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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 5 (X)
WT INVESTMENT TRUST I
(Exact Name of Registrant as Specified in Charter)
1100 North Market Street, Wilmington, DE 19890-0001
(Address of Principal Executive Offices (Zip Code)
Registrant's Telephone Number, Including Area Code (800) 254-3948
Robert J. Christian
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0001
(Name and Address of Agent for Service of Process)
Please Send Copy of Communications to:
Joseph V. Del Raso, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
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WT INVESTMENT TRUST I
Large Cap Growth Series
WT Large Cap Growth Series
Large Cap Core Series
Small Cap Core Series
Large Cap Value Series
Mid Cap Value Series
Small Cap Value Series
Mid Cap Series
Science and Technology Series
Socially Responsible Series
International Multi-Manager Series
Short/Intermediate Bond Series
Intermediate Bond Series
Municipal Bond Series
Premier Money Market Series
Prime Money Market Series
U.S. Government Series
Tax-Exempt Series
FORM N-1A, PART A: Responses to items 1 through 3, 5 and 9 have been omitted
pursuant to paragraph 2(b) of Instruction B of the General Instructions to Form
N-1A.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED
RISKS.
(a) INVESTMENT OBJECTIVES.
The LARGE CAP GROWTH SERIES, the WT LARGE CAP GROWTH SERIES, the SMALL CAP
CORE SERIES, the MID CAP SERIES, the SCIENCE AND TECHNOLOGY SERIES and the
SOCIALLY RESPONSIBLE SERIES each seek superior long-term growth of capital. The
LARGE CAP CORE SERIES, the LARGE CAP VALUE SERIES, the MID CAP VALUE SERIES and
the SMALL CAP VALUE SERIES each seek to achieve long-term capital appreciation.
The INTERNATIONAL MULTI-MANAGER SERIES seeks superior long-term capital
appreciation. The SHORT/INTERMEDIATE BOND SERIES and the INTERMEDIATE BOND
SERIES each seek a high total return, consistent with high current income. The
MUNICIPAL BOND SERIES seeks a high level of income exempt from federal income
tax, consistent with the preservation of capital. The PRIME MONEY MARKET Series,
the U.S. GOVERNMENT SERIES and PREMIER MONEY MARKET SERIES each seek a high
level of current income consistent with the preservation of capital and
liquidity. The TAX-EXEMPT SERIES seeks as high a level of interest income exempt
from federal income tax as is consistent with preservation of principal. The
investment objectives for each Series except Large Cap Core Series may not be
changed without shareholder approval. The Prime Money Market, U.S. Government,
Premier Money Market and Tax-Exempt Series are money market funds and intend to
maintain a stable $1 share price, although this may not be possible under
certain circumstances. There is no guarantee that a Series will achieve its
investment objective.
For purposes of these investment objectives, "superior" long-term growth of
capital means to exceed the long-term growth of capital from an investment in
the securities comprising the S&P 500 Index (for the Large Cap Growth, Large Cap
Core, Science and Technology and Socially Responsible Series); the Russell 1000
Growth Index for the WT Large Cap Growth; Russell 1000 Index for Large Cap
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Value Series; the Russell 2000 Index, (for the Small Cap Core Series); the
Russell 2000 Value Index (for the Small Cap Value Series); the Russell Mid Cap
Index (for the Mid Cap Value and Mid Cap Series), and the Morgan Stanley Capital
International Europe, Australasia and Far East Index (for the International
Multi-Manager Series).
(b) IMPLEMENTATION OF INVESTMENT OBJECTIVES.
EQUITY SERIES
The LARGE CAP GROWTH SERIES and WT LARGE CAP GROWTH SERIES are managed in
an identical manner. Each Series invests, under normal market conditions, at
least 65% of its total assets in the following equity (or related) securities:
- common stocks of U.S. corporations that are judged by the adviser to
have strong growth characteristics and, with respect to at least 65%
of the Series' total assets, have a market capitalization of $2
billion or higher at the time of purchase;
- options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
- options on indexes of the common stock of U.S. corporations described
above; and
- contracts for either the future delivery, or payment in respect of the
future market value, of certain indexes of the common stock of U.S.
corporations described above, and options upon such futures contracts.
The adviser of each Series looks for high quality, sustainable growth
stocks while paying careful attention to valuation. Research is bottom-up,
emphasizing business fundamentals, including financial statement analysis and
industry and competitor evaluations. The adviser selects stocks it believes
exhibit consistent, above-average earnings growth, superior quality and
attractive risk/reward characteristics. These dominant companies are expected to
generate consistent earnings growth in a variety of economic environments.
The adviser also seeks to provide a greater margin of safety and stability
in each Series. Superior earnings growth is expected to translate ultimately
into superior compounding of returns. Additionally, several valuation tools are
used to avoid over-paying for growth or chasing "hot" stocks. Over time, the
adviser believes these favorable characteristics will produce superior returns
with less risk than many growth styles.
The adviser's research team analyzes a broad universe of over 2,000
companies. Industry specialists search for high-quality companies growing at
roughly double the market's average. Approximately 150 stocks pass these initial
screens and are subject to thorough research. Dominant market share, strong
financials, the power to price, significant free cash flow and
shareholder-oriented management are critical variables.
Final purchase candidates are selected by the adviser's investment
committee based on attractive risk/reward characteristics and diversification
guidelines. Certain industries may be over or under-weighted by the adviser
based upon favorable growth rates or valuation parameters.
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The adviser attempts to maintain portfolio continuity by purchasing
sustainable growth companies that are less sensitive to short-term economic
trends than cyclical, low quality companies. The adviser generally sells stocks
when the risk/reward characteristics of a stock turn negative, company
fundamentals deteriorate, or the stock underperforms the market or its peer
group. The latter device is employed to minimize mistakes and protect capital.
Each Series combines three distinct components, each of which is intended
to enhance returns and add balance.
LARGE CAP GROWTH STOCKS (over $5 billion in total market cap) - Up to 100%,
but not less than 65%, of each Series' total assets:
- Mature, predictable businesses
- Capital appreciation and income
- Highest liquidity
MEDIUM CAP GROWTH STOCKS (between $1 and $5 billion in total market cap) -
Up to 20% of each Series' total assets:
- Superior long-term potential
- Strong niche or franchise
- Seasoned management
SPECIAL SITUATIONS GROWTH OPPORTUNITIES - Up to 20% of each Series' total
assets:
- Stable return, independent of the market
- Unusually favorable risk/reward characteristics
- Typically involve corporate restructuring
In order to respond to adverse market, economic, political or other
conditions, each Series may assume a temporary defensive position and invest
without limit in commercial paper and other money market instruments that are
rated investment grade. The result of this action may be that a Series will be
unable to achieve its investment objective.
The LARGE CAP CORE SERIES invests, under normal market conditions, at least
65% of its total assets in the following equity (or related) securities:
- securities of U.S. corporations that are judged by the adviser to have
strong growth and valuation characteristics;
- options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
- receipts or American Depositary Receipts ("ADRs"), which are typically
issued by a U.S. bank or trust company as evidence of ownership of
underlying securities issued by a foreign corporation; and
- cash reserves and money market instruments (including securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, repurchase agreements, certificates of deposit and
bankers' acceptances issued by banks or savings and loan associations,
and commercial paper).
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The Large Cap Core Series is a diversified portfolio of U.S. equity (or
related) securities, including common stocks, preferred stocks and securities
convertible into common stock of companies with market capitalizations of at
least $2 billion. Dividend income is an incidental consideration compared to
growth in capital in the selection of securities. The adviser seeks securities
that possess strong growth and value characteristics based on the evaluation of
the issuer's background, industry position, historical returns and the
experience and qualifications of the management team. The adviser may rotate the
Series' holdings among various market sectors based on economic analysis of the
overall business cycle.
As a temporary defensive investment policy, the Large Cap Core Series may
invest up to 100% of its assets in money market instruments and other short-term
debt instruments, rated investment grade or higher at the time of purchase, and
may hold a portion of its assets in cash. The result of this action may be that
the Series will be unable to achieve its investment objective.
The SMALL CAP CORE SERIES invests, under normal market conditions, at least
65% of its total assets in the following equity (or related) securities:
- common stocks of U.S. corporations that are judged by the adviser to
have strong growth characteristics or to be undervalued in the
marketplace relative to underlying profitability and have a market
capitalization ofwhich at the time of purchase is less than that of
the largest stock in the Russell 2000 Index;
- options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
- options on indexes of the common stock of U.S. corporations described
above; and
- contracts for either the future delivery, or payment in respect of the
future market value, of certain indexes of the common stock of U.S.
corporations described above, and options upon such futures contracts.
The Small Cap Core Series is a diversified portfolio of small cap U.S.
equity (or related) securities with a market capitalizationwhich at the time of
purchase is less than that of the largest stock in the Russell 2000 Index. To
achieve the Series' objective of long-term growth of capital, the Series'
adviser employs a combined growth and value investment approach.
The adviser uses proprietary quantitative research techniques to find
companies with long-term growth potential or that seem undervalued. After
analyzing those companies, the adviser invests the Series' assets in the stocks
of companies with the most attractive combination of long-term earnings, growth
and valuation. Securities will be sold to make room for new companies with
superior growth, valuation and projected return characteristics or to preserve
capital where the original assessment of the company's growth prospects and
earnings power was too optimistic.
In the Series' efforts to achieve its investment objective, it seeks to
outperform the Russell 2000 Index (assuming a similar investment in the
securities comprising this index would reinvest dividends and capital gains
distributions). The Russell 2000 Index is a passive index of the smallest 2000
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stocks in the Russell 3000 Index of the 3000 largest stocks in the U.S. as
measured by market capitalization.
The MID CAP SERIES, under normal market conditions, invests at least 100%
of its total assets in the following equity (or equity-related securities):
- common stocks of corporations that are judged by the adviser to have
strong growth characteristics and, with respect to at least 65% of the
Series' total assets, have a market capitalization within the
capitalization range of the S&P Mid Cap 400 Index;
- American Depository Receipts ("ADRs"), which are negotiable
certificates held in a U.S. bank representing a specific number of
shares of a foreign stock traded on a U.S. stock exchange. ADRs make
it easier for Americans to invest in foreign companies, due to the
widespread availability of dollar-denominated price information, lower
transaction costs, and timely dividend distributions. An American
Depository Share or ADS is the share issued under an American
Depositary Receipt agreement which is actually traded;
- securities convertible into the common stock of corporations described
above;
- options on common stock or options on stock indexes.
Mid-cap companies are those whose capitalization is similar to the market
capitalization of companies in the S&P Mid Cap 400 Index at the time of the
Fund's investment. The Adviser looks for quality, sustainable-growth stocks
within the mid-cap portion of the market. At the time of initial purchase, an
investment's market capitalization will fall within the S&P Mid Cap 400 Index.
Due to market price adjustments or other events after the time of purchase, it
is possible that an investment's market capitalization may drift above or below
this range. Nevertheless, companies whose capitalization no longer meets this
definition after purchase continue to be considered to have a medium market
capitalization for purposes of the 65% policy. The Series is not limited to only
mid-cap companies, and under normal market conditions, may invest up to 35% of
its assets in stocks of companies in other capitalizations.
The Adviser believes that over the long-term, companies that experience a
higher growth in earnings and cash flow per share will achieve higher investment
returns. By consistently investing in a diversified portfolio of high growth
companies and by applying valuation disciplines, the Adviser believes that
superior long-term investment returns can be achieved at an acceptable level of
risk.
The Adviser uses a bottom-up approach to investing. This investment
approach searches for potential investment opportunities in individual companies
by researching a company's financial statements, underlying industry trends,
competitive dynamics and other relevant information. The Adviser uses a bottom
up approach to not only identify new investment opportunities but also to
evaluate existing investments on an ongoing basis to determine continued
suitability.
The Adviser selects stocks it believes exhibit consistent, above average
growth prospects. Through research and its understanding of business
fundamentals, the Adviser seeks to identify companies with sound economic
business models, reputable managements, strong competitive positions, and the
ability to grow their businesses in a variety of economic environments.
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Additionally, all investments undergo a valuation analysis to estimate their
risk/reward characteristics.
The Adviser's research team analyzes a broad universe of over 2,000
companies to identify potential research candidates. Companies are screened for
several metrics including but not limited to revenue and earnings growth, debt
leverage, operating margin characteristics, cash flow generation, and return on
invested capital. Companies which pass the screens are subject to more thorough
research to evaluate their investment suitability.
Final investment candidates are evaluated and approved by the Adviser's
investment committee based on individual investment merits, and within the
context of the Series' overall portfolio characteristics and diversification
guidelines. The Series may invest in up to 100 stocks. At the time of purchase
individual stock holdings may represent up to 5% of the Series' value. Due to
market price fluctuations individual stock holdings may exceed 5% of the value
of the total portfolio. The Series may over or underweight certain industries
and sectors based on the Adviser's opinion of the relative attractiveness of
companies within those industries and sectors. The Series may not invest in more
than 10% of the outstanding shares of a company.
The SCIENCE AND TECHNOLOGY SERIES is a non-diversified portfolio and may
invest up to 100% of its total assets in the following equity (or
equity-related) securities:
- common stocks of corporations;
- securities convertible into the common stock of corporations;
- American Depository Receipts ("ADRs"), which are negotiable
certificates held in a U.S. bank representing a specific number of
shares of a foreign stock traded on a U.S. stock exchange. ADRs make
it easier for Americans to invest in foreign companies, due to the
widespread availability of dollar-denominated price information, lower
transaction costs, and timely dividend distributions. An American
Depository Share or ADS is the share issued under an American
Depositary Receipt agreement which is actually traded;
- options on common stock or options on stock indexes. Options may not
represent more than 15% of the Fund's market value.
- Initial Public Offerings ("IPOs"). IPOs may not represent more than
15% of the Fund's market value.
The Series is a unique, non-diversified portfolio which is generally
focused on up to 60 stocks from three of the fastest growth industries in the
world: healthcare, telecommunications and technology. This all capitalization
portfolio incorporates the Adviser's focus on industry leading growth companies
in the science and technology industries. The Adviser believes demographic
trends and technological developments will continue to generate strong,
sustainable growth rates and high returns on invested capital for the leading
companies.
Investments are spread across the science and technology industries in
varying weights while balancing risk by investing in a mix of large and small
capitalization stocks. The Adviser believes that over the long-term, companies
that experience a higher growth in earnings and cash flow per share will achieve
higher investment returns. By applying valuation disciplines, the Adviser
believes that superior long-term investment returns can be achieved at an
acceptable level of risk.
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The Adviser uses a bottom-up approach to investing. This investment
approach searches for potential investment opportunities in individual companies
by researching a company's financial statements, underlying industry trends,
competitive dynamics and other relevant information. The process also involves
extensive company visits, interviews with customers and suppliers and attending
industry symposiums. The Adviser uses a bottom-up approach to not only identify
new investment opportunities but also to evaluate existing investments on an
ongoing basis to determine continued suitability.
The Adviser selects stocks it believes exhibit sustainable growth and
expanding returns on invested capital. Through research and its understanding of
business fundamentals, the Adviser seeks to identify companies with sound
economic business models, reputable managements, strong competitive positions,
and the ability to grow their businesses in a variety of economic environments.
Additionally, all investments undergo a valuation analysis to estimate their
risk/reward characteristics.
The Adviser's research analyst team surveys a broad universe of over 2,000
companies to identify potential research candidates. Companies are screened for
several metrics including but not limited to revenue and earnings growth, debt
leverage, operating margin characteristics, cash flow generation, and return on
invested capital. Companies which pass the screens are subject to more thorough
research to evaluate their investment suitability.
Final investment candidates are evaluated and approved by the Adviser's
investment committee based on individual investment merits, and within the
context of the Series' overall portfolio characteristics and diversification
guidelines. The Series may invest in up to 100 stocks. The Series may not invest
in more than 10% of the outstanding shares of a company.
The SOCIALLY RESPONSIBLE SERIES, under normal market conditions, may invest
100% of its total assets in the following equity (or equity-related) securities:
- common stocks of corporations that are judged by the adviser to have
strong growth characteristics;
- securities convertible into the common stock of corporations described
above;
- American Depository Receipts ("ADRs"), which are negotiable
certificates held in a U.S. bank representing a specific number of
shares of a foreign stock traded on a U.S. stock exchange. ADRs make
it easier for Americans to invest in foreign companies, due to the
widespread availability of dollar-denominated price information, lower
transaction costs, and timely dividend distributions. An American
Depository Share or ADS is the share issued under an American
Depositary Receipt agreement which is actually traded;
- options on common stock or options on stock indexes.
The Adviser looks for high quality, sustainable growth stocks while paying
careful attention to valuation. Research is bottom-up, emphasizing business
fundamentals, including financial statement analysis and industry and competitor
evaluations. The Adviser selects stocks it believes exhibit consistent,
above-average earnings growth, industry leadership, attractive risk/reward
characteristics and meet the CEEDs-TM- social criteria. These
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companies are expected to generate consistent earnings growth in a variety of
economic environments.
The Adviser also seeks to provide a greater margin of safety and stability
in its investments. Rapid earnings growth is expected to translate ultimately
into superior total returns. Additionally, several valuation tools are used to
avoid over-paying for growth stocks. Over time, the Adviser believes these
favorable characteristics will produce better returns with less risk than many
other growth styles.
The Adviser's research team analyzes a broad universe of over 2,000
companies. Industry specialists search for high-quality companies that are
growing their earnings at roughly double the market's average. Approximately 150
stocks pass these initial screens and are subject to thorough research. Dominant
market share, strong financials, the power to price, significant free cash flow
and shareholder-oriented management are critical attributes or factors.
After applying the fundamental investment analysis, the research process
for the Series also includes proactive screens, exclusionary screens, and proxy
voting, with emphasis placed on the community, environment, employees, and
diversity (CEEDs-TM-). These screens permit identification of the companies that
are not only making a positive contribution to the community, environment, and
employees, but are also creating policies for superior long-term shareholder
returns. The Series excludes companies, based on data available to the Adviser,
whose primary business is the production of alcoholic beverages, the production
of tobacco products, gaming or lottery, weapons related contracting, or nuclear
power.
Final purchase candidates are selected by the Adviser's investment
committee based on attractive risk/reward characteristics, social criteria and
diversification guidelines. Certain industries may be over or under-weighted by
the adviser based upon favorable growth rates or valuation parameters.
The Adviser generally sells stocks when the risk/reward characteristics of
a stock turn negative, company fundamentals deteriorate, the stock underperforms
the market or its peer group or the company violates the social criteria.
The Fund's investments will emphasize large cap growth stocks (generally $5
billion or more of market capitalization at the time of purchase), but also may
include small to medium cap stocks (between $1 billion and 5 billion in total
market capitalization) and special situations (expected stable return, favorable
risk/reward characteristics, typically involving corporate restructuring). The
Fund may also use derivative securities from time to time in order to manage
cash flows in and out of the Fund while remaining fully invested.
The INTERNATIONAL MULTI-MANAGER SERIES invests, at all times, at least 85%
of its total assets in the following equity (or related) securities:
- common stocks of foreign issuers;
- preferred stocks and/or debt securities that are convertible
securities of such foreign issuers; and
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- open or closed-end investment companies (mutual funds) that invest
primarily in the equity securities of issuers in countries where it is
impossible or impractical to invest directly.
The International Multi-Manager Series is a diversified portfolio of equity
securities (including convertible securities) of issuers which (1) are organized
under the laws of a non-U.S. country, or (2) derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed in a non-U.S. country or hast at least 50% of its assets situated in a
non-U.S. country. The Series may use forward currency contracts, options,
futures contracts and options on futures contracts to attempt to hedge actual or
anticipated investment security positions. Three sub-advisers, Clemente Capital,
Inc., Invista Capital Management LLC, and Scudder Kemper Investments, Inc.,
manage the assets of the Series. The adviser allocates the Series' assets among
each sub-adviser in roughly equal portions and then allows each sub-adviser to
use its own investment approach and strategy to achieve the Series' objective.
Clemente's investment approach begins with a global outlook, identifying
the major forces (i.e., political events, social developments, trade and capital
flows) affecting the global environment and then identifying the themes (i.e.,
corporate restructuring, infrastructure spending, consumer's coming of age) that
are responding to the major forces. The third step is to decide which countries
or sectors will benefit from these themes and then seek companies with favorable
growth characteristics in those countries or sectors. The next steps are to
research and identify specific holdings and ongoing monitoring and evaluation of
the Series. Series holdings are sold when shares reach the target price, the
fundamentals of a company have deteriorated or when new companies with superior
growth and valuation characteristics have been identified.
Invista's investment approach focuses on identifying opportunities through
a fundamentally sound, economic value driven process applied evenly across all
international markets. Candidates for purchase are companies whose current price
is substantially below investment value as determined by Invista's estimate of
future free cash flows. Once this evaluation process is applied, purchases are
made among those companies that provide optimal combinations of valuation,
growth and risk. Series holdings are sold when the relative attractiveness of a
security is not as great as additions proposed by a member of the investment
team.
Scudder Kemper's investment approach involves a top-down/bottom-up approach
with a focus on fundamental research. Investment ideas are generated by regional
analysts, global industry analysts and portfolio managers through the
integration of three analytical disciplines; global themes (identification of
sectors and industries likely to gain or lose during specific phases of a
theme's cycle); country analysis (quantitative assessment of each country's
fundamental and political characteristics combined with an objective,
quantitative analysis of market and economic data); and company analysis
(identification of company opportunities by searching for unique attributes such
as franchise or monopoly, above average growth potential, innovation or
scarcity). Series holdings are sold when the analysts indicate that the
underlying fundamentals are no longer strong.
The Series utilizes this multiple sub-adviser arrangement to reduce
volatility through multiple investment approaches, a strategy used by many
institutional investors. For example, a particular investment approach used by a
sub-adviser may be successful in a bear (falling) market, while another
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investment approach used by a different sub-adviser may be more successful in a
bull (rising) market. The multiple investment approach is designed to soften the
impact of a single sub-adviser's performance in a market cycle during which that
sub-adviser's investment approach is less successful. Because each sub-adviser
has different investment approaches, the performance of one or more of the
sub-advisers is expected to offset the impact of any other sub-adviser's poor
performance, regardless of the market cycle. Unfortunately, this also works the
opposite way. The successful performance of a sub-adviser will be diminished by
the less successful performances of the other sub-advisers. There can be no
guarantee that the expected advantages of the multiple adviser technique will be
achieved.
In the Series' efforts to achieve its investment objective, it seeks to
outperform the Morgan Stanley Capital International Europe, Australasia & Far
East ("EAFE") Index (assuming a similar investment in the securities comprising
this index would reinvest dividends and capital gains distributions). The EAFE
Index is an unmanaged index comprised of the stocks of approximately 1100
companies, screened for liquidity, cross ownership and industry representation
and listed on major stock exchanges in Europe, Australasia and the Far East.
THE VALUE SERIES: The Large Cap Value, Mid Cap Value and Small Cap
Value Series seek to invest in stocks that are less expensive than comparable
companies, as determined by price/earnings ratios, cash flows or other measures.
Value investing therefore may reduce risk while offering potential for capital
appreciation as a stock gains favor among other investors and its price rises.
The Series are managed using investment ideas that the adviser has used
for over twenty-five years. The Series' adviser relies on selecting individual
stocks and does not try to predict when the stock market might rise or fall. It
seeks out those stocks that are undervalued and, in some cases, neglected by
financial analysts. The adviser evaluates the degree of analyst recognition by
monitoring the number of analysts who follow the company and recommend its
purchase or sale to investors.
The adviser starts by identifying early change in a company's
operations, finances or management. The adviser is attracted to companies which
will look different tomorrow - operationally, financially, managerially - when
compared to yesterday. This type of dynamic change often creates confusion and
misunderstandings and may lead to a drop in the company's stock price. Examples
of change include mergers, acquisitions, divestitures, restructuring, change of
management, new market/product/means of production/distribution, regulatory
change, etc. Once change is identified, the adviser evaluates the company on
several levels. It analyzes:
- Financial models based principally upon projected cash flows
- The price of the company's stock in the context of what the
market is willing to pay for stock of comparable companies and
what a strategic buyer would pay for the whole company
- The extent of management's ownership interest in the company
- The company's market by corroborating its observations and
assumptions by meeting with management, customers and suppliers
The adviser also evaluates the degree of recognition of the business by
the investors by monitoring the number of sell side analysts who closely follow
the company and the nature of the shareholder base. Before deciding to purchase
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a stock, the adviser conducts an extensive amount of business due diligence to
corroborate its observations and assumptions.
The identification of change comes from a variety of sources including
the private capital network which the adviser has established among its clients,
historical investments and intermediaries. The adviser also makes extensive use
of clipping services and regional brokers and bankers to identify elements of
change.
The investment professionals regularly meet companies around the
country and sponsor more than 200 company/management meetings in its New York
office.
By reviewing historical relationships and understanding the
characteristics of a business, the adviser establishes valuation parameters
using relative ratios or target prices. In its overall assessment, the adviser
seeks stocks that it believes have a greater upside potential than downside risk
over an 18 to 24-month holding period.
