated below, a Fund's futures transactions will be entered into for
traditional hedging purposes -- i.e., futures contracts will be sold to protect
against a decline in the price of securities (or the currency in which they are
quoted or denominated) that the Fund owns or futures contracts will be purchased
to protect the Fund against an increase in the price of securities (or the
currency in which they are quoted or denominated) it intends to purchase. As
evidence of this hedging intent, each Fund expects that on 75% or more of the
occasions on which it takes a long futures or option position (involving the
purchase of futures contracts), the Fund will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities (or assets
denominated in the related currency) in the cash market at the time when the
futures or option position is closed out. However, in particular cases, when it
is economically advantageous for a Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to compliance with the bona fide hedging definition, a
CFTC regulation permits a Fund to elect to comply with a different test under
which the aggregate initial margin and premiums required to establish positions
to seek to increase total return in futures contracts and options on futures
will not exceed 5% of the net asset value of the Fund's portfolio, after taking
into account unrealized profits and losses on any such positions and excluding
the amount by which such options were in-the-money at the time of purchase. Each
Fund will engage in transactions in currency forward contracts, futures
contracts and options only to the extent such transactions are consistent with
the requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
for maintaining its qualification as a regulated investment company for federal
income tax purposes. See "Taxation."
Transactions in futures contracts and options on futures involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating the International Fund to purchase securities or currencies,
require the Fund to establish a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while a Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices or currency
exchange rates may result in a poorer overall performance for the Fund than if
it had not entered into any futures contracts or options transactions. In the
event of an imperfect correlation between a futures position and a portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of loss. In addition, it is not
possible to hedge fully or protect against currency fluctuations affecting the
value of securities denominated in foreign currencies because the value of such
securities is likely to fluctuate as a result of independent factors not related
to currency fluctuations.
Perfect correlation between a Fund's futures positions and portfolio
positions will be impossible to achieve. There are no futures contracts based
upon individual securities, except certain U.S. Government securities. The only
futures contracts available to hedge the Fund's portfolio are various futures on
Eurodollars, U.S. Government securities, securities indices and foreign
currencies.
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FORWARD FOREIGN CURRENCY TRANSACTIONs
The International Fund, Growth and Income Fund, Tudor Fund and Growth
Fund may each, to the extent that it invests in foreign securities, enter into
forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign currency exchange rates. A Fund will
conduct its foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
through entering into forward contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days (usually less than one year) from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between traders (usually large
commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the spread) between the price at which
they are buying and selling various currencies.
The Funds are permitted to enter into forward contracts under two
circumstances. First, when a Fund enters into a contract for the purchase or
sale of a security quoted or denominated in a foreign currency, it may desire to
"lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale, for a fixed number of U.S. dollars, of the
amount of foreign currency involved in the underlying security transactions, the
Fund will be able to insulate itself from a possible loss resulting from a
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is purchased
or sold and the date on which payment is made or received.
Second, when the Adviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
cause a Fund to enter a forward contract to sell, for a fixed U.S. dollar
amount, the amount of foreign currency approximating the value of some or all of
the Fund's portfolio securities quoted or denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures.
Although the Funds have no current intention to do so, the Funds may
engage in cross-hedging by using forward contracts in one currency to hedge
against fluctuations in the value in securities denominated or quoted in a
different currency if the Adviser determines that there is a pattern of
correlation between the two currencies. Cross-hedging may also include entering
into a forward transaction involving two foreign currencies, using one foreign
currency as a proxy for the U.S. dollar to hedge against variations in the other
U.S. foreign currency, if the Adviser determines that there is a pattern of
correlation between the proxy currency and the U.S. dollar.
The Funds will not enter into forward contracts to sell currency or
maintain a net exposure to such contracts if the consummation of such contracts
would obligate the Funds to deliver an amount of foreign currency in excess of
the value of the Funds' respective portfolio securities or other assets quoted
or denominated in that currency. At the consummation of the forward contract, a
Fund may either make delivery of the foreign currency or terminate its
contractual obligation by purchasing an offsetting contract obligating it to
purchase at the same maturity date, the same amount of such foreign currency. If
a Fund
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chooses to make delivery of foreign currency, it may be required to obtain such
delivery through the sale of portfolio securities quoted or denominated in such
currency or through conversion of other assets of the Fund into such currency.
If a Fund engages in an offsetting transaction, the Fund will realize a gain or
a loss to the extent that there has been a change in forward contract prices.
Closing purchase transactions with respect to forward contracts are usually
effected with the currency trader who is party to the original forward contract.
The Funds' transactions in forward contracts will be limited to those
described above. Of course, no Fund is required to enter into such transactions
with regard to its foreign currency quoted or denominated securities, and a Fund
will not do so unless deemed appropriate by the Adviser.
When entering into a forward contract, a Fund will segregate either cash
or liquid securities quoted or denominated in any currency in an amount equal to
the value of the Fund's total assets committed to the consummation of forward
currency exchange contracts which require the Fund to purchase a foreign
currency. If the value of the segregated securities declines, additional cash or
securities will be segregated by the Fund on a daily basis so that the value of
the segregated securities will equal the amount of the Fund's commitments with
respect to such contracts.
This method of protecting the value of a Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which can be achieved at some future point in time. The precise
projection of short-term currency market movements is not possible, and
short-term hedging provides a means of fixing the U.S. dollar value of only a
portion of a Fund's foreign assets. It also reduces any potential gain which may
have otherwise occurred had the currency value increased above the settlement
price of the contract.
While the Funds may enter into forward contracts to seek to reduce
currency exchange rate risks, transactions in such contracts involve certain
other risks. Thus, while a Fund may benefit from such transactions,
unanticipated changes in currency prices may result in a poorer overall
performance for a Fund then if it had not engaged in any such transactions.
Moreover, there may be imperfect correlation between a Fund's portfolio holdings
or securities quoted or denominated in a particular currency and forward
contracts entered into by the Fund. Such imperfect correlation may cause the
Fund to sustain losses which will prevent the Fund from achieving a complete
hedge or expose the Fund to the risk of foreign exchange loss.
Forward contracts are subject to the risks that the counterparty to such
contract will default on its obligations. Since a forward foreign currency
exchange contract is not guaranteed by an exchange or clearing house, a default
on the contract would deprive a Fund of unrealized profits, transaction costs or
the benefits of a currency hedge or force the Fund to cover its purchase or sale
commitments, if any, at the current market price.
The Funds' foreign currency transactions (including related options,
futures and forward contracts) may be limited by the requirements of Subchapter
M of the Code for qualification as a regulated investment company.
PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES
Certain Funds, and in particular the Government Money Market Fund and the
Core Bond Fund, may invest in mortgage-backed securities issued by trusts or
other entities formed or sponsored by private originators of and institutional
investors in mortgage loans and other non-governmental entities (or
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representing custodial arrangements administered by such institutions). These
private originators and institutions include savings and loan associations,
mortgage bankers, commercial banks, insurance companies, investment banks and
special purpose subsidiaries of the foregoing.
Privately issued mortgage-backed securities are generally backed by pools
of conventional (i.e., non-government guaranteed or insured) mortgage loans.
Since such mortgage-backed securities normally are not guaranteed by an entity
having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to
receive a high quality rating from the rating organizations (e.g., Standard &
Poor's or Moody's), they often are structured with one or more types of "credit
enhancement." Such credit enhancement falls into two categories: (1) liquidity
protection and (2) protection against losses resulting after default by a
borrower and liquidation of the collateral (e.g., sale of a house after
foreclosure). Liquidity protection refers to the payment of cash advances to
holders of mortgage-backed securities when a borrower on an underlying mortgage
fails to make its monthly payment on time. Protection against losses resulting
after default and liquidation is designed to cover losses resulting when, for
example, the proceeds of a foreclosure sale are insufficient to cover the
outstanding amount on the mortgage. Such protection may be provided through
guarantees, insurance policies or letters of credit, through various means of
structuring the securities or through a combination of such approaches.
Examples of credit enhancement arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes entitled to receive payment before other classes, with
the result that defaults on the underlying mortgages are borne first by the
holders of the subordinated class), creation of "spread accounts" or "reserve
funds" (where cash or investments are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on the underlying
mortgages in a pool exceeds the amount required to be paid on the
mortgage-backed securities). The degree of credit enhancement for a particular
issue of mortgage-backed securities is based on the level of credit risk
associated with the particular mortgages in the related pool. Losses on a pool
in excess of anticipated levels could nevertheless result in losses to security
holders since credit enhancement rarely covers every dollar owed on a pool. See
the Funds' Prospectus for a further description of mortgage-backed securities.
RISKS ASSOCIATED WITH SPECIFIC TYPES OF DERIVATIVE SECURITIES
The Core Bond Fund may invest in floating rate securities based on the
Cost of Funds Index ("COFI floaters"), other "lagging rate" floating rate
securities, floating rate securities that are subject to a maximum interest rate
("capped floaters"), and Mortgage-Backed Securities purchased at a discount. The
primary risks associated with these derivative debt securities are the potential
extension of average life and/or depreciation due to rising interest rates.
STRUCTURED OR HYBRID NOTES
The Growth and Income Fund may invest in "structured" or "hybrid" notes.
The distinguishing feature of a structured or hybrid note is that the amount of
interest and/or principal payable on the note is based on the performance of a
benchmark asset or market other than fixed-income securities or interest rates.
Examples of these benchmarks include stock prices, currency exchange rates and
physical commodity prices. Investing in a structured note allows the Fund to
gain exposure to the benchmark market while fixing the maximum loss that the
Fund may experience in the event that market does not perform as expected.
Depending on the terms of the note, the Fund may forego all or part of the
interest and principal that would be payable on a comparable conventional note;
the Fund's loss cannot exceed this foregone interest and/or principal.
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It is expected that not more than 5% of the Fund's net assets will be at
risk as a result of investments in structured or hybrid notes. In addition to
the risks associated with a direct investment in the benchmark asset,
investments in structured and hybrid notes involve the risk that the issuer or
counterparty to the obligation will fail to perform its contractual obligations.
Certain structured or hybrid notes may also be leveraged to the extent that the
magnitude of any change in the interest rate or principal payable on the
benchmark asset is a multiple of the change in the reference price. Leverage
enhances the price volatility of the security and, therefore, the volatility of
the Fund's net asset value. Further, certain structured or hybrid notes may be
illiquid for purposes of the Fund's limitation on investments in illiquid
securities.
VARIABLE AMOUNT MASTER DEMAND NOTES
The Government Money Market Fund, Tax Free Money Market Fund and
Municipal Fund may invest in variable amount master demand notes, which are a
form of commercial paper. These are obligations that permit the investment of
fluctuating amounts at varying rates of interest pursuant to direct arrangements
between a Fund, as lender, and the borrower. These notes permit daily changes in
the amounts borrowed. The lender has the right to increase the amount under the
note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may prepay up to the full amount of the
note without penalty. Because variable amount master demand notes are direct
lending arrangements between the lender and borrower, it is not generally
contemplated that such instruments will be traded, and there is no secondary
market for these notes. However, they are redeemable (and thus immediately
repayable by the borrower) at face value, plus accrued interest, at any time. In
connection with master demand note arrangements, the Adviser will consider, on
an ongoing basis, the earning power, cash flow, and other liquidity ratios of
the borrower and its ability to pay principal and interest on demand. These
notes generally are not rated by Moody's or Standard & Poor's. A Fund may invest
in them only if the Adviser believes that, at the time of investment, the notes
are of comparable quality to the other commercial paper in which that Fund may
invest, including, in the case of the Government Money Market Fund and Tax Free
Money Market Fund, the requirements of the rules of the SEC applicable to the
use of the amortized cost method of securities valuation.
For the purpose of limitations on the maturities of the investments of a
Fund, variable amount master demand notes will be considered to have a maturity
of one day unless the Adviser has reason to believe that the borrower could not
make immediate repayment upon demand.
VARIABLE RATE DEMAND INSTRUMENTS
The Government Money Market Fund, Tax Free Money Market Fund and
Municipal Fund may purchase variable rate demand instruments that are tax-exempt
municipal obligations and other debt securities providing for a periodic
adjustment in the interest rate paid on the instrument according to changes in
interest rates generally. These instruments also permit a Fund to demand payment
of the unpaid principal balance plus accrued interest upon a specified number of
days' notice to the issuer or its agent. The demand feature may be backed by a
bank letter of credit or guarantee issued with respect to such instrument. A
bank that issues a repurchase commitment may receive a fee from a Fund for this
arrangement. The issuer of a variable rate demand instrument may have a
corresponding right to prepay in its discretion the outstanding principal of the
instrument plus accrued interest upon notice comparable to that required for the
holder to demand payment.
The variable rate demand instruments that these Funds may purchase are
payable on demand on not more than thirty calendar days' notice. The terms of
the instruments provide that interest rates are adjustable at intervals ranging
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from daily up to six months, and the adjustments are based upon the prime rate
of a bank or other appropriate interest rate adjustment index as provided in the
respective instruments. The Funds intend to exercise the demand only (1) upon a
default under the terms of the debt security, (2) as needed to provide
liquidity, or (3) to maintain the respective quality standards of each Fund's
investment portfolio. A Fund will determine the variable rate demand instruments
that it will purchase in accordance with procedures approved by the Boards to
minimize credit risks. The Adviser may determine that an unrated variable rate
demand instrument meets a Fund's quality criteria by reason of being backed by a
letter of credit or guarantee issued by a bank that meets the quality criteria
for the Fund. Thus, either the credit of the issuer of the obligation or the
guarantor bank or both will meet the quality standards of a Fund. The Adviser
will reevaluate each unrated variable rate demand instrument held by a Fund on a
quarterly basis to determine that it continues to meet the Fund's quality
criteria.
The value of the underlying variable rate demand instruments may change
with changes in interest rates generally, but the variable rate nature of these
instruments should decrease changes in value due to interest rate fluctuations.
Accordingly, as interest rates decrease or increase, the potential for capital
gain and the risk of capital loss on the disposition of portfolio securities are
less than would be the case with a comparable portfolio of fixed income
securities. The Funds may purchase variable rate demand instruments on which
stated minimum or maximum rates, or maximum rates set by state law, limit the
degree to which interest on such variable rate demand instruments may fluctuate;
to the extent a Fund purchases such instruments, increases or decreases in value
of such variable rate demand notes may be somewhat greater than would be the
case without such limits. Because the adjustment of interest rates on variable
rate demand instruments is made in relation to changes in the applicable rate
adjustment index, variable rate demand instruments are not comparable to
long-term fixed interest rate securities. Accordingly, interest rates on
variable rate demand instruments may be higher or lower than current market
rates for fixed rate obligations of comparable quality with similar final
maturities.
The maturity of the variable rate demand instruments held by the Funds
will ordinarily be deemed to be the longer of (1) the notice period required
before a Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment.
The acquisition of variable rate demand notes for the Government Money
Market Fund and the Tax Free Money Market Fund must also meet the requirements
of rules issued by the SEC applicable to the use of the amortized cost method of
securities valuation.
PARTICIPATION INTERESTS
Subject to their respective investment objective and policies, Government
Money Market Fund and Tax Free Money Market Fund may purchase from banks
participation interests in all or part of specific holdings of municipal or
other debt obligations. Each participation interest is backed by an irrevocable
letter of credit or guarantee of the selling bank that the Adviser has
determined meets the prescribed quality standards of each Fund. Thus, even if
the credit of the issuer of the debt obligation does not meet the quality
standards of a Fund, the credit of the selling bank will, subject in each
instance to the requirements of rules issued by the SEC applicable to the use by
these Funds of the amortized cost method of valuation. Each Fund will have the
right to sell the participation interest back to the bank after seven days'
notice for the full principal amount of a Fund's interest in the municipal or
debt obligation plus accrued interest, but only (1) as required to provide
liquidity to that Fund, (2) to maintain the quality standards of each Fund's
investment portfolio or (3) upon a default under the terms of the debt
obligation. The selling bank may receive a fee from a Fund in connection with
the arrangement. Tax Free Money Market Fund will not
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purchase participation interests in municipal obligations unless it receives an
opinion of issuer's counsel or a ruling of the Internal Revenue Service (the
"Service") satisfactory to its Board that interest earned by the Fund on
municipal obligations in which it holds participation interests is excluded from
gross income for Federal income tax purposes in the hands of such Fund.
MUNICIPAL OBLIGATIONS
Tax Free Money Market Fund and Municipal Fund may invest in municipal
obligations. Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities to obtain funds for various public
purposes. The interest on most of these obligations is generally exempt from
regular Federal income tax in the hands of most individual investors, although
it may be subject to the individual and corporate alternative minimum tax. The
two principal classifications of municipal obligations are "notes" and "bonds."
Municipal notes are generally used to provide for short-term capital
needs and generally have maturities of one year or less. Municipal notes include
tax anticipation notes, revenue anticipation notes, bond anticipation notes, and
construction loan notes. Tax anticipation notes are sold to finance working
capital needs of municipalities. They are generally payable from specific tax
revenues expected to be received at a future date. Revenue anticipation notes
are issued in expectation of receipt of other types of revenue such as federal
revenues available under the Federal Revenue Sharing Program. Tax anticipation
notes and revenue anticipation notes are generally issued in anticipation of
various seasonal revenues such as income, sales, use, and business taxes. Bond
anticipation notes are sold to provide interim financing. These notes are
generally issued in anticipation of long-term financing in the market. In most
cases, these monies provide for the repayment of the notes. Construction loan
notes are sold to provide construction financing. After the projects are
successfully completed and accepted, many projects receive permanent financing
through the Federal Housing Administration under "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association). There are, of course, a number of other types of notes issued for
different purposes and secured differently from those described above.
Municipal bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have two principal
classifications, "general obligation" bonds and "revenue" bonds. Issuers of
general obligation bonds include states, counties, cities, towns and regional
districts. The proceeds of these obligations are used to fund a wide range of
public projects including the construction or improvement of schools, highways
and roads, water and sewer systems and a variety of other public purposes. The
basic security of general obligation bonds is the issuer's pledge of its faith,
credit, and taxing power for the payment of principal and interest. The taxes
that can be levied for the payment of debt service may be limited or unlimited
as to rate or amount or special assessments.
The principal security for a revenue bond is generally the net revenues
derived from a particular facility or group of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Revenue
bonds have been issued to fund a wide variety of capital projects including:
electric, gas, water and sewer systems; highways, bridges and tunnels; port and
airport facilities; colleges and universities; and hospitals. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may also be
used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security including partially or
fully insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in the debt service reserve
fund. Lease rental revenue bonds issued by a state or local
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authority for capital projects are secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations.
Industrial development bonds (now a subset of a class of bonds known as
"private activity bonds"), although nominally issued by municipal authorities,
are generally not secured by the taxing power of the municipality but are
secured by the revenues of the authority derived from payments by the industrial
user. Distributions by the Tax Free Money Market Fund and the Municipal Fund of
interest income from private activity bonds may subject certain investors to the
federal alternative minimum tax.
There is, in addition, a variety of hybrid and special types of municipal
obligations as well as numerous differences in the security of municipal
obligations both within and between the two principal classifications above.
An entire issue of municipal obligations may be purchased by one or a
small number of institutional investors such as one of the Funds. Thus, the
issue may not be said to be publicly offered. Unlike securities which must be
registered under the Securities Act of 1933, as amended (the "1933 Act"), prior
to offer and sale unless an exemption from such registration is available,
municipal obligations which are not publicly offered may nevertheless be readily
marketable. A secondary market exists for municipal obligations which were not
publicly offered initially.
The Adviser determines whether a municipal obligation is readily
marketable based on whether it may be sold in a reasonable time consistent with
the customs of the municipal markets (usually seven days) at a price (or
interest rate) which accurately reflects its value. The Adviser believes that
the quality standards applicable to the Tax Free Money Market Fund's investments
enhance marketability. In addition, stand-by commitments and demand obligations
also enhance marketability.
For the purpose of a Fund's investment restrictions, the identification
of the "issuer" of municipal obligations which are not general obligation bonds
is made by the Adviser on the basis of the characteristics of the obligation as
described above, the most significant of which is the source of funds for the
payment of principal of and interest on such obligations.
Yields on municipal obligations depend on a variety of factors, including
money market conditions, municipal bond market conditions, the size of a
particular offering, the maturity of the obligation and the quality of the
issue. High grade municipal obligations tend to have a lower yield than lower
rated obligations. Municipal obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or municipalities to levy taxes. There is also the
possibility that as a result of litigation or other conditions the power or
ability of any one or more issuers to pay when due principal of and interest on
its or their municipal obligations may be materially affected.
The Tax Free Money Market Fund expects that it will not invest more than
25% of its total assets in municipal obligations whose issuers are located in
the same state or more than 25% its total assets in municipal obligations the
security of which is derived from any one of the following categories: hospitals
and health facilities; turnpikes and toll roads; ports and airports; or colleges
and universities. The Tax Free Money Market Fund may invest more than 25% of its
total assets in municipal obligations of one or more of the following types:
public housing authorities; general obligations of states and localities; lease
rental obligations of states and local authorities; state and local housing
finance authorities; municipal
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utilities systems; bonds that are secured or backed by the Treasury or other
U.S. Government guaranteed securities to the extent such securities are
tax-exempt as defined in the Code; or industrial development and pollution
control bonds. The Municipal Fund will not invest 25% or more of its total
assets in municipal obligations whose issuers are located in the same state.
There could be economic, business or political developments, which might affect
all municipal obligations of a similar type. However, the Adviser believes that
the most important consideration affecting risk is the quality of particular
issues of municipal obligations rather than factors affecting all, or broad
classes of, municipal obligations.
The acquisition of municipal securities by the Tax Free Money Market Fund
will also be subject to the rules of the SEC applicable to use of the amortized
cost method of securities valuation.
MUNICIPAL LEASES. Funds that may invest in municipal securities may
invest in municipal leases and certificates of participation in municipal
leases. A municipal lease is an obligation in the form of a lease or installment
purchase which is issued by a state or local government to acquire equipment and
facilities. Certificates of participation represent undivided interests in
municipal leases, installment purchase agreements or other instruments. The
certificates are typically issued by a trust or other entity which has received
an assignment of the payments to be made by the state or political subdivision
under such leases or installment purchase agreements. The primary risk
associated with municipal lease obligations and certificates of participation is
that the governmental lessee will fail to appropriate funds to enable it to meet
its payment obligations under the lease. Although the obligations may be secured
by the leased equipment or facilities, the disposition of the property in the
event of nonappropriation or foreclosure might prove difficult, time consuming
and costly, and may result in a delay in recovering, or the failure to fully
recover, the Fund's original investment. To the extent that a Fund invests in
unrated municipal leases or participates in such leases, the Adviser will
monitor on an ongoing basis the credit quality rating and risk of cancellation
of such unrated leases. Certain municipal lease obligations and certificates of
participation may be deemed illiquid for the purposes of the Municipal Fund's
15% (10% with respect to the Money Market Funds) limitation on investments in
illiquid securities.
PRE-REFUNDED MUNICIPAL SECURITIES. Funds that invest in municipal
securities may invest in pre-refunded municipal securities. The principal of and
interest on pre-refunded municipal securities are no longer paid from the
original revenue source for the securities. Instead, the source of such payments
is typically an escrow fund consisting of U.S. Government securities. The assets
in the escrow fund are derived from the proceeds of refunding bonds issued by
the same issuer as the pre- refunded municipal securities. Issuers of municipal
securities use this advance refunding technique to obtain more favorable terms
with respect to securities that are not yet subject to call or redemption by the
issuer. For example, advance refunding enables an issuer to refinance debt at
lower market interest rates, restructure debt to improve cash flow or eliminate
restrictive covenants in the indenture or other governing instrument for the
pre-refunded municipal securities. However, except for a change in the revenue
source from which principal and interest payments are made, the pre-refunded
municipal securities remain outstanding on their original terms until they
mature or are redeemed by the issuer. Pre-refunded municipal securities are
usually purchased at a price which represents a premium over their face value.
