PART B
RWB/WPG U.S. LARGE STOCK FUND
A No-Load, Diversified
Mutual Fund
STATEMENT OF ADDITIONAL
INFORMATION
May 1, 1997
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of the RWB/ WPG U.S. Large Stock Fund dated
May 1, 1997, as amended and/or supplemented from time to time (the
"Prospectus"), a copy of which may be obtained without charge by writing to
RWB/WPG U.S. Large Stock Fund, 1190 Saratoga Avenue, Suite 200, San Jose,
California 95129 or calling 1-(800)-366-7266 - EXT. 124.
THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
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TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE AND POLICIES 3
Futures Transactions 3
Repurchase Agreements 5
Other Investment Companies 5
INVESTMENT RESTRICTIONS 6
INVESTMENT ADVISER AND ADMINISTRATOR 7
Investment Adviser 7
Administrator 9
TRUSTEES AND OFFICERS 11
HOW TO PURCHASE SHARES 15
REDEMPTION OF FUND SHARES 16
SHAREHOLDER SERVICES 16
NET ASSET VALUE 17
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS 17
PORTFOLIO BROKERAGE 20
PORTFOLIO TURNOVER 23
ORGANIZATION 23
PERFORMANCE INFORMATION 24
PERFORMANCE SUMMARY 25
CUSTODIAN 25
TRANSFER AGENT 25
INDEPENDENT AUDITORS 25
FINANCIAL STATEMENTS 26
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INVESTMENT OBJECTIVE AND POLICIES
RWB/WPG U.S. Large Stock Fund (the "Fund") is a registered no-load,
diversified open-end management investment company organized as a Delaware
business trust on February 16, 1993. On May 1, 1996, the Fund changed its name
from "U.S. Large Stock Fund" to "RWB/WPG U.S. Large Stock Fund."
The investment objective, policies and restrictions of the Fund may be
changed or altered by the Board of Trustees of the Fund (the "Board"), without
shareholder approval except to the extent such policies and restrictions have
been adopted as fundamental. See "Investment Restrictions." The securities in
which the Fund may invest and certain other investment policies are described in
the Fund's Prospectus. This Statement of Additional Information should be read
in conjunction with the Prospectus.
The Fund offers investment advisory clients of Reinhardt Werba Bowen
Advisory Services, 1190 Saratoga Avenue, Suite 200, San Jose California 95129, a
registered investment adviser, the opportunity to participate in a portfolio of
securities selected and managed to seek to provide investment results that
exceed the performance of publicly traded common stocks in the aggregate, as
represented by the capitalization weighted Standard & Poor's 500 Composite Index
(the "S&P 500 Index"). Normally the Fund seeks to achieve its goal by investing
in a portfolio of stocks that is more "efficient", as that term is used in
modern portfolio theory, than the S&P 500 Index selected common stocks. While
equity securities will comprise most or all of the Fund's portfolio, the Fund
may invest in index futures, American Depositary Receipts (ADRs) to the extent
they are represented in the S&P 500, repurchase agreements, Eurodollar and
Yankee dollar obligations and short-term, high quality debt obligations. The
Fund may also purchase securities on a when-issued basis. There can be no
assurance that the Fund's investment objective will be achieved. (See
"Description of the Fund" and Risk Considerations and Other Investment Practices
and Policies of the Fund" in the Fund's Prospectus.)
WPG's research personnel will monitor and occasionally make changes in
the way the Quantitative Equity Fund's portfolio is constructed or traded. Such
changes may include determining better ways to eliminate issues from
consideration in the matrix, improving the manner in which the matrix is
calculated, altering constraints in the optimization process and effecting
changes in trading procedure (to reduce transaction costs or enhance the effects
of rebalancing). Any such changes are intended to be consistent with the Fund's
basic philosophy of seeking higher returns than those that could be obtained by
investing directly in all of the stocks in the S&P 500 Index.
Futures Transactions
The Fund may enter into futures contracts for the purchase or sale of
futures contracts based on the S&P 500 Index which are traded on exchanges that
are licensed and regulated by the Commodity Futures Trading Commission ("CFTC").
Futures Contracts on Indices. Futures contracts on indices do not
require the physical delivery of securities, but merely provide for profits and
losses resulting from changes in the market value of a contract to be credited
or debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date a final cash
settlement occurs and the futures positions
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are simply closed out. Changes in the market value of a particular futures
contract reflect changes in the value or level of the index on which the futures
contract is based.
Hedging Strategies. Hedging by use of futures contracts seeks to
establish with more certainty than would otherwise be possible the value of or
effective rate of return on portfolio securities or securities that the Fund
proposes to acquire. The Fund may, for example, take a "short" position in the
futures market by selling futures contracts in order to hedge against an
anticipated decline in securities prices or rise in interest rates that would
adversely affect the value of the Fund's portfolio securities. If, in the
opinion of Weiss, Peck & Greer, L.L.C., the Fund's investment adviser (the
"Adviser"), there is a sufficient degree of correlation between price trends for
the Fund's portfolio securities and futures contracts based on the S&P 500
Index, the Fund may enter into such other futures contracts as part of its
hedging strategy. When hedging of this character is successful, any depreciation
in the value of portfolio securities will be substantially offset by
appreciation in the value of the futures position. On other occasions, the Fund
may take a "long" position by purchasing such futures contracts. This would be
done, for example, when the Fund anticipates the purchase of particular
securities when it has the necessary cash, but expects the price or rate of
return then available in the securities market to be less favorable than prices
or rates that are currently available in the futures markets.
Limitations and Risks of Futures Transactions. The Fund may engage in
futures transactions for hedging purposes in accordance with CFTC regulations or
to seek to increase total return to the extent permitted by such regulations. In
utilizing futures for hedging the Fund will determine that the price
fluctuations in the futures contracts used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or
which it expects to purchase. Except as stated below, the Fund's futures
transactions will be entered into for traditional hedging purposes--that is,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
In instances involving the purchase of futures contracts by the Fund, an amount
of cash and cash equivalents, equal to the market value of the futures contracts
and options (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian to collateralize the position,
thereby insuring that the use of such futures contracts and options is
unleveraged. As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures position (purchases
futures contracts) the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities in the securities market at
the time when the futures position is closed out. However, in particular cases
when it is economically advantageous for the Fund to do so, a long futures
position may be terminated without the corresponding purchase of securities. As
an alternative to compliance with the bona fide hedging definition, a CFTC
regulation permits the Fund to elect to comply with a different test, under
which the sum of the amounts of initial margin deposits on the Fund's existing
futures contracts and premiums paid for options on futures entered into for the
purpose of seeking to increase total return (net of the amount the positions
were "in the money" at the time of purchase) would not exceed 5% of the market
value of the Fund's net assets, after taking into account unrealized gains and
losses on such positions.
The Fund will incur brokerage fees in connection with its futures
transactions, and it will be required to deposit and maintain funds with its
brokers as margin to guarantee performance of its futures obligations. In
addition, while futures contracts may be traded to reduce certain risks, futures
trading itself entails certain other risks. Thus, while the Fund may benefit
from the use of such contracts, unanticipated changes in stock market prices or
in interest rates may result in a poorer overall
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performance for the Fund than if it had not entered into any futures contracts.
Moreover, in the event of an imperfect correlation between the futures contract
and the portfolio position which is intended to be protected, the desired
protection may not be obtained and the Fund may be exposed to risk of loss.