An important function of the adviser is to set a price target, that is,
the price at which the stock will be sold when there has been no fundamental
change in the investment case. The adviser constantly monitors the companies
held by the Series to determine if there have been any fundamental changes in
the reasons that prompted the initial purchase of the stock. If significant
changes for the better have not materialized, the stock will be sold. The
initial investment case for stock purchase, which has been documented, is
examined by the adviser's investment professionals. A final decision on selling
the stock is made after all such factors are analyzed.
The LARGE CAP VALUE SERIES invests, under normal conditions, at least
65% of its total assets in the following equity (or related) securities:
- common stocks of U.S. corporations that are judged by the adviser
to be undervalued in the marketplace relative to underlying
profitability and have a market capitalization of $10 billion or
higher at the time of purchase;
- options on, or securities convertible (such as convertible
preferred stock and convertible bonds) into, the common stock of
U.S. corporations described above;
- options on indexes of the common stock of U.S. corporations
described above;
- contracts for either the future delivery, or payment in respect
of the future market value, of certain indexes of the common
stock of U.S. corporations described above, and options upon such
futures contracts; and
- without limit in commercial paper and other money market
instruments rated in one of the two highest rating categories by
a nationally recognized statistical rating organization
("NRSRO"), in response to adverse market conditions, as a
temporary defensive position. The result of this action may be
that the Series will be unable to achieve its investment
objective.
The Large Cap Value Series is a diversified portfolio of large cap U.S.
equity (or related) securities that are deemed by the adviser to be undervalued
as compared to the company's profitability potential.
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The MID CAP VALUE SERIES invests, under normal conditions, at least 65%
of its total assets in the following equity (or related) securities:
- common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization between
$1 and $10 billion at the time of purchase;
- securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
- warrants; and
- without limit in commercial paper and other money market
instruments rated in one of the two highest rating categories by a
NRSRO, in response to adverse market conditions, as a temporary
defensive position. The result of this action may be that the
Series will be unable to achieve its investment objective.
The Mid Cap Value Series is a diversified portfolio of medium cap U.S.
equity (or related) securities that are deemed by the adviser to be undervalued
as compared to the company's profitability potential.
The SMALL CAP VALUE SERIES invests, under normal conditions, at least
65% of its total assets in the following equity (or related) securities:
- common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization of $1
billion or less at the time of purchase;
- securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
- warrants; and
- without limit in commercial paper and other money market
instruments rated in one of the two highest rating categories by a
NRSRO, in response to adverse market conditions, as a temporary
defensive position. The result of this action may be that the
Series will be unable to achieve its investment objective.
The Small Cap Value Series is a diversified portfolio of large cap U.S.
equity (or related) securities that are deemed by the adviser to be undervalued
as compared to the company's profitability potential.
ALL EQUITY SERIES. The frequency of portfolio transactions and a
Series' turnover rate will vary from year to year depending on the market.
Increased turnover rates incur the cost of additional brokerage commissions and
may cause recognition of greater capital gains. Series turnover rate is normally
expected to be less than 100% for each of the Series.
Each Series also may use other strategies and engage in other
investment practices, which are described in detail in Part B.
FIXED INCOME SERIES
The SHORT/INTERMEDIATE BOND SERIES:
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- will invest at least 85% of its total assets in various types of
investment grade fixed income securities;
- may invest up to 10% of its total assets in investment grade
fixed income securities of foreign issuers;
- will, as a matter of fundamental policy, maintain a
short-to-intermediate average duration (2 1/2 to 4 years); and
- the average dollar-weighted duration of securities held by the
Short/Intermediate Bond Series will normally fall within a range
of 2 1/2 to 4 years.
The INTERMEDIATE BOND SERIES:
- will invest at least 85% of its total assets in various types of
investment grade fixed income securities;
- may invest up to 10% of its total assets in investment grade
fixed income securities of foreign issuers;
- will, as a matter of fundamental policy, maintain an intermediate
average duration (4 to 7 years); and
- the average dollar-weighted duration of securities held by the
Intermediate Bond Series will normally fall within a range of 4
to 7 years.
The MUNICIPAL BOND SERIES:
- will, as a fundamental policy, invest substantially all (at least
80%) of its net assets in a diversified portfolio of municipal
securities that provide interest that is exempt from federal
income tax;
- may invest up to 20% of its net assets in other types of fixed
income securities that provide income that is subject to federal
tax; and
- will, as a matter of fundamental policy, maintain an intermediate
average duration (4 to 8 years); and
- the average dollar-weighted duration of securities held by the
Municipal Bond Series will normally fall within a range of 4 to 8
years.
The Municipal Bond Series may not invest more than 25% of its total
assets in any one industry. Governmental issuers of municipal securities are not
considered part of any industry. The 25% limitation applies to municipal
securities backed by the assets and revenues of non-governmental users, such as
private operators of educational, hospital or housing facilities. However, the
investment adviser may decide that the yields available from concentrating in
obligations of a particular market sector or political subdivision justify the
risk that the performance of the Municipal Bond Series may be adversely affected
by such concentration. Under such market conditions, the Municipal Bond Series
may invest more than 25% of its assets in sectors of the municipal securities
market, such as health care or housing, or in securities relating to one
political subdivision, such as a given state or U.S. territory. Under these
conditions, the Municipal Bond Series' vulnerability to any special risks that
affects that sector or jurisdiction could have an adverse impact on the value of
an investment in the Series. There are no limitations on the Municipal Bond
Series' investment in any one of the three general categories of municipal
obligations: general obligation bonds, revenue (or special) obligation bonds and
private activity bonds.
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SERIES COMPOSITION. The composition of each Series' holdings varies,
depending upon the investment adviser's analysis of the fixed income markets,
the municipal securities market and the expected trends in those markets. The
securities purchased by a Series may be purchased based upon their yield, the
income earned by the security, or their potential capital appreciation, the
potential increase in the security's value, or both. The investment adviser
seeks to protect the Series' principal value by reducing fluctuations in value
relative to those that may be experienced by fixed income funds with a longer
average duration. This strategy may reduce the level of income attained by the
Series. There is no guarantee that principal value can be protected during
periods of extreme interest volatility.
The Series invest only in securities that are rated, at the time of
purchase, in the top four categories by a rating agency such as Moody's
Investors Service, Inc. or Standard & Poor's. If the securities are not rated,
then the adviser must determine that they are of comparable quality.
Each Series also may use other strategies and engage in other
investment practices, which are described in detail in Part B. The investments
and strategies listed above and described throughout this prospectus are those
that are used under normal market conditions.
MONEY MARKET SERIES
The PRIME MONEY MARKET SERIES invests in:
- U.S. dollar-denominated obligations of major U.S. and foreign
banks and their branches located outside of the United States, of
U.S. branches of foreign banks, of foreign branches of foreign
banks, of U.S. agencies of foreign banks and wholly-owned banking
subsidiaries of foreign banks;
- high quality commercial paper and corporate obligations;
- U.S. Government obligations;
- high quality municipal securities; and
- repurchase agreements that are fully collateralized by U.S.
Government obligations.
U.S. Government obligations are debt securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
The U.S. GOVERNMENT SERIES invests at least 65% of its total assets in:
- U.S. Government obligations; and
- repurchase agreements that are fully collateralized by such
obligations.
The PREMIER MONEY MARKET SERIES invests in:
- U.S. dollar-denomination obligations of major U.S. and foreign
banks and their branches located outside of the United States, of
U.S. branches of foreign banks, of foreign branches of foreign
banks, of U.S. agencies of foreign banks and wholly-owned banking
subsidiaries of foreign banks;
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- commercial paper rated, at the time of purchase, in the highest
category of short-term debt ratings of any two nationally
recognized statistical rating organizations ("NRSRO");
- corporate obligations having a remaining maturity of 397 calendar
days or less, issued by corporations having outstanding
comparable obligations that are (a) rated in the two highest
categories of any two NRSROs or (b) rated no lower than the two
highest long-term debt ratings categories by any NRSRO.
- U.S. Government obligations;
- high quality municipal securities; and
- repurchase agreements that are fully collateralized by U.S.
Government obligations.
The TAX-EXEMPT SERIES invests in:
- high quality municipal obligations and municipal bonds;
- floating and variable rate obligations;
- participation interests;
- high quality tax-exempt commercial paper; and
- high quality short-term municipal notes.
The Tax-Exempt Series has adopted a policy that, under normal
circumstances, at least 80% of its annual income will be exempt from federal
income tax. Additionally, at least 80% of its annual income will not be a tax
preference item for purposes of the federal alternative minimum tax.
High quality securities include those that (1) are rated in one of the
two highest short-term rating categories by two NRSROs, such as S&P, Moody's and
Fitch IBCA (or by one NRSRO if only one NRSRO has issued a rating) or; (2) if
unrated are issued by an issuer with comparable outstanding debt that is rated
or are otherwise unrated and determined by the investment adviser to be of
comparable quality.
Each Series also may invest in other securities, use other strategies
and engage in other investment practices, which are described in detail in Part
B.
(c) RISKS. The following is a list of certain risks that may apply to an
investment in a Series, unless otherwise indicated. Further information about
investment risks is available in Part B:
- CREDIT RISK: The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become
unable to honor a financial obligation. (All Fixed Income and
Money Market Series)
- CURRENCY RISK: The risk related to investments denominated in
foreign currencies. Foreign securities are usually denominated in
foreign currency therefore changes in foreign currency exchange
rates can affect the net asset value of the International
Multi-Manager Series. (International Multi-Manager Series)
- DERIVATIVES RISK: Some of the WT Equity Series' investments may
be referred to as "derivatives" because their value depends on,
or derives from, the value of an underlying asset, reference rate
or index. These investments include options, futures contracts
and similar investments that may be used in hedging and related
income strategies. The market value of derivative instruments and
securities
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is sometimes more volatile than that of other investments, and
each type of derivative may pose its own special risks. As a
fundamental policy, no more than 15% of an Equity Series' total
assets may at any time be committed or exposed to derivative
strategies. (Equity Series)
- FOREIGN SECURITY RISK: The risk of losses due to political,
regulatory, economic, social or other uncontrollable forces in a
foreign country not normally associated with investing in the
U.S. markets. (International Multi-Manager Series, the Large Cap
Core Series, Short/Intermediate Bond Series, Intermediate Bond
Series, Mid Cap Series, Socially Responsible Series, Science and
Technology Series, and all Money Market Series)
- GROWTH-ORIENTED INVESTING RISK: The risk that an investment in a
growth-oriented portfolio, which invests in growth-oriented
companies, will be more volatile than the rest of the U.S. market
as a whole. (Large Cap Growth, WT Large Cap Growth, Large Cap
Core, Small Cap Core, Mid Cap, Science and Technology and
Socially Responsible Series)
- INDUSTRY RISK: The Science and Technology Series will concentrate
on investments in the healthcare, telecommunications and
technology industries. This Series' investments in companies
dependent on scientific and technological developments may be
more volatile because of certain risks associated with these
industries. Such risks include the short life cycles and
competitive pressures of many of the products or services of
theses companies, and the adverse impact of government
regulation.
- INTEREST RATE RISK: The risk of market losses attributable to
changes in interest rates. With fixed-rate securities, a rise in
interest rates typically causes a fall in values, while a fall in
rates typically causes a rise in values. The yield earned by a
Series will vary with changes in interest rates. (All Fixed
Income and Money Market Series)
- IPO RISK: The risk of investing in the initial public offerings
of shares is greater than investing in mature public companies.
In addition, since a Series may participate in IPOs, an
investment in an IPO may have a magnified impact on a Series'
returns, especially newly launched Series due to such Series'
small asset base. As a new Series' assets grow, it is probable
that the effect of investments in IPOs on that Series; total
returns will decline, which may reduce the Series' total returns.
(Science and Technology Series)
- LEVERAGE RISK: The risk associated with securities or practices
(such as when-issued and forward commitment transactions) that
multiply small market movements into larger changes in value.
(All Fixed Income Series)
- LIQUIDITY RISK: The risk that certain securities may be difficult
or impossible to sell at the time and the price that the seller
would like. (All Fixed Income Series)
- MARKET RISK: The risk that the market value of a security may
move up and down, sometimes rapidly and unpredictably. (All
Series)
- NON-DIVERSIFICATION RISK: The susceptibility of the Science and
Technology Series to the risks associated with the particular
industries in which it may invest most of its assets. Such risks
include unsuccessful product or services and adverse impact by
government regulation.
- OPPORTUNITY RISK: The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it
are tied up in less advantageous investments. (All Equity and
Fixed Income Series)
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- PREPAYMENT RISK: The risk that a debt security may be paid off
and proceeds invested earlier than anticipated. Depending on
market conditions, the new investments may or may not carry the
same interest rate. (All Fixed Income and Money Market Series)
- SMALL/MID CAP RISK: Small cap companies may be more vulnerable
than larger companies to adverse business or economic
developments. Small cap companies may also have limited product
lines, markets or financial resources, may be dependent on
relatively small or inexperienced management groups and may
operate in industries characterized by rapid technological
obsolescence. Securities of such companies may be less liquid and
more volatile than securities of larger companies and therefore
may involve greater risk than investing in larger companies.
(Small Cap Core, Mid Cap Value, Small Cap Value, Mid Cap and
Science and Technology Series)
- VALUATION RISK: The risk that a Series has valued certain of its
securities at a higher price than it can sell them. (All Equity
and Fixed Income Series)
- VALUE INVESTING RISK: The risk that a portfolio's investment in
companies whose securities are believed to be undervalued,
relative to their underlying profitability, do not appreciate in
value as anticipated. (Large Cap Value, Mid Cap Value, Small Cap
Value and Small Cap Core Series)
ITEM 6. MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE.
(a) MANAGEMENT. The Board of Trustees for each Series supervises the
management, activities and affairs of the Series and has approved contracts with
various financial organizations to provide, among other services, the day-to-day
management required by a Series and its shareholders.
(a) (1) INVESTMENT ADVISERS AND SUB-ADVISERS.
WILMINGTON TRUST COMPANY ("WTC"), the investment adviser for the Large
Cap Core Series, Small Cap Core Series, International Multi-Manager Series,
Short/Intermediate Bond Series, Intermediate Bond Series and Municipal Bond
Series, is located at 1100 North Market Street, Wilmington, Delaware 19890. WTC
is a wholly owned subsidiary of Wilmington Trust Corporation, which is a
publicly held bank holding company. WTC, subject to the supervision of the Board
of Trustees, directs the investments of these Series in accordance with their
respective investment objectives, policies and limitations. For the
International Multi-Manager Series, WTC allocates the Series' assets equally
among the sub-advisers and then oversees their investment activities. In
addition to serving as investment adviser for the Series, WTC is engaged in a
variety of investment advisory activities, including the management of other
mutual funds and collective investment vehicles.
Under an advisory agreement, the Large Cap Core Series pays a monthly
advisory fee to WTC at the annual rate of 0.70% of the Series' first $1 billion
of average daily net assets; 0.65% of the Series' next $1 billion of average
daily net assets; and 0.60% of the Series' average daily net assets over $2
billion. The Small Cap Core Series pays WTC a monthly advisory fee at the annual
rate of 0.60% of the Series' first $1 billion of average daily net assets; 0.55%
of the Series' next $1 billion of average daily net assets; and 0.50% of the
Series' average daily net assets over $2 billion. The International
Multi-Manager Series pays WTC a monthly advisory fee at the annual rate of 0.65%
of the Series' average daily net assets. For the twelve
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months ended June 30, 2000, WTC received the following fees (after fee waivers),
as a percentage of each Series' average daily net assets:
<TABLE>
<S> <C>
Large Cap Core Series 0.70%
Small Cap Core Series 0.60%
International Multi-Manager Series 0.65%
</TABLE>
Prior to November 1, 2000, WTC served as investment adviser to the
Large Cap Growth Series and WT Large Cap Growth Series for which WTC received
0.55% of average daily net assets of each of the Large Cap Growth and WT Large
Cap Growth Series. Under an advisory agreement, each of Short/Intermediate Bond
Series, Intermediate Bond Series and Municipal Bond Series pays a monthly fee to
WTC at the annual rate of 0.35% of the Series' first $1 billion of average daily
net assets; 0.30% of the Series' next $1 billion of average daily net assets;
and 0.25% of the Series' average daily net assets over $2 billion. For the
twelve months ended June 30, 2000, WTC received the following advisory fees
(after fee waivers) as a percentage of each Series' average daily net assets for
investment advisory services:
<TABLE>
<S> <C>
Short/Intermediate Bond Series 0.35%
Intermediate Bond Series 0.35%
Municipal Bond Series 0.35%
</TABLE>
CRAMER ROSENTHAL MCGLYNN, LLC, 707 Westchester Avenue, White Plains,
New York 10604, serves as the investment adviser to the Large Cap Value Series,
the Mid Cap Value Series and the Small Cap Value Series. Subject to the
supervision of the Board of Trustees, CRM makes investment decisions for these
Series. CRM and its predecessors have managed investments in small and medium
capitalization companies for more than twenty-five years. As of September 30,
2000, CRM had over $3 billion of assets under management.
Under the advisory agreement, the Large Cap Value Series pays a monthly
advisory fee to CRM at the annual rate of 0.55% of its first $1 billion of
average daily net assets; 0.50% of the Series' next $1 billion of average daily
net assets; and 0.45% of the Series' average daily net assets over $2 billion.
The Mid Cap Value Series and the Small Cap Value Series each pay CRM a monthly
advisory fee of 0.75% of the Series' first $1 billion of average daily net
assets; 0.70% of the Series' next $1 billion of average daily net assets; and
0.65% of the Series' average daily net assets over $2 billion. For the twelve
months ended June 30, 2000, CRM received the following fees (after waivers) as a
percentage of the Series' average daily net assets.
<TABLE>
<S> <C>
Large Cap Value Series 0.55%
Mid Cap Value Series 0.75%
Small Cap Value Series 0.75%
</TABLE>
ROXBURY CAPITAL MANAGEMENT, LLC, 100 Wilshire Boulevard, Suite 600,
Santa Monica, California 90401, serves as the investment adviser for the Large
Cap Growth Series, WT Large Cap Growth Series, Mid Cap Series, Science and
Technology Series and Socially Responsible Series. Roxbury is engaged in a
variety of investment advisory activities, including the management of separate
accounts and, as of September 30, 2000, had assets under management of
approximately $7.5 billion.
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<PAGE>
Pursuant to an investment advisory agreement with Roxbury, Large Cap
Growth Series and WT Large Cap Growth Series each pay a monthly advisory fee to
Roxbury at the annual rate of 0.55% of the Series' first $1 billion of average
daily net assets; 0.50% of the Series next $1 billion of average daily net
assets; and 0.45% of the Series' average daily net assets. Roxbury also receive
a monthly advisory fee from the Mid Cap Series and Socially Responsible Series
at the annul rate of 0.75% of each Series' first $1 billion of average daily net
assets; 0.70% of each Series' next $1 billion of average daily net assets; and
0.65% of each Series' average daily net assets over $2 billion. Pursuant to the
same investment advisory agreement, the Science and Technology Series pays
Roxbury a monthly advisory fee at the annual rate of 1.00% of the Series' first
$1 billion of average daily net assets; 0.95% of the Series' next $1 billion of
average daily net assets; and 0.90% of the Series' average daily net assets over
$2 billion.
For the twelve months ended June 30, 2000, Roxbury received the
following fees as a percentage of the Series averaged daily net assets:
<TABLE>
<S> <C>
Large Cap Growth Series 0.55%
WT Large Cap Growth Series 0.55%
</TABLE>
RODNEY SQUARE MANAGEMENT CORPORATION ("RSMC"), the investment adviser
of Prime Money Market Series, U.S. Government Series, Premier Money Market
Series and Tax-Exempt Series, is located at 1100 North Market Street,
Wilmington, Delaware 19890. RSMC is a wholly owned subsidiary of Wilmington
Trust Company, which is wholly owned by Wilmington Trust Corporation. RSMC also
provides asset management services to collective investment funds maintained by
WTC. In the past, RSMC has provided asset management services to individuals,
personal trusts, municipalities, corporations and other organizations.
Each of the U.S. Government Series, the Prime Money Market Series, and
the Tax-Exempt Series pays a monthly fee to RSMC at the annual rate of 0.47% of
the Series' first $1 billion of average daily net assets; 0.43% of the Series'
next $500 million of average daily net assets; 0.40% of the Series' next $500
million of average daily net assets; and 0.37% of the Series' average daily net
assets in excess of $2 billion, as determined at the close of business on each
day throughout the month. The Premier Money Market Series pays a monthly fee to
RSMC at the annual rate of 0.20%. Out of its fees, RSMC makes payments to PFPC
Inc. for the provision of administration, accounting and transfer agency
services and to PFPC Trust Company for provision of custodial services.
For the twelve months ended June 30, 2000, the RSMC received the
following fees (after waivers) as a percentage of the Series' average daily net
assets.
<TABLE>
<S> <C>
Premier Money Market Series 0.14%
Prime Money Market Series 0.44%
U.S. Government Series 0.47%
Tax-Exempt Series 0.47%
</TABLE>
SUB-ADVISERS -- The International Multi-Manager Series has three
sub-advisers, Clemente Capital Inc., Invista Capital Management LLC and Scudder
Kemper Investments, Inc.
CLEMENTE, located at Carnegie Hall Tower, 152 West 57th Street, 25th
Floor, New York, New York 10019, registered as an investment adviser in 1979.
Clemente manages in excess of $500 million in assets. Leopoldo M. Clemente,
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<PAGE>
President and Chief Investment Officer serves as portfolio manager for the
portion of the International Multi-Manager Series' assets under Clemente's
management. Mr. Clemente has been responsible for portfolio management and
security selection for the past eight years.
INVISTA, located at 1800 Hub Tower, 699 Walnut Street, Des Moines, Iowa
50309, is a registered investment adviser organized in 1984. Invista is an
indirect, wholly owned subsidiary of Principal Mutual Life Insurance Company.
Invista manages in excess of $26 billion in assets, of which approximately $3.8
billion are in foreign equities in separately managed accounts and mutual funds
for public funds, corporations, endowments and foundations, insurance companies
and individuals. Scott D. Opsal, CFA, Executive Vice President and lead
portfolio manager of international equities for Invista, is the portfolio
manager for the portion of the International Multi-Manager Series under
Invista's management. Mr. Opsal joined Invista at its inception in 1985 and
assumed his current responsibilities in 1993. Before 1993, his responsibilities
included security analysis and portfolio management activities for various U.S.
equity portfolios, managing the firm's convertible securities and overseeing
Invista's index fund and derivatives positions. Kurtis D. Spieler, CFA, Vice
President and manager of the firm's dedicated emerging market portfolios, is Mr.
Opsal's backup. Mr. Spieler has been Invista's emerging markets portfolio
manager since joining Invista in 1995.
SCUDDER KEMPER, located at 345 Park Avenue, New York, New York 10154,
was founded as America's first independent investment counselor and has served
as investment adviser, administrator and distributor of mutual funds since 1928.
Scudder Kemper manages in excess of $200 billion in assets, with approximately
$30 billion of those assets in foreign investments in separately managed
accounts for pension funds, foundations, educational institutions and government
entities and in open-end and closed-end investment companies. Irene T. Cheng
serves as the lead portfolio manager for the portion of the International
Multi-Manager Series' assets under Scudder Kemper's management. Ms. Cheng has
been in the asset management business for over nine years and joined Scudder
Kemper as a portfolio manager in 1993.
(a) (2) PORTFOLIO MANAGERS.
E. MATTHEW BROWN, Vice President, leads a "growth" team and is
responsible for the day-to-day management of the Large Cap Core Series and Small
Cap Core Series. Mr. Brown joined WTC in October of 1996. Prior to joining WTC,
he served as Chief Investment Officer of PNC Bank, Delaware, from 1993 through
1996. Mr. Brown also is responsible for co-management of the Small Cap Core
Series.
RAFAEL E. TAMARGO, Vice President, Director of Equity Research, is
responsible for the day-to-day management of the Large Cap Core Series. Mr.
Tamargo joined WTC in 1996 as an equities analyst. Prior to joining WTC, Mr.
Tamargo was employed by U.S. Trust as an Equities Analyst.
THOMAS P. NEALE, CFA, Vice President, Equity Research Division, is a
member of the "growth" team and is responsible for the co-management of the
Small Cap Core Series. Mr. Neale joined Wilmington Trust in 1986 as an
Institutional Multi-Manager Portfolio Manager. Currently he specializes in
managing taxable accounts for Delaware holding companies and has equity research
responsibilities following the insurance and brokerage industries.
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<PAGE>
ROBERT J. CHRISTIAN, Chief Investment Officer of WTC, or his delegate,
is primarily responsible for monitoring the day-to-day investment activities of
the sub-advisers to the International Multi-Manager Series. Mr. Christian has
been a Director of Wilmington Management Corporation since February 1996, and
was Chairman and Director of PNC Equity Advisors Company, and President and
Chief Investment Officer of PNC Asset Management Group, Inc. from 1994 to 1996.
