<PAGE>
Registration No. 2-84904
811-3790
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 19
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21
QUANTITATIVE GROUP OF FUNDS
------------------------------
(Exact Name of Registrant as Specified in Charter)
55 Old Bedford Road
Lincoln, Massachusetts 01773
----------------------------
(Address of Principal Executive Offices) (Zip Code)
(781) 259-1144
--------------
Registrant's Telephone Number, including Area Code
WILLARD L. UMPHREY, President
Quantitative Group of Funds
55 Old Bedford Road
Lincoln, Massachusetts 01773
----------------------------
(Name and Address of Agent for Service)
Copy to:
Joseph R. Fleming, Esq.
DECHERT PRICE & RHOADS
Ten Post Office Square, Suite 1230
Boston, Massachusetts 02109
________________
It is proposed that this filing will become effective:
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on (date) pursuant to paragraph (b)
/_/ 75 days after filing pursuant to paragraph (a)(2)
/X/ 60 days after filing pursuant to paragraph (a)(i)
/_/ on (date) pursuant to paragraph (a) of Rule 485
_________
Pursuant to Rule 24f-2, Registrant has registered an indefinite number
of its shares of beneficial interest under the Securities Act of 1933. The Rule
24f-2 Notice for the Registrant's fiscal year ended March 31, 1999 was filed on
May 14, 1999.
<PAGE>
QUANTITATIVE GROUP OF FUNDS
55 Old Bedford Road
Lincoln, Massachusetts 01773 PROSPECTUS
800-331-1244 August 1, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Fund Summary 2
Summary of Fees and Expenses 3
Financial Highlights 5
Investment Policies and Related Risks 8
Management of the Funds 11
How to Invest 14
How to Make Exchanges 16
How to Redeem 17
Calculation of Net Asset Value 18
Dividends, Distributions, and Taxation 19
Other Information 19
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
_____________________________________________________QUANTITATIVE GROUP OF FUNDS
FUND SUMMARY
INVESTMENT SUMMARY
U.S. Equity Funds
- -----------------
Investment Objective
Quantitative Small Cap Fund ("Small Cap Fund") seeks maximum long-term capital
appreciation.
Quantitative Mid Cap Fund ("Mid Cap Fund") seeks long-term growth of capital.
Quantitative Growth and Income Fund ("Growth and Income Fund") seeks long-term
growth of capital and income.
Principal Investment Strategies
Under normal market conditions, each fund invests at least 65% of its total
assets in common stocks. The Small Cap Fund mainly buys stocks of small-sized
companies, generally with less than $1.5 billion dollars in market
capitalization. The Mid Cap Fund mainly buys stocks of mid-sized companies,
generally between $1 billion and $5 billion in market capitalization and the
Growth and Income Fund mainly buys stocks of large companies, generally greater
than $5 billion in market capitalization, that are currently paying dividends.
PRINCIPAL RISKS
The main risks that could adversely affect the value of one of the U.S. equity
fund's shares and the total return on your investment include:
The risk that the stock price of one or more of the companies in a fund's
portfolio will fall, or will fail to appreciate as anticipated by the fund's
manager. Many factors can adversely affect a stock's performance. This risk is
greater for smaller companies, which tend to be more vulnerable to adverse
developments.
The risk that movements in the securities markets will adversely affect the
price of a fund's investments, regardless of how well the companies in which a
fund invests perform.
You can lose money by investing in the funds. The funds may not achieve their
goals, and none of the individual funds are intended as complete investment
programs. An investment in a fund is NOT a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
International Funds
- -------------------
Quantitative International Equity Fund ("International Equity Fund") seeks long-
term capital growth and income.
Quantitative Emerging Markets Fund ("Emerging Markets Fund") seeks long-term
growth of capital.
Quantitative Foreign Value Fund ("Foreign Value Fund") seeks long-term capital
growth and income.
Principal Investment Strategy
Under normal market conditions the International Equity Fund and the Foreign
Value Fund invest at least 65% of their assets in common stocks of issuers that
have their principal activities in foreign markets. The Emerging Markets Fund
invests at least 65% of its assets in common stocks of issuers that have their
principal activities in emerging markets.
PRINCIPAL RISKS
The main risks that could adversely affect the value of one of the international
funds' shares and the total return on your investment include the same risks as
the U. S. equity funds and in addition:
Foreign markets, particularly emerging markets, can be more volatile than the
U.S. market due to increased risks of adverse issuer, political, regulatory,
market or economic developments and can perform differently than the U.S.
market. Emerging markets can be subject to greater social, economic, regulatory
and political uncertainties and can be extremely volatile. An investment in the
Emerging Markets Fund should be regarded as speculative and is subject to
special risks that should be considered carefully by potential investors.
PERFORMANCE
The following bar charts and tables indicate some of the risks of investing in
the funds by showing changes in the funds' performance over time. The tables
also compare the funds' performance to a broad measure of market performance
that reflects the type of securities in which the funds invest. Of course, past
performance does not necessarily indicate how the funds will perform in the
future. Because the chart and table reflect calendar year performance, the
numbers will differ from those in the "Financial Highlights" table later in the
Prospectus and in the funds' shareholder reports, which are based on the funds'
fiscal year end of March 31.
- --------------------------------------------------------------------------------
2
<PAGE>
_____________________________________________________QUANTITATIVE GROUP OF FUNDS
The bar charts show changes in the annual total returns of the funds' Ordinary
Shares for the past ten years, or a shorter period of time if a fund has not
been in existence for ten years. There is no bar chart for the Foreign Value
Fund because it began operations during 1998 and does not have a full calendar
year of performance. Returns do not reflect the 1% deferred sales charge
applicable to the Ordinary Shares of all the funds except for the Mid Cap Fund.
The sales charge, if reflected, would reduce the returns of the funds. Returns
for Institutional Shares will differ from the Ordinary Share returns, due to
differences in expenses between the classes. The average annual total returns
tables following the bar charts reflect the deferred sales charge for all funds
but the Mid Cap Fund.
Quantitative Small Cap Fund
[BAR CHART APPEARS HERE]
The calendar year-to-date return of the Ordinary Shares of the fund as of
3/31/99 is -8.69%.
Best Quarter: Q4 1998 18.88%
Worst Quarter: Q3 1998 -20.08%
Average Annual Total Returns
For the periods ended December 31, 1998
<TABLE>
<CAPTION>
1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C>
Ordinary Shares -0.63% 13.09% 19.10% (8/3/92)
Institutional Shares 1.01% 13.87% 16.40% (1/6/93)
Russell 2000 Index -2.55% 11.87% 14.44% (8/3/92)
</TABLE>
Quantitative Mid Cap Fund
[BAR CHART APPEARS HERE]
The calendar year-to-date return of the Ordinary Shares of the fund as of
3/31/99 is -1.90%.
Best Quarter: Q4 1998 20.78%
Worst Quarter: Q3 1998 -16.41%
Average Annual Total Returns
For the periods ended December 31, 1998
<TABLE>
<CAPTION>
1 Year Inception
- ---------------------------------------------
<S> <C> <C>
Ordinary Shares 12.71% 25.28% (3/21/95)
Institutional Shares 12.92% 24.96% (4/17/95)
S&P 400 Index 19.11% 24.75% (3/21/95)
</TABLE>
Quantitative Growth & Income Fund
[BAR CHART APPEARS HERE]
The calendar year-to-date return of the Ordinary Shares of the fund as of
3/31/99 is -0.89%.
Best Quarter: Q4 1998 23.07%
Worst Quarter: Q3 1990 -12.91%
Average Annual Total Returns
For the periods ended December 31, 1998
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Inception
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary Shares 28.24% 21.77% 18.65% 17.24%(5/9/85)
Institutional Shares 28.24% 22.61% -- 18.62%(3/25/91)
S&P 500 Index 28.58% 24.06% 19.21% 18.44%(5/9/85)
</TABLE>
Quantitative International Equity Fund
[BAR CHART APPEARS HERE]
The calendar year-to-date return of the Ordinary Shares of the fund as of
3/31/99 is -1.73%.
Best Quarter: Q4 1998 18.71%
Worst Quarter: Q3 1990 -24.17%
Average Annual Total Returns
For the periods ended December 31, 1998
- --------------------------------------------------------------------------------
3
<PAGE>
_____________________________________________________QUANTITATIVE GROUP OF FUNDS
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Inception
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary Shares 10.19% 5.19% 3.15% 3.77%(7/31/87)
Institutional Shares 11.85% -- -- 3.29%(8/25/94)
EAFE Index 19.99% 9.19% 5.54% 7.29%(7/31/87)
</TABLE>
Quantitative Emerging Markets Fund
[BAR CHART APPEARS HERE]
The calendar year-to-date return of the Ordinary Shares of the fund is -10.94%.
Best Quarter: Q2 1995 9.94%
Worst Quarter: Q3 1998 -17.54%
<TABLE>
<CAPTION>
1 Year Inception
- -------------------------------------------
<S> <C> <C>
Ordinary Shares -22.42% -10.81% (10/1/94)
Institutional Shares -21.28% -11.30% ( 4/2/96)
EMG Index -23.22 -12.03% (10/1/94)
</TABLE>
A Word About Indexes
The Average Annual Total Return tables compare the funds to indexes that invest
in comparable types of stocks. Unlike the funds, the indexes are not actively
managed. The Russell 2000 Index is comprised of the bottom two-thirds of the
largest 3,000 publicly traded companies in the United States. It is widely
recognized as representative of the general market for small company stocks. The
S&P 400 Index is comprised of stocks outside the large capitalization bias of
the S&P 500, which are chosen by Standard & Poor's for their size and industry
characteristics. It is widely recognized as representative of the general market
for stocks with medium capitalizations. The S&P 500 Index is comprised of stocks
chosen by Standard & Poors for their size and industry characteristics. It is
widely recognized as representative of the general market for stocks in the
United States. The Morgan Stanley Capital International Europe, Australasia, and
Far East ("EAFE") Index is comprised of stocks located in countries other than
the United States. It is widely recognized as representative of the general
market for developed foreign markets. The Morgan Stanley Capital International
Emerging Markets Global ("EMG") Index is comprised of stocks located in
countries other than the United States. It is widely recognized as
representative of the general market for emerging markets. Investment returns
for the Indexes assume the reinvestment of dividends paid on stocks comprising
the Indexes.
- --------------------------------------------------------------------------------
4
<PAGE>
_____________________________________________________ QUANTITIVE GROUP OF FUNDS
SUMMARY OF FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the funds.
Shareholder Fees (fees paid directly from your investment)
Ordinary Institutional
Shares Shares
Maximum Deferred Sales Charge (Load) Imposed
on Purchases (as a percentage of redemption
proceeds) (Mid Cap Fund) None/1/ None
Maximum Deferred Sales Charge (Load)
Imposed on Purchases (as a percentage of redemption
proceeds) (all other funds) 1.00% None
_______________
/1/ The deferred sales charge is not imposed on redemptions of Ordinary Shares
of the Mid Cap Fund purchased on or after August 1, 1996.
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
Small Cap Mid Cap Growth and International Emerging Markets Foreign
Fund Fund Income Fund Equity Fund Fund Value Fund
--------- ------- ----------- ------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ordinary Shares
Management Fee 1.00% 1.00% .75% 1.00% .80% 1.00%
Distribution and Service
(12b-1) Fees .50% .25% .50% .50% .50% .25%
Other Expenses* .44% .62% .42% .61% 1.27% .74%
Total Annual Fund
Operating Expenses 1.94% 1.87% 1.67% 2.11% 2.57% 1.99%
Institutional Shares
Management Fee 1.00% 1.00% .75% 1.00% .80% 1.00%
Distribution and Service
(12b-1) Fees None None None None None None
Other Expenses* .45% .62% .41% .61% 1.30% .72%
Total Operating Expenses 1.45% 1.62% 1.16% 1.61% 2.10% 1.72%
</TABLE>
*The funds have an expense offset arrangement that reduces their custodian fee
based upon the amount of cash maintained by the funds with the custodians.
"Other expenses" do not take into account these expense reductions, and are
therefore higher than the actual expenses of the funds. The Manager has
contractually agreed to limit the total operating expenses of the Small Cap, and
Growth and Income and International Equity Funds to 2.00% of their average net
assets, without giving effect to custody credits, if applicable. The Manager
also voluntarily has agreed to temporarily limit the total operating expenses of
the Mid Cap and Emerging Markets Funds to 1.65% and 2.25%, respectively, of
their average net assets, without giving effect to custody credits, if
applicable. The Distributor voluntarily waived 12b-1 fees for the Mid Cap Fund
for most of the fiscal year, and the Transfer Agent voluntarily waived fees for
the Foreign Value Fund for the fiscal year. The agreement is subject to
periodic review, and there is no guarantee that the Manager will continue to
limit expenses of these Funds and the Distributor and Transfer Agent will
continue their respective fee waivers in the future. Expenses of the Mid Cap
Fund, the Emerging Markets Fund, and the Foreign Value Fund do not reflect the
effects of these voluntary limitations. If the voluntary limitations were
included, the total expenses of the Funds would have been as follows: Mid Cap
Fund Ordinary Shares - 1.65%, Mid Cap Fund Institutional Shares - 1.62%,
Emerging Markets Fund Ordinary Shares - 2.32%, Emerging Markets Fund
Institutional Shares - 1.82%, Foreign Value Fund Ordinary Shares - 1.99%, and
Foreign Value Fund Institutional Shares - 1.72%, Expenses eligible for
reimbursement under all applicable expense limitations do not include interest,
taxes, brokerage commissions, or extraordinary expenses such as international
custody fees. Long-term shareholders owning Ordinary Shares may pay more than
the economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. The management fee paid to the
Manager for managing the Small Cap Fund, the Mid Cap Fund, the International
Equity Fund, and the Foreign Value Fund is higher than that paid by most other
investment companies.
Example
This Example is intended to help you compare the cost of investing in a fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the funds for the time periods
indicated and then redeem all of your shares at the end of those time periods.
The Example also assumes that your investment has a 5% return each year and that
the funds' operating expenses remain the same. Expenses shown in this Example do
not give effect to the custody credits applicable to all the funds or the
voluntary expense limitations on the Mid Cap and Emerging Markets Funds.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
Ordinary Shares Institutional Shares
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap Fund $30 $72 $117 $241 $15 $46 $ 79 $174
Mid Cap Fund $19 $59 $101 $222 $16 $51 $ 89 $194
Growth and Income Fund $27 $64 $103 $222 $12 $37 $ 64 $141
International Equity Fund $32 $77 $125 $258 $16 $51 $ 88 $192
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
__________________________________________________ QUANTITIVE GROUP OF FUNDS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets Fund $36 $91 $149 $308 $21 $66 $139 $247
Foreign Value Fund $31 $74 $120 $248 $18 $54 $ 94 $205
You would pay the following expenses if you did not redeem your shares:
Small Cap Fund $20 $61 $105 $227 $15 $46 $ 79 $174
Mid Cap Fund $19 $59 $101 $222 $16 $51 $ 89 $194
Growth and Income Fund $17 $53 $ 91 $198 $12 $37 $ 64 $141
International Equity Fund $21 $66 $114 $245 $16 $51 $ 88 $192
Emerging Markets Fund $26 $80 $138 $295 $21 $66 $139 $247
Foreign Value Fund $20 $63 $108 $235 $18 $54 $ 94 $205
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following per share financial information for the Small Cap Fund, Mid Cap
Fund, Growth and Income Fund, International Equity Fund, Emerging Markets Fund
and Foreign Value Fund has been examined by PricewaterhouseCoopers LLP (formerly
Price Waterhouse LLP), independent accountants, whose report thereon is included
in the Statement of Additional Information. This condensed financial information
should be read in conjunction with the related financial statements and notes
thereto included in the Statement of Additional Information.