STAND-BY COMMITMENTS
The Tax Free Money Market Fund and Municipal Fund may acquire stand-by
commitments. Acquisition of stand-by commitments by a Fund may improve portfolio
liquidity by making available same-day settlements on sales of portfolio
securities (and thus facilitate the same-day payments of redemption proceeds in
federal funds). A Fund may engage in such transactions subject to the
limitations in the rules under the 1940 Act. A stand-by commitment is a right
acquired by a Fund, when it purchases a
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municipal obligation from a broker, dealer or other financial institution
("seller"), to sell up to the same principal amount of such securities back to
the seller, at that Fund's option, at a specified price. Stand-by commitments
are also known as "puts." The exercise by a Fund of a stand-by commitment is
subject to the ability of the other party to fulfill its contractual commitment.
Stand-by commitments acquired by the Funds will generally have the
following features: (1) they will be in writing and will be physically held by
the Fund's custodian; (2) the Funds' rights to exercise them will be
unconditional and unqualified; (3) they will be entered into only with sellers
which in the Adviser's opinion present a minimal risk of default; (4) although
stand-by commitments will not be transferable, municipal obligations purchased
subject to such commitments may be sold to a third party at any time, even
though the commitment is outstanding; and (5) their exercise price will be (i) a
Fund's acquisition cost (excluding the cost, if any, of the stand-by commitment)
of the municipal obligations which are subject to the commitment (excluding any
accrued interest which the Fund paid on their acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date.
The Trust, on behalf of the Tax Free Money Market Fund and the Municipal
Fund, expects that stand-by commitments generally will be available without the
payment of any direct or indirect consideration. However, if necessary or
advisable, the Funds will pay for stand-by commitments, either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to the commitments. If the Fund pays additional consideration for a
stand-by commitment, the yield on the security to which the stand-by commitment
relates will, in effect, be lower than if the Fund had not acquired such
stand-by commitment.
It is difficult to evaluate the likelihood of use or the potential
benefit of a stand-by commitment. Therefore, it is expected that the Boards will
determine that stand-by commitments ordinarily have a "fair value" of zero,
regardless of whether any direct or indirect consideration was paid. When a Fund
has paid for a stand-by commitment, its cost will be reflected as unrealized
depreciation for the period during which the commitment is held.
The Adviser understands that the Service has issued a favorable revenue
ruling to the effect that, under specified circumstances, a registered
investment company will be the owner of tax-exempt municipal obligations
acquired subject to a put option. The Service has subsequently announced that it
will not ordinarily issue advance ruling letters as to the identity of the true
owner of property in cases involving the sale of securities or participation
interests therein if the purchaser has the right to cause the security, or the
participation interest therein, to be purchased by either the seller or a third
party. Each Fund intends to take the position that it is the owner of any
municipal obligations acquired subject to a stand-by commitment and that
tax-exempt interest earned with respect to such municipal obligations will be
tax-exempt in its hands. There is no assurance that the Service will agree with
this position in any particular case or that stand-by commitments will be
available to the Funds, nor have the Funds assumed that such commitments would
continue to be available under all market conditions.
A Fund, subject to its investment policies and restrictions, may also
enter into stand-by commitments in which the Fund may bind itself to accept
delivery of a municipal obligation with a stated price and fixed yield upon the
exercise of an option held by the other party to the agreement at a stated
future date. The Fund will receive a commitment fee in consideration of its
agreement to "stand-by" to purchase the municipal obligation. This stand-by
commitment may be deemed to be the sale by the Fund of a put. The stand-by
commitment agreement creates a risk of loss to the investment company and its
shareholders well in excess of the commitment fees the Fund would receive as
consideration for entering into the agreement.
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For example, if interest rates in the marketplace increase after the agreement
is made, it is likely that the contract price on the delivery date will exceed
the then current market value of the municipal obligation. The broker-dealer can
be expected to exercise its option and, in effect, pass the decline in the value
of the municipal obligation to the investment company. That decline in value may
significantly exceed the fee received by the investment company for entering
into the agreement. In accordance with the SEC's General Statement of Policy
(IC-10666), and in order to limit risk of loss, if a Fund engages in a stand-by
commitment transaction, such Fund will maintain in a segregated account,
commencing on the date the Fund enters into the stand-by commitment agreement,
liquid assets equal to the value of the purchase price under the stand-by
commitment.
RESTRICTED AND ILLIQUID SECURITIES
Each Fund may purchase securities that are not registered or offered in
an exempt non-public offering ("Restricted Securities") under the 1933 Act,
including securities eligible for resale to "qualified institutional buyers"
pursuant to Rule 144A under the 1933 Act. However, a Fund will not invest more
than 15% of its net assets (10% of total assets in the case of the Government
Money Market Fund and the Tax Free Money Market Fund) in illiquid investments,
which include repurchase agreements maturing in more than seven days, interest
rate, currency and mortgage swaps, interest rate caps, floors and collars,
certain SMBS, municipal leases, certain over-the-counter options, securities
that are not readily marketable and Restricted Securities, unless the Boards
determine, based upon a continuing review of the trading markets for the
specific Restricted Securities, that such Restricted Securities are liquid.
Certain commercial paper issued in reliance on Section 4(2) of the 1933 Act is
treated like Rule 144A Securities. The Boards have adopted guidelines and
delegated to the Adviser the daily function of determining and monitoring the
liquidity of the Fund's portfolio securities. The Boards, however, retain
sufficient oversight and are ultimately responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market for
Restricted Securities sold and offered under Rule 144A or Section 4(2) will
develop, the Boards will carefully monitor the Funds' investments in these
securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of increasing the level of illiquidity in a Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these Restricted Securities.
The purchase price and subsequent valuation of Restricted Securities
normally reflect a discount from the price at which such securities trade when
they are not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market price is expected to vary
depending upon they type of security, the character of the issuer, the party who
will bear the expenses of registering the Restricted Securities and prevailing
supply and demand conditions.
OTHER INVESTMENT COMPANIES
Each Fund, subject to authorization by its Board, may invest all of its
investable assets in the securities of a single open-end investment company (a
"Portfolio"). If authorized by the Board, a Fund would seek to achieve its
investment objective by investing in a Portfolio, which Portfolio would invest
in a portfolio of securities that complies with the Fund's investment
objectives, policies and restrictions. The ability of the Funds to convert to
the so-called Master-Feeder fund structure does not require shareholder
approval. The Boards do not intend to authorize investing in this manner at this
time.
Each Fund may invest up to 10% of its total assets in the securities of
other investment companies not affiliated with WPG, but not invest more than 5%
of its total assets in the securities of any one investment company or acquire
more than 3% of the voting securities of any other investment company.
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For example, the Quantitative Fund may invest in Standard & Poor's Depositary
Receipts (commonly referred to as "Spiders"), which are exchange-traded shares
of a closed-end investment company that are designed to replicate the price
performance and dividend yield of the Standard & Poor's 500 Composite Stock
Price Index. The Municipal Fund will only invest in investment companies that
are money market funds which invest in municipal obligations. A Fund will
indirectly bear its proportionate share of any management fees and other
expenses paid by investment companies in which it invests in addition to the
advisory and administration fees paid by the Fund.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following investment restrictions, which may
not be changed without approval of the holders of a majority of the outstanding
voting securities of the applicable Fund. As defined in the 1940 Act and as used
in the Prospectus and this Statement of Additional Information, "a majority of
the outstanding voting securities" of a Fund, means the lesser of (1) 67% of the
shares of the Fund present at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are present in person or by proxy, or (2) more
than 50% of the outstanding shares of the Fund. So long as these fundamental
restrictions are in effect, each Fund may not:
FOR THE GOVERNMENT MONEY MARKET FUND, TAX FREE MONEY MARKET FUND, MUNICIPAL FUND
AND CORE BOND FUND:
1. With respect to 75% of its total assets, purchase securities of
an issuer (other than U.S. Government securities or, with
respect to each Fund other than the Municipal Fund, repurchase
agreements collateralized by U.S. Government securities and
shares of other investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the
securities of such issuer; or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held
by the Fund;
provided, however, that each Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as such Fund.
2. Purchase or sell real estate (other than securities secured by
real estate or interests therein, or issued by entities which
invest in real estate or interests therein or, for Municipal
Bond Fund, real estate acquired by the Fund as a result of the
ownership of securities), but it may lease office space for its
own use and invest up to 15% of its assets in publicly held real
estate investment trusts.
3. Borrow amounts in excess of 33% of its total assets (including
the amount borrowed) and then only as a temporary measure for
extraordinary or emergency purposes. This restriction shall not
apply to reverse repurchase agreements entered into in
accordance with a Fund's investment policies.
4. Make loans, except that this restriction shall not prohibit the
purchase of or investment in bank certificates of deposit or
bankers acceptances, the purchase and holding of all or a
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portion of an issue of publicly distributed debt securities, the
lending of portfolio securities and the entry into repurchase
agreements.
5. Engage in the business of underwriting securities of others,
except to the extent that the Fund may be deemed to be an
underwriter under the 1933 Act, when it purchases or sells
portfolio securities in accordance with its investment
objectives and policies; provided, however, that the Fund may
invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
6. Purchase securities, excluding U.S. Government securities, of
one or more issuers conducting their principal business activity
in the same industry, if immediately after such purchase the
value of its investments in such industry would exceed 25% of
its total assets (except securities of banks and bank holding
companies in the case of the Government Money Market Fund and
the Tax Free Money Market Fund and except municipal securities,
U.S. Government securities and securities the payment of which
is secured by U.S. Government securities in the case of the
Municipal Bond Fund); provided, however, that the Fund may
invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund. In addition,
in the case of the Municipal Bond Fund, for purposes of this
restriction, state and municipal governments and their agencies
and instrumentalities are not deemed to be industries.
7. Issue senior securities, except as permitted under the 1940 Act
and except that the Fund may issue shares of beneficial interest
in multiple classes or series.
FOR THE QUANTITATIVE FUND:
1. Purchase or sell real estate, but the Fund may lease office
space for its own use as its principal office and may invest in
securities of companies engaged in the real estate business.
2. Borrow amounts in excess of 33% of its total assets (including
the amount borrowed) and then only as a temporary measure for
extraordinary or emergency purposes.
3. Make loans, except that this restriction shall not prohibit the
purchase of or investment in bank certificates of deposits or
bankers acceptances, the purchase and holding of all or a
portion of an issue of publicly distributed debt securities, the
lending of portfolio securities and the entry into repurchase
agreements.
4. Engage in the business of underwriting securities of others,
except to the extent that the Fund may be deemed to be an
underwriter under the 1933 Act, when it purchases or sells
portfolio securities in accordance with its investment
objectives and policies; provided, however, that the Fund may
invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
5. Purchase securities, excluding U.S. Government securities, of
one or more issuers conducting their principal business activity
in the same industry, if immediately after such purchase the
value of its investments in such industry would exceed 25% of
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its total assets except that the Fund may concentrate its assets
in securities of issuers in any industry to the extent the S&P
500 Index is so concentrated; provided, however, that the Fund
may invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
6. Invest in commodities or in commodities contracts except that
the Fund may purchase and sell financial futures contracts on
securities, indices and currencies and options on such futures
contracts, and the Fund may purchase securities on a forward
commitment or when-issued basis.
7. Issue senior securities except as permitted under the 1940 Act
and except that the Fund may issue shares of beneficial interest
in multiple classes or series.
8. With respect to 75% of its total assets, the Fund may not
purchase securities of an issuer (other than the U.S.
Government, its agencies, instrumentalities or authorities or
repurchase agreements collateralized by U.S. Government
securities and other investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the
securities of such issuer; or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held
by the Fund;
provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as the Fund.
FOR THE GROWTH AND INCOME FUND:
1. Purchase securities of an issuer if such purchase would result
in more than 10% of the voting securities of any one issuer,
other than the United States Government and its
instrumentalities, being held by the Fund; provided, however,
that the Fund may invest all or part of its investable assets in
an open-end investment company with substantially the same
investment objective, policies and restrictions as the Fund.
2. Purchase securities of an issuer if such purchase would result
in more than 5% of the Fund's total assets being invested in the
securities of any one issuer other than the United States
Government and its agencies and instrumentalities; provided,
however, that the Fund may invest all or part of its investable
assets in an open-end investment company with substantially the
same investment objective, policies and restrictions as the
Fund.
3. Purchase, sell or invest in commodities or commodity contracts
or real estate or interests in real estate, except futures
contracts on securities and securities indices and options on
such futures, forward foreign currency exchange contracts and
except that the Fund may purchase, sell or invest in marketable
securities of companies holding real estate or interests in real
estate, including real estate investment trusts.
4. Purchase securities of one or more issuers conducting their
principal business activity in the same industry, if immediately
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after such purchase the value of its investments in such
industry would exceed 25% of its total assets, provided that
this restriction shall not apply to securities issued or
guaranteed as to principal and interest by the U.S. Government,
its agencies or instrumentalities; provided, however, that the
Fund may invest all or part of its investable assets in an
open-end investment company with substantially the same
investment objective, policies and restrictions as the Fund.
5. Lend its funds to other persons, except through the purchase of
all or a portion of an issue of debt securities publicly
distributed or other securities or debt obligations in
accordance with its objective or through entering into
repurchase agreements; provided that each such repurchase
agreement has a duration of no more than seven days and that the
value of all of the Fund's outstanding repurchase agreements,
together with the value of all illiquid investments of the Fund,
does not exceed 15% of the Fund's total assets at any time.
6. Lend its portfolio securities unless the borrower is a broker,
dealer or financial institution; provided that the terms, the
structure and the aggregate amount of such loans are not
inconsistent with the 1940 Act or the Rules and Regulations or
interpretations of the SEC thereunder.
7. Borrow money, except from banks as a temporary measure to
facilitate the meeting of redemption requests which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes, provided
that the aggregate amount of such borrowings may not exceed 33%
of the value of the Fund's total assets (including amounts
borrowed) at the time of borrowing, or mortgage, pledge or
hypothecate its assets, except in an amount sufficient to secure
any such borrowing.
8. Issue senior securities, except as permitted under the 1940 Act
and except that the Fund may issue shares of beneficial interest
in multiple classes or series.
9. Engage in the business of underwriting the securities of other
issuers (except as the Fund may be deemed an underwriter under
the 1933 Act in connection with the purchase and sale of
portfolio securities in accordance with its investment objective
and policies); provided, however, that the Fund may invest all
or part of its investable assets in an open-end investment
company with substantially the same investment objective,
policies and restrictions as the Fund.
FOR THE TUDOR FUND:
1. Purchase securities of one or more issuers conducting their
principal business activity in the same industry, if immediately
after such purchase the value of its investments in such
industry would exceed 25% of its total assets provided that this
restriction shall not apply to securities issued or guaranteed
as to principal and interest by the U.S. Government, its
agencies or instrumentalities; provided, however, that the Fund
may invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund. In this
connection, the Fund may invest in "Special Situations." The
term "Special Situation" shall be deemed to refer to a security
of a company in which an unusual and possibly nonrepetitive
development is taking place which, in the opinion of the
investment adviser of the Fund, may cause the security to attain
a higher market value independently, to a degree, of the trend
in the securities market in general. The
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particular development (actual or prospective) which may qualify
a security as a "Special Situation" may be one of many different
types. Such developments may include, among others, a
technological improvement or important discovery or acquisition
which, if the expectation for it materialized, would effect a
substantial change in the company's business; a reorganization;
a recapitalization or other development involving a security
exchange or conversion; a merger, liquidation or distribution of
cash, securities or other assets; a breakup or workout of a
holding company; litigation which, if resolved favorably, would
improve the value of the company's stock; a new or changed
management; or material changes in management policies. A
"Special Situation" may often involve a comparatively small
company which is not well known and which has not been closely
watched by investors generally, but it may also involve a large
company. The fact, if it exists, that an increase in the
company's earnings, dividends or business is expected, or that a
given security is considered to be undervalued, would not in
itself be sufficient to qualify as a "Special Situation." The
Fund may invest in securities (even if not "Special Situations")
which, in the opinion of the investment adviser of the Fund, are
appropriate investments for the Fund, including securities which
the investment adviser of the Fund believes are undervalued by
the market. The Fund shall not be required to invest any minimum
percentage of its aggregate portfolio in "Special Situations,"
nor shall it be required to invest any minimum percentage of its
aggregate portfolio in securities other than "Special
Situations."
2. With respect to 75% of its total assets, the Fund may not
purchase securities of an issuer (other than the U.S.
Government, its agencies, instrumentalities or authorities or
repurchase agreements collateralized by U.S. Government
securities and other investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the
securities of such issuer; or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held
by the Fund;
provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as the Fund.
3. Lease, acquire, purchase, sell or hold real estate, but it may
lease office space for its own use and invest in marketable
securities of companies holding real estate or interests in real
estate, including real estate investment trusts.
4. Purchase or sell commodities or commodities contracts, except
futures contracts, including but not limited to contracts for
the future delivery of securities and contracts based on
securities indices and options on such futures contracts, and
forward foreign currency exchange contracts.
5. Lend money, except that it may (i) invest in all or a portion of
an issue of bonds, debentures and other obligations distributed
publicly or of a type commonly purchased by financial
institutions (e.g., certificates of deposit, bankers'
acceptances or other short-term debt obligations) or other debt
obligations in accordance with its objectives or (ii) enter into
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repurchase agreements; provided that the Fund will not enter
into repurchase agreements of more than one week's duration if
more than 15% of its net assets would be invested therein
together with other illiquid or not readily marketable
securities.
6. Lend its portfolio securities unless the borrower is a broker,
dealer, bank or other qualified financial institution; provided
that the terms, the structure and the aggregate amount of such
loans are not inconsistent with the 1940 Act or the Rules and
Regulations or interpretations of the SEC thereunder.
7. Engage in the business of underwriting the securities of others,
except to the extent that the Fund may be deemed to be an
underwriter under the 1933 Act when it purchases or sells
portfolio securities; provided, however, that the Fund may
invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
8. Borrow money except as a temporary measure to facilitate the
meeting of redemption requests or for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings
may not exceed 33% of the value of the Fund's total assets
(including the amount borrowed), at the time of such borrowing.
9. Issue senior securities except as permitted under the 1940 Act
and except that the Fund may issue shares of beneficial interest
in multiple classes or series.
FOR THE GROWTH FUND:
1. Purchase securities of one or more issuers conducting their
principal business activity in the same industry, if immediately
after such purchase the value of the Fund's investments in such
industry would exceed 25% of the value of its total assets
provided that this restriction shall not apply to securities
issued or guaranteed as to principal and interest by the U.S.
Government, its agencies and instrumentalities and provided,
however, that the Fund may invest all or part of its investable
assets in an open-end investment company with substantially the
same investment objective, policies and restrictions as the
Fund. In this connection, the Fund may invest in "Special
Situations." The term "Special Situation" shall be deemed to
refer to a security of a company in which an unusual and
possibly nonrepetitive development is taking place which, in the
opinion of the investment adviser of the Fund, may cause the
security to attain a higher market value independently, to a
degree, of the trend in the securities market in general. The
particular development (actual or prospective) which may qualify
a security as a Special Situation may be one of many different
types. Such developments may include, among others, a
technological improvement or important discovery or acquisition
which, if the expectation for it materialized, would effect a
substantial change in the company's business; a reorganization;
a recapitalization or other development involving a security
exchange or conversion; a merger, liquidation or distribution of
cash, securities or other assets; a breakup or workout of a
holding company; litigation which, if resolved favorably, would
improve the value of the company's stock; a new or changed
management; or material changes in management policies. A
Special Situation may often involve a comparatively small
company which is not well known and which has not been closely
watched by investors generally, but it may also involve a large
company. An expectation of an increase in the company's
earnings, dividends or business or a judgment that a given
security is undervalued, would not be sufficient in itself to
qualify as a Special Situation. The Fund may invest in
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<PAGE>
securities (even if they are not Special Situations) which, in
the opinion of the investment adviser of the Fund, are
appropriate investments for the Fund, including securities which
the investment adviser of the Fund believes are undervalued by
the market.
2. With respect to 75% of its total assets, the Fund may not
purchase securities of an issuer (other than the U.S.
Government, its agencies, instrumentalities or authorities or
repurchase agreements collateralized by U.S. Government
securities and other investment companies), if:
(a) such purchase would cause more than 5% of the Fund's total
assets taken at market value to be invested in the
securities of such issuer; or
(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held
by the Fund;
provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with
substantially the same investment objective, policies and
restrictions as the Fund.
3. Lease, acquire, purchase, sell or hold real estate other than
securities secured by real estate or interests therein or issued
by entities which invest in real estate or interests therein,
but it may lease office space for its own use.
4. Purchase or sell commodities or commodities contracts, except
futures contracts, including but not limited to contracts for
the future delivery of securities and contracts based on
securities indices.
5. Lend money, except that it may (i) invest in all or a portion of
an issue of bonds, debentures and other obligations distributed
publicly or of a type commonly purchased by financial
institutions (e.g., certificates of deposit, bankers'
acceptances, or other short-term debt obligations) or (ii) enter
into repurchase agreements; provided that each such repurchase
agreement is with a broker-dealer, bank or other financial
institution and that the Fund will not enter into repurchase
agreements of more than one week's duration if more than 15% of
its net assets would be invested therein together with other
illiquid or not readily marketable securities.
6. Lend its portfolio securities unless the borrower is a
broker-dealer, bank or other qualified financial institution;
provided that the terms, the structure and the aggregate amount
of such loans are not inconsistent with the 1940 Act or the
rules and regulations or interpretations of the SEC thereunder.
7. Engage in the business of underwriting securities of others,
except to the extent that the Fund may be deemed to be an
underwriter under the 1933 Act when it purchases or sells
portfolio securities; provided, however, that the Fund may
invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
8. Borrow money except as a temporary measure to facilitate the
meeting of redemption requests or for extraordinary or emergency
purposes, provided that the amount borrowed may not exceed 33%
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<PAGE>
of the Fund's total assets at the time of such borrowing;
provided, however, that this restriction shall not prohibit the
Fund from entering into repurchase agreements or option or
futures contracts.
9. Issue senior securities except as permitted under the 1940 Act
and except that the Fund may issue shares of beneficial interest
in multiple classes or shares.
FOR THE INTERNATIONAL FUND:
1. With respect to 75% of its total assets, invest more than 5% of
its total assets in securities of any one issuer, excluding
securities issued or guaranteed by the United States Government
or by its agencies and instrumentalities except that the Fund
may invest up to 10% of its total assets in repurchase
agreements with any member bank of the Federal Reserve System or
member of the NASD which is a primary dealer in U.S. Government
securities; or purchase more than 10% of the voting securities
of any class of any issuer; provided, however, that the Fund may
invest all or part of its investable assets in an open-end
investment company with substantially the same investment
objective, policies and restrictions as the Fund.
2. Make an investment that would result in more than 25% of its
total assets being invested in securities of issuers in the same
industry, except U.S. Government securities; provided, however,
that the Fund may invest all or part of its investable assets in
an open-end investment company with substantially the same
investment objective, policies and restrictions as the Fund.
3. Purchase or sell commodities or commodities contracts, except
that the Fund may enter into or purchase futures contracts,
including but not limited to contracts for the future delivery
of securities, contracts based on securities indices, forward
foreign currency contracts, foreign currency futures and
options, and options on securities.
4. Lend money, except that it may (i) invest in all or a portion of
an issue of bonds, debentures and other obligations distributed
publicly or of a type commonly purchased by financial
institutions (e.g., certificates of deposit, bankers'
acceptances or other short-term debt obligations) or other debt
obligations in accordance with its objectives or (ii) enter into
repurchase agreements; provided that the Fund will not enter
into repurchase agreements of more than one week's duration if
more than 15% of its net assets would be invested therein
together with other illiquid or not readily marketable
securities.
5. Lend its portfolio securities unless the borrower is a broker,
dealer or financial institution; provided that the terms, the
structure and the aggregate amount of such loans are not
inconsistent with the 1940 Act or the Rules and Regulations or
interpretations of the SEC thereunder.