He was Chief Investment Officer of PNC Bank, N.A. from 1992 to 1996 and Director
of Provident Capital Management from 1993 to 1996.
The day-to-day management of the Large Cap Value Series, the Mid Cap
Value Series and the Small Cap Value Series is shared by a team of individuals
employed by the CRM. Ronald H. McGlynn and Jay B. Abramson are responsible for
the overall management of these Series. In addition, Michael A. Prober is part
of the team responsible for the management of Mid Cap Value Series; Scott L.
Scher and Christopher Fox are part of the team responsible for the management of
Small Cap Value Series; and Kevin M. Chin and Adam L. Starr are part of the team
responsible for the management of the Large Cap Value Series. Each portfolio
manager's business experience and educational background is as follows:
RONALD H. MCGLYNN President and Chief Executive Officer since 1983 and
Co-Chief Investment Officer of CRM. He has been with CRM for twenty-five years
and is responsible for investment policy, portfolio management and investment
research.
JAY B. ABRAMSON, CPA Executive Vice President since 1989 and Director
of Research and Co-Chief Investment Officer of CRM. He has been with CRM for
twelve years and is responsible for investment research and portfolio
management. Mr. Abramson received a B.S.E. and J.D. from the University of
Pennsylvania Wharton School and Law School, respectively, and is a Certified
Public Accountant.
MICHAEL A. PROBER Vice President of CRM since 1993 where he is
responsible for investment research. Prior to joining CRM in 1993, he worked in
corporate finance and commercial banking at Chase Manhattan Bank and as a
Research Analyst for Alpha Capital Venture Partners. Mr. Prober received a
B.B.A. from the University of Michigan and an M.M. from the Northwestern
University J.L. Kellogg Graduate School of Management.
SCOTT L. SCHER, CFA Vice President of CRM since 1995 where he is
responsible for investment research. Prior to joining CRM in 1995, he worked as
an analyst/portfolio manager at The Prudential from 1988. Mr. Scher received a
B.A. from Harvard College, a M.B.A. from Columbia Business School and is a
Chartered Financial Analyst.
KEVIN M. CHIN is a Vice President at Cramer Rosenthal McGlynn, LLC.
Kevin joined CRM in 1989. He is responsible for investment research. Formerly,
Kevin was a Financial Analyst for the Mergers and Acquisitions Department of
Morgan Stanley and a risk arbitraguer with The First Boston Corporation. He
received a BS from Columbia University School of Engineering and Applied
Science.
CHRISTOPHER S. FOX, CFA joined CRM in 1999 as a Vice President and has
over fifteen years experience in the Investment business. In 1995 Chris
co-founded Schaenen Fox Capital Management, LLC, a hedged fund with small cap
value investments. He previously was at Schaenen Wood & Associates, Inc. as Vice
President and Senior Manager/Analyst; Chemical Bank's Private Banking
22
<PAGE>
Division as a portfolio manager and analyst; and Drexel Burnham Lambert,
Inc. as a financial analyst.
ADAM L. STARR joined CRM in 1999 as a Vice President and is responsible
for investment research. Prior to CRM, he was a Partner and Portfolio Manager at
Weiss, Peck & Greer, LLC. Previously, he was an Analyst and Portfolio Manager at
Charter Oak Partners and First Manhattan Company. Adam earned an MBA from
Columbia University. The day-to-day management of the Large Cap Growth Series is
the responsibility of Roxbury's Investment Committee. The Investment Committee
meets regularly to make investment decisions for the Series and relies on
Roxbury's research team.
TERRY LALLY, CFA, joined CRM in 2000 and is a Vice President at Cramer
Rosenthal McGlynn, LLC. He is responsible for investment research. Prior to
joining CRM, Terry spent 9 years working at The Prudential in US small cap and
emerging market equity analysis, corporate finance, and equity trading. Terry
earned a BBA from the University of Notre Dame, an MBA from Harvard University,
and is a Chartered Financial Analyst.
ERIC K. CHEUNG, Vice President and Manager of the Fixed Income
Management Division, Clayton M. Albright, III, Vice President of the Fixed
Income Management Division and Dominick J. D'Eramo, CFA, Vice President of the
Fixed Income Management Division, all of the Asset Management Department of WTC,
are primarily responsible for the day-to-day management of the
Short/Intermediate Bond Series and the Intermediate Bond Series. From 1978 until
1986, Mr. Cheung was the Portfolio Manager for fixed income assets of the
Meritor Financial Group. In 1986, Mr. Cheung joined WTC. In 1991, he became the
Division Manager for all fixed income products. Mr. Albright has been employed
at WTC since 1976. In 1987, he joined the Fixed Income Management Division and
since then has specialized in the management of intermediate and long-term fixed
income portfolios. Mr. D'Eramo began his career with WTC in 1986 as a fixed
income trader and was promoted to portfolio manager in 1990.
LISA MORE, Assistant Vice President of Credit Research and Municipal
Trading within the Fixed Income Management Divisions of Asset Management
Department of WTC is primarily responsible for the day-to-day management of the
Municipal Bond Series. Mrs. More has been employed at WTC since 1988. In 1990,
she joined the Fixed Income Division specializing in the management of municipal
income portfolios.
The day-to-day management of Mid Cap Series, Large Cap Growth Series,
Science and Technology Series, Socially Responsible Series and WT Large Cap
Growth Series is the responsibility of Roxbury's investment committee. The
investment committee meets regularly to make investment decisions for each of
these series and relies on Roxbury's research team.
(a) (3) LEGAL PROCEEDINGS. None.
(b) CAPITAL STOCK. Inapplicable.
ITEM 7. SHAREHOLDER INFORMATION.
(a) PRICING OF FUND SHARES.
(a) (1-2) The Equity and Fixed Income Series value their assets based on current
market values when such values are available. These prices normally are supplied
by a pricing service. Fixed income securities maturing within 60 days
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of the valuation date are valued at amortized cost. Any assets held by a Series
that are denominated in foreign currencies are valued daily in U.S. dollars at
the foreign currency exchange rates that are prevailing at the time that PFPC,
Inc. ("PFPC") determines the daily net asset value. To determine the value of
those securities, PFPC may use a pricing service that takes into account not
only developments related to specific securities, but also transactions in
comparable securities. Securities that do not have a readily available current
market value are valued in good faith under the direction of the Board of
Trustees.
PFPC determines the NAV per share of each Equity and Fixed Income
Series as of the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time), on each Business Day (a day that the
Exchange, the Transfer Agent and the Philadelphia branch of the Federal Reserve
Bank are open for business). The NAV is calculated by adding the value of all
securities and other assets in a Series, deducting its liabilities and dividing
the balance by the number of outstanding shares in that Series.
MONEY MARKET SERIES
Each Money Market Series uses its best effort to maintain its $1
constant share price and values its securities at cost. This involves valuing a
security initially at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of fluctuating interest rates
on the market value of the security. All cash, receivables and current payables
are carried at their face value. Other assets, if any, are valued at fair value
as determined in good faith by, or under the direction of, the Board of
Trustees.
PFPC determines the NAV per share of each Series as of 12:00 p.m.
Eastern time for the Tax-Exempt Series and as of 2:00 p.m. Eastern Time for the
U.S. Government Series, the Prime Money Market Series, and the Premier Money
Market Series, on each Business Day (a day that the New York Stock Exchange, the
Transfer Agent and the Philadelphia branch of the Federal Reserve Bank are open
for business). The NAV is calculated by adding the value of all securities and
other assets in a Series, deducting its liabilities and dividing the balance by
the number of outstanding shares in that Series.
(a) (3) Shares will not be priced on those days when the Series' offices are
closed. As of the date of this registration statement, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
(b) PURCHASE OF FUND SHARES. The Trust's shares have not been registered under
the Securities Act of 1933, which means that its shares may not be sold
publicly. However, the Trust may sell its shares through private placements
pursuant to available exemptions from registration under that Act. Shares of the
Trust may be sold only to: affiliates of WTC; subsidiaries of the parent company
of WTC; certain joint venture partners of affiliates of WTC; and other
institutional investors. Shares of the Series are sold at net asset value
without a sales charge. Shares are purchased at the net asset value next
determined after the Trust receives the order in proper form. All investments
are credited to the shareholder's account in the form of full and fractional
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shares of the Series calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will be issued only upon
written request.
The minimum initial investment in a Series is $1,000,000. There is no
minimum for subsequent investments.
The Trust distributes its own shares.
IN KIND PURCHASES. If accepted by the Trust, shares of each Series may
be purchased in exchange for securities which are eligible for acquisition by
such Series as described in this registration statement. Securities to be
exchanged which are accepted by the Trust and Trust shares to be issued
therefore will be valued, as set forth under "Pricing of Fund Shares" in Item
7(a), at the time of the next determination of net asset value after such
acceptance. All dividends, interest, subscription, or other rights pertaining to
such securities shall become the property of the Series whose shares are being
acquired and must be delivered to the Trust by the investor upon receipt from
the issuer.
The Trust will not accept securities in exchange for shares of a Series
unless: (1) current market quotations are readily available for such securities;
(2) the investor represents and agrees that all securities offered to be
exchanged are not subject to any restrictions upon their sale by the Series
under the Securities Act of 1933 or under the laws of the country in which the
principal market for such securities exists, or otherwise; (3) at the discretion
of the Series, the value of any such security (except U.S. Government
securities) being exchanged together with other securities of the same issuer
owned by the Series will not exceed 5% of the net assets of the Series
immediately after the transaction; and (4) the Series acquires the securities
for investment and not for resale. In addition, nearly all of the securities
accepted in an exchange must be, at the time of the exchange, eligible to be
included in the Series whose shares are issued. (See Item 4(b)) Investors
interested in such exchanges should contact the adviser.
(c) REDEMPTION OF FUND SHARES. As stated above in response to Item 7(b),
"Purchase of Fund Shares," the Trust's shares have not been registered under the
Securities Act of 1933, which means that its shares are restricted securities
which may not be sold unless registered or pursuant to an available exemption
from that Act.
Redemptions are processed on any day on which the specific Series is
open for business and are effected at the Series' net asset value next
determined after the Series receives a redemption request in good form.
Redemption payments in cash will ordinarily be made within seven days
after receipt of the redemption request in good form. However, the right of
redemption may be suspended or the date of payment postponed in accordance with
the 1940 Act. The amount received upon redemption may be more or less than the
amount paid for the shares depending upon the fluctuations in the market value
of the assets owned by the Series.
If the Board of Trustees determines that it would be detrimental to the
best interests of the remaining shareholders of any Series to make a particular
payment wholly or partly in cash, a Series may pay the redemption price in whole
or in part by a distribution of portfolio securities from the Series of the
shares being redeemed in lieu of cash in accordance with Rule 18f-1 under
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the 1940 Act. Investors may incur brokerage charges and other transaction costs
selling securities that were received in payment of redemptions.
Although the redemption payments will ordinarily be made within seven
days after receipt, payment to investors redeeming shares which were purchased
by check will not be made until the Trust can verify that the payments for the
purchase have been, or will be, collected, which may take up to fifteen days or
more. Investors may avoid this delay by submitting a certified check along with
the purchase order.
(d) DIVIDENDS AND DISTRIBUTIONS. It is not expected that any Series will make
cash or property distributions. Rather, each investor can redeem part or all of
its shares in a Series. As explained below in (e), each investor will be
required to report separately on its own U.S. federal income tax return its
distributive share (as determined in accordance with the governing instruments
of the Series) of a Series' income, gains, losses, deductions and credits. Each
investor will be required to report its distributive share regardless of whether
it has received a corresponding distribution of cash or property from a Series.
(e) TAX CONSEQUENCES. Each Series of the Trust is intended to be taxable as a
partnership for U.S. federal income tax purposes.
The Series are series of a trust organized under Delaware law. The
Series will not be subject to any U.S. federal income tax. Instead, each
investor will be required to report separately on its own U.S. federal income
tax return its distributive share (as determined in accordance with the
governing instruments of the Series) of a Series' income, gains, losses,
deductions and credits. Each investor will be required to report its
distributive share regardless of whether it has received a corresponding
distribution of cash or property from a Series. An allocable share of a
tax-exempt investor's income will be "unrelated business taxable income"
("UBTI") only to the extent that a Series borrows money to acquire property or
invests in assets that produce UBTI or to the extent a tax-exempt investor
borrows money to make an investment in the Series. In addition to U.S. federal
income taxes, investors in the Series may also be subject to state and local
taxes on their distributive share of a Series' income.
While the Series are not classified as "regulated investment companies"
under Subchapter M of the Code, the Series' assets, income and distributions
will be managed in such a way that an investor in the Series will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in a Series for such Series' entire fiscal year.
There are certain other tax issues that will be relevant to only
certain of the investors; for instance, investors that are segregated asset
accounts and investors who contribute assets rather than cash to the Series. It
is intended that contributions of assets will not be taxable provided certain
requirements are met. Such investors are advised to consult their own tax
advisors as to the tax consequences of an investment in the Series. Also, a
Series may be required to withhold taxes on distributions to foreign investors.
Foreign investors should contact their own tax advisors for more information
with respect to any applicable withholding on distributions from a Series.
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Redemptions of shares in a Series may be taxable. In general, a
redemption of shares is taxable to the extent such cash or property received by
the redeeming investor exceeds such investor's tax basis in its shares.
It is not expected that any Series will make distributions of cash or
property. Instead, at the close of each fiscal year investors will be advised of
their allocable share of a Series' income, gains, losses deductions and credits
for U.S. federal income tax purposes.
If a Series of the Trust purchases shares in certain foreign investment
entities, called "passive foreign investment companies" ("PFIC"), the investors
in Series may be subject to U.S. federal income tax and a related interest
charge on a portion of any "excess distribution" or gain from the disposition of
such shares even if such income is distributed to investors in the Series and
whether or not such investors are subject to tax.
Certain Series of the Trust may be subject to foreign withholding taxes
on income from certain of their foreign securities.
The Series' taxable year-end will normally be June 30. Although, as
described above, the Series will not be subject to U.S. federal income tax, they
will file appropriate U.S. federal income tax returns.
ITEM 8. DISTRIBUTION ARRANGEMENTS. Inapplicable.
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
ITEM 10. COVER PAGE AND TABLE OF CONTENTS. Inapplicable.
ITEM 11. FUND HISTORY. WT Investment Trust I (the "Trust") is a diversified,
open-end management investment company organized as a Delaware business trust on
January 23, 1997. The name of the Trust was changed from Kiewit Investment Trust
to WT Investment Trust I on October 20, 1998.
The Trust has established the following Series described in this
Statement of Additional Information: Prime Money Market, Premier Money Market,
U.S. Government, Tax-Exempt, Short/Intermediate Bond, Intermediate Bond,
Municipal Bond, Large Cap Growth, WT Large Cap Growth, Large Cap Core, Small Cap
Core, Mid Cap, Science and Technology, Socially Responsible, International
Multi-Manager, Large Cap Value, Mid Cap Value and Small Cap Value Series.
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS.
(a) CLASSIFICATION. The Trust is a diversified, open-end management
investment company.
(b) INVESTMENT STRATEGIES AND RISKS. The following information supplements
the information concerning each Series' investment objective, policies
and limitations found in Item 4 of Part A.
MONEY MARKET SERIES.
The "Money Market Series" are the Prime Money Market, the Premier Money
Market, the U.S. Government and the Tax-Exempt Series. Each has adopted a
fundamental policy requiring it to maintain a constant net asset value of $1.00
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per share, although this may not be possible under certain circumstances. Each
Series values its portfolio securities on the basis of amortized cost (see
"Purchase, Redemption and Pricing of Shares") pursuant to Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"). As conditions of that Rule, the
Board of Trustees has established procedures reasonably designed to stabilize
each Series' price per share at $1.00 per share. Each Series maintains a
dollar-weighted average portfolio maturity of 90 days or less; purchases only
instruments with effective maturities of 397 days or less; and invests only in
securities which are of high quality as determined by major rating services or,
in the case of instruments which are not rated, of comparable quality as
determined by the investment adviser, Rodney Square Management Corporation,
under the direction of and subject to the review of the Board of Trustees.
BANK OBLIGATIONS. The Prime Money Market and the Premier Money Market
Series may invest in U.S. dollar-denominated obligations of major banks,
including certificates of deposit, time deposits and bankers' acceptances of
major U.S. and foreign banks and their branches located outside of the United
States, of U.S. branches of foreign banks, of foreign branches of foreign banks,
of U.S. agencies of foreign banks and of wholly owned banking subsidiaries of
such foreign banks located in the United States.
Obligations of foreign branches of U.S. banks and U.S. branches of
wholly owned subsidiaries of foreign banks may be general obligations of the
parent bank, of the issuing branch or subsidiary, or both, or may be limited by
the terms of a specific obligation or by governmental regulation. Because such
obligations are issued by foreign entities, they are subject to the risks of
foreign investing. A brief description of some typical types of bank obligations
follows:
- BANKERS' ACCEPTANCES. The Prime Money Market, the Premier Money
Market and the Tax-Exempt Series may invest in bankers'
acceptances, which are credit instruments evidencing the
obligation of a bank to pay a draft that has been drawn on it by a
customer. These instruments reflect the obligation of both the
bank and the drawer to pay the face amount of the instrument upon
maturity.
- CERTIFICATES OF DEPOSIT. The Prime Money Market, the Premier Money
Market and the Tax-Exempt Series may invest in certificates
evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually from 14
days to one year) at a stated or variable interest rate. Variable
rate certificates of deposit provide that the interest rate will
fluctuate on designated dates based on changes in a designated
base rate (such as the composite rate for certificates of deposit
established by the Federal Reserve Bank of New York).
- TIME DEPOSITS. The Prime Money Market and the Premier Money Market
Series may invest in time deposits, which are bank deposits for
fixed periods of time.
CERTIFICATES OF PARTICIPATION. The Tax-Exempt Series may invest in
certificates of participation, which give the investor an undivided interest in
the municipal obligation in the proportion that the investor's interest bears to
the total principal amount of the municipal obligation.
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CORPORATE BONDS, NOTES AND COMMERCIAL PAPER. The Prime Money Market and
the Premier Money Market Series may invest in corporate bonds, notes and
commercial paper. These obligations generally represent indebtedness of the
issuer and may be subordinated to other outstanding indebtedness of the issuer.
Commercial paper consists of short-term unsecured promissory notes issued by
corporations in order to finance their current operations. The Series will only
invest in commercial paper rated, at the time of purchase, in the highest
category by a nationally recognized statistical rating organization ("NRSRO"),
such as Moody's or S&P or, if not rated, determined by the adviser to be of
comparable quality. The Series may invest in asset-backed commercial paper
subject to Rule 2a-7 restrictions on investment in asset-backed securities,
which include a requirement that the security must have received a rating from a
NRSRO.
FOREIGN SECURITIES. At the present time, portfolio securities of the
Prime Money Market and the Premier Money Market Series that are purchased
outside the United States are maintained in the custody of foreign branches of
U.S. banks. To the extent that the Series may maintain portfolio securities in
the custody of foreign subsidiaries of U.S. banks, and foreign banks or clearing
agencies in the future, those sub-custodian arrangements are subject to
regulations under the 1940 Act that govern custodial arrangements with entities
incorporated or organized in countries outside of the United States.
ILLIQUID SECURITIES. Each Money Market Series may not invest more than
10% of the value of its net assets in securities that at the time of purchase
have legal or contractual restrictions on resale or are otherwise illiquid.
Illiquid securities are securities that cannot be disposed of within seven days
at approximately the value at which they are being carried on a Series' books.
The Board of Trustees has the ultimate responsibility for determining
whether specific securities are liquid or illiquid. The Board has delegated the
function of making day to day determinations of liquidity to the adviser,
pursuant to guidelines approved by the Board. The adviser will monitor the
liquidity of securities held by a Series and report periodically on such
decisions to the Board.
INVESTMENT COMPANY SECURITIES. The Money Market Series may invest in
the securities of other money market mutual funds, within the limits prescribed
by the 1940 Act. These limitations currently provide, in part, that a Series may
not purchase shares of an investment company if (a) such a purchase would cause
the Series to own in the aggregate more than 3% of the total outstanding voting
stock of the investment company or (b) such a purchase would cause the Series to
have more than 5% of its total assets invested in the investment company or (c)
more than 10% of the Series' total assets to be invested in the aggregate in all
investment companies. As a shareholder in an investment company, the Series
would bear its pro rata portion of the investment company's expenses, including
advisory fees, in addition to its own expenses.
MUNICIPAL SECURITIES. The Prime Money Market, the Premier Money Market
and the Tax-Exempt Series each may invest in debt obligations issued by states,
municipalities and public authorities ("Municipal Securities") to obtain funds
for various public purposes. Yields on Municipal Securities are the product of a
variety of factors, including the general conditions of the money market and of
the municipal bond and municipal note markets, the size of a particular
offering, the maturity of the obligation and the rating of the issue. Although
the interest on Municipal Securities may be exempt from federal income tax,
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dividends paid by a Series to its shareholders may not be tax-exempt. A brief
description of some typical types of municipal securities follows:
- GENERAL OBLIGATION SECURITIES are backed by the taxing power of
the issuing municipality and are considered the safest type of
municipal bond.
- REVENUE OR SPECIAL OBLIGATION SECURITIES are backed by the
revenues of a specific project or facility - tolls from a toll
bridge, for example.
- BOND ANTICIPATION NOTES normally are issued to provide interim
financing until long-term financing can be arranged. The long-term
bonds then provide money for the repayment of the Notes.
- TAX ANTICIPATION NOTES finance working capital needs of
municipalities and are issued in anticipation of various seasonal
tax revenues, to be payable for these specific future taxes.
- REVENUE ANTICIPATION NOTES are issued in expectation of receipt of
other kinds of revenue, such as federal revenues available under
the Federal Revenue Sharing Program.
- INDUSTRIAL DEVELOPMENT BONDS ("IDBs") and Private Activity Bonds
("PABs") are specific types of revenue bonds issued on or behalf
of public authorities to finance various privately operated
facilities such as solid waste facilities and sewage plants. PABs
generally are such bonds issued after April 15, 1986. These
obligations are included within the term "municipal bonds" if the
interest paid on them is exempt from federal income tax in the
opinion of the bond issuer's counsel. IDBs and PABs are in most
case revenue bonds and thus are not payable from the unrestricted
revenues of the issuer. The credit quality of the IDBs and PABs is
usually directly related to the credit standing of the user of the
facilities being financed, or some form of credit enhancement such
as a letter of credit.
- TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES provide
for short-term capital needs and usually have maturities of one
year or less. They include tax anticipation notes, revenue
anticipation notes and construction loan notes.
- CONSTRUCTION LOAN NOTES are sold to provide construction
financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing
Administration by way of "Fannie Mae" (the Federal National
Mortgage Association) or "Ginnie Mae" (the Government National
Mortgage Association).
- PUT BONDS are municipal bonds which give the holder the right to
sell the bond back to the issuer or a third party at a specified
price and exercise date, which is typically well in advance of the
bond's maturity date.
REPURCHASE AGREEMENTS. The Money Market Series may invest in repurchase
agreements. A repurchase agreement is a transaction in which a Series purchases
a security from a bank or recognized securities dealer and simultaneously
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commits to resell that security to a bank or dealer at an agreed date and price
reflecting a market rate of interest, unrelated to the coupon rate or the
maturity of the purchased security. While it is not possible to eliminate all
risks from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delays and costs to the
Series if the other party to the repurchase agreement becomes bankrupt), it is
the policy of a Series to limit repurchase transactions to primary dealers and
banks whose creditworthiness has been reviewed and found satisfactory by the
adviser. Repurchase agreements maturing in more than seven days are considered
illiquid for purposes of a Series' investment limitations.
SECURITIES LENDING. The Money Market Series may from time to time lend
their portfolio securities pursuant to agreements, which require that the loans
be continuously secured by collateral equal to 100% of the market value of the
loaned securities. Such collateral consists of cash, securities of the U.S.
Government or its agencies, or any combination of cash and such securities. Such
loans will not be made if, as a result, the aggregate amount of all outstanding
securities loans for a Series exceed one-third of the value of the Series' total
assets taken at fair market value. A Series will continue to receive interest on
the securities lent while simultaneously earning interest on the investment of
the cash collateral in U.S. Government securities. However, a Series will
normally pay lending fees to such broker-dealers and related expenses from the
interest earned on invested collateral. There may be risks of delay in receiving
additional collateral or risks of delay in recovery of the securities and even
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the adviser to
be of good standing and when, in the judgment of the adviser, the consideration
that can be earned currently from such securities loans justifies the attendant
risk. Either party upon reasonable notice to the other party may terminate any
loan.
