WILMINGTON
FUNDS
Premier Money
Market Portfolio
PROSPECTUS
November 1, 1999
<PAGE>
THE WILMINGTON PREMIER MONEY MARKET PORTFOLIO
of WT Mutual Fund
- --------------------------------------------------------------------------------
PROSPECTUS DATED NOVEMBER 1, 1999
This prospectus gives vital information about the Wilmington Premier Money
Market Portfolio, including information on investment policies, risks and fees.
For your own benefit and protection, please read it before you invest, and keep
it on hand for future reference.
Please note that this Portfolio:
o is not a bank deposit
o is not an obligation of, or guaranteed or endorsed by
Wilmington Trust Company or any of its affiliates
o is not federally insured
o is not an obligation of, or guaranteed or endorsed or
otherwise supported by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board or
any other governmental agency
o is not guaranteed to achieve its goals
o may not be able to maintain a stable $1 share price
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
A look at the goals, Summary.........................................3
strategies, risks, Performance Information.........................4
expenses and financial Fees and Expenses...............................5
history of each Investment Objectives...........................6
portfolio. Primary Investment Strategies...................6
Additional Risk Information.....................7
Financial Highlights............................9
MANAGEMENT OF THE PORTFOLIO
Details about the Investment Adviser.............................10
service providers. Service Providers..............................11
SHAREHOLDER INFORMATION
Policies and Pricing of Shares..............................12
instructions for Purchase of Shares.............................13
opening, maintaining Redemption of Shares...........................14
and closing an account Exchange of Shares.............................16
in the portfolios. Distributions..................................17
Taxes..........................................17
DISTRIBUTION ARRANGEMENTS
Details on the Master/Feeder Structure........................18
portfolio's
master/feeder
arrangement.
FOR MORE INFORMATION...............................19
For information about key terms and concepts, look for our "Plain Talk"
explanations.
2
<PAGE>
THE WILMINGTON PREMIER MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
PLAIN TALK
================================================================================
WHAT ARE MONEY MARKET FUNDS?
Money market funds invest only in high quality, short-term debt securities,
commonly known as money market instruments. Money market funds follow strict
rules about credit risk, maturity and diversification of their investments. An
investment in a money market fund is not a bank deposit. Although a money market
fund seeks to keep a constant share price of $1.00, you may lose money by
investing in a money market fund.
================================================================================
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
Investment Objective o The Premier Money Market Portfolio seeks
high current income, while preserving
capital and liquidity.
- --------------------------------------------------------------------------------
Investment Focus o Money market instruments.
- --------------------------------------------------------------------------------
Share Price Volatility o The Portfolio will strive to maintain a
stable $1.00 share price.
- --------------------------------------------------------------------------------
Principal Investment Strategy o The Portfolio operates as a "feeder fund"
which means that the Portfolio does not
buy individual securities directly.
Instead, it invests in a corresponding
mutual fund or "master fund," which in
turn purchases investment securities. The
Portfolio invests all of its assets in a
master fund, which is a separate series of
WT Investment Trust I. The Portfolio and
its corresponding Series has the same
investment objective, policies and
limitations.
o The Premier Money Market Portfolio invests
in the Premier Money Market Series, which
invests in money market instruments,
including bank obligations, high quality
commercial paper and U.S. Government
obligations.
o In selecting securities for the Series,
the adviser seeks current income,
liquidity and safety of principal. The
adviser may sell securities if the
securities are downgraded to a lower
ratings category.
o The Premier Money Market Portfolio,
through its corresponding Series, may
invest more than 25% of its total assets
in the obligations of banks and finance
companies.
- --------------------------------------------------------------------------------
3
<PAGE>
Principal Risks The Portfolio is subject to the following risks
summarized below which are further described
under "Additional Risk Information."
o An investment in the Portfolio is not a
deposit of Wilmington Trust Company or any
of its affiliates and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Portfolio
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in the
Portfolio.
o The obligations in which the Portfolio
invests through its corresponding Series
are subject to credit risk and interest
rate risk. Typically, when interest rates
rise, the market prices of debt securities
go down.
o The performance of the Portfolio will
depend on whether or not the adviser is
successful in pursuing an investment
strategy.