To compensate for the imperfect correlation of movements in the price
of securities being hedged and movements in the price of futures contracts, the
Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of the securities being hedged if the historical volatility of the
prices of such securities has been greater than the historical volatility of the
futures contracts. Conversely, the Fund may buy or sell fewer futures contracts
if the historical volatility of the price of the securities being hedged is less
than the historical volatility of the futures contracts.
Repurchase Agreements
The Fund may enter into repurchase agreements in order to generate
additional current income. A repurchase agreement is an agreement under which
the Fund acquires a money market instrument, generally a United States
Government obligation, from a financial institution subject to resale to the
financial institution at an agreed upon price and date. Such resale price
reflects an agreed upon interest rate effective for the period of time the
instrument is held by the Fund. The repurchase price may be higher than the
purchase price, the difference being income to the Fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Fund together with the repurchase price on repurchase. In either case, the
income to the Fund is unrelated to the interest rate on the instrument.
Repurchase agreements usually are for short periods, such as one week or less,
but may be for longer periods. Repurchase agreements of more than one week's
duration are subject to the Fund's limitation on investments in illiquid
securities.
The use of repurchase agreements involves certain risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore subject to sale by the trustee in bankruptcy. Finally,
it is possible that the Fund may not be able to perfect its interest in the
underlying security and may be deemed an unsecured creditor of the other party
to the agreement. While the Fund's management acknowledges these risks, it is
expected that they can be controlled through careful monitoring procedures.
Other Investment Companies
The Fund may, subject to authorization by its Board of Trustees, invest
all of its investable assets in the securities of a single open-end investment
company (a "Portfolio"). If authorized by the Board, the Fund would seek to
achieve its investment objective by investing in a Portfolio, which Portfolio
would invest in a portfolio of securities that complies with the Fund's
investment objective, policies and restrictions. The Board does not intend to
authorize investing in this manner at this time.
The Fund may invest up to 10% of its total assets in the securities of
other investment companies not affiliated with WPG. For example, the Fund may
invest in Standard & Poor's Depositary Receipts (commonly referred to as
"Spiders"), which are exchange-traded shares of a closed-end investment
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company that are designed to replicate the price performance and dividend yield
of the Standard & Poor's 500 Composite Stock Price Index. The Fund will
indirectly bear its proportionate share of any management fees and other
expenses paid by investment companies in which it invests in addition to the
advisory and administration fees paid by the Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, which may
not be changed without approval of the holders of a majority of its outstanding
shares (a term which in this Statement of Additional Information means the
lesser of (i) 67% or more of the shares present at a meeting if the holders of
more than 50% of the outstanding shares of the Fund are present or represented
by proxy or (ii) more than 50% of the outstanding shares of the Fund). So long
as these fundamental restrictions are in effect, the Fund may not:
1. Purchase or sell real estate including securities of real estate
limited partnerships, but the Fund may invest in securities of companies engaged
in the real estate business.
2. Issue senior securities except as permitted by the Investment
Company Act of 1940, as amended, and except that the Fund may issue shares of
its beneficial interest in multiple classes or series, or borrow amounts in
excess of 33% of its total assets (including the amount borrowed) and then only
as a temporary measure for extraordinary or emergency purposes.
3. Make loans, except that this restriction shall not prohibit the
making of securities loans, the purchase of or investment in bank certificates
of deposits or bankers acceptances, the purchase and holding of all or a portion
of an issue of publicly distributed debt securities, or the entry into
repurchase agreements.
4. Engage in the business of underwriting securities of others, except
to the extent that the Fund may be deemed to be an underwriter under the
Securities Act of 1933, as amended, when it purchases or sells portfolio
securities in accordance with its investment objective and policies; provided,
however, that the Fund may invest all or part of its investable assets in an
open-end investment company with substantially the same investment objective,
policies, and restrictions as the Fund.
5. Purchase securities, excluding U.S. Government securities, of one or
more issuers conducting their principal business activity in the same industry,
if immediately after such purchase the value of its investments in such industry
would exceed 25% of its total assets; provided, however, that the Fund may
invest all or part of its investable assets in an open-end investment company
with substantially the same investment objective, policies, and restrictions as
the Fund.
6. Invest in commodities or in commodities contracts except that the
Fund may purchase and sell financial futures contracts on the S&P 500 and
related options, and the Fund may purchase securities on a when-issued, stand-by
or forward commitment basis.
7. With respect to 75% of its total assets, purchase any security, if
as a result: (i) more than 5% of its total assets would be invested in
securities of any one issuer (excluding securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities), or (ii) the Fund would own
more
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than 10% of the voting securities of any issuer; provided, however, that the
Fund may invest all or part of its investable assets in an open-end investment
company with substantially the same investment objective, policies, and
restrictions as the Fund.
In addition to the fundamental policies mentioned above, the Board has
adopted the following non-fundamental policies which may be changed or amended
by action of the Board without approval of shareholders. So long as these
non-fundamental restrictions are in effect, the Fund may not:
(a) Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to protect
or enhance the value of an existing investment.
(b) Purchase securities of any other investment company except as
permitted by the Investment Company Act.
(c) Purchase securities on margin, except any short-term credits which
may be necessary for the clearance of transactions and the initial or
maintenance margin in connection with options and futures contracts and related
options.
(d) Invest more than 15% of its net assets in securities which are
illiquid.
(e) Purchase additional securities if the Fund's borrowings exceed 5%
of its net assets.
The Fund has no current intention of investing in the current fiscal
year in securities which the Fund is restricted from selling to the public
without registration under the Securities Act of 1933, as amended.
All percentage limitations (except for limitations on borrowing) apply
only at the time a transaction is entered into. Accordingly, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in the percentage which results from a relative change in values or
from a change in the Fund's net assets will not be treated as a violation.
INVESTMENT ADVISER AND ADMINISTRATOR
(See "Investment Adviser and Administrator" and "Portfolio Brokerage"
in the Prospectus.)
Investment Adviser
The Fund's investment adviser is Weiss, Peck & Greer, L.L.C. (the
"Adviser"). The Adviser serves as investment adviser to the Fund pursuant to an
investment advisory agreement dated May 19, 1993 (the "Agreement"), which was
initially approved by the Board of Trustees of the Fund and by WPG, as the
Fund's sole shareholder, on April 29, 1993. On April 24, 1996 the Board of
Trustees approved an amendment to and the continuation of the Agreement until
April 30, 1997. The amendment permanently reduced the advisory fee payable to
the Adviser under the Agreement.
Pursuant to the Agreement, the Adviser supervises and assists in the
management of the assets of the Fund and furnishes the Fund with research,
statistical, advisory and managerial services. The
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Adviser also pays the compensation of all Trustees who are "interested persons"
(as defined in the Investment Company Act) of the Adviser except for Mr. Alan
Werba, who is compensated by Reinhardt Werba Bowen.
The Fund pays administration fees, taxes, brokerage fees and
commissions on portfolio transactions, interest, legal and accounting fees,
organizational expenses of the Fund, fees of custodians and transfer agents,
costs of share certificates, costs in connection with annual or special meetings
of shareholders, including the preparation and distribution of proxy materials,
costs in connection with the preparation and distribution of periodic reports to
shareholders, insurance premiums, expenses of an extraordinary and nonrecurring
nature, the compensation of non-executive employees of the Fund and fees of
Trustees who are not "interested persons" of the Adviser.