[see attached]
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Income from
Investment Operations (e) Distributions
------------------------------------------------ ---------------------------
Net Asset Net Realized Dividends Dividends
Value at Net and Unrealized Total from from Net in excess of
Beginning Investment Gain (Loss) Investment Investment Net Investment
of Period Income (a) on Securities Operations Income Income
<S> <C> <C> <C> <C> <C> <C>
Small Cap
Ordinary Shares
Year Ended March 31, 1995 $ 15.33 (0.20) 1.67 1.47 --- ---
Year Ended March 31, 1996 $ 15.81 (0.21) 5.54 5.33 --- ---
Year Ended March 31, 1997 $ 18.91 0.16 (f) 0.77 0.93 --- ---
Year Ended March 31, 1998 $ 15.04 (0.23) 5.60 5.37 (0.16) ---
Year Ended March 31, 1999 $ 17.80 (0.15) (3.05) (3.20) --- ---
Institutional Shares
Year Ended March 31, 1995 $ 15.46 (0.13) 1.71 1.58 --- ---
Year Ended March 31, 1996 $ 16.05 (0.12) 5.63 5.51 --- ---
Year Ended March 31, 1997 $ 19.33 0.08 (f) 0.94 1.02 --- ---
Year Ended March 31, 1998 $ 15.55 (0.15) 5.79 5.64 (0.34) ---
Year Ended March 31, 1999 $ 18.40 (0.08) (3.15) (3.23) --- ---
Mid Cap
Ordinary Shares
Oct. 3, 1994** to March 31, 1995 $ 10.00 0.05 0.07 0.12 --- ---
Year Ended March 31, 1996 $ 10.12 0.06 3.27 3.33 (0.01) ---
Year Ended March 31, 1997 $ 13.20 0.09 2.29 2.38 (0.14) ---
Year Ended March 31, 1998 $ 13.44 (0.08) 6.06 5.98 --- ---
Year Ended March 31, 1999 $ 16.05 (0.11) (0.09) (0.20) --- ---
Institutional Shares
April 17, 1995** to March 31, 1996 $ 10.27 0.10 3.09 3.19 (0.02) ---
Year Ended March 31, 1997 $ 13.20 0.11 2.27 2.38 (0.03) ---
Year Ended March 31, 1998 $ 13.55 (0.06) 6.12 6.06 --- ---
Year Ended March 31, 1999 $ 16.24 (0.10) (0.10) (0.20) --- ---
Growth and Income
Ordinary Shares
Year Ended March 31, 1995 $ 13.85 0.14 1.44 1.58 (0.18) ---
Year Ended March 31, 1996 $ 13.72 0.12 2.89 3.01 (0.13) ---
Year Ended March 31, 1997 $ 14.57 0.08 2.53 2.61 (0.10) ---
Year Ended March 31, 1998 $ 15.22 0.00 7.61 7.61 (0.05) ---
Year Ended March 31, 1999 $ 20.85 (0.08) 2.82 2.74 --- ---
Institutional Shares
Year Ended March 31, 1995 $ 13.86 0.21 1.44 1.65 (0.23) ---
Year Ended March 31, 1996 $ 13.72 0.20 2.89 3.09 (0.20) ---
Year Ended March 31, 1997 $ 14.58 0.15 2.55 2.70 (0.18) ---
Year Ended March 31, 1998 $ 15.24 0.10 7.60 7.70 (0.17) ---
Year Ended March 31, 1999 $ 20.84 0.03 2.83 2.86 --- ---
<CAPTION>
-------------------------------------------------------------------------------------
Distributions Distributions Net Assets
from in excess of Net Asset End of
Realized Realized Total Value End Total Period
Capital Gains Capital Gains Distributions of Period Return (c) (000's)
<S> <C> <C> <C> <C> <C> <C>
Small Cap
Ordinary Shares
Year Ended March 31, 1995 (0.99) --- (0.99) $ 15.81 10.24 % $ 53,920
Year Ended March 31, 1996 (2.23) --- (2.23) $ 18.91 34.25 % $ 71,618
Year Ended March 31, 1997 (4.80) --- (4.80) $ 15.04 1.72 % $ 57,135
Year Ended March 31, 1998 (2.45) (g) --- (2.61) $ 17.80 37.79 % $ 66,876
Year Ended March 31, 1999 --- --- --- $ 14.60 (17.98)% $ 47,605
Institutional Shares
Year Ended March 31, 1995 (0.99) --- (0.99) $ 16.05 10.88 % $ 47,044
Year Ended March 31, 1996 (2.23) --- (2.23) $ 19.33 34.89 % $ 42,803
Year Ended March 31, 1997 (4.80) --- (4.80) $ 15.55 2.21 % $ 9,207
Year Ended March 31, 1998 (2.45) (g) --- (2.79) $ 18.40 38.44 % $ 6,286
Year Ended March 31, 1999 --- --- --- $ 15.17 (17.55)% $ 4,680
Mid Cap
Ordinary Shares
Oct. 3, 1994** to March 31, 1995 --- --- --- $ 10.12 1.20 % $ 420
Year Ended March 31, 1996 (0.24) --- (0.25) $ 13.20 33.01 % $ 6,025
Year Ended March 31, 1997 (2.00) --- (2.14) $ 13.44 17.47 % $ 8,733
Year Ended March 31, 1998 (3.37) --- (3.37) $ 16.05 46.76 % $ 15,484
Year Ended March 31, 1999 (0.39) --- (0.39) $ 15.46 (1.08) % $ 12,617
Institutional Shares
April 17, 1995** to March 31, 1996 (0.24) --- (0.26) $ 13.20 31.12 % $ 4,621
Year Ended March 31, 1997 (2.00) --- (2.03) $ 13.55 17.51 % $ 361
Year Ended March 31, 1998 (3.37) --- (3.37) $ 16.24 47.01 % $ 823
Year Ended March 31, 1999 (0.39) --- (0.39) $ 15.65 (1.07)% $ 557
Growth and Income
Ordinary Shares
Year Ended March 31, 1995 (1.56) --- (1.72) $ 13.72 12.71 % $ 37,048
Year Ended March 31, 1996 (2.03) --- (2.16) $ 14.57 22.17 % $ 41,353
Year Ended March 31, 1997 (1.86) --- (1.96) $ 15.22 17.97 % $ 43,266
Year Ended March 31, 1998 (1.93) --- (1.98) $ 20.85 51.52 % $ 66,397
Year Ended March 31, 1999 (2.33) --- (2.33) $ 21.26 13.67 % $ 70,874
Institutional Shares
Year Ended March 31, 1995 (1.56) --- (1.79) $ 13.72 13.29 % $ 1,975
Year Ended March 31, 1996 (2.03) --- (2.23) $ 14.58 22.75 % $ 1,888
Year Ended March 31, 1997 (1.86) --- (2.04) $ 15.24 18.62 % $ 1,532
Year Ended March 31, 1998 (1.93) --- (2.10) $ 20.84 52.18 % $ 3,724
Year Ended March 31, 1999 (2.33) --- (2.33) $ 21.37 14.27 % $ 4,607
<CAPTION>
Ratios and Supplemental Data
-------------------------------------------------------------------------------------
Ratio of Ratio of Ratio of Net
Operating Operating Investment
Expenses Expenses Income (Loss)
to Average Net of to Average Portfolio
Net Assets Custody Net Assets Turnover
Credits
to Average
Net Assets(d)
<S> <C> <C> <C> <C>
Small Cap
Ordinary Shares
Year Ended March 31, 1995 1.84 % 1.84 % (1.31) % 320.00 %
Year Ended March 31, 1996 1.97 % 1.88 % (1.17) % 324.00 %
Year Ended March 31, 1997 1.97 % 1.90 % 0.90 % (l) 393.00 %
Year Ended March 31, 1998 1.90 % 1.89 % (1.33) % 135.00 %
Year Ended March 31, 1999 1.94 % 1.94 % (0.99) % 113.00 %
Institutional Shares
Year Ended March 31, 1995 1.36 % 1.36 % (0.62) % 320.00 %
Year Ended March 31, 1996 1.47 % 1.38 % (0.67) % 324.00 %
Year Ended March 31, 1997 1.47 % 1.40 % 0.41 % (l) 393.00 %
Year Ended March 31, 1998 1.41 % 1.40 % (0.66) % 135.00 %
Year Ended March 31, 1999 1.44 % 1.44 % (0.49) % 113.00 %
Mid Cap
Ordinary Shares
Oct. 3, 1994** to March 31, 1995 --- % --- % 1.50 % 0.00 %
Year Ended March 31, 1996 2.34 % 1.92 % 0.48 % 181.00 %
Year Ended March 31, 1997 1.19 % 1.11 % 0.62 % 162.00 %
Year Ended March 31, 1998 1.57 % 1.57 % (0.52) % 128.00 %
Year Ended March 31, 1999 1.65 % 1.65 % (0.72) % 168.00 %
Institutional Shares
April 17, 1995** to March 31, 1996 2.02 % (b) 1.66 % 0.67 % 181.00 %
Year Ended March 31, 1997 1.44 % 1.27 % 0.77 % 162.00 %
Year Ended March 31, 1998 1.40 % 1.40 % (0.35) % 128.00 %
Year Ended March 31, 1999 1.62 % 1.62 % (0.69) % 168.00 %
Growth and Income
Ordinary Shares
Year Ended March 31, 1995 1.69 % 1.60 % 1.01 % 121.00 %
Year Ended March 31, 1996 1.73 % 1.64 % 0.61 % 152.00 %
Year Ended March 31, 1997 1.73 % 1.70 % 0.50 % 96.00 %
Year Ended March 31, 1998 1.69 % 1.65 % (0.01) % 72.00 %
Year Ended March 31, 1999 1.67 % 1.62 % (0.36) % 97.00 %
Institutional Shares
Year Ended March 31, 1995 1.23 % 1.23 % 1.48 % 121.00 %
Year Ended March 31, 1996 1.24 % 1.15 % 1.31 % 152.00 %
Year Ended March 31, 1997 1.24 % 1.21 % 0.99 % 96.00 %
Year Ended March 31, 1998 1.19 % 1.14 % 0.50 % 72.00 %
Year Ended March 31, 1999 1.17 % 1.12 % 0.14 % 97.00 %
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS - Continued
(For a share outstanding throughout each period)
Income from
Investment Operations (e) Distributions
------------------------------------------------------------
Net Asset Net Realized Dividends Dividends
Value at Net and Unrealized Total from from Net in excess of
Beginning Investment Gain (Loss) Investment Investment Net Investment
of Period Income (a) on Securities Operations Income Income
<S> <C> <C> <C> <C> <C> <C>
International Equity
Ordinary Shares
Year Ended March 31, 1995 $ 10.18 (0.03) 0.04 0.01 (0.13) ---
Year Ended March 31, 1996 $ 10.06 0.00 0.67 0.67 (0.03) ---
Year Ended March 31, 1997 $ 10.70 0.01 0.40 0.41 (0.08) ---
Year Ended March 31, 1998 $ 11.03 0.07 1.30 1.37 (0.11) (0.06)
Year Ended March 31, 1999 $ 11.97 0.01 (0.58) (0.57) (0.02) (0.01)
Institutional Shares
August 25, 1994** to March 31, 1995 $ 11.00 0.01 (0.73) (0.72) (0.18) ---
Year Ended March 31, 1996 $ 10.10 0.04 0.66 0.70 (0.07) ---
Year Ended March 31, 1997 $ 10.73 0.06 0.41 0.47 (0.10) ---
Year Ended March 31, 1998 $ 11.10 0.14 1.28 1.42 (0.20) (0.11)
Year Ended March 31, 1999 $ 11.95 0.06 (0.58) (0.52) (0.03) (0.01)
Emerging Markets
Ordinary Shares
August 8, 1994** to March 31, 1995 $ 10.00 (0.05) (2.71) (2.76) --- ---
Year Ended March 31, 1996 $ 7.24 (0.07) 1.21 1.14 --- ---
Year Ended March 31, 1997 $ 8.38 (0.04) 0.90 0.86 --- ---
Year Ended March 31, 1998 $ 9.24 (0.04) (1.50) (1.54) --- ---
Year Ended March 31, 1999 $ 7.70 0.07 (1.11) (1.04) (0.07) (h) ---
Institutional Shares
April 2,1996** to March 31, 1997 $ 8.49 0.01 0.80 0.81 (0.03) ---
Year Ended March 31, 1998 $ 9.27 0.02 (1.53) (1.51) --- ---
Year Ended March 31, 1999 $ 7.76 0.09 (1.11) (1.02) (0.10) (h) ---
Foreign Value
Ordinary Shares
May 15, 1998** to March 31, 1999 $ 10.00 0.02 (1.64) (1.62) (0.01) (0.01)
Institutional Shares
December 18, 1998** to March 31, 1999 $ 8.43 0.06 (0.12) (0.06) --- ---
<CAPTION>
Distributions
---------------------------------------------
Distributions Distributions
excess of from Net Asset
Investment Realized Total Value End Total
Capital Gains Capital Gains Distributions of Period Return (c)
<S> <C> <C> <C> <C> <C>
International Equity
Ordinary Shares
Year Ended March 31, 1995 --- --- (0.13) $ 10.06 0.07 %
Year Ended March 31, 1996 --- --- (0.03) $ 10.70 6.63 %
Year Ended March 31, 1997 --- --- (0.08) $ 11.03 3.82 %
Year Ended March 31, 1998 (0.21) (0.05) (0.43) $ 11.97 12.95 %
Year Ended March 31, 1999 --- --- (0.03) $ 11.37 (4.78) %
Institutional Shares
August 25, 1994** to March 31, 1995 --- --- (0.18) $ 10.10 (6.57) %
Year Ended March 31, 1996 --- --- (0.07) $ 10.73 6.95 %
Year Ended March 31, 1997 --- --- (0.10) $ 11.10 4.38 %
Year Ended March 31, 1998 (0.21) (0.05) (0.57) $ 11.95 13.50 %
Year Ended March 31, 1999 --- --- (0.04) $ 11.39 (4.34) %
Emerging Markets
Ordinary Shares
August 8, 1994** to March 31, 1995 --- --- --- $ 7.24 (27.60) %
Year Ended March 31, 1996 --- --- --- $ 8.38 15.75 %
Year Ended March 31, 1997 --- --- --- $ 9.24 10.26 %
Year Ended March 31, 1998 --- --- --- $ 7.70 (16.67) %
Year Ended March 31, 1999 --- --- (0.07) $ 6.59 (13.40) %
Institutional Shares
April 2,1996** to March 31, 1997 --- --- (0.03) $ 9.27 9.54 %
Year Ended March 31, 1998 --- --- --- $ 7.76 (16.29) %
Year Ended March 31, 1999 --- --- (0.10) $ 6.64 (12.93) %
Foreign Value
Ordinary Shares
May 15, 1998** to March 31, 1999 --- --- (0.02) $ 8.36 (16.16) %
Institutional Shares
December 18, 1998** to March 31, 1999 --- --- --- $ 8.37 (0.71) %
<CAPTION>
Ratios and Supplemental Data
----------------------------------------------
Ratio of Ratio of Ratio of Net
Net Assets Operating Operating Investment
End of Expenses Expenses Income (Loss)
Period to Average Net of to Average Portfolio
(000's) Net Assets Custody Net Assets Turnover
Credits
to Average
Net Assets (d)
<S> <C> <C> <C> <C> <C>
International Equity
Ordinary Shares
Year Ended March 31, 1995 $ 27,657 1.91 % 1.91 % (0.20) % 45.49 %
Year Ended March 31, 1996 $ 27,402 2.15 % 2.09 % (0.04) % 43.03 %
Year Ended March 31, 1997 $ 27,410 2.20 % 2.15 % 0.10 % 135.03 %
Year Ended March 31, 1998 $ 32,182 2.18 % 2.03 % 0.62 % 51.03 %
Year Ended March 31, 1999 $ 21,956 2.11 % 2.08 % 0.12 % 128.03 %
Institutional Shares
August 25, 1994** to March 31, 1995 $ 3,052 1.66 % (b) 1.56 % (b) 0.13 % (b) 45.49 % (b)
Year Ended March 31, 1996 $ 1,241 1.65 % 1.59 % 0.38 % 43.03 %
Year Ended March 31, 1997 $ 1,760 1.69 % 1.64 % 0.31 % 135.03 %
Year Ended March 31, 1998 $ 1,728 1.68 % 1.54 % 1.19 % 81.00 %
Year Ended March 31, 1999 $ 1,895 1.61 % 1.58 % 0.62 % 128.03 %
Emerging Markets
Ordinary Shares
August 8, 1994** to March 31, 1995 $ 4,259 2.54 % (b) 2.54 % (b) (1.03) % (b) 10.72 % (b)
Year Ended March 31, 1996 $ 7,736 2.74 % 2.59 % (0.84) % 9.03 %
Year Ended March 31, 1997 $ 10,052 2.68 % 2.56 % (0.47) % 9.07 %
Year Ended March 31, 1998 $ 9,241 2.69 % 2.57 % (0.43) % 52.02 %
Year Ended March 31, 1999 $ 8,442 2.32 % 2.24 % 1.03 % 49.00 %
Institutional Shares
April 2,1996** to March 31, 1997 $ 1,212 2.01 % (b) 1.59 % (b) 0.13 % (b) 8.00 % (b)
Year Ended March 31, 1998 $ 1,002 2.19 % 2.07 % 0.24 % 52.00 %
Year Ended March 31, 1999 $ 1,447 1.82 % 1.74 % 1.36 % 49.00 %
Foreign Value
Ordinary Shares
May 15, 1998** to March 31, 1999 $ 7,478 1.99 % (b) 1.90 % (b) 0.19 % (b) 22.00 % (b)
Institutional Shares
December 18, 1998** to March 31, 1999 $ 401 1.72 % (b) 1.70 % (b) 0.75 % (b) 22.00 % (b)
</TABLE>
** Commencement of Operations
(a) Reflects expense waivers/reimbursements and reductions in effect during the
period. See Note 3 to the Financial Statements. As a result of such
waivers/reimbursements and reductions, expenses of the Small Cap Ordinary
Shares for the periods ended March 31, 1998, 1997, and 1996 reflect a
reduction of $0.01, $0.02 and $0.02 per share; expenses of the Small Cap
Institutional Shares for the periods ended March 31, 1998, 1997 and 1996
reflect a reduction of $0.01,$0.02 and $0.02 per share; expenses of the Mid
Cap Ordinary Shares for the periods ended March 31, 1999, 1998, 1997, 1996
and 1995 reflect a reduction of $0.03, $0.07, $0.15, $0.23 and $0.76 per
share; expenses of the Mid Cap Institutional Shares for the periods ended
March 31, 1998, 1997, and 1996 reflects a reduction of $0.06, $0.10 and
$0.11 per share; expenses of the Growth and Income Ordinary Shares for the
periods ended March 31, 1997 and 1996 reflect a reduction of $0.01 and $0.01
per share; expenses of the Growth and Income Institutional Shares for the
periods ended March 31,1997 and 1996 reflect a reduction of $0.01 and $0.01
per share; expenses of the International Equity Ordinary Shares for the
periods ended March 31, 1998, 1997, 1996 and 1995 reflect a reduction of
$ ---, $0.01 $0.01 and $0.01 per share respectively; expenses of the
International Equity Institutional Shares for the periods ended March 31,
1998, 1997, 1996, and 1995 reflect a reduction of $ ---, $0.02, $0.01 and
$0.01 per share; expenses of the Emerging Markets Ordinary Shares for the
periods ended March 31, 1999, 1997, 1996 and 1995 reflect a reduction of
$0.02, $0.01, $0.01 and $0.02 per share; expenses of the Emerging Markets
Institutional Shares for the periods ended March 31, 1999 and 1997 reflects
a reduction of $0.02 and $0.02 per share; expenses of the Foreign Value
Ordinary Shares for the period ended March 31, 1999 reflect a reduction of $
0.01 per share, and expenses of the Foreign Value Institutional Shares for
the period ending March 31, 1999 reflect a reduction of $ 0.01 per share.
(b) Annualized
(c) Total Return does not include the one time deferred sales charge of 1% for
the Ordinary Shares. See Note 3 to the financial statements. Effective
August 1, 1996 Mid Cap Ordinary Shares are no longer subject to the deferred
sales charge of 1%.
The total return would have been lower if certain fees had not been waived
or if custodial fees had not been reduced by credits allowed by the
custodian.
(d) Expense ratios for the years ended March 31, 1999, March 31, 1998, March 31,
1997 and March 31, 1996 are shown gross of custody credits (Note 3) in
accordance with SEC regulations. These credits are generated by interest
earned on uninvested cash balances maintained by the Funds, and are used to
offset custodial expenses of the Fund. This column shows the Funds' expense
ratios net of such credits,
(e) Per share numbers have been calculated using the average shares method.
(f) Net investment income per share and the net investment income ratio would
have been lower without a certain investment strategy followed by the
subadvisor during the fiscal year ended March 31, 1997.
(g) Represents $ 2.42 per share of distributions from realized capital gains and
$ 0.03 per share of a return of capital.
(h) Represents $ 0.05 per share of distributions from net investment income and
$ 0.02 per share of a return of capital for Ordinary Shares and $0.07 per
share of distributions from net investment income and $ 0.03 per share of a
return of capital for Institutional Shares.
<PAGE>
INVESTMENT POLICIES AND RELATED RISKS
What are the funds' main investment strategies and related risks?
U.S. Equity Funds
Quantitative Small Cap Fund
Quantitative Mid Cap Fund
Quantitative Growth and Income Fund
Under normal market conditions the Small Cap Fund mainly buys stocks of small-
sized companies, generally with less than $1.5 billion dollars in market
capitalization. The Mid Cap Fund mainly buys stocks of mid-sized companies,
generally between $1 billion and $5 billion in market capitalization. The Growth
and Income Fund mainly buys stocks of large companies, generally greater than $5
billion in market capitalization that are currently paying dividends.
International Funds
Quantitative International Equity Fund
Under normal market conditions the International Equity Fund invests at least
65% of its assets in common stocks of issuers that have their principal
activities in foreign markets. The fund's investments will be diversified among
securities of companies located in nine or more foreign countries. This
diversification should enable the fund to take advantage of differences between
economic trends and the performance of the securities markets in various
countries. The diversification also may reduce the effect of events in any one
country on the Fund's performance.
Quantitative Emerging Markets Fund
Under normal market conditions the Emerging Markets Fund invests at least 65% of
its assets in common stocks of issuers that are located in emerging markets. The
fund generally will be invested in issuers in eight or more emerging markets. An
emerging market is broadly defined as one with low- to middle per capita income.
The classification system used by the World Bank and International Finance
Corporation in determining the emerging markets of the world will be used to
define the eligible universe of potential markets for investment.
Quantitative Foreign Value Fund
Under normal market conditions the International Equity Fund invests at least
65% of its assets in common stocks of issuers that have their principal
activities in foreign markets. Generally, the International Equity Fund invests
in Western Europe, Australia, and the larger capital markets in the Far East;
however, the Fund may also invest without limit in issuers in emerging markets.
All Funds
The funds currently operate under a "manager of managers" system. A manager
selects advisors to execute the day-to-day investment strategy of the funds and
monitors the advisor's performance. Each of the funds' advisors employs a
"quantitative" investment approach to selecting investments. Investment managers
using this approach to investing rely on computer technology and financial
databases to assist in the stock selection process. Proprietary computer models
are capable of rapidly ranking a large universe of eligible investments using an
array of traditional factors applied in financial analysis, such as cash flow,
earnings growth, and price to earnings ratios, as well as other non-traditional
factors. With the benefit of these rankings, a fund's advisor constructs a
portfolio of securities consistent with each individual fund's investment
objectives. A description of the risks associated with each fund's main
investment strategies follows.
Related Risks
COMMON STOCKS. Common stocks represent ownership interests in companies. The
value of a company's stock may fall as a result of factors directly relating to
that company, such as decisions made by its management or lower demand for the
company's products or services. A stock's value may also fall because of factors
affecting multiple companies in a number of different industries, such as
increases in production costs. The value of a company's stock may also be
affected by changes in financial market conditions that are relatively unrelated
to the company or its industry, such as changes in interest rates or currency
exchange rates. In addition, a company's stock generally pays dividends only
after the company makes required payments to holders of its bonds and other
debt. For this reason, the value of the stock will usually react more strongly
than the bonds and other debt to actual or perceived changes in the company's
financial condition or prospects.
GROWTH STOCKS. Each fund may invest in stocks of companies its advisor believes
have earnings that are likely to grow faster than the economy as a whole. These
growth stocks typically trade at higher multiples of current earnings than other
stocks. Therefore, the values of growth stocks may be more sensitive to changes
in current or expected earnings than the values of other stocks. If the fund's
advisor's assessment of the prospects for the company's earnings growth is
wrong, or if its judgment about how other investors will value the company's
earnings growth is wrong, then the price of the company's stock may fall or not
approach the value that the fund's advisor has placed on it.
VALUE STOCKS. Each fund may also invest in companies that are not expected to
experience significant earnings growth, but whose stock the fund's advisor
believes is undervalued compared to its true worth. These companies may have
experienced adverse
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
business developments or may be subject to special risks that have caused their
stocks to be out of favor. If the fund's advisor's assessment of a company's
prospects is wrong, or if other investors do not eventually recognize the value
of the company, then the price of the company's stock may fall or may not
approach the value that the fund's advisor has placed on it.
SMALLER COMPANIES. Each of the Small Cap Fund and the Mid Cap Fund invests a
substantial portion of its assets in small and medium-sized companies, including
companies with market capitalization of less than $3 billion. These companies
are more likely than larger companies to have limited product lines, markets or
financial resources, or to depend on a small, inexperienced management group.
Stocks of these companies may trade less frequently and in limited volume, and
their prices may fluctuate more than stocks of other companies. Stocks of these
companies may therefore be more vulnerable to adverse developments than those of
larger companies. There are no minimum market capitalizations for companies
whose securities a fund may purchase..
FOREIGN INVESTMENTS. The International Funds may invest without limit in
securities of foreign issuers. Foreign investments involve certain special
risks, including
. Unfavorable changes in currency exchange rates: Foreign investments are
normally issued and traded in foreign currencies. As a result, their values
may be affected by changes in the exchange rates between particular foreign
currencies and the U.S. dollar.
. Political and economic developments: Foreign investments may be subject to
the risks of seizure by a foreign government, imposition of restrictions on
the exchange or transport of foreign currency, and tax increases.