6. Engage in the business of underwriting the securities of other
issuers (except as the Fund may be deemed an underwriter under
the 1933 Act in connection with the purchase and sale of
portfolio securities in accordance with its investment objective
and policies); provided, however, that the Fund may invest all
or part of its investable assets in an open-end investment
company with substantially the same investment objective,
policies and restrictions as the Fund.
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<PAGE>
7. Invest in the securities of an issuer for the purpose of
exercising control or management, but it may do so where it is
deemed advisable to protect or enhance the value of an existing
investment; provided, however, that the Fund may invest all or
part of its investable assets in an open-end investment company
with substantially the same investment objective, policies and
restrictions as the Fund.
8. Invest its assets in securities of other open-end investment
companies but the Fund may invest in closed-end investment
companies to the extent permitted by the 1940 Act or rules,
regulations or orders issued thereunder; provided, however, that
the Fund may invest all or part of its investable assets in an
open-end investment company with substantially the same
investment objective, policies and restrictions as the Fund.
9. Participate on a joint or joint and several basis in any
securities trading account; provided, however, that combining or
"bunching" of orders of other accounts under the investment
management of the Adviser or Hill Samuel Asset Management shall
not be considered participation in a joint securities trading
account.
10. Invest in or retain the securities of any issuer, if, to the
knowledge of the Fund, those officers and trustees of the Fund
who individually own in excess of 1/2 of 1% of the issuer's
securities own more than 5% of such securities in the aggregate.
11. Issue senior securities, except as permitted under the 1940 Act
and except that the Fund may issue shares of beneficial interest
in multiple classes or series.
12. Purchase securities on margin except as short-term credits may
be necessary for the clearance of transactions; provided,
however, that this restriction shall not prohibit the Fund from
entering into repurchase agreements or option contracts, nor
from entering into transactions pursuant to investment
restriction 14 below.
13. Make short sales of securities except short sales against the
box; provided, however, that this restriction shall not prohibit
the Fund from writing or entering into option contracts.
14. Borrow money, except as a temporary or emergency measure, and
then only from banks and trust companies in an aggregate amount
not exceeding 10% of the value of its total assets taken at
cost. The Fund may pledge, mortgage, or hypothecate no more than
15% of its total assets in connection with such borrowings.
15. Lease, acquire, purchase, sell or hold real estate (including
limited partnership interests which are not readily marketable),
but it may lease office space for its own use and invest in (1)
readily marketable interests of real estate investment trusts or
readily marketable securities of issuers whose business involves
the purchase and sale of real estate; and (2) securities secured
by real estate or interests therein.
Each Fund may, notwithstanding any other fundamental or non-fundamental
investment restriction or policy, invest all of its assets in the securities of
a single open-end investment company with substantially the same investment
objectives, restrictions and policies as that Fund.
For purposes of the above fundamental investment restrictions regarding
industry concentration, the Adviser generally classifies issuers by industry in
accordance with classifications set forth in the Standard & Poor's Stock Guide.
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<PAGE>
In the absence of such classification or if the Adviser determines in good faith
based on its own information that the economic characteristics affecting a
particular issuer make it more appropriately considered to be engaged in a
different industry, the Adviser may classify an issuer according to its own
sources.
In addition to the fundamental policies mentioned above, the Board has
adopted the following non-fundamental policies which may be changed or amended
by action of the Board without approval of shareholders. So long as these
non-fundamental restrictions are in effect, the Fund may not:
(a) Invest in the securities of an issuer for the purpose of
exercising control or management, but it may do so where it
is deemed advisable to protect or enhance the value of an
existing investment.
(b) Purchase securities of any other investment company except
as permitted by the 1940 Act.
(c) Purchase securities on margin, except any short-term
credits which may be necessary for the clearance of
transactions and the initial or maintenance margin in
connection with options and futures contracts and related
options.
(d) Invest more than 15% of its net assets in securities which
are illiquid (10% of total assets for Government Money
Market Fund and Tax Free Market Fund).
(e) Purchase additional securities if the Fund's borrowings
exceed 5% of its net assets.
All percentage limitations apply only at the time a transaction is
entered into. Accordingly, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in the percentage which results from
a relative change in values or from a change in a Fund's net assets will not be
treated as a violation. Under the 1940 Act, each Fund will be required to
maintain continuous asset coverage of at least 300% for borrowings from a bank.
In the event that such asset coverage is below 300%, the applicable Fund will be
required to reduce the amount of its borrowings to obtain 300% asset coverage,
within three days (not including Sundays and holidays) or such longer period as
the rules and regulations of the SEC prescribe.
ADVISORY, SUBADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISER
Weiss, Peck & Greer, L.L.C. (the "Adviser" or "WPG"), One New York Plaza,
New York, New York 10004, serves as investment adviser and administrator to each
Fund. See "Management of the Funds -- Investment Adviser and Administrator" and
"Portfolio Brokerage" in the Prospectus for a description of the duties of WPG
as investment adviser and administrator to the Funds.
On or about September 9, 1998, Robeco Groep N.V., a Dutch public limited
liability company ("Robeco"), acquired all of the outstanding equity interests
of WPG from its prior owners (the "Acquisition"). As a result of the
Acquisition, WPG is an indirect, wholly-owned subsidiary of Robeco. The
Acquisition did not result in material changes in the business, corporate
structure or composition of the senior management or personnel of WPG, or in the
manner in which WPG renders advisory, administrative or brokerage services to
the Funds. The Acquisition did
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<PAGE>
not involve an increase in the advisory or administrative fees paid by any Fund.
Moreover, the Funds' Trustees did not change as a result of the Acquisition.
In connection with the Acquisition, the Funds' Boards, including a
majority of the Trustees who are not "interested persons" (as such term is
defined in the 1940 Act) of the Funds or WPG (the "non- Interested Trustees"),
approved the Funds' current investment advisory agreements (the "Advisory
Agreements") at a meeting held on May 19, 1998. The Advisory Agreements were
approved by a "majority of the outstanding voting securities" (as defined in the
1940 Act) of each Fund at a joint special meeting of shareholders held on July
29, 1998, and became effective upon the consummation of the Acquisition. Except
for the dates of execution, effectiveness and termination, the terms of each
Fund's Advisory Agreement are substantially identical to the terms of such
Fund's investment advisory agreement which was in effect immediately prior to
the Acquisition.
Pursuant to the Advisory Agreements, the Adviser supervises and assists
in the management of the assets of each Fund and furnishes each Fund with
research, statistical and advisory services. In managing the assets of the
Funds, the Adviser furnishes continuously an investment program for each Fund
consistent with the investment objectives and policies of that Fund. More
specifically, the Adviser determines from time to time what securities shall be
purchased for the Fund, what securities shall be held or sold by the Fund and
what portion of the Fund's assets shall be held uninvested as cash, subject
always to the provisions of the applicable Fund's Declaration of Trust, By-Laws
and registration statement and to its investment objectives, policies and
restrictions, as each of the same shall be from time to time in effect, and
subject, further, to such policies and instructions as the applicable Fund's
Board may from time to time establish. To carry out such determinations, the
Adviser places orders for the investment and reinvestment of each Fund's assets.
(See "Portfolio Brokerage.")
For its investment advisory services under the Advisory Agreements, the
Adviser receives an annual fee, payable monthly, which varies in accordance with
the average daily net assets of the Funds under the management of the Adviser.
The advisory fee is accrued daily and will be prorated if the Adviser shall not
have acted as a Fund's investment adviser during any entire monthly period.
The annual fee rates under the Advisory Agreements and the advisory fees
paid to the Adviser under the prior investment advisory agreements for the
fiscal years ended December 31, 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
ADVISORY FEES PAID
DECEMBER 31,
ANNUAL
FUND FEE RATE 1995 1996 1997
- ---- -------- ---- ---- ----
<S> <C> <C> <C> <C>
GOVERNMENT MONEY 0.50% of net assets up to $754,581 $684,845 $780,088
MARKET FUND AND $500 million
TAX FREE MONEY 0.45% of net assets 620,407 637,124 650,081
MARKET FUND $500,000 million to $1
billion
0.40% of net assets $1
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<PAGE>
ADVISORY FEES PAID
DECEMBER 31,
ANNUAL
FUND FEE RATE 1995 1996 1997
- ---- -------- ---- ---- ----
billion to $1.5 billion
0.35% of net assets in
excess $1.5 billion
MUNICIPAL FUND 0.00% of average daily -0- -0- 39,8631
net assets while net
assets are less than
$17 million
0.50% of average
daily net assets
while net assets are
$17 million or more
CORE BOND FUND 0.60% of net assets 1,117,390 864,402 702,166
up to $300 million
0.55% of net assets $30
million to $500
million
0.50% of net assets in
excess of $500 million
GROWTH AND INCOME 0.75% of net assets 490,867 551,520 759,489
FUND
TUDOR FUND 0.90% of net assets up 1,361,493 1,634,978 166,458,723
to $300 million
0.80% of net assets $300
million to $500
million
0.75% of net assets in
excess of $500 million
INTERNATIONAL FUND (2) 0.50% of net assets 73,504 66,670 61,731
while net assets are
less than $15 million
0.85% of net assets
while net assets are
between $15 million
and $20 million
1.00% of net assets
while net assets
are $20 million or more
GROWTH FUND 0.75% of net assets 494,164 471,606 474,629
QUANTITATIVE FUND 0.75% of net assets 765,319 1,097,250 783,469
<FN>
- ------------------
(1) During the fiscal year ended December 31, 1997, WPG agreed not to
impose a portion of its advisory fees and to assume certain other expenses. Had
WPG not so agreed, Municipal Fund would have paid advisory fees of $96,169.
(2) See "Subadviser to the International Fund" below for a discussion
of the subadvisory fees paid by the Adviser to the International Fund's
subadviser.
</FN>
</TABLE>
Each Advisory Agreement provides that the Adviser will not be liable for
any loss sustained by a
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<PAGE>
Fund by reason of the adoption or implementation of any investment policy or the
purchase, sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research of the
Adviser, or upon investigation and research made by any other individual, firm
or corporation if such recommendation shall have been made and such other
individual, firm or corporation shall have been selected with due care and in
good faith, except for a loss resulting from willful misfeasance, bad faith, or
gross negligence in the performance by the Adviser of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties thereunder.
Each Advisory Agreement may be modified or amended only with the approval
of the holders of a "majority of the outstanding voting securities" (as defined
in the 1940 Act) of the applicable Fund and by a vote of the majority of the
non-Interested Trustees of the Fund. Each Advisory Agreement's continuance after
its initial two-year term must be approved annually by a majority vote of the
applicable Board or by a vote of the holders of a "majority of the outstanding
voting securities" of the applicable Fund, but in either event it also must be
approved by a vote of a majority of the non-Interested Trustees of the
applicable Fund, cast in person at a meeting called for the purpose of voting on
such approval. Each Advisory Agreement may be terminated without penalty, by
either party, upon not more than 60 days' written notice and will terminate
automatically in the event of its assignment.
As of June 1, 1998, WPG had capital of approximately $72 million. WPG
consists of 35 Managing Directors, one of whom is a member of the NYSE, and
certain principals. WPG has approximately 250 full-time employees in addition to
its Managing Directors. As of June 1, 1998, WPG and its affiliates had assets
under management of approximately $16 billion, primarily for institutions and
high net worth individuals.
Robeco is a Dutch corporation that was formed to be the holding company
for 100% of the shares of Robeco International B.V. and Robeco Nederland B.V.
("Robeco Nederland") (collectively referred to as the "Robeco Group").
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland owns
50% of the shares of Robeco and the balance is owned by shareholders of the
Robeco Group funds.
The Robeco Group is a fund management group. Robeco Nederland advises
and manages investment funds, some of whose shares are traded primarily on the
Amsterdam Stock Exchange, which funds include (1) Robeco N.V., (2) Rolinco N.V.,
(3) Rorento N.V., (4) RG Rente Mixfund N.V., (5) RG Obligatie Mixfund N.V., (6)
RG Aandelen Mixfund N.V., (7) RG Florente Fund N.V., (8) RG Divirente Fund N.V.,
(9) RG America Fund N.V., (10) RG Europe Fund N.V., (11) RG Pacific Fund N.V.,
(12) Nettorente Fund N.V., (13) RG Hollands Bezit N.V., (14) RG Emerging Markets
Fund N.V., (15) RG Tactimix Funds, and (16) RG Zelfselect Landen Fund N.V.
Robeco Nederland also advises and manages a number of institutional funds. The
Robeco Group operates primarily outside of the United States, although it
currently holds significant ownership interests in three U.S. investment
advisers, in addition to being the parent company of WPG.
The Robeco Group, through its subsidiaries, has approximately 1,250
employees worldwide. Of the approximately $59.4 billion in assets under
management at December 31, 1997, approximately $810 million was is managed in
the U.S.
Roger J. Weiss is a Senior Managing Director of WPG and Chairman of the
Board and Trustee of each of the Funds and President of the International Fund.
Stephen H. Weiss, brother of Roger J. Weiss, is also a Senior Managing Director
of WPG. Francis H. Powers is a Managing Director of WPG, and Executive Vice
President and Treasurer of each of the Funds. Jay C. Nadel, is a Managing
Director of WPG and an Executive Vice President and Secretary of each of the
Funds. Mr. R. Scott Richter is a Managing Director of WPG and Vice President of
Tax Free Money Market Fund and Municipal Fund. Ms. Janet A. Fiorenza is a
Managing Director of WPG and a Vice President of Tax Free Money Market Fund. A.
Roy Knutsen is a Managing Director of WPG and President of the Growth and Income
Fund. Adam Starr is a Managing Director of WPG and President and Trustee of
Tudor Fund and Growth Fund.
The persons responsible for the day-to-day management of each Fund's
portfolio are listed in the Prospectus. Messrs. Stephen H. Weiss and Roger J.
Weiss may also participate in each Fund's investment decisions and all of the
Managing Directors in WPG consult on a regular basis among themselves about
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<PAGE>
general market conditions, as well as specific securities and industries.
In the management of the Funds and their other accounts, WPG and its
affiliates allocate investment opportunities to all accounts for which they are
appropriate subject to the availability of cash in any particular account and
the final decision of the individual or individuals in charge of such accounts.
Where market supply is inadequate for a distribution to all such accounts,
securities are allocated on a pro rata basis. In some cases this procedure may
have an adverse effect on the price or volume of the security as far as the
Funds are concerned. However, it is the judgment of the Board that the
desirability of continuing the Funds' advisory arrangements with the Adviser
outweighs any disadvantages that may result from contemporaneous transactions.
See "Portfolio Brokerage."
SUBADVISER TO THE INTERNATIONAL FUND
Hill Samuel Asset Management Limited ("Hill Samuel" or the "Subadviser")
of London, England, serves as subadviser to the International Fund pursuant to a
Subadvisory Agreement by and among the Fund, the Adviser and Hill Samuel. An
affiliate of Hill Samuel, Hill Samuel Investment Management Limited ("HSIM"),
previously served as the International Fund's subadviser. HSIM merged with Hill
Samuel in a transaction that did not, as represented by Hill Samuel, result in
an "assignment" of the Subadvisory Agreement (as such term is defined in the
1940 Act and the rules thereunder). Prior to April 4, 1996, Lloyds Investment
Management International Limited ("LIMI"), an affiliate of Hill Samuel, served
as the International Fund's subadviser. LIMI merged with Hill Samuel on April 4,
1996 in a transaction that did not, in the opinion of counsel to Hill Samuel and
LIMI, result in an "assignment" of the Subadvisory Agreement (as such term is
defined in the 1940 Act and the rules thereunder).
In connection with the Acquisition, the International Fund's Board,
including a majority of the non-Interested Trustees, approved the International
Fund's current subadvisory agreement (the "Subadvisory Agreement") by and among
WPG, Hill Samuel and the International Fund at a meeting held on May 19, 1998.
The Subadvisory Agreement was approved by a "majority of the outstanding voting
securities" (as defined in the 1940 Act) at the special meeting of shareholders
held on July 29, 1998, and became effective upon the consummation of the
Acquisition. Except for the dates of execution, effectiveness and termination,
the terms of the Subadvisory Agreement are substantially identical to the terms
of the investment subadvisory agreement which was in effect immediately prior to
the Acquisition.
Hill Samuel is a United Kingdom corporation regulated by IMRO in the
United Kingdom and registered with the SEC as an investment adviser under the
Investment Advisers Act of 1940. Hill Samuel is an indirect wholly owned
subsidiary of Lloyds TSB plc of London ("Lloyds TSB"), a major U.K. banking
institution whose predecessor was established in 1677 and whose shares are
listed on the International Stock Exchange in London. Hill Samuel services
clients throughout the world ranging from governments, financial institutions
and international companies to small growing concerns, charities, pension funds,
mutual funds, closed-end trusts and private individuals. Hill Samuel maintains
global investment management capabilities covering equity, fixed income, money
market and other investment assets and instruments. Hill Samuel conducts
investment research directly and through associated and joint venture companies
and utilizes a variety of other external sources, including brokers and dealers
who may execute transactions for the Fund and other clients. London-based
specialist investment managers and analysts visit international markets and
remain in continuous contact with affiliated advisory organizations of Hill
Samuel.
Under the Subadvisory Agreement, Hill Samuel provides the International
Fund and the Adviser with investment research, advice and supervision and with
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<PAGE>
an investment program for that portion of the International Fund's portfolio
invested in foreign securities consistent with the International Fund's
objective and policies. Pursuant to the Subadvisory Agreement, the Adviser pays
to Hill Samuel a quarterly advisory fee equal on an annual basis to 0.40% of the
average daily net assets of the International Fund. In the event that the
advisory fee payable by the International Fund to WPG is reduced, the amount
payable by WPG to Hill Samuel shall likewise be reduced by a proportionate
amount. The International Fund has no responsibility to pay Hill Samuel's fees
and pays only the Adviser's fee. Hill Samuel's predecessor in interest agreed
not to impose all or a portion of its fee (payable by the International Fund's
investment adviser) from time to time since the International Fund's inception.
For the years ended December 31, 1995, 1996 and 1997, WPG paid Hill Samuel or
its predecessors in interest, as the case may be, $29,402, $26,668 and $24,753,
respectively, in subadvisory fees.
The Subadvisory Agreement provides that the Subadviser will not be liable
for any loss sustained by the International Fund by reason of the adoption or
implementation of any investment policy or the purchase, sale or retention of
any security, whether or not such purchase, sale or retention shall have been
based upon investigation and research made by any other individual, firm or
corporation if such recommendation shall have been made and such other
individual firm or corporation shall have been selected with due care and in
good faith, except for a loss resulting from willful misfeasance, bad faith or
gross negligence in the performance by the Subadviser of its duties or by reason
of the Subadviser's reckless disregard of its obligations and duties thereunder.
The Adviser may from time to time recommend to the Board the engagement
of a new subadviser or may determine to manage directly that portion of the
International Fund's portfolio invested in foreign securities. Any agreement
with a new subadviser will be subject to the approval of a majority vote of
shareholders of the International Fund unless otherwise permitted by the 1940
Act or an exemption therefrom.
The subadvisory fee is accrued daily and will be prorated if Hill Samuel
shall not have acted as the International Fund's subadviser during any entire
monthly period. The Subadvisory Agreement may be modified or amended only with
the approval of the holders of a "majority of the outstanding voting securities"
of the International Fund and by a vote of the majority of the non-Interested
Trustees of the International Fund. The Subadvisory Agreement's continuance
after its initial two-year term must be approved annually by a majority of the
Board of the International Fund or by a vote of the holders of a majority of the
outstanding voting securities of the International Fund, but in either event it
also must be approved by a vote of the majority of the non-Interested Trustees
of the International Fund, cast in person at a meeting called for the purpose of
voting on such approval. The Subadvisory Agreement may be terminated without
penalty by any party upon not more than 60 days' written notice and will
terminate automatically in the event of its assignment.
In the management of the International Fund and their other accounts, WPG
and the Subadviser and their subsidiaries allocate investment opportunities to
all accounts for which they are appropriate subject to the availability of cash
in any particular account and the final decision of the individual or
individuals in charge of such accounts. Where market supply is inadequate for a
distribution to all such accounts, securities are allocated on a pro rata basis.
In some cases this procedure may have an adverse effect on the price or volume
of the security as far as the International Fund is concerned. However, it is
the judgment of the Board that the desirability of continuing the International
Fund's advisory arrangements with the Adviser and the Subadviser outweighs any
disadvantages that may result from contemporaneous transactions. See "Portfolio
Brokerage."
-37-
<PAGE>
ADMINISTRATOR
WPG, in its capacity of administrator to the Funds, performs
administrative, transfer agency related and shareholder relations services and
certain clerical and accounting services for each Fund under separate
administration agreements (the "Administration Agreements"). More specifically,
these obligations pursuant to the Administration Agreements include, subject to
the general supervision of the Boards, (a) providing supervision of all aspects
of the Funds' non-investment operations (the parties giving due recognition to
the fact that certain of such operations are performed by others pursuant to
agreements with the Funds), (b) providing the Funds, to the extent not provided
pursuant to their custodian and transfer agency agreements or agreements with
other institutions, with personnel to perform such executive, administrative,
accounting and clerical services as are reasonably necessary to provide
effective administration of the Funds, (c) arranging, to the extent not provided
pursuant to such agreements, for the preparation, at the Funds' expense, of its
tax returns, reports to shareholders, periodic updating of the prospectuses and
reports filed with the SEC and other regulatory authorities, (d) providing the
Funds, to the extent not provided pursuant to such agreements, with adequate
office space and certain related office equipment and services, (e) maintaining
all of the Funds' records other than those maintained pursuant to such
agreements or the Advisory Agreements, and (f) providing to the Funds transfer
agency-related and shareholder relations services and facilities and the
services of one or more of its employees or officers, or employees or officers
of its affiliates, relating to such functions (including salaries and benefits,
office space and supplies, equipment and teaching).
For its services under the Administration Agreements, WPG is entitled to
receive a fee, computed daily and payable monthly, at an annual rate based on
each Fund's average daily net assets and the annual fee rates are as follows:
- 38 -
<PAGE>
<TABLE>
<CAPTION>
ADMINISTRATION FEES PAID
FOR THE YEAR ENDED DECEMBER 31,
PRESENT ANNUAL
FUND ANNUAL RATE(1) 1995 1996 1997
- ---- -------------- ---- ---- ----
<S> <C> <C> <C> <C>
Government Money 0.04% $90,549 $82,182 $71,476
Market Fund
Tax Free Money 0.05% 34,224 38,227 47,012
Market Fund
Municipal Fund 0.00% while net -0- -0- -0-
assets are less
than $50 million
0.12% while net
assets are $50
million or
more
Core Bond Fund 0.05% 55,869 43,212 50,727
Growth and Income
Fund 0.06% 75,890 466,182 69,393
Tudor Fund 0.05% 105,894 127,165 99,436
International Fund 0.00% while net -0- -0- -0-
assets are less than
$25 million
0.06% while net
assets are $25 million
or more
Growth Fund 0.15% 13,177 12,576 38,528
Quantitative Fund 0.06% 20,409 29,280 42,169
<FN>
- ------------------
(1) The Trustees review the rate at which the administration fees are
paid at least annually and may change the rate of compensation without
shareholder approval. The administration fees were paid at different rates than
those set forth above at various times during the periods shown.
</FN>
</TABLE>
Each Administration Agreement provides that WPG will not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the matters to which the Agreements relate, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
WPG in the performance of its duties or from the reckless disregard by WPG of
its obligations and duties thereunder. Each Administration Agreement's
continuance must be approved annually by a majority vote of the Board and may be
terminated without penalty, by either party, upon not more than 60 days' written
notice.
PRINCIPAL UNDERWRITER
First Data Distributors, Inc., 4400 Computer Drive, Westboro,
Massachusetts, 01581-5120, (the "Underwriter") serves as the principal
underwriter in connection with the continuous offering of shares of each Fund
pursuant to an Underwriting Agreement dated August 1998. The Underwriting
Agreement's continuance after its initial two-year term must be
-39-
<PAGE>
approved annually by the Trustees, including a majority of the non-Interested
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Underwriting Agreement was approved by the Trustees at a meeting
held on July 22, 1998. As the Funds' principal underwriter, the Underwriter
performs certain services related to the distribution of shares of the Funds to
the public.