For its investment advisory services under the Agreement, the Adviser
is entitled to receive a monthly fee equal on an annual basis to a percentage of
the Fund's average daily net assets as follows: 0.26% up to $500 million, 0.24%
from $500 million to $1 billion, 0.22% from $1 billion to $2 billion, and 0.20%
thereafter. For the fiscal years ended December 31, 1994, 1995 and 1996, the
Fund paid the Adviser advisory fees of $238,045, $436,134 and $545,737,
respectively, after the expense limitation. Had the Advisor not voluntary agreed
to limit its expense limitation, the Fund would have paid the Adviser advisory
fees of $271,941, $457,958 and $547,177, respectively. Prior to April 1, 1996,
the Fund paid an advisory fee equal on an annual basis to a percentage of the
Fund's average daily net assets as follows: 0.31% up to $200 million, 0.26% from
$200 million to $500 million, 0.24% from $500 million to $1 billion, 0.22% from
$1 billion to $2 billion, and 0.20% thereafter.
The advisory fee is accrued daily and will be prorated if the Adviser
shall not have acted as the Fund's investment adviser during any entire monthly
period. The Adviser has agreed to limit total fund operating expenses to certain
levels, as further described under "Expense Information" and "Management of the
Fund" in the Fund's Prospectus.
The Agreement provides that the Adviser will not be liable for any loss
sustained by the Fund by reason of the adoption or implementation of any
investment policy or the purchase, sale or retention of any security, whether or
not such purchase, sale or retention shall have been based upon the
investigation and research of the Adviser, or upon investigation and research
made by any other individual, firm or corporation if such recommendation shall
have been made and such other individual, firm or corporation shall have been
selected with due care and in good faith, except for a loss resulting from
willful misfeasance, bad faith, or gross negligence in the performance by the
Adviser of its duties or by reason of the Adviser's reckless disregard of its
obligations and duties thereunder.
The Agreement may be modified or amended only with the approval of the
holders of a majority of the Fund's outstanding shares and by a vote of the
majority of those Trustees of the Fund who are not parties to the Agreement or
"interested persons" of the Fund or the Adviser. The Agreement's continuance
must be approved annually by a majority vote of the Board or by a vote of the
holders of a majority of the outstanding shares of the Fund, but in either event
it also must be approved by a vote of a majority of those Trustees of the Fund
who are not parties to the Agreement or "interested persons" of the Fund or the
Adviser, cast in person at a meeting called for the purpose of voting on such
approval. The Agreement may be terminated without penalty, by either party upon
60 days' written notice and automatically will terminate in the event of its
assignment.
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Officers and Trustees of the Fund who are also partners in and
employees of the Adviser may receive indirect compensation by reason of
investment advisory fees paid by the Trust to the Adviser. Mr. Werba, who is a
Trustee of the Fund and a shareholder and officer of RWB, may receive indirect
compensation by reason of the shareholder services fee paid by the Fund to RWB.
See "Shareholder Services."
WPG has capital in excess of $66 million. WPG consists of 45
principals, one of whom is a member of the NYSE, and certain associate
principals. WPG has approximately 245 full-time employees in addition to its
principals. WPG together with its wholly-owned subsidiary acts as investment
adviser or manager for approximately $13 billion of institutional and private
investment accounts.
The senior managing principals of the Adviser are Messrs. Stephen H.
Weiss, Philip Greer, Melville Straus and Roger J. Weiss, brother of Stephen H.
Weiss. Francis H. Powers is a principal of the Adviser and Executive Vice
President and Treasurer of the Fund. Jay C. Nadel is a principal of WPG and an
Executive Vice President and Secretary of the Fund. The principals of WPG who
serve on WPG's executive committee are Stephen H. Weiss (Chairman), Roger J.
Weiss, Phillip Greer, Melville Straus, Ronald M. Hoffner, Wesley W. Lang, Jr.,
Mitch Kantor and Gil Cogan.
The person responsible for the day-to-day management of the Fund's
portfolio is Daniel J. Cardell. Messrs. Stephen H. Weiss and Roger J. Weiss may
also participate in the Fund's investment decisions and all of the principals in
WPG consult on a regular basis among themselves about general market conditions,
as well as specific securities and industries.
In addition to the Fund, the Adviser acts as the investment adviser to
each fund in the Weiss, Peck & Greer Group of Funds.
In the management of the Fund and its other accounts, the Adviser and
its subsidiaries allocate investment opportunities to all accounts for which
they are appropriate subject to the availability of cash in any particular
account and the final decision of the individual or individuals in charge of
such accounts. Where market supply is inadequate for a distribution to all such
accounts, securities are allocated on a pro rata basis. In some cases this
procedure may have an adverse effect on the price or volume of the security as
far as the Fund is concerned. However, it is the judgment of the Board that the
desirability of continuing the Fund's advisory arrangements with the Adviser
outweighs any disadvantages that may result from contemporaneous transactions.
See "Portfolio Brokerage."
Administrator
WPG, in its capacity of Administrator, performs administrative,
transfer agency related and shareholder relations services and certain clerical
and accounting services for the Fund under an administration agreement dated May
19, 1993 (the "Administration Agreement"). More specifically, these obligations
pursuant to the Administration Agreement include, subject to the general
supervision of the Board of Trustees of the Fund, (a) providing supervision of
all aspects of the Fund's non-investment operations (the parties giving due
recognition to the fact that certain of such operations are performed by others
pursuant to agreements with the Fund), (b) providing the Fund to the extent not
provided pursuant to such agreements, for the preparation, at the Fund's
expense, of its tax returns, reports to shareholders, periodic updating of the
prospectuses and reports filed with the Commission and
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other regulatory authorities, (c) providing, to the extent not provided pursuant
to other agreements, the Fund with personnel to perform such executive,
administrative, accounting and clerical services as are reasonably necessary to
provide effective administration of the Fund, (d) providing the Fund, to the
extent not provided pursuant to such agreements, with adequate office space and
certain related office equipment and services, (e) maintaining all of the Fund's
records other than those maintained pursuant to such agreements or the Advisory
Agreement, and (f) providing to the Fund, to the extent not provided pursuant to
other agreements, transfer agency-related and shareholder relations services and
facilities and the services of one or more of its employees or officers, or
employees or officers of its affiliates, relating to such functions (including
salaries and benefits, office space and supplies, equipment and training).
For its services under the Administration Agreement, the Administrator
currently does not receive any compensation, although the Board of Trustees may
in the future decide to compensate WPG for the provisions of administrative
services.
The Fund pays: (i) fees and expenses of any investment adviser or
administrator of the Fund; (ii) organization expenses of the Fund; (iii) fees
and expenses incurred by the Fund in connection with membership in investment
company organizations; (iv) brokers' commissions; (v) payment for portfolio
pricing services to a pricing agent, if any, (vi) legal, accounting or auditing
expenses (including an allocable portion of the cost of its employees rendering
legal services to the Fund); (vii) interest, insurance premiums, taxes or
governmental fees; (viii) the fees and expenses of the transfer agent of the
Fund; (ix) the cost of preparing stock certificates or any other expenses,
including, without limitation, clerical expenses of issue, redemption or
repurchase of shares of the Fund; (x) the expenses of and fees for registering
or qualifying shares of the Fund for sale and of maintaining the registration of
the Fund as a broker or a dealer; (xi) the fees and expenses of Trustees of the
Fund who are not affiliated with the Adviser or RWB; (xii) the cost of preparing
and distributing reports and notices to shareholders, the SEC and other
regulatory authorities; (xiii) the fees or disbursements of custodians of the
Fund's assets, including expenses incurred in the performance of any obligations
enumerated by the Declaration of Trust or By-Laws of the Fund insofar as they
govern agreements with any such custodian; (xiv) costs in connection with annual
or special meetings of shareholders, including proxy material preparation
printing and mailing; and (xv) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business.