. Unreliable or untimely information: There may be less information publicly
available about a foreign company than about most U.S. companies, and
foreign companies are usually not subject to accounting, auditing and
financial reporting standards and practices comparable to those in the
United States.
. Limited legal recourse: Legal remedies for investors such as the funds may
be more limited than those available in the United States.
. Limited markets: Certain foreign investments may be less liquid (harder to
buy and sell) and more volatile than domestic investments, which means the
funds may at times be unable to sell these investments at desirable prices.
For the same reason, the funds may at times find it difficult to value
their foreign investments.
. Trading Practices: Brokerage commissions and other fees are generally
higher for foreign investments than for domestic investments. The
procedures and rules for settling foreign transactions may also involve
delays in payment, delivery or recovery of money or investments. Special
U.S. tax considerations may apply to the funds' foreign investments.
. LowerYield: Common stocks of foreign companies have historically offered
lower dividends than comparable U.S. companies. Foreign withholding taxes
may further reduce the amount of income available to distribute to
shareholders of the fund. The funds' yields are therefore expected to be
lower than yields of most funds that invest mainly in common stocks of U.S.
companies. Certain of these risks may also apply to some extent to U.S.-
traded investments that are denominated in foreign currencies, investments
in U.S. companies that are traded in foreign markets, or to investments in
U.S. companies that have significant foreign operations.
. Emerging markets: Investing in emerging markets involves risks in addition
to and greater than those generally associated with investing in more
developed foreign markets. The extent of foreign development, political
stability, market depth, infrastructure and capitalization and regulatory
oversight are generally less than in more developed markets. Emerging
market economies can be subject to greater social, economic, regulatory and
political uncertainties. All of these factors generally make emerging
market securities more volatile and potentially less liquid than securities
issued in more developed markets.
OTHER INVESTMENTS. In addition to the main investment strategies described
above, each fund may also make other types of investments, such as investments
in preferred stocks, convertible securities, fixed-income securities, ADRs,
derivatives, or repurchase agreements and may also implement other strategies
including selling securities short, and therefore may be subject to other risks,
as described in the fund's statement of additional information ("SAI").
ALTERNATIVE STRATEGIES. At times each fund's advisor may judge that market
conditions make pursuing the fund's investment strategies inconsistent with the
best interests of its shareholders. Each fund's advisor may then temporarily use
alternative strategies that are mainly designed to limit the fund's losses.
Although each fund's advisor has the flexibility to use these strategies, it may
choose not to for a variety of reasons, even in very volatile market conditions.
These strategies may cause the fund to miss out on investment opportunities, and
may prevent the fund from achieving its goal.
- --------------------------------------------------------------------------------
7
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
CHANGES IN POLICIES. Each fund's Trustees may change the fund's goal, investment
strategies and other policies without shareholder approval, except as otherwise
indicated.
MANAGEMENT OF THE FUNDS
Under Massachusetts law, the management of the funds' business and affairs is
the ultimate responsibility of the Board of Trustees of the funds.
The Manager and the Advisors
The funds are managed by Quantitative Advisors, Inc., 55 Old Bedford Road,
Lincoln, MA 01773 (the "Manager"), which handles the funds' business affairs.
The Manager may, subject to the approval of the Trustees, choose the investments
of the funds itself or, subject to the approval by the Trustees, select
subadvisors (the "Advisors") to handle the day-to-day investments of the funds.
The Manager currently employs Advisors to make the investment decisions and
portfolio transactions for all of the funds and supervises the Advisors'
investment programs.
Day-to-day responsibility for investing the funds' assets currently is provided
by the Advisors described below.
Quantitative Small Cap Fund
Quantitative Mid Cap Fund
Columbia Partners, L.L.C., Investment Management, 1701 Pennsylvania Ave., NW,
Washington, DC 20006 ("Columbia Partners") serves as Advisor to the Small Cap
Fund and the Mid Cap Fund. The firm presently has over $1 billion in assets
under management for individual, pension plan and endowment accounts. Robert A.
von Pentz, CFA has managed the Small Cap and Mid Cap Funds since July 1996. Mr.
von Pentz is a founder of Columbia Partners and previously served as chairman of
the board and chief financial officer of Riggs Investment Management
Corporation, where he worked from 1989 to 1995.
Quantitative Growth and Income Fund
State Street Global Advisors, 2 International Place, Boston, MA 02110, a unit of
State Street Bank and Trust Company ("State Street"), serves as Advisor to the
Growth and Income Fund. State Street is a wholly owned subsidiary of State
Street Boston Corporation, a publicly owned bank holding company. State Street
manages over $150 billion in assets for employee benefit plans, endowment funds
and individuals. The Growth and Income Fund has been managed continuously by the
Matrix Equity Group at State Street since the Fund's inception. The team at
State Street presently responsible for the daily management of the Fund includes
Steven M. Esielonis, Douglas T. Holmes, CFA, and Charles Babin, CFA. Mr.
Esielonis has served as a Vice President at State Street since 1992. Mr. Holmes,
Senior Vice President at State Street, has worked at State Street since 1984.
Mr. Babin joined State Street as a Managing Director in 1996. Prior to that
time, he was a Senior Vice President at Natwest Investment Management from 1995
to 1996 and the President and Managing Director of BRS Capital Management from
1987-1995.
Quantitative International Equity Fund
Quantitative Emerging Markets Fund
Independence International Associates, Inc., 53 State Street, Boston, MA 02109,
formerly Boston International Advisors, Inc. ("Independence International"),
serves as Advisor to the International Equity Fund and the Emerging Markets
Fund. The firm presently has over $2 billion under management in international
portfolios of pension and endowment funds, among others. Norman H. Meltz and
Dennis Fogerty manage both the International Equity Fund and Emerging Markets
Fund. Mr. Meltz has been involved since the inception of each fund in the
development and application of the funds' investment strategies. Independence
International is wholly owned by Independence Investment Associates, Inc., a
Delaware corporation.
Quantitative Foreign Value Fund
Day-to-day responsibility for managing the Foreign Value Fund presently is
provided by Polaris Capital Management, Inc., 125 Summer Street, Boston, MA
02110 ("Polaris"). The firm presently has over $50 million under management for
institutional clients and wealthy individuals. The Foreign Value Fund is managed
by Bernard R. Horn, Jr. Prior to founding Polaris in 1995, Mr. Horn worked as a
portfolio manager at Horn & Company, Freedom Capital Management Corporation, and
MDT Advisers, Inc.
Management and Advisory Fees
As compensation for services rendered, the funds pay the Manager a monthly fee
at the annual rate of: 1% of the average daily net asset value of the Small Cap
Fund, Mid Cap Fund, the International Equity Fund, and the Foreign Value Fund
(this fee is higher than that paid by most other investment companies); 0.80% of
the average daily net asset value of the Emerging Markets Fund; and 0.75% of the
average daily net asset value of the Growth and Income Fund. From this fee, the
Manager pays the expenses of providing investment advisory services to the
funds, including the fees of the Advisors of the individual funds, if
applicable.
The Manager is contractually obligated to reduce its compensation paid with
respect to the Small Cap Fund, Growth and Income Fund, and International Equity
Fund to the extent that a fund's total expenses exceed 2% of average net asset
value for any fiscal year. The funds' Distribution
- --------------------------------------------------------------------------------
8
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
Agreement calls for U.S. Boston Capital Corporation, the Funds' Distributor, to
reduce its fee similarly after the Manager's fee has been eliminated. The
Manager has also agreed to assume expenses of those Funds if necessary in order
to reduce its total expenses to no more than 2% of average net asset value for
any fiscal year. Fund expenses subject to this limitation are exclusive of
brokerage, interest, taxes and extraordinary expenses, and are calculated gross
of custody credits, if applicable. Extraordinary expenses include, but are not
limited to, the higher incremental costs of custody associated with foreign
securities, litigation and indemnification expenses. The Distributor would not
be required to reduce its compensation to the extent it is committed to make
payments to non-affiliated entities for services in connection with the
distribution of a Fund's shares. The Distributor, and in some cases the Manager,
may make ongoing payments to brokerage firms, financial institutions (including
banks) and others that facilitate the administration and servicing of
shareholder accounts.
The Manager may voluntarily agree to limit the total operating expenses of a
fund for a period of time by waiving fees or reimbursing a fund for an expense
that it would otherwise incur. In such cases, the Manager may seek reimbursement
from the fund if the fund's total operating expenses fall below that limit prior
to the end of the fund's fiscal year. The Manager voluntarily has agreed to
waive fees or assume certain operating expenses of the Mid Cap and Emerging
Markets Funds in order to reduce the total expenses of the Funds to no more than
1.65% and 2.25%, respectively, of their average net asset value. Expenses
eligible for reimbursement do not include interest, taxes, brokerage
commissions, or extraordinary expenses, and expenses are calculated gross of
custody credits, if applicable. Extraordinary expenses include, but are not
limited to, the higher incremental costs of custody associated with foreign
securities, litigation and indemnification expenses. The agreement is subject to
periodic review and there is no guarantee that the Manager will continue to
limit these expenses in the future.
For services rendered by the Manager during the fiscal year ended March 31,
1999, the funds paid to the Manager fees in an amount equivalent to 1% of the
average net assets of the Small Cap Fund, the Mid Cap Fund, and the
International Equity Fund, 0.80% of the average net assets of the Emerging
Markets Fund, and 0.75% of the average net assets of the Growth and Income Fund.
The Manager waived these fees as necessary consistent with the expense
limitations discussed above.
The funds have received an exemptive order from the SEC that permits the
Manager, subject to certain conditions, to enter into or amend an Advisory
Contract without obtaining shareholder approval. With Trustee approval, the
Manager may employ a new Advisor for a fund, change the terms of the Advisory
Contracts, or enter into new Advisory Contracts with the Advisors. The Manager
retains ultimate responsibility to oversee the Advisers and to recommend their
hiring, termination, and replacement. Shareholders of a fund continue to have
the right to terminate the Advisory Contract applicable to that Fund at any time
by a vote of the majority of the outstanding voting securities of the fund.
Shareholders will be notified of any Advisor changes or other material
amendments to an Advisory Contract that occurs under these arrangements.
HOW TO INVEST
Classes of Shares
The funds offer two classes of shares: Ordinary Shares and Institutional Shares.
Ordinary Shares are available to all purchasers and are subject to a 12b-1 fee
and in some cases a deferred sales charge as set forth below:
Deferred 12b-1
Fund Sales Charge Fee
- ---------------------- ------------ -----
Small Cap 1.00% 0.50%
Mid Cap 0.00% 0.25%
Growth & Income 1.00% 0.50%
International Equity 1.00% 0.50%
Emerging Markets 1.00% 0.50%
Foreign Value 1.00% 0.25%
Institutional Shares are available to limited classes of purchasers and are
offered on a no load basis. See How to Redeem - Payment of Redemption Amount on
page 18. Both classes of shares represent interests in the same portfolios of
securities and each has the same rights, except that Ordinary Shares have
exclusive voting rights with respect to the funds' 12b-1 Plan, which is
described below.
Distributor and Distribution Plan
U.S. Boston Capital Corporation ("Distributor") is the principal distributor of
the funds' shares.
The funds have adopted a plan under Rule 12b-1 that permits them to pay fees to
support the sale, distribution and servicing of accounts of shareholders of
Ordinary Shares. These annual distribution and service fees are 0.50% for
Ordinary Shares of the Small Cap Fund, Growth and Income Fund, International
Equity Fund, and Emerging Markets Fund and 0.25% of the average net asset value
of Ordinary Shares of the Mid Cap Fund and the Foreign Value Fund, and are paid
out of the assets of these classes. Over time, these fees will increase the cost
of your shares and may cost you more than paying other types of sales charges.
- --------------------------------------------------------------------------------
9
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
The fee is not directly tied to the Distributor's expenses. If expenses exceed
the Distributor's fees, the funds are not required to reimburse the Distributor
for excess expenses; if the Distributor's fees exceed the expenses of
distribution, the Distributor may realize a profit.
Ordinary Shares
The minimum initial investment is generally $2,500. However, you may make a
minimum investment of $1,000 if you:
. participate in the Funds' Automatic Investment Plan;
. open a Uniform Gifts/Transfers to Minors account; or
. open an Individual Retirement Account ("IRA") or an account under similar
plan established under the Employee Retirement Income Security Act of 1974,
or for any pension, profit sharing or other employee benefit plan or
participant therein, whether or not the plan is qualified under Section 401
of the Internal Revenue Code, including any plan established under the
Self-Employed Individuals Tax Retirement Act of 1962 (HR-10).
The funds or the Distributor, at their discretion, may waive these minimums.
You may make subsequent purchases in any amount, although the funds or the
Distributor, at their discretion, reserve the right to impose a minimum at any
time.
Institutional Shares
Institutional Shares of a Fund generally are available in minimum investments of
$1,000,000 or more. You may only purchase Institutional Shares, subject to the
$1,000,000 minimum, if you fall under one of the following classes of investors:
(i) benefit plans with at least $10,000,000 in plan assets and 200
participants, that either have a separate trustee vested with investment
discretion and certain limitations on the ability of plan beneficiaries to
access their plan investments without incurring adverse tax consequences or
which allow their participants to select among one or more investment options,
including the Fund; (ii) banks and insurance companies purchasing shares for
their own account; (iii) a bank, trust company, credit union, savings
institution or other depository institution, its trust departments or common
trust funds purchasing for non-discretionary customers or accounts; (iv) certain
fee paid registered investment advisors not affiliated with the Manager or
Distributor purchasing on behalf of their clients; and (v) investors who hold
Institutional Shares purchasing for existing Institutional Share accounts.
Clients of certain securities dealers not affiliated with the Distributor
offering programs in which the client pays a separate fee to an advisor
providing financial management or consulting services, including WRAP fee
programs may purchase Institutional Shares subject to a minimum initial
investment of $250,000 in aggregate at the investment management level and/or
$100,000 at the individual client level. The securities dealers offering WRAP
fees or similar programs may charge a separate fee for purchases and redemptions
of Institutional Shares. Neither the fund, the Manager, nor the Distributor
receives any part of the fees charged to clients of such securities dealers or
financial advisors.
The following classes of investors may also purchase Institutional Shares and
are not subject to the minimum initial investment requirement:
(i) any state, county, city, or any instrumentality, department, authority, or
agency of these entities or any trust, pension, profit-sharing or other benefit
plan for the benefit of the employees of these entities which is prohibited by
applicable investment laws from paying a sales charge or commission when it
purchases shares of any registered investment management company; and (ii)
officers, partners, trustees or directors and employees of the funds, the funds'
affiliated corporations, or of the funds' Advisors and their affiliated
corporations (a "Fund Employee"), the spouse or child of a Fund Employee, a Fund
Employee acting as custodian for a minor child, any trust, pension, profit-
sharing or other benefit plan for the benefit of a Fund Employee or spouse and
maintained by one of the above entities, the employee of a broker-dealer with
whom the Distributor has a sales agreement or the spouse or child of such
employee. To qualify for the purchase of Institutional Shares, Fund Employees
and other persons listed in section (ii) must provide Quantitative Institutional
Services, the funds' Transfer Agent with a letter stating that the purchase is
for their own investment purposes only and that the shares will not be resold
except to the funds.
Institutional Shares are not subject to any sales charges, including fees
pursuant to the funds' 12b-1 Plan. Investments in Institutional Shares require a
special Account Application. Please call 800-331-1244 for an Application.
Making an Initial Investment
You may purchase shares of each class of a fund at the per share net asset value
of shares of such class next determined after your purchase order is received by
the fund. Orders
- --------------------------------------------------------------------------------
10
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
received prior to the close of regular trading on the New York Stock Exchange
("NYSE") (ordinarily 4:00 p.m., New York time), will receive that evening's
closing price. The funds will accept orders for purchases of shares on any day
on which the NYSE is open. See Calculation of Net Asset Value on page 19. The
offering of shares of the Funds, or of any particular fund, may be suspended
from time to time, and the funds reserve the right to reject any specific order.
You must provide the fund with a completed Account Application for all initial
investments. If you wish to have telephone exchange or telephone redemption
privileges for your account, you must elect these options on the Account
Application. You should carefully review the Application and particularly
consider the discussion in this Prospectus regarding the funds' policies on
exchanges of fund shares and processing of redemption requests. Some accounts,
including IRA accounts, require a special Account Application. See Investment
Through Tax Deferred Retirement Plans on page 17. For further information,
including assistance in completing an Account Application, call the funds' toll-
free number 800-331-1244.
Investments by Check
You may purchase shares of the funds by sending a check payable to Quantitative
Group of Funds specifying the name(s) of the fund(s) and amount(s) of
investment(s), together with the appropriate Account Application (in the case of
an initial investment) to:
Quantitative Group of Funds
Attention: Transfer Agent
55 Old Bedford Road
Lincoln, Massachusetts 01773
If you buy shares with a check that does not clear, your account may be subject
to extra charges to cover collection costs.
Automatic Investment Plan
You may participate in the Automatic Investment Plan for the funds by completing
the appropriate section of the Account Application and enclosing a minimum
investment of $1,000 per fund. You must also authorize an automatic withdrawal
of at least $100 per fund from your checking, NOW or similar account each month
to purchase shares of a fund. You may cancel the Plan at any time, but your
request must be received five business days before the next automatic withdrawal
(generally the 20th of each month) to become effective for that withdrawal.
Requests received fewer than five business days before a scheduled withdrawal
will take effect with the next scheduled withdrawal. The funds or the Transfer
Agent may terminate the Automatic Investment Plan at any time.
Investments by Wire
If you wish to buy shares by wire, please contact the Transfer Agent at 800-331-
1244 or your dealer or broker for wire instructions. For new accounts, you must
provide a completed Account Application before, or at the time of, payment. To
ensure that a wire is credited to the proper account, please specify your name,
the name(s) of the fund(s) and class of shares in which they are investing, and
your account number. A bank may charge a fee for wiring funds.
Investments through Brokers
Ordinary Shares may be purchased through any securities dealer with whom the
Distributor has a sales agreement. Orders received by the Distributor from
dealers or brokers will receive that evening's closing price if the orders are
received by the dealer or broker from its customer prior to 4:00 p.m., or such
other time as agreed upon by the Distributor, and are transmitted to and
received by the Distributor prior to its close of business that day.
Exchange of Securities for Shares of the Fund
At the discretion of the Manager and relevant Advisors, you may purchase shares
of a fund in exchange for securities of certain companies, consistent with the
fund's investment objectives. Additional information regarding this option is
contained in the Statement of Additional Information.
Subsequent Investments
If you are buying additional shares in an existing account, you should identify
the fund and your account number. If you do not specify the fund, we will return
your check to you. If you wish to make additional investments in more than one
fund, you should provide your account numbers and identify the amount to be
invested in each fund. You may pay for all purchases with a single check.
Investments through Tax-Deferred Retirement Plans
Retirement plans offer you a number of benefits, including the chance to shelter
investment income and capital gains. Contributions to a retirement plan also may
be tax deductible. Custodial retirement accounts, including Individual
Retirement Accounts (IRAs), Rollover IRAs, Roth IRAs, Simplified Employee
Pension Plans (SEP-IRAs), and 403(b) Accounts for employees of tax exempt
institutions including schools, hospitals and charitable organizations require a
special Account Application. Please call 800- 331-1244 for
- --------------------------------------------------------------------------------
11
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
assistance. State Street Bank and Trust Company acts as custodian for the funds'
tax-deferred accounts. Custodial accounts are subject to specific fees. You may
open other types of tax-deferred accounts, including accounts established by a
Plan Sponsor under Section 401(k) of the Internal Revenue Code for employee
benefit plans, using the attached Account Application.
HOW TO MAKE EXCHANGES
You can exchange all or a portion of your shares between funds within the same
class, subject to the applicable minimum. You may not exchange from one class of
shares to another class of shares of the same or a different fund. There is no
fee for exchanges. However, if you exchange shares of a fund subject to the
deferred sales charge for the no-load Ordinary Shares of the Mid Cap Fund, you
will be assessed the deferred sales charge upon redemption from the fund group.
The exchange privilege is available only in states where shares of the fund
being acquired may legally be sold. Individual funds may not be registered in
each state. You should be aware that exchanges may produce a gain or loss, as
the case may be, for tax purposes.
You can make exchanges in writing or by telephone, if applicable. Exchanges must
be made between accounts that have the same name, address and tax identification
number. Exchanges will be made at the per share net asset value of shares of
such class next determined after the exchange request is received in good order
by the fund. If exchanging by telephone, you must call prior to the close of
regular trading on the NYSE (ordinarily 4:00 p.m., New York time). We will only
honor a telephone exchange if you have elected the telephone exchange option on
your Account Application.
HOW TO REDEEM
You can directly redeem shares of a fund by written request, by telephone, and
by automatic withdrawal. Redemptions will be made at the per share net asset
value of such shares next determined after the redemption request is received in
good order by the fund. The Transfer Agent will accept redemption requests only
on days the NYSE is open. We will not accept requests for redemption that are
subject to any special conditions or which specify a future or past effective
date, except for certain notices of redemptions exceeding $250,000 (see Payment
of Redemption Amount on page 18.