The Underwriter bears all expenses in providing services under the
Underwriting Agreement. Such expenses include compensation to its employees and
representatives to any investment dealers and financial firms for distribution
related services. The Underwriter also pays certain expenses in connection with
the distribution of the Funds' shares, including the cost of preparing, printing
and distributing advertising materials, and the cost of printing and
distributing prospectuses and supplements to prospective shareholders. WPG, and
not the Funds, bears the fees charged by the Underwriter. Each Fund bears, among
other things, the cost of registering its shares under federal, state and
foreign securities law.
EXPENSES
With respect to each Fund, the Fund pays: (i) fees and expenses of any
investment adviser or administrator of the Fund; (ii) organization expenses of
the Fund; (iii) fees and expenses incurred by the Fund in connection with
membership in investment company organizations; (iv) brokers' commissions; (v)
payment for portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses (including an allocable portion of the cost of
WPG's employees rendering legal services to the Fund); (vii) interest, insurance
premiums, taxes or governmental fees; (viii) the fees and expenses of the
transfer agent of the Fund; (ix) the cost of preparing stock certificates or any
other expenses, including, without limitation, clerical expenses of issue,
redemption or repurchase of shares of the Fund; (x) the expenses of and fees for
registering or qualifying shares of the Fund for sale and of maintaining the
registration of the Fund and registering the Fund as a broker or a dealer; (xi)
the fees and expenses of Trustees of the Fund who are not affiliated with the
Adviser; (xii) the cost of preparing and distributing reports and notices to
shareholders, the SEC and other regulatory authorities; (xiii) the fees or
disbursements of custodians of the Fund's assets, including expenses incurred in
the performance of any obligations enumerated by the Declaration of Trust or
By-Laws of the Fund insofar as they govern agreements with any such custodian;
(xiv) costs in connection with annual or special meetings of shareholders,
including proxy material preparation, printing and mailing; and (xv) litigation
and indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the Fund's business.
During the fiscal years ended December 31, 1996 and 1997, the Adviser
voluntarily reimbursed the Municipal Fund in the amount of $21,096 and $4,292,
respectively, and voluntarily did not impose its management fee in the amount of
$56,306 during the fiscal year ended December 31, 1997. See the Prospectus
regarding current fee waivers and expense limitations.
Each Fund may also enter into arrangements with third parties that
provide omnibus accounting and transfer agency-related services (including
recordkeeping and nondistribution-related shareholder servicing) for the benefit
of Fund shareholders who are the beneficial owners of Fund shares held in
nominee form with the third parties. A Fund may compensate such third parties
for the provision of subaccounting and transfer agency-related services based on
a percentage of the Fund's assets for which such entities perform such services.
To the extent that a Fund compensates a third party for the provision of these
services, it will not incur duplicative fees with its transfer agent. As of the
date of this Statement of Additional Information, the Funds have entered into
-40-
<PAGE>
arrangements with the following third parties omnibus account service
providers: Hewitt (Core Bond Fund), Mercer (Core Bond Fund), Jack White (Growth
and Income Fund, Tudor Fund, Core Bond Fund, Growth Fund, International Fund,
Quantitative Fund and Municipal Fund), Corroon (each Fund), Schwab (Quantitative
Fund and Municipal Fund) and Fidelity (Growth and Income Fund, Tudor Fund, Core
Bond Fund, Growth Fund, Quantitative Fund and Municipal Fund).
The Funds' Advisory and Administration Agreements each provide that WPG,
in its capacities as investment adviser and administrator, may render similar
services to others so long as the services provided thereunder are not impaired
thereby.
In an attempt to avoid any potential conflict with portfolio transactions
for a Fund, the Adviser and the Funds have adopted extensive restrictions on
personal securities trading by personnel of the Adviser and its affiliates.
These restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings of
securities. These restrictions are a continuation of the basic principle that
the interests of the Funds and their shareholders come before those of the
Adviser and its principals and employees.
ADMINISTRATION AND SERVICE PLANS
Under the administration and service plans of the Core Bond Fund and the
International Fund (each, a "Plan" and together, the "Plans"), these Funds may
enter into contracts ("Servicing Agreements") with banks (other than the
Custodian), trust companies, broker-dealers (other than WPG) or other financial
organizations ("Service Organizations") to provide certain administrative and
shareholder services ("Services") on behalf of the Funds. In connection with the
Acquisition, the Boards of the International Fund and Funds Trust, including a
majority of the non-Interested Trustees, approved the current Plans at a meeting
held on May 19, 1998. Each Plan was approved by a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the applicable Fund at a
joint special meeting held on July 29, 1998, and became effective upon the
consummation of the Acquisition. The terms of the Plans are substantially
identical to the terms of the Funds' administration and service plans in effect
prior to the consummation of the Acquisition.
A Service Organization will receive a fee payable by the applicable Fund
in respect of shares held by or through such Service Organization for its
customers for Services performed pursuant to the Plan and the applicable
Servicing Agreement. The schedule of fees and the basis upon which such fees
will be paid will be determined by the Trustees of the applicable Fund;
provided, however, that the aggregate annual fees to be paid to all Service
Organizations and a Fund's expenses under the Plans will not exceed 0.05% of the
Fund's average daily net assets per year. Neither the Custodian nor WPG will be
a Service Organization or receive fees for Services. During the year ended
December 31, 1997, the Core Bond Fund paid or incurred fees to Service
Organizations of $378 pursuant to its prior Plan, all of which was paid to
dealers. During the year ended December 31, 1997, no fees were paid by the
International Fund pursuant to its prior Plan.
Rule 12b-1 (the "Rule") under the 1940 Act regulates the circumstances
under which an investment company may, directly or indirectly, bear the expenses
of distributing its shares. The Rule defines such distribution expenses to
include the cost of "any activity which is primarily intended to result in the
sale of fund shares." The Rule provides, among other things, that an investment
company may bear such expenses only pursuant to a plan adopted in accordance
with the Rule. Because some or all of the fees to be paid to certain Service
Organizations, in some cases, could be deemed to be payment of distribution
expenses, and because the Core Bond Fund and the International Fund bear the
expense of preparing, printing and distributing the Prospectus and Statement of
Additional Information, the Boards have adopted the Plans and will enter into
Service Agreements pursuant thereto. In adopting the Plans, the Boards concluded
-41-
<PAGE>
that there is a reasonable likelihood that the Plans will benefit the Core Bond
Fund and the International Fund and their respective shareholders by the
provision of the services described above. Specifically, the Boards determined
that the Plans may increase the assets of the Funds which may reduce each Fund's
expense ratio, reduce securities transaction costs, reduce the advisory fee
rates, prevent untimely disposition of portfolio securities to meet redemption
requests and increase the diversification of the Fund's investments.
The Plans permit, among other things, the payments to Service
Organizations and the reimbursement by the Funds, as well as the payment by the
Funds, of the costs of preparing, printing and distributing prospectuses and
statements of additional information for prospective and existing shareholders
and of implementing and operating the Plans as described above. A report of the
amounts so expended, and the purposes for which such expenditures were incurred,
must be made to the Trustees for their review at least quarterly. In addition,
the Plans provide that they may not be amended to increase materially the costs
which a Fund may bear for distribution pursuant to its Plan without shareholder
approval and that the other material amendments of the Plan must be approved by
the Trustees, and by the non-Interested Trustees who do not have any direct or
indirect financial interest in the operation of the Plan or in the related
Service Agreements, by vote cast in person at a meeting called for the purpose
of considering such amendments. The selection and nomination of the
non-Interested Trustees of Funds Trust and the International Fund has been
committed to the discretion of the non-Interested Trustees of Funds Trust and
the International Fund. Each Plan is subject to annual approval, by the
applicable Board and by the non-Interested Trustees who do not have any direct
or indirect financial interest in the operation of the Plan or in any of such
Service Agreements, by vote cast in person at a meeting called for the purpose
of voting on the Plan.
Each Plan is terminable at any time by a vote of a majority of the
non-Interested Trustees who have no direct or indirect financial interest in the
operation of the Plan or in any of the related Service Agreements or by vote of
the holders of a "majority of the outstanding voting securities" of the
applicable Fund. Any Service Agreement will be terminable without penalty, at
any time, by vote of a majority of the non-Interested Trustees who have no
direct or indirect financial interest in the operation of the applicable Plan or
in any of the related Service Agreements, or upon not more than 60 days' written
notice to the Service Organization by vote of the holders of a majority of the
outstanding voting securities of the applicable Fund. Each Service Agreement
will terminate automatically in the event of its assignment.
The Glass-Steagall Act and other applicable statutes and regulations
prohibit certain types of banks from engaging in the business of underwriting,
selling or distributing securities. While the scope of this prohibition has not
been clearly defined by the courts or appropriate regulatory agencies, the
Trustees believe that such laws should not preclude a bank from acting as a
Service Organization. Accordingly, the Core Bond Fund and the International Fund
may engage banks to perform administrative and shareholder servicing functions.
Judicial or administrative decisions or interpretations of such laws, as well as
changes in either federal or state statutes or regulations relating to the
permissible activities of banks and their subsidiaries or affiliates, could
prevent a bank from continuing to perform all or a part of its servicing
activities. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders of the Funds and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Funds might occur and a shareholder serviced by
such bank might no longer be able to avail itself of any automatic investment or
other services then being provided by the bank. The Trustees do not expect that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein, and banks and
other financial institutions purchasing shares on behalf of their customers may
be required to register as dealers pursuant to state law.
- 42 -
<PAGE>
TRUSTEES AND OFFICERS
Each Board has responsibility for management of the business of its
Fund(s). The executive officers of each Fund are responsible for its day to day
operation. Set forth below is certain information concerning the Trustees and
officers of the Funds. Unless otherwise noted, each individual serves in the
capacity indicated with each Fund. Trustees and executive officers deemed to be
"interested persons" of the Funds for purposes of the 1940 Act are indicated by
an asterisk. Each of the non-Interested Trustees is a member of each Fund's
Audit Committee and Special Nominating Committee.
<TABLE>
<CAPTION>
NAME AND ADDRESS/DATE OF BIRTH TITLE FIVE YEARS
- ------------------------------ ----- ----------
<S> <C> <C>
Roger J. Weiss* Chairman of the Senior Managing Director, WPG;
One New York Plaza Board and Trustee; Chairman of the Board and Trustee,
New York, NY 10004 President(1) RWB/WPG U.S. Large Stock Fund and
Tomorrow Funds Retirement Trust;
4/29/39 Executive Vice President and Director,
WPG Advisers, Inc.
Raymond R. Herrmann, Jr. Trustee Chairman of the Board, Sunbelt Beverage
654 Madison Avenue Corporation (distributor of wines and
Suite 1400 liquors); Former Vice Chairman and
New York, NY 10017 Director, McKesson Corporation (U.S.
distributor of drugs and health care
9/11/20 products, wine and spirits); Life Member,
Board of Overseers of Cornell Medical
College; Member of Board and Executive
Committee, Sky Ranch for Boys; Member,
Evaluation Advisory Board, Biotechnology
Investments, Ltd.; Trustee, RWB/WPG
U.S. Large Stock Fund and Tomorrow
Funds Retirement Trust
Lawrence J. Israel Trustee Private Investor; Director and Trustee of
200 Broadway, Suite 249 the Touro Infirmary; Member of the
New Orleans, LA 70118 Intercollegiate Athletics Committee of the
Administrators of the Tulane Educational
12/13/34 Fund; Trustee, RWB/WPG U.S. Large
Stock Fund and Tomorrow Funds
Retirement Trust
Graham E. Jones Trustee Senior Vice Prresident, BGK Realty Inc.,
330 Garfield Street, Suite 200 since 1995; Financial Manager, Practice
Santa Fe, NM 87501 Management Systems (Medical Services Company);
Director, the Malaysia Fund; Director,
1/31/33 twelve closed-end funds managed by Morgan
Stanley Asset Management; Trustee, various
investment companies managed by
Morgan Grenfell Capital Management, Inc.
and Morgan Grenfell Investment Services,
Ltd., since 1993; Trustee, RWB/WPG U.S. Large
Stock Fund and Tomorrow Funds Retirement
Trust
-43-
<PAGE>
PRINCIPAL OCCUPATIONS DURING PAST
NAME AND ADDRESS/DATE OF BIRTH TITLE FIVE YEARS
- ------------------------------ ----- ----------
Paul Meek Trustee Financial and Economic Consultant to
5837 Cove Landing Road foreign central banks under the auspices
Burke, VA 22015 of each of the Harvard Institute for
International Development, the Inter-
11/12/25 national Monetary Fund and the World
Bank; President, PM Consulting (financial
and economic consulting); Former
Consultant, Fischer, Francis, Trees & Watts
("FFTW") (fixed income investment
managers); Trustee, FFTW Funds; Former
Vice President and Monetary Adviser,
Federal Reserve Bank of New York;
Trustee, RWB/WPG U.S. Large Stock
Fund
William B. Ross Trustee Financial Consultant; Former Senior Vice
2733 E. Newton Avenue President, Mortgage Guaranty Insurance
Shorewood, WI 53211 Corporation (mortgage credit insurer);
Former Senior Vice President, MGIC
8/22/27 Investment Corporation (financial services
holding company); Trustee, RWB/WPG
U.S. Large Stock Fund
Robert A. Straniere Trustee Member, New York State Assembly; Sole
182 Rose Avenue Proprietor, Straniere Law Firm; Director,
Staten Island, NY 10306 various Reich and Tang Funds; Trustee,
RWB/WPG U.S. Large Stock Fund
3/28/41
A. Roy Knutsen* Vice President(2) Managing Director, WPG
One New York Plaza
New York, NY10004
6/10/40
Adam Starr* Vice President(3) Managing Director, WPG;
One New York Plaza President, WPG Tudor
New York, NY 10004 Fund and WPG Growth
Fund; Analyst and
4/16/51 Portfolio Manager for the
Farber Fund prior thereto
Francis H. Powers* Executive Vice Managing Director, WPG; Vice President
One New York Plaza President and Secretary, Weiss, Peck & Greer Advisers,
New York, NY 10004 Treasurer Inc.; Executive Vice President and
Treasurer, RWB/WPG U.S. Large Stock
7/6/40 Fund and Tomorrow Funds Retirement
Trust
-44-
<PAGE>
PRINCIPAL OCCUPATIONS DURING PAST
NAME AND ADDRESS/DATE OF BIRTH TITLE FIVE YEARS
- ------------------------------ ----- ----------
Jay C. Nadel* Executive Vice Managing Director, WPG; Director,
One New York Plaza President and Operating Departments of WPG; Executive
New York, NY 10004 Secretary VicePresident and Secretary, RWB/WPG
U.S. Large Stock Fund and Tomorrow Funds
7/21/58 Retirement Trust
Daniel Cardell* Vice President(6) Managing Director, WPG;
One New York Plaza Senior Vice President and
New York, NY 10004 Director of Equities for the Bank of
America prior thereto
7/31/57
Janet A. Fiorenza* Vice President(1) Managing Director, WPG
One New York Plaza
New York, NY 10004
6/9/49
S. Blake Miller* Vice President(5) Principal, WPG
One New York Plaza
New York, NY 10004
3/4/65
R. Scott Richter* Vice President(1,5) Managing Director, WPG;
One New York Plaza Vice President, WPG Tax
New York, NY 10004 Free Money Market Fund
12/6/50
Joseph J. Reardon* Vice President Senior Vice President, Mutual Fund
One New York Plaza Operations, WPG; Vice President,
New York, NY 10004 Tomorrow Funds Retirement Trust
4/4/60
Joseph Parascondola* Assistant Vice Assistant Manager, Mutual Fund
One New York Plaza President Operations, WPG since 1995; Assistant
New York, NY 10004 Vice President, Tomorrow Funds
Retirement Trust; Manager, Mutual Fund
6/6/63 Accounting, Concord Financial Group
prior thereto
- 45 -
<PAGE>
PRINCIPAL OCCUPATIONS DURING PAST
NAME AND ADDRESS/DATE OF BIRTH TITLE FIVE YEARS
- ------------------------------ ----- ----------
Therese Hogan Assistant Manager, State Regulation, First Data
First Data Investor Secretary Investor Services Group, Inc. since June
Services Group 1994; Senior Legal Assistant,
53 State Street Palmer & Dodge prior thereto
Boston, MA 02109
2/27/62
<FN>
- ------------
1. Tax Free Money Market Fund .
2. Growth and Income Fund.
3. Tudor Fund and Growth Fund.
4. International Fund.
5. Municipal Fund.
6. Quantitative Fund.
</FN>
</TABLE>
-46-
<PAGE>
COMPENSATION OF TRUSTEES AND OFFICERS
The Funds pay no compensation to their Trustees affiliated with the
Adviser or to their officers. None of the Trustees or officers have engaged in
any financial transactions with any Fund or with the Adviser during the past
fiscal year (other than the purchase and redemption of Fund shares) and except
that certain Trustees and officers who are managing directors or directors of
the Adviser may, from time to time, purchase and sell ownership interests in the
Adviser.
The following table sets forth the compensation paid to the Trustees for the
Funds' fiscal years ended December 31, 1997:
-47-
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION FROM*
- ---------------------------------------------------------------------------------------------------------------------------
GOVERNMENT TAX-FREE GROWTH
MONEY MONEY AND
MARKET MARKET MUNICIPAL CORE BOND INCOME TUDOR INTERNATIONAL GROWTH QUANTITATIVE
NAME OF TRUSTEE FUND FUND FUND FUND FUND FUND FUND FUND FUND
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Roger J. Weiss $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Melville Straus*** N/A N/A N/A N/A 0 0 N/A 0 N/A
Raymond R. Herrmann, Jr 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625
Lawrence J. Israel 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625
Graham E. Jones 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625
Paul Meek 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625
William B. Ross 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625
Harvey E. Sampson**** 2,125 2,125 2,125 2,125 2,125 2,125 2,125 2,125 2,125
Robert A. Straniere 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625 2,625
</TABLE>
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
BENEFITS FROM THE
ACCRUED AS FUNDS
PART OF AND OTHER
FUNDS' FUNDS IN
EXPENSES COMPLEX**
---------- ---------
<S> <C> <C>
Roger J. Weiss $0 $ 0
Melville Straus*** 0 0
Raymond R. Herrmann, Jr 0 34,125
Lawrence J. Israel 0 34,125
Graham E. Jones 0 24,125
Paul Meek 0 24,125
William B. Ross 0 24,125
Harvey E. Sampson**** 0 29,625
Robert A. Straniere 0 24,125
<FN>
- ------------
* In addition to the compensation paid during 1997 by the Funds to the
Trustees, the Funds paid deferred compensation to Willis Winn, a
former Trustee, as follows: Growth and Income Fund - $9,099.45; Tudor
Fund - $9,099.45; Growth Fund - $6,684.81; Core Bond Fund - $6,684.81;
Government Money Market Fund - $4,873.85; Tax Free Money Market Fund -
$4,873.85; International Fund - $3,224.70; and Quantitative Fund -
$509.49.
** As of December 31, 1997, there were 13 mutual funds in the Weiss, Peck
& Greer group of funds (including the Tomorrow(R) Funds) that publicly
offer their shares.
*** Mr. Straus resigned as a Trustee of WPG Growth and Income Fund, WPG
Tudor Fund and WPG Growth Fund during 1997.
**** Effective April 23, 1998, Mr. Sampson is no longer a Trustee of the
Funds.
</FN>
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF MAY 31, 1998
SHARES (PERCENTAGE OF OUTSTANDING) HELD BY
------------------------------------------ WPG ADVISORY
ACCOUNTS IN WHICH
TRUSTEES AND OFFICERS WPG ADVISORY WPG DISCLAIMS
FUND (AS A GROUP) WPG ACCOUNTS(1) BENEFICIAL OWNERSHIP
- ---- ------------ --- ----------- --------------------
<S> <C> <C> <C> <C>
Government Money Market * 0 64,640,000 (39.76%) 63,284,000 (97.90%)
Tax Free Money Market Fund * 0 52,332,000 (52.70%) 52,332,000 (100.00%)
Municipal Fund * 0 1,320,057 (56.50%) 1,320,057 (100.00%)
Core Bond Fund * 12,458 (0.09%) 8,907,701 (66.05%) 8,892,691 (99.83%)
Growth and Income Fund * 5,196 (0.14%) 1,613,944 (44.13%) 1,584,682 (98.19%)
Tudor Fund * 6,859 (0.11%) 1,283,549 (19.75%) 1,260,951 (98.24%)
International Fund 771,702 (1.35%) 11,050 (1.43%) 514,207 (66.63%) 510,197 (99.22%)
Growth Fund * 1,270 (0.52%) 221,682 (91.17%) 221,682 (100.00%)
Quantitative Fund * 0 8,588,752 (62.82%) 8,441,602 (98.29%)
<FN>
- -----------------
*As of May 31, 1998, the Trustees and officers of each Fund as a group
beneficially owned not more than 1% of the outstanding shares of each Fund.
(1) WPG Advisory Accounts are advisory accounts over which WPG or its
affiliates have discretionary investment authority and/or discretionary
authority to vote the securities held in such accounts.
</FN>
</TABLE>
CERTAIN SHAREHOLDERS
As of May 31, 1998, no person within the knowledge of the management of
the Funds directly or indirectly owned, controlled or held with power to vote 5%
or more of the outstanding voting securities (i.e., shares) of any Fund, except
as set forth below:
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
TAX FREE MONEY MARKET FUND
Robert Sussman & 7.13%
Robynn Sussman JT WROS
21 Murray Hill Road
New York, NY 10583
CORE BOND FUND
The Trust Co. of Toledo Ttee 10.04%
For NWO Plumbers & Pipefitters
Local 50 Pension and Trust
6135 Trust Drive
Holland, OH 43528
Key Trust Co Ttee FBO 8.49%
Bricklayers Allied Craftsmen
Local 83 Pen/PL
A/C 40009500
P. O. Box 94871
Cleveland, OH 44101-4871
The Trust Co. of Toledo NA 8.15%
Ttee. Toledo Plumbers Local
#50 Pension & Retirement Option C
Attn: Lenore Peterson
6135 Trust Drive, Suite #206
Holland, OH 43528
The Trust Co. of Toledo 6.93%
Successor Ttee for
Toledo Roofers Local 134
Pen Plan dtd 7/6/83
6135 Trust Drive Ste. 206
Holland, OH 43528
Oneal Steel Co. Pension Trust 5.77%
Southtrust Corp - Trust Ops
Attn: Lisa Dark
P.O. Box 2554
Birmingham, AL 35290
-50-
<PAGE>
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
GROWTH AND INCOME FUND
Star Creations Hong Kong Ltd.
Ugland House 10.48%
P.O. Box 309
Georgetown Grand Cayman BWI
Sunbelt Beverage Corporation* 8.36%
Profit Sharing Plan
4601 Hollins Ferry Rd.
Baltimore, MD 21227
INTERNATIONAL FUND
Gussman Investments 7.43%
Nadel & Gussman Oil Producers
First National Tower 32nd Floor
Tulsa, OK 74103
MUNICIPAL FUND
James J. Shea Jr. & 5.48%
Marisa Shea Ttees
FBO The Shea Family Trust
UTD 06/15/87
42-600 Bob Hope Drive. #406
Rancho Mirage, CA 92270
GROWTH FUND
Mac & Co. 25.83%
A/C #861-319
P.O. Box 320
Mellon Bank Mutual Funds
Pittsburgh, PA 15230-0320
- -------------
*Mr. Herrmann, a non-interested Trustee of each Fund, is Chairman of the
Board of Sunbelt Beverage Corporation. Mr. Herrmann disclaims beneficial
ownership of more than 99% of the shares held by the Sunbelt Beverage
Corporation's Profit Sharing Plan.