The Fund's Advisory and Administration Agreements each provide that
WPG, in its capacities as investment adviser and administrator, may render
similar services to others so long as the services provided thereunder are not
impaired thereby.
In an attempt to avoid any potential conflict with portfolio
transactions for the Fund, the Adviser and the Fund have adopted extensive
restrictions on personal securities trading by personnel of the Adviser and its
affiliates. These restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings of
securities. These restrictions are a continuation of the basic principle that
the interests of the Fund and its shareholders come before those of the Adviser
and its principals and employees.
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TRUSTEES AND OFFICERS
The Board has responsibility for management of the business of the
Trust. The executive officers of the Trust are responsible for its day to day
operation. The Trustees and officers of the Trust are as follows:
Name and Address/Title/
Date of Birth Principal Occupations During Past Five Years
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Roger J. Weiss* Senior Managing Principal, Weiss, Peck &
One New York Plaza Greer, L.L.C.
New York, NY 10004 Chairman of the Board of all WPG Funds and
Tomorrow Funds Retirement Trust
President, Weiss, Peck & Greer International
Fund
Chairman of the Board Former Executive Vice President and Director,
and Trustee WPG Advisers, Inc.
Former Executive Vice President and Director,
4/29/39 Tudor Management Company
Raymond R. Herrmann, Jr.** Chairman of the Board, Sunbelt Beverage
654 Madison Avenue Corporation (distributor of wines and
Suite 1400 liquors)
New York, NY 10017 Former Vice Chairman and Director, McKesson
Corporation (U.S. distributor of
Trustee drugs and health care products, wine and
spirits)
9/11/20 Life Member, Board of Overseers of Cornell
Medical College
Member of Board and Executive Committee, Sky
Ranch for Boys
Member, Evaluation Advisory Board,
Biotechnology Investments, Ltd.
Trustee of all WPG Funds and Tomorrow Funds
Retirement Trust
Lawrence J. Israel** Private Investor
200 Broadway, Suite 249 Director and Trustee of the Touro Infirmary
New Orleans, LA 70118 Member of the Intercollegiate Athletics
Committee of the Administrators of the
Trustee Tulane Educational Fund
12/13/34 Trustee of all WPG Funds and Tomorrow Funds
Retirement Trust
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Graham E. Jones** Financial Manager, Practice Management
23 Chestnut Street Systems
Boston, MA 02108 (Medical Services Company)
Director, the Malaysia Fund
Trustee Director, the Thai Fund
Member of the Advisory Council, The Thailand
1/31/33 Fund
Director, the Turkish Investment Fund
Trustee, various investment companies managed
by Morgan Grenfell Capital Management,
Inc., since 1993
Director, the Pakistan Fund
Trustee of all WPG Funds
Paul Meek** Financial and Economic Consultant to foreign
5837 Cove Landing Road central banks under the auspices of each
Burke, VA 22015 of the Harvard Institute for
International Development, the
Trustee International Monetary Fund and the
World Bank
11/12/25 President, PM Consulting (financial and
economic consulting)
Former Consultant, Fischer, Francis,
Trees & Watts ("FFTW") (fixed
income investment manager
Trustee, FFTW Fund
Former Vice President and Monetary Adviser,
Federal Reserve Bank of New York
Trustee of all WPG Funds
William B. Ross** Financial Consultant
2733 E. Newton Avenue Former Senior Vice President, Mortgage
Shorewood, WI 53211 Guaranty Insurance Corporation (mortgage
credit insurer)
Trustee Former Senior Vice President, MGIC Investment
Corporation (financial services holding
8/22/27 company)
Trustee of all WPG Funds
Harvey E. Sampson** Chief Executive Officer and Chairman of Harvey
600 Secaucus Road Group, Inc. (retail sales of consumer
Secaucus, NJ 07094 electronics)
Trustee, Cornell University
Trustee Joint Board of The New York Hospital -
Cornell Medical Center
3/29/29 Trustee, North Shore University Hospital
Trustee of all WPG Funds and Tomorrow
Funds Retirement Trust
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Robert A. Straniere** Member, New York State Assembly
182 Rose Avenue Sole Partner, Straniere Law Firm
Staten Island, NY 10306 Director, various Reich and Tang Funds
Trustee of all WPG Funds
Trustee
3/28/41
Alan Werba* Director, Reinhardt Werba
1190 Saratoga Avenue Bowen Advisory Services (investment
Suite 200 adviser)
San Jose, CA 95129 Registered Principal, Royal Alliance Inc.
(broker-dealer) 1991-1993
Trustee Registered Principal, Integrated Resources
Equity Corporation (broker-dealer)
1988-1991
6/5/49
Francis H. Powers* Principal, Weiss, Peck & Greer, L.L.C.
One New York Plaza Former Vice President and Secretary, Weiss,
New York, NY 10004 Peck & Greer Advisers, Inc.
Executive Vice President and Treasurer of all
Executive Vice President WPG Funds and Tomorrow Funds
and Treasurer Retirement Trust
Former Vice President and Secretary, Tudor
Management Company
7/6/40
Jay C. Nadel* Principal, Weiss, Peck & Greer, L.L.C.
One New York Plaza Director of Operating Departments
New York, NY 10004 Executive Vice President and Secretary of all
WPG Funds and Tomorrow Funds
Retirement Trust
Executive Vice President
and Secretary
7/21/58
Arlen S. Oransky* Vice President, Mutual Fund
One New York Plaza Operations, Weiss, Peck & Greer, L.L.C.
New York, NY 10004 since December, 1991
Assistant Vice President of all
Assistant Vice WPG Funds
President
- 13 -
<PAGE>
Joseph J. Reardon* Senior Vice President, Mutual Fund
One New York Plaza Operations, Weiss, Peck & Greer, L.L.C.
New York, NY 10004 since 1995 (Vice President since
December, 1993)
Vice President Manager, Mutual Fund Operations,
Weiss, Peck & Greer, L.L.C.
from February, 1990 to December, 1993
4/4/60 Vice President of all WPG Funds
and Tomorrow Funds Retirement Trust
Joseph Parascondola* Assistant Manager, Mutual Fund Operations,
One New York Plaza Weiss, Peck & Greer, L.L.C. since 1995
New York, NY 10004 Manager, Mutual Fund Accounting, Concord
Financial Group, November 1991 to
Assistant Vice President November, 1995
Assistant Vice President of all WPG Funds and
6/6/63 Tomorrow Funds Retirement Trust
- -----------------------
* "Interested Person" within the meaning of the Investment Company Act.
** Member of the Audit Committee and the Special Nominating Committee.
Compensation of Trustees and Officers
The Fund pays no compensation to its Trustees affiliated with the
Adviser or RWB, or its officers. None of the Fund's Trustees or officers have
engaged in any financial transactions with the Fund or the Adviser.