STANDBY COMMITMENTS. The Money Market Series may invest in standby
commitments. It is expected that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary and advisable, the Series may pay for standby commitments either
separately in cash or by paying a higher price for the obligations acquired
subject to such a commitment (thus reducing the yield to maturity otherwise
available for the same securities). Standby commitments purchased by the Series
will be valued at zero in determining net asset value and will not affect the
valuation of the obligations subject to the commitments. Any consideration paid
for a standby commitment will be accounted for as unrealized depreciation and
will be amortized over the period the commitment is held by a Series.
U.S. GOVERNMENT OBLIGATIONS. The Money Market Series may invest in debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Although all obligations of agencies and instrumentalities
are not direct obligations of the U.S. Treasury, payment of the interest and
principal on these obligations is generally backed directly or indirectly by the
U.S. Government. This support can range from securities supported by the full
faith and credit of the United States (for example, securities of the Government
National Mortgage Association), to securities that are supported solely or
primarily by the creditworthiness of the issuer, such as securities of the
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Tennessee Valley Authority, Federal Farm Credit Banks and the Federal Home Loan
Banks. In the case of obligations not backed by the full faith and credit of the
United States, a Series must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate
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repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitments.
VARIABLE AND FLOATING RATE SECURITIES. The Money Market Series may
invest in variable and floating rate securities. The terms of variable and
floating rate instruments provide for the interest rate to be adjusted according
to a formula on certain pre-determined dates. Certain of these obligations also
may carry a demand feature that gives the holder the right to demand prepayment
of the principal amount of the security prior to maturity. An irrevocable letter
of credit or guarantee by a bank usually backs the demand feature. Series
investments in these securities must comply with conditions established by the
SEC under which they may be considered to have remaining maturities of 397 days
or less.
WHEN-ISSUED SECURITIES. The Money Market Series may buy when-issued
securities or sell securities on a delayed-delivery basis. This means that
delivery and payment for the securities normally will take place approximately
15 to 90 days after the date of the transaction. The payment obligation and the
interest rate that will be received are each fixed at the time the buyer enters
into the commitment. During the period between purchase and settlement, the
purchaser makes no payment and no interest accrues to the purchaser. However,
when a security is sold on a delayed-delivery basis, the seller does not
participate in further gains or losses with respect to the security. If the
other party to a when-issued or delayed-delivery transaction fails to transfer
or pay for the securities, the Series could miss a favorable price or yield
opportunity or could suffer a loss.
A Series will make a commitment to purchase when-issued securities only
with the intention of actually acquiring the securities, but the Series may
dispose of the commitment before the settlement date if it is deemed advisable
as a matter of investment strategy. A Series may also sell the underlying
securities before they are delivered, which may result in gains or losses. A
separate account for each Series is established at the custodian bank, into
which cash and/or liquid securities equal to the amount of when-issued purchase
commitments is deposited. If the market value of the deposited securities
declines additional cash or securities will be placed in the account on a daily
basis to cover the Series' outstanding commitments.
When a Series purchases a security on a when-issued basis, the security
is recorded as an asset on the commitment date and is subject to changes in
market value generally, based upon changes in the level of interest rates. Thus,
upon delivery, the market value of the security may be higher or lower than its
cost, and this may increase or decrease the Series' net asset value. When
payment for a when-issued security is due, a Series will meet its obligations
from then-available cash flow, the sale of the securities held in the separate
account, the sale of other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a when-issued purchase
obligation carries with it the potential for the realization of capital gains or
losses.
BOND SERIES.
The "Bond Series" are the Short/Intermediate Bond, the Intermediate
Bond and the Municipal Bond Series. Wilmington Trust Company, the investment
adviser for the Bond Series, employs an investment process that is disciplined,
systematic and oriented toward a quantitative assessment and control of
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volatility. The Bond Series' exposure to credit risk is moderated by limiting
their investments to securities that, at the time of purchase, are rated
investment grade by a nationally recognized statistical rating organization such
as Moody's, S&P, or, if unrated, are determined by the adviser to be of
comparable quality. See "Description of Ratings" below. Ratings, however, are
not guarantees of quality or of stable credit quality. Not even the highest
rating constitutes assurance that the security will not fluctuate in value or
that a Series will receive the anticipated yield on the security. WTC
continuously monitors the quality of the Series' holdings, and should the rating
of a security be downgraded or its quality be adversely affected, WTC will
determine whether it is in the best interest of the affected Series to retain or
dispose of the security.
The effect of interest rate fluctuations in the market on the principal
value of the Bond Series is moderated by limiting the average dollar-weighted
duration of their investments -- in the case of the Short/Intermediate Bond
Series to a range of 2 1/2 to 4 years, in the case of the Intermediate Bond
Series to a range of 4 to 7 years, and in the case of the Municipal Bond Series
to a range of 4 to 8 years. Investors may be more familiar with the term
"average effective maturity" (when, on average, the fixed income securities held
by the Series will mature), which is sometimes used to express the anticipated
term of the Series' investments. Generally, the stated maturity of a fixed
income security is longer than it's projected duration. Under normal market
conditions, the average effective maturity, in the case of the
Short/Intermediate Bond Series, is expected to fall within a range of
approximately 3 to 5 years, in the case of the Intermediate Bond Series, within
a range of approximately 7 to 12 years, and in the case of the Municipal Bond
Series, within a range of approximately 5 to 10 years. In the event of unusual
market conditions, the average dollar-weighted duration of the Series may fall
within a broader range. Under those circumstances, the Short/Intermediate Bond
and the Intermediate Bond Series may invest in fixed income securities with an
average dollar-weighted duration of 1 to 6 years and 2 to 10 years,
respectively.
WTC's goal in managing the Short/Intermediate Bond and the Intermediate
Bond Series is to gain additional return by analyzing the market complexities
and individual security attributes which affect the returns of fixed income
securities. The Bond Series are intended to appeal to investors who want a
thoughtful exposure to the broad fixed income securities market and the high
current returns that characterize the short-term to intermediate-term sector of
that market.
Given the average duration of the holdings of the Bond Series and the
current interest rate environment, the Series should experience smaller price
fluctuations than those experienced by longer-term bond and municipal bond funds
and a higher yield than fixed-price money market and tax-exempt money market
funds. Of course, the Series will likely experience larger price fluctuations
than money market funds and a lower yield than longer-term bond and municipal
bond funds. Given the quality of the Series' holdings, which must be investment
grade (rated within the top four categories) or comparable to investment grade
securities at the time of purchase, the Series will accept lower yields in order
to avoid the credit concerns experienced by funds that invest in lower quality
fixed income securities. In addition, although the Municipal Bond Series expects
to invest substantially all of its net assets in municipal securities that
provide interest income that is exempt from federal income tax, it may invest up
to 20% of its net assets in other types of fixed income securities that provide
federally taxable income.
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The composition of each Series' holdings varies depending upon WTC's
analysis of the fixed income markets and the municipal securities markets (for
the Municipal Bond Series), including analysis of the most attractive segments
of the yield curve, the relative value of the different market sectors, expected
trends in those markets and supply versus demand pressures. Securities purchased
by the Series may be purchased on the basis of their yield or potential capital
appreciation or both. By maintaining each Series' specified average duration,
WTC seeks to protect the Series' principal value by reducing fluctuations in
value relative to those that may be experienced by bond funds with longer
average durations. This strategy may reduce the level of income attained by the
Series. Of course, there is no guarantee that principal value can be protected
during periods of extreme interest rate volatility.
WTC may make frequent changes in the Series' investments, particularly
during periods of rapidly fluctuating interest rates. These frequent changes
would involve transaction costs to the Series and could result in taxable
capital gains.
ASSET-BACKED SECURITIES. The Bond Series may purchase interests in
pools of obligations, such as credit card or automobile loan receivables,
purchase contracts and financing leases. Such securities are also known as
"asset-backed securities," and the holders thereof may be entitled to receive a
fixed rate of interest, a variable rate that is periodically reset to reflect
the current market rate or an auction rate that is periodically reset at
auction.
Asset-backed securities are typically supported by some form of credit
enhancement, such as cash collateral, subordinated tranches, a letter of credit,
surety bond or limited guaranty. Credit enhancements do not provide protection
against changes in the market value of the security. If the credit enhancement
is exhausted or withdrawn, security holders may experience losses or delays in
payment if required payments of principal and interest are not made with respect
to the underlying obligations. Except in very limited circumstances, there is no
recourse against the vendors or lessors that originated the underlying
obligations.
Asset-backed securities are likely to involve unscheduled prepayments
of principal that may affect yield to maturity, result in losses, and may be
reinvested at higher or lower interest rates than the original investment. The
yield to maturity of asset-backed securities that represent residual interests
in payments of principal or interest in fixed income obligations is particularly
sensitive to prepayments.
The value of asset-backed securities may change because of changes in
the market's perception of the creditworthiness of the servicing agent for the
pool of underlying obligations, the originator of those obligations or the
financial institution providing credit enhancement.
BANK OBLIGATIONS. The Bond Series may invest in the same U.S.
dollar-denominated obligations of major banks as the Money Market Series.
(See "Bank Obligations" above)
CORPORATE BONDS, NOTES AND COMMERCIAL PAPER. The Bond Series may invest
in corporate bonds, notes and commercial paper. These obligations generally
represent indebtedness of the issuer and may be subordinated to other
outstanding indebtedness of the issuer. Commercial paper consists of short-term
unsecured promissory notes issued by corporations in order to finance their
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current operations. The Series will only invest in commercial paper rated, at
the time of purchase, in the highest category by a nationally recognized
statistical rating organization, such as Moody's or S&P or, if not rated,
determined by WTC to be of comparable quality.
FIXED INCOME SECURITIES WITH BUY-BACK FEATURES. Fixed income securities
with buy-back features enable the Bond Series to recover principal upon
tendering the securities to the issuer or a third party. Letters of credit
issued by domestic or foreign banks often supports these buy-back features. In
evaluating a foreign bank's credit, WTC considers whether adequate public
information about the bank is available and whether the bank may be subject to
unfavorable political or economic developments, currency controls or other
governmental restrictions that could adversely affect the bank's ability to
honor its commitment under the letter of credit. The Municipal Bond Series will
not acquire municipal securities with buy-back features if, in the opinion of
counsel, the existence of a buy-back feature would alter the tax-exempt nature
of interest payments on the underlying securities and cause those payments to be
taxable to that Series and its shareholders. Buy-back features include standby
commitments, put bonds and demand features.
- STANDBY COMMITMENTS. The Bond Series may acquire standby
commitments from broker-dealers, banks or other financial
intermediaries to enhance the liquidity of portfolio securities. A
standby commitment entitles a Series to same day settlement at
amortized cost plus accrued interest, if any, at the time of
exercise. The amount payable by the issuer of the standby
commitment during the time that the commitment is exercisable
generally approximates the market value of the securities
underlying the commitment. Standby commitments are subject to the
risk that the issuer of a commitment may not be in a position to
pay for the securities at the time that the commitment is
exercised.
Ordinarily, a Series will not transfer a standby commitment to a
third party, although the Series may sell securities subject to a
standby commitment at any time. A Series may purchase standby
commitments separate from or in conjunction with the purchase of
the securities subject to the commitments. In the latter case, the
Series may pay a higher price for the securities acquired in
consideration for the commitment.
- PUT BONDS. A put bond (also referred to as a tender option or
third party bond) is a bond created by coupling an intermediate or
long-term fixed rate bond with an agreement giving the holder the
option of tendering the bond to receive its par value. As
consideration for providing this tender option, the sponsor of the
bond (usually a bank, broker-dealer or other financial
intermediary) receives periodic fees that equal the difference
between the bond's fixed coupon rate and the rate (determined by a
remarketing or similar agent) that would cause the bond, coupled
with the tender option, to trade at par. By paying the tender
offer fees, a Series in effect holds a demand obligation that
bears interest at the prevailing short-term rate.
In selecting put bonds for the Bond Series, WTC takes into
consideration the creditworthiness of the issuers of the
underlying bonds and the creditworthiness of the providers of the
tender option features. A sponsor may withdraw the tender option
feature if the
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issuer of the underlying bond defaults on interest or principal
payments, the bond's rating is downgraded or, in the case of a
municipal bond, the bond loses its tax-exempt status.
- DEMAND FEATURES. Many variable rate securities carry demand
features that permit the holder to demand repayment of the
principal amount of the underlying securities plus accrued
interest, if any, upon a specified number of days' notice to the
issuer or its agent. A demand feature may be exercisable at any
time or at specified intervals. Variable rate securities with
demand features are treated as having a maturity equal to the time
remaining before the holder can next demand payment of principal.
The issuer of a demand feature instrument may have a corresponding
right to prepay the outstanding principal of the instrument plus
accrued interest, if any, upon notice comparable to that required
for the holder to demand payment.
GUARANTEED INVESTMENT CONTRACTS. A guaranteed investment contract
("GIC") is a general obligation of an insurance company. A GIC is generally
structured as a deferred annuity under which the purchaser agrees to pay a given
amount of money to an insurer (either in a lump sum or in installments) and the
insurer promises to pay interest at a guaranteed rate (either fixed or variable)
for the life of the contract. Some GICs provide that the insurer may
periodically pay discretionary excess interest over and above the guaranteed
rate. At the GIC's maturity, the purchaser generally is given the option of
receiving payment or an annuity. Certain GICs may have features that permit
redemption by the issuer at a discount from par value.
Generally, GICs are not assignable or transferable without the
permission of the issuer. As a result, the acquisition of GICs is subject to the
limitations applicable to each Series' acquisition of illiquid and restricted
securities. The holder of a GIC is dependent on the creditworthiness of the
issuer as to whether the issuer is able to meet its obligations. No Series
intends to invest more than 5% of its net assets in GICs.
ILLIQUID SECURITIES. No Bond Series may invest more than 15% of the
value of its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid.
MONEY MARKET FUNDS. The Bond Series may invest in the securities of
money market mutual funds, within the limits prescribed by the 1940 Act, as
previously described for the Money Market Series under "Investment Company
Securities."
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities
representing interests in a pool of mortgages secured by real property.
Government National Mortgage Association ("GNMA") mortgage-backed
securities are securities representing interests in pools of mortgage loans to
residential home buyers made by lenders such as mortgage bankers, commercial
banks and savings associations and are either guaranteed by the Federal Housing
Administration or insured by the Veterans Administration. Timely payment of
interest and principal on each mortgage loan is backed by the full faith and
credit of the U.S. Government.
The Federal National Mortgage Association ("FNMA") and Federal Home
Loan Mortgage Corporation ("FHLMC") both issue mortgage-backed securities that
are similar to GNMA securities in that they represent interests in pools of
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mortgage loans. FNMA guarantees timely payment of interest and principal on its
certificates and FHLMC guarantees timely payment of interest and ultimate
payment of principal. FHLMC also has a program under which it guarantees timely
payment of scheduled principal as well as interest. FNMA and FHLMC guarantees
are backed only by those agencies and not by the full faith and credit of the
U.S. Government.
In the case of mortgage-backed securities that are not backed by the
U.S. Government or one of its agencies, a loss could be incurred if the
collateral backing these securities is insufficient. This may occur even though
the collateral is U.S. Government-backed.
Most mortgage-backed securities pass monthly payment of principal and
interest through to the holder after deduction of a servicing fee. However,
other payment arrangements are possible. Payments may be made to the holder on a
different schedule than that on which payments are received from the borrower,
including, but not limited to, weekly, bi-weekly and semiannually. The monthly
principal and interest payments also are not always passed through to the holder
on a PRO RATA basis. In the case of collateralized mortgage obligations
("CMOs"), the pool is divided into two or more tranches and special rules for
the disbursement of principal and interest payments are established.
CMO residuals are derivative securities that generally represent
interests in any excess cash flow remaining after making required payments of
principal and interest to the holders of the CMOs described above. Yield to
maturity on CMO residuals is extremely sensitive to prepayments. In addition, if
a series of a CMO includes a class that bears interest at an adjustable rate,
the yield to maturity on the related CMO residual also will be extremely
sensitive to the level of the index upon which interest rate adjustments are
based.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities and may be issued by agencies or instrumentalities of the
U.S. Government or by private mortgage lenders. SMBS usually are structured with
two classes that receive different proportions of the interest and/or principal
distributions on a pool of mortgage assets. A common type of SMBS will have one
class of holders receiving all interest payments -- "interest only" or "IO" --
and another class of holders receiving the principal repayments -- "principal
only" or "PO." The yield to maturity of IO and PO classes is extremely sensitive
to prepayments on the underlying mortgage assets.
MUNICIPAL SECURITIES. Municipal securities are debt obligations issued
by or on behalf of states, territories and possessions of the United States, the
District of Columbia and their sub-divisions, agencies and instrumentalities,
the interest on which is, in the opinion of bond counsel, exempt from federal
income tax. These debt obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various privately owned or operated activities. The three
general categories of municipal securities are general obligation, revenue or
special obligation and private activity municipal securities. A brief
description of typical municipal securities follows:
- GENERAL OBLIGATION SECURITIES are backed by the taxing power of
the issuing municipality and are considered the safest type of
municipal bond. The proceeds from general obligation securities
are used to fund
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a wide range of public projects, including the construction or
improvement of schools, highways and roads, and water and sewer
systems.
- REVENUE OR SPECIAL OBLIGATION SECURITIES are backed by the
revenues of a specific project or facility tolls from a toll
bridge, for example. The proceeds from revenue or special
obligation securities are used 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. Many municipal issuers
also establish a debt service reserve fund from which principal
and interest payments are made. Further security may be available
in the form of the state's ability, without obligation, to make up
deficits in the reserve fund.
- MUNICIPAL LEASE OBLIGATIONS may take the form of a lease, an
installment purchase or a conditional sale contract issued by
state and local governments and authorities to acquire land,
equipment and facilities. Usually, the Series will purchase a
participation interest in a municipal lease obligation from a bank
or other financial intermediary. The participation interest gives
the holder a pro rata, undivided interest in the total amount of
the obligation.
Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. The interest
income from the lease obligation may become taxable if the lease
is assigned. Also, to free the municipal issuer from
constitutional or statutory debt issuance limitations, many leases
and contracts include non-appropriation clauses providing that the
municipality has no obligation to make future payments under the
lease or contract unless money is appropriated for that purpose by
the municipality on a yearly or other periodic basis. Finally, the
lease may be illiquid.
- RESOURCE RECOVERY BONDS are affected by a number of factors, which
may affect the value and credit quality of these revenue or
special obligations. These factors include the viability of the
project being financed, environmental protection regulations and
project operator tax incentives.
- PRIVATE ACTIVITY SECURITIES are specific types of revenue bonds
issued on behalf of public authorities to finance various
privately operated facilities such as educational, hospital or
housing facilities, local facilities for water supply, gas,
electricity, sewage or solid waste disposal, and industrial or
commercial facilities. The payment of principal and interest on
these obligations generally depends upon the credit of the private
owner/user of the facilities financed and, in certain instances,
the pledge of real and personal property by the private
owner/user. The interest income from certain types of private
activity securities may be considered a tax preference item for
purposes of the federal alternative minimum tax ("Tax Preference
Item").
Short-term municipal securities in which the Series may invest include
Tax Anticipation, Revenue Anticipation, Bond Anticipation and Construction Loan
Notes, which were previously described for the Money Market Series (See
"Municipal Securities" above).
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OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES. Although the
Municipal Bond Series has no current intention of so doing, each of the Bond
Series may use options and futures contracts. The Short/Intermediate Bond and
the Intermediate Bond Series may use forward currency contracts.
PARTICIPATION INTERESTS. The Bond Series may invest in participation
interests in fixed income securities. A participation interest provides the
certificate holder with a specified interest in an issue of fixed income
securities.
Some participation interests give the holders differing interests in
the underlying securities, depending upon the type or class of certificate
purchased. For example, coupon strip certificates give the holder the right to
receive a specific portion of interest payments on the underlying securities;
principal strip certificates give the holder the right to receive principal
payments and the portion of interest not payable to coupon strip certificate
holders. Holders of certificates of participation in interest payments may be
entitled to receive a fixed rate of interest, a variable rate that is
periodically reset to reflect the current market rate or an auction rate that is
periodically reset at auction. Asset-backed residuals represent interests in any
excess cash flow remaining after required payments of principal and interest
have been made.
More complex participation interests involve special risk
considerations. Since these instruments have only recently been developed, there
can be no assurance that any market will develop or be maintained for the
instruments. Generally, the fixed income securities that are deposited in trust
for the holders of these interests are the sole source of payments on the
interests; holders cannot look to the sponsor or trustee of the trust or to the
issuers of the securities held in trust or to any of their affiliates for
payment.
Participation interests purchased at a discount may experience price
volatility. Certain types of interests are sensitive to fluctuations in market
interest rates and to prepayments on the underlying securities. A rapid rate of
prepayment can result in the failure to recover the holder's initial investment.
The extent to which the yield to maturity of a participation interest
is sensitive to prepayments depends, in part, upon whether the interest was
purchased at a discount or premium, and if so, the size of that discount or
premium. Generally, if a participation interest is purchased at a premium and
principal distributions occur at a rate faster than that anticipated at the time
of purchase, the holder's actual yield to maturity will be lower than that
assumed at the time of purchase. Conversely, if a participation interest is
purchased at a discount and principal distributions occur at a rate faster than
that assumed at the time of purchase, the investor's actual yield to maturity
will be higher than that assumed at the time of purchase.
Participation interests in pools of fixed income securities backed by
certain types of debt obligations involve special risk considerations. The
issuers of securities backed by automobile and truck receivables typically file
financing statements evidencing security interests in the receivables, and the
servicers of those obligations take and retain custody of the obligations. If
the servicers, in contravention of their duty to the holders of the securities
backed by the receivables, were to sell the obligations, the third party
purchasers could acquire an interest superior to the interest of the security
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holders. Also, most states require that a security interest in a vehicle must be
noted on the certificate of title and the certificate of title may not be
amended to reflect the assignment of the lender's security interest. Therefore,
the recovery of the collateral in some cases may not be available to support
payments on the securities. Securities backed by credit card receivables are
generally unsecured, and both federal and state consumer protection laws may
allow set-offs against certain amounts owed.
The Municipal Bond Series will only invest in participation interests
in municipal securities, municipal leases or in pools of securities backed by
municipal assets if, in the opinion of counsel, any interest income on the
participation interest will be exempt from federal income tax to the same extent
as the interest on the underlying securities.
REPURCHASE AGREEMENTS. The Bond Series may invest in repurchase
agreements, which were previously described for the Money Market Portfolios (See
"Repurchase Agreements" above).
SECURITIES LENDING. Generally, the Bond Series may lend securities
subject to the same conditions applkicable to the Money Market Series, as
described under "Money Market Series-Securities Lending" above.
However, the Municipal Bond Series has no current intention of lending
its portfolio securities and would do so only under unusual market conditions
since the interest income that a Series receives from lending its securities is
taxable.
U.S. GOVERNMENT OBLIGATIONS. The Bond Series may invest in the same
debt securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities as the Money Market Series. (See "U.S. Government Obligations"
above).
VARIABLE AND FLOATING RATE SECURITIES. The Bond Series may invest in
variable and floating rate securities. The terms of variable and floating rate
instruments provide for the interest rate to be adjusted according to a formula
on certain pre-determined dates. Certain of these obligations also may carry a
demand feature that gives the holder the right to demand prepayment of the
principal amount of the security prior to maturity. An irrevocable letter of
credit or guarantee by a bank usually backs the demand feature. Series
investments in these securities must comply with conditions established by the
SEC under which they may be considered to have remaining maturities of 397 days
or less.
Each of the Bond Series may also purchase inverse floaters that are
floating rate instruments whose interest rates bear an inverse relationship to
the interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the interest rate
paid on the inverse floater, with the result that the inverse floater's price is
considerably more volatile than that of a fixed rate security. For example, an
issuer may decide to issue two variable rate instruments instead of a single
long-term, fixed rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument (the
inverse floater) reflects the approximate rate the issuer would have paid on a
fixed rate bond multiplied by two minus the interest rate paid on the short-term
instrument. Depending on market availability, the two variable rate instruments
may be combined to form a fixed rate bond. The market for inverse floaters is
relatively new.
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WHEN-ISSUED SECURITIES. The Bond Series may buy when-issued securities
or sell securities on a delayed-delivery basis. This means that delivery and
payment for the securities normally will take place approximately 15 to 90 days
after the date of the transaction. The payment obligation and the interest rate
that will be received are each fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, the purchaser
makes no payment and no interest accrues to the purchaser. However, when a
security is sold on a delayed-delivery basis, the seller does not participate in
further gains or losses with respect to the security. If the other party to a
when-issued or delayed-delivery transaction fails to transfer or pay for the
securities, the Series could miss a favorable price or yield opportunity or
could suffer a loss.
A Series will make a commitment to purchase when-issued securities only
with the intention of actually acquiring the securities, but the Series may
dispose of the commitment before the settlement date if it is deemed advisable
as a matter of investment strategy. A Series may also sell the underlying
securities before they are delivered, which may result in gains or losses. A
separate account for each Series is established at the custodian bank, into
which cash and/or liquid securities equal to the amount of when-issued purchase
commitments is deposited. If the market value of the deposited securities
declines additional cash or securities will be placed in the account on a daily
basis to cover the Series' outstanding commitments.