Written Request for Redemption
You can redeem all or any portion of your shares by submitting a written request
for redemption signed by each registered owner of the shares exactly as the
shares are registered. The request must clearly identify the account number and
the number of shares or the dollar amount to be redeemed.
If you redeem more than $10,000, or request that the redemption proceeds be paid
to someone other than the shareholder of record or sent to an address other than
the address of record, your signature must be signature guaranteed. The use of
signature guarantees is designed to protect both you and the funds from the
possibility of fraudulent requests for redemption. The Transfer Agent has
adopted standards and procedures pursuant to which signature guarantees in
proper form generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. A notary public cannot
provide a signature guarantee. Shares may not be redeemed by facsimile request
or by electronic mail.
Requests should be sent to:
Quantitative Group of Funds
Attention: Transfer Agent
55 Old Bedford Road
Lincoln, Massachusetts 01773
Telephone Redemption
If you have elected the telephone redemption option on your Account Application,
you can redeem your shares by calling the Transfer Agent at 800-331-1244
provided that you have not changed their address of record within the last
thirty days. You must make your redemption request prior to the close of regular
trading on the NYSE (ordinarily 4:00 p.m., New York time). Once you make a
telephone redemption request, you may not cancel it. The funds, the Manager, the
Distributor, and the Transfer Agent will not be liable for any loss or damage
for acting in good faith on exchange or redemption instructions received by
telephone reasonably believed to be genuine. The funds employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
It is the funds' policy to require some form of personal identification prior to
acting upon instructions received by telephone, to provide written confirmation
of all transactions effected by telephone, and to mail the proceeds of telephone
redemptions only to the redeeming shareholder's address of record.
Automatic Withdrawal Plan
If you have a minimum of $10,000 in your account, you may request withdrawal of
a specified dollar amount (a minimum of $100) on either a monthly or quarterly
basis. You may establish an Automatic Withdrawal Plan by completing the
- --------------------------------------------------------------------------------
12
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
Automatic Withdrawal Form, which is available by calling 800-331-1244. You may
stop your Automatic Withdrawal Plan at any time, and the funds or the Transfer
Agent may choose to stop offering the Automatic Withdrawal Plan.
Redemption through Brokers
You may sell shares back to the Funds through selected dealers or brokers. You
should contact your securities broker or dealer for appropriate instructions and
for information concerning any transaction or service fee that may be imposed by
the dealer or broker. Redemption requests received by the Distributor from
dealers or brokers will receive that evening's closing price if the requests are
received by the dealer or broker from its customer prior to 4:00 p.m., New York
time, or such other time as agreed upon by the Distributor, and are transmitted
to and received by the Distributor prior to its close of business that day.
Payment of Redemption Amount
The funds will generally send redemption proceeds, less a deferred sales charge
of one percent (1%) for Ordinary Shares where applicable, within three business
days of the execution of a redemption request. However, if the shares to be
redeemed represent an investment made by check or through the automatic
investment plan, the funds reserve the right not to honor the redemption request
until the check clears or monies have been collected.
Except as noted below, a deferred sales charge amounting to one percent (1%) of
the value of the shares redeemed will be withheld from the redemption proceeds
of Ordinary Shares and paid to the Distributor. The deferred sales charge is
also imposed when you transfer your shares from an account maintained with the
fund that is subject to the deferred sales charge to an account maintained by a
broker-dealer that is not subject to the deferred sales charge due to one of the
exceptions cited below. Ordinary Shares of the Mid Cap Fund purchased after
August 1, 1996 are no-load and are generally not subject to the deferred sales
charge. Special rules apply to exchanges into the Mid Cap Fund (see How to Make
Exchanges on page 17). Ordinary Shares of the Mid Cap Fund purchased before
August 1, 1996 (the "Pre-August Shares") remain subject to a 1% deferred sales
charge. Additional shares acquired by reinvestment of dividends and capital
gains paid on Pre-August shares are also subject to the 1% deferred sales charge
on Pre-August Shares. Because of this deferred sales charge, prospective
investors should purchase Ordinary Shares only as a long-term investment. The
deferred sales charge is not imposed in the case of: (i) Institutional Shares;
(ii) involuntary redemptions; (iii) redemptions of shares tendered for exchange;
(iv) redemptions of shares held by contributory plans qualified under Section
401(k) of the Internal Revenue Code; and (v) redemptions of shares held in
omnibus accounts maintained by no transaction fee ("NTF") programs of certain
broker-dealers pursuant to a written agreement between the broker-dealer and the
fund, the Manager and/or the Distributor. However, the deferred sales charge
will be imposed on redemptions of shares maintained by NTF programs held for
fewer than thirty-one calendar days. In addition, the deferred sales charge will
not be imposed on redemptions of Ordinary Shares made by Fund Employees and
related persons qualified to purchase Institutional Shares.
Redemptions in Excess of $250,000
The funds have reserved the right to pay redemption proceeds by a distribution
in-kind of portfolio securities (rather than cash). In the event that a fund
makes an in-kind distribution, you could incur the brokerage and transaction
charges when converting the securities to cash. The funds do not expect to make
in-kind distributions, and if they do, the funds will pay, during any 90-day
period, your redemption proceeds in cash up to either $250,000 or 1% of the
fund's net assets, whichever is less.
The funds will pay all of your redemption proceeds in cash if you provide the
funds with at least 30 days' notice before you plan to redeem. You must specify
the dollar amount or number of shares to be redeemed and the date of the
transaction, a minimum of 30 days after receipt of the instruction by the funds.
You may make the instruction by telephone if you have telephone redemption
privileges; otherwise, your request must be in writing with all signatures
guaranteed. If you make a request and subsequently cancel it, you may not make
another request for at least 90 days.
CALCULATION OF NET ASSET VALUE
Net asset value ("NAV") for one fund share is the value of that share's portion
of all of the net assets in the fund. NAV per share of each class of shares of a
fund will be determined as of close of market on the NYSE on each day on which
the NYSE is open for trading. A fund calculates its NAV by adding the value of
the fund's investments, cash, and other assets, subtracting its liabilities, and
then dividing the result by the number of shares outstanding.
The funds' assets are valued primarily on the basis of market quotations. For
certain foreign securities, where no sales have been reported, the fund may
value such securities at the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars using current exchange
rates. If a fund holds securities listed primarily on a foreign exchange that
trades on days that the fund is not open for business, the value of your shares
may change on days when you cannot buy or sell shares.
Short-term notes having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market, subject to a determination by the
Trustees that this method
- --------------------------------------------------------------------------------
13
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
represents fair value. All other securities and assets, including any restricted
securities, will be valued at their fair value as determined in good faith by
the Trustees.
DIVIDENDS, DISTRIBUTIONS, AND TAXATION
Dividends and Distributions
Each fund's policy is to pay at least annually as dividends substantially all of
its net investment income and to distribute annually substantially all of its
net realized capital gains, if any, after giving effect to any available capital
loss carryover. Normally, distributions are made once a year in December.
Unless you elect otherwise, all distributions will be automatically reinvested
in additional shares of the fund you own. You may also elect to have dividends,
capital gains, or both paid in cash. All distributions, whether received in
shares or cash, are taxable and must be reported by you on Federal income tax
returns.
Taxation
The following discussion is very general. You are urged to consult your tax
adviser regarding the effect that an investment in the funds may have on your
particular tax situation.
Taxability of Distributions. As long as the funds qualify for treatment as a
regulated investment company (which it has in the past and intends to do in the
future), it pays no federal income tax on the earnings it distributes to
shareholders.
You will normally have to pay federal income taxes, and any state or local
taxes, on the distributions you receive from the funds, whether you take the
distributions in cash or reinvest them in additional shares. Distributions
designated as capital gain dividends are taxable as long-term capital gains.
Other distributions are generally taxable as ordinary income. Some dividends
paid in January may be taxable as if they had been paid the previous December.
The Form 1099 that is mailed to you every January details your distributions and
how they are treated for federal tax purposes.
Fund distributions will reduce the fund's net asset value per share. Therefore,
if you buy shares shortly before the record date of a distribution, you may pay
the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.
If you are neither a citizen nor a resident of the U.S., the funds will withhold
U.S. federal income tax at the rate of 30% on taxable dividends and other
payments that are subject to such withholding. You may be able to arrange for a
lower withholding rate under an applicable tax treaty if you supply the
appropriate documentation required by the funds. The funds are also required in
certain circumstances to apply backup withholding at the rate of 31% on taxable
dividends and redemption proceeds paid to any shareholder (including a
shareholder who is neither a citizen nor a resident of the U.S.) who does not
furnish to the fund certain information and certifications or who is otherwise
subject to backup withholding. Backup withholding will not, however, be applied
to payments that have been subject to 30% withholding. Prospective investors
should read the funds' Account Application for additional information regarding
backup withholding of federal income tax.
Taxability of Transactions. When you redeem, sell or exchange shares, it is
generally considered a taxable event for you. Depending on the purchase price
and the sale price of the shares you redeem, sell or exchange, you may have a
gain or a loss on the transaction. You are responsible for any tax liabilities
generated by your transaction.
Further information relating to tax consequences is contained in the Statement
of Additional Information. Fund distributions also may be subject to state,
local and foreign taxes.
OTHER INFORMATION
Year 2000 Issues
The funds could be adversely affected if the computer systems used by the
Manager, the Advisors or the companies in which the funds invest do not properly
process date-related information from and after January 1, 2000 (the "Year 2000
Issue"). The funds recognize the importance of the Year 2000 Issue and, to
address Year 2000 compliance, created a Year 2000 Working Group that reports
directly to the funds' senior management. The Group is responsible for
ascertaining that all internal systems, data feeds and third party applications
are Year 2000 compliant. While the funds are confident that all of the funds'
systems will be Year 2000 compliant before the turn of the century, there are
significant systems interdependencies in the domestic and foreign markets for
securities, the business environments in which companies held by the funds
operate and in the funds' own business environment. The funds have been actively
working with the funds' other service providers to identify and respond to
potential problems in an effort to ensure Year 2000 compliance or develop
contingency plans. There can be no assurance, however, that these steps will be
sufficient to avoid any adverse impact on the funds.
Provision Of Annual and Semiannual Reports
- --------------------------------------------------------------------------------
14
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
To avoid sending duplicate copies of materials to households, only one copy of
the funds' annual and semiannual report will be mailed to shareholders having
the same residential address on the fund's records. However, any shareholder may
contact the funds (see back cover for address and phone number) to request that
copies of these reports be sent personally to that shareholder free of charge.
- --------------------------------------------------------------------------------
15
<PAGE>
____________________________________________________ QUANTITATIVE GROUP OF FUNDS
This Prospectus concisely describes the information that you ought to know
before investing. Please read the Prospectus carefully and keep it for further
reference. You can learn more about the funds in the following documents:
Statement of Additional Information ("SAI")
The SAI dated August 1, 1999 contains more detailed information about each fund,
its investments and policies. It is incorporated by reference into (meaning it
is legally a part of) this Prospectus.
Annual and Semiannual Reports to Shareholders
- ---------------------------------------------
These reports list the funds' holdings, contain a discussion of the market
conditions and strategies that significantly affected the funds' performance
during their last fiscal year and last six months respectively.
The SAI and reports are available free of charge by writing the funds,
telephoning the funds at 800-331-1244, or visiting the funds' web site at
www.quantfunds.com.
The SAI and reports have been filed with the Securities and Exchange Commission
("SEC") and may be read and copied by visiting the SEC's Public Reference Room
in Washington, D.C. (phone 1-800-SEC-0330) or by sending your request and the
appropriate duplicating fee to the SEC's Public Reference Section, Washington,
D.C. 20549-6009. You can also visit the SEC's Internet site at
http://www.sec.gov.
- --------------------------------------------------------------------------------
16
<PAGE>
QUANTITATIVE GROUP OF FUNDS
Statement of Additional Information
-----------------------------------
August 1, 1999
--------------
U.S. Equity Funds International Funds
- ----------------- -------------------
Quantitative Small Cap Fund Quantitative International Equity Fund
Quantitative Mid Cap Fund. Quantitative Emerging Markets Fund
Quantitative Growth and Income Fund Quantitative Foreign Value Fund
This Statement of Additional Information ("Statement") contains information
which may be of interest to investors but which is not included in the
Prospectus of Quantitative Group of Funds (the "Trust"). This Statement is not a
Prospectus and is only authorized for distribution when accompanied by the
Prospectus of the Trust dated August 1, 1999, and should be read in conjunction
with the Prospectus. This Statement incorporates information from the Trust's
Annual Report dated March 31, 1999. Investors may obtain a free copy of the
Prospectus and/or the Annual Report by writing Quantitative Group of Funds, 55
Old Bedford Road, Lincoln, MA 01773 or by calling 800-331-1244.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT POLICIES AND RELATED RISKS................................ 2
MANAGEMENT OF THE FUNDS.............................................. 2
PORTFOLIO TRANSACTIONS............................................... 8
HOW TO INVEST........................................................ 9
HOW TO MAKE EXCHANGES................................................ 10
HOW TO REDEEM........................................................ 11
CALCULATION OF NET ASSET VALUE....................................... 11
DISTRIBUTIONS........................................................ 13
TAXATION............................................................. 13
OTHER INVESTMENT PRACTICES........................................... 16
INVESTMENT RESTRICTIONS OF THE FUNDS................................. 20
PERFORMANCE MEASURES................................................. 21
THE QUANTITATIVE GROUP............................................... 23
EXPERTS.............................................................. 24
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Funds are series of an open-end, management investment company. The
Funds are nondiversified. The investment objectives and policies of the Funds
are summarized in the text of the Prospectus following the captions Quick
-----
Reference Guide - The Quantitative Funds and Investment Policies and Related
- ---------------------------------------- -------------------------------
Risks. There is no assurance that those objectives will be achieved. This
- -----
Statement contains certain additional information about those objectives and
policies. Capitalized terms used in this Statement but not defined herein have
the same meaning as in the Prospectus.
MANAGEMENT OF THE FUNDS
The trustees are responsible for protecting the interests of shareholders.
The trustees met periodically throughout the year to oversee the Funds'
activities, review contractual arrangements with companies that provide services
to the Funds and review the Funds' performance. The majority of the trustees are
otherwise not affiliated with the Funds.
Trustees and Officers
- ---------------------
<TABLE>
<CAPTION>
Position with Position with
Distributor, U.S. Manager,
Position Boston Capital Quantitative
Name and Address+ with Fund Principal Occupation** Corporation Advisors, Inc.
- ----------------- --------- ---------------------- ---------------- --------------
<S> <C> <C> <C> <C>
ROBERT M. ARMSTRONG Trustee Associate, Keystone None None
Associates (career
management); formerly
President, Alumni Career
Services, Inc. (consulting firm);
Director of Alumni Career
Services, Harvard University,
Graduate School of
Business Administration
EDWARD A. BOND, JR. Trustee President, Bond Brothers Inc. None
(general contractors).
JOHN M. BULBROOK Trustee President, John M. Bulbrook None None
Insurance Agency, Inc.
EDWARD E. BURROWS Trustee Independent consulting None None
actuary - employee benefit
plans; formerly Vice
President and Director of
Actuarial Services, Mintz,
Levin, Cohn, Ferris,
Glovsky and Popeo, PC (law
firm/consulting); formerly
President, The Pentad
Corporation (employee
benefit consultants and
actuaries).
MARK A. KATZOFF Clerk Vice President - Counsel, Vice President Assistant Clerk -
U.S. Boston Capital - Counsel Counsel
Corporation
LEON OKUROWSKI* Trustee,
Vice President, Director and Vice President, Director and Director and
Treasurer U.S. Boston Capital Vice President
Corporation Treasurer
WILLARD L. UMPHREY* President, Director, President, and Director, Director
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Chairman, Treasurer, U.S. Boston President, and President
Trustee Capital Corporation and Treasurer
RON ZWANZIGER Trustee Director, President, and None None
Chief Executive Officer,
Selfcare, Inc.
</TABLE>
+The mailing address of each of the officers and Trustees is 55 Old Bedford
Road, Lincoln, Massachusetts 01773.
*Messrs. Umphrey and Okurowski are "interested persons" (as defined in the
Investment Company Act of 1940) of the Funds, the Manager or an Advisor.
**The principal occupations of the officers and Trustees for the last five
years have been with the employers shown above, although in some cases they have
held different positions with such employers.
Each Trustee receives an annual fee of $4,000. For services rendered during
the fiscal year ended March 31, 1999, the Funds paid Trustees' fees aggregating
$28,000.
The following Compensation Table provides, in tabular form, the following
data:
Column (1) All Ttrustees who receive compensation from the Trust.
Column (2) Aggregate compensation received by a Trustee from all series of the
Trust.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Trust. The Trust does not pay its Trustees such benefits.
Column (5) Total compensation received by a Trustee from the Trust plus
compensation received from all funds managed by the Manager for which a Trustee
serves. As there are no such funds other than the series of the Trust, this
figure is identical to column (2).
Compensation Table
for the fiscal year ended March 31, 1999
<TABLE>
<CAPTION>
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Accrued Annual Benefits From the Trust
Name of Person, Compensation As Part of Fund Upon and Fund Complex
Position from the Trust Expenses Retirement Paid to Trustee
<S> <C> <C> <C> <C>
Robert M. Armstrong, $4,000 N/A N/A $4,000
Trustee
Edward A. Bond, Jr. $4,000 N/A N/A $4,000
Trustee
John M Bulbrook, $4,000 N/A N/A $4,000
Trustee
Edward E. Burrows, $4,000 N/A N/A $4,000
Trustee
Leon Okurowski, $4,000 N/A N/A $4,000
Trustee
Willard L. Umphrey, $4,000 N/A N/A $4,000
Trustee
Ron Zwanziger, $4,000 N/A N/A $4,000
</TABLE>
3
<PAGE>
Trustee
The Trust's Agreement and Declaration of Trust provides that the Funds will
indemnify their Trustees and officers against liabilities and expenses incurred
in connection with the litigation in which they may be involved because of their
offices with the Funds, except if it is determined in the manner specified in
the Agreement and Declaration of Trust that they have not acted in good faith in
the reasonable belief that their actions were in the best interests of the Funds
or that such indemnification would relieve any officer or Trustee of any
liability to the Funds or their shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of his or her duties. The
Funds, at their expense, will provide liability insurance for the benefit of
their Trustees and officers.
Messrs. Umphrey and Okurowski, as officers of the Manager and the
Distributor, will benefit from the management and distribution fees paid or
allowed by the Funds and from brokerage commissions received by U.S. Boston
Capital Corporation in connection with the purchase and sale of the Funds'
portfolio securities.
At April 30, 1999, the officers and Trustees as a group owned in the
aggregate 1.23% of the outstanding Ordinary Shares of the Small Cap Fund, 11.35%
of the outstanding Institutional Shares of the Small Cap Fund, 0.23% of the
outstanding Ordinary Shares of the Mid Cap Fund, 50.60% of the outstanding
Institutional Shares of the Mid Cap Fund, 0.79% of the outstanding Ordinary
Shares of the Growth and Income Fund, 21.64% of the outstanding Institutional
Shares of the Growth and Income Fund, 0.61% of the outstanding Ordinary Shares
of the International Equity Fund, 7.32% of the outstanding Institutional Shares
of the International Equity Fund, 3.32% of the outstanding Ordinary Shares of
the Emerging Markets Fund, 1.05% of the outstanding Institutional Shares of the
Emerging Markets Fund, 7.33% of the outstanding Ordinary Shares of the Foreign
Value Fund, and 1.58% of the outstanding Institutional Shares of the Foreign
Value Fund. On the same date, each of the following persons owned 5% or more of
the then outstanding Institutional Shares of the Small Cap Fund:
<TABLE>
<CAPTION>
Name and Address % of Outstanding Institutional Shares
---------------- -------------------------------------
<S> <C>
Charles Schwab & Co., Inc.
San Francisco, CA 18.77%
Pershing Division of Donaldson, Lufkin & Jenrette
Jersey City, NJ 16.42%
The John Dickson Home
Washington, DC 12.02%
National Postal Forum
Fairfax, VA 9.71%
U.S. Boston Corporation
Lincoln, MA 8.87%
Temple Preservation Foundation
Washington, DC 6.51%
The Henry and Annie Hurt Home for the Blind
Washington, DC 5.53%
</TABLE>
On the same date, each of the following persons owned 5% or more of the then
outstanding Ordinary Shares of the Mid Cap Fund:
<TABLE>
<CAPTION>
Name and Address % of Outstanding Ordinary Shares
---------------- --------------------------------
<S> <C>
Dover Instrument Corporation
Westboro, MA 10.67%
Mr. George H. Howell
Wayland, MA 6.16%
</TABLE>
4
<PAGE>
On the same date, each of the following persons owned 5% or more of the then
outstanding Institutional Shares of the Mid Cap Fund:
<TABLE>
<CAPTION>
Name and Address % of Outstanding Institutional Shares
---------------- -------------------------------------
<S> <C>
U.S. Boston Corporation
Lincoln, MA 33.25%
Mr. James E. and Ms. Sandra G. Jones
Owensboro, KY 13.52%
Ms. Lawrie Okurowski
Concord, MA 10.29%
State Street Bank and Trust Custodian for Marsha W. Vaughan IRA
Stafford, VA 9.02%
State Street Bank and Trust Custodian for Marlys Bernal
Herndon, VA 7.73%
U.S. Boston Corporation PSRP A/C Leon Okurowski
Lincoln, MA 7.05%
</TABLE>
On the same date, each of the following persons owned 5% or more of the then
outstanding Institutional Shares of the Growth and Income Fund:
<TABLE>
<CAPTION>
Name and Address % of Outstanding Institutional Shares
---------------- -------------------------------------
<S> <C>
Dover Instrument Corporation
Westboro, MA 53.13%
U.S. Boston Corporation
Lincoln, MA 15.46%
Charles Schwab & Co., Inc.