The following table sets forth all compensation paid to the Fund's
Trustees as of the Fund's fiscal year ended December 31, 1996:
- 14 -
<PAGE>
<TABLE>
<S> <C> <C> <C>
Pension or Total
Aggregate Retirement Benefits Compensation
Compensation Accrued as Part of from Fund and
Name of Trustee from the Fund Fund's Expenses Other Funds in Complex*
- ---------------- ------------- ---------------- -----------------------
Roger J. Weiss $0 $0 $0
Alan Werba 0 0 0
Raymond R. Herrmann, Jr. 500 0 34,125
Thomas J. Hilliard, Jr. ** 500 0 24,125
Lawrence J. Israel 500 0 34,125
Graham E. Jones 500 0 24,125
Paul Meek 500 0 19,625
William B. Ross 500 0 24,125
Harvey E. Sampson 500 0 34,125
Robert A. Straniere 500 0 24,125
- -----------------------
<FN>
* As of the date of this SAI, there were 15 mutual funds in the fund
complex.
** Mr. Hilliard retired as a Trustee of the Fund in October 1996.
</FN>
</TABLE>
Certain Shareholders
As of March 31, 1997, no person within the knowledge of management of
the Fund or RWB directly or indirectly owned, controlled or had the power to
vote more than 5% of the outstanding shares of the Fund. As of such date, the
officers and Trustees of the Fund as a group owned, directly or indirectly, less
than 1% of the shares of the Fund. As of March 31, 1997, RWB held an aggregate
of 99% of the shares of the Fund in accounts of clients with respect to which
RWB exercises investment discretion and has the power to vote. RWB disclaims
beneficial ownership of all of such shares.
HOW TO PURCHASE SHARES
Shares of the Fund may be purchased only by clients of RWB.
Clients of RWB who are participants in RWB's Strategic Asset Money
Management program pay to RWB an annual asset allocation fee at the rate of 2%
(or less on larger accounts) of the average monthly net assets under management
in the program, including assets invested in the Fund. Financial institutions
utilized by RWB clients also charge certain service and transaction fees for
serving as record holders of shares of the Fund and other investments selected
by RWB for its clients. These fees, no part of which is received by the Fund or
the Adviser, are paid by RWB clients in addition to the expenses of the Fund.
The Strategic Asset Money Management program or "SAMM" program currently
consists of a number of asset classes. One such asset class is U.S. "blue chip"
stocks (the "Large Cap U.S. Stocks class"). The RWB/WPG U.S. Large Stock Fund is
one of two mutual funds utilized by RWB to represent the Large Cap U.S. Stocks
class.
For additional information regarding purchases of shares of the Fund,
see "How to Purchase Shares" in the Fund's Prospectus.
- 15 -
<PAGE>
REDEMPTION OF FUND SHARES
The Fund will redeem shares at the net asset value of such shares next
determined after receipt of the redemption order by the applicable financial
institution, provided that such order is transmitted to the Fund by its close of
business. The redemption price, which may be more or less than the price paid by
the shareholder for his shares, is the net asset value per share next determined
after a written request for redemption in proper form is received by the
applicable financial institution or the Fund. Redemptions are taxable
transactions which may result in a gain or loss for Federal, state and local
income tax purposes.
The redemption price may be paid in cash or portfolio securities, at
the Fund's discretion. The Fund has, however, elected to be governed by Rule
18f-1 under the Investment Company Act pursuant to which the Fund is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund during any 90-day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, the Fund will have the
option of redeeming the excess in cash or portfolio securities. In the latter
case, the securities are taken at their value employed in determining the
redemption price and the shareholder may incur a brokerage charge when the
shareholder sells the securities he receives. The selection of such securities
will be made in such manner as the Board deems fair and reasonable.
Payment for redeemed shares normally will be made after receipt from
the applicable financial institution of a written request for redemption in
proper form within the time periods described in the Prospectus. Such payment
may be postponed, and the right of redemption suspended during any period when:
(a) trading on the NYSE is restricted as determined by the applicable rules and
regulations of the SEC or the NYSE is closed for other than weekends and
holidays; (b) the SEC has, by order, permitted such suspension; or (c) an
emergency, as defined by rules and regulations of the SEC exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.
For additional information concerning Redemptions, see "How to Redeem
Shares" in the Fund's Prospectus.
SHAREHOLDER SERVICES
RWB provides account servicing functions for the Fund. These services
include but are not limited to: establishing and maintaining a toll-free
telephone number for investors to use in obtaining current account information;
providing to investors quarterly reports with respect to the Fund's performance,
and providing to investors upon request information concerning the operation of
the Fund and their investment in the Fund. In consideration of these services,
the Fund pays to RWB a fee equal, on an annual basis, to 0.14% of the Fund's
average daily net assets. For the year ended December 31, 1996, the fee was paid
in the amount of $309,492. See "How to Purchase Shares" in the Fund's
Prospectus. Mr. Alan Werba, a Trustee of the Fund, is a shareholder and Director
of RWB.
- 16 -
<PAGE>
NET ASSET VALUE
The net asset value of a share of the Fund is determined once daily,
Monday through Friday on each day the NYSE is open for regular trading (other
than a day during which no shares of the Fund were tendered for redemption and
no order to purchase or sell shares of the Fund was received by the Fund) in
which there is a sufficient degree of trading in the Fund's portfolio securities
to affect materially the Fund's net assets as of the close of regular trading on
the NYSE (normally 4:00 P.M., New York City time). The New York Stock Exchange
is normally closed on the following national holidays: New Year's Day,
Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value is determined by dividing
the value of the Fund's securities, cash and other assets (including dividends
accrued but not collected) less all its liabilities (including options and
accrued expenses but excluding capital and surplus), by the total number of
shares outstanding, the result being rounded to the nearest cent. In making such
determination, securities listed or admitted to trading on a national securities
exchange, are valued at their last sale on such exchange prior to the time of
determining net asset value; or if no sales are reported on such exchange on
that day, at the mean between the most recent bid and asked price. Unlisted
securities are valued at the mean between the most recent bid and asked prices.
Other securities and assets for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
Valuation Committee as authorized by the Board.
The public offering price of the Fund's shares is the net asset value
per share next determined after receipt of an order.
Orders for shares which have been received by the applicable financial
institution prior to the close of trading of the NYSE are confirmed at the
offering price effective at the close of the NYSE on that day provided that the
order is transmitted to the Fund by its close of business, while orders received
subsequent to the close of trading of the NYSE or transmitted to the Fund after
its close of business will be confirmed at the offering price effective at the
close of the NYSE on the next day on which the net asset value is calculated.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The Fund will be subject to a 4% nondeductible federal excise tax on
amounts required to be but not distributed under a prescribed formula. The
formula requires that the Fund distribute (or be deemed to have distributed) to
shareholders during a calendar year at least 98% of the Fund's ordinary income
for the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 during such
year, as well as any income or gain (as so computed) from the prior calendar
year that was not distributed for such year and on which the Fund paid no
federal income tax.