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<PAGE>
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
Wisconsin State Carpenter Pension Fund 23.08%
A/C Weiss Acct #416-977001
c/o Firstar Trust Company
Attn: Mutual Funds
P.O. Box 1787
Milwaukee, WI 53201-1787
Cullman Ventures Inc. Master Trust 10.28%
Attn: James O. Moore
101 Merritt 7
Norwalk, CT 06851
Mint & Co. 9.49%
A/C# 1960772010
Attn: Mutual Fund Ops
PO Box 92800
Rochester, NY 14692-8900
Thermo Electron Corp. Plan 9.29%
C/O State Street Bank & Trust
Nay Ling Chin
Master Trust Division
PO Box 1992
Boston, MA 02105-1992
Wells Fargo Bank as Agent for the 9.03%
Goldman 1988 Charitable Remainder Trust
#112874 MF MAC 9139-027
PO Box 9800
Calabasas, CA 91372-0800
Key Trust Co. Ttee FBO 5.64%
Bricklayers Allied Craftsmen
Local #3 Pen/P1
A/C 40009500
P.O. Box 94871
Cleveland, OH 44101-4871
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<PAGE>
PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING SHARES
- ---------------- ------------------
QUANTITATIVE FUND
The Trust Co. of Toledo NA 23.44%
Ttee. Toledo Plumbers Local
#50 Pension & Retirement Pool A
Attn: Lenore Peterson
6135 Trust Drive, Suite #206
Holland, OH 43528
The Trust Co. of Toledo Ttee 18.72%
for NWO Plumbers & Pipefitters
Local 50 Pension and Trust
6135 Trust Drive, Suite 206
Holland, OH 43528
Star Creations Hong Kong Ltd. 8.98%
Ugland House
P.O. Box 309
Georgetown Grand Cayman BWI
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<PAGE>
HOW TO PURCHASE SHARES
(See "How to Purchase Shares" in the Prospectus.)
The offering of shares of each Fund is continuous. A Fund may terminate
the continuous offering of its shares and may refuse to accept any purchase
order at any time at the discretion of its Trustees. Shares of the Funds may be
purchased from the Funds directly by an investor or may be purchased on behalf
of an investor by WPG or another broker-dealer or, in the case of Core Bond Fund
and International Fund, by a Service Organization. An investor directly
purchasing a Fund's shares should complete and execute the subscription form
included with the Prospectus in accordance with the instructions in the
Prospectus. Investors purchasing a Fund's shares through WPG, another
broker-dealer or a Service Organization should contact WPG, the broker-dealer or
the Service Organization, as appropriate, directly by mail or by telephone for
appropriate instructions.
In the case of telephone subscriptions, if full payment for telephone
subscriptions is not received by the Fund within the customary time period for
settlement then in effect after the acceptance of the order by the Fund, the
order is subject to cancellation and the purchaser will be liable to the
affected Fund for any loss suffered as a result of such cancellation. To recoup
such loss each Fund reserves the right to redeem shares owned by any shareholder
whose purchase order is cancelled for non-payment, and such purchaser may be
prohibited from placing further telephone orders.
The purchaser of a Fund's shares pays no sales load or underwriting
commission with respect to an investment in the Fund. If a subscription or
redemption is arranged and settlement made through a member of the National
Association of Securities Dealers, Inc. ("NASD"), then that member may, in its
discretion, charge a fee for this service. Service Organizations may receive
fees for certain administrative services which they perform for the Core Bond
Fund and International Fund and may also charge their customers fees for
automatic investment, redemption or other services provided to the customers.
Information concerning services and customer charges will be provided by the
particular Service Organization to any customer who must authorize the purchase
of a Fund's shares prior to such purchase.
Shares of the Funds may be transferred upon delivery to the Transfer
Agent of appropriate written instructions which clearly identify the account and
the number of shares to be transferred. Such instructions must be signed by the
registered owner and must be accompanied by certificates for the shares, if any,
which are being transferred, duly endorsed, or with an executed stock power. No
signature guarantee will be required on a transfer request if the proceeds of
the transfer are requested to be made payable to the shareholder of record and
sent to the record address of such shareholder. Otherwise, the signature on the
letter of instructions and the share certificates or the stock power must be
guaranteed, and otherwise be in good order for purposes of transfer. See "How to
Redeem Shares" in the Prospectus for a discussion of acceptable signature
guarantors. The Funds are not bound to record any transfer until all required
documents have been received by the Transfer Agent.
In addition to the Transfer Agent, each Fund has authorized one or more
brokers and dealers to accept on its behalf orders for the purchase and
redemption of Fund shares. Under certain conditions, such authorized brokers and
dealers may designate other intermediaries to accept orders for the purchase and
redemption of Fund shares. In accordance with a position taken by the staff of
the SEC, such purchase and redemption orders are considered to have been
received by a Fund when accepted by the authorized broker or dealer or, if
applicable, the authorized broker's or dealer's designee. Also in accordance
with the position taken by the staff of the SEC, such purchase and redemption
orders will receive the appropriate Fund's net asset value per share next
computed after the purchase or redemption order is accepted by the authorized
broker or dealer or, if applicable, the authorized broker's or dealer's
designee.
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<PAGE>
LIMITS ON FUND SHARE TRANSACTIONS
In order to reduce the investment performance effect of excessive
shareholder trading in shares of the Weiss, Peck & Greer Equity Funds and to
minimize the Funds' transaction expenses, WPG has adopted a policy of limiting
the number of shareholder exchange and purchase/redemption transactions by any
one account (or group of accounts under common management) involving Weiss, Peck
& Greer Equity Funds ("Equity Share Transactions"), to a total of six such
transactions per calendar year, computed on a multi-Fund basis. Equity Share
Transactions subject to this limit are: (a) exchanges into or out of any Weiss,
Peck & Greer Equity Fund; and (b) any pair of transactions involving a purchase
followed by a redemption for offsetting or substantially similar amounts, in any
one Weiss, Peck & Greer Equity Fund.
The Weiss, Peck & Greer Equity Funds currently include WPG Tudor Fund,
WPG Growth and Income Fund, Weiss, Peck & Greer International Fund, WPG Growth
Fund and WPG Quantitative Equity Fund. This limit does not apply to any
transactions solely among or solely involving WPG Core Bond Fund, WPG Government
Money Market Fund, WPG Tax Free Money Market Fund and the WPG Intermediate
Municipal Bond Fund.
If the transaction activity in any account or group of accounts under
common management exceeds this limit, the applicable Fund may, at its
discretion, refuse additional purchase orders, or the purchase portion of
additional exchange orders, as the case may be, with respect to such account or
group of accounts for the remainder of the calendar year. Redemption orders will
not be refused.
"IN-KIND" PURCHASES
The shares of a Fund may be purchased, in whole or in part, by delivering
to the Fund securities that (a) meet the investment objective and policies of
that Fund, (b) have readily available market prices and quotations, (c) are
liquid securities not restricted as to transfer and (d) are otherwise acceptable
to the Adviser and the Fund, which reserve the right to reject all or any part
of the securities offered in exchange for shares of such Fund. An investor who
wishes to make an "in-kind" purchase should furnish to the Fund a list with a
full and exact description of all of the securities which he proposes to
deliver. The market value of securities accepted in exchange must be at least
equal to the initial or additional purchase minimum. The Fund will specify those
securities which it is prepared to accept and will provide the investor with the
necessary forms to be completed and signed by the investor. The investor should
then send the securities, in proper form for transfer, with the necessary forms
to the Fund's custodian and certify that there are no legal or contractual
restrictions on the free transfer and sale of the securities. The securities
will be valued as of the close of business on the day of receipt by the Fund in
the same manner as portfolio securities of the Fund are valued. See "Net Asset
Value." The number of full and fractional Fund shares having a net asset value
(as next determined following receipt of the securities) equal to the value of
the securities delivered by the investor will be issued to the investor, less
any applicable stock transfer taxes. A Fund will acquire such securities for
investment purposes only and not for immediate resale. The exchange of
securities by the investor for shares of a Fund is a taxable transaction that
may result in recognition of gain or loss on the securities so exchanged for
federal, state and local income tax purposes. Investors should consult their own
tax advisers in light of their particular tax situations.
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<PAGE>
REDEMPTION OF SHARES
(See "How to Redeem Shares" in the Prospectus.")
Any shareholder of a Fund is entitled to require the Fund to redeem all
or part of his shares. It is suggested that all redemption requests be sent by
certified mail, return receipt requested. Investors whose shares are purchased
through their accounts at WPG, a broker-dealer or a Service Organization may
redeem all or a part of their shares in accordance with instructions pertaining
to such accounts. It is the responsibility of WPG, the broker-dealer or the
Service Organization to transmit the redemption order and credit its customer's
account with the redemption proceeds on a timely basis. Other investors may
redeem all or part of their shares in accordance with the procedures detailed in
the Prospectus.
The redemption price, which may be more or less than the price paid by
the shareholder for his shares, is the net asset value per share next determined
after a written request for redemption in proper form is received by First Data
Investor Services Group, Inc. (the "Transfer Agent") or the Fund. Redemptions
are taxable transactions for shareholders who are subject to tax. There is no
redemption charge imposed by any Fund with respect to the redemption of shares.
Redemption requests which are not in proper form will be returned to the
shareholder for correction. Redemptions will not become effective until all
documents in proper form have been received by the Transfer Agent. The Transfer
Agent will reject redemption requests unless checks (including certified checks
or cashier's checks) received for shares purchased have cleared (which may take
up to fifteen days). To prevent such rejection, an investor may contact the Fund
or the Transfer Agent to arrange for payment for shares in cash or another form
of immediately available funds.
The redemption price may be paid in cash or portfolio securities, at each
Fund's discretion. The Funds have, however, elected to be governed by Rule 18f-1
under the 1940 Act pursuant to which each Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund during any 90-day period for any one shareholder. Should redemptions by any
shareholder exceed such limitation, a Fund will have the option of redeeming the
excess in cash or portfolio securities. In the latter case, the securities are
taken at their value employed in determining the redemption price and the
shareholder may incur a brokerage charge when the shareholder sells the
securities he receives. The selection of such securities will be made in such
manner as the officers of the affected Fund deem fair and reasonable.
Payment for redeemed shares normally will be made after receipt by the
Transfer Agent of a written request for redemption in proper form as more fully
described in the Prospectus. Normally redemption proceeds are paid by check and
mailed to the shareholder of record. Shareholders may elect to have payments
wired to their bank, unless their bank cannot receive federal reserve wires.
(Please contact the Funds for further information on wire charges.) Such payment
may be postponed, and the right of redemption suspended during any period when:
(a) trading on the New York Stock Exchange ("NYSE") is restricted as determined
by the applicable rules and regulations of the SEC or the NYSE is closed for
other than weekends and holidays; (b) the SEC has, by order, permitted such
suspension; or (c) an emergency, as defined by rules and regulations of the SEC,
exists, making disposal of portfolio securities or valuation of net assets of
the Fund not reasonably practicable.
-56-
<PAGE>
NET ASSET VALUE
(See "How Each Fund's Net Asset Value is Determined" in the Prospectus.)
The net asset value of each Fund is determined once daily, Monday through
Friday (when the NYSE is open for regular trading) on each day (other than a day
during which no shares of the applicable Fund were tendered for redemption and
no order to purchase or sell shares of that Fund was received) in which there is
a sufficient degree of trading in that Fund's portfolio securities that the
current net asset value of that Fund's shares might be materially affected. Such
determination is made as of the close of regular trading on the NYSE, normally
4:00 P.M. New York City time. In addition, Government Money Market Fund and Tax
Free Money Market Fund calculate their net asset value per share as of 12:00
P.M. New York City time on those days on which the NYSE is open for regular
trading and on which a purchase order for Fund shares and related federal funds
wire is received prior to 12:00 P.M. New York City time. The net asset value per
share is calculated by dividing the value of a Fund's securities, cash and other
assets (including dividends accrued but not collected) less all of its
liabilities (including options and accrued expenses but excluding capital and
surplus), by the total number of shares outstanding, the result being rounded to
the nearest cent. All expenses of a Fund are accrued daily and taken into
account for the purpose of determining the net asset value. The NYSE is not open
for trading on weekends or on New Year's Day (January 1), Dr. Martin Luther
King, Jr. Day (the third Monday in January), Presidents' Day (the third Monday
in February), Good Friday, Memorial Day (the last Monday in May), Independence
Day (July 4), Labor Day (the first Monday in September), Thanksgiving Day (the
fourth Thursday in November) and Christmas Day (December 25).
The public offering price of a Fund's shares is the net asset value per
share next determined after receipt of an order. Orders for shares which have
been received by a Fund or the Transfer Agent prior to the close of regular
trading of the NYSE are confirmed at the offering price effective at the close
of regular trading of the NYSE on that day, while orders received subsequent to
the close of regular trading of the NYSE will be confirmed at the offering price
effective at the close of regular trading of the NYSE on the next day on which
the net asset value is calculated.
Portfolio securities traded on more than one U.S. national securities
exchange or on a U.S. exchange and a foreign securities exchange are valued at
the last sale price from the exchange representing the principal market for such
securities on the business day when such value is determined. The value of all
assets and liabilities expressed in foreign currencies will be converted into
U.S. dollar values at currency exchange rates determined by the Fund's custodian
to be representative of fair levels at times prior to the close of trading on
the NYSE. Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business on the NYSE and may not take place on all business days that the NYSE
is open and may take place on days when the NYSE is closed. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
a Fund's calculation of net asset value unless the Adviser determines that the
particular event would materially affect net asset value, in which case an
adjustment may be made.
THE NON-MONEY MARKET FUNDS
In determining the net asset value of each non-Money Market Fund,
securities, options on securities, futures contracts and options thereon which
are listed or admitted to trading on a national exchange, are valued at their
last sale on such exchange prior to the time of determining net asset value; or
if no sales are reported on such exchange on that day, at the mean between the
most recent bid and asked price. Securities
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<PAGE>
listed on more than one exchange shall be valued on the exchange on which the
security is most extensively traded. Unlisted securities for which market
quotations are readily available are valued at the mean between the most recent
bid and asked prices. Other securities and assets for which market quotations
are not readily available are valued at their fair value as determined in good
faith by the Funds' Valuation Committee as authorized by the Boards.
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) in a Fund's portfolio are valued at
fair market value on the basis of valuations furnished by a pricing service
which utilizes both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, when such valuations are believed to reflect the fair
value of such securities.
For purposes of determining the net asset value of the Funds' shares,
options transactions will be treated as follows: When a Fund sells an option, an
amount equal to the premium received by that Fund will be included in that
Fund's accounts as an asset and a deferred liability will be created in the
amount of the option. The amount of the liability will be marked to the market
to reflect the current market value of the option. If the option expires or if
that Fund enters into a closing purchase transaction, that Fund will realize a
gain (or a loss if the cost of the closing purchase exceeds the premium
received), and the related liability will be extinguished. If a call option
contract sold by a Fund is exercised, that Fund will realize the gain or loss
from the sale of the underlying security and the sale proceeds will be increased
by the premium originally received.
THE MONEY MARKET FUNDS
Pursuant to a rule of the SEC, each Money Market Fund's portfolio
securities are valued using the amortized cost method of valuation to seek to
maintain a constant net asset value of $1.00 per share. This method involves
valuing a security at cost on the date of acquisition and thereafter assuming a
constant accretion of a discount or amortization of a premium to maturity,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price that a Money Market Fund would receive if it sold the
instrument. During such periods, the yield to investors in a Money Market Fund
may differ somewhat from that obtained in a similar investment company which
uses available market quotations to value all of its portfolio securities.
During periods of declining interest rates, the quoted yield on shares of a
Money Market Fund may tend to be higher than a like computation made by a fund
with identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of amortized cost by a Money Market Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield if he or she purchased
shares of the Fund on that day, than would result from investment in a fund
utilizing solely market values, and existing investors in the Fund would receive
less investment income. The converse would apply in a period of rising interest
rates.
The Board of Trustees of Funds Trust has established procedures designed
to stabilize, to the extent reasonably possible, each Money Market Fund's price
per share as computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Money Market Funds' respective portfolio by the
Board, at such intervals as they deem appropriate, to determine whether the
Funds' net asset values per share calculated by using available market
quotations or market equivalents (the determination of value by
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<PAGE>
reference to interest rate levels, quotations of comparable securities and other
factors) deviate from $1.00 per share based on amortized cost. If such deviation
exceeds 1/2 of 1%, the Board will promptly consider what action, if any, will be
initiated. In the event that the Board determines that a deviation exists which
may result in material dilution or other unfair results to investors or existing
shareholders of either Money Market Fund, it will take such corrective action as
it regards to be necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding part or all of dividends or payment of
distributions from capital or capital gains; redemptions of shares in kind; or
establishing a net asset value per share by using available market quotations or
equivalents. In addition, in order to stabilize the net asset value per share at
$1.00 the Board has the authority (1) to reduce or increase the number of shares
outstanding on a pro rata basis, and (2) to offset each shareholder's pro rata
portion of the deviation between the net asset value per share and $1.00 from
the shareholder's accrued dividend account or from future dividends. Further,
the Board may authorize an affiliate of the Money Market Funds to purchase from
a Money Market Fund any security that is not an "eligible security" in
accordance with Rule 2a-7 under the 1940 Act. Each Money Market Fund may hold
cash for the purpose of stabilizing its net asset value per share. Holdings of
cash, on which no return is earned, would tend to lower the yield on a Money
Market Fund's shares.
Generally, in order to continue to use the amortized cost method of
valuation, the Money Market Funds' respective investments, including repurchase
agreements, must be U.S. dollar-denominated instruments which the Board
determines present minimal credit risks and which are of high quality (i.e., two
highest ratings) as determined by two nationally recognized statistical rating
organizations or, in the case of any instrument that is not so rated, of
comparable quality as determined by the Board. Each Money Market Fund must also
comply with certain other conditions, including certain diversification
requirements, and must maintain a dollar-weighted average portfolio maturity
(not more than 90 days) appropriate to its objective of maintaining a stable net
asset value of $1.00 per share and generally may not purchase any instrument
with a remaining maturity of more than 397 days. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, a Money Market Fund will invest its available cash in such a
manner as to reduce such maturity to 90 days or less as soon as reasonable
practicable. The Adviser will periodically review this method of valuation and
recommend changes to the Board which may be necessary to assure that the
portfolio instruments are valued at their fair value as determined by the Board
in good faith.
INVESTOR SERVICES
The Funds offer a variety of services, as described in Appendix B and in
the sections that follow, designed to meet the needs of its shareholders. The
costs of providing such services are borne by the Funds, except as otherwise
specified below. Further information on each service is set forth in the
Prospectus under the caption "Shareholder Services."
AUTOMATIC REINVESTMENT PLAN
For the convenience of a Fund's shareholders and to permit shareholders
to increase their shareholdings in a Fund, the Funds' Transfer Agent is, unless
otherwise specified, appointed in the subscription form by the investor as an
agent to receive all dividends and capital gains distributions and to reinvest
them in shares (or fractions thereof) of the applicable Fund, at the net asset
value per share next determined after the record date for the dividend or
distribution. The investor may, of course, terminate such agency agreement at
any time by written notice to the Transfer Agent, and direct the Transfer Agent
to have dividends or capital gains distributions, or both, if any, sent to him
in cash rather than reinvested in shares of the applicable Fund. The Funds or
Transfer Agent may also terminate such agency agreement, and the Funds have the
right to appoint a successor Transfer Agent.
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<PAGE>
EXCHANGE PRIVILEGE
Shares of a Fund may be exchanged by mail for shares of any other Fund at
their relative net asset values. Shareholders may exchange shares by telephone
or telegram once the Telephone Authorization Section of the account application
has been completed and filed with the Transfer Agent and it has been accepted.
To exchange shares by telephone, call 1-800-223-3222 between the hours of 9:00
A.M. and 4:00 P.M. Eastern time on any day that the Funds are open for business.
A current Prospectus, which may be obtained from a Fund, should be read in
advance of any investment in any Fund. For tax purposes, an exchange involves a
redemption of shares, which is a taxable transaction for shareholders who are
subject to tax. Signatures on the written authorization to exchange by telephone
or telegram must be guaranteed in the same manner as set forth under "How to
Purchase Shares." However, for exchanges by mail, no guarantee is required if
the exchange is being made into an identically registered account. The exchange
privilege is available only in those jurisdictions where shares of the Funds may
be legally sold. When establishing a new account by an exchange, the value of
the shares redeemed must meet the minimum initial investment requirement of the
Funds involved. In addition, the exchange privilege is available only when
payment for the shares to be redeemed has been made. Exchange requests will not
be accepted for shares purchased by check until such check clears which could be
up to 15 days from the date that the shares were purchased. If for these or
other reasons the exchange cannot be effected, the shareholder will be so
notified.
This service is intended to provide shareholders with a convenient way to
switch their investments when their objectives or perceived market conditions
suggest a change. The exchange privilege is not meant to afford shareholders an
investment vehicle to play short-term swings in the stock market by engaging in
frequent transactions in and out of the Funds. Shareholders who engage in such
frequent transactions may be prohibited from or restricted in placing future
exchange orders. See "HOW TO REDEEM SHARES --Excessive Trading" in the
Prospectus and "HOW TO PURCHASE SHARES --Limits On Fund Share Transactions"
above for limitations on exchanges and trading in the Funds' shares.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan enables investors to make regular (monthly
or quarterly) investments of $50 or more in shares of any Fund (except for the
Growth Fund and the Quantitative Fund) through an automatic withdrawal from your
designated bank account by simply completing the Automatic Investment Plan
application. Please call 1-800-223-3332 or write to WPG to receive this form. By
completing the form, you authorize the Funds' Custodian to periodically draw
money from your designated account, and to invest such amounts in account(s)
with the Fund(s) specified. The transaction will be automatically processed to
your mutual fund account on or about the first business day of the month or
quarter you designate.
If you elect the Automatic Investment Plan, please be aware that: (1) the
privilege may be revoked without prior notice if any check is not paid upon
presentation; (2) the Funds' Custodian is under no obligation to notify you as
to the non-payment of any check, and (3) this service may be modified or
discontinued by the Funds' Custodian upon thirty (30) days' written notice to
you prior to any payment date, or may be discontinued by you by written notice
to the Transfer Agent at least ten (10) days before the next payment date.
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SWEEP PROGRAM
Shares may be purchased through a sweep program under which funds in a
customer's private account with WPG are automatically invested in shares of the
Government Money Market Fund or the Tax Free Money Market Fund. Under this
program, funds deposited in a private account with WPG usually are invested
daily in the customer's account with the Government Money Market Fund or the Tax
Free Money Market Fund. The Funds expect that WPG will transmit orders for the
purchase of a Fund's shares on the same day that funds are swept from the
private account. The Sweep Program is serviced by WPG's outside service bureau,
ADP, in connection with the Funds' Custodian. An account statement will be
generated through WPG.
SYSTEMATIC WITHDRAWAL PLAN
Redemption of shares for such purposes may reduce or even liquidate the
account, particularly in a declining market. Such payments paid to a shareholder
cannot be considered a yield or income on the investment. Payments to a
shareholder in excess of distributions of investment income will constitute a
return of his invested principal, and liquidation of shares pursuant to this
Plan is a redemption, which is a taxable transaction for shareholders who are
subject to tax.
Withdrawals at the same time as regular purchases of a Fund's shares
ordinarily will not be permitted since purchases are intended to accumulate
capital and the Systematic Withdrawal Plan is designed for the regular
withdrawal of funds, except that a shareholder may make lump sum investments, of
$5,000 or more. The Systematic Withdrawal Plan may be terminated by the
shareholder, without penalty, at any time and the Funds may terminate the Plan
at will. There are no contractual rights on the part of either party with
respect to the Plan.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund is separate for investment and accounting purposes and is
treated as a separate entity for federal income tax purposes. A regulated
investment company qualifying under Subchapter M of the Code is not subject to
federal income tax on distributed amounts to the extent that it distributes its
taxable and tax-exempt net investment income and net realized capital gains in
accordance with the timing and other requirements of the Code. Each Fund intends
to qualify and be treated as a regulated investment company for each taxable
year.