San Francisco, CA 10.39%
</TABLE>
On the same date, the following person owned 5% or more of the then outstanding
Institutional Shares of the International Equity Fund:
<TABLE>
<S> <C>
Dover Instrument Corporation
Westboro, MA 91.48%
</TABLE>
On the same date, the following person owned 5% or more of the then outstanding
Institutional Shares of the Emerging Markets Fund:
<TABLE>
<S> <C>
Strafe & Co.
Westerville, OH 97.81%
</TABLE>
On the same date, each of the following persons owned 5% or more of the then
outstanding Ordinary Shares of the Foreign Value Fund:
<TABLE>
<S> <C>
Dermatology Associates of Concord, Inc. Profit Sharing Retirement Plan
Concord, MA 6.13%
Lexington Medical Associates Inc. Profit Sharing Trust 1974
Lexington, MA 5.84%
</TABLE>
5
<PAGE>
U.S. Boston Corporation
Lincoln, MA 5.27%
On the same date, each of the following persons owned 5% or more of the then
outstanding Institutional Shares of the Foreign Value Fund:
David Jaffin
New York, NY 83.58%
National Financial Services Corp.
New York, NY 16.38%
The Manager and Management Contract
- -----------------------------------
Each fund emphasizes the use of computer models in the stock selection
process. These computer models generally are developed as a result of research
conducted by a team of individuals. The same investment strategy used to manage
a particular fund also may be used to manage separate institutional accounts
maintained at the Manager or Advisor.
The Manager is an affiliate of U.S. Boston Capital Corporation, the Funds'
Distributor, which is a wholly owned subsidiary of U.S. Boston Corporation.
Willard L. Umphrey, CFA President and Trustee of the Funds, Leon Okurowski,
Treasurer and Trustee of the Funds, individually and jointly with their spouses,
together own 100% of the Manager's outstanding voting securities. Messrs.
Umphrey and Okurowski also are affiliates of U.S. Boston Capital Corporation.
Under the terms of the management agreement, the Manager may, subject to
the approval of the Trustees, manage the Funds itself or, subject to the
approval by the Trustees, select subadvisors (the "Advisors") to manage certain
of the Funds. In the latter case, the Manager monitors the Advisors' investment
program and results, reviews brokerage matters, oversees compliance by the Funds
with various federal and state statutes and the Funds' own investment
objectives, policies, and restrictions and carries out the directives of the
Trustees. In each case, the Manager also provides the Funds with office space,
office equipment, and personnel necessary to operate and administer the Funds'
business, and provides general management and administrative services to the
Funds, including overall supervisory responsibility for the general management
and investment of the Fund's securities portfolios and for the provision of
services by third parties such as the Funds' custodian.
The Management Contract continues in force from year to year, but only so
long as its continuance is approved at least annually by (i) vote, cast in
person at a meeting called for the purpose, of a majority of those Trustees who
are not "interested persons" of the Manager or the Funds, and by (ii) either the
majority vote of all the Trustees or the vote of a majority of the outstanding
voting securities of each Fund. The Management Contract automatically terminates
on assignment, and is terminable on 60 days' written notice by either party.
In addition to the management fee, the Funds pay all expenses not assumed
by the Manager, including, without limitation, fees and expenses of the
Trustees, interest charges, taxes, brokerage commissions, expenses of issue or
redemption of shares, fees and expenses of registering and qualifying the Trust
and shares of the respective Funds for distribution under federal and state laws
and regulations, charges of custodians, auditing and legal expenses, expenses of
determining net asset value of the Funds' shares, reports to shareholders,
expenses of meetings of shareholders, expenses of printing and mailing
prospectuses and proxies to existing shareholders, and their proportionate share
of insurance premiums and professional association dues or assessments. All
general Fund expenses are allocated among and charged to the assets of the
respective Funds on a basis that the Trustees deem fair and equitable, which may
be based on the relative net assets of each Fund or the nature of the services
performed and relative applicability to each Fund. The Funds are also
responsible for such non-recurring expenses as may arise, including litigation
in which the Funds may be a party, and other expenses as determined by the
Trustees. The Funds may have an obligation to indemnify their officers and
Trustees with respect to such litigation.
As compensation for services rendered, the Funds pay the Manager a monthly
fee at the annual rate of: 1.00% of the average daily net asset value of the
Small Cap Fund, Mid Cap Fund, the International Equity Fund, and the Foreign
6
<PAGE>
Value Fund (this fee is higher than that paid by most other investment
companies); 0.80% of the average daily net asset value of the Emerging Markets
Fund; and 0.75% of the average daily net asset value of the Growth and Income
Fund. For services rendered to the Small Cap Fund during the fiscal years ended
March 31, 1999, 1998, and 1997, the Manager received fees of $595,869, $712,299,
and $916,777, respectively. For services rendered to the Mid Cap Fund during the
fiscal years ended March 31, 1999, 1998, and 1997, the Manager received fees of
$148,620, $122,800, and $96,688, respectively, a portion of which were waived by
the Manager. For services rendered to the Growth and Income Fund during the
fiscal years ended March 31, 1999, 1998, and 1997, the Manager received fees of
$527,997, $425,583, and $334,461, respectively. For services rendered to the
International Equity Fund during the fiscal years ended March 31, 1999, 1998,
and 1997, the Manager received fees of $276,103, $311,008, and $287,461,
respectively. For services rendered to the Emerging Markets Fund during the
fiscal years ended March 31, 1999, 1998, and 1997, the Manager received fees of
$73,465, $86,261, and $77,271, respectively. For services rendered to the
Foreign Value Fund during the fiscal year ended March 31, 1999, the Manager
received fees of $50,130. Such fees were rebated by the Manager to the extent
required to comply with its contractual undertaking to assume certain expenses
of the Small Cap Fund, the Growth and Income Fund, and the International Equity
Fund (including the Manager's compensation) in excess of 2% of such Fund's
average net assets and were waived by the Manager to the extent required to
comply with its voluntary undertaking to assume certain expenses of the Mid Cap
Fund and the Emerging Markets Fund) in excess of 1.65 and 2.25%, respectively,
of such Funds' average net assets.
Advisory Contracts
- ------------------
Pursuant to an Advisory Contract with the Manager, the Advisor to a Fund
furnishes continuously an investment program for the Fund, makes investment
decisions on behalf of the Fund, places all orders for the purchase and sale of
portfolio investments for the Fund's account with brokers or dealers selected by
such Advisor and may perform certain limited, related administrative functions
in connection therewith.
Each Advisory Contract provides that it will continue in force for two
years from its date, and from year to year thereafter, but only so long as its
continuance is approved at least annually by (i) vote, cast in person at a
meeting called for the purpose, of a majority of those Trustees who are not
"interested persons" of the Advisor, the Manager or the Funds, and by (ii)
either the majority vote of all of the Trustees or the vote of a majority of the
outstanding voting securities of each Fund to which it relates. Each Advisory
Contract may be terminated without penalty with respect to any Fund by vote of
the Trustees or the shareholders of that Fund, or by the Manager on not less
than 30 nor more than 60 days' written notice or by the particular Advisor on
not less than 30 nor more than 60 days', or no less than 150 days' written
notice, depending on the Fund. Each Advisory Contract may be amended with
respect to any Fund without a vote of the shareholders of that Fund. Each
Advisory Contract also terminates without payment of any penalty in the event of
its assignment and in the event that for any reason the Management Contract
between the Funds and the Manager terminates generally or terminates with
respect to that particular Fund.
Each Advisory Contract provides that the Advisor shall not be subject to
any liability to the Funds or to the Manager or to any shareholder of the Funds
for any act or omission in the course of or connected with the rendering of
services thereunder in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties on the part of the Advisor.
For services rendered, the Manager pays to the Advisor of a fund a fee
based on a percentage of the average daily net asset value of the Fund. The fee
for each fund is determined separately. The fees paid by the Manager to the
Advisors of the Funds are as follows: Small Cap Fund - 0.50% of average daily
total net assets; Mid Cap Fund - 0.40% of average daily total net assets; Growth
and Income Fund - 0.375% of the first $20 million and 0.30% of amounts in excess
of $20 million of average daily total net assets, with an annual minimum of
$25,000; International Equity Fund - 0.50% of average daily total net assets;
Foreign Value Fund - 0.35% of the first $30 million and 0.50% of amounts in
excess of $30 million of average daily total net assets; and Emerging Markets
Fund - 0.40% of average daily total net assets.
For services rendered during the fiscal year ended March 31, 1999, the
Manager paid to the Advisors of the following Funds fees in amounts equivalent
to the following percentages of average daily net asset value: Small Cap Fund -
0.50%; Mid Cap Fund - 0.40%, Growth and Income Fund - 0.334%; International
Equity Fund - 0.50%, Emerging Markets Fund - 0.40%, and Foreign Value Fund -
0.35%.
Distributor and Distribution Plan
- ---------------------------------
7
<PAGE>
U.S. Boston Capital Corporation, 55 Old Bedford Road, Lincoln, MA 01773
("Distributor"), a Massachusetts corporation organized April 23, 1970, is a
broker-dealer registered under the Securities Exchange Act of 1934 and a member
of the National Association of Securities Dealers, Inc. The Distributor is an
affiliated person of the Funds' Manager by virtue of being under common
ownership with the Manager. The Distributor acts as the principal distributor of
the Funds' shares pursuant to a written agreement dated April 17, 1985
("Distribution Agreement"). Under the Distribution Agreement, the Distributor is
not obligated to sell any specific amount of shares of the Funds and will
purchase shares for resale only against orders for shares. The Distribution
Agreement calls for the Distributor to use its best efforts to secure purchasers
for shares of the Funds.
To permit the Funds to pay a monthly fee to the Distributor, the Funds have
adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940.. The fee is not directly tied to the
Distributor's expenses. If expenses exceed the Distributor's fees, the Funds are
not required to reimburse the Distributor for excess expenses; if the
Distributor's fees exceed the expenses of distribution, the Distributor may
realize a profit. The Small Cap, Growth and Income, International Equity, and
Emerging Markets Funds pay the Distributor a monthly fee at the annual rate of
0.50% of the average net asset value of shares (excluding Institutional Shares)
held in shareholder accounts opened during the period the plan is in effect, as
determined at the close of each business day during the month. The Mid Cap and
Foreign Value Funds pay the Distributor a monthly fee at the annual rate of
0.25% of the average net asset value of their respective Ordinary Shares. Rule
12b-1 provides that any payments made by an investment company to a distributor
must be made pursuant to a written plan describing all material aspects of the
proposed financing of distributions and that all agreements with any person
relating to implementation of the plan must be in writing. Continuance of the
Plan and the Distribution Agreement is subject to annual approval by a vote of
the Trustees, including a majority of the Trustees who are not "interested
persons" of the Fund and have no direct or indirect financial interest in the
operation of the plan or related agreements ("Qualified Trustees"), cast in
person at a meeting called for the purpose. The Plan may be terminated as to a
Fund by the vote of a majority of the Qualified Trustees, or by the vote of a
majority of the outstanding voting securities of the Fund. All material
amendments to the Plan must be approved by the Qualified Trustees and any
amendment to increase materially the amount to be spent pursuant to the Plan
must be approved by the vote of a majority of the outstanding voting securities
of the Fund. The Trustees of the Funds review quarterly a written report of the
amounts so expended and the purposes for which such expenditures were made.
For the fiscal year ended March 31, 1999, the aggregate fees (net of fees
waived), paid to the Distributor pursuant to the Plan totaled $789,740, or 0.50%
of the average net assets of the Ordinary Shares of the Small Cap, Growth and
Income, International Equity, and Emerging Markets Funds and 0.25% of the
average net assets of the Ordinary Shares of the Mid Cap Fund.
The Distributor also receives the deferred sales charges withheld from
redemption proceeds, see How to Redeem, and may benefit from its temporary
holding of investors' funds in connection with certain purchases and redemptions
of shares of the Funds.
Custodian
Investors Fiduciary Trust Company ("Custodian") is the custodian of each of
the Funds' securities and cash. The Custodian's responsibilities include
safekeeping and controlling the Funds' cash and securities, handling the receipt
and delivery of securities, determining income and collecting interest and
dividends on the Fund's investments, maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, and
calculating the daily net asset value of each class of shares of the Funds The
Custodian does not determine the investment policies of the Funds or decide
which securities the Funds will buy or sell. The Funds may, however, invest in
securities of the Custodian and may deal with the Custodian as principal in
securities transactions. Custodial services are performed at the Custodian's
office at 801 Pennsylvania Ave., Kansas City, MO 64105.
Transfer Agent
- --------------
Quantitative Institutional Services ("Transfer Agent"), a division of the
Manager, is the transfer agent and dividend disbursing agent for each of the
Funds. All mutual fund transfer, dividend disbursing and shareholder services
activities are performed at the offices of Quantitative Institutional Services,
55 Old Bedford Road, Lincoln, Massachusetts 01773. Account balances and other
shareholder inquiries can be directed to the Transfer Agent at 800-
8
<PAGE>
331-1244. Subject to the approval of the Trustees, the Transfer Agent or the
Fund may from time to time appoint a sub-transfer agent for the receipt of
purchase orders and funds from certain investors. For its services, the Transfer
Agent receives base at an annual rate of 0.13% of the aggregate average daily
net asset value of each class of shares of each Fund and is reimbursed for out
of pocket expenses.
PORTFOLIO TRANSACTIONS
Investment Decisions. Investment decisions for a Fund and for other
--------------------
investment advisory clients of the Manager or that Fund's Advisor or its
affiliates are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling the security. In some instances, one client may sell a particular
security to another client. It also happens that two or more clients
simultaneously buy or sell the same security, in which event each day's
transactions in such security are, insofar as possible, allocated between such
clients in a manner designed to be equitable to each, taking into account among
other things the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients.
Brokerage and Research Services. Transactions on stock exchanges and other
-------------------------------
agency transactions involve the payment by the Funds of negotiated brokerage
commissions. Such commissions vary among different brokers. Also, a particular
broker may charge different commissions according to such factors as the
difficulty and size of the transaction. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid by the Funds usually includes an undisclosed dealer commission or mark-up.
In underwritten offerings, the price paid includes a disclosed, fixed commission
or discount retained by the underwriter or dealer.
All orders for the purchase and sale of portfolio securities for the Fund
are placed, and securities for the Fund bought and sold, through a number of
brokers and dealers. In so doing, the Manager or Advisor uses its best efforts
to obtain for the Fund the most favorable price and execution available, except
to the extent that it may be permitted to pay higher brokerage commissions as
described below. In seeking the most favorable price and execution, the Manager
or Advisor, having in mind the Fund's best interests, considers all factors it
deems relevant, including, by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker-dealer
involved and the quality of service rendered by the broker-dealer in other
transactions.
It has for many years been common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical and quotation services from broker-dealers
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, the Advisors and the Manager may receive
research, statistical and quotation services from certain broker-dealers with
which the Manager or Advisors place the Funds' portfolio transactions. These
services, which in some instances may also be purchased for cash, include such
matters as general economic and securities market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities. Some of these services are of value to the Advisors or the
Manager in advising various of their clients (including the Funds), although not
all of these services are necessarily useful and of value in advising the Funds.
The fees paid to the Advisors by the Manager or paid to the Manager by the Funds
are not reduced because the Advisors or the Manager receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, and
by the Advisory Contracts, the Manager or Advisors may cause the Funds to pay a
broker-dealer which provides "brokerage and research services" (as defined in
that Act) to the Manager or Advisors an amount of disclosed commission for
effecting a securities transaction for the Fund in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
The Manager's or Advisors' authority to cause the Funds to pay any such greater
commissions is subject to such written policies as the Trustees may adopt from
time to time.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, the Manager or
Advisors may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
9
<PAGE>
Pursuant to conditions set forth in rules of the Securities and Exchange
Commission, the Funds may purchase securities from an underwriting syndicate of
which U.S. Boston Capital Corporation is a member (but not from U. S. Boston
Capital Corporation itself). The conditions relate to the price and amount of
the securities purchased, the commission or spread paid, and the quality of the
issuer. The rules further require that such purchases take place in accordance
with procedures adopted and reviewed periodically by the Trustees, particularly
those Trustees who are not "interested persons" of the Fund.
Brokerage commissions paid by the Funds on portfolio transactions for the
fiscal years ended March 31, 1997, March 31, 1998, and March 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
Fund 1997 1998 1999
- ---- -------- -------- --------
<S> <C> <C> <C>
Small Cap Fund 773,033 272,199 221,371
Mid Cap Fund 46,196 44,701 58,392
Growth and Income Fund 85,411 63,665 94,378
International Equity Fund 147,002 74,654 74,831
Emerging Markets Fund 19,551 39,223 35,435
Foreign Value Fund -- -- 34,047
</TABLE>
None of such commissions was paid to a broker who was an affiliated person of
the Funds or an affiliated person of such a person or, to the knowledge of the
Funds, to a broker an affiliated person of which was an affiliated person of the
Fund, the Manager or any Advisor.
HOW TO INVEST
The procedures for purchasing shares are summarized in the Prospectus under
the caption How to Invest.
-------------
Investments through Brokers. The Distributor may pay a sales fee of 1.00%
---------------------------
of the offering price to the dealer transmitting an order for Ordinary Shares,
provided that the Ordinary Shares sold are subject to the 1.00% deferred sales
charge. The Distributor may also pay the dealer a service fee at an annual rate
of 0.25% of the average daily net asset value of Ordinary Shares in accounts
serviced by the dealer.
Exchange of Securities for Shares of the Funds. Applications to exchange
----------------------------------------------
common stocks for Fund Shares must be accompanied by stock certificates (if any)
and stock powers with signatures guaranteed by domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies or savings associations. Securities accepted by
the Funds will be valued as set forth under Calculation of Net Asset Value in
------------------------------
the Prospectus as of the time of the next determination of net asset value after
such acceptance. Shares of a Fund are issued at net asset value determined as of
the same time. All dividends, subscription, or other rights which are reflected
in the market price of accepted securities at the time of valuation become the
property of the Funds and must be delivered to the Funds by the investor upon
receipt from the issuer. A gain or loss for Federal income tax purposes would be
realized by the investor upon the exchange depending upon the cost of the
securities tendered.
Open Account System. Under the Funds' Open Account System all shares
-------------------
purchased are credited directly to your account in the designated Fund at the
time of purchase. All shares remain on deposit with the Transfer Agent. No
certificates are issued.
The following services are currently offered by the Open Account System:
1. You may make additional investments in a Fund by sending a check
(made payable to "Quantitative Group of Funds") to the Funds or by wire, as
described under How to Invest in the Prospectus.
-------------
2. You may select one of the following distribution options which
best fits your needs.
* REINVESTMENT PLAN OPTION: Income dividends and capital gain
distributions paid in additional shares at net asset value.
10
<PAGE>
* INCOME OPTION: Income dividends paid in cash, capital gain
distributions paid in additional shares at net asset value.
* CASH OPTION: Income dividends and capital gain distributions
paid in cash.
You should indicate the Option you prefer, as well as the other
registration details of your account, on the Account Application. The
Reinvestment Plan Option will automatically be assigned unless you select a
different option. Dividends and distributions paid on a class of shares of a
Fund will be paid in shares of such class taken at the per share net asset value
of such class determined at the close of business on the ex-date of the dividend
or distribution or, at your election, in cash.
3. You will receive a statement setting forth the most recent
transactions in your account after each transaction which affects your share
balance.
The cost of services rendered under the Open Account System to the holders
of a particular class of shares of a Fund are borne by that class as an expense
of all shareholders of that class. However, in order to cover additional
administrative costs, any shareholder requesting a historical transcript of his
account will be charged a fee based upon the number of years researched. There
is a minimum fee of $5. The right is reserved on 60 days' written notice to make
charges to individual investors to cover other administrative costs of the Open
Account System.
Tax Deferred Retirement Plans. The Funds offer investors the opportunity to
-----------------------------
participate in the following types of retirement plans:
*For individuals whether or not covered by other qualified plans, such as
IRAs
*For employees of tax exempt organizations, such as 403(b) plans
Capital gains and income received by participants in each of the foregoing
plans are exempt from taxation until distribution from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Additional information,
including the fees and charges with respect to these plans, is available upon
request to the Distributor.