A portion of the Fund's dividends may qualify for the 70%
dividends-received deduction for corporate shareholders. The portion of such
dividends which qualifies for such deduction is the portion, properly designated
by the Fund, which is derived from dividends of U.S. domestic corporations with
respect to shares held by the Fund that are not debt-financed and have been held
at least a minimum period, generally 46 days. For this purpose, the Fund's
holding periods for such shares may be reduced below the required minimum by
certain futures contracts or other positions that diminish its risk of loss with
respect to such shares. The dividends-received deduction for corporations will
be reduced to the
- 17 -
<PAGE>
extent the shares of the Fund with respect to which the dividends are received
are treated as debt-financed under Federal income tax law and will be eliminated
if such shares are deemed to have been held for less than the minimum period
referred to above. Shareholders will be informed of the percentages of dividends
which may qualify for the dividends-received deduction. Section 1059 of the Code
provides for a reduction in a stock's basis for the untaxed portion (i.e., the
portion qualifying for the dividends-received deduction) of an extraordinary
dividend" if the stock has not been held at least two years prior to the
extraordinary dividend. Extraordinary dividends are dividends paid during a
prescribed period which equal or exceed 10 percent (5 percent for preferred
stock) of the recipient corporation's adjusted basis in the stock of the payor
or which meet an alternative fair market value test. To the extent that dividend
payments by the Fund to its corporate shareholders constitute extraordinary
dividends, such shareholders' basis in their Fund shares will be reduced, and
gain recognized upon the redemption of such shares will be correspondingly
increased or loss recognized will be reduced.
Net investment income is the Fund's investment income less its
expenses. Dividends from net investment income and the excess of net short-term
capital gain over net long-term capital loss will be taxed to shareholders as
ordinary income and dividends from net long-term capital gain in excess of net
short-term capital loss ("capital gain dividends") will be taxed to shareholders
as long-term capital gain, for Federal income tax purposes. Net realized capital
gains for a taxable year are computed by taking into account any capital loss
carryforward of the Fund. Disclose amount(s) and expiration date(s) of any
capital loss carryforwards. Long-term capital gains of the Fund are taxable to
shareholders as long-term capital gains if they are either distributed in the
form of capital gain dividends or retained by the Fund and designated for
treatment as capital gains distributed to the shareholders. Capital gain
dividends are not eligible for the dividends-received deduction. If any net
realized long-term capital gain in excess of net realized short-term capital
loss are retained by the Fund for reinvestment, requiring federal income taxes
to be paid thereon by the Fund, the Fund will elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains, will be able to claim his
share of federal income taxes paid by the Fund on such gains as a credit against
his own federal income tax liability, and will be entitled to increase the
adjusted tax basis on his Fund shares by the difference between his pro rata
share of such gains and his tax credit.
A regulated investment company qualifying under Subchapter M of the
Code is not subject to Federal income tax on distributed amounts to the extent
that it distributes at least annually its net investment income and net realized
capital gains in accordance with the timing requirements of the Code. The Fund
intends to qualify and be treated as a regulated investment company for each
taxable year. Qualification for treatment as a regulated investment company
under the Code requires, among other things, that (a) at least 90% of the Fund's
annual gross income, without offset for losses from the sale or other
disposition of stock or securities be derived from interest, payments with
respect to securities loans, dividends and gains from the sale or other
disposition of stock or securities or foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) the Fund derive less than 30% of its annual gross income from
gains (without deduction for losses) from the sale or other disposition of any
of the following which was held (for tax purposes) for less than three months:
(i) stock or securities, (ii) options, futures or forward contracts (not on
foreign currencies) or (iii) foreign currencies (or options, futures or forward
contracts on foreign currencies) not directly related to the Fund's principal
business of investing in stock or securities and related options or futures; (c)
the Fund distribute at least annually to its shareholders as dividends at least
90% of its net investment income, certain net realized foreign currency gains
and the excess of net short-term capital gain over net
- 18 -
<PAGE>
long-term capital loss earned in each year and any other net income (except for
the excess, if any, of net long-term capital gain over net short-term capital
loss, which need not be distributed in order for the Fund to qualify as a
regulated investment company but is taxed to the Fund if it is not distributed);
and (d) the Fund diversify its assets so that, at the close of each quarter of
its taxable year, (i) at least 50% of the fair market value of its total (gross)
assets is comprised of cash, cash items, U.S. Government securities, securities
of other regulated investment companies and other securities, with such other
securities limited in respect of any one issuer to no more than 5% of the fair
market value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer and (ii) no more than 25% of the fair market value of
its total assets is invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged in the
same, similar, or related trades or businesses.
The excess, if any, of a corporation's "adjusted current earnings" over
its alternative minimum taxable income includes the amount of dividends, if any,
excluded from income by virtue of the 70% dividends-received deduction which may
increase its alternative minimum tax liability.
Dividends, including capital gain dividends, paid shortly after a
shareholder's purchase of shares have the effect of reducing the net asset value
per share of his shares by the amount per share of the dividend distribution.
Although such dividends are, in effect, a partial return of the purchase price
to the shareholder, they will be subject to Federal income tax as described
above. Therefore, prior to purchasing shares an investor should consider the
impact of an anticipated dividend distribution.
Distributions from the Fund's current or accumulated earnings and
profits ("E&P"), as computed for Federal income tax purposes, will be taxable as
described above whether taken in shares or in cash. Distributions, if any, in
excess of E&P will constitute a return of capital, which will first reduce an
investor's tax basis in Fund shares and thereafter (after such basis is reduced
to zero) will generally give rise to capital gains. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for Federal income tax purposes in the shares so received equal to the amount of
cash they would have received if they had elected to receive cash.
All futures contracts entered into by the Fund will be governed by
Section 1256 of the Code. Absent a tax election to the contrary, gain or loss
attributable to the delivery under or closing out of any such position will be
treated as 60% long-term and 40% short-term capital gain or loss, and on the
last trading day of the Fund's taxable year, all outstanding Section 1256
positions will be marked to market (i.e. treated as if such positions were
closed out at their closing price on that day), with any resulting gain or loss
recognized as 60% long-term and 40% short-term capital gain or loss. Under
certain circumstances, the tax straddle rules applicable to offsetting positions
in personal property may cause an adjustment in the holding period of the
underlying security or a substantially identical security in the Fund's
portfolio, or, in conjunction with rules of Section 1256, otherwise affect the
character or timing of the Fund's income, gain or loss and hence of its
distributions to shareholders.
Because futures activities of the Fund may increase the amount of gains
from the sale of investments (including futures contracts) held for less than
three months, the Fund may have to limit its futures transactions in order to
comply with the 30% limitation described above.
- 19 -
<PAGE>
All or a portion of the loss realized upon the redemption or other
disposition of shares may be disallowed under "wash sale" rules to the extent
shares of the same Fund are purchased (including shares acquired by means of
reinvested dividends) within a 61-day period beginning 30 days before and ending
30 days after such redemption. Any loss realized upon the sale, redemption or
other disposition of shares with a tax holding period of six months or less will
be treated as a long-term capital loss to the extent of any distribution of
long-term capital gains with respect to such shares. Exchanges are treated as
redemptions for Federal tax purposes. Different tax treatment, including a
penalty on certain distributions, excess contributions or other transactions, is
accorded to accounts maintained as IRAs or other retirement plans. Investors
should consult their tax advisers for more information.
The Fund is organized as a Delaware Business Trust and is not liable
for any corporate or franchise tax in the State of Delaware nor is it liable for
any Delaware income taxes, provided that it qualifies as a regulated investment
company for federal income tax purposes. If it so qualifies and distributes all
of its investment company taxable income and net capital gain, the Fund will
also not be required to pay the New York State franchise tax and the New York
City general corporation tax, except for the small minimum tax component of such
taxes.