When a Series purchases a security on a when-issued basis, the security
is recorded as an asset on the commitment date and is subject to changes in
market value generally, based upon changes in the level of interest rates. Thus,
upon delivery, the market value of the security may be higher or lower than its
cost, and this may increase or decrease the Series' net asset value. When
payment for a when-issued security is due, a Series will meet its obligations
from then-available cash flow, the sale of the securities held in the separate
account, the sale of other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a when-issued purchase
obligation carries with it the potential for the realization of capital gains or
losses.
The Municipal Bond Series may purchase securities on a when-issued
basis in connection with the refinancing of an issuer's outstanding indebtedness
("refunding contracts"). These contracts require the issuer to sell and the
Series to buy municipal obligations at a stated price and yield on a settlement
date that may be several months or several years in the future. The offering
proceeds are then used to refinance existing municipal obligations. Although the
Municipal Bond Series may sell its rights under a refunding contract, the
secondary market for these contracts may be less liquid than the secondary
market for other types of municipal securities. The Series generally will not be
obligated to pay the full purchase price if it fails to perform under a
refunding contract. Instead, refunding contracts usually provide for payment of
liquidated damages to the issuer (currently 15-20% of the purchase price). The
Series may secure its obligation under a refunding contract by depositing
collateral or a letter of credit equal to the liquidated damages provision of
the refunding contract. When required by Securities and Exchange Commission
("SEC") guidelines, the Series will place liquid assets in a segregated
custodial account equal in amount to its obligations under outstanding refunding
contracts.
ZERO COUPON BONDS. The Bond Series may invest in zero coupon bonds of
governmental or private issuers that generally pay no interest to their holders
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prior to maturity. Since zero coupon bonds do not make regular interest
payments, they allow an issuer to avoid the need to generate cash to meet
current interest payments and may involve greater credit risks than bonds paying
interest currently. Tax laws requiring the distribution of accrued discount on
the bonds, even though no cash equivalent thereto has been paid, may cause a
Series to liquidate investments in order to make the required distributions.
RISK FACTORS APPLICABLE TO THE MUNICIPAL BOND SERIES:
HEALTH CARE SECTOR. The health care industry is subject to regulatory
action by a number of private and governmental agencies, including federal,
state and local governmental agencies. A major source of revenues for the
industry is payments from the Medicare and Medicaid programs. As a result, the
industry is sensitive to legislative changes and reductions in governmental
spending for those programs. Numerous other factors may affect the industry,
such as general and local economic conditions; demand for services; expenses
(including malpractice insurance premiums) and competition among health care
providers. In the future, the following may adversely affect the industry:
adoption of legislation proposing a national health insurance program; medical
and technological advances which alter the demand for health services or the way
in which such services are provided; and efforts by employers, insurers and
governmental agencies to reduce the costs of health insurance and health care
services.
Health care facilities include life care facilities, nursing homes and
hospitals. The Municipal Bond Series may invest in bonds to finance these
facilities which are typically secured by the revenues from the facilities and
not by state or local government tax payments. Moreover, in the case of life
care facilities, since a portion of housing, medical care and other services may
be financed by an initial deposit, there may be a risk of default in the payment
of principal or interest on a bond issue if the facility does not maintain
adequate financial reserves for debt service.
HOUSING SECTOR. The Municipal Bond Series may invest in housing revenue
bonds which typically are issued by state, county and local housing authorities
and are secured only by the revenues of mortgages originated by those
authorities using the proceeds of the bond issues. Factors that may affect the
financing of multi-family housing projects include acceptable completion of
construction, proper management, occupancy and rent levels, economic conditions
and changes in regulatory requirements.
Since the demand for mortgages from the proceeds of a bond issue cannot
be precisely predicted, the proceeds may be in excess of demand, which would
result in early retirement of the bonds by the issuer. Since the cash flow from
mortgages cannot be precisely predicted, differences in the actual cash flow
from the assumed cash flow could have an adverse impact upon the issuer's
ability to make scheduled payments of principal and interest or could result in
early retirement of the bonds.
Scheduled principal and interest payments are often made from reserve
or sinking funds. These reserves are funded from the bond proceeds, assuming
certain rates of return on investment of the reserve funds. If the assumed rates
of return are not realized because of changes in interest rate levels or for
other reasons, the actual cash flow for scheduled payments of principal and
interest on the bonds may be inadequate.
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ELECTRIC UTILITIES SECTOR. The electric utilities industry has
experienced, and may experience in the future: problems in financing large
construction programs in an inflationary period; cost increases and delays
caused by environmental considerations (particularly with respect to nuclear
facilities); difficulties in obtaining fuel at reasonable prices; the effects of
conservation on the demand for energy; increased competition from alternative
energy sources; and the effects of rapidly changing licensing and safety
requirements.
PROPOSED LEGISLATION. From time to time, proposals have been introduced
before Congress for the purpose of restricting or eliminating the federal income
tax exemption for interest on debt obligations issued by states and their
political subdivisions. For example, federal tax law now limits the types and
amounts of tax-exempt bonds issuable for industrial development and other types
of private activities. These limitations may affect the future supply and yields
of private activity securities. Further proposals affecting the value of
tax-exempt securities may be introduced in the future. In addition, proposals
have been made, such as that involving the "flat tax," that could reduce or
eliminate the value of that exemption. If the availability of municipal
securities for investment or the value of the Municipal Bond Series' holdings
could be materially affected by such changes in the law, the Trustees would
reevaluate the Series' investment objective and policies or consider the Series'
dissolution.
EQUITY SERIES.
The "Equity Series" are the Large Cap Growth, the WT Large Cap Growth,
the Large Cap Core, the Small Cap Core, the International Multi-Manager, the
Large Cap Value, the Mid Cap Value, the Small Cap Value, the Mid Cap, the
Science and Technology and the Socially Responsible Series.
AMERICAN DEPOSITARY RECEIPTS (ADRS) AND EUROPEAN DEPOSITARY RECEIPTS
(EDRS). The International Multi-Manager and Large Cap Core Series each may
invest in ADRs and EDRs. ADRs and EDRs are securities, typically issued by a
U.S. financial institution or a non-U.S. financial institution in the case of an
EDR (a "depositary"). The institution has ownership interests in a security, or
a pool of securities, issued by a foreign issuer and deposited with the
depositary. ADRs and EDRs may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary. An unsponsored facility may be
established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.
CASH MANAGEMENT. The Small Cap Core and the International Multi-Manager
Series each may invest no more than 15% of its total assets in cash and cash
equivalents including high-quality money market instruments and money market
funds in order to manage cash flow in the Series. The other Equity Series are
not subject to specific percentage limitations on such investments. Certain of
these instruments are described below.
- MONEY MARKET FUNDS. The Equity Series may invest in the securities
of other money market mutual funds, within the limits prescribed
by the
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1940 Act. The International Multi-Manager Series may invest in
securities of open-end and closed-end investment companies that
invest primarily in the equity securities of issuers in countries
where it is impossible or impractical to invest directly. Such
investments will be subject to the limits described above.
- U.S. GOVERNMENT OBLIGATIONS. The Equity Series may invest in the
same debt securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities as the Money Market Series. (See
"U.S. Government Obligations" under Money market Series above)
- COMMERCIAL PAPER. The Equity Series may invest in commercial
paper. Commercial paper consists of short-term (up to 270 days)
unsecured promissory notes issued by corporations in order to
finance their current operations. The Series may invest only in
commercial paper rated A-1 or higher by S&P or Moody's or if not
rated, determined by the adviser or sub-adviser to be of
comparable quality.
- BANK OBLIGATIONS. The Equity Series may invest in the same
obligations of U.S. banks as the Money Market Funds. (See "Bank
Obligations" under Money Market Series above)
CONVERTIBLE SECURITIES. Convertible securities have characteristics
similar to both fixed income and equity securities. Because of the conversion
feature, the market value of convertible securities tends to move together with
the market value of the underlying stock. As a result, a Series' selection of
convertible securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuers and any call provisions.
The Equity Series may invest in convertible securities that are rated,
at the time of purchase, in the three highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") such as Moody's or S&P, or
if unrated, are determined by the adviser or a sub-adviser, as applicable, to be
of comparable quality. In addition, the International Multi-Manager Series may
invest in non-convertible debt securities issued by foreign governments,
international agencies, and private foreign issuers that, at the time of
purchase, are rated A or better by a NRSRO, or, if not rated, are judged by the
adviser or one or more of the sub-advisers to be of comparable quality. Ratings
represent the rating agency's opinion regarding the quality of the security and
are not a guarantee of quality. Should the rating of a security be downgraded
subsequent to a Series' purchase of the security, the adviser or a sub-adviser,
as applicable, will determine whether it is in the best interest of the Series
to retain the security.
DEBT SECURITIES. Debt securities represent money borrowed that
obligates the issuer (e.g., a corporation, municipality, government, government
agency) to repay the borrowed amount at maturity (when the obligation is due and
payable) and usually to pay the holder interest at specific times.
HEDGING STRATEGIES. The Equity Series may engage in certain hedging
strategies that involve options, futures and, in the case of the International
Multi-Manager Series, forward currency exchange contracts. See "Options, Futures
and Forward Currency Contract Strategies" below.
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ILLIQUID SECURITIES. Each of the Large Cap Value, Mid Cap Value and
Small Cap Value Series may invest no more than 10% of their net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. Each of the Large Cap Growth, WT Large Cap
Growth, Large Cap Core, Small Cap Core and International Multi-Manager Series
may invest no more than 15% of their net assets in securities that at the time
of purchase have legal or contractual restrictions on resale or are otherwise
illiquid. If the limitations on illiquid securities are exceeded, other than by
a change in market values, the condition will be reported by the Series'
investment adviser to the Board of Trustees.
OPTIONS ON SECURITIES AND SECURITIES INDEXES. The Large Cap Growth, WT
Large Cap Growth, Large Cap Value and Small Cap Core Series each may purchase
call options on securities that WTC intends to include in the Series in order to
fix the cost of a future purchase or attempt to enhance return by, for example,
participating in an anticipated increase in the value of a security. The Series
may purchase put options to hedge against a decline in the market value of
securities held in the Series or in an attempt to enhance return. The Series may
write (sell) put and covered call options on securities in which they are
authorized to invest. The Series may also purchase put and call options, and
write put and covered call options on U.S. securities indexes. Stock index
options serve to hedge against overall fluctuations in the securities markets
rather than anticipated increases or decreases in the value of a particular
security. Of the percentage of the total assets of a Series that are invested in
equity (or related) securities, the Series may not invest more than 10% of such
assets in covered call options on securities and/or options on securities
indices.
REPURCHASE AGREEMENTS. The Equity Series may invest in repurchase
agreements, which were previously described. See "Repurchase Agreements" under
Money Market Series above.
RESTRICTED SECURITIES. Restricted securities are securities that may
not be sold to the public without registration under the Securities Act of 1933
or an exemption from registration. Each of the Equity Series may invest up to
15% of its net assets in illiquid securities, subject to a Series' investment
limitations on the purchase of illiquid securities. Restricted securities,
including securities eligible for re-sale under 1933 Act Rule 144A, that are
determined to be liquid are not subject to this limitation. This determination
is to be made by the adviser or a sub-adviser pursuant to guidelines adopted by
the Board of Trustees. Under these guidelines, the adviser or a sub-adviser will
consider the frequency of trades and quotes for the security, the number of
dealers in, and potential purchasers for, the securities, dealer undertakings to
make a market in the security, and the nature of the security and of the
marketplace trades. In purchasing such restricted securities, the adviser or a
sub-adviser intends to purchase securities that are exempt from registration
under Rule 144A under the 1933 Act.
SECURITIES LENDING. The Equity Series may lend securities subject to
the same conditions applicable to the Money Market Series. See "Securities
Lending" under Money Market Series above.
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES.
REGULATION OF THE USE OF OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT
STRATEGIES. The adviser or the sub-advisers (for International Multi-Manager
Series) may engage in certain options, futures and forward currency contract
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strategies for certain bona fide hedging, risk management or other portfolio
management purposes. Certain special characteristics of and risks associated
with using these strategies are discussed below. Use of options, futures and
forward currency contracts is subject to applicable regulations and/or
interpretations of the SEC and the several options and futures exchanges upon
which these instruments may be traded. The Board of Trustees has adopted
investment guidelines (described below) reflecting these regulations.
In addition to the products, strategies and risks described below and in the
prospectus, the adviser expects to discover additional opportunities in
connection with options, futures and forward currency contracts. These new
opportunities may become available as new techniques develop, as regulatory
authorities broaden the range of permitted transactions and as new options,
futures and forward currency contracts are developed. These opportunities may be
utilized to the extent they are consistent with each Portfolio's investment
objective and limitations and permitted by applicable regulatory authorities.
The registration statement for the Portfolios will be supplemented to the extent
that new products and strategies involve materially different risks than those
described below and in the prospectus.
COVER REQUIREMENTS. The Series will not use leverage in their options,
futures, and in the case of the International Multi-Manager Series, its forward
currency contract strategies. Accordingly, the Series will comply with
guidelines established by the SEC with respect to coverage of these strategies
by either (1) setting aside cash or liquid, unencumbered, daily marked-to-market
securities in one or more segregated accounts with the custodian in the
prescribed amount; or (2) holding securities or other options or futures
contracts whose values are expected to offset ("cover") their obligations
thereunder. Securities, currencies, or other options or futures contracts used
for cover cannot be sold or closed out while these strategies are outstanding,
unless they are replaced with similar assets. As a result, there is a
possibility that the use of cover involving a large percentage of the Series'
assets could impede portfolio management, or the Series' ability to meet
redemption requests or other current obligations.
OPTIONS STRATEGIES. With the exception of the International
Multi-Manager Series, a Series may purchase and write (sell) only those options
on securities and securities indices that are traded on U.S. exchanges.
Exchange-traded options in the U.S. are issued by a clearing organization
affiliated with the exchange, on which the option is listed, which, in effect,
guarantees completion of every exchange-traded option transaction. The
International Multi-Manager Series may purchase and write (sell) options only on
securities and securities indices that are traded on foreign exchanges.
Each Series may purchase call options on securities in which it is
authorized to invest in order to fix the cost of a future purchase. Call options
also may be used as a means of enhancing returns by, for example, participating
in an anticipated price increase of a security. In the event of a decline in the
price of the underlying security, use of this strategy would serve to limit the
potential loss to the Series to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Series either sells or exercises the option, any profit eventually realized
would be reduced by the premium paid.
Each Series may purchase put options on securities that it holds in
order to hedge against a decline in the market value of the securities held or
to
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enhance return. The put option enables the Series to sell the underlying
security at the predetermined exercise price; thus, the potential for loss to
the Series below the exercise price is limited to the option premium paid. If
the market price of the underlying security is higher than the exercise price of
the put option, any profit the Series realizes on the sale of the security is
reduced by the premium paid for the put option less any amount for which the put
option may be sold.
Each Series may on certain occasions wish to hedge against a decline in
the market value of securities that it holds at a time when put options on those
particular securities are not available for purchase. At those times, the Series
may purchase a put option on other carefully selected securities in which it is
authorized to invest, the values of which historically have a high degree of
positive correlation to the value of the securities actually held. If the
adviser's judgment is correct, changes in the value of the put options should
generally offset changes in the value of the securities being hedged. However,
the correlation between the two values may not be as close in these transactions
as in transactions in which a Series purchases a put option on a security that
it holds. If the value of the securities underlying the put option falls below
the value of the portfolio securities, the put option may not provide complete
protection against a decline in the value of the portfolio securities.
Each Series may write covered call options on securities in which it is
authorized to invest for hedging purposes or to increase return in the form of
premiums received from the purchasers of the options. A call option gives the
purchaser of the option the right to buy, and the writer (seller) the obligation
to sell, the underlying security at the exercise price during the option period.
The strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Series declines, the amount of the decline
will be offset wholly or in part by the amount of the premium received by the
Series. If, however, there is an increase in the market price of the underlying
security and the option is exercised, the Series will be obligated to sell the
security at less than its market value.
Each Series may also write covered put options on securities in which
it is authorized to invest. A put option gives the purchaser of the option the
right to sell, and the writer (seller) the obligation to buy, the underlying
security at the exercise price during the option period. So long as the
obligation of the writer continues, the writer may be assigned an exercise
notice by the broker-dealer through whom such option was sold, requiring it to
make payment of the exercise price against delivery of the underlying security.
The operation of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options. If the put
option is not exercised, the Series will realize income in the amount of the
premium received. This technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the
market price of the underlying securities would decline below the exercise price
less the premiums received, in which case the Series would expect to suffer a
loss.
Each Series may purchase put and call options and write covered put and
call options on indexes in much the same manner as the more traditional options
discussed above, except that index options may serve as a hedge against overall
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fluctuations in the securities markets (or a market sector) rather than
anticipated increases or decreases in the value of a particular security. An
index assigns values to the securities included in the index and fluctuates with
changes in such values. Settlements of index options are effected with cash
payments and do not involve delivery of securities. Thus, upon settlement of an
index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
index. The effectiveness of hedging techniques using index options will depend
on the extent to which price movements in the index selected correlate with
price movements of the securities in which a Series invests. Perfect correlation
is not possible because the securities held or to be acquired by the Series will
not exactly match the composition of indexes on which options are purchased or
written.
Each Series may purchase and write covered straddles on securities or
indexes. A long straddle is a combination of a call and a put purchased on the
same security where the exercise price of the put is less than or equal to the
exercise price on the call. The Series would enter into a long straddle when the
adviser believes that it is likely that prices will be more volatile during the
term of the options than is implied by the option pricing. A short straddle is a
combination of a call and a put written on the same security where the exercise
price on the put is less than or equal to the exercise price of the call where
the same issue of the security is considered "cover" for both the put and the
call. The Series would enter into a short straddle when the adviser believes
that it is unlikely that prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Series will set
aside cash and/or liquid, unencumbered securities in a segregated account with
its custodian equivalent in value to the amount, if any, by which the put is
"in-the-money," that is, that amount by which the exercise price of the put
exceeds the current market value of the underlying security. Because straddles
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Each Series may purchase put and call warrants with values that vary
depending on the change in the value of one or more specified indexes ("index
warrants"). An index warrant is usually issued by a bank or other financial
institution and gives the Series the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment from the issuer
of the warrant based on the value of the underlying index at the time of
exercise. In general, if a Series holds a call warrant and the value of the
underlying index rises above the exercise price of the warrant, the Series will
be entitled to receive a cash payment from the issuer upon exercise based on the
difference between the value of the index and the exercise price of the warrant;
if the Series holds a put warrant and the value of the underlying index falls,
the Series will be entitled to receive a cash payment from the issuer upon
exercise based on the difference between the exercise price of the warrant and
the value of the index. The Series holding a call warrant would not be entitled
to any payments from the issuer at any time when the exercise price is greater
than the value of the underlying index; the Series holding a put warrant would
not be entitled to any payments when the exercise price is less than the value
of the underlying index. If the Series does not exercise an index warrant prior
to its expiration, then the Series loses the amount of the purchase price that
it paid for the warrant.
Each Series will normally use index warrants as it may use index
options. The risks of the Series' use of index warrants are generally similar to
those relating to its use of index options. Unlike most index options, however,
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index warrants are issued in limited amounts and are not obligations of a
regulated clearing agency, but are backed only by the credit of the bank or
other institution which issues the warrant. Also, index warrants generally have
longer terms than index options. Index warrants are not likely to be as liquid
as index options backed by a recognized clearing agency. In addition, the terms
of index warrants may limit the Series' ability to exercise the warrants at any
time or in any quantity.
OPTIONS GUIDELINES. In view of the risks involved in using the options
strategies described above, each Series has adopted the following investment
guidelines to govern its use of such strategies; these guidelines may be
modified by the Board of Trustees without shareholder approval:
(1) each Series will write only covered options, and each
such option will remain covered so long as the Series
is obligated thereby; and
(2) no Series will write options (whether on securities
or securities indexes) if aggregate exercise prices
of previous written outstanding options, together
with the value of assets used to cover all
outstanding positions, would exceed 25% of its total
net assets.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. A Series may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If a Series wishes to terminate its obligation to purchase
or sell securities under a put or a call option it has written, the Series may
purchase a put or a call option of the same series (that is, an option identical
in its terms to the option previously written). This is known as a closing
purchase transaction. Conversely, in order to terminate its right to purchase or
sell specified securities under a call or put option it has purchased, a Series
may sell an option of the same series as the option held. This is known as a
closing sale transaction. Closing transactions essentially permit a Series to
realize profits or limit losses on its options positions prior to the exercise
or expiration of the option. If a Series is unable to effect a closing purchase
transaction with respect to options it has acquired, the Series will have to
allow the options to expire without recovering all or a portion of the option
premiums paid. If a Series is unable to effect a closing purchase transaction
with respect to covered options it has written, the Series will not be able to
sell the underlying securities or dispose of assets used as cover until the
options expire or are exercised, and the Series may experience material losses
due to losses on the option transaction itself and in the covering securities.
In considering the use of options to enhance returns or for hedging
purposes, particular note should be taken of the following:
(1) The value of an option position will reflect, among other
things, the current market price of the underlying security or
index, the time remaining until expiration, the relationship
of the exercise price to the market price, the historical
price volatility of the underlying security or index, and
general market conditions. For this reason, the successful use
of options depends upon the adviser's ability to forecast the
direction of price fluctuations in the underlying securities
markets or, in the case of index
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options, fluctuations in the market sector represented by
the selected index.
(2) Options normally have expiration dates of up to three years.
An American style put or call option may be exercised at any
time during the option period while a European style put or
call option may be exercised only upon expiration or during a
fixed period prior to expiration. The exercise price of the
options may be below, equal to or above the current market
value of the underlying security or index. Purchased options
that expire unexercised have no value. Unless an option
purchased by the Series is exercised or unless a closing
transaction is effected with respect to that position, the
Series will realize a loss in the amount of the premium paid
and any transaction costs.
(3) A position in an exchange-listed option may be closed out only
on an exchange that provides a secondary market for identical
options. Although the Series intends to purchase or write only
those exchange-traded options for which there appears to be a
liquid secondary market, there is no assurance that a liquid
secondary market will exist for any particular option at any
particular time. A liquid market may be absent if: (i) there
is insufficient trading interest in the option; (ii) the
exchange has imposed restrictions on trading, such as trading
halts, trading suspensions or daily price limits; (iii) normal
exchange operations have been disrupted; or (iv) the exchange
has inadequate facilities to handle current trading volume.
(4) With certain exceptions, exchange listed options generally
settle by physical delivery of the underlying security. Index
options are settled exclusively in cash for the net amount, if
any, by which the option is "in-the-money" (where the value of
the underlying instrument exceeds, in the case of a call
option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is
exercised. If the Series writes a call option on an index, the
Series will not know in advance the difference, if any,
between the closing value of the index on the exercise date
and the exercise price of the call option itself and thus will
not know the amount of cash payable upon settlement. If the
Series holds an index option and exercises it before the
closing index value for that day is available, the Series runs
the risk that the level of the underlying index may
subsequently change.
(5) A Series' activities in the options markets may result in a
higher Series turnover rate and additional brokerage costs;
however, the Series also may save on commissions by using
options as a hedge rather than buying or selling individual
securities in anticipation of, or as a result of, market
movements.
FUTURES AND RELATED OPTIONS STRATEGIES. Each Series may engage in
futures strategies for certain non-trading bona fide hedging, risk management
and portfolio management purposes.
Each Series may sell securities index futures contracts in anticipation
of a general market or market sector decline that could adversely affect the
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market value of the Series' securities holdings. To the extent that a portion of
a Series' holdings correlate with a given index, the sale of futures contracts
on that index could reduce the risks associated with a market decline and thus
provide an alternative to the liquidation of securities positions. For example,
if a Series correctly anticipates a general market decline and sells index
futures to hedge against this risk, the gain in the futures position should
offset some or all of the decline in the value of the Series' holdings. A Series
may purchase index futures contracts if a significant market or market sector
advance is anticipated. Such a purchase of a futures contract would serve as a
temporary substitute for the purchase of the underlying securities, which may
then be purchased, in an orderly fashion. This strategy may minimize the effect
of all or part of an increase in the market price of securities that a Series
intends to purchase. A rise in the price of the securities should be in part or
wholly offset by gains in the futures position.
As in the case of a purchase of an index futures contract, a Series may
purchase a call option on an index futures contract to hedge against a market
advance in securities that the Series plans to acquire at a future date. The
Series may write covered put options on index futures as a partial anticipatory
hedge, and may write covered call options on index futures as a partial hedge
against a decline in the prices of securities held by the Series. This is
analogous to writing covered call options on securities. The Series also may
purchase put options on index futures contracts. The purchase of put options on
index futures contracts is analogous to the purchase of protective put options
on individual securities where a level of protection is sought below which no
additional economic loss would be incurred by the Series.