Qualification of a Fund for treatment as a regulated investment company
under the Code requires, among other things, that (a) at least 90% of the Fund's
gross income for its taxable year, without offset for losses from the sale or
other disposition of stock or securities or other transactions, be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (b) the Fund distribute for its taxable year
(in accordance with the Code's timing and other requirements) to its
shareholders as dividends at least 90% of its taxable and tax-exempt net
investment income, the excess of net short-term capital gain over net long-term
capital loss earned in such year and any other net income (except for the
excess, if any, of net long-term capital gain over net short-term capital loss,
which need not be distributed in order for the Fund to qualify as a regulated
investment company but is taxed to the Fund if it is not distributed); and (c)
the Fund diversify its assets so that, at the close of each quarter of its
taxable year, (i) at least 50% of the fair market value of its total (gross)
assets is comprised of cash, cash items, U.S. Government securities, securities
of other regulated investment companies and other securities, with such other
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securities limited in respect of any one issuer to no more than 5% of the fair
market value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer and (ii) no more than 25% of the fair market value of
its total assets is invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged in the
same, similar, or related trades or businesses.
Each Fund intends to distribute at least annually to its shareholders all
or substantially all of its taxable income (if any) (including net realized
capital gains) and any net tax-exempt interest. Exchange control or other
foreign laws, regulations or practices may restrict repatriation of investment
income, capital or the proceeds of securities sales by foreign investors and may
therefore make it more difficult for a Fund that invests in foreign securities,
such as the International Fund, to satisfy the distribution requirements
described above, as well as the excise tax distribution requirements described
below. However, each Fund generally expects to be able to obtain sufficient cash
to satisfy such requirements from new investors, the sale of securities or other
sources. If for any taxable year a Fund does not qualify as a regulated
investment company, it will be taxed on all of its taxable income at corporate
rates, its net tax-exempt interest (if any) may be subject to the alternative
minimum tax, and its distributions to shareholders will be taxable as ordinary
dividends to the extent of its current and accumulated earnings and profits.
Each Fund is subject to a 4% nondeductible federal excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires that a Fund distribute (or be deemed to have distributed) to
shareholders during a calendar year at least 98% of the Fund's ordinary income
(not including tax-exempt interest) for the calendar year, at least 98% of the
excess of its capital gains over the capital losses realized during the one-year
period ending October 31 during such year, as well as any income or gain (as so
computed) from the prior calendar year that was not distributed for such year
and on which the Fund paid no federal income tax. Each Fund has distribution
policies that should generally enable it to avoid liability for this tax.
Net investment income for a Fund is the Fund's investment income less its
expenses. Dividends from taxable net investment income, certain net realized
foreign currency gains, and the excess, if any, of net short-term capital gain
over net long-term capital loss of a Fund will be taxed to shareholders as
ordinary income, and dividends from net long-term capital gain in excess of net
short-term capital loss ("capital gain dividends") will be taxed to shareholders
as long-term capital gain, for federal income tax purposes. As a result of
federal tax legislation enacted on August 5, 1997 (the "Act"), gain recognized
after May 6, 1997 from the sale of a capital asset is taxable to individual
(noncorporate) investors at different maximum federal income tax rates,
depending generally upon the tax holding period for the asset, the federal
income tax bracket of the taxpayer, and the dates the asset was acquired and/or
sold. The Treasury Department has issued guidance under the Act that (subject to
possible modification by future "technical corrections" legislation) will enable
each Fund to pass through to its shareholders the benefits of the capital gains
rates enacted in the Act. Each Fund will provide appropriate information to its
shareholders about the tax rate(s) applicable to its capital gain dividends (if
any) in accordance with this and any future guidance. Shareholders should
consult their own tax advisers on the correct application of these new rules in
their particular circumstances. These dividends are paid after taking into
account, and reducing the distribution to the extent of, any available capital
loss carryforwards. The Funds have the following capital loss carryforwards as
of December 31, 1997:
YEAR OF
FUND AMOUNT EXPIRATION
- ---- ------ ----------
Tax Free Money Market Fund $ 10,444 2001
Government Money Market Fund 2,014,086 2002
Municipal Fund 100,067 2002
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Core Bond Fund $18,940,089 2002
Tax Free Money Market Fund 1,383 2003
Core Bond Fund 20,112,733 2003
Municipal Fund 7,685 2003
Core Bond Fund 753,007 2004
Tax Free Money Market Fund 3,072 2004
Government Money Market Fund 252 2005
Tax Free Money Market Fund 4,337 2005
Long-term capital gains of a Fund are taxable to shareholders as capital
gains if they are either distributed in the form of capital gain dividends or
retained by the Fund and designated for treatment as capital gains distributed
to the shareholders. Capital gain dividends are not eligible for the
dividends-received deduction. If any net realized long-term capital gain in
excess of net realized short-term capital loss is retained by a Fund for
reinvestment, requiring federal income taxes to be paid thereon by the Fund, the
Fund will elect to treat such capital gains as having been distributed to
shareholders. As a result, each shareholder will report such capital gains as
capital gains, will be able to claim his share of federal income taxes paid by
the Fund on such gains as a credit against his own federal income tax liability,
and will be entitled to increase the adjusted tax basis of his Fund shares by
the difference between his pro rata share of such gains and his tax credit.
Each year, each Fund will notify shareholders of the tax status of its
dividends and distributions including, in the case of the Tax-Free Money Market
Fund and the Municipal Fund, a statement of the percentage of the prior calendar
year's distributions which the Fund has designated as tax-exempt, the percentage
(if any) of such tax-exempt distributions treated as a tax-preference item for
purposes of the federal alternative minimum tax, and the source on a
state-by-state basis of all distributions of tax-exempt interest.
A portion of the dividends from the Growth and Income Fund, Tudor Fund,
International Fund, Growth Fund and Quantitative Fund may qualify for the 70%
dividends-received deduction for corporate shareholders. The portion of such
dividends which qualifies for such deduction is the portion, properly designated
by the Funds, which is derived from dividends of U.S. domestic corporations with
respect to shares held by the Funds that are not debt-financed and have been
held for tax purposes at least a minimum period, generally 46 days, extending
before and after each such dividend. The International Fund does not expect to
have any significant investment in U.S. domestic corporations. The
dividends-received deduction for corporations will be reduced to the extent the
shares of a Fund with respect to which the dividends are received are treated as
debt-financed under the Code and will be eliminated if such shares are deemed to
have been held (for tax purposes) for less than the minimum period referred to
above with respect to each dividend. Shareholders will be informed of the
percentages of dividends which may qualify for the dividends-received deduction.
Dividends from Funds other than the Growth and Income Fund, Tudor Fund,
International Fund, Growth and Quantitative Fund will not qualify for the
dividends-received deduction.
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Section 1059 of the Code provides for a reduction in a stock's basis for
the untaxed portion (i.e., the portion qualifying for the dividends-received
deduction) of an "extraordinary dividend" if the stock has not been held at
least two years prior to the extraordinary dividend. Extraordinary dividends are
dividends paid during a prescribed period which equal or exceed 10 percent (5
percent for preferred stock) of the recipient corporation's adjusted basis in
the stock of the payor or which meet an alternative fair market value test. To
the extent that dividend payments by the Growth and Income Fund, Tudor Fund,
Growth Fund, International Fund and Quantitative Fund to their corporate
shareholders constitutes extraordinary dividends, such shareholders' basis in
their shares will be reduced, and to the extent such basis would be reduced
below zero, current recognition of income may be required.
The excess, if any, of a corporation's "adjusted current earnings" over
its "alternative minimum taxable income" includes the amount of dividends, if
any, excluded from income by virtue of the 70% dividends-received deduction,
which may increase its alternative minimum tax liability.
Dividends, including capital gain dividends, paid by a Fund (except for
daily dividends paid by the Money Market Funds, the Core Bond Fund and the
Municipal Bond Fund) shortly after a shareholder's purchase of shares have the
effect of reducing the net asset value per share of his shares by the amount per
share of the dividend distribution. Although such dividends are, in effect, a
partial return of the shareholder's purchase price to the shareholder, they will
be subject to federal income tax as described above, except for exempt-interest
dividends (as defined below). Therefore, prior to purchasing shares an investor
should consider the impact of an anticipated dividend distribution.
Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for federal income tax purposes, will be taxable as
described above whether taken in shares or in cash. Amounts that are not
allowable as a deduction in computing taxable income, including expenses
associated with earning tax-exempt interest income, do not reduce current E&P
for this purpose. Distributions, if any, in excess of E&P will constitute a
return of capital, which will first reduce an investor's tax basis in Fund
shares and thereafter (after such basis is reduced to zero) will generally give
rise to capital gains. Shareholders electing to receive distributions in the
form of additional shares will have a cost basis for federal income tax purposes
in the shares so received equal to the amount of cash they would have received
had they elected to receive cash.
All dividends and capital gain dividends, whether received in shares or
in cash, must be reported by each taxable shareholder on his or her federal
income tax return. Shareholders are also required to report tax-exempt interest,
including exempt-interest dividends. Redemptions of shares, including exchanges
for shares of another Fund, may result in tax consequences to the shareholder
and are also subject to these reporting requirements, although no gain or loss
would usually be realized on the redemption or other disposition of shares of
the Money Market Funds.
Equity options (including options on stock and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by a Fund will be subject to tax under Section 1234 of the Code. In
general, no loss is recognized by a Fund upon payment of a premium in connection
with the purchase of a put or call option. The character of any gain or loss
recognized (i.e., long-term or short-term) will generally depend, in the case of
a lapse or sale of the option, on the Fund's holding period for the option, and
in the case of an exercise of the option, on the Fund's holding period for the
underlying security. The purchase of a put option may constitute a short sale
for federal income tax purposes, possibly requiring the recognition of gain in
an appreciated substantially identical portfolio stock or security causing an
adjustment in the holding period of such stock or security in the Fund's
portfolio. If a Fund writes a put or call option, no gain is recognized upon its
receipt of a premium. If the option lapses or is closed out, any gain or loss is
treated as a short-term capital gain or loss. If a call option is exercised,
whether the gain or loss is long-term or short-term depends on the holding
period of the underlying stock or security. The exercise of a put option written
by a Fund is not a taxable transaction for the Fund.
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Futures contracts, including certain foreign currency futures contracts,
that are "regulated futures contracts," entered into by a Fund and listed
non-equity options written or purchased by a Fund (including options on debt
securities, options on futures contracts, options on securities indices, options
on broad-based stock indices, and certain foreign currency options), will be
governed by Section 1256 of the Code. Absent a tax election to the contrary,
gain or loss attributable to the lapse, exercise or closing out of any such
position (with the exceptions stated in the next paragraph) will be treated as
60% long-term and 40% short-term capital gain or loss, and on the last trading
day of a Fund's taxable year, all outstanding Section 1256 positions will be
marked to market (i.e., treated as if such positions were closed out at their
closing price on such day), and any resulting gain or loss will be recognized as
60% long-term and 40% short-term capital gain or loss. Under certain
circumstances, entry into a futures contract to sell a security may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in a
Fund's portfolio. Additionally, a Fund may be required to recognize gain (which
is subject to tax distribution requirements) if an option, future, forward
contract, short sale or other transaction that is not marked to market under
Section 1256 of the Code is treated as a constructive sale of an appreciated
financial position in the Fund's portfolio.
Certain foreign currency forward contracts entered into by a Fund may
also be subject to Section 1256 of the Code, which as described above generally
requires that contracts governed by Section 1256 be marked to market (i.e.,
treated as if they were closed out at their closing price) on the last day of
the Fund's taxable year, with any resulting gain or loss taken into account for
such year. Absent a tax election to the contrary that may be available for any
such contract that is not part of a straddle, this mark to market gain or loss,
as well as gain or loss from the actual closing out of or delivery under such a
contract, will generally be treated as ordinary income or loss. Gain or loss
from any foreign currency forward contracts, foreign currency futures contracts
or foreign currency options that are not subject to Section 1256 will also
generally be treated as ordinary income or loss.
Certain tax rules governing foreign currency activities and foreign
currency options, futures and forward contracts not directly related to a Fund's
principal business of investing in stock or securities could require that these
activities be limited under possible future Treasury regulations, in order to
satisfy the 90% test described above.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security not
governed by Section 1256 and at least one futures contract or listed non-equity
option governed by Section 1256 which substantially diminishes a Fund's risk of
loss with respect to such debt security will be treated as a "mixed straddle."
Although mixed straddles are subject to the straddle rules of Section 1092 of
the Code, certain tax elections exist for them which reduce or eliminate the
operation of these rules. Each Fund will monitor its transactions in options,
futures and forward contracts and may make certain tax elections
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in order to mitigate the operation of these rules.
Foreign exchange gain or loss realized with respect to foreign
currency-denominated debt instruments, foreign currency forward contracts,
foreign currency-denominated payables and receivables and foreign currency
options and futures contracts (other than foreign currency options and futures
contracts that are governed by Section 1256 of the Code and for which no
election is made) are generally treated as ordinary income or loss under Section
988 of the Code.
The tax rules applicable to options, futures, currency forward contracts,
foreign currency transactions and constructive sales may affect the amount,
timing and character of a Fund's income and, consequently, its distributions to
shareholders by causing holding period adjustments, converting short-term
capital losses into long-term capital losses, converting capital gain or loss
into ordinary income or loss, and accelerating a Fund's income or gains or
deferring its losses.
The federal income tax rules applicable to dollar rolls and certain
structured or hybrid securities are not or may not be settled, and a Fund may be
required to account for these transactions or investments in a manner that,
under certain circumstances, may limit the extent of its use of such
transactions or investments.
A Fund's investment in zero coupon securities, capital appreciation
bonds, or other securities having original issue discount (or market discount,
if the Fund elects to include market discount in income currently) will
generally cause it to realize income prior to the receipt of cash payments with
respect to these securities. The mark to market and constructive sale rules
described above may also require a Fund to recognize income or gains without a
concurrent receipt of cash. In order to distribute this income or gains,
maintain its qualification as a regulated investment company, and avoid federal
income or excise taxes, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold.
Investments in lower-rated securities, in which the Growth and Income
Fund, Tudor Fund and Growth Fund may invest, may present special tax issues for
a Fund to the extent actual or anticipated defaults may be more likely with
respect to such securities. Tax rules are not entirely clear about issues such
as when a Fund may cease to accrue interest, original issue discount, or market
discount; when and to what extent deductions may be taken for bad debts or
worthless securities; how payments received on obligations in default should be
allocated between principal and income; and whether exchanges of debt
obligations in a workout context are taxable. These and other issues will be
addressed by the Funds, in the event they invest in such securities, in order to
reduce the risk of distributing insufficient income to preserve their status as
regulated investment companies and seek to avoid becoming subject to federal
income or excise tax.
A Fund, to the extent it invests in foreign securities, may be subject to
foreign withholding or other foreign taxes with respect to income (possible
including, in some cases, capital gains) derived from foreign securities. These
taxes may be reduced or eliminated under the terms of an applicable U.S. income
tax treaty in some cases. However, the Funds, other than the International Fund,
generally will not be eligible to pass through to shareholders these taxes and
any associated foreign tax credits or deductions for foreign taxes paid by such
Funds that are not thus reduced or eliminated. Such Funds generally will,
however, be entitled to deduct such taxes in computing their income subject to
tax (if any).
The International Fund may qualify for and make the election permitted
under Section 853 of the Code so that shareholders will be able to claim a
credit or deduction on their federal income tax returns for, and will be
required to treat as amounts distributed to them (in addition to the dividends
and distributions
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they actually received), their pro rata portion of qualified taxes paid by the
Fund to foreign countries. Qualified taxes generally include only taxes that are
treated as income taxes under United States tax principles and therefore would
not include, for example, stamp taxes, securities transaction taxes, and similar
taxes. The shareholders of the International Fund may claim a foreign tax credit
or deduction by reason of the Fund's election under Section 853 of the Code, if
the Fund makes such an election, which is permitted only if more than 50% of the
value of the total assets of the Fund at the close of its taxable year consists
of stocks or securities of foreign corporations. The foreign tax credit or
deduction available to shareholders is subject to the satisfaction of holding
period requirements and certain other requirements and limitations imposed under
the Code. For instance, under Section 63 of the Code, no deduction for foreign
taxes may be claimed by shareholders who do not itemize deductions on their
federal income tax returns, although any such shareholder may claim a credit for
foreign taxes and in any event will be treated as having taxable income
increased by the shareholder's pro rata share of foreign taxes paid by the Fund
if the Fund makes the election permitted under Section 853. If a shareholder
chooses to take a credit for the foreign taxes deemed paid by such shareholder,
the amount of the credit that may be claimed in any year may not exceed the same
proportion of the U.S. tax against which such credit is taken which the
shareholder's taxable income from foreign sources (but not in excess of the
shareholder's entire taxable income) bears to his entire taxable income. For
this purpose, long-term and short-term capital gains the Fund realizes and
distributes to shareholders will generally not be treated as income from foreign
sources in their hands, nor will distributions of certain foreign currency gains
subject to Section 988 of the Code and of any other income realized by the Fund
that is deemed, under the Code, to be U.S.-source income in the hands of the
Fund. This foreign tax credit limitation may also be applied separately to
certain specific categories of foreign-source income and the related foreign
taxes. As a result of these rules, which have different effects depending upon
each shareholder's particular tax situation, certain shareholders may not be
able to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. It should also be noted that, if the election is
made, a tax-exempt shareholder, like other shareholders, will be required to
treat as part of the amounts distributed its pro rata portion of the income
taxes paid by the Fund to foreign countries. However, that income will generally
be exempt from taxation by virtue of such shareholder's tax-exempt status, and
such a shareholder will not be entitled to either a tax credit or a deduction
with respect to such income.
If a Fund acquires stock (including, under proposed regulations, an
option to acquire stock such as is inherent in a convertible bond) in certain
foreign corporations that receive at least 75% of their annual gross income from
passive sources (such as interest, dividends, certain rents and royalties, or
capital gain) or hold at least 50% of their assets in investments producing such
passive income ("passive foreign investment companies"), the Fund could be
subject to federal income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
distributed on a timely basis to its shareholders. The Fund would not be able to
pass through to its shareholders any credit or deduction for such tax and
interest charges. Certain elections may be available to ameliorate these adverse
tax consequences, but any such election could require the Fund to include
certain amounts as income or gain (subject to the distribution requirements
described above) without a concurrent receipt of cash. These investments could
also result in the treatment of associated capital gains as ordinary income.
Each Fund that is permitted to acquire foreign investments may limit and/or
manage its investments in passive foreign investment companies to minimize its
tax liability or maximize its return from these investments.
Subchapter M of the Code permits the character of tax-exempt interest
distributed by a regulated investment company to flow through as
"exempt-interest dividends" that are treated as tax-exempt interest to its
shareholders, provided that at least 50% of the value of its assets at the end
of each quarter of its taxable year is invested in state, municipal and other
obligations the interest on which is excluded from gross income under Section
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103(a) of the Code. Each of the Municipal Bond Fund and Tax Free Money Market
Fund intends to satisfy this 50% requirement in order to permit its
distributions of tax-exempt interest to be treated as exempt-interest dividends
under the Code. Distributions to shareholders of tax-exempt interest earned by
Municipal Bond Fund and Tax Free Money Market Fund for the taxable year are
therefore not subject to regular federal income tax, although they may be
subject to the individual and corporate alternative minimum taxes described
below.
A portion of the income that Tax Free Money Market Fund and Municipal
Bond Fund receive and distribute to shareholders may be subject to regular
federal, alternative minimum, state and local income taxes. Investments or
transactions that produce taxable income or gain would include options or
futures transactions, securities loans, repurchase agreements and when-issued or
forward- commitment transactions disposed of at a gain. Accrued market discount
that is required to be included in income with respect to securities acquired at
a market discount and a portion of the discount from certain stripped tax-exempt
obligations or their coupons is also taxable.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Tax Free Money Market Fund or Municipal Bond Fund will not be
deductible for federal income tax purposes to the extent it is deemed related to
exempt-interest dividends paid by such funds. Under rules used by the Internal
Revenue Service to determine when borrowed funds are used for the purpose of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares.
Section 147(a) of the Code prohibits exemption from taxation of interest
on certain governmental obligations to persons who are "substantial users" (or
persons related thereto) of facilities financed by such obligations. Neither Tax
Free Money Market Fund nor Municipal Bond Fund has undertaken any investigation
as to the users of the facilities financed by bonds in their respective
portfolios, and these funds may not be appropriate investments for substantial
users (or related persons) of such facilities.
Distributions of tax exempt income are taken into account in computing
the portion, if any, of Social Security and Railroad Retirement benefits subject
to federal and, in some cases, state taxes.
Several provisions of federal tax law were enacted principally in the
1970's and 1980's that may affect the supply of, and the demand for, tax-exempt
bonds, as well as the tax-exempt nature of interest paid thereon. For example:
(i) Interest on certain private activity bonds issued after August 15,
1986 (or, in certain cases, on or after September 1, 1986) is generally not
exempt from regular tax, although it might have been exempt under prior law.
These include bonds the proceeds of which are used to finance sports facilities,
convention facilities, industrial parks and nuclear waste disposal facilities;
(ii) Interest (including exempt-interest dividends attributable to such
interest) on all private activity bonds issued on or after August 8, 1986 (or,
in certain cases, September 1, 1986) other than qualified Section 501(c)(3)
bonds or refundings of bonds originally issued before such dates is an item of
tax preference that is subject to the individual alternative minimum tax and the
alternative minimum tax on corporations;
(iii) Interest (including exempt-interest dividends attributable to such
interest) on all tax-exempt bonds, regardless of when issued, may increase
liability for the corporate alternative minimum tax because 75% of the excess of
adjusted current earnings over alternative minimum taxable income is an
adjustment that, except to the extent already taken into account as private
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activity bond interest, increases the alternative minimum taxable income subject
to the corporate alternative minimum tax; and
(iv) Due to the substantial number and range of requirements to be
satisfied by tax-exempt bonds after their issuance, the risk of retroactive
revocation of the tax-exempt status of bonds due to acts or omissions on the
part of issuers after the date of issuance is in general greater than under
prior law but varies for different types of bonds.
It is not possible to predict with certainty the effect of these tax law
changes upon the tax-exempt bond market, including the availability of
obligations appropriate for investment by the Tax Free Money Market Fund or the
Municipal Bond Fund.
Different tax treatment, including a penalty on certain distributions,
excess contributions or other transactions is accorded to accounts maintained as
IRAs or other retirement plans. Investors should consult their tax advisors for
more information. See also Appendix B.
All or a portion of a loss realized upon the redemption or other
disposition of shares of a Fund may be disallowed under "wash sale" rules to the
extent shares of the same Fund are purchased (including shares acquired by means
of reinvested dividends) within a 61-day period beginning 30 days before and
ending 30 days after such redemption or other disposition. Any loss realized
upon a shareholder's sale, redemption or other disposition of shares with a tax
holding period of six months or less will be disallowed, in the case of a
disposition of shares of Tax Free Money Fund or Municipal Bond Fund, to the
extent of the amount of any exempt-interest dividends paid with respect to such
shares and, for such shares of all Funds, any portion of such loss that is not
disallowed will be treated as a long-term capital loss to the extent of any
capital gains with respect to such shares. Exchanges and withdrawals under the
Systematic Withdrawal Plan are treated as redemptions for federal income tax
purposes. Shareholders should consult their own tax advisers regarding their
particular circumstances to determine whether a disposition of the shares of a
Fund is properly treated as a sale for tax purposes, as is assumed in the
foregoing discussion. Also, future Treasury Department guidance issued to
implement the Act may contain additional rules for determining the tax treatment
of sales of the shares of a Fund held for various periods, including the
treatment of losses on the sale of shares held for six months or less that are
recharacterized as long-term capital losses, as described above.