The foregoing discussion of U.S. federal income tax relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. domestic corporations, partnerships, trusts and estates subject to tax
under such law. The discussion does not address special tax rules applicable to
certain classes of investors such as tax-exempt entities, banks and insurance
companies. Each shareholder who is not a U.S. person should consider the U.S.
and foreign tax consequences of ownership of shares of the Fund, including the
possibility that such a shareholder may be subject to a U.S. withholding tax at
a rate of 30% (or at a lower rate under an applicable income tax treaty) on Fund
distributions treated as ordinary dividends.
Investors should consult their own tax advisers with respect to the
application of the provisions of tax law described in this statement of
additional information and about the possible application of state, local or
foreign taxation in light of their particular tax situations.
PORTFOLIO BROKERAGE
It is the general policy of the Fund not to employ any broker in the
purchase or sale of securities for the Fund's portfolio unless the Fund believes
that such broker will obtain the best results for the Fund, taking into
consideration such relevant factors as price, the ability of the broker to
effect the transaction and the broker's facilities, reliability and financial
responsibility. Commission rates, being a component of price, are considered
together with such factors. Subject to the foregoing, where transactions are
effected on securities exchanges, the Fund employs the Adviser as principal
broker. Where transactions are effected in the over-the-counter market or a
third market, the Fund deals with the primary market makers unless a more
favorable result is obtainable elsewhere.
The commission rate on all exchange orders is subject to negotiation.
Section 17(e) of the Investment Company Act limits to "the usual and customary
broker's commission" the amount which can be paid by the Fund to an affiliated
person, such as the Adviser, acting as broker in connection with transactions
effected on a securities exchange. Rule 17e-1 under the Investment Company Act
stipulates that a commission, fee or other remuneration does not exceed the
usual and customary broker's commission if it is "reasonable and fair compared
to the commission, fee or other remuneration received
- 20 -
<PAGE>
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time. . . ." Rule 17e-1 also requires the Board, including a majority
of the Trustees who are not "interested persons" of the Fund or the Adviser, to
adopt procedures reasonably designed to provide that the commission paid is
consistent with the above standard, review those procedures at least annually to
determine that they continue to be appropriate and determine at least quarterly
that transactions have been effected in compliance with those procedures. The
Board of Trustees of the Fund, including a majority of the Trustees who are not
"interested persons" of the Fund, the Adviser or RWB, have adopted procedures
designed to comply with the requirements of Rule 17e-1.
The Adviser acts as broker for the Fund on exchange transactions,
subject, however, to the general policy of the Fund set forth above and the
procedures adopted by the Board. Commissions paid to WPG must be at least as
favorable as those believed to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange. A transaction is not placed with WPG
if the Fund would have to pay a commission rate less favorable than the
Adviser's contemporaneous charges for comparable transactions for its other most
favored, but unaffiliated, customers except for accounts for which the Adviser
acts as a clearing broker for another brokerage firm, and any customers of the
Adviser determined by a majority of the Trustees who are not "interested
persons" of the Fund, the Adviser and RWB not to be comparable to the Fund. With
regard to comparable customers, in isolated situations, subject to the approval
of a majority of the Trustees who are not "interested persons" of the Fund, the
Adviser and RWB, exceptions may be made. Since the Adviser has, as investment
adviser to the Fund, the obligation to provide management, which includes
elements of research and related skills, such research and related skills will
not be used by the Adviser as a basis for negotiating commissions at a rate
higher than that determined in accordance with the above criteria. When
appropriate, orders for the account are combined with orders for the account of
other funds in order to obtain a more favorable commission rate. When the same
security is purchased for two or more funds on the same day, each fund pays the
average price and commissions paid are allocated in direct proportion to the
number of shares purchased.
In selecting brokers other than the Adviser to effect transactions on
securities exchanges, the Fund considers the factors set forth in the first
paragraph under this heading and any investment products or services provided by
such brokers, subject to the criteria of Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Section 28(e) specifies
that a person with investment discretion shall not be "deemed to have acted
unlawfully or to have breached his fiduciary duty" solely because such person
has caused the account to pay a higher commission than the lowest rate
available. To obtain the benefit of Section 28(e), the person so exercising
investment discretion must make a good faith determination that the commissions
paid are "reasonable in relation to the value of the brokerage and research
services provided viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion." Accordingly, if the Adviser determines in good faith
that the amount of commissions charged by a broker is reasonable in relation to
the value of the brokerage and research services provided by such broker, it may
cause the Fund to pay commissions to such broker in an amount greater than the
amount another firm might charge.
Research products and services provided to the Fund include research
reports on particular industries and companies, economic surveys and analyses,
recommendations as to specific securities and other products or services (e.g.,
quotation equipment and computer related costs and expenses) providing
- 21 -
<PAGE>
lawful and appropriate assistance to the Adviser in the performance of
their decision-making responsibilities.
Each year, the Adviser considers the amount and nature of the research
products and services provided by other brokers as well as the extent to which
such products and services are relied upon, and attempts to allocate a portion
of the brokerage business of its clients, such as the Fund, on the basis of that
consideration. In addition, brokers sometimes suggest a level of business they
would like to receive in return for the various services they provide. Actual
brokerage business received by any broker may be less than the suggested
allocations, but can (and often does) exceed the suggestions, because total
brokerage is allocated on the basis of all the considerations described above.
In no instance is a broker excluded from receiving business because it has not
been identified as providing research products and services, although the Fund
may not be willing to pay the same commission to such a broker as the Fund would
have paid had the broker provided research products and services. As permitted
by Section 28(e), the investment information received from other brokers may be
used by the Adviser (and its subsidiaries) in servicing all its accounts and not
all such information may be used by the Adviser in connection with the Fund.
Nonetheless, the Fund believes that such investment information provides the
Fund with benefits by supplementing the research otherwise available to the
Fund.
As set forth above, the Fund employs the Adviser, a member firm of the
NYSE, as its principal broker on exchange transactions. Section 11(a) of the
Exchange Act provides that a member firm of a national securities exchange (such
as the Adviser) may not effect transactions on such exchange for the account of
an investment company (such as the Fund) of which the member firm or its
affiliate (such as the Adviser) is the investment adviser unless certain
conditions are met. These conditions require that the investment company
authorize the practice and that the investment company receive from the member
firm at least annually a statement of all commissions paid in connection with
such transactions. The Adviser's transactions on behalf of the Fund are effected
in compliance with these conditions.
In certain instances there may be securities which are suitable for
the Fund's portfolio as well as for that of one or more of the other clients of
the Adviser. Investment decisions for the Fund and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security in a particular transaction as far
as the Fund is concerned. The Fund believes that over time its ability to
participate in volume transactions will produce better executions for the Fund.
The Adviser furnishes to the Fund at least quarterly a statement
setting forth the total amount of all compensation retained by the Adviser or
any associated person of the Adviser in connection with effecting transactions
for the account of the Fund, and the Board reviews and approves all the Fund's
portfolio transactions and the compensation received by WPG in connection
therewith.
- 22 -
<PAGE>
The Adviser does not knowingly participate in commissions paid by the
Fund to other brokers or dealers and does not seek or knowingly receive any
reciprocal business as the result of the payment of such commissions. In the
event WPG at any time learns that it has knowingly received reciprocal business,
it will so inform the Board.