- --------------------------------------------------------------------------------
Investor Profile o Conservative
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Wilmington Premier Money Market Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, past performance is not
necessarily an indicator of how the Portfolio will perform in the future.
Annual Returns Since Inception
[The following table was depicted as a bar chart in the printed material.]
1995........... 5.90%
1996........... 5.40%
1997........... 5.54%
1998........... 5.49%
Performance Years
1999 Total Return as of September 30: 3.71%
This bar chart shows changes in the performance of the Portfolio's shares
from calendar year to calendar year.
Best Quarter Worst Quarter
------------ -------------
1.47% 1.29%
(June 30, 1995) (June 30, 1996)
4
<PAGE>
<TABLE>
<CAPTION>
Average Annual Returns as of 12/31/98 1 Year Since Inception (December 6, 1994)
- ------------------------------------- ------ ----------------------------------
<S> <C> <C>
Premier Money Market Portfolio 5.49% 5.51%
</TABLE>
PLAIN TALK
================================================================================
WHAT IS YIELD?
Yield is a measure of the income (interest) earned by the securities in a fund's
portfolio and paid to you over a specified time period. The annualized yield is
expressed as a percentage of the offering price per share on a specified date.
================================================================================
You may call (800) 336-9970 to obtain the Portfolio's current 7-day yield.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT ARE MUTUAL FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, distribution, administration and custody services. The
Portfolio's expenses in the table below are shown as a percentage of the
Portfolio's net assets. These expenses are deducted from Portfolio assets.
================================================================================
The table below describes the fees and expenses that you may pay if you
buy and hold shares of the Portfolio. No sales charges or other fees are paid
directly from your investment.
Annual Fund Operating Expenses (expenses that are deducted from Portfolio
assets)(1)
The Premier Money
Market Portfolio
----------------
Management fees ........................... 0.20%
Other Expenses ............................ 0.11%
Total Annual Operating Expenses(2) ........ 0.31%
Waivers/reimbursements .................... 0.11%
Net annual operating expenses ............. 0.20%
(1) The table above and the Example below each reflect the aggregate annual
operating expenses of the Portfolio and the corresponding Series of the
Trust in which the Portfolio invests.
(2) The adviser has agreed to waive a portion of its advisory fee or reimburse
expenses to the extent total operating expenses exceed 0.20%. This waiver
will remain in place until the Board of Trustees approves its termination.
5
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds. The table below
shows what you would pay if you invested $10,000 over the various time frames
indicated. The example assumes that:
o you reinvested all dividends;
o the average annual return was 5%;
o the Portfolio's maximum (without regard to waivers or
reimbursements) total operating expenses are charged and
remain the same over the time periods; and
o you redeemed all of your investment at the end of the time
period.
Although your actual cost may be higher or lower, based on these
assumptions, your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Premier Money Market Portfolio..... $32 $100 $174 $393
The above example is for comparison purposes only and is not a
representation of the Portfolio's actual expenses and returns, either past or
future.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
o The Premier Money Market Portfolio seeks a high level of
current income consistent with the preservation of capital and
liquidity.
The investment objective for the Portfolio may be changed without
shareholder approval. The Portfolio is a money market fund and intends to
maintain a stable $1 share price, although this may not be possible under
certain circumstances. There can be no guarantee that the Portfolio will achieve
its investment objective.
- --------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Premier Money Market Portfolio invests its assets in the Premier Money
Market Series, which in turn invests in:
o U.S. dollar-denomination obligations of major U.S. and foreign
banks and their branches located outside of the United States,
of U.S. branches of foreign banks, of foreign branches of
foreign banks, of U.S. agencies of foreign banks and
wholly-owned banking subsidiaries of foreign banks;
o commercial paper rated, at the time of purchase, in the
highest category of short-term debt ratings of any two
nationally recognized statistical rating organizations
("NRSRO");
6
<PAGE>
o corporate obligations having a remaining maturity of 397
calendar days or less, issued by corporations having
outstanding comparable obligations that are (a) rated in the
two highest categories of any two NRSROs or (b) rated no lower
than the two highest long-term debt ratings categories by any
NRSRO.
o U.S. Government obligations;
o high quality municipal securities; and
o repurchase agreements that are fully collateralized by U.S.