The Funds may be required to pay state taxes in states that have
jurisdiction to tax them, except to the extent an exemption may be available,
but the Funds do not anticipate that their state tax liabilities will be
substantial.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. domestic corporations, partnerships, trusts and estates subject to tax
under such law. The discussion does not address the special tax rules applicable
to certain classes of investors, such as tax-exempt entities, financial
institutions, and insurance companies. Each shareholder who is not a U.S. person
should consider the U.S. and foreign tax consequences of ownership of shares of
the Funds, including the possibility that such a shareholder may be subject to a
U.S. withholding tax at a rate of 30% (or at a lower rate under an applicable
income tax treaty) on Fund distributions treated as ordinary dividends and,
unless an effective IRS Form W-8 or authorized substitute for Form W-8 is on
file, to 31% backup withholding on certain other payments from a Fund.
This discussion of the federal income tax treatment of the Fund and its
shareholders is based on the federal income tax law in effect as of the date of
this Statement of Additional Information. Shareholders should consult their tax
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advisers about the application of the provisions of tax law described in this
statement of additional information and about the possible application of state,
local and foreign taxes in light of their particular tax situations.
PORTFOLIO BROKERAGE
It is the general policy of the Adviser not to employ any broker in the
purchase or sale of securities for a Fund's portfolio unless the Adviser
believes that the broker will obtain the best results for the Fund, taking into
consideration such relevant factors as price, the ability of the broker to
effect the transaction and the broker's facilities, reliability and financial
responsibility. Commission rates, being a component of price, are considered
together with such factors.
U.S. Government and debt securities are traded primarily in the
over-the-counter market. Transactions in the over-the-counter market are
generally principal transactions with dealers and the costs of such transactions
involve dealer spreads rather than brokerage commissions. With respect to
over-the-counter transactions, the Funds, where possible, deal directly with the
dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Under
the 1940 Act, persons affiliated with a Fund are prohibited from dealing with
the Fund as a principal in the purchase and sale of securities. Since
transactions in the over-the-counter market usually involve transactions with
dealers acting as principal for their own account, affiliated persons of the
Funds, including WPG, may not serve as a Fund's dealer in connection with such
transactions. However, affiliated persons of a Fund may serve as its broker in
transactions conducted on an exchange or over-the-counter transactions conducted
on an agency basis. Subject to the foregoing, where transactions are effected on
securities exchanges, the Funds employ WPG as principal broker. A Fund is not
obligated to deal with any broker or group of brokers in the execution of
transactions in portfolio securities. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The commission rate on all U.S. exchange orders is subject to
negotiation. Section 17(e) of the 1940 Act limits to "the usual and customary
broker's commission" the amount which can be paid by a Fund to an affiliated
person, such as WPG, acting as broker in connection with transactions effected
on a securities exchange. The Board, including a majority of the Trustees who
are not "interested persons" of the Fund or the Adviser, has adopted procedures
designed to comply with the requirements of Section 17(e) of the 1940 Act and
Rule 17e-1 thereunder to ensure that a broker's commission is "reasonable and
fair compared to the commission, fee or other remuneration received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time ...." Rule 17e-1 also requires the Boards, including a majority of the
non-Interested Trustees, to adopt procedures reasonably designed to provide that
the commission paid is consistent with the above standard, review those
procedures at least annually to determine that they continue to be appropriate
and determine at least quarterly that transactions have been effected in
compliance with those procedures. The Boards, including a majority of the
non-Interested Trustees, have adopted procedures designed to comply with the
requirements of Rule 17e-1.
It is contemplated that the International Fund may employ Lloyds Bank
Stockbrokers, a broker affiliated with the Subadviser, as principal broker in
agency transactions on U.K. securities exchanges . The above discussion
regarding Rule 17e-1 and the procedures adopted by the Boards to comply with the
requirements thereof applies equally to exchange orders effected by Lloyds Bank
Stockbrokers.
Pursuant to these procedures, commissions paid to WPG must be at least as
favorable as those
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<PAGE>
believed to be contemporaneously charged by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange. A transaction is not placed with WPG if a Fund would have
to pay a commission rate less favorable than WPG's contemporaneous charges for
comparable transactions for its other most favored, but unaffiliated, customers
except for accounts for which WPG acts as a clearing broker for another
brokerage firm, and any customers of WPG determined by a majority of the
non-Interested Trustees not to be comparable to the Funds. With regard to
comparable customers, in isolated situations, subject to the approval of a
majority of the non-Interested Trustees, exceptions may be made. Since WPG, as
investment adviser to the Funds, is obligated to provide management, which
includes elements of research and related skills, such research and related
skills will not be used by WPG as a basis for negotiating commissions at a rate
higher than that determined in accordance with the above criteria. When
appropriate, orders for the account of the Funds are combined with orders for
other investment companies advised by WPG and orders placed for the account of
the International Fund by the Subadviser are combined with orders of their
respective clients, in order to obtain a more favorable commission rate. When
the same security is purchased for two or more funds or accounts on the same
day, each Fund or account pays the average price and commissions paid are
allocated in direct proportion to the number of shares purchased.
In selecting brokers other than WPG and Lloyds Bank Stockbrokers to
effect transactions on securities exchanges, the Funds consider the factors set
forth in the first paragraph under this heading and any investment products or
services provided by such brokers, subject to the criteria of Section 28(e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). When more
than one firm is believed to meet the factors set forth in the first paragraph
under this heading, preference may be given to firms that also sell shares of
the respective Fund. Section 28(e) specifies that a person with investment
discretion shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay a
higher commission than the lowest rate available. To obtain the benefit of
Section 28(e), the person so exercising investment discretion must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided viewed in terms of either
that particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion." Accordingly, if the
Adviser determines in good faith that the amount of commissions charged by a
broker is reasonable in relation to the value of the brokerage and research
products and services provided by such broker, the Adviser may cause the Funds
to pay commissions to such broker in an amount greater than the amount another
firm might charge. Research services may include (i) furnishing advice as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, (ii) furnishing seminars, information, analyses and reports
concerning issuers, industries, securities, trading markets and methods,
legislative developments, changes in accounting practices, economic factors and
trends, portfolio strategy, access to research analysts, corporate management
personnel, industry experts and economists, comparative performance evaluation
and technical measurement services and quotation services, and products and
other services (such as third party publications, reports and analysis, and
computer and electronic access, equipment, software, information and accessories
that deliver, process or otherwise utilize information, including the research
described above) providing lawful and appropriate assistance to the Adviser (and
its affiliates) in carrying out their decision-making responsibilities and (iii)
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement). The investment advisory fees paid by the
Funds under the advisory agreements will not be reduced as a result of the
Adviser's receipt of research services.
Each year, the Adviser and Subadviser (in the case of the International
Fund) consider the amount and nature of the research products and services
provided by other brokers as well as the extent to which such products and
services are relied upon, and attempt to allocate a portion of the brokerage
business
-71-
<PAGE>
of its clients, such as the Funds, on the basis of that consideration. In
addition, brokers sometimes suggest a level of business they would like to
receive in return for the various services they provide. Actual brokerage
business received by any broker may be less than the suggested allocations, but
can (and often does) exceed the suggestions, because total brokerage is
allocated on the basis of all the considerations described above.
For the fiscal year ended December 31, 1997, the International Fund paid
commissions in the amount of $58,693 to unaffiliated brokers on the basis of
research services they afforded to such Fund. The foregoing amounts do not
include or take into account any profits or losses realized by such brokers on
"net" transactions for the account of a Fund such as transactions in U.S.
Government securities and transactions executed through market makers and in the
third market. In no instance is a broker excluded from receiving business
because it has not been identified as providing research services. As permitted
by Section 28(e), the investment information received from other brokers may be
used by the Adviser (and its affiliates) and the Subadviser (for the
International Fund) in servicing all of their accounts and not all such
information may be used by the Adviser or Subadviser, as the case may be, in
connection with the Fund generating the brokerage credits. Nonetheless, the
Funds believe that such investment information provides the Funds with benefits
by supplementing the research otherwise available to the Adviser.
As set forth above, each Fund employs WPG, a member firm of the NYSE, as
its principal broker on U.S. exchange transactions. Section 11(a) of the
Exchange Act provides that a member firm of a national securities exchange (such
as WPG) may not effect transactions on such exchange for the account of an
investment company (such as a Fund) of which the member firm or its affiliate is
the investment adviser unless certain conditions are met. These conditions
require that the investment company authorize the practice and that the
investment company receive from the member firm at least annually a statement of
all commissions paid in connection with such transactions. WPG's transactions on
behalf of the Funds are effected in compliance with these conditions.
In certain instances there may be securities which are suitable for a
Fund's portfolio as well as for that of another Fund or one or more of the other
clients of the Adviser. Investment decisions for a Fund and for the Adviser's
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security in a particular transaction as far
as a Fund is concerned. The Funds believe that over time their ability to
participate in volume transactions will produce better executions for the Funds.
WPG and, with respect to the International Fund, Lloyds Bank
Stockbrokers, furnish to the Funds at least quarterly statements setting forth
the total amount of all compensation retained by them or any associated person
of them in connection with effecting transactions for the account of the Funds,
and the Boards review and approve all Fund portfolio transactions and the
compensation received by WPG and Lloyds Bank Stockbrokers in connection
therewith.
- 72 -
<PAGE>
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
PERCENTAGE OF
AGGREGATE DOLLAR
AMOUNT OF
TRANSACTIONS
INVOLVING THE
PERCENTAGE OF PAYMENT OF
AGGREGATE COMMISSIONS
AGGREGATE BROKERAGE COMMISSIONS EFFECTED THROUGH
COMMISSIONS PAID TO WPG WPG
FUND 1995 1996 1997 DURING 1997 DURING 1997
- ---- ---- ---- ---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Government Money Market $0 $0 $0 N/A N/A
Tax Free Money Market 0 0 0 N/A N/A
Municipal Fund 0 0 0 N/A N/A
Core Bond Fund 12,754 0 0 N/A N/A
Growth and Income Fund 123,093 110,111 125,690 79.30% 81.66%
Tudor Fund 431,776 400,178 258,048 35.44% 38.86%
International Fund 68,825 82,181 58,693 0% 0%
Growth Fund 192,837 116,204 101,120 39.58% 41.76%
Quantitative Fund 54,903 157,358 215,632 97.87% 98.60%
</TABLE>
-73-
<PAGE>
PERCENTAGE OF
AGGREGATE DOLLAR
AMOUNT OF
TRANSACTIONS
INVOLVING THE
PERCENTAGE OF PAYMENT OF
AGGREGATE COMMISSIONS
COMMISSIONS PAID EFFECTED DURING 1997
DURING 1997 TO THROUGH
LLOYDS LLOYDS
FUND BANK STOCKBROKERS BANK STOCKBROKERS
- ---- ----------------- -----------------
INTERNATIONAL FUND 0% 0%
The foregoing amounts do not include any profits of losses realized by
brokers or dealers on "net" transactions for the account of any Fund (such as
transactions in U.S. Government securities and transactions executed through
market makers and in the third market).
WPG does not knowingly participate in commissions paid by the Funds to
other brokers or dealers and does not seek or knowingly receive any reciprocal
business as the result of the payment of such commissions. In the event that WPG
at any time learns that it has knowingly received reciprocal business, it will
so inform the Boards.
To the extent that WPG receives brokerage commissions on a Fund's
portfolio transactions, officers and Trustees of a Fund who are also managing
directors of WPG may receive indirect compensation from the Fund through their
participation in such brokerage commissions.
Subject to the supervision of the Boards, all investment decisions of the
Funds are executed through WPG's trading department.
PORTFOLIO TURNOVER
See "Financial Highlights" in the Prospectus for the Funds' portfolio
turnover rates.
In determining such portfolio turnover, U. S. Government securities and
all other securities (including options) which have maturities at the time of
acquisition of one year or less ("short-term securities") are excluded. The
annual portfolio turnover rate is calculated by dividing the lesser of the cost
of purchases or proceeds from sales of portfolio securities for the year by the
monthly average of the value of the portfolio securities owned by the applicable
Fund during the year. The monthly average is calculated by totalling the values
of the portfolio securities as of the beginning and end of the first month of
the year and as of the end of the succeeding 11 months and dividing the sum by
13. A turnover rate of 100% would occur if all of a Fund's portfolio securities
(other than short-term securities) were replaced once in a period of one year.
It should be noted that if a Fund were to write a substantial number of options
which are exercised, the portfolio turnover rate of that Fund would increase.
Increased portfolio turnover results in increased brokerage costs which a Fund
must pay and the possibility of more short-term gains, distributions of which
are taxable as ordinary income.
The non-Money Market Funds will trade their portfolio securities without
regard to the length of time for which they have been held. To the extent that a
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<PAGE>
Fund's portfolio is traded for short-term market considerations and portfolio
turnover rate exceeds 100%, the annual portfolio turnover rate of the Fund could
be higher than most mutual funds.
Although the Money Market Funds intend normally to hold securities
purchased until maturity, at which time they will be redeemable at their full
principal value plus accrued interest, either Fund may, at times, sell portfolio
securities prior to maturity based on a revised evaluation of the issuer, to
meet redemptions, or in anticipation of a change in short-term interest rates.
In the event there are unusually heavy redemption requests due to changes in
interest rates or otherwise, a Money Market Fund may have to sell a portion of
its investment portfolio at a time when it may be disadvantageous to do so.
However, the Adviser believes that a Fund's ability to borrow money to
accommodate redemption requests may mitigate the necessity for such portfolio
sales during these periods.
ORGANIZATION
(See "Organization and Capitalization," "How to Purchase Shares," and
"Redemption of Shares" in the Prospectus.)
Government Money Market Fund, Tax Free Money Market Fund, Municipal Fund,
Core Bond Fund and Quantitative Fund are each separate investment portfolios of
Weiss, Peck & Greer Funds Trust ("Funds Trust"). Funds Trust, Growth and Income
Fund, Tudor Fund, International Fund and Growth Fund are Massachusetts business
trusts established under separate Declarations of Trust on September 11, 1985,
April 13, 1988, April 13, 1988, January 24, 1989 and April 13, 1988,
respectively. Each Fund's Declaration of Trust ("Declaration of Trust") was
amended and restated on May 1, 1993 and further amended from time to time.
Under Massachusetts law, shareholders of a business trust, unlike
shareholders of a corporation, could be held personally liable as partners for
the obligations of the trust under certain circumstances. The Declarations of
Trust, however, provide that Fund shareholders shall not be subject to any
personal liability for the acts or obligations of the Funds and that every
written obligation, contract, instrument or undertaking made by the Funds may
contain a provision to that effect. The Boards intend to conduct the operations
of the Funds, with the advice of counsel, in such a way so as to avoid, to the
extent possible, ultimate liability of the shareholders for liabilities of the
Funds.
The Declarations of Trust further provide that no Trustee, officer,
employee or agent of a Fund is liable to the Fund or to a shareholder, nor is
any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise from
his or its own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or its duties. They each also provide that all third parties
shall look solely to the property of the particular Fund for satisfaction of
claims arising in connection with the affairs of that Fund. With the exceptions
stated, the Declarations of Trust permit the Boards to provide for the
indemnification of Trustees, officers, employees or agents of the Funds against
all liability in connection with the affairs of the Funds. All persons dealing
with a Fund must look solely to the property of that Fund for the enforcement of
any claims against that Fund as neither the Trustees, officers, agents or
shareholders assume any personal liability for obligations entered into on
behalf of the Funds. No Fund is liable for the obligations of any other Fund.
Under the Declarations of Trust, the Funds are not required to hold
annual meetings to elect Trustees or for other purposes. It is not anticipated
that the Funds will hold shareholders' meetings unless required by law or the
Declarations of Trust. A Fund will be required to hold a meeting to elect
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<PAGE>
Trustees to fill any existing vacancies on its Board if, at any time, fewer than
a majority of the Trustees have been elected by the shareholders of the Fund.
The Boards are required to call a meeting for the purpose of considering the
removal of persons serving as Trustee if requested in writing to do so by the
holders of not less than 10 percent of the outstanding shares of a Fund.
Fund shares do not have cumulative voting rights, so that the holders of
more than 50% of the outstanding shares may elect all of the Trustees. Each Fund
share is entitled to such dividends and distributions out of the income earned
on the assets belonging to that Fund as are declared in the discretion of the
Board. In the event of the liquidation or dissolution of a Fund, Fund shares are
entitled to receive their proportionate share of the assets which are available
for distribution as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive or subscription rights. All
shares, when issued, will be fully paid and non-assessable by the Funds.
Pursuant to the Declarations of Trust, the Boards may create additional
funds by establishing additional series of shares. The establishment of
additional series would not affect the interests of current shareholders in the
existing Funds. As of the date of this Statement of Additional Information, the
Boards do not have any plans to establish additional series of shares in any of
the Funds.
Pursuant to the Declarations of Trust, the Boards may establish and issue
multiple classes of shares. As of the date of this Statement of Additional
Information, the Boards do not have any plan to establish multiple classes of
shares for any of the Funds.
Pursuant to the Declarations of Trust, the Boards may also authorize a
Fund to invest all or part of its investable assets in a single open-end
investment company that has substantially the same investment objectives,
policies and restrictions as the Fund. As of the date of this Statement of
Additional Information, the Boards do not have any plan to authorize any Fund to
so invest its assets.
Upon the initial purchase of shares, the shareholder agrees to be bound
by the applicable Fund's Declaration of Trust, as amended from time to time. The
Declarations of Trust are on file at the Office of the Secretary of State of The
Commonwealth of Massachusetts in Boston, Massachusetts.
CUSTODIAN
The Custodian for the Funds is Boston Safe Deposit and Trust Company at
One Exchange Place, Boston, Massachusetts 02109. In its capacity as Custodian,
Boston Safe Deposit and Trust Company performs all accounting services, holds
the assets of the Funds and is responsible for calculating the net asset value
per share. The custodian may appoint subcustodians from time to time to hold
certain securities purchased by a Fund in foreign countries and to hold cash and
currencies for the Funds.
TRANSFER AGENT
First Data Investor Services Group, Inc., 4400 Computer Drive,
Westborough, MA 01581 acts as transfer agent for the Funds and in such capacity,
processes purchases, transfers and redemptions of shares, acts as dividend
disbursing agent, and maintains records and handles correspondence with respect
to shareholder accounts.
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<PAGE>
LEGAL COUNSEL
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, serves
as legal counsel to each Fund.
INDEPENDENT AUDITORS
KPMG Peat Marwick, LLP ("KPMG"), 345 Park Avenue, New York, New York
10154, serves as the Funds' independent accountants and in that capacity audits
the Fund's annual financial statements.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
NON-MONEY MARKET FUNDS
- ----------------------
Each Non-Money Market Fund, may calculate current return for a
twelve-month period by determining the "net change in value" of a hypothetical
account having a balance of one share at the beginning of the period, dividing
the net change in value by the value of the account at the end of the base
period, with the resulting return figure carried to the nearest hundredth of one
percent. "Net change in value" of an account will consist of the value of
additional shares purchased with dividends from the original share and dividends
declared on both the original share and any such additional shares (not
including long-term realized gains or losses and unrealized appreciation or
depreciation) less applicable expenses of a Fund.
The average annual total return of each Fund is determined for a
particular period by calculating the actual dollar amount of the investment
return on a $1,000 investment in the Fund made at the maximum public offering
price (i.e., net asset value) at the beginning of the period, and then
calculating the annual compounded rate of return which would produce that
amount. Total return of a Fund for a period of one year is equal to the actual
return of the Fund during that period. This calculation assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period.
Total return information for each of the non-Money Market Funds is set
forth on the following page.
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<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN
ONE YEAR FIVE YEARS TEN YEARS
ENDED ENDED 12/31/97 ENDED 12/31/97
FUND 12/31/97 ANNUALIZED CUMULATIVE ANNUALIZED CUMULATIVE
- ---- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Municipal Fund 7.85%(1) 5.51%(1) 27.32%(1) N/A N/A
Core Bond Fund 7.37% 4.67%(2) 25.63%(2) 7.54%(2) 106.96%(2)
Growth and Income Fund 36.27% 18.42% 133.01% 16.65% 367.19%
Tudor Fund 11.11% 13.77% 90.63% 14.83% 299.01%
International Fund(3) 2.89%(3) 8.95%(3) 53.55%(3) 3.82%(3) 37.95%(3)
Growth Fund 9.67% 12.28% 78.54% 13.70% 261.31%
Quantitative Fund(4) 25.47% 17.78%(4) 126.62%(4) N/A N/A
<FN>
- -------------
(1) The Municipal Fund commenced operations on July 1, 1993. The Municipal
Fund's advisory fee was not imposed, in whole or in part, and the Adviser
reimbursed certain operating expenses during various periods since inception of
the Fund. Had the Adviser imposed its entire fee, the Municipal Fund's total
returns for the periods ended December 31, 1997 would be as follows: One-Year
7.56%; Life-of-Fund Annualized 5.15%; and Life-of-Fund Cumulative 25.37%. Prior
to October 19, 1994, the Municipal Fund paid an advisory fee at a different
rate.
(2) The Core Bond Fund's management fee was increased by 0.10% of the Fund's
average daily net assets effective July 31, 1991. The performance data set forth
herein includes periods during which the lower management fee was in effect.
(3) The International Fund commenced operations on June 1, 1989. The
International Fund's advisory fee was not imposed, in whole or in part, during
various periods since inception of the Fund. Had the Adviser imposed its entire
fee, the International Fund's total returns for the periods ended December 31,
1997 would be as follows: Five-Year Annualized 8.74%; Five-Year Cumulative
52.06%; Life-of-Fund Annualized 3.34%; and Life-of-Fund Cumulative 32.56%.
(4) The Quantitative Fund commenced operations on January 1, 1993.
</FN>
</TABLE>
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<PAGE>
YIELD
MUNICIPAL FUND, CORE BOND FUND AND GROWTH AND INCOME FUND
The 30-day yield quotation of Municipal Fund, Core Bond Fund and Growth and
Income Fund is computed by dividing the net investment income for the period by
the maximum offering price per share on the last day of the period, according to
the following formula:
YIELD=2[(A - B +1) 6-1]
-----
CD
Where:
a = Dividends and interest earned during the period.
b = Expenses accrued for the period.
c = The average daily number of shares outstanding during the period that
were entitled to receive dividends
d = The maximum offering price (i.e., net asset value) per share on the
last day of the period.
YIELD FOR
30-DAY PERIOD
ENDED 12/31/97
--------------
1. Municipal Fund 4.00%
2. Core Bond Fund 5.13%
3. Growth and Income Fund 1.32%
THE MONEY MARKET FUNDS
The Money Market Funds' yield quotations are calculated by a standard
method prescribed by the rules of the SEC. Under this method, the yield
quotation is based on a hypothetical account having a balance of exactly one
share at the beginning of a seven-day period.
The yield quotation is computed as follows: the net change, exclusive of
capital changes (i.e., realized gains and losses from the sale of securities and
unrealized appreciation and depreciation), in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the base
period is determined by dividing the net change in account value by the value of
the account at the beginning of the base period. This base period return is then
multiplied by 365/7 with the resulting yield figure carried to the nearest 100th
of 1%. The determination of net change in account value reflects the value of
additional shares purchased with dividends from the original share, dividends
declared on both the original share and any such additional shares, and all fees
that are charged to that Fund, in proportion to the length of the base period
and that Fund's average account size.
The Money Market Funds also may advertise quotations of effective yield for
a 7 calendar day period.
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<PAGE>
Effective yield is computed by compounding the unannualized base period return
determined as described in the preceding paragraph by adding 1 to that return,
raising the sum to the 365/7 power and subtracting one from the result,
according to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7-1
YIELD
7-DAY PERIOD
ENDED 12/31/97
--------------
SEVEN
SEVEN DAY
DAY EFFECTIVE
YIELD YIELD
----- -----
Government Money Market Fund 4.94% 4.82%
Tax Free Money Market Fund 3.47% 3.53%
HYPOTHETICAL TAX EQUIVALENT YIELD
TAX FREE MONEY MARKET FUND AND MUNICIPAL FUND
Tax Free Money Market Fund and Municipal Fund may also publish their
tax-equivalent yield, which is the net annualized taxable yield needed to
produce a specified tax-exempt yield at a given tax rate based on a specified 7
day period in the case of Tax Free Money Market Fund, and a specified 30-day
period in the case of Municipal Fund. Tax-equivalent yield is calculated by
dividing that portion of the Fund's yield which is tax-exempt by one minus a
stated income tax rate and adding that quotient to the remaining portion, if
any, of the yield of the Fund which is not tax-exempt.