The Fund paid total brokerage commissions on purchases and sales of
portfolio securities for the years ended December 31, 1994, 1995 and 1996, in
the amounts of $89,870, $73,588 and $171,866, respectively, of which $89,442,
$73,588 and $171,866, respectively, was received by WPG. To the extent that the
Adviser receives brokerage commissions on Fund portfolio transactions, officers
and Trustees of the Fund who are also principals in WPG may receive indirect
compensation from the Fund through their participation in such brokerage
commissions.
Subject to the supervision of the Board, all investment decisions of
the Fund are made by the Adviser, which places orders for all purchases and
sales of portfolio securities through the Adviser trading department.
PORTFOLIO TURNOVER
The portfolio turnover rates of the Fund for the fiscal years ended
December 31, 1994, 1995 and 1996 were 36%, 27.1% and 59.6%, respectively. The
annual portfolio turnover rate is calculated by dividing the lesser of the cost
of purchases or proceeds from sales of portfolio securities for the year by the
monthly average of the value of the portfolio securities owned by the Fund
during the year. Such monthly average is calculated by totaling the values of
the portfolio securities as of the beginning and end of the first month of the
year and as of the end of the succeeding 11 months and dividing the sum by 13.
U.S. Government securities and all other securities the maturities of which at
the time of their acquisitions were one year or less are excluded from the
calculation of the annual portfolio turnover rate. A turnover rate of 100% would
occur if all of the Fund's portfolio securities were replaced in a period of one
year. Increased portfolio turnover results in increased brokerage costs which
the Fund must pay.
To the extent that its portfolio is traded for the short-term, the Fund
will be engaged essentially in trading operations based on short-term market
considerations as distinct from long-term investments based upon fundamental
valuation of securities. Because of this policy, portfolio securities may be
sold without regard to the length of time for which they have been held.
Consequently, the annual portfolio turnover rate of the Fund could be higher
than most mutual funds. However, the Fund intends to comply with the limitation
on gains from short-term portfolio turnover contained in Subchapter M of the
Code, as described above in "Dividends, Distributions and Tax Status."
ORGANIZATION
(See "Organization and Capitalization," "How to Purchase Shares," and
"Redemption of Fund Shares" in the Fund's Prospectus.)
The Fund was formed on February 16, 1993 as a "business trust" under
the laws of Delaware. On May 1, 1996, the Fund changed its name from "U.S. Large
Stock Fund" to "RWB/WPG U.S. Large Stock Fund."
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<PAGE>
Under the Declaration of Trust, the Fund is not required to hold annual
meetings to elect Trustees or for other purposes. It is not anticipated that the
Fund will hold shareholders' meetings unless required by law or the Declaration
of Trust. The Trust will be required to hold a meeting to elect Trustees to fill
any existing vacancies on the Board if, at any time, fewer than a majority of
the Trustees have been elected by the shareholders of the Fund. The Board is
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10 percent of the outstanding shares of the Fund. Whenever ten or more
shareholders of record (who have been such for at least six months and who hold
in the aggregate shares having a value of the lesser of $25,000 or 1% of the
Fund's net asset value) apply to the Trustees in writing that they wish
assistance in communicating with other shareholders for the purpose of causing
the Trust to call a meeting of shareholders to consider the removal of Trustees,
the Fund will so assist such shareholders in accordance with Section 16(a) of
the 1940 Act.
The Fund's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect all of the
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees. Shareholders are entitled to one vote for each full share
held, and fractional votes for fractional shares held.
Each share of the Fund is entitled to such dividends and distributions
out of the income earned on the assets of the Fund as are declared in the
discretion of the Board. In the event of the liquidation or dissolution of the
Fund, shareholders of the Fund are entitled to receive their proportional share
of the assets which are available for distribution as the Trustees in their sole
discretion may determine. Shareholders are not entitled to any preemptive or
subscription rights. All shares, when issued, will be fully paid and
non-assessable by the Fund.
Pursuant to the Declaration of Trust, the Board may create additional
funds by establishing additional series of shares in the Fund. The establishment
of additional series would not affect the interests of current shareholders in
the existing Fund. The Board may also divide the shares of the Fund or any
series into classes, which classes shall have such rights, terms and preferences
as the Trustees may establish. As of the date of this Statement of Additional
Information, the Board does not have any plan to establish another series of
shares in the Fund.
Upon the initial purchase of shares, the shareholder agrees to be bound
by the Fund's Declaration of Trust, as amended from time to time.
PERFORMANCE INFORMATION
The Fund will calculate performance on a total return basis, which
combines principal and dividend income changes, for various periods. Principal
changes are based on the difference between the initial offering price and the
closing net asset value per share for the period and assume reinvestments of
dividends. Dividend income is the capital gains and income dividends paid by the
Fund during the period.
Performance will vary from time to time and past results are not
necessarily representative of future results. Performance is a function of
portfolio management and is affected by operating expenses. Performance
information may not provide a basis for comparison with other investments or
other investment companies using a different method of calculating performance.
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<PAGE>
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc., Morningstar, Inc., Standard & Poor's Index of 500 Stocks, the Dow Jones
Industrial Average, the Value Line Composite Index, the NASDAQ OTC Composite
Index, and other industry publications.
The average annual total return of the Fund is determined for a
particular period by calculating the actual dollar amount of the investment
return on a $1,000 investment in the Fund made at the maximum public offering
price (net asset value) at the beginning of the period, and then calculating the
annual compounded rate of return which would produce that amount. Total return
for a period of one year is equal to the actual return of the Fund during that
period. This calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period.
The Fund's results assume the reinvestment of all capital gain
distributions and income dividends.
Performance information for the Fund is set forth below:
<TABLE>
<CAPTION>
PERFORMANCE SUMMARY
<S> <C> <C> <C>
TOTAL RETURN
From 6/8/93 From 6/8/93
(commencement (commencement
For the Year of operations) of operations)
Ended to 12/31/96 to 12/31/96
12/31/96 Cumulative Annualized
RWB/WPG U.S.
Large Stock Fund 19.33% 67.91% 15.64%
</TABLE>
CUSTODIAN
The custodian for the Fund is Boston Safe Deposit and Trust
Company, One Exchange Place, Boston, Massachusetts 02109. In its capacity as
custodian, Boston Safe Deposit and Trust Company performs all accounting
services, holds the assets of the Fund and is responsible for calculating the
daily net asset value per share.
TRANSFER AGENT
First Data Investor Services Group, Inc., acts as Transfer Agent
and Dividend Paying Agent for the Fund.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 345 Park Avenue, New York, NY 10154, serves
as the Fund's independent accountants and in that capacity audits the Fund's
annual financial statements.
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<PAGE>
FINANCIAL STATEMENTS
The Statement of Assets and Liabilities, including the Schedule of
Investments, as of December 31, 1996, the Statement of Operations December 31,
1996, the Statement of Changes in Net Assets for the fiscal years ended December
31, 1995 and 1996, the Notes to Financial Statements, Financial Highlights for
the period from inception of the Fund (June 8, 1993) through December 31, 1996
and the Report of KPMG Peat Marwick LLP, independent auditors, each of which is
included in the Annual Report to Shareholders of the Fund for December 31, 1996,
are hereby attached to and incorporated by reference into this Statement of
Additional Information.
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