Government obligations.
High quality securities include those that (1) are rated in one of the two
highest short-term rating categories by two NRSROs, such as S&P, Moody's and
Fitch IBCA (or by one NRSRO if only one NRSRO has issued a rating) or; (2) if
unrated are issued by an issuer with comparable outstanding debt that is rated
or are otherwise unrated and determined by the investment adviser to be of
comparable quality.
The Series may also invest in other securities, use other strategies and
engage in other investment practices, which are described in detail in our
Statement of Additional Information.
- --------------------------------------------------------------------------------
ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
The following is a list of certain risks that may apply to your investment
in the Portfolio. Further information about investment risks is available in our
Statement of Additional Information:
o Credit Risk: The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become
unable to honor a financial obligation.
o Foreign Security Risk: The risk of losses due to political,
regulatory, economic, social or other uncontrollable forces in
a foreign country.
o Interest Rate Risk: The risk of market losses attributable to
changes in interest rates. With fixed-rate securities, a rise
in interest rates typically causes a fall in values, while a
fall in rates typically causes a rise in values. The yield
paid by the Portfolio will vary with changes in interest
rates.
o Market Risk: The risk that the market value of a security may
move up and down, sometimes rapidly and unpredictably.
o Master/Feeder Risk: The Portfolio's master/feeder structure is
relatively new and more complex. While this structure is
designed to reduce costs, it may not do so, and the Portfolio
might encounter operational or other complications. For
example, large-scale redemptions by other feeders of their
shares of a master fund could have adverse effects on the
Portfolio such as requiring the liquidation of a substantial
portion of the master fund's holdings at a time when it could
be disadvantageous to do so. Also, other feeders of a master
fund may have a greater ownership interest in the master fund
than the Portfolio's interest and, therefore, could have
effective voting control over the operation of the master
fund.
7
<PAGE>
o Prepayment Risk: The risk that a debt security may be paid off
and proceeds invested earlier than anticipated. Depending on
market conditions, the new investments may or may not carry
the same interest rate.
o Year 2000 Compliance Risk: Like other organizations around the
world, the Portfolio could be adversely affected if the
computer systems used by its various service providers (or the
market in general) do not properly operate after January 1,
2000. The Portfolio is taking steps to address the Year 2000
issue with respect to the computer systems that they rely on.
There can be no assurance, however, that these steps will be
sufficient to avoid a temporary service disruption or any
adverse impact on the Portfolio.
Additionally, if a company in which the Series is invested is
adversely affected by Year 2000 Problems, it is likely that
the price of that company's securities will also be adversely
affected. A decrease in one or more of the Series' holdings
may have a similar impact on the price of the Series' shares.
The Series' adviser will rely on public filings and other
statements by companies about their Year 2000 readiness.
Issuers in countries outside the U.S. present a greater Year
2000 readiness risk because they may not be required to make
the same level of disclosure about Year 2000 readiness as is
required in the U.S. The adviser is not able to audit any
company and its major suppliers to verify their Year 2000
readiness.
8
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past 5 years or since the inception of
the Portfolio, if shorter. Certain information reflects financial results for a
single share of the Portfolio. The total returns in the table represent the rate
that you would have earned (or lost) on an investment in the Portfolio (assuming
reinvestment of all dividends and other distributions). Financial highlights
(except for the fiscal years ended June 30, 1995, 1996, 1997 and 1998 which were
audited by other auditors) have been audited by Ernst & Young LLP, whose report,
along with the Portfolio's financial statements, is included in the Annual
Report, which is available without charge upon request.
<TABLE>
<CAPTION>
For the Fiscal Years Ended June 30,
1999(3) 1998 1997 1996 1995(2)
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Wilmington Premier Money Market Portfolio(1)
For a Share Outstanding Through Each Period:
Net Asset Value -- Beginning of Period .............. $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------
Investment Operations:
Net investment income ............................. 0.05 0.05 0.05 0.05 0.05
---------------------------------------------------------------
Distributions:
From net investment income ........................ (0.05) (0.05) (0.05) (0.05) (0.05)
---------------------------------------------------------------
Net Asset Value -- End of Period .................... $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================
Total Return ........................................ 5.15% 5.61% 5.43% 5.61% 5.04%*
Ratios (to average net assets)/Supplemental Data:
Expenses(4) ....................................... 0.20% 0.20% 0.20% 0.20% 0.30%**
Net investment income(4) .......................... 5.00% 5.46% 5.31% 5.47% 5.51%**
Net assets, end of period (000 omitted) ............. $411,701 $240,359 $415,285 $389,967 $380,708
</TABLE>
(1) Effective November 1, 1999, the Money Market Portfolio was renamed the
Wilmington Premier Money Market Portfolio.