The International Multi-Manager Series may sell foreign currency
futures contracts to hedge against possible variations in the exchange rates of
foreign currencies in relation to the U.S. dollar. In addition, the Series may
sell foreign currency futures contracts when a sub-adviser anticipates a general
weakening of foreign currency exchange rates that could adversely affect the
market values of the Series' foreign securities holdings. In this case, the sale
of futures contracts on the underlying currency may reduce the risk to the
Series of a reduction in market value caused by foreign currency exchange rate
variations and, by so doing, provide an alternative to the liquidation of
securities positions and resulting transaction costs. When a sub-adviser
anticipates a significant foreign currency exchange rate increase while
intending to invest in a security denominated in that currency, the Series may
purchase a foreign currency futures contract to hedge against that increase
pending completion of the anticipated transaction. Such a purchase would serve
as a temporary measure to protect the Series against any rise in the foreign
exchange rate that may add additional costs to acquiring the foreign security
position. The Series may also purchase call or put options on foreign currency
futures contracts to obtain a fixed foreign exchange rate at limited risk. The
Series may purchase a call option on a foreign currency futures contract to
hedge against a rise in the foreign exchange rate while intending to invest in a
security denominated in that currency. The Series may purchase put options on
foreign currency futures contracts as a partial hedge against a decline in the
foreign exchange rates or the value of its foreign portfolio securities. The
Series may write a call option on a foreign currency futures contract as a
partial hedge against the effects of declining foreign exchange rates on the
value of foreign securities.
FUTURES AND RELATED OPTIONS GUIDELINES. In view of the risks involved
in using the futures strategies that are described above, each Series has
adopted
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the following investment guidelines to govern its use of such strategies. The
Board of Trustees may modify these guidelines without shareholder vote.
(1) The Series will engage only in covered futures transactions,
and each such transaction will remain covered so long as the
Series is obligated thereby.
(2) The Series will not write options on futures contracts if
aggregate exercise prices of previously written outstanding
options (whether on securities or securities indexes),
together with the value of assets used to cover all
outstanding futures positions, would exceed 25% of its total
net assets.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS
TRADING. No price is paid upon entering into a futures contract. Instead, upon
entering into a futures contract, a Series is required to deposit with its
custodian, in a segregated account in the name of the futures broker through
whom the transaction is effected, an amount of cash, U.S. Government securities
or other liquid instruments generally equal to 10% or less of the contract
value. This amount is known as "initial margin." When writing a call or a put
option on a futures contract, margin also must be deposited in accordance with
applicable exchange rules. Unlike margin in securities transactions, initial
margin on futures contracts does not involve borrowing to finance the futures
transactions. Rather, initial margin on a futures contract is in the nature of a
performance bond or good-faith deposit on the contract that is returned to a
Series upon termination of the transaction, assuming all obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, a
Series may be required by a futures exchange to increase the level of its
initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures or options position varies, a process known as "marking
to market." For example, when a Series purchases a contract and the value of the
contract rises, the Series receives from the broker a variation margin payment
equal to that increase in value. Conversely, if the value of the futures
position declines, a Series is required to make a variation margin payment to
the broker equal to the decline in value. Variation margin does not involve
borrowing to finance the futures transaction, but rather represents a daily
settlement of a Series' obligations to or from a clearing organization.
Buyers and sellers of futures positions and options thereon can enter
into offsetting closing transactions, similar to closing transactions on options
on securities, by selling or purchasing an offsetting contract or option.
Futures contracts or options thereon may be closed only on an exchange or board
of trade providing a secondary market for such futures contracts or options.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures contract or related option may
vary either up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. The daily limit governs only price movements
during a particular trading day and therefore does not limit potential losses,
because prices could move to the daily limit for several consecutive trading
days with little or no trading and thereby prevent prompt liquidation of
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unfavorable positions. In such event, it may not be possible for the Series to
close a position and, in the event of adverse price movements, the Series would
have to make daily cash payments of variation margin (except in the case of
purchased options). However, if futures contracts have been used to hedge
portfolio securities, such securities will not be sold until the contracts can
be terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.
In considering a Series' use of futures contracts and related options,
particular note should be taken of the following:
(1) Successful use by a Series of futures contracts and related
options will depend upon the adviser's ability to predict
movements in the direction of the securities markets, which
requires different skills and techniques than predicting changes
in the prices of individual securities. Moreover, futures
contracts relate not only to the current price level of the
underlying securities, but also to anticipated price levels at
some point in the future. There is, in addition, the risk that
the movements in the price of the futures contract will not
correlate with the movements in the prices of the securities
being hedged. For example, if the price of an index futures
contract moves less than the price of the securities that are the
subject of the hedge, the hedge will not be fully effective, but
if the price of the securities being hedged has moved in an
unfavorable direction, a Series would be in a better position
than if it had not hedged at all. If the price of the securities
being hedged has moved in a favorable direction, the advantage
may be partially offset by losses in the futures position. In
addition, if a Series has insufficient cash, it may have to sell
assets to meet daily variation margin requirements. Any such sale
of assets may or may not be made at prices that reflect a rising
market. Consequently, a Series may need to sell assets at a time
when such sales are disadvantageous to the Series. If the price
of the futures contract moves more than the price of the
underlying securities, a Series will experience either a loss or
a gain on the futures contract that may or may not be completely
offset by movements in the price of the securities that are the
subject of the hedge.
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in
the futures position and the securities being hedged, movements
in the prices of futures contracts may not correlate perfectly
with movements in the prices of the hedged securities due to
price distortions in the futures market. There may be several
reasons unrelated to the value of the underlying securities that
cause this situation to occur. First, as noted above, all
participants in the futures market are subject to initial and
variation margin requirements. If, to avoid meeting additional
margin deposit requirements or for other reasons, investors
choose to close a significant number of futures contracts through
offsetting transactions, distortions in the normal price
relationship between the securities and the futures markets may
occur. Second, because the margin deposit requirements in the
futures market are less
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onerous than margin requirements in the securities market, there
may be increased participation by speculators in the futures
market. Such speculative activity in the futures market also may
cause temporary price distortions. As a result, a correct
forecast of general market trends may not result in successful
hedging through the use of futures contracts over the short term.
In addition, activities of large traders in both the futures and
securities markets involving arbitrage and other investment
strategies may result in temporary price distortions.
(3) Positions in futures contracts may be closed out only on an
exchange or board of trade that provides a secondary market for
such futures contracts. Although each Series intends to purchase
and sell futures only on exchanges or boards of trade where there
appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange or board of trade
will exist for any particular contract at any particular time. In
such event, it may not be possible to close a futures position,
and in the event of adverse price movements, a Series would
continue to be required to make variation margin payments.
(4) Like options on securities, options on futures contracts have
limited life. The ability to establish and close out options on
futures will be subject to the development and maintenance of
liquid secondary markets on the relevant exchanges or boards of
trade. There can be no certainty that such markets for all
options on futures contracts will develop.
(5) Purchasers of options on futures contracts pay a premium in cash
at the time of purchase. This amount and the transaction costs
are all that is at risk. Sellers of options on futures contracts,
however, must post initial margin and are subject to additional
margin calls that could be substantial in the event of adverse
price movements. In addition, although the maximum amount at risk
when the Series purchases an option is the premium paid for the
option and the transaction costs, there may be circumstances when
the purchase of an option on a futures contract would result in a
loss to the Series when the use of a futures contract would not,
such as when there is no movement in the level of the underlying
index value or the securities or currencies being hedged.
(6) As is the case with options, a Series' activities in the futures
markets may result in a higher portfolio turnover rate and
additional transaction costs in the form of added brokerage
commissions. However, a Series also may save on commissions by
using futures contracts or options thereon as a hedge rather than
buying or selling individual securities in anticipation of, or as
a result of, market movements.
HEDGING STRATEGIES. The International Multi-Manager Series'
sub-advisers may use forward currency contracts, options and futures contracts
and related options to attempt to hedge securities held by the Series. There can
be no assurance that such efforts will succeed. Hedging strategies, if
successful, can reduce risk of loss by wholly or partially offsetting the
negative effect of unfavorable price movements in the investments being hedged.
However,
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hedging strategies can also reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the hedged investment.
The International Multi-Manager Series may enter into forward currency
contracts either with respect to specific transactions or with respect to the
Series' positions. When WTC or a sub-adviser believes that a particular currency
may decline compared to the U.S. dollar, the Series may enter into a forward
contract to sell the currency that the adviser or the sub-adviser expects to
decline in an amount approximating the value of some or all of the Series'
securities denominated in that currency. Such contracts may only involve the
sale of a foreign currency against the U.S. dollar. In addition, when the Series
anticipates purchasing or selling a security, it may enter into a forward
currency contract in order to set the rate (either relative to the U.S. dollar
or another currency) at which a currency exchange transaction related to the
purchase or sale will be made.
The International Multi-Manager Series also may sell (write) and
purchase put and call options and futures contracts and related options on
foreign currencies to hedge against movements in exchange rates relative to the
U.S. dollar. In addition, the Series may write and purchase put and call options
on securities and stock indexes to hedge against the risk of fluctuations in the
prices of securities held by the Series or which the adviser or a sub-adviser
intends to include in the portfolio. Stock index options serve to hedge against
overall fluctuations in the securities markets rather than anticipated increases
or decreases in the value of a particular security. The Series also may sell and
purchase stock index futures contracts and related options to protect against a
general stock market decline that could adversely affect the Series' securities
or to hedge against a general stock market or market sector advance to lessen
the cost of future securities acquisitions. The Series may use interest rate
futures contracts and related options thereon to hedge the debt portion of its
portfolio against changes in the general level of interest rates.
The International Multi-Manager Series will not enter into an options, futures
or forward currency contract transaction that exposes the Series to an
obligation to another party unless the Series either (i) owns an offsetting
("covered") position in securities, currencies, options, futures or forward
currency contracts or (ii) has cash, receivables and liquid securities with a
value sufficient at all times to cover its potential obligations to the extent
not covered as provided in (i) above.
SPECIAL RISKS RELATED TO FOREIGN CURRENCY OPTIONS AND FUTURES CONTRACTS
Options and futures contracts on foreign currencies are affected by all
of those factors that influence foreign exchange rates and investments
generally. The value of a foreign currency option or futures contract depends
upon the value of the underlying currency relative to the U.S. dollar. As a
result, the price of the International Multi-Manager Series' position in a
foreign currency option or currency contract may vary with changes in the value
of either or both currencies and may have no relationship to the investment
merits of a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that may be
involved in the use of foreign currency options or futures transactions,
investors may be disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) at prices that are less
favorable than for round lots.
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There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(that is, less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options or futures markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options or
futures markets until they reopen.
As with other options and futures positions, the International
Multi-Manager Series' ability to establish and close out such positions in
foreign currencies is subject to the maintenance of a liquid secondary market.
Trading of some such positions is relatively new. Although the Series will not
purchase or write such positions unless and until, in the adviser's or the
sub-adviser's opinion, the market for them has developed sufficiently to ensure
that the risks in connection with such positions are not greater than the risks
in connection with the underlying currency, there can be no assurance that a
liquid secondary market will exist for a particular option or futures contract
at any specific time. Moreover, the Series will not enter into OTC options that
are illiquid if, as a result, more than 15% of its net assets would be invested
in illiquid securities.
Settlement of a foreign currency futures contract must occur within the
country issuing the underlying currency. Thus, the Series must accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign banking
arrangements by U.S. residents, and it may be required to pay any fees, taxes
and charges associated with such delivery that are assessed in the issuing
country.
FORWARD CURRENCY CONTRACTS. The International Multi-Manager Series may
use forward currency contracts to protect against uncertainty in the level of
future foreign currency exchange rates.
The Series may enter into forward currency contracts with respect to
specific transactions. For example, when the Series enters into a contract for
the purchase or sale of a security denominated in a foreign currency or
anticipates the receipt in a foreign currency of dividend or interest payments
on a security that it holds or anticipates purchasing, the Series may desire to
"lock in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such payment, as the case may be, by entering into a forward contract for the
sale, for a fixed amount of U.S. dollars, of the amount of foreign currency
involved in the underlying transaction. The Series will thereby be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between the
date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Series also may hedge by using forward currency contracts in
connection with portfolio positions to lock in the U.S. dollar value of those
positions or to increase its exposure to foreign currencies that the adviser or
the sub-advisers believe may rise in value relative to the U.S. dollar. For
example, when the adviser or the sub-advisers believe that the currency of a
particular foreign country may suffer a substantial decline relative to the
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U.S. dollar, it may enter into a forward contract to sell the amount of the
former foreign currency approximating the value of some or all of the Series'
securities holdings 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 because 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. Accordingly, it may be necessary for
the Series to purchase additional foreign currency on the spot (that is, cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Series is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the security holding if
the market value of the security exceeds the amount of foreign currency the
Series is obligated to deliver. The projection of short-term currency market
movements is extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements might not be accurately predicted, causing the
Series to sustain losses on these contracts and transaction costs. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the longer-term investment decisions made with regard to
overall diversification strategies. However, the adviser and the sub-advisers
believe that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Series will be
served.
At or before the maturity date of a forward contract requiring the
Series to sell a currency, the Series may either sell a security holding and use
the sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Series will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, the
Series may close out a forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. The Series
would realize a gain or loss as a result of entering into such an offsetting
forward currency contract under either circumstance to the extent the exchange
rate or rates between the currencies involved moved between the execution dates
of the first contract and the offsetting contract.
The cost to the Series of engaging in forward currency contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved. The use of forward currency contracts does not eliminate fluctuations
in the prices of the underlying securities the Series owns or intends to
acquire, but it does fix a rate of exchange in advance. In addition, although
forward currency contracts limit the risk of loss due to a decline in the value
of the hedged currencies, at the same time they limit any potential gain that
might result should the value of the currencies increase.
Although the Series values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Series may convert foreign currency from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference between the prices at which they are
buying and
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selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Series at one rate, while offering a lesser rate of exchange should the
Series desire to resell that currency to the dealer.
DESCRIPTION OF RATINGS.
Moody's and S&P are private services that provide ratings of the credit
quality of debt obligations. A description of the ratings assigned by Moody's
and S&P to the securities in which the Portfolios' corresponding Series may
invest is discussed below. These ratings represent the opinions of these rating
services as to the quality of the securities that they undertake to rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. The advisers and sub-advisers attempt to discern
variations in credit rankings of the rating services and to anticipate changes
in credit ranking. However, subsequent to purchase by a Series, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Series. In that event, an adviser or
sub-adviser will consider whether it is in the best interest of the Series to
continue to hold the securities.
MOODY'S RATINGS
CORPORATE AND MUNICIPAL BONDS.
Aaa: Bonds that 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 edged." 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 that 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 fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds that 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 some time in the future.
Baa: Bonds that 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.
CORPORATE AND MUNICIPAL COMMERCIAL PAPER. The highest rating for
corporate and municipal commercial paper is "P-1" (Prime-1). Issuers rated P-1
(or supporting institutions) have a superior ability for repayment of senior
short-term debt obligations. P-1 repayment ability will often be evidenced by
many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
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- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
MUNICIPAL NOTES. The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2" and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3"
in the case of an issue having a variable-rate demand feature). Notes rated "MIG
1" or "VMIG 1" are judged to be of the best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing. Notes rated "MIG 2" or "VMIG 2"
are of high quality, with margins of protection that are ample although not so
large as in the preceding group. Notes rated "MIG 3" or "VMIG 3" are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow protection
may be narrow, and market access for refinancing is likely to be less well
established.
S&P RATINGS
CORPORATE AND MUNICIPAL BONDS.
AAA: Bonds rated AAA are highest grade debt obligations. This rating
indicates an extremely strong capacity to pay interest and repay principal.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from AAA issues only in small degree.
A: Bonds rated A have a 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 debt in this category than in higher rated categories.
CORPORATE AND MUNICIPAL COMMERCIAL PAPER. The "A-1" rating for
corporate and municipal commercial paper indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics will be rated "A-1+."
MUNICIPAL NOTES. The "SP-1" rating reflects a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be rated "SP-1+." The "SP-2" rating
reflects a satisfactory capacity to pay principal and interest.
FITCH RATINGS
DESCRIPTION OF FITCH'S HIGHEST STATE AND MUNICIPAL NOTES RATING.
AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
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repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA.
F-1+ - Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 - Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
(C) FUND POLICIES. Except as otherwise provided, each Series has adopted the
investment limitations set forth below. Limitations which are designated as
fundamental policies may not be changed without the affirmative vote of the
lessor of (i) 67% or more of the shares of a Series present at a shareholders
meeting if holders of more than 50% of the outstanding shares of the Series are
present in person or by proxy or (ii) more than 50% of the outstanding shares of
a Series. If any percentage restriction on investment or utilization of assets
is adhered to at the time an investment is made, a later change in percentage
resulting from a change in the market values of a Series' assets or redemptions
of shares will not be considered a violation of the limitation.
MONEY MARKET SERIES.
Each Money Market Series will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more
than 5% of the Series' total assets would be invested in the
securities of such issuer, or the Series would own or hold 10% or
more of the outstanding voting securities of that issuer, provided
that (1) each Series may invest up to 25% of its total assets
without regard to these limitations; and (2) these limitations do
not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
2. purchase the securities of any issuer if, as a result, more than
25% of the Series' total assets would be invested in the
securities of one or more issuers having their principal business
activities in the same industry, provided, that each of the Prime
Money Market and Premier Money Market Series may invest more than
25% of its total assets in the obligations of banks;
3. borrow money, except (1) from a bank for temporary or emergency
purposes (not for leveraging or investment) or (2) by engaging in
reverse repurchase agreements if the Series' borrowings do not
exceed an amount equal to 33 1/3% of the current value of its
assets taken at market value, less liabilities other than
borrowings;
4. make loans to other persons, except by (1) purchasing debt
securities in accordance with its investment objective, policies
and limitations; (2) entering into repurchase agreements; or (3)
engaging in securities
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loan transactions limited to 33 1/3% of the value of the Series'
total assets;
5. underwrite any issue of securities, except to the extent that the
Series may be considered to be acting as underwriter in connection
with the disposition of any portfolio security;
6. purchase or sell real estate, provided that the Series may invest
in obligations secured by real estate or interests therein or
obligations issued by companies that invest in real estate or
interests therein;
7. purchase or sell physical commodities or contracts, provided that
currencies and currency-related contracts will not be deemed
physical commodities; or
8. issue senior securities, except as appropriate to evidence
indebtedness that the Series is permitted to incur, provided that
the Series' use of options, futures contracts and options thereon
or currency-related contracts will not be deemed to be senior
securities for this purpose.
With respect to the exclusion from the investment limitation described
in number 2 above, the Trust has been advised that it is the SEC staff's current
position, that the exclusion may be applied only to U.S. bank obligations; the
Prime Money Market and Premier Money Market Series, however, will consider both
foreign and U.S.
bank obligations within this exclusion.
The following non-fundamental policies apply to each Money Market
Series unless otherwise indicated, and the Board of Trustees may change them
without shareholder approval.
No Series will:
1. make short sales of securities except short sales against the box;
2. purchase securities on margin except for the use of short-term
credit necessary for the clearance of purchases and sales of
portfolio securities;
3. purchase portfolio securities if its outstanding borrowings exceed
5% of the value of its total assets, and if at any time the
Series' bank borrowings exceed its fundamental borrowing
limitations due to a decline in net assets, such borrowings will
be promptly (within 3 days) reduced to the extent necessary to
comply with such limitations;
4. make loans of portfolio securities unless such loans are fully
collateralized by cash, securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or any
combination of cash and securities, marked to market daily; or
5. with respect to the U.S. Government, Prime Money Market and
Premier Money Market Series only, purchase the securities of any
one issuer if as a result more than 5% of the Series' total assets
would be invested in the securities of such issuer, provided that
this limitation does not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
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BOND SERIES.
Each Bond Series will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more
than 5% of the Series' total assets would be invested in the
securities of such issuer, or the Series would own or hold 10% or
more of the outstanding voting securities of that issuer, provided
that (1) each Series may invest up to 25% of its total assets
without regard to these limitations; and (2) these limitations do
not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
2. purchase the securities of any issuer if, as a result, more than
25% of the Series' total assets would be invested in the
securities of one or more issuers having their principal business
activities in the same industry, provided that this limitation
does not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including
repurchase agreements fully collateralized by U.S. Government
obligations) or to tax-exempt municipal securities;
3. borrow money, provided that the Series may borrow money from banks
for temporary or emergency purposes (not for leveraging or
investment) or by engaging in reverse repurchase agreements if the
Series' borrowings do not exceed an amount equal to 33 1/3% of the
current value of its assets taken at market value, less
liabilities other than borrowings;
4. make loans to other persons, except by (1) purchasing debt
securities in accordance with its investment objective, policies
and limitations; (2) entering into repurchase agreements; or (3)
engaging in securities loan transactions limited to 33 1/3% of the
value of the Series' total assets;
5. underwrite any issue of securities, except to the extent that the
Series may be considered to be acting as underwriter in connection
with the disposition of any portfolio security;
6. purchase or sell real estate or real estate limited partnership
interests, provided that the Series may invest in obligations
secured by real estate or interests therein or obligations issued
by companies that invest in real estate or interests therein,
including real estate investment trusts;
7. purchase or sell physical commodities or commodities contracts
except financial and foreign currency futures contracts and
options thereon, options on foreign currencies and forward
currency contracts; or
8. issue senior securities, except as appropriate to evidence
indebtedness that the Series is permitted to incur, provided that
futures, options and forward currency transactions will not be
deemed to be senior securities for purposes of this limitation.
The following non-fundamental policies apply to each Series and may
be changed by the Board of Trustees without shareholder approval. Each Series
will not:
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1. pledge, mortgage or hypothecate its assets, except the Series may
pledge securities having a market value at the time of the pledge
not exceeding 33 1/3% of the value of its total assets to secure
borrowings, and the Series may deposit initial and variation
margin in connection with transactions in futures contracts and
options on futures contracts;
2. make short sales of securities except short sales against the box;
3. purchase securities on margin except for the use of short-term
credit necessary for the clearance of purchases and sales of
portfolio securities, provided that the Series may make initial
and variation margin deposits in connection with permitted
transactions in options or futures;
4. purchase portfolio securities if its outstanding borrowings exceed 5% of
the value of its total assets;
5. when engaging in options, futures and forward currency contract
strategies, a Series will either: (1) set aside cash or liquid
securities in a segregated account with the Fund's custodian in
the prescribed amount; or (2) hold securities or other options or
futures contracts whose values are expected to offset ("cover")
its obligations thereunder. Securities, currencies or other
options or futures contracts used for cover cannot be sold or
closed out while the strategy is outstanding, unless they are
replaced with similar assets;
6. purchase or sell non-hedging futures contracts or related options
if aggregate initial margin and premiums required to establish
such positions would exceed 5% of the Series' total assets. For
purposes of this limitation, unrealized profits and unrealized
losses on any open contracts are taken into account, and the
in-the-money amount of an option that is in-the-money at the time
of purchase is excluded; or
7. write put or call options having aggregate exercise prices greater
than 25% of the Series' net assets, except with respect to options
attached to or acquired with or traded together with their
underlying securities and securities that incorporate features
similar to options.
EQUITY SERIES.
Each Equity Series will not as a matter of fundamental policy:
1. purchase the securities of any one issuer, if as a result, more than
5% of the Series' total assets would be invested in the securities of
such issuer, or the Series would own or hold 10% or more of the
outstanding voting securities of that issuer, provided that (1) each
Series may invest up to 25% of its total assets without regard to these
limitations; (2) these limitations do not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities; and
(3) for the WT Large Cap Growth, Large Cap Growth, Large Cap Core, Small
Cap Core and International Multi-Manager Series, repurchase agreements
fully collateralized by U.S. Government obligations will be treated as
U.S. Government obligations; (This restriction does not apply to the
Science and Technology Series.)
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2. purchase securities of any issuer if, as a result, more than 25% of the
Series' total assets would be invested in the securities of one or more
issuers having their principal business activities in the same industry,
provided, that (1) for the Large Cap Value, Small Cap Value and Mid Cap
Value Series, this limitation does not apply to investments in short-term
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (2) the Large Cap Growth, WT Large Cap Growth,
Large Cap Core, Small Cap Core and International Multi-Manager Series, this
limitation does not apply to debt obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities; (This restriction
does not apply to the Science and Technology Series.)