Individual Retirement Account (IRA). All individuals with earned income
-----------------------------------
(whether or not covered by qualified private or governmental retirement plans)
may purchase shares of any of the Funds pursuant to an IRA. However,
contributions to an IRA for taxable years after 1986 by an individual who is
covered by a qualified private or governmental plan may not be tax-deductible
depending on the individual's income. Detailed information concerning the IRA is
available from the Distributor. Custodian services are provided by State Street
Bank and Trust Company.
Retirement Plan for Employees of Tax Exempt Organizations (403(b)).
------------------------------------------------------------------
Employees of public school systems and certain types of charitable organizations
may enter into a deferred compensation arrangement for the purchase of shares of
any of the Funds without being taxed currently on the investment. Contributions
which are made by the employer through salary reduction are excludable from the
gross income of the employee. Such deferred compensation plans, which are
intended to qualify under Section 403(b) of the Internal Revenue Code, are
available through the Distributor. Custodian services are provided by State
Street Bank and Trust Company.
HOW TO MAKE EXCHANGES
The procedures for exchanging shares of one Fund for those of another are
described in the Prospectus under How to Make Exchanges.
---------------------
An exchange involves a redemption of all or a portion of shares of one
class of a Fund and the investment of the redemption proceeds in shares of a
like class in another Fund. The redemption will be made at the per share net
asset value of the particular class of shares of a Fund being redeemed which is
next determined after the exchange request is received in proper order.
The shares of the particular class of shares of the Fund being acquired
will be purchased when the proceeds from the redemption become available,
normally on the day of the exchange request, at the per share net asset value of
such class
11
<PAGE>
next determined after acceptance of the purchase order by the Fund being
acquired in accordance with the customary policy of that Fund for accepting
investments.
The exchange of shares of one class of a Fund for shares of a like class of
another Fund will constitute a sale for federal income tax purposes on which the
investor will realize a capital gain or loss.
The exchange privilege may be modified or terminated at any time, and the
Funds may discontinue offering shares of any Fund or any class of any Fund
generally or in any particular State without notice to shareholders.
HOW TO REDEEM
The procedures for redeeming shares of a Fund are described in the
Prospectus under How to Redeem.
-------------
Proceeds will normally be forwarded on the second day on which the New York
Stock Exchange is open after a redemption request is processed; however, the
Funds reserve the right to take up to three (3) business days to make payment.
This amount may be more or less than the shareholder's investment and thus may
involve a capital gain or loss for tax purposes. If the shares to be redeemed
represent an investment made by check or through the automatic investment plan,
the Funds reserve the right not to honor the redemption request until the check
or monies have been collected.
Shareholders are entitled to redeem all or any portion of the shares
credited to their accounts by submitting a written request for redemption to
Quantitative Group of Funds. Shareholders who redeem more than $10,000, or
request that the redemption proceeds be paid to someone other than the
shareholders of record or sent to an address other than the address of record,
must have their signature(s) guaranteed by domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies or savings associations. If the shareholder is a
corporation, partnership, agent, fiduciary or surviving joint owner, the Funds
may require additional documentation of a customary nature. Shareholders who
have authorized the Funds to accept telephone instructions may redeem shares
credited to their accounts by telephone. Once made, a telephone request may not
be modified or canceled.
The Funds and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. If the Funds
and the Transfer Agent fail to do so, they may be liable for any losses due to
unauthorized or fraudulent transactions. The Funds provide written confirmation
of all transactions effected by telephone and only mail the proceeds of
telephone redemptions to the redeeming shareholder's address of record.
The Funds may suspend this right of redemption and may postpone payment for
more than seven days only when the New York Stock Exchange is closed for other
than customary weekends and holidays, or if permitted by the rules of the
Securities and Exchange Commission during periods when trading on the Exchange
is restricted or during any emergency which makes it impracticable for the Funds
to dispose of their securities or to determine fairly the value of their net
assets, or during any other period permitted by order of the Securities and
Exchange Commission. As set forth in the Prospectus, the Funds may also delay
payment of redemption proceeds from shares purchased by check until the check
clears, which may take seven business days or longer.
The Funds reserve the right to redeem shares and mail the proceeds to the
shareholder if at any time the number of shares in the shareholder's account
falls below a specified amount, currently set at 50 shares. Shareholders will be
notified and will have 30 days to bring the account up to the required amount
before any redemption action will be taken by the Funds. To prevent a
shareholder from becoming an affiliate of the Funds, the Funds reserve the right
to redeem shares in a shareholder's account in excess of an amount set from time
to time by the Trustees. No such limit is presently in effect, but such a limit
could be established at any time and could be applicable to existing as well as
future shareholders.
CALCULATION OF NET ASSET VALUE
Net asset value per share of each class of shares of a Fund will be
determined as of the close of market on the New York Stock Exchange ("NYSE"), on
each day on which the NYSE is open for trading. Currently, the NYSE is closed
Saturdays, Sundays, and the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving and Christmas. The International Equity, Emerging
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Markets and Foreign Value Funds may invest in securities listed on foreign
exchanges which trade on days on which those Funds do not compute net asset
value (i.e., Saturdays and Exchange holidays) and the net asset value of shares
of those Funds may be significantly affected on such days.
Securities for which market quotations are readily available shall be
valued at market value, which is determined by using the last reported sale
price on the primary exchange or market for each such security, or, if no sales
are reported - as in the case of some securities traded over-the-counter - the
mean between the last reported bid and asked prices. For certain foreign
securities, where no sales have been reported, the Fund may value such
securities at the last reported bid price. Securities quoted in foreign
currencies shall be translated into U.S. dollars based upon the prevailing
exchange rate of each business day. Short-term notes having remaining maturities
of 60 days or less are stated at amortized cost, which approximates market,
subject to a determination by the Trustees that this method represents fair
value. All other securities and assets, including any restricted securities,
will be valued at their fair value as determined in good faith by the Trustees.
Liabilities are deducted from the total, and the resulting amount is divided by
the number of shares outstanding to produce the "net asset value" per share.
The fair value of any restricted securities from time to time held by a
Fund is determined by its Advisor in accordance with procedures approved by the
Trustees. Such valuations and procedures are reviewed periodically by the
Trustees. The fair value of such securities is generally determined as the
amount which the Fund could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Fund in connection with such
disposition). In addition, such specific factors are also generally considered
as the cost of the investment, the market value of any unrestricted securities
of the same class (both at the time of purchase and at the time of valuation),
the size of the holding, the prices of any recent transactions or offers with
respect to such securities and any available analysts' reports regarding the
issuer.
Market quotations are not considered to be readily available for long-term
corporate bonds, debentures and notes; such investments are stated at fair value
on the basis of valuations furnished by a pricing service, approved by the
Trustees, which determines valuations for normal, institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.
For purposes of determining the net asset value per share of each class of
a Fund, all assets and liabilities initially expressed in foreign currencies
will be valued in U.S. dollars at the mean between the bid and asked prices of
such currencies against U.S. dollars.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
government securities and money market instruments is substantially completed
each day at various times prior to 4:15 p.m. Eastern time upon the close of
business on the primary exchange for such securities. The values of such
securities used in determining the net asset value of the Funds' shares are
computed as of such other times. Foreign currency exchange rates are also
generally determined prior to 4:15 p.m. Eastern time. Occasionally, events
affecting the value of such securities may occur between such times and 4:15
p.m. Eastern time which will not be reflected in the computation of the Funds'
net asset value. If events materially affecting the value of the Funds'
securities occur during such a period, then these securities will be valued at
their fair value as determined in good faith by the Trustees.
Expenses of the Funds directly charged or attributable to any Fund will be
paid from the assets of that Fund except that 12b-1 Plan expenses will not be
borne by holders of Institutional Shares of the Funds and each class of shares
of the Fund will bear its own transfer agency fees. General expenses of the
Funds will be allocated among and charged to the assets of the respective Funds
on a basis that the Trustees deem fair and equitable, which may be the relative
assets of each Fund or the nature of the services performed and relative
applicability to each Fund.
DISTRIBUTIONS
Each Fund will be treated as a separate entity for federal income tax
purposes (see Taxation), with its net realized gains or losses being determined
--------
separately, and capital loss carryovers determined and applied on a separate
Fund basis.
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TAXATION
Each Fund intends to qualify annually as a "regulated investment company"
("RIC") under the Code.
To qualify as a RIC, a Fund must (a) derive at least 90% of its gross
income from dividends, interest, gains from the sale or other disposition of
stock, securities, or foreign currencies certain payments with respect to
securities loans or other income derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the close of each quarter of its taxable year, (i) at least
50% of the value of its total assets consists of cash, cash items, Government
securities, securities of other RICs, and other securities limited generally
with respect to any one issuer to not more than 5% of the total assets of the
Fund and not more than 10% of the outstanding voting securities of such issuer
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than Government securities and securities of
RICs); and (c) distribute at least 90% of its investment company taxable income
(which includes interest, dividends, and net short-term capital gains in excess
of net long-term capital losses) each taxable year.
As a RIC, a Fund generally will not be subject to U.S. federal income tax
on its investment company taxable income and net capital gains (the excess of
net long-term capital gains over net short-term capital losses), if any, that it
distributes to shareholders. Each Fund intends to distribute to its
shareholders, at least annually, substantially all of its investment company
taxable income and net capital gains. Amounts not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, a Fund
must distribute during each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (not taking into account any capital gains or
losses) for the calendar year, (2) at least 98% of its capital gains in excess
of its capital losses (adjusted for certain ordinary losses, as prescribed by
the Code) for the one-year period ending on October 31 of the calendar year, and
(3) any ordinary income and capital gains for previous years that was not
distributed during those years. A distribution will be treated as paid on
December 31 of the current calendar year if it is declared by the Fund in
October, November or December with a record date in such a month and paid by a
Fund during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To prevent application of the excise tax, each Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
Dividends paid out of a Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of a Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains, if any, designated as capital
gain dividends are taxable to individual shareholders at a maximum 20% or 28%
capital gains rate (depending on the Fund's holding period for the assets giving
rise to the gain), regardless of how long the shareholder has held the Fund's
shares, and are not eligible for the dividends-received deduction. Shareholders
receiving distributions in the form of additional shares, rather than cash,
generally will have a cost basis in each such share equal to the net asset value
of a share of the Fund on the reinvestment date. Shareholders will be notified
annually as to the U.S. federal tax status of distributions, and shareholders
receiving distributions in the form of additional shares will receive a report
as to the net asset value of those shares.
The taxation of equity options and over-the-counter options on debt
securities is governed by Code section 1234. Pursuant to Code section 1234, the
premium received by a Fund for selling a put or call option is not included in
income at the time of receipt. If the option expires, the premium is short-term
capital gain to the Fund. If a Fund enters into a closing transaction, the
difference between the amount paid to close out its position and the premium
received is short-term capital gain or loss. If a call option written by a Fund
is exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by a Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term,
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options and futures contracts in which a Fund may invest are
"section 1256 contracts." Gains or losses on section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses;
however,
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foreign currency gains or losses (as discussed below) arising from certain
section 1256 contracts may be treated as ordinary income or loss. Also, section
1256 contracts held by a Fund at the end of each taxable year (and, generally,
for purposes of the 4% excise tax, on October 31 of each year) are "marked-to-
market" (that is, treated as sold at fair market value), resulting in unrealized
gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of engaging in hedging transactions
are not entirely clear. Hedging transactions may increase the amount of short-
term capital gain realized by a Fund which is taxed as ordinary income when
distributed to shareholders.
Each Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle positions, the amount which may be distributed to
shareholders, and which will be taxed to them as ordinary income or long-term
capital gain, may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
Notwithstanding any of the foregoing, a Fund may recognize gain (but not
loss) from a constructive sale of certain "appreciated financial positions" if
the Fund enters into a short sale, offsetting notional principal contract or
forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options and forward
contracts and short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments. Constructive sale
treatment does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the taxable year, if certain
conditions are met.
Unless certain constructive sale rules (discussed more fully above) apply,
a Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender.
Pursuant to Code Section 1233, all or a portion of any gain arising from a short
sale may be treated as short-term capital gain, regardless of the period for
which the Fund held the security used to close the short sale. In addition, the
Fund's holding period of any security which is substantially identical to that
which is sold short may be reduced or eliminated as a result of the short sale.
Recent legislation, however, alters this treatment by treating certain short
sales against the box and other transactions as a constructive sale of the
underlying security held by the Fund, thereby requiring current recognition of
gain, as described more fully above. Similarly, if a Fund enters into a short
sale of property that becomes substantially worthless, the Fund will recognize
gain at that time as though it had closed the short sale. Future Treasury
regulations may apply similar treatment to other transactions with respect to
property that becomes substantially worthless.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency, and the time the Fund actually collects such
receivables or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain options futures, and forward
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income.
Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which may be eligible for reduced capital gains
rates for individual shareholders, generally depending upon the shareholder's
holding period for the shares. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced (including shares
acquired pursuant to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after disposition of the shares. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on a disposition of Fund
shares held by the shareholder for
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six months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gains received by the shareholder with respect
to such shares.
If a Fund invests in stock of certain foreign investment companies, the
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income tax rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Alternatively, a Fund may elect to mark to market its foreign investment
company stock, resulting in the stock being treated as sold at fair market value
on the last business day of each taxable year. Any resulting gain would be
reported as ordinary income; any resulting loss and any loss from an actual
disposition of the stock would be reported as ordinary loss to the extent of any
net mark-to-market gains previously included in income. A Fund also may elect,
in lieu of being taxable in the manner described above, to include annually in
income its pro rata share of the ordinary earnings and net capital gain of the
foreign investment company.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
If more than 50% of the value of a Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible and may elect to "pass-through" to the Fund's shareholders the amount
of foreign income and similar taxes paid by the Fund. Pursuant to this election,
if made, a shareholder will be required to include in gross income (in addition
to taxable dividends actually received) his or her pro rata share of the foreign
income and similar taxes paid by the Fund, and will be entitled either to deduct
his or her pro rata share of foreign income and similar taxes in computing his
taxable income or to use it as a foreign tax credit against his U.S. Federal
income taxes, subject to limitations. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. Foreign taxes
generally may not be deducted by a shareholder that is an individual in
computing the alternative minimum tax.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to the Fund, gains from the sale of securities
generally will be treated as derived from U.S. sources and section 988 gains
will be treated as ordinary income derived from U.S. sources. The limitation on
the foreign tax credit is applied separately to foreign source passive income,
including foreign source passive income received from the Fund. The foreign tax
credit limitation rules do not apply to certain electing individual taxpayers
who have limited creditable foreign taxes and no foreign source income other
than passive investment-type income. The foreign tax credit is eliminated with
respect to foreign taxes withheld on dividends if the dividend paying shares or
the shares of a Fund are held by the Fund or the shareholder, as the case may
be, for less than 16 days (46 days in the case of preferred shares) during the
30-day period (90-day period for preferred shares) beginning 15 days (45 days
for preferred shares) before the shares become ex-dividend. In addition, the
foreign tax credit may offset only 90% of the revised alternative minimum tax
imposed on corporations and individuals.
The foregoing is only a general description of the foreign tax credit under
current law. Because application of the credit depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisers.
A Fund may be required to withhold U.S. federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability.
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Fund shareholders may be subject to state, local and foreign taxes on their
Fund distributions. In many states, Fund distributions that are derived from
interest on certain U.S. Government obligations are exempt from taxation. The
tax consequences to a foreign shareholder of an investment in the Fund may be
different from those described herein. Foreign shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in a Fund. Shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
OTHER INVESTMENT PRACTICES
--------------------------
Convertible Securities. Each of the Funds may invest in convertible
----------------------
securities, such as convertible debentures, bonds and preferred stock, which
allow the holder thereof to convert the instrument into common stock at a
specified share price or ratio. The price of the common stock may fluctuate
above or below the specified price or ratio, which may allow a Fund the
opportunity to purchase the common stock at below market price or, conversely,
render the right of conversion worthless. The Funds will invest in convertible
securities primarily for their equity characteristics.
Investment Companies. The International Equity Fund and Emerging Markets
--------------------
Fund may invest up to 10% of their assets in closed-end country funds whose
shares are traded in the United States. Investments in closed-end funds may
allow the Funds to attain exposure to a broader base of companies in certain
emerging markets and to avoid foreign government restrictions that may limit
direct investment in a country's equity markets. Closed-end funds are managed
pools of securities of companies having their principal place of business in a
particular foreign country. Shares of certain of these closed-end investment
companies may at times only be acquired at market premiums to their net asset
values. Investments in closed-end funds by the Funds are subject to limitations
under the Investment Company Act.
Derivatives. Each fund may, but is not required to, engage in a variety
-----------
of transactions using "derivatives," such as futures, options, warrants and
swaps. Derivatives are financial instruments whose value depends upon, or is
derived from, the value of something else, such as one or more underlying
investments, indexes or currencies. Derivatives may be traded on organized
exchanges, or in individually negotiated transactions with other parties (these
are known as "over the counter"). Each fund may use derivatives both for hedging
and non-hedging purposes. Although each fund's advisor has the flexibility to
use these strategies, it may choose not to for a variety of reasons, even under
very volatile market conditions. Derivatives involve special risks and costs and
may result in losses to the fund. The successful use of derivatives requires
sophisticated management and each fund will depend on its advisor's ability to
analyze and manage derivatives transactions. The prices of derivatives may move
in unexpected ways, especially in abnormal market conditions. Some derivatives
are "leveraged" and therefore may magnify or otherwise increase investment
losses to the fund. A fund's use of derivatives may also increase the amount of
taxes payable by shareholders. Other risks arise from the potential inability to
terminate or sell derivatives positions. A liquid secondary market may not
always exist for the fund's derivatives positions at any time. In fact, many
over-the-counter instruments will not be liquid. Over-the-counter instruments
also involve the risk that the other party will not meet its obligations to a
fund.
OPALS. The International Equity Fund, Emerging Markets Fund, and Foreign
-----
Value Fund may each invest in OPALS. OPALS represent an interest in a basket of
securities of companies primarily located in a specific country generally
designed to track an index for that country. Investments in OPALS are subject to
the same risks inherent in directly investing in foreign securities. See Risk
Considerations - Foreign Securities in the Prospectus. In addition, because the
OPALS are not registered under the securities laws, they may only be sold to
certain classes of investors, and it may be more difficult for the Fund to sell
OPALS than other types of securities. However, the OPALS may generally be
exchanged with the issuer for the underlying securities, which may be more
readily tradable.
Foreign Currency Transactions. A forward foreign currency exchange contract
-----------------------------
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
principally traded in the inter-bank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades.
Since investments in foreign companies will usually involve currencies of
foreign countries, and since the International Equity, Foreign Value, and
Emerging Markets Funds may temporarily hold funds in bank deposits in foreign
currencies during the completion of investment programs, the value of the assets
of the Funds as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Funds may incur costs in connection with conversions
between various currencies. Each Fund will conduct its
17
<PAGE>
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. The
Funds will generally not enter into a forward contract with a term of greater
than one year. The Funds' Custodian will place cash or liquid debt securities
into a segregated account of the series in an amount equal to the value of the
Funds' total assets committed to the consummation of forward foreign currency
exchange contracts. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the account on
a daily basis so that the value of the account will equal the amount of the
Funds' commitments with respect to such contracts.
The International Equity, Foreign Value, and Emerging Markets Funds will
generally enter into forward foreign currency exchange contracts under two
circumstances. First, when a Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars, of the amount of
foreign currency involved in the underlying security transactions, the Fund will
seek to protect itself against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and the subject foreign currency
during the period between the date the security is purchased or sold and the
date on which payment is made or received.
Second, when a Fund's Advisor believes that the currency of a particular
foreign country may experience an adverse movement against the U.S. dollar, it
may enter into a forward contract to sell an amount of the foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. Alternatively, where appropriate, a Fund
may hedge all or part of its foreign currency exposure through the use of a
basket of currencies where certain of such currencies act as an effective proxy
for other currencies. In such a case, the Fund may enter into a forward contract
where the amount of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into separate
forward contracts for each currency held in the Fund. The precise matching of
the forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Under certain circumstances, the Fund may commit a
substantial portion, or up to 75% of the value of its assets, to the
consummation of these contracts. The Fund's Advisor will consider the effect a
substantial commitment of its assets to forward contracts would have on the
investment program of the Fund and the flexibility of the Fund to purchase
additional securities. Other than as set forth above, the Fund will also not
enter into such forward contracts or maintain a net exposure to such contracts
where the consummation of the contracts would obligate the Fund to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency. 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 Fund's Advisor believes that it
is important to have the flexibility to enter into such forward contracts when
it determines that the best interests of the Fund will be served.
At the maturity of a forward contract, a Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision
the market value of portfolio securities at the expiration of the forward
contract. Accordingly, it may be necessary for a Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency the
Fund 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
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
18
<PAGE>
The Funds are not required to enter into forward contracts with regard to
their foreign currency-denominated securities and will not do so unless deemed
appropriate by the Funds' Advisor. It also should be realized that this method
of hedging against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result from
an increase in the value of that currency.