(2) For the period July 28, 1994 (commencement of operations) through June 30,
1995.
(3) Effective October 20, 1998, Wilmington Trust Company ("WTC"), a wholly
owned subsidiary of Wilmington Trust Corporation, became the investment
manager of the Portfolio.
(4) The annualized expense ratios, had there been no fees waived by the
adviser, would have been 0.31%, 0.31%, 0.27%, 0.27% and 0.34% for the
fiscal years ended June 30, 1999, 1998, 1997, 1996, and for the period
ended June 30, 1995, respectively. The annualized net investment income
ratios, had there been no fees waived by the adviser, would have been
4.89%, 5.35%, 5.24%, 5.40% and 5.47% for the fiscal years ended June 30,
1999, 1998, 1997, 1996, and for the period ended June 30, 1995,
respectively.
* Not annualized.
** Annualized.
9
<PAGE>
MANAGEMENT OF THE PORTFOLIO
The Board of Trustees for the Portfolio supervises the management,
activities and affairs of the Portfolio and has approved contracts with various
organizations to provide, among other services, the day-to-day management
required by the Portfolio and its shareholders.
PLAIN TALK
================================================================================
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a mutual fund and
continuously reviews, supervises and administers the fund's investment program.
The Board of Trustees supervises the investment adviser and establishes policies
that the adviser must follow in its management activities.
================================================================================
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Rodney Square Management Corporation, the Series' investment adviser, is
located at 1100 North Market Street, Wilmington, Delaware 19890. RSMC is a
wholly owned subsidiary of Wilmington Trust Company, which is wholly owned by
Wilmington Trust Corporation. RSMC also provides asset management services to
collective investment funds maintained by WTC. In the past, RSMC has provided
asset management services to individuals, personal trusts, municipalities,
corporations and other organizations.
The Premier Money Market Series pays a monthly fee to RSMC at the annual
rate of 0.20% of its average daily net assets.
Prior to November 1, 1999, WTC served as investment adviser to the Premier
Money Market Series. For the period from October 20, 1998 to June 30, 1999, the
Premier Money Market Series paid WTC 0.09% of the Series' average daily net
assets for investment advisory services. The Series' previous investment
adviser, Kiewit Investment Management Corp., received advisory fees of 0.09% of
the Series' average daily net assets for the period from July 1, 1998 to October
19, 1998.
10
<PAGE>
- --------------------------------------------------------------------------------
SERVICE PROVIDERS
- --------------------------------------------------------------------------------
The chart below provides information on the Portfolio's primary service
providers.
Asset
Management
- --------------------------------------------------------------------------------
Investment Adviser
Rodney Square Management Corp. Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Manages the Portfolio's investment
activities.
- --------------------------------------------------------------------------------
Shareholder
Services
- --------------------------------------------------------------------------------
Transfer Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Handles shareholder services, including recordkeeping and statements, payment of
distributions and processing of buy and sell requests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WT MUTUAL FUND
Wilmington Premier
Money Market Portfolio
- --------------------------------------------------------------------------------
Fund
Operations
- --------------------------------------------------------------------------------
Administrator and
Accounting Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Provides facilities, equipment and personnel to carry out administrative
services related to the Portfolio and calculates the Portfolio's NAV and
distributions.
- --------------------------------------------------------------------------------
Asset
Safe Keeping
- --------------------------------------------------------------------------------
Custodian
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Holds the Portfolio's assets, settles all
portfolio trades and collects most of the
valuation data required for calculating the
Portfolio's NAV per share.
- --------------------------------------------------------------------------------
Distribution
- --------------------------------------------------------------------------------
Distributor
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken, PA 19428
Distributes the Portfolio's Shares.