3. borrow money, provided that (1) each of the Large Cap Value, Small
Cap Value and Mid Cap Value Series may borrow money for temporary
or emergency purposes, including the meeting of redemption
requests, in amounts up to 33 1/3% of a Series' assets; and (2)
each of the Large Cap Growth, WT Large Cap Growth, Large Cap Core,
Small Cap Core, International Multi-Manager Series, Socially
Responsible Series, Science and Technology Series and Mid Cap
Series may borrow money for temporary or emergency purposes, and
then in an aggregate amount not in excess of 10% of a Series'
total assets;
4. make loans to other persons, except by (1) purchasing debt
securities in accordance with its investment objective, policies
and limitations; (2) entering into repurchase agreements; or (3)
engaging in securities loan transactions;
5. underwrite any issue of securities, except to the extent that the
Series may be considered to be acting as underwriter in connection
with the disposition of any portfolio security;
6. purchase or sell real estate, provided that (1) the Large Cap Value,
Small Cap Value and Mid Cap Value Series additionally may not invest
in any interest in real estate except securities issued or guaranteed by
corporate or governmental entities secured by real estate or interests
therein, such as mortgage pass-throughs and collateralized mortgage
obligations, or issued by companies that invest in real estate or
interests therein; and (2) the Large Cap Growth, WT Large Cap Growth,
Large Cap Core, Small Cap Core, International Multi-Manager Series, Mid
Cap Series, Science and Technology Series, and Socially Responsible
Series each may invest in obligations secured by real estate or interests
therein or obligations issued by companies that invest in real estate or
interests therein, including real estate investment trusts;
7. purchase or sell physical commodities, provided that (1) the Large
Cap Value, Small Cap Value and Mid Cap Value Series additionally
are restricted from purchasing or selling contracts, options or
options on contracts to purchase or sell physical commodities and
(2) the Large Cap Growth, WT Large Cap Growth, Large Cap Core,
Small Cap Core, International Multi-Manager Series. Mid Cap
Series, Science and Technology Series, and Socially Responsible
Series each may invest in purchase, sell or enter into financial
options and futures, forward and spot currency contracts, swap
transactions and other derivative financial instruments; or
64
<PAGE>
8. issue senior securities, except to the extent permitted by the
1940 Act, provided that each of the Large Cap Value, Small Cap
Value and Mid Cap Value Series may borrow money subject to its
investment limitation on borrowing.
The following non-fundamental policies apply to each Series unless
otherwise indicated, and the Board of Trustees may change them without
shareholder approval. Each Series will not:
1. pledge, mortgage or hypothecate its assets except to secure indebtedness
permitted to be incurred by the Series, provided that (1) this limitation
does not apply to the Large Cap Growth, WT Large Cap Growth, Large Cap
Core, Small Cap Core Series, Mid Cap Series, Science and Technology
Series, and Socially Responsible Series; and (2) with respect to the
Large Cap Value, Small Cap Value, Mid Cap Value and International
Multi-Manager Series, the deposit in escrow of securities in connection
with the writing of put and call options, collateralized loans of
securities and collateral arrangements with respect to margin for future
contracts are not deemed to be pledges or hypothecations for this purpose;
2. make short sales of securities except short sales against the box;
3. purchase securities on margin except for the use of short-term
credit necessary for the clearance of purchases and sales of
portfolio securities, provided that Large Cap Value, Small Cap
Value and Mid Cap Value Series may make initial and variation
margin deposits in connection with permitted transactions in
options without violating this limitation;
4. purchase portfolio securities if its outstanding borrowings exceed
5% of the value of its total assets, provided that (1) the Large
Cap Value, Small Cap Value and Mid Cap Value Series may not borrow
for purposes other than meeting redemptions in an amount exceeding
5% of the value of its total assets at the time the borrowing is
made.
(d) TEMPORARY DEFENSIVE MEASURES. Each of the Equity Series except Small
Cap Core Series and International Multi Manager Series is permitted to take a
temporary defensive position by investing without limit in commercial paper
and other money market instruments rated in one of the two highest ratings
categories by a NRSRO.
(e) PORTFOLIO TURNOVER. Series turnover rates for the past 2 years, (or since
inception, if applicable) were:
<TABLE>
<CAPTION>
12 Months Ended 12 Months Ended
6/30/99 6/30/00
--------------- ---------------
<S> <C> <C>
Short/Intermediate Bond 47.23% 34.40%
Intermediate Bond 53.23% 36.22%
Municipal Bond 50.26% 23.93%
Large Cap Growth 111.49% 32.48%
Large Cap Core 11.52% 5.19%
Small Cap Core 46.80% 22.97%
Large Cap Value 136.45% 67.05%
Mid Cap Value 274.00% 118.00%
Small Cap Value 96.00% 64.00%
International Multi-Manager 78.24% 67.05%
</TABLE>
ITEM 13. MANAGEMENT OF THE FUND.
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<PAGE>
(a) BOARD OF DIRECTORS. The Board of Trustees supervises the Series'
activities and reviews contractual arrangements with the Series' service
providers.
(b-c) MANAGEMENT INFORMATION. The Trustees and officers are listed below.
All persons named as Trustees and officers also serve in a similar capacity
for WT Mutual Fund. An asterisk (*) indicates those Trustees who are
"interested persons".
<TABLE>
<CAPTION>
---------------------------------------- -------------------- -----------------------------------------------------------
NAME, ADDRESS AND POSITION(S) HELD
DATE OF BIRTH WITH THE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
---------------------------------------- -------------------- -----------------------------------------------------------
<S> <C> <C>
ROBERT ARNOLD Trustee In 1989, Mr. Arnold founded, and currently co-manages,
152 W. 57th Street, 44th Floor R. H. Arnold & Co., Inc., an investment banking company.
New York, NY 10019 Prior to forming R. H. Arnold & Co., Inc., Mr. Arnold was
Date of Birth: 3/44 Executive Vice President and a director to Cambrian
Capital Corporation, an investment banking firm he
co-founded in 1987.
---------------------------------------- -------------------- -----------------------------------------------------------
ROBERT J. CHRISTIAN* Trustee, Mr. Christian has been Chief Investment Officer of
Rodney Square North President Wilmington Trust Company since February 1996 and Director
1100 N. Market Street of Rodney Square Management Corporation since 1996. He
Wilmington, DE 19890 was Chairman and Director of PNC Equity Advisors Company,
Date of Birth: 2/49 and President and Chief Investment Officer of PNC Asset
Management Group Inc. from 1994 to 1996. He was Chief
Investment Officer of PNC Bank from 1992 to 1996 and
Director of Provident Capital Management from 1993 to
1996.
---------------------------------------- -------------------- -----------------------------------------------------------
NICHOLAS A. GIORDANO Trustee Mr. Giordano served as interim President of LaSalle
LaSalle University University from July 1, 1998 to June 1999, and was a
Philadelphia, PA 19141 consultant for financial services organizations from late
Date of Birth: 3/43 1997 through 1998. He served as president and chief
executive officer of the Philadelphia Stock Exchange from
1981 through August 1997, and also served as chairman of
the board of the exchange's two subsidiaries: Stock
Clearing Corporation of Philadelphia and Philadelphia
Depository Trust Company. Before joining the
Philadelphia Stock Exchange, Mr. Giordano served as chief
financial officer at two brokerage firms (1968-1971). A
certified public accountant, he began his career at Price
Waterhouse in 1965.
---------------------------------------- -------------------- -----------------------------------------------------------
JOHN J. QUINDLEN Trustee Mr. Quindlen has retired as Senior Vice President -
313 Southwinds Finance of E.I. duPont de Nemours & Company, Inc.
1250 W. Southwinds Blvd. (diversified chemicals), a position held from 1984 to
Vero Beach, FL 32963
---------------------------------------- -------------------- -----------------------------------------------------------
66
<PAGE>
---------------------------------------- -------------------- -----------------------------------------------------------
Date of Birth: 5/32 November 30, 1993. He served as Chief Financial Officer
of E.I. duPont de Nemours & Company from 1984 through
June 1993. He also serves as a Director of St. Joe Paper
Co. and as a Trustee of Kalmar Pooled Investment Trust.
---------------------------------------- -------------------- -----------------------------------------------------------
LOUIS KLEIN, JR. Trustee Self employed financial consultant from 1991 to the
80 Butternut Lane present. Trustee of Manville Personal Injury Settlement
Stamford, CT 06903 Trust since 1991.
Date of Birth: 5/35
---------------------------------------- -------------------- -----------------------------------------------------------
CLEMENT C. MOORE, II Trustee Managing Partner, Mariemont Holdings, LLC, a commercial
10 Rockefeller Plaza real estate holding and development company since 1980.
New York, NY 10004
Date of Birth: 9/44
---------------------------------------- -------------------- -----------------------------------------------------------
ERIC BRUCKER Trustee Dean of the College of Business, Public Policy and Health
University of Maine at the University of Maine since September 1998. Dean of
Orono, ME 04469 the School of Management at the University of Michigan
Date of Birth: 12/41 from 1992 to 1998.
---------------------------------------- -------------------- -----------------------------------------------------------
WILLIAM P. RICHARDS, JR.* Trustee Managing Director - Client Service and Portfolio
100 Wilshire Boulevard Communication, Roxbury Capital Management since 1998.
Suite 600 Formerly, Senior Vice President and Partner at Van
Santa Monica, CA 90401 Deventer, Hoch an investment management firm. Prior to
Date of Birth: 11/36 that, he was with the consulting firm Booz, Allen and
Hamilton.
---------------------------------------- -------------------- -----------------------------------------------------------
(a) ERIC K. CHEUNG Vice President From 1978 to 1986, Mr. Cheung was the Portfolio Manager
Rodney Square North for fixed income assets of the Meritor Financial Group.
1100 N. Market Street In 1986, Mr. Cheung joined Wilmington Trust Company and
Wilmington, DE 19890 in 1991, he became the Division Manager for all fixed
Date of Birth: 12/54 income products.
---------------------------------------- -------------------- -----------------------------------------------------------
JOHN R. GILES Vice President From 1991 to 1996, Mr. Giles was employed by Consistent
Rodney Square North Asset Management Company; From April 1996 to the
1100 N. Market Street present, Mr. Giles has been employed by Wilmington Trust
Wilmington, DE 19890 Company and serves as Vice President.
Date of Birth: __/__
---------------------------------------- -------------------- -----------------------------------------------------------
FRED FILOON Vice President Fred M. Filoon is a Senior Vice President and Principal
520 Madison Avenue at Cramer Rosenthal McGlynn, LLC. Prior to joining CRM in
New York, NY 10022 1989, Fred was Vice President and Portfolio Manager at
Date of Birth: __/__ Alliance Capital Management. Subsequently, he was a Vice
President and Senior Portfolio Manager for Morgan Stanley
Asset Management. He received his BA from Bowdoin College.
---------------------------------------- -------------------- -----------------------------------------------------------
PAT COLLETTI Vice President and Mr. Colletti is Vice President and Director of Investment
400 Bellevue Parkway Treasurer Accounting and Administration of PFPC Inc. since April
Wilmington, DE 19809 1999. Prior to joining PFPC, Mr. Colletti was Controller
Date of Birth: 11/58 for the Reserve
---------------------------------------- -------------------- -----------------------------------------------------------
67
<PAGE>
---------------------------------------- -------------------- -----------------------------------------------------------
Funds since 1986.
---------------------------------------- -------------------- -----------------------------------------------------------
GARY M. GARDNER Secretary Mr. Gardner has been a Senior Vice President of PFPC Inc.
400 Bellevue Parkway since January 1994. Previously, Mr. Gardner had provided
Wilmington, DE 19809 legal and regulatory advice to mutual funds and their
Date of Birth: 2/51 management for more than twenty years at Federated
Investors, Inc., SunAmerica Asset Management Corp. and
The Boston Company, Inc.
---------------------------------------- -------------------- -----------------------------------------------------------
</TABLE>
(d) COMPENSATION. The following chart provides certain information for the
fiscal year ended June 30, 2000 about the fees paid by WT Mutual Fund and WT
Trust to the Trustees:
<TABLE>
<CAPTION>
INDEPENDENT TRUSTEE AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM THE TRUST THE WT FUND COMPLEX
<S> <C> <C>
Robert Arnold $10,400 $21,100
Eric Brucker $10,900 $19,600
Nicholas Giordano $10,400 $22,200
Louis Klein, Jr. $ 8,400 $17,100
Clement C. Moore, II $ 8,400 $17,100
John J. Quindlen $12,400 $23,600
</TABLE>
(e) SALES LOADS. Inapplicable.
(f) CODE OF ETHICS. The Trust and the Series' investment advisers and
sub-advisers have each adopted a code of ethics pursuant to Rule 17j-1 of the
1940 Act. Among other provisions, such codes require investment personnel and
certain other employees to pre-clear securities transactions that are subject
to the code of ethics, to file reports or duplicate confirmations regarding
personal securities transactions and to refrain from engaging in short-term
trading of a security and transactions of a security within seven days of a
Series' portfolio transaction involving the same security. Directors/trustees,
officers and employees of the Trust and each adviser and sub-adviser are
required to abide by the provisions under their respective code of ethics. On
a quarterly and annual basis, the Board of Trustees reviews reports regarding
the codes of ethics, including information on any substantial violations of
the codes.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) CONTROL PERSONS. As of November 1, 2000, Peter Kiewit Sons' Inc., a
Delaware corporation with principal offices at 1000 Kiewit Plaza, Omaha, NE
68131, owns, directly or indirectly, more than 25% of the voting securities
of Wilmington Premier Money Market Portfolio of WT Mutual Fund and,
therefore, may
68
<PAGE>
be deemed to control Premier Money Market Series through pass-through voting
rights.
(b) PRINCIPAL HOLDERS. As of November 1, 2000, Wilmington Premier Money
Market Portfolio of WT Mutual Fund owns beneficially at least 5% of the
outstanding shares of Premier Money Market Series.
As of November 1, 2000, Wilmington Short/Intermediate Bond Portfolio of
WT Mutual Fund owns beneficially at least 5% of the outstanding shares of
Short/Intermediate Bond Series.
As of November 1, 2000, Wilmington Large Cap Core Portfolio of WT Mutual
Fund owns beneficially at least 5% of the outstanding shares of Large Cap
Core Series.
(c) MANAGEMENT OWNERSHIP. On October 31, 2000, the Trustees and officers of
the Trust, as a group, owned beneficially, or may be deemed to have owned
beneficially, less than 1% of the outstanding shares of each Series.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES.
(a) INVESTMENT ADVISERS.
(i) RODNEY SQUARE MANAGEMENT CORPORATION. RSMC serves as the investment
adviser to the Prime Money Market, Premier Money Market, the U.S. Government
and the Tax-Exempt Series. RSMC is a Delaware corporation organized on
September 17, 1981. It is a wholly owned subsidiary of Wilmington Trust
Company ("WTC"), a state-chartered bank organized as a Delaware corporation
in 1903. WTC is a wholly owned subsidiary of Wilmington Trust Corporation, a
publicly held bank holding company. RSMC may occasionally consult, on an
informal basis, with personnel of WTC's investment departments. Several
affiliates of RSMC are also engaged in the investment advisory business.
Wilmington Trust FSB and Wilmington Brokerage Services Company, both wholly
owned subsidiaries of WTC, are registered investment advisers. In addition,
WBSC is a registered broker-dealer.
WTC previously served as the investment advisor of the Premier Money Market
Series until November 1, 1999. For information regarding the fees WTC
received, and waived, for its services, please see below. For its services as
adviser, RSMC received the following fees:
<TABLE>
<CAPTION>
12 MONTHS 12 MONTHS 12 MONTHS
ENDED 6/30/00 ENDED 6/30/99 ENDED 6/30/98
<S> <C> <C> <C>
Premier Money Market Series $677,240(1) N/A N/A
Prime Money Market Series $9,040,719 $7,672,029 $5,078,193
U.S. Government Series $3,240,463 $3,076,718 $2,001,355
Tax-Exempt Series $2,104,423 $2,047,289 $1,246,730
</TABLE>
(1) For the period November 1, 1999 to June 30, 2000.
For its services as adviser to the Premier Money Market Series for the period
November 1, 1999 to June 30, 2000, RSMC waived fees of $313,343.
(ii) WILMINGTON TRUST COMPANY. WTC, the parent of RSMC, is a state-chartered
bank organized as a Delaware corporation in 1903. WTC is a wholly owned
69
<PAGE>
subsidiary of Wilmington Trust Corporation, a publicly held bank holding
company. WTC is engaged in a variety of investment advisory activities,
including the management of collective investment pools, and has nearly a
century of experience managing the personal investments of high net-worth
individuals. WTC presently manages over $__ billion in fixed income assets
and approximately $__ billion in equity assets for clients.
WTC serves as the adviser to the Short/Intermediate Bond Series, the
Intermediate Bond Series, the Municipal Bond Series, the Large Cap Core
Series, the Small Cap Core Series and the International Multi-Manager Series.
The Premier Money Market Series, Large Cap Growth Series, Large Cap Value
Series changed advisers on November 1, 1999.
For WTC's services as investment adviser to each Series, WTC received the
following fees:
<TABLE>
<CAPTION>
12 MONTHS ENDED 12 MONTHS 12 MONTHS
6/30/00 ENDED 6/30/99 ENDED 6/30/98
<S> <C> <C> <C>
Premier Money Market Series $327,586 $518,578(2) N/A
Short/Intermediate Bond Series $515,635 $177,376(2) N/A
Large Cap Core Series $905,961 $568,176(2) N/A
Intermediate Bond Series $305,276 $322,428 N/A
Municipal Bond Series $55,020 $61,687 $86,841
Large Cap Growth Series $397,459(1) $1,150,375 N/A
International Multi-Manager Series $517,304 $447,808 $755,902
Small Cap Core Series $502,815 N/A N/A
Large Cap Value Series $131,600(1) N/A N/A
</TABLE>
For the period July 1, 1999 to October 31, 1999.
For the period October 20, 1998 to June 30, 1999.
For its services as adviser, WTC waived the following fees:
<TABLE>
<CAPTION>
12 MONTHS ENDED 12 MONTHS 12 MONTHS
6/30/00 ENDED 6/30/99 ENDED 6/30/98
<S> <C> <C> <C>
Premier Money Market Series $286,696(1) $281,704(2) N/A
Short/Intermediate Bond Series $189,596 $98,480(2) N/A
Large Cap Core Series $230,030 $94,401(2) N/A
Intermediate Bond Series $143,584 $103,995 N/A
Municipal Bond Series $7,707 $36,996 $81,481
Large Cap Growth Series $56,620 $201,147 $8,138
International Multi-Manager Series $169,523 $102,850 N/A
Small Cap Core Series $96,214 N/A N/A
Large Cap Value Series $139,897(1) N/A N/A
</TABLE>
For the period July 1, 1999 to October 31, 1999.
For the period October 20, 1998 to June 30, 1999.
Prior to October 19, 1998, Kiewit Investment Management Corp. served as
investment adviser to the Premier Money Market, Short/Intermediate Bond and
Large Cap Core Series. Pursuant to investment management agreements then in
effect, the following fees were payable to the Series' previous investment
adviser, Kiewit, for:
70
<PAGE>
<TABLE>
<CAPTION>
JULY 1, 1998 TO OCTOBER 12 MONTHS ENDED
19, 1998 JUNE 30, 1998
<S> <C> <C>
Premier Money Market Series $228,204 $983,634(2)
Short/Intermediate Bond Series $78,062 $579,830(2)
Large Cap Core Series $250,050 $695,586(2)
</TABLE>
Kiewit Investment Management Corp., waived the following amounts for:
<TABLE>
<CAPTION>
JULY 1, 1998 TO OCTOBER 12 MONTHS ENDED
19, 1998 JUNE 30, 1998
<S> <C> <C>
Premier Money Market Series $123,952 $519,887
Short/Intermediate Bond Series $43,340 $115,748
Large Cap Core Series $40,225 $126,953
</TABLE>
For Institutional shares, WTC has agreed to reimburse expenses to the extent
total operating expenses exceed 0.20% for the Premier Money Market Portfolio,
0.55% for the Short/Intermediate Bond Portfolio; 0.55% for the Intermediate Bond
Portfolio; 0.75% for the Municipal Bond Portfolio, 0.75% for the Large Cap
Growth Portfolio; .80% for the Large Core Portfolio; 0.75% for the Large Cap
Value Portfolio; 0.80% for the Small Cap Core Portfolio; and 1.00% for the
International Multi-Manager Portfolio. This undertaking will remain in place
until the Board of Trustees approves its termination.
(iii) CRAMER ROSENTHAL MCGLYNN, LLC. CRM serves as investment adviser to the
Large Cap Value, the Mid Cap Value and the Small Cap Series. CRM and its
predecessors have managed investments in small and medium capitalization
companies for over 25 years. CRM is 67% owned (and therefore controlled)
by Cramer, Rosenthal, McGlynn, Inc. and its shareholders. CRM is
registered as an investment adviser with the SEC.
For its services as adviser, CRM received the following fees:
<TABLE>
<CAPTION>
12 MONTHS ENDED 6/30/00(1)
<S> <C>
Large Cap Value Series $331,030
Mid Cap Value Series $91,720
Small Cap Value Series $1,277,831
</TABLE>
For the period November 1, 1999 (commencement of operations) to June 30, 2000.
For its services as adviser, CRM waived the following fees.
<TABLE>
<CAPTION>
12 MONTHS ENDED 6/30/00
<S> <C>
Large Cap Value Series $112,969
Mid Cap Value Series $129,279
Small Cap Value Series $0
</TABLE>
(iv) ROXBURY CAPITAL MANAGEMENT. Roxbury serves as the investment adviser to the
corresponding Series of the Large Cap Growth Portfolio.
The Large Cap Growth Series pays a monthly advisory fee to Roxbury at the annual
rate of 0.55% of the Series' first $1 billion of average daily net assets; 0.50%
of the Series' next $1 billion of average daily net assets; and 0.45% of the
Series, average daily net assets over $2 billion. For the period November 1,
1999 to June 30, 2000, Roxbury received $1,005,944 for its services as adviser
to the WT Large Cap Growth Series.
(v) THE SUB-ADVISERS FOR THE INTERNATIONAL MULTI-MANAGER SERIES ARE:
71
<PAGE>
- Clemente Capital, Inc. is located at Carnegie Hall Tower, 152
West 57th Street, New York, New York 10019. Clemente has been a
registered investment adviser since 1979.
- Scudder Kemper Investments, Inc. is located at 345 Park Avenue,
New York, New York 10154. Scudder Kemper was founded as America's
first independent investment counselor and has served as
investment adviser, administrator and distributor of mutual funds
since 1928.
- Invista Capital Management, LLC, a registered investment adviser
since 1984, is located at 1800 Hub Tower, 699 Walnut Street, Des
Moines, Iowa 50309. Invista is an indirect, wholly owned
subsidiary of Principal Mutual Life Insurance Company.
SUB-ADVISORY AGREEMENTS. For services furnished pursuant to each
Sub-Advisory Agreement, WTC pays each sub-adviser a monthly
portfolio management fee at an annual rate of 0.50% of the
average daily net assets under the sub-adviser's management. For
the fiscal year ended June 30, 2000, WTC paid sub-advisory fees
in the amounts of $______to Clemente, $_______ to Invista and
$_______ to Scudder.
Each Sub-Advisory Agreement provides that the sub-adviser has
discretionary investment authority (including the selection of
brokers and dealers for the execution of the Series' portfolio
transactions) with respect to the portion of the Series' assets
allocated to it by WTC, subject to the restrictions of the 1940
Act, the Internal Revenue Code of 1986, as amended, applicable
state securities laws, applicable statutes and regulations of
foreign jurisdictions, the Series' investment objective, policies
and restrictions and the instructions of the Board of Trustees
and WTC.
Each Sub-Advisory Agreement provides that the sub-adviser will
not be liable for any action taken, omitted or suffered to be
taken except if such acts or omissions are the result of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duty. Each Agreement continues in effect for two years and then
from year to year so long as continuance of each such Agreement
is approved at least annually (i) by the vote of a majority of
the Independent Trustees at a meeting called for the purpose of
voting on such approval and (ii) by the vote of a majority of the
Trustees or by the vote of a majority of the outstanding voting
securities of the Series. Each Sub-Advisory Agreement terminates
automatically in the event of its assignment and is terminable on
written notice by the Fund (without penalty, by action of the
Board of Trustees or by vote of a majority of the Series'
outstanding voting securities) or by WTC or the sub-adviser. Each
Agreement provides that written notice of termination must be
provided sixty days prior to the termination date, absent mutual
agreement for a shorter notice period.
(b) PRINCIPLE UNDERWRITER. Inapplicable.
72
<PAGE>
(c) SERVICES PROVIDED BY EACH INVESTMENT ADVISER AND FUND EXPENSES PAID BY
THIRD PARTIES.
ADVISORY SERVICES. Under the terms of advisory agreements, each
adviser agrees to: (a) direct the investments of each Series, subject to and in
accordance with the Series' investment objective, policies and limitations set
forth in the Prospectus and this Statement of Additional Information; (b)
purchase and sell for each Series, securities and other investments consistent
with the Series' objectives and policies; (c) supply office facilities,
equipment and personnel necessary for servicing the investments of the Series;
(d) pay the salaries of all personnel of the Series and the adviser performing
services relating to research, statistical and investment activities on behalf
of the Series; (e) make available and provide such information as the Series
and/or its administrator may reasonably request for use in the preparation of
its registration statement, reports and other documents required by any
applicable federal, foreign or state statutes or regulations; (f) make its
officers and employees available to the Trustees and officers of the Fund for
consultation and discussion regarding the management of each Series and its
investment activities. Additionally, each adviser agrees to create and maintain
all necessary records in accordance with all applicable laws, rules and
regulations pertaining to the various functions performed by it and not
otherwise created and maintained by another party pursuant to contract with the
Fund. Each adviser may at any time or times, upon approval by the Board of
Trustees, enter into one or more sub-advisory agreements with a sub-advisor
pursuant to which the adviser delegates any or all of its duties as listed.