<TABLE>
<CAPTION>
A TAX-EXEMPT YIELD OF
5%, 7% AND 9% IS EQUIVALENT TO
A FULLY TAXABLE YIELD OF*
-------------------------
1998 TAXABLE INCOME 1998 FEDERAL TAX
------------------- ----------------
INDIVIDUAL RETURN BRACKET 5% 7% 9%
----------------- ------- -- -- --
<S> <C> <C> <C> <C> <C>
$ 0 25,350 15.0% 5.88% 8.24% 10.59%
$ 25,351 61,400 28.0% 6.94% 9.72% 12.50%
$ 61,401 128,100 31.0% 7.25% 10.14% 13.04%
$ 128,101 278,450 36.0% 7.81% 10.94% 14.06%
Over $278,450 39.6% 8.28% 11.59% 14.90%
JOINT RETURN
$ 0 42,350 15.0% 5.88% 8.24% 10.59%
$ 42,351 102,300 28.0% 6.94% 9.72% 12.50%
$ 102,301 155,950 31.0% 7.25% 10.14% 13.04%
$ 155,951 278,450 36.0% 7.81% 10.94% 14.06%
Over $278,450 39.6% 8.28% 11.59% 14.90%
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<PAGE>
<FN>
- --------------
* These illustrations assume the Federal alternative minimum tax is not
applicable and that an individual is not a "head of household," a "married
individual filing a separate return," or a "surviving spouse." Note also that
these Federal income tax brackets and rates do not take into account the effects
of (i) a reduction in the deductibility of itemized deductions for taxpayers
whose federal adjusted gross income exceeds $124,500 (or, in the case of a
separate return by a married individual, $62,250), or (ii) the gradual phase-out
of the personal exemption amount for taxpayers whose federal adjusted gross
income exceeds $124,500 (for single individuals) or $186,800 (for married
individuals filing jointly).The effective federal tax rates and equivalent
yields for such taxpayers would be higher than those shown above.
</FN>
</TABLE>
TAX-EQUIVALENT YIELD (1)
SEVEN DAY SEVEN DAY 30-DAY
TAX EQUIVALENT TAX EQUIVALENT TAX EQUIVALENT
YIELD EFFECTIVE YIELD YIELD
----- --------------- -----
Tax Free Money Market Fund 5.75% 5.90% N/A
Municipal Fund N/A N/A 6.62%
- -----------
(1) Assumes a 39.6% Federal marginal tax rate.
GENERAL
Each Fund may from time to time advertise comparative performance as
measured by various independent sources, including, but not limited to, Lipper
Analytical Services, Inc., Donaghues Money Fund Report, Barron's, The Wall
Street Journal, Weisenberger Investment Companies Service, Business Week,
Changing Times, Financial World, Forbes, Fortune, Morningstar Mutual Funds, The
New York Times, Personal Investor, Sylvia Porter's Personal Finance and Money.
Each Fund may from time to time advertise its performance relative to
certain indices and benchmark investments, including: (a) the Lipper Analytical
Services, Inc. Mutual Fund Performance Analysis, Fixed Income Analysis and
Mutual Fund Indices (which measure total return and average current yield for
the mutual fund industry and rank mutual fund performance); (b) the CDA Mutual
Fund Report published by CDA Investment Technologies, Inc. (which analyzes
price, risk and various measures of return for the mutual fund industry); (c)
the Consumer Price Index published by the U.S. Bureau of Labor Statistics (which
measures changes in the price of goods and services); (d) Stocks, Bonds, Bills
and Inflation published by Ibbotson Associates (which provides historical
performance figures for stocks, government securities and inflation); (e) the
Standard & Poor's Indices; (f) other taxable investments including certificates
of deposit (CDs), money market deposit accounts (MMDAs), checking accounts,
savings accounts, money market mutual funds and repurchase agreements; and (g)
historical investment data supplied by the research departments of various
research and brokerage firms. In addition, each Fund may from time to time
advertise its performance relative to the following benchmark indices: Core Bond
Fund -- Lehman Aggregate Index; Municipal Fund -- Lipper Intermediate Municipal
Bond Funds Average and Lehman Brothers 3-10 Year Municipal Bond Index;
Quantitative Fund -- S&P 500 Index; Growth and Income Fund -- S&P 500 and Lipper
Capital Growth and Income Funds Average; Tudor Fund -- Lipper Capital
Appreciation Index and Russell 2500 Growth Index; International Fund -- Morgan
Stanley Europe, Australia, Far East (EAFE) Index; and Growth Fund -- Lipper
Small Cap Index, Wilshire Small Company Growth Index and Russell 2,000 Growth
Index.
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<PAGE>
The composition of the investments in the above-referenced indices and the
characteristics of a Fund's benchmark investments are not identical to, and in
some cases may be very different from, those of a Fund's portfolio. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may not be identical to the formulas
used by a Fund to calculate its performance figures.
From time to time advertisements or communications to shareholders may
summarize the substance of information contained in shareholder reports
(including the investment composition of a Fund), as well as the views of the
Adviser as to current market, economic, trade and interest rate trends,
legislative, regulatory and monetary developments, investment strategies and
regulated matters believed to be of relevance to a Fund.
In addition, from time to time, advertisements or information may include a
discussion of asset allocation models developed by the Adviser and/or its
affiliates, certain attributes or benefits to be derived from asset allocation
strategies and the WPG mutual funds that may be offered as investment options
for the strategic asset allocations. Such advertisements and information may
also include the Adviser's current economic outlook and domestic and
international market views to suggest periodic tactical modifications to current
asset allocation strategies. Such advertisements and information may include
other material which highlight or summarize the services provided in support of
an asset allocation program.
In addition, advertisements or shareholder communications may include a
discussion of certain attributes or benefits to be derived by an investment in a
Fund. Such advertisements or information may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
therein.
Performance data is based on historical results and is not intended to
indicate future performance. Total return, thirty-day yield, 7-day yield and
7-day effective yield, tax equivalent yield and distribution rate will vary
based on changes in market conditions, portfolio expenses, portfolio investments
and other factors. The value of a Fund's shares will fluctuate and an investor's
shares may be worth more or less than their original cost upon redemption. Each
Fund may also, at its discretion, from time to time make a list of its portfolio
holdings available to investors upon request. Performance information of a Fund
may not provide a basis for comparison with other investments using a different
method of calculating performance.
Return for a Fund will fluctuate from time to time, unlike bank deposits or
other investments which pay a fixed yield or return for a stated period of time,
and do not provide a basis for determining future returns.
FINANCIAL STATEMENTS
Each Fund's audited financial statements and related report of KPMG,
independent auditors, included in the Annual Report to Shareholders of the Funds
for the year ended December 31, 1997, is attached hereto and hereby incorporated
by reference into this Statement of Additional Information.
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<PAGE>
APPENDIX A
Description of Bond Ratings Moody's Investors Service, Inc.
AAA: Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds which are rated AA are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds which are rated BAA are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA: Bonds rated BA are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Moody's also provides credit ratings for preferred stocks. It should be
borne in mind that preferred stock occupies a junior position to bonds within a
particular capital structure and that these securities are rated within the
universe of preferred stocks.
AAA: An issue which is rated "AAA" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
AA: An issue which is rated "AA" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance that earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
A: An issue which is rated "A" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protections are, nevertheless,
expected to be maintained at adequate levels.
A-1
<PAGE>
BAA: An issue which is rated "BAA" is considered to be a medium grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
BA: An issue which is rated "BA" is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
B: An issue which is rated "B" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG 2 are of high quality, with margins of protection ample although
not so large as in the preceding group. A short term issue having a demand
feature (i.e. payment relying on external liquidity and usually payable on
demand rather than fixed maturity dates) is differentiated by Moody's with the
use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax-exempt commercial paper. These
are promissory obligations (1) not having an original maturity in excess of nine
months, and (2) backed by commercial banks. Notes bearing the designation P-1
have a superior capacity for repayment. Notes bearing the designation P-2 have a
strong capacity for repayment.
STANDARD & POOR'S RATINGS GROUP
AAA: Bonds rated AAA have the higher rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a very strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
interest or principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures.
A-2
<PAGE>
BB: Debt rated BB has less near-term vulnerability to default that other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB-rating.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. The designation SP-1 indicates a very strong capacity to pay principal
and interest. A"+" is added for those issues determined to possess overwhelming
safety characteristics. An "SP-2" designation indicates a satisfactory capacity
to pay principal and interest.
Commercial paper rated A-2 or better by S&P is described as having a very
strong degree of safety regarding timeliness and capacity to repay.
Additionally, as a precondition for receiving an S&P commercial paper rating, a
bank credit line and/or liquid assets must be present to cover the amount of
commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity for
repayment of short-term promissory obligations.
GLOSSARY
--------
Commercial Paper: Short-term promissory notes of large corporations with
excellent credit ratings issued to finance their current operations.
Certificates of Deposit: Negotiable certificates representing a commercial
bank's obligations to repay funds deposited with it, earning specified rates of
interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a draft which has
been drawn on it by a customer. These obligations are backed by large banks and
usually are backed by goods in international trade.
Time Deposits: Non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and other business
organizations in order to finance their long-term credit needs.
A - 3
<PAGE>
APPENDIX B
ADDITIONAL INVESTOR SERVICES
(Each Fund other than Tax Free Money Market Fund, Municipal Fund
and Growth Fund)
PROTOTYPE RETIREMENT PLAN FOR EMPLOYERS AND SELF-EMPLOYED INDIVIDUALS
Prototype retirement plans (the "Retirement Plan") are available for those
entities or self-employed individuals who wish to purchase shares in a Fund
(other than the Tax Free Money Market Fund, the Municipal Fund and Growth Fund)
in connection with a money purchase plan or a profit sharing plan maintained by
their employer. The Retirement Plans were designed to conform to the
requirements of the Code and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The Retirement Plans received opinion letters from
the Internal Revenue Service (the "IRS") on March 29, 1990 that the form of the
Retirement Plans is acceptable under Section 401 of the Code.
Annual tax-deductible contributions to the Retirement Plan may be made up
to the lesser of $30,000 or 25% of the participant's earned income (disregarding
any compensation in excess of $160,000 (as adjusted by the IRS for inflation)).
Under the terms of the Retirement Plan, contributions by or on behalf of
participants may be invested in a Fund's shares with the designated custodian
under the Retirement Plan (the "Retirement Plan's Custodian"). Investment in
other mutual funds advised by the Adviser or one of its affiliates may also be
available. Employers adopting the Retirement Plan may elect either that a
participant shall specify the investments to be made with contributions by or on
behalf of such participant or that the employer shall specify the investments to
be made with all such contributions. Since no Fund is intended as a complete
investment program it is important, in connection with such election, that
employers give careful consideration to the fiduciary obligation requirements of
ERISA.
All dividends and distributions received by the Retirement Plan's Custodian
on the Funds' shares held by the Plan's Custodian will be reinvested in the
applicable Fund's shares at net asset value. Distributions of benefits to
participants, when made, will be paid first in cash, to the extent that any
amount credited to a participant's account is not invested in the applicable
Fund's shares, and then in full Fund shares (and cash in lieu of fractional
shares).
Boston Safe Deposit and Trust Company serves as the Retirement Plan's
Custodian under a Custodial Agreement. Custodian fees which are payable by the
employer to the Retirement Plan's Custodian under such Custodial Agreement are a
$10 application fee for processing the Retirement Plan application, an annual
maintenance fee of $15 per participant, and a distribution fee of $10 for each
distribution from a participant's account. Such fees may be altered from time to
time by agreement of the employer and the Retirement Plan's Custodian. For
further details see the terms of the Retirement Plan which are available from
the Trust.
Distributions must be made pursuant to the terms of the Retirement Plan
and generally may not commence before retirement, disability, death, termination
of employment, or termination of the Retirement Plan and must commence no later
than April 1 of the year following the year in which the participant attains age
70 1/2 (the "required beginning date"). Distributions are taxed as ordinary
income when received, except the portion, if any, considered a return of a
participant's nondeductible contributions. Certain distributions before age 59
1/2 may be subject to a 10% nondeductible penalty on the taxable portion of the
distribution. Failure to make minimum required distributions by the required
beginning date may be subject to a 50% excise tax.
B-1
<PAGE>
It should be noted that the Retirement Plan is a retirement investment
program involving commitments covering future years. In deciding whether to
utilize the Retirement Plan, it is important that the employer consider his or
her needs and those of the Retirement Plan participants and whether the
investment objectives of the Funds are likely to fulfill such needs. Termination
or curtailment of the Retirement Plan for other than business reasons within a
few years after its adoption may result in adverse tax consequences.
Employers who contemplate adoption of the Retirement Plan should consult an
attorney or financial adviser regarding all aspects of the Plan as a retirement
plan vehicle (including fiduciary obligations under ERISA).
INDIVIDUAL RETIREMENT ACCOUNT
Persons with earned income, whether or not they are active participants in
a pension, profit-sharing or stock bonus plan described in Code ss. 401(a),
Federal, state or local pension plan, an annuity plan described in Code ss.
403(a), an annuity contract or custodial account described in Code ss. 403(b), a
simplified employee pension plan described in Code ss. 408(k), or a trust
described in Code ss. 501(c)(18) ("active participant"), generally are eligible
to establish an Individual Retirement Account ("IRA"). An individual may make a
deductible IRA contribution only if (i) the individual is not an active
participant, or (ii) the individual has an adjusted gross income below a certain
level ($50,000 for married individuals filing a joint return, with a phase-out
for adjusted gross income between $50,000 and $60,000; $30,000 for a single
individual, with a phase-out for adjusted gross income between $30,000 and
$40,000). The phase-out ranges for deductibility are increased in years after
1998 until they reach $50,000 to $60,000 for single taxpayers for the year 2005
and thereafter and $80,000 to $100,000 for married taxpayers filing jointly for
the years 2007 and thereafter. The phase-out range of $0 to $10,000 of AGI for
an active participant, married and filing separately does not increase. An
individual whose spouse is an active participant may still be able to make a
deductible contribution if he or she is not an active participant,
subject to a phase-out range of $150,000 to $160,000 of modified AGI if filing
jointly. An individual who is not permitted to make a deductible contribution to
an IRA for a taxable year may nonetheless make annual nondeductible
contributions to an IRA up to the lesser of 100% of the individual's earned
income or $2,000 to an IRA (up to $4,000 to IRAs for an individual and his or
her spouse) for that year. There are special rules for determining how
withdrawals are to be taxed if an IRA contains both deductible and nondeductible
amounts. In general, a proportionate amount of each withdrawal will be deemed to
be made from nondeductible contributions; amounts treated as a return of
nondeductible contributions will not be taxable. Also, annual contributions may
be made to a spousal IRA even if the spouse has no earnings in a given year.
Withdrawals from the IRA (other than the portion treated as a return of
nondeductible contributions) are taxed as ordinary income when received, may be
made without penalty after the participant reaches age 59 1/2 and must commence
no later than the required beginning date (see discussion of Prototype
Retirement Plans above). Withdrawals before age 59 1/2 may involve the payment
of a 10% nondeductible penalty on the taxable portion of the amount withdrawn.
The time and rate of withdrawal must conform with Code requirements in order to
avoid adverse tax consequences. All dividends and distributions on shares held
in IRA accounts are reinvested in full and fractional shares and are not subject
to federal income tax until withdrawn from the IRA. Investors should consult
their tax advisers for further tax information, including information with
respect to the imposition of state and local income taxes and the effects of tax
law changes.
B-2
<PAGE>
The Funds have arranged for Boston Safe Deposit and Trust Company to
furnish the required custodial services for IRAs using any of a Fund's shares as
the underlying investment. The Bank will charge an acceptance fee of $10 for
each new IRA and an annual maintenance fee of $15 for each year that an IRA is
in existence. There is a $10 fee for processing a premature distribution. These
fees will be deducted from the IRA account and may be changed by the Custodian
upon 30 days' prior notice.
To establish an IRA for investment in a Fund's shares, an investor must
complete an application and a custodial agreement that includes IRS Form 5305-A
(which has been supplemented to provide certain additional custodial provisions)
and must make an initial cash contribution to the IRA, subject to the limitation
on contributions described above. Pursuant to IRS regulations, an investor may
for seven days following establishment of an IRA revoke the IRA. Detailed
information on IRAs, together with the necessary form of application and
custodial agreement, is available from the Trust and should be studied carefully
by persons interested in utilizing a Fund for IRA investments. Such persons
should also consult their own advisers regarding all aspects of the Funds as an
appropriate IRA investment vehicle.
ROTH INDIVIDUAL RETIREMENT ACCOUNT
Like the traditional IRA described above, a Roth Individual Retirement
Account ("Roth IRA") is a program through which taxpayers may obtain certain
income tax benefits for themselves. Unlike a traditional IRA, contributions to a
Roth IRA are not deductible. However, a Roth IRA is a tax-sheltered account and,
if certain conditions are met, distributions from a Roth IRA will be tax free.
Annual contributions to a Roth IRA must be in cash and (other than rollover
or conversion contributions) when combined with contributions to both
traditional IRAs and other Roth IRAs may not exceed the lesser of $2,000 or 100
percent of compensation. The $2,000 maximum amount is reduced and phased out for
a single taxpayer with modified adjusted gross income (AGI) between $95,000 and
$110,000, and for a husband and wife who file joint returns and have AGIs
between $150,000 and $160,000. The $2,000 maximum is reduced and phased out for
married taxpayers filing separately with AGIs between zero and $10,000.
Participation in a Roth IRA contribution is not limited by participation in
a retirement plan or program other than a traditional IRA, as discussed above.
In addition, unlike traditional IRAs, contributions to a Roth IRA may be made
after age 70 1/2 so long as the IRA owner has compensation and an AGI below the
maximum thresholds discussed above.
Provided that all of the applicable rollover rules are followed, a Roth IRA
may be rolled over to another Roth IRA, or may receive rollover contributions
from either a traditional IRA or Roth IRA.
If AGI is less than $100,000, an individual may rollover (or convert) all
or any portion of any existing traditional IRA into a Roth IRA. The conversion
amount or the amount of the rollover from the traditional IRA to the Roth IRA is
treated as a distribution for income tax purposes and is includible in gross
income (except for any nondeductible contributions). Although the rollover
amount is generally included in income, the 10 percent early distribution excise
tax does not apply to rollovers or conversions from a traditional IRA to a Roth
IRA.
For a rollover of assets from a traditional IRA to a Roth IRA prior to
January 1, 1999, the taxable amount of the distribution is included in gross
income ratably over a four year period beginning with 1998.
B-3
<PAGE>
Qualified distributions from a Roth IRA are NOT includable in income.
Qualified distributions are distributions made AFTER the five taxable year
period beginning with the first taxable year for which a contribution (or
conversion from a traditional IRA) was made to the Roth IRA, and which is made
after age 59 1/2, death, disability, or for first-time home buyer expenses.
SIMPLIFIED EMPLOYEE PENSION PLAN
A simplified employee pension (a "SEP") allows an employer to make
contributions toward his or her own (if a self-employed individual) and his or
her employees' retirement and, for certain SEPs established prior to 1997, may
permit the employees to make elective deferrals by salary reduction. A SEP
requires an Individual Retirement Account (a "SEP-IRA") to be established for
each "qualifying employee," although the employer may include additional
employees if it wishes. A qualifying employee is one who: (a) is at least age
21, (b) has worked for the employer during at least 3 of 5 years immediately
preceding the tax year, and (c) has received at least $400 for 1998 (as indexed
for inflation) in compensation in the tax year.
An employer is not required to make any contribution to the SEP-IRA.
However, if the employer does make a contribution, the contribution must be
based on a written allocation formula and must not discriminate in favor of
highly compensated employees, as defined in Code Section 414(q). The employer
may make annual contributions on behalf of each qualifying employee, provided
that the contributions, when combined with the employee's elective deferrals, do
not exceed 15% of the employee's compensation or $30,000, whichever is less.
A SEP-IRA that is part of a SEP established before 1997 may include a
salary reduction arrangement under which the employee can choose to have the
employer make contributions ("elective deferrals") to his or her SEP-IRA out of
his or her salary. However, employees may make elective deferrals only if (i) at
least 50% of the employer's eligible employees choose elective deferrals; (ii)
the employer did not have more than 25 eligible employees at any time during the
preceding year; and (iii) the amount deferred each year by each eligible highly
compensated employee as a percentage of pay is no more than 125% of the average
deferral percentage of all other eligible employees. An elective deferral
arrangement is not available for a SEP maintained by a state or local
government, or any of their political subdivisions, agencies, or
instrumentalities, or to exempt organizations.
In general, the total income which an employee can defer under a salary
reduction arrangement included in a SEP and certain other elective deferral
arrangements is limited to $10,000 (indexed annually for inflation). This dollar
limit applies only to the elective deferrals, not to any contributions from
employer funds. The Code may require that contributions be further limited to
prevent discrimination in favor of highly compensated employees. An employee may
also make regular IRA contributions to his or her SEP-IRA (see discussion of
IRAs, above).
Under the terms of the SEP-IRA, contributions by or on behalf of
participants may be invested in Fund shares (or shares of other funds designated
by the Adviser as eligible investments), as specified by the participant. All
dividends and distributions on shares held in SEP-IRAs are reinvested in full
and fractional shares. Since no Fund is intended as a complete investment
program it is important, in connection with the adoption of a SEP-IRA, that
employers give careful consideration to the fiduciary obligation requirements of
ERISA, particularly those pertaining to diversification of investments.
Withdrawals before age 59 1/2 may involve the payment of a 10%
nondeductible penalty on the amount withdrawn. Withdrawals must commence no
later than the required beginning date (see discussions of Prototype Retirement
Plans, above). The time and rate of withdrawal must conform with
B-4
<PAGE>
Code requirements in order to avoid adverse tax consequences. Contributions to a
SEP-IRA by an employer are excluded from the employee's income rather than
deducted from it. Elective deferrals made to an employee's SEP-IRA generally are
excluded from his income in the year of deferral, but are included in wages for
social security (FICA) and unemployment (FUTA) tax purposes. However, if the
employee makes regular IRA contributions to his SEP-IRA, (other than elective
deferrals), he can deduct them the same way as contributions to a regular IRA,
up to the amount of his deduction limit. Investors should consult their tax
advisers for further tax information including information with respect to the
imposition of state and local income taxes and the effects of tax law changes.
The Funds have arranged for Boston Safe Deposit and Trust Company to
furnish the required custodial services for SEP-IRAs using the Fund's shares as
the underlying investment. Boston Safe Deposit and Trust Company will charge an
acceptance fee of $10 for each new SEP-IRA and an annual maintenance fee of $15
for each year that a SEP-IRA is in existence. There is a $10 fee for each
premature distribution. These fees will be deducted from the SEP-IRA account and
may be changed by the Custodian upon 30 days' prior written notice.
To establish a SEP-IRA, an employer and employee should complete the Weiss,
Peck & Greer IRA application materials, as well as IRS Form 5305-SEP. Pursuant
to IRS regulations, an investor may for seven days following establishment of a
SEP-IRA revoke the SEP-IRA. Detailed information on SEP-IRAs, together with the
necessary form of application and custodial agreement, is available from the
Fund and should be studied carefully by persons interested in utilizing the Fund
for SEP-IRA investments. Such persons should also consult their own advisers
regarding all aspects of the Fund as an appropriate SEP- IRA investment vehicle.
SIMPLE RETIREMENT PLANS
Effective for plan years after 1996, an employer may establish a SIMPLE
retirement plan under new Section 408(p) of the Code. Under such plan, the
employer may make contributions to individual retirement accounts established
for each employee. Such individual retirement accounts must, by their terms, be
limited to contributions under a SIMPLE retirement program. THE WEISS, PECK &
GREER IRA IS NOT SO LIMITED AND MAY NOT BE USED TO FUND A SIMPLE RETIREMENT
PROGRAM.
B-5