Although the Funds value their assets daily in terms of U.S. dollars,
they do not intend to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. They will do so 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 (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Funds at one rate, while offering a lesser rate of exchange should the
Funds desire to resell that currency to the dealer.
Short-term Debt Obligations. The Funds may invest in Short-term
---------------------------
Debt Obligations for temporary defensive purposes, and each Fund may invest in
Short-term Debt Obligations for liquidity purposes (e.g., for redemption of
shares, to pay expenses or pending other investments). Short-term Debt
Obligations may include obligations of the U.S. government and (in the case of
the International Equity Fund, Foreign Value Fund, and Emerging Markets Fund)
securities of foreign governments. Short-term Debt Obligations may also include
certificates of deposit and bankers' acceptances issued by U.S. banks (and, in
the case of the International Equity Fund, Foreign Value Fund and Emerging
Markets Fund, foreign banks) having deposits in excess of $2 billion, commercial
paper, short-term corporate bonds, debentures and notes and repurchase
agreements, all with one year or less to maturity. Investments in commercial
paper are limited to obligations (i) rated Prime-1 by Moody's Investors Service,
Inc. or A-1 by Standard & Poor's Corporation, or in the case of any instrument
that is not rated, of comparable quality as determined by the Manager or
Advisor, or (ii) issued by companies having an outstanding debt issue currently
rated Aaa or Aa by Moody's or AAA or AA by Standard & Poor's. Investments in
other corporate obligations are limited to those having a maturity of one year
or less and rated Aaa or Aa by Moody's or AAA or AA by Standard & Poor's. The
value of fixed-income securities may fluctuate inversely in relation to the
direction of interest rate changes.
Bond Ratings. The Moody's Investors Service, Inc. bond ratings cited
------------
above are as follows:
Aaa: Bonds that are rated "Aaa" are judged to be the best quality and
to carry the smallest degree of investment risk. Interest payments are protected
by a large or exceptionally stable margin and principal is secure.
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 with "Aaa" securities or other elements may
make long-term risks appear greater than those of "Aaa" securities.
The Standard & Poor's Corporation bond ratings cited above are as
follows:
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from "AAA" issues only in small degree.
Repurchase Agreements. A repurchase agreement is a contract under which a
---------------------
Fund would acquire a security for a relatively short period (usually not more
than one week), subject to the obligation of the seller to repurchase and the
Fund to resell such security at a fixed time and price (representing the Fund's
cost plus interest). The Funds will enter into repurchase agreements only with
(i) commercial banks or (ii) registered broker-dealers. Although each Fund may
enter into repurchase agreements with respect to any securities which it may
acquire consistent with its investment policies and restrictions, it is the
Funds' present intention to enter into repurchase agreements only with respect
to obligations of the U.S. government or its agencies or instrumentalities.
While the repurchase agreements entered into by a Fund will provide that the
underlying security at all times shall have a value at least equal to the resale
price stated in the agreements (and, for
19
<PAGE>
this purpose, the underlying security will be marked to market daily), if the
seller defaults, the Fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of the sale including accrued interest
are less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the Fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the Fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Securities Loans. Each Fund may make secured loans of its portfolio
----------------
securities amounting to not more than 30% of its total assets. See Investment
----------
Restrictions of the Funds. The risks in lending portfolio securities, as with
- -------------------------
other extensions of credit, consist of possible delay in the recovery of the
securities or loss of rights in the collateral should the borrower fail
financially. However, such loans will be made only to broker-dealers that a
Fund's Advisor believes to be of high credit standing. Securities loans are made
to broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or cash equivalents (such as U.S. Treasury bills)
at least equal at all times to the market value of the securities lent. The
borrower pays to a Fund an amount equal to any dividends or interest received on
the securities lent. A Fund may invest the cash collateral received in
interest-bearing, short-term securities or receive a fee from the borrower.
Although voting rights, or rights to consent with respect to the loaned
securities, pass to the borrower, a Fund retains the right to call the loans at
any time on reasonable notice, and it will do so in order that the securities
may be voted by a Fund if the holders of such securities are asked to vote upon
or consent to matters materially affecting the investment. A Fund may also call
such loans in order to sell the security involved.
Options. The Small Cap Fund, Mid Cap Fund, Growth and Income Fund,
-------
Foreign Value Fund, and Emerging Markets Fund may write covered call options
which are traded on national securities exchanges with respect to stocks in
their portfolios (ensuring that the Funds at all times will have in their
portfolios the securities which they may be obligated to deliver if the options
are exercised). The "writer" of a call option gives to the purchaser of that
option the right to buy the underlying security from the writer at the exercise
price prior to the expiration date of the call. Call options are generally
written for periods of less than six months. These Funds may write covered call
options on securities in their portfolios in an attempt to realize a greater
current return than would be realized on the securities alone or to provide
greater flexibility in disposing of such securities. The Small Cap Fund, Mid Cap
Fund, Growth and Income Fund, Foreign Value Fund, and Emerging Markets Fund may
also write call options to partially hedge a possible stock market decline.
Because these Funds seek growth of capital, covered call options would not be
written except at a time when it is believed that the price of the common stock
on which the call is being written will not rise in the near future and the Fund
does not desire to sell the common stock for tax or other reasons. The writer of
a covered call option receives a premium for undertaking the obligation to sell
the underlying security at a fixed price during the option period if the option
is exercised. So long as these Funds remain obligated as writers of covered
calls, they forego the opportunity to profit from increases in the market prices
of the underlying securities above the exercise prices of the options, except
insofar as the premiums represent such profits, and retain the risk of loss
should the value of the underlying securities decline. These Funds may also
enter into "closing purchase transactions" in order to terminate their
obligations as writers of covered call options prior to the expiration of the
options. Although limiting writing covered call options to those which are
traded on national securities exchanges increases the likelihood of being able
to make closing purchase transactions, there is no assurance that these Funds
will be able to effect such transactions at any particular time or at an
acceptable price. If the Funds were unable to enter into a closing purchase
transaction, the principal risks to the Funds would be the loss of any capital
appreciation of the underlying security in excess of the exercise price and the
inability to sell the underlying security in a down market until the call option
was terminated. The writing of covered call options could result in an increase
in the portfolio turnover rates of the Funds, especially during periods when
market prices of the underlying securities appreciate.
Short Sales. The Mid Cap Fund also may engage in short sales of
-----------
securities by selling securities it does not own in anticipation of a decline in
the market value of those securities. To effect such transactions, the Fund must
borrow the security to make delivery to a buyer and then later replace the
borrowed security by purchasing it at market price. The Adviser may sell
securities short in anticipation of a decline in the price of the security
between the time it is sold and the time it is purchased for replacement.
However, the actual replacement price of the security may be more or less than
the price at the time of sale. The Fund will realize a gain if its replacement
price is less than the sale price, but will experience a loss if there is an
increase in price. The Fund also will incur transaction costs, including
interest expenses, and will be required to make margin deposits with brokers
until the short position is closed out.
No securities will be sold short if, after giving effect to any short
sales, the value of all securities sold short would exceed 25% of the Fund's net
assets. The Fund will place in a segregated account with its custodian an amount
of cash or U.S. government securities equal to the difference between (i) the
market value of the securities sold short at the
20
<PAGE>
time of sale and (ii) any cash or securities required by the broker to be
deposited as margin for the short sale (excluding the proceeds of the short
sale). The value of U.S. government securities and cash in the segregated
account will be marked to market daily and additional deposits will be added if
the value of the Fund's short position declines. At all times, however, the
deposits in the segregated account together with the amounts held by the broker
as margin will not be less than the initial market value of the securities sold
short.
All of the Funds may sell short securities identical to ones that they
own in their portfolios.
Forward Commitments. Each Fund may make contracts to purchase
-------------------
securities for a fixed price at a future date beyond customary settlement time
("forward commitments"), if the Fund holds, and maintains until the settlement
date in a segregated account with the Funds' custodian, cash or Short-term Debt
Obligations in an amount sufficient to meet the purchase price. These debt
obligations will be marked to market on a daily basis and additional liquid
assets will be added to such segregated accounts as required. Forward
commitments may be considered securities in themselves. They involve a risk of
loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Fund's other assets. Although a Fund will generally enter into forward
commitments with the intention of acquiring securities for its portfolio, a Fund
may dispose of a commitment prior to settlement if the Advisor deems it
appropriate to do so. A Fund may realize short-term profits or losses upon the
sale of forward commitments.
Warrants. The Funds may invest in warrants purchased as units or
--------
attached to securities purchased by the series. Warrants are options to purchase
equity securities at specific prices valid for a specific period of time. Their
prices do not necessarily move parallel to the prices of the underlying
securities. Warrants have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.
Portfolio Turnover. A change in securities held by a Fund is known as
------------------
"portfolio turnover" and almost always involves the payment by the Fund of
brokerage commissions or dealer markups and other transaction costs on the sale
of securities as well as on the reinvestment of the proceeds in other
securities. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Fund and may affect taxes paid by shareholders to the extent short-term gains
are distributed. Portfolio turnover is not a limiting factor with respect to
investment decisions by any Fund.
The portfolio turnover rates for the Funds for their fiscal years 1998
(April 1, 1997 to March 31, 1998) and 1999 (April 1, 1998 to March 31, 1999)
were as follows:
1998 1999
---- ----
Small Cap Fund 135% 113%
(Ordinary and Institutional Shares)
Mid Cap Fund 128% 168%
(Ordinary and Institutional Shares)
Growth and Income Fund 72% 97%
(Ordinary and Institutional Shares)
International Equity Fund 61% 128%
(Ordinary and Institutional Shares)
Emerging Markets Fund 52% 49%
(Ordinary and Institutional Shares)
Foreign Value Fund --% 22%
(Ordinary and Institutional Shares)
There were no outstanding shares of the Foreign Value Fund during the 1998
fiscal year. The Foreign Value Fund commenced operations on May 18, 1998.
INVESTMENT RESTRICTIONS OF THE FUNDS
As fundamental policies, which may not be changed without "a vote of
the majority of the outstanding voting securities" of a Fund (as defined below),
a Fund will not take any of the following actions:
21
<PAGE>
(1) purchase any security if as a result a Fund would then hold
more than 10% of any class of securities of an issuer (taking all common stock
issues of an issuer as a single class, all preferred stock issues as a single
class, and all debt issues as a single class) or more than 10% of the
outstanding voting securities of an issuer;
(2) purchase any security if as a result any Fund would then have
more than 10% of the value of its net assets (taken at current value) invested
in any of the following types of investment vehicles: in securities of companies
(including predecessors) less than three years old, in securities which are not
readily marketable, in securities which are subject to legal or contractual
restrictions on resale ("restricted securities") and in repurchase agreements
which have a maturity longer than seven (7) days, provided, however, that no
Fund may invest more than 15% of its assets in illiquid securities;
(3) make short sales of securities or maintain a short position,
if, for the Mid Cap Fund, as a result the value of all securities sold short
would exceed 25% of the Fund's net assets; or, for all other Funds, unless at
all times when a short position is open the particular Fund owns an equal amount
of such securities or securities convertible into, or exchangeable without
payment of any further consideration for, securities of the same issue as, and
equal in amount to, the securities sold short, and unless not more than 10% of
the Fund's net assets (taken at current value) is held as collateral for such
sales at any one time. Such sales of securities subject to outstanding options
would not be made. A Fund may maintain short positions in a stock index by
selling futures contracts on that index.;
(4) issue senior securities, borrow money or pledge its assets
except that a Fund may borrow from a bank for temporary or emergency purposes in
amounts not exceeding 10% (taken at the lower of cost or current value) of its
total assets (not including the amount borrowed) and pledge its assets to secure
such borrowings. A Fund will not purchase any additional portfolio securities so
long as its borrowings amount to more than 5% of its total assets. (For purposes
of this restriction, collateral arrangements with respect to the writing of
covered call options and options on index futures and collateral arrangements
with respect to margin for a stock index future are not deemed to be a pledge of
assets and neither such arrangements nor the purchase or sale of stock index
futures or the purchase of related options are deemed to be the issuance of a
senior security.);
(5) purchase or retain securities of any company if, to the
knowledge of the Funds, officers and Trustees of the Funds or of the Manager or
of the Advisor of the particular Funds who individually own more than 1/2 of 1%
of the securities of that company together own beneficially more than 5% of such
securities;
(6) buy or sell real estate or interests in real estate, although
it may purchase and sell securities which are secured by real estate and
securities of companies which invest or deal in real estate;
(7) act as underwriter except to the extent that, in connection
with the disposition of Fund securities, it may be deemed to be an underwriter
under certain provisions of the federal securities laws;
(8) make investments for the purpose of exercising control or
management;
(9) participate on a joint or joint and several basis in any
trading account in securities;
(10) write, purchase, or sell puts, calls or combinations thereof,
except that: (i) the Small Cap Fund, Mid Cap Fund, Growth and Income Fund,
Foreign Value Fund, and Emerging Markets Fund may each write covered call
options with respect to all of their portfolio securities; (ii) the Mid Cap
Fund, Foreign Value Fund, and Emerging Markets Fund may purchase put options and
call options on widely recognized securities indices, common stock of individual
companies or baskets of individual companies in a particular industry or sector;
(iii) the Small Cap Fund may purchase put and call options on stock index
futures and on stock indices; (iv) the International Equity Fund and Foreign
Value Fund may purchase and write call options on stock index futures and on
stock indices; and (v) each of the Funds may sell and purchase such options to
terminate existing positions;
(11) invest in interests in oil, gas or other mineral exploration
or development programs, although it may invest in the common stocks of
companies which invest in or sponsor such programs;
(12) make loans, except (i) through the purchase of bonds,
debentures, commercial paper, corporate notes and similar evidences of
indebtedness of a type commonly sold privately to financial institutions, (ii)
through repurchase agreements and loans of portfolio securities (limited to 30%
of the value of a Fund's total assets). The purchase of a portion
22
<PAGE>
of an issue of such securities distributed publicly, whether or not such
purchase is made on the original issuance, is not considered the making of a
loan; or
(13) invest more than 25% of the value of its total assets in any one
industry.
Although certain of these policies envision a Fund maintaining a
position in a stock index by selling futures contracts on that index and also
envision that under certain conditions one or more Funds may engage in
transactions in stock index futures and related options, the Funds do not
currently intend to engage in such transactions.
No more than 5% of the value of a Fund's total assets will be invested
in repurchase agreements which have a maturity longer than seven (7) days.
(Investments in repurchase agreements which have a longer maturity are not
considered to be readily marketable and their purchase is therefore also
restricted as set forth in restriction number (2) above). In addition, a Fund
will not enter into repurchase agreements with a securities dealer if such
transactions constitute the purchase of an interest in such dealer under the
Investment Company Act of 1940.
All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.
As provided in the Investment Company Act of 1940, a "vote of a
majority of the outstanding voting securities" necessary to amend a fundamental
policy as to any Fund means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of such Fund or (2) 67% or more of the shares of
such Fund present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.
PERFORMANCE MEASURES
Average Annual Total Rate of Return(1), (2), (3)
<TABLE>
<CAPTION>
Year Ended 5 Years Ended 10 Years Ended
March 31, 1999 March 31, 1999 March 31, 1999 Since Inception
<S> <C> <C> <C> <C>
Small Cap Fund
Ordinary Shares (18.80)% 10.99% __ 16.73% (8/3/92)
Institutional Shares (17.55)% 11.75% __ 14.05% (1/6/93)
Mid Cap Fund
Ordinary Shares ( 1.08)% __ __ 22.90% (3/21/95)
Institutional Shares ( 1.07)% __ __ 22.63% (4/17/95)
Growth and Income Fund
Ordinary Shares 12.53% 22.61% 17.47% 16.92% (5/9/85)
Institutional Shares 14.27% 23.47% __ 17.89% (3/25/91)
International Equity Fund
Ordinary Shares ( 5.73)% 3.36% 3.09% 3.53% (7/31/87)
Institutional Shares ( 4.34)% __ __ 2.74% (8/25/94)
Emerging Markets Fund
Ordinary Shares (14.27)% __ __ (8.16)% (8/8/94)
Institutional Shares (12.93)% __ __ (7.24)% (4/2/96)
Foreign Value Fund
Ordinary Shares __ __ __ (19.26)% (5/18/98)
Institutional Shares __ __ __ ( 0.71)% (12/18/98)
</TABLE>
(1) Total return with all dividends and capital gains reinvested. The
performance data quoted represents past performance. The investment return
and principal value of a current investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Returns for the Quantitative Foreign Value Fund are for a
limited period of time and are not annualized.
(2) These results reflect the impact of a contractual 2% expense cap applicable
to the Quantitative Small Cap Fund, Quantitative Growth and Income Fund,
and Quantitative International Equity Fund (when applicable),
23
<PAGE>
and voluntary expense caps of 1.65% and 2.25%, respectively, applicable to
the Quantitative Mid Cap fund and Quantitative Emerging Markets Fund, as
described in the Prospectus, and expense waivers and/or reimbursements
applicable to the Funds. If the expenses had not been subsidized, the
performance would have been lower.
(3) The return for the Ordinary Shares of the Funds takes into account a one
percent (1%) deferred sales charge imposed at the time of redemption. The
deferred sales charge is not imposed in the case of redemptions of
Institutional Shares, redemptions of Ordinary Shares of the Mid Cap Fund
purchased on or after August 1, 1996, involuntary redemptions, redemptions
of Shares tendered for exchange and redemptions of Shares held by
contributory plans qualified under Section 401(k) of the Internal Revenue
Code or for certain other redemptions. (See How to Redeem in the
-------------
Prospectus.)
From time to time, the Funds may advertise their performance in various
ways. These methods include providing information on the returns of the Funds
and comparing the performance of the Funds to relevant benchmarks. Performance
will be stated in terms of total return. "Total return" figures are based on the
historical performance of each Fund, show the performance of a hypothetical
investment and are not intended to indicate future performance.
Under the rules of the Securities and Exchange Commission (the
"Commission"), funds advertising performance must include total return quotes,
"T" below, calculated according to the following formula:
P(1+T)n = ERV
Where:P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the "n" year period (or fractional portion thereof) at the end
of such period.
The average annual total return will be calculated under the foregoing
formula and the time periods used in advertising will be based on rolling
calendar quarters, updated to the last day of the most recent quarter prior to
submission of the advertising for publication, and will cover one, five, and ten
year periods plus the time period since the effective date of the registration
statement relating to the particular Fund. When the period since inception is
less than one year, the total return quoted will be the aggregate return for the
period. In calculating redeemable value, the deferred sales charge is deducted
from the ending redeemable value and all dividends and distributions by the Fund
are deemed to have been reinvested at net asset value as described in the
Prospectus on the reinvestment dates during the period. Total return, or "T" in
the formula above, is computed by finding the average annual compounded rates of
return over the 1, 5 and 10 year periods (or fractional portions thereof) that
would equate the initial amount invested to the ending redeemable value. Any
sales loads that might in the future be made applicable at the time to
reinvestments would be included as would any recurring account charges that
might be imposed on the Fund. The average annual total returns for the Funds as
of December 31, 1998, the last calendar year end preceding the Prospectus and
this Statement of Additional Information, are set forth in the Prospectus under
the caption Performance.
-----------
In reports to shareholders or other literature, the Funds may compare their
performance to that of other mutual funds with similar investment objectives and
to stock or other relevant indices. For example, it may compare its performance
to rankings prepared by Lipper Analytical Services Inc. (Lipper) or Morningstar,
Inc., widely recognized independent services that monitor the performance of
mutual funds. The Funds may also compare their performance to the Standard &
Poor's 500 Stock Index (S&P 500) or Standard & Poor's 400 Mid Cap Index, indexes
of unmanaged groups of common stocks; the Russell 2000, an unmanaged index of
the smallest 2,000 of the 3,000 largest U.S. companies; the Morgan Stanley
Capital International Europe, Australasia, Far East Index, an index of unmanaged
groups of common stocks of foreign companies having their principal business
activities in one of eighteen foreign countries in Europe, Australia, and the
Far East; or the Baring Emerging Markets Index, International Finance
Corporation Investable Composite Index or the Morgan Stanley Capital
International Emerging Markets Index, indexes of unmanaged groups of common
stocks of foreign companies having their principal business activities in
emerging nations. In making such
24
<PAGE>
comparisons, the Funds may from time to time include a total aggregate return
figure or an average annual total return figure that is not calculated according
to the formula set forth above in order to make a more accurate comparison to
other measures of investment return. For such purposes, the Funds calculate
their aggregate total return in the same manner as the above formula except that
no deferred sales charges are deducted from the ending amount. When the period
since inception is less than one year, the total return quoted will be the
aggregate return for the period. The Funds, however, will disclose the maximum
deferred sales charge and will also disclose that the performance data so quoted
do not reflect sales charges and that the inclusion of sales charges would
reduce the performance quoted. Such alternative information will be given no
greater prominence in such sales literature than the information prescribed
under Commission rules.
Performance information, rankings, ratings, published editorial comments
and listings reported in national financial publications may also be used in
computing performance of the Funds (if the Funds are listed in any such
publication). Performance comparisons should not be considered as representative
of the future performance of the Funds.