The agreements provide that each adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Series in
connection with the matters to which the Agreement relates, except to the extent
of a loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its obligations and duties under the agreement.
The salaries of any officers and the interested Trustees of the Funds
who are affiliated with an adviser and the salaries of all personnel of each
adviser performing services for each Fund relating to research, statistical and
investment activities are paid by the adviser.
(d) SERVICE AGREEMENTS.
(i) ADMINISTRATION AND ACCOUNTING SERVICES. Under separate
Administration and Accounting Services Agreements, PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809 performs certain
administrative and accounting services for WT Investment Trust I.
These services include preparing shareholder reports, providing
statistical and research data, assisting the advisers in
compliance monitoring activities, and preparing and filing
federal and state tax returns on behalf of the Fund and the
Trust. In addition, PFPC prepares and files various reports with
the appropriate regulatory agencies and prepares materials
required by the SEC or any state securities commission having
jurisdiction over the Fund. The accounting services performed by
PFPC include determining the net asset value per share of each
Series and maintaining records relating to the securities
transactions of the Fund. The Administration and Accounting
Services Agreements provides that PFPC and its affiliates shall
not be liable for any error of
73
<PAGE>
judgment or mistake of law or for any loss suffered by the Fund
or its Series, except to the extent of a loss resulting from
willful misfeasance, bad faith or gross negligence on their part
in the performance of their obligations and duties under the
Administration and Accounting Services Agreements.
(e) OTHER INVESTMENT ADVICE. See Item 15(a) above.
(f) DEALER REALLOWANCES. Inapplicable.
(g) RULE 12B-1 PLANS. Inapplicable.
(h) OTHER SERVICE PROVIDERS.
(i) INDEPENDENT AUDITORS. Ernst & Young LLC, serves as the
independent auditor, providing services which include (1)
auditing the annual financial statements for the Series, (2)
assistance and consultation in connection with SEC filings and
(3) preparation of the annual federal income tax returns filed on
behalf of each Series.
(ii) LEGAL COUNSEL. Pepper Hamilton LLP, 3000 Two Logan Square, 18th
and Arch Streets, Philadelphia, PA 19103, serves as counsel to
the Trust.
(iii) CUSTODIAN. Wilmington Trust Company, 1100 Market Street,
Wilmington, DE 19890, serves as the Custodian.
(iv) TRANSFER AGENT. PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19890-0001, serves as the Transfer Agent and Dividend Paying
Agent.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.
(a) BROKERAGE TRANSACTIONS. The advisers and sub-advisers place all portfolio
transactions on behalf of each Series. Debt securities purchased and sold by the
Series are generally traded on the dealer market on a net basis (i.e., without
commission) through dealers acting for their own account and not as brokers, or
otherwise involve transactions directly with the issuer of the instrument. This
means that a dealer (the securities firm or bank dealing with a Series) makes a
market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread. When
securities are purchased in underwritten offerings, they include a fixed amount
of compensation to the underwriter.
Some of the advisers' other clients have investment objectives and
programs similar to that of the Series. Occasionally, recommendations made to
other clients may result in their purchasing or selling securities
simultaneously with the Series. Consequently, the demand for securities being
purchased or the supply of securities being sold may increase, and this could
have an adverse effect on the price of those securities. It is the policy of the
advisers not to favor one client over another in making recommendations or in
placing orders. In the event of a simultaneous transaction, purchases or sales
are averaged as to price, transaction costs are allocated between a Series and
other clients participating in the transaction on a pro rata basis and purchases
and sales are normally allocated between the Series and the other clients as to
amount according to a formula determined prior to the execution of such
transactions.
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<PAGE>
(b) COMMISSIONS.
The advisers cannot readily determine the extent to which spreads or commission
rates or net prices charged by brokers or dealers reflect the value of their
research, analysis, advice and similar services. In such cases, each adviser
receives services it otherwise might have had to perform itself. The research,
analysis, advice and similar services provided by brokers or dealers can be
useful to the advisers in serving its other clients, as well as in serving the
Series. Conversely, information provided to the advisers by brokers or dealers
who have executed transaction orders on behalf of other clients of the adviser
may be useful in providing services to the Series. During the twelve-month
periods ended June 30, 2000, 1999 and 1998, the Series paid the following
brokerage commissions:
<TABLE>
<CAPTION>
12 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED
6/30/00 6/30/99 6/30/98
<S> <C> <C> <C>
Premier Money Market Series N/A N/A N/A
Prime Money Market Series N/A N/A N/A
U.S. Government Series N/A N/A N/A
Tax-Exempt Series N/A N/A N/A
Short/Intermediate Bond Series N/A N/A N/A
Intermediate Bond Series N/A N/A N/A
Municipal Bond Series N/A N/A N/A
Large Cap Growth Series $334,125 $196,083 $378,000
Large Cap Core Series $43,966 $15,538 $115,000
Small Cap Core Series $110,997 $67,932 N/A
Large Cap Value Series $307,935 $234,362 N/A
Mid Cap Value Series $93,494 $52,621 $16,841
Small Cap Value Series $463,676 $424,842 $397,058
International Multi-Manager Series $285,574 $227,743 N/A
</TABLE>
(c) BROKERAGE SELECTION. The primary objective of the advisers and sub-advisers
in placing orders on behalf of the Series for the purchase and sale of
securities is to obtain best execution at the most favorable prices through
responsible brokers or dealers and, where the spread or commission rates are
negotiable, at competitive rates. In selecting a broker or dealer, each adviser
considers, among other things: (i) the price of the securities to be purchased
or sold; (ii) the rate of the spread or commission; (iii) the size and
difficulty of the order; (iv) the nature and character of the spread or
commission for the securities to be purchased or sold; (v) the reliability,
integrity, financial condition, general execution and operational capability of
the broker or dealer; and (vi) the quality of any research or statistical
services provided by the broker or dealer to the Series or to the advisers.
(d) DIRECTED BROKERAGE. Inapplicable.
(e) REGULAR BROKER-DEALERS. Inapplicable.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES.
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(a) CAPITAL STOCK. The Trust issues shares for each Series with a par value of
$.01 per share. The shares of each Series, when issued and paid for in
accordance with this registration statement, will be fully paid and
non-assessable shares, with equal, non-cumulative voting rights, except as
described below, and no preferences as to conversion, exchange, dividends,
redemptions or any other feature. Shareholders shall have the right to vote only
(i) for removal of Trustees, (ii) with respect to such additional matters
relating to the Trust as may be required by the applicable provisions of the
1940 Act, including Section 16(a) thereof, and (iii) on such other matters as
the Trustees may consider necessary or desirable. In addition, the shareholders
of each Series will be asked to vote on any proposal to change a fundamental
investment policy (i.e. a policy that may be changed only with the approval of
shareholders) of that Series. All shares of the Trust entitled to vote on a
matter shall vote without differentiation between the separate Series on a
one-vote-per-share basis; provided however, if a matter to be voted on affects
only the interests of not all Series, then only the shareholders of such
affected Series shall be entitled to vote on the matter. If liquidation of the
Trust should occur, shareholders would be entitled to receive on a per class
basis the assets of the particular Series whose shares they own, as well as a
proportionate share of Trust assets not attributable to any particular class
then in existence. Ordinarily, the Trust does not intend to hold annual meetings
of shareholders, except as required by the 1940 Act or other applicable law. The
Trust's by-laws provide that meetings of shareholders shall be called for the
purpose of voting upon the question of removal of one or more Trustees upon the
written request of the holders of not less than 10% of the outstanding shares.
(b) OTHER SECURITIES. Inapplicable.
ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SHARES.
(a) PURCHASE OF SHARES. Inapplicable.
(b) FUND REORGANIZATIONS. Inapplicable.
(c) OFFERING PRICE. See Item 7(a) of Part A.
(d) REDEMPTION IN KIND. The Trust has filed a notice of election pursuant to
Rule 18f-1 under the 1940 Act (See Item 7(c) of Part A.)
ITEM 19. TAXATION OF THE SERIES. See Item 7(e) of Part A.
ITEM 20. UNDERWRITERS. Inapplicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA. The performance of a Series may be
quoted in terms of its yield and its total return in advertising and other
promotional materials. Performance data quoted represents past performance and
is not intended to indicate future performance. Performance of the Series will
vary based on changes in market conditions and the level of each Series'
expenses. These performance figures are calculated in the following manner:
MONEY MARKET SERIES:
(a) Yield for a money market fund is the net annualized yield for a specified 7
calendar days calculated at simple interest rates. Yield is calculated by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the
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<PAGE>
beginning of the period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return.
The yield is annualized by multiplying the base period return by 365/7. The
yield figure is stated to the nearest hundredth of one percent.
(b) Effective Yield is the net annualized yield for a specified 7 calendar days
assuming reinvestment of income or compounding. Effective yield is calculated by
the same method as yield except the yield figure is compounded by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result, according to the following formula:
Effective yield = [(Base Period Return + 1) 365/7] - 1.
(c) Tax-Equivalent Yield 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
assuming a reinvestment of all dividends paid during such period. Tax-equivalent
yield is calculated by dividing that portion of the Tax-Exempt Series' yield
(computed as in the yield description above) which is tax-exempt by 1 minus a
stated income tax rate and adding the quotient to that portion, if any, of the
yield of the Tax-Exempt Series that is not tax-exempt.
The following table, which is based upon federal income tax rates in
effect on the date of this Statement of Additional Information, illustrates the
yields that would have to be achieved on taxable investments to produce a range
of hypothetical tax-equivalent yields:
TAX EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
Federal
Marginal
Income Tax Tax-equivalent Yields Based On
Bracket Tax-exempt Yields Of:
---------- ---------------------------------------------------------
2% 3% 4% 5% 6% 7% 8%
--- --- --- --- --- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
28% 2.8 4.2 5.6 6.9 8.3 9.7 11.1
31% 2.9 4.3 5.8 7.2 8.7 10.1 11.6
36% 3.1 4.7 6.3 7.8 9.4 10.9 12.5
39.6% 3.3 5.0 6.6 8.3 9.9 11.6 13.2
</TABLE>
ALL SERIES:
(a) Average Annual Total Return is the average annual compound rate of return
for the periods of one year, five years, ten years and the life of a Series,
where applicable, all ended on the last day of a recent calendar quarter.
Average annual total return quotations reflect changes in the price of a Series'
shares, if any, and assume that all dividends during the respective periods were
reinvested in Series shares. Average annual total return is calculated by
finding the average annual compound rates of return of a hypothetical investment
over such periods, according to the following formula (average annual total
return is then expressed as a percentage):
T = (ERV/P)1/n - 1
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Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end
of the applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
(b) Yield Calculations. From time to time, an Equity or Bond Series may
advertise its yield. Yield for these Series is calculated by dividing the
Series' investment income for a 30-day period, net of expenses, by the average
number of shares entitled to receive dividends during that period according to
the following formula:
YIELD = 2[((a-b)/cd + 1)6-1]
where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
The result is expressed as an annualized percentage (assuming
semiannual compounding) of the maximum offering price per share at the
end of the period.
Except as noted below, in determining interest earned during the period
(variable "a" in the above formula), pfpc calculates the interest earned on each
debt instrument held by a Series during the period by: (i) computing the
instrument's yield to maturity, based on the value of the instrument (including
actual accrued interest) as of the last business day of the period or, if the
instrument was purchased during the period, the purchase price plus accrued
interest; (ii) dividing the yield to maturity by 360; and (iii) multiplying the
resulting quotient by the value of the instrument (including actual accrued
interest). Once interest earned is calculated in this fashion for each debt
instrument held by the Series, interest earned during the period is then
determined by totaling the interest earned on all debt instruments held by the
Series.
For purposes of these calculations, the maturity of a debt instrument
with one or more call provisions is assumed to be the next date on which the
instrument reasonably can be expected to be called or, if none, the maturity
date. In general, interest income is reduced with respect to debt instruments
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and increased with respect to debt
instruments trading at a discount by adding a portion of the discount to daily
income.
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<PAGE>
In determining dividends earned by any preferred stock or other equity
securities held by a Series during the period (variable "a" in the above
formula), PFPC accrues the dividends daily at their stated dividend rates.
Capital gains and losses generally are excluded from yield calculations.
Because yield accounting methods differ from the accounting methods
used to calculate net investment income for other purposes, a Series' yield may
not equal the dividend income actually paid to investors or the net investment
income reported with respect to the Series in the Fund's financial statements.
Yield information may be useful in reviewing a Series' performance and
in providing a basis for comparison with other investment alternatives. However,
the Series' yields fluctuate, unlike investments that pay a fixed interest rate
over a stated period of time. Investors should recognize that in periods of
declining interest rates, the Series' yields will tend to be somewhat higher
than prevailing market rates, and in periods of rising interest rates, the
Series' yields will tend to be somewhat lower. Also, when interest rates are
falling, the inflow of net new money to the Series from the continuous sale of
their shares will likely be invested in instruments producing lower yields than
the balance of the Series' holdings, thereby reducing the current yields of the
Series. In periods of rising interest rates, the opposite can be expected to
occur.
Comparison of Series Performance. A comparison of the quoted
performance offered for various investments is valid only if performance is
calculated in the same manner. Since there are many methods of calculating
performance, investors should consider the effects of the methods used to
calculate performance when comparing performance of a Series with performance
quoted with respect to other investment companies or types of investments. For
example, it is useful to note that yields reported on debt instruments are
generally prospective, contrasted with the historical yields reported by a
Series.
ITEM 22. FINANCIAL STATEMENTS.
The Series' audited financial statements for the fiscal year ended June 30,
2000, including notes thereto, are incorporated herein by reference to the
Trust's Annual Report to Shareholders as well as the Annual Reports of WT Mutual
Fund.
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<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) (i) Agreement and Declaration of Trust*
(ii) Certificate of Trust* A.
(iii) Certificate of Amendment to Certificate of Trust dated
October 20, 1998 is filed herewith
(b) By-Laws*
(c) None
(d) (i) (a) Advisory Agreement between WT Investment Trust I, on behalf
of the Large Cap Core Series, Small Cap Core Series,
Short/Intermediate Series, Intermediate Bond Series, Municipal
Bond Series and International Multi-Manager Series, and
Wilmington Trust Company filed herewith.
(b) Amended Schedule A to Advisory Agreement is filed herewith.
(ii) Advisory Agreement between WT Investment Trust I, on behalf of
the Prime Money Market Series, Premier Money Market Series, U.S.
Government Series and the Tax Exempt Series, and Rodney Square
Management Corporation filed herewith.
(iii) Advisory Agreement between WT Investment Trust I, on behalf of
the Large Cap Value Series, Small Cap Value Series and Mid Cap
Series and Cramer Rosenthal McGlynn LLC filed herewith.
(iv) Advisory Agreement between WT Investment Trust I, on behalf of
the Large Cap Growth Series and WT Large Cap Growth Series, and
Roxbury Capital Management LLC filed herewith.
(v) Sub-Advisory Agreement among WT Investment Trust I, on behalf of
the International Multi-Manager Series, Wilmington Trust Company
and Clemente Capital, Inc. filed herewith.
(vi) Sub-Advisory Agreement among WT Investment Trust I, on behalf of
the International Multi-Manager Series, Wilmington Trust Company
and Scudder, Kemper Investments, Inc. filed herewith.
(vii) Sub-Advisory Agreement among WT Investment Trust I, on behalf of
the International Multi-Manager Series, Wilmington Trust Company
and Invista Capital Management filed herewith.
(e) Inapplicable.
(f) None.
(g) (i) Custody Agreement with Wilmington Trust Company is filed
herewith.
(ii) Sub-Custody Agreement with PFPC Trust Company is filed herewith..
(iii) Custodian Agreement between WT Investment Trust I, on behalf of
the International Multi-Manager Series, and Bankers Trust Company
to be filed herewith.
(h) (i) Transfer Agency Agreement with PFPC Inc. filed herewith.
(ii) Administration and Accounting Services Agreement with PFPC, Inc.
filed herewith.
(i) Inapplicable.
(j) Inapplicable.
(k) Inapplicable.
(l) Inapplicable.
(m) Inapplicable.
(n) Inapplicable.
(o) Inapplicable.
(p) (i) Code of Ethics of WT Investment Trust I, WT Mutual Fund, Rodney
Square Management Corporation and Wilmington Trust Company is
filed herewith.
(ii) Code of Ethics of Cramer Rosenthal McGlynn, LLC is filed herewith.
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<PAGE>
(iii) Code of Ethics of Roxbury Capital Management LLC is filed
herewith.
(iv) Code of Ethics of Clemente Capital, Inc. is filed herewith.
(v) Code of Ethics of Invista Capital Management, LLC is filed
herewith.
(vi) Code of Ethics of Scudder Kemper Investments, Inc. is filed
herewith.
* Previously filed with the Securities and Exchange Commission with
Amendment No. 1 on Form N1-A on February 28, 1997 and incorporated
herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND. None.
ITEM 25. INDEMNIFICATION. Reference is made to Article VII of the Registrant's
Agreement and Declaration of Trust (Exhibit 23(a)(i)) and to Article X of the
Registrant's By-Laws (Exhibit 23(b)), which are incorporated herein by
reference. Pursuant to Rule 484 under the Securities Act of 1933, as amended,
the Registrant furnishes the following undertaking:
"Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
(i) Wilmington Trust Company ("WTC"), a Delaware corporation, serves as
investment adviser to the Large Cap Core, Small Cap Core,
Short/Intermediate, Intermediate Bond, Municipal Bond, and International
Multi Manager Series of the Fund. It currently manages large institutional
accounts and collective investment funds.
The directors and principal executive officers of WTC have held the following
positions of a substantial nature in the past two years:
<TABLE>
<CAPTION>
Business or Other Connections of Principal Executive
Name Officers and Directors of WTC
-----------------------------------------------------------------------------------------
<S> <C>
Carolyn S. Burger Principal, CB Associates, Inc.; Director, PJM
Interconnection, L.L.C.
Ted T. Cecala Chairman and Chief Executive
Officer, Wilmington Trust Corporation and
Wilmington Trust Company; Member of
81
<PAGE>
Board of Managers of Cramer, Rosenthal McGlynn,
LLC and Roxbury Capital Management, LLC.
Richard R. Collins Retired President and Chief Operating Officer,
American Life Insurance Company; Chairman of
Collins, Inc. (consulting firm).
Charles S. Crompton Attorney of counsel, Partner, Potter Anderson
& Corroon (law firm)
H. Stewart Dunn, Jr., Attorney, Partner, Ivins, Phillips & Barker (law
firm)
Edward B. du Pont Private investor; Director, E. I. du Pont de
Nemours and Company, Incorporated
R. Keith Elliott Former Director, Chairman, President and Chief
Executive Officer, Hercules
Incorporated; Director, PECO Energy and Computer
Task Group
Robert V.A. Harra, Jr. President, Chief Operating Officer and Treasurer,
Wilmington Trust Corporation and Wilmington Trust
Company
Rex L. Mears President of Ray L. Mears & Sons, Inc. (farming
corporation)
Walter D. Mertz Retired Senior Vice President, Wilmington Trust
Corporation and Wilmington Trust Company;
Associate Director (Honorary)
Hugh E. Miller Formerly Vice Chairman, ICI Americas, Inc.; was
with parent Imperial Chemicals Industries PLC for
20 years until 1990 including management positions
in the United States and Europe; Chairman and
Director, MGI Pharma, Inc.
Stacey J. Mobley Senior Vice President, General Counsel and Chief
Administrative Officer, E. I. Du Pont de Nemours
and Company, Incorporated
Leonard W. Quill Retired Chairman and Chief Executive Officer,
Wilmington Trust Corporation and Wilmington Trust
Company
David P. Roselle President, University of Delaware
H. Rodney Sharp, III Retired from several management positions with E. I.
Du Pont de Nemours and Company; Director, E. I. Du
Pont de Nemours and Company
Thomas P. Sweeney, Esq. Attorney, Member, Richards, Layton & Finger (law
firm)
Robert W. Tunnell, Jr. Managing Partner of Tunnell Companies, L.P., owner
and developer of real estate
</TABLE>
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<PAGE>
(ii) Rodney Square Management Corporation ("RSMC"), a Delaware corporation,
serves as investment adviser to the Prime Money Market, U.S. Government,
Tax Exempt and Premier Money Market Series of the Fund. RSMC is a wholly
owned subsidiary of Wilmington Trust Company, also a Delaware corporation,
which in turn is wholly owned by Wilmington Trust Corporation. Information
as to the officers and directors of RSMC is included in its Form ADV filed
on March 11, 1987 with the Securities and Exchange Commission File No.
801-22071 and is incorporated by reference herein.
(iii) Cramer Rosenthal McGlynn, LLC ("CRM") serves as investment adviser to the
Large Cap Value, Small Cap Value and Mid Cap Value Series of the Fund.
Information as to the officers and directors of CRM is included in its
Form ADV filed with the Securities and Exchange Commission and most
recently supplemented on March 26, 1999. The Form ADV, File No. 801-55244,
is incorporated by reference herein.
(iv) Roxbury Capital Management, LLC ("Roxbury") serves as investment advisor
to the Large Cap Growth Series, Mid Cap Series, Socially Responsible
Series and Science and Technology Series of the Fund. Information as to
the officers and directors of Roxbury is included in its Form ADV filed
with the Securities and Exchange Commission and most recently supplemented
on April 12, 1999. The Form ADV, File No. 801-55521, is incorporated by
reference.
ITEM 27. PRINCIPAL UNDERWRITERS. Inapplicable.
ITEM 28. LOCATIONS OF ACCOUNTS AND RECORDS. All accounts and records are
maintained by the Registrant, or on its behalf by the Fund's administrator,
transfer agent, dividend paying agent and accounting services agent, PFPC Inc.,
400 Bellevue Parkway, Wilmington, DE 19809.
ITEM 29. MANAGEMENT SERVICES. There are no management-related service contracts
not discussed in Part A or Part B.
ITEM 30. UNDERTAKINGS. None.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment No. 5 to the Registration Statement to
be signed on its behalf by the undersigned, duly authorized, in the city of
Wilmington, state of Delaware on the 31ST day of OCTOBER, 2000.
WT INVESTMENT TRUST
BY: /S/ROBERT J. CHRISTIAN
--------------------------------
Robert J. Christian, President
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(d) (i) (a) Advisory Agreement between WT Investment Trust I, on behalf
of the Large Cap Core Series, Small Cap Core Series,
Short/Intermediate Series, Intermediate Bond Series, Municipal
Bond Series and International Multi-Manager Series, and Wilmington
Trust Company filed herewith.
(b) Amended Schedule A to Advisory Agreement is filed herewith.
(ii) Advisory Agreement between WT Investment Trust I, on behalf of the
Prime Money Market Series, Premier Money Market Series, U.S.
Government Series and the Tax Exempt Series, and Rodney Square
Management Corporation filed herewith.
(iii) Advisory Agreement between WT Investment Trust I, on behalf of the
Large Cap Value Series, Small Cap Value Series and Mid Cap Series
and Cramer Rosenthal McGlynn LLC filed herewith.
(iv) Advisory Agreement between WT Investment Trust I, on behalf of the
Large Cap Growth Series and WT Large Cap Growth Series, and
Roxbury Capital Management LLC filed herewith.
(v) Sub-Advisory Agreement among WT Investment Trust I, on behalf of
the International Multi-Manager Series, Wilmington Trust Company
and Clemente Capital, Inc. filed herewith.
(vi) Sub-Advisory Agreement among WT Investment Trust I, on behalf of
the International Multi-Manager Series, Wilmington Trust Company
and Scudder, Kemper Investments, Inc. filed herewith.
(vii) Sub-Advisory Agreement among WT Investment Trust I, on behalf of
the International Multi-Manager Series, Wilmington Trust Company
and Invista Capital Management filed herewith.
(g) (i) Custody Agreement with Wilmington Trust Company is filed herewith.
(ii) Sub-Custody Agreement with PFPC Trust Company is filed herewith..
(iii) Custodian Agreement between WT Investment Trust I, on behalf of
the International Multi-Manager Series, and Bankers Trust Company
to be filed herewith.
(h) (i) Transfer Agency Agreement with PFPC Inc. filed herewith.
(ii) Administration and Accounting Services Agreement with PFPC, Inc.
filed herewith.
(p) (i) Code of Ethics of WT Investment Trust I, WT Mutual Fund, Rodney
Square Management Corporation and Wilmington Trust Company is
filed herewith.
(ii) Code of Ethics of Cramer Rosenthal McGlynn, LLC is filed herewith.
(iv) Code of Ethics of Clemente Capital, Inc. is filed herewith.