- --------------------------------------------------------------------------------
11
<PAGE>
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
- --------------------------------------------------------------------------------
The Portfolio uses its best effort to maintain its $1 constant share price
and values its securities at cost. This involves valuing a security initially at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of fluctuating interest rates on the market
value of the security. All cash, receivables and current payables are carried at
their face value. Other assets, if any, are valued at fair value as determined
in good faith by, or under the direction of, the Board of Trustees.
PLAIN TALK
================================================================================
WHAT IS THE NET ASSET VALUE OR "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
================================================================================
PFPC determines the NAV per share of the Portfolio as of 2:00 p.m. Eastern
Time on each Business Day (a day that the New York Stock Exchange, the Transfer
Agent and the Philadelphia branch of the Federal Reserve Bank are open for
business). The NAV is calculated by adding the value of all securities and other
assets in the Portfolio, deducting its liabilities and dividing the balance by
the number of outstanding shares in the Portfolio.
Shares will not be priced on those days the Portfolio is closed. As of the
date of this prospectus, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
12
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
HOW TO PURCHASE SHARES:
o Directly by mail or by wire
o As a client of WTC through a trust account or a corporate cash management
account
o As a client of a Service Organization
================================================================================
Portfolio shares are offered on a continuous basis and are sold without
any sales charges. The minimum initial purchase is $10,000,000. Additional
investments in the Portfolio may be made in any amount. You may purchase shares
as specified below.
You may also purchase shares if you are a client of WTC through your trust
or corporate cash management accounts. If you are a client of an institution
(such as a bank or broker-dealer) that has entered into a servicing agreement
with the Portfolio's distributor ("Service Organization"), you may also purchase
shares through such Service Organization. You should also be aware that you may
be charged a fee by WTC or the Service Organization in connection with your
investment in the Portfolio. If you wish to purchase Portfolio shares through
your account at WTC or a Service Organization, you should contact that entity
directly for information and instructions on purchasing shares.
By Mail: You may purchase shares by sending a check drawn on a U.S. bank
payable to Wilmington Premier Money Market Portfolio, indicating the name of the
Portfolio, along with a completed application (included at the end of this
prospectus). If a subsequent investment is being made, the check should also
indicate your Portfolio account number. When you make purchases by check, the
Portfolio may withhold payment on redemptions until it is reasonably satisfied
that the funds are collected (which can take up to 10 days). If you purchase
shares with a check that does not clear, your purchase will be canceled and you
will be responsible for any losses or fees incurred in that transaction. Send
the check and application to:
Regular mail: Overnight mail:
------------- ---------------
Wilmington Premier Money Wilmington Premier Money
Market Portfolio Market Portfolio
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Wire: You may purchase shares by wiring federal funds readily
available. Please call PFPC at (800) 336-9970 for instructions and to make
specific arrangements before making a purchase by wire, and if making an initial
purchase, to also obtain an account number.
13
<PAGE>
Additional Information Regarding Purchases: Investments in the Portfolio
are accepted on the Business Day that federal funds are deposited for your
account on or before 2:00 p.m. Eastern Time. Monies immediately convertible to
federal funds are deposited for your account on or before 2:00 p.m. Eastern
Time, or checks deposited for your account have been converted to federal funds
(usually within two Business Days after receipt). All investments in the
Portfolio are credited to your account as shares of the Portfolio immediately
upon acceptance and become entitled to dividends declared as of the day and time
of investment.
Any purchase order may be rejected if the Portfolio determines that
accepting the order would not be in the best interest of the Portfolio or its
shareholders.
It is the responsibility of WTC or the Service Organization to transmit
orders for the purchase of shares by its customers to the Transfer Agent and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
For information on other ways to purchase shares, including through an
individual retirement account (IRA), an automatic investment plan or a payroll
investment plan, please refer to the Statement of Additional Information.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
HOW TO REDEEM (SELL) SHARES:
o By mail
o By telephone
================================================================================
You may sell your shares on any Business Day, as described below.
Redemptions are effected at the NAV next determined after the Transfer Agent has
received your redemption request. There is no fee when Portfolio shares are
redeemed. It is the responsibility of WTC