THE QUANTITATIVE GROUP
The Trust was established in 1983 as a business trust under Massachusetts
law. A copy of the Amended and Restated Declaration of Trust (as amended through
July 19, 1993) amending and restating the Agreement and Declaration of Trust
dated June 27, 1983, is on file with the Secretary of the Commonwealth of
Massachusetts. The Trust has an unlimited authorized number of shares of
beneficial interest which may, without shareholder approval, be divided into an
unlimited number of series of such shares and an unlimited number of classes of
shares of any such series. Shares are presently divided into six series of
shares, the Funds, each comprised of two classes of shares. There are no rights
of conversion between shares of different Funds which are granted by the Amended
and Restated Declaration of Trust, but holders of shares of either class of a
Fund may exchange all or a portion of their shares for shares of a like class in
another Fund (subject to their respective minimums). No exchanges are permitted
from one class of shares to another class of shares of the same or a different
Fund.
These shares are entitled to one vote per share (with proportional voting
for fractional shares) on such matters as shareholders are entitled to vote,
including the election of Trustees. Shares vote by individual Fund (or class
thereof under certain circumstances) on all matters except that (i) when the
Investment Company Act of 1940 so requires, shares shall be voted in the
aggregate and not by individual Fund and (ii) when the Trustees of the Funds
have determined that a matter affects only the interest of one or more Funds,
then only holders of shares of such Fund shall be entitled to vote thereon.
There will normally be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees have been elected by the shareholders, at which time the Trustees then
in office will call a shareholders' meeting for the election of Trustees. In
addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares of each Fund and filed with the
Fund or by a vote of the holders of tw thirds of the outstanding shares of each
Fund at a meeting duly called for that purpose, which meeting shall be held upon
the written request of the holders of not less than 10% of the outstanding
shares. Upon written request by ten or more shareholders, who have been such for
at least six months and who hold, in the aggregate, shares having a net asset
value of at least $25,000, stating that such shareholders wish to communicate
with the other shareholders for the purpose of obtaining the signatures
necessary to demand a meeting to consider removal of a Trustee, the Funds have
undertaken to provide a list of shareholders or to disseminate appropriate
materials (at the expense of the requesting shareholders). Except as set forth
above, the Trustees shall continue to hold office and may appoint their
successors.
Shares are freely transferable, are entitled to dividends as declared by
the Trustees, and in liquidation of the Trust are entitled to receive the net
assets of their Fund, but not of the other Funds. Shareholders have no
preemptive rights. The Funds' fiscal year ends on the last day of March.
Under Massachusetts law, shareholders could, under certain circumstances,
be held liable for the obligations of the Funds. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Funds and requires notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Funds or the Trustees.
The Agreement and Declaration of Trust provides for indemnification out of a
Fund's property for all loss and expense of any shareholder of that Fund held
liable on account of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund of which he was a shareholder would
be unable to meet its obligations.
25
<PAGE>
EXPERTS
The audited financial statements as of March 31, 1999 incorporated by
reference in this Statement of Additional Information have been so included in
reliance upon the report of PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, MA 02110, independent accountants, given on the authority of that firm
as experts in accounting and auditing.
26
<PAGE>
FORM N-1A PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Quantitative Small Cap Fund
---------------------------
Per Share Income and Capital Changes, Years Ended March 31, 1999,
1998, 1997, 1996, and 1995 for Ordinary Shares; and for
Institutional Shares, Years Ended March 31, 1999, 1998, 1997,
1996, and 1995
Quantitative Mid Cap Fund (formerly Quantitative Numeric II Fund)
----------------------------------------------------------------
Per Share Income and Capital Changes, Years Ended March 31, 1999,
1998, 1997 and 1996, and Period from October 1, 1994 to March 31,
1995 for Ordinary Shares; and for Institutional Shares, Years
Ended March 31, 1999, 1998 and 1997 and Period from April 17,
1995 to March 31, 1996
Quantitative Growth and Income Fund
-----------------------------------
Per Share Income and Capital Changes, Years Ended March 31, 1999,
1998, 1997, 1996, and 1995 for Ordinary Shares; and for
Institutional Shares, Years Ended March 31, 1999, 1998, 1997,
1996, and 1995
Quantitative International Equity Fund
--------------------------------------
Per Share Income and Capital Changes, Years Ended March 31, 1999,
1998, 1997, 1996, and 1995, for Ordinary Shares; and for
Institutional Shares, Years Ended March 31, 1999, 1998, 1997 and
1996 and Period from August 25, 1994 to March 31, 1995
Quantitative Emerging Markets Fund
----------------------------------
Per Share Income and Capital Changes, Years Ended March 31, 1999,
1998, 1997 and 1996, and Period from August 8, 1994 to March 31,
1995 for Ordinary Shares; and for Institutional Shares, Years
Ended March 31, 1999 and 1998 and Period from April 2, 1997 to
March 31, 1997
Quantitative Foreign Value Fund
-------------------------------
Per Share Income and Capital Changes, Period from May 15, 1998 to
March 31, 1999 for Ordinary Shares; and for Institutional Shares,
Period from December 18, 1998 to March 31, 1999
Included in Part B*:
Quantitative Small Cap Fund
---------------------------
Report of Independent Accountants, May 17, 1999
Investments, March 31, 1999
Statement of Assets and Liabilities, March 31, 1999
<PAGE>
Statement of Operations, Year Ended March 31, 1999
Statement of Changes in Net Assets, Year Ended March 31, 1999 and
March 31, 1998
Selected Per Share Data and Ratios, Years Ended March 31, 1999,
1998, 1997, 1996, and 1995 for Ordinary Shares; and for
Institutional Shares, Years
Ended March 31, 1999, 1998, 1997, 1996, and 1995
Notes to Financial Statements, March 31, 1999
Quantitative Mid Cap Fund
-------------------------
Report of Independent Accountants, May 17, 1999
Investments, March 31, 1999
Statement of Assets and Liabilities, March 31, 1999
Statement of Operations, Year Ended March 31, 1999
Statement of Changes in Net Assets, Year Ended March 31, 1999 and
March 31, 1998
Selected Per Share Data and Ratios, Years Ended March 31, 1999,
1998, 1997 and 1996, and Period from October 1, 1994 to March 31,
1995 for Ordinary Shares; and for Institutional Shares, Years
Ended March 31, 1999, 1998, and 1997 and Period from April 17,
1995 to March 31, 1996
Notes to Financial Statements, March 31, 1999
Quantitative Growth and Income Fund
-----------------------------------
Report of Independent Accountants, May 17, 1999
Investments, March 31, 1999
Statement of Assets and Liabilities, March 31, 1999
Statement of Operations, Year Ended March 31, 1999
Statement of Changes in Net Assets, Year Ended March 31, 1999 and
March 31, 1998
Selected Per Share Data and Ratios, Years Ended March 31, 1999,
1998, 1997, 1996, and 1995 for Ordinary Shares; and for
Institutional Shares, Years Ended March 31, 1999, 1998, 1997,
1996, and 1995
Notes to Financial Statements, March 31, 1999
Quantitative International Equity Fund
--------------------------------------
Report of Independent Accountants, May 17, 1999
Investments, March 31, 1999 Statement of Assets and Liabilities,
March 31, 1999
Statement of Operations, Year Ended March 31, 1999
Statement of Changes in Net Assets, Year Ended March 31, 1999 and
March 31, 1998
Selected Per Share Data and Ratios, Years Ended March 31, 1999,
1998, 1997, 1996, and 1995 for Ordinary Shares; and for
Institutional Shares, Years Ended March 31, 1999, 1998, 1997 and
1996, and Period from August 25, 1994 to March 31, 1995
Notes to Financial Statements, March 31, 1999
Quantitative Emerging Markets Fund
----------------------------------
Report of Independent Accountants, May 17, 1999
Investments, March 31, 1999
Statement of Assets and Liabilities, March 31, 1999
Statement of Operations, Year Ended March 31, 1999
<PAGE>
Statement of Changes in Net Assets, Year Ended March 31, 1999 and
March 31, 1998
Selected Per Share Data and Ratios, Years Ended March 31, 1999,
1998, 1997 and 1996, and Period from August 8, 1994 to March 31,
1995 for Ordinary Shares and for Institutional Shares Years Ended
March 31, 1999 and 1998 and
Period from April 2, 1997 to March 31, 1997
Notes to Financial Statements, March 31, 1999
Quantitative Foreign Value Fund
--------------------------------
Report of Independent Accountants, May 17, 1999
Investments, March 31, 1999
Statement of Assets and Liabilities, March 31, 1999
Statement of Operations, Period from May 15, 1998 to March 31,
1999
Statement of Changes in Net Assets, Period from May 15, 1998 to
March 31, 1999
Selected Per Share Data and Ratios, Period from May 15, 1998 to
March 31, 1999 for Ordinary Shares; and for Institutional Shares,
Period from December 18, 1998 to March 31, 1999
Notes to Financial Statements, March 31, 1999
* Incorporated herein by reference to the Trust's Annual Report to Shareholders
dated March 31, 1999, to be filed with the SEC via EDGAR on or before May 28,
1999.
(b) Exhibits
10. Consent of Independent Public Accountants
14. Financial Data Schedule
Item 24. Persons Controlled by or under Common Control with Registrant
None
Item 25. Indemnification
Article VIII of the Trust's Declaration of Trust provides in relevant
part:
Trustees, Officers, etc.
-----------------------
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interest of the Trust or (b)
to be liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in satisfaction
of judgments, in compromise or as fines or penalties), shall be paid from time
to time by the Trust in advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by
<PAGE>
or on behalf of such Covered Person to repay amounts so paid to the Trust if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article, provided, however, that either (a) such Covered Person shall
have provided appropriate security for such undertaking, (b) the Trust shall be
insured against losses arising from any such advance payments or (c) either a
majority of the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial type
inquiry) that there is reason to believe that such Covered Person will be found
entitled to indemnification under this Article.
Compromise Payment
- ------------------
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an adjudication by a
court, or by any other body before which the proceeding was brought, that such
Covered Person either (a) did not act in good faith in the reasonable belief
that his action was in the best interests of the Trust or (b) is liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office, indemnification shall be provided if (a) approved as in the best
interests of the Trust, after notice that it involves such indemnification, by
at least a majority of the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in office act on the matter)
upon a determination, based upon a review of readily available facts (as opposed
to a full trial type inquiry) that such Covered Person acted in good faith in
the reasonable belief that his action was in the best interests of the Trust and
is not liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (b) there has been obtained an opinion in
writing of independent legal counsel, based upon a review of readily available
facts (as opposed to a full trial type inquiry) to the effect that such Covered
Person appears to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust and that such indemnification
would not protect such Person against any liability to the Trust to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in the best
interests of the Trust or to have been liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office.
Indemnification Not Exclusive
- -----------------------------
Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended, (or who has
been exempted from being an "interested person" by any rule, regulation or order
of the Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by contract or otherwise
under law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the Fund
pursuant to the foregoing provisions or otherwise, the Fund has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, and is, therefore,
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Fund of expenses incurred or paid by
a trustee, officer or controlling person of the Fund in the successful defense
of any action, suit or proceeding) is asserted against the Fund by such trustee,
officer or controlling person in connection with the securities being
registered, the Fund 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
There is set forth below information as to any other business,
vocation or employment of a substantial nature in which each director or officer
of Quantitative Advisors, Inc., the Registrant's investment adviser (viz. the
"Manager"), is or at any time during the past two fiscal years has been engaged
for his own account or in the capacity of director, officer, employee, partner
or trustee.
Name Business and other connections
- ---- ------------------------------
Willard L. Umphrey: President/Treasurer/Clerk/Director, U.S.
President Boston Insurance Agency, Inc.;
Treasurer President/Treasurer/Director, U.S. Boston
Director Capital Corporation, USB Technology, Inc.;
President/Director, USB Atlantic Associates,
Inc., USB 95 Acquisition Corp., Waterfront
Parking Corporation; Director/Treasurer, USB
Corporation and U.S. Boston Corporation;
Assistant Secretary/Director, AB&T, Inc.;
Director, Cambridge Diagnostics Ireland Ltd.,
Pear Tree Royalty Company, Inc., U.S. Boston
Asset Management Corporation, U.S. Boston
Funding Corporation, U.S. Boston Fiduciary
Corporation, U.S. Boston Institutional
Services, Inc., Selfcare, Inc.; Partner, U.S.
Boston Company, U.S. Boston Company II, U.S.
Boston Company III; U.S. Boston Company IV;
President/Chairman/Trustee, Quantitative
Group of Funds
Leon Okurowski: Director/President, U.S. Boston Corporation,
Clerk USB Corporation and U.S. Boston Asset
Director Management Corporation; Vice
President/Treasurer/Clerk/Director,
Waterfront Parking Corporation; Vice
President/Director, U.S. Boston Capital
Corporation; Vice President, U.S. Boston
Insurance Agency, Inc. Director/Treasurer,
U.S. Boston Institutional Services, Inc.,
AB&T, Inc.; Director, U.S. Boston Fiduciary
Corporation, U.S. Boston Funding Corporation,
USB Technology, Inc.; Partner, U.S. Boston
Company, U.S. Boston Company II, U.S. Boston
Company III, U.S. Boston Company IV;
Treasurer/Vice Chairman/Trustee, Quantitative
Group of Funds
Mark A. Katzoff Clerk, Quantitative Group of Funds
Assistant Clerk
The principal business address of each U.S. Boston affiliate named above is
Lincoln North, Lincoln, Massachusetts 01773. The principal business address of
AB&T is 200 Franklin Street, Boston, Massachusetts 02109.
<PAGE>
Item 27. Principal Underwriter
(a) Not applicable.
(b) The directors and officers of the Registrant's principal
underwriter are:
Positions and Positions and
Offices with Offices with
Name Underwriter Registrant
- ---- ------------- -------------
Carol A. Higgins Clerk None
Leon Okurowski Vice President Vice President, Treasurer
and Director and Trustee
Willard L. Umphrey President, President, Chairman,
Treasurer and Trustee
and Director
The principal business address of each person listed above is 55 Old Bedford
Road, Lincoln, Massachusetts 01773.
(c) Not applicable.
Item 28. Location of Accounts and Records.
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder include Registrant's investment
advisers, Quantitative Advisors, Inc. and Polaris Capital Management, Inc.;
Registrant's custodian, Investors' Fiduciary Trust Company; and Registrant's
transfer agent and dividend disbursing agent, Quantitative Institutional
Services. The address of Quantitative Advisors, Inc. is 55 Old Bedford Road,
Lincoln, Massachusetts 01773; the address of Quantitative Institutional Services
is 55 Old Bedford Road, Lincoln, Massachusetts 01773; the address of State
Street Bank and Trust Company is 2 International Place, Boston, Massachusetts
02110; the address of Independence International Associates, Inc. is 53 State
Street, Boston, Massachusetts 02109, the address of Columbia Partners, L.L.C.,
Investment Management is 1775 Pennsylvania Avenue, N.W., Washington, DC 20006;
the address of Polaris Capital Management, Inc. is 125 Summer Street, Boston,
Massachusetts 02110; and the address of Investors' Fiduciary Trust Company is
801 Pennsylvania Ave, Kansas City, MO 64105.
Item 29. Management Services
None.
<PAGE>
Item 30. Undertakings
(a) Not applicable.
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of Quantitative Group of Funds,
as amended, is on file with the Secretary of the Commonwealth of Massachusetts
and notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the registrant acting as an officer and not
individually and that the obligations of or arising out of this instrument are
not binding on any of the Trustees or shareholders individually but are binding
only upon the assets and property of the Registrant.
-----------------
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Lincoln, and Commonwealth of Massachusetts on
the 28 day of May, 1999.
Quantitative Group of Funds
By___________________________________
Willard L. Umphrey, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement of Quantitative Group of Funds has been
signed by the following persons in the capacities and on the dates indicated.
- --------------------
Robert M. Armstrong Trustee May 28, 1999
- --------------------
Edward A. Bond, Jr. Trustee May 28, 1999
- --------------------
John M. Bulbrook Trustee May 28, 1999
- --------------------
Edward E. Burrows Trustee May 28, 1999
- --------------------
Leon Okurowski Trustee May 28, 1999
- --------------------
Willard L. Umphrey Trustee May 28, 1999
- --------------------
Ron Zwanziger Trustee May 28, 1999
<PAGE>
EXHIBIT 10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 19 to the Registration Statement on Form N-1A (the "Registration
Statement") of our report dated May 17, 1999, appearing in the annual report to
shareholders for the year ended March 31, 1999. We also consent to the reference
to us under the heading "Financial Highlights" in the Prospectus, which
constitutes part of this Registration Statement, and under the heading "Experts"
in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, MA
May 28, 1999
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<PERIOD-END> MAR-31-1999
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<INVESTMENTS-AT-VALUE> 73,765
<RECEIVABLES> 24,263
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 1,523
<TOTAL-ASSETS> 99,765
<PAYABLE-FOR-SECURITIES> 24,153
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 132
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<PAID-IN-CAPITAL-COMMON> 46,779
<SHARES-COMMON-STOCK> 3,334
<SHARES-COMMON-PRIOR> 3,185
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,131
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,571
<NET-ASSETS> 75,481
<DIVIDEND-INCOME> 885
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,122
<NET-INVESTMENT-INCOME> (237)
<REALIZED-GAINS-CURRENT> 10,151
<APPREC-INCREASE-CURRENT> (1,023)
<NET-CHANGE-FROM-OPS> 5,361
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 7,029
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 360
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<SHARES-REINVESTED> 298
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 528
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,154
<AVERAGE-NET-ASSETS> 66,393
<PER-SHARE-NAV-BEGIN> 20.85
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 2.82
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 2.33
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.26
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[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
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<PERIOD-END> MAR-31-1999
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<INVESTMENTS-AT-VALUE> 23,793
<RECEIVABLES> 1,021
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 2,642
<TOTAL-ASSETS> 27,464
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<OTHER-ITEMS-LIABILITIES> 1,246
<TOTAL-LIABILITIES> 3,613
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,457
<SHARES-COMMON-STOCK> 1,931
<SHARES-COMMON-PRIOR> 2,608
<ACCUMULATED-NII-CURRENT> (27)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (384)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,805
<NET-ASSETS> 23,851
<DIVIDEND-INCOME> 566
<INTEREST-INCOME> 38
<OTHER-INCOME> 0
<EXPENSES-NET> 564
<NET-INVESTMENT-INCOME> 605
<REALIZED-GAINS-CURRENT> 51
<APPREC-INCREASE-CURRENT> (1,703)
<NET-CHANGE-FROM-OPS> (1,612)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 47
<DISTRIBUTIONS-OF-GAINS> 9
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 202
<NUMBER-OF-SHARES-REDEEMED> (964)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> (8,384)
<ACCUMULATED-NII-PRIOR> 204
<ACCUMULATED-GAINS-PRIOR> 221
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 276
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 671
<AVERAGE-NET-ASSETS> 25,767
<PER-SHARE-NAV-BEGIN> 11.97
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.58)
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> .00
<PER-SHARE-NAV-END> 11.37
<EXPENSE-RATIO> .021
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[AVG-DEBT-PER-SHARE] 0
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<SHARES-COMMON-STOCK> 166
<SHARES-COMMON-PRIOR> 145
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<OVERDISTRIBUTION-GAINS> 0
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<ACCUMULATED-GAINS-PRIOR> 221
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 671
<AVERAGE-NET-ASSETS> 1,828
<PER-SHARE-NAV-BEGIN> 11.95
<PER-SHARE-NII> 0.06
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<PER-SHARE-DIVIDEND> 0.04
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<PERIOD-END> MAR-31-1999
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[AVG-DEBT-OUTSTANDING] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
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<NUMBER> 7
<NAME> QUANTITATIVE SMALL CAP FUND ORD. SHS.
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<S> <C>
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[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
<SERIES>
<NUMBER> 8
<NAME> QUANTITATIVE SMALL CAP FUND INST. SHS.
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<S> <C>
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[AVG-DEBT-OUTSTANDING] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
<SERIES>
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<NAME> QUANTITATIVE EMERGING MARKETS FUND ORD. SHS.
<MULTIPLIER> 1,000
<S> <C>
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[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
<SERIES>
<NUMBER> 10
<NAME> QUANTITATIVE EMERGING MARKETS FUND INST. SHS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<PER-SHARE-NAV-END> 6.64
<EXPENSE-RATIO> .018
[AVG-DEBT-OUTSTANDING] 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
<SERIES>
<NUMBER> 11
<NAME> QUANTITATIVE MID CAP FUND ORD. SHS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<EXPENSE-RATIO> .017
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
<SERIES>
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<NAME> QUANTITATIVE MID CAP FUND INST. SHS.
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<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> MAR-31-1999
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[AVG-DEBT-OUTSTANDING] 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
<SERIES>
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<NAME> QUANTITATIVE FOREIGN VALUE FUND ORD SHS.
<MULTIPLIER> 1,000
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000722885
<NAME> QUANTITATIVE GROUP OF FUNDS
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<NAME> QUANTITATIVE FOREIGN VALUE FUND INST. SHS
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<PER-SHARE-GAIN-APPREC> (0.12)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.37
<EXPENSE-RATIO> .017
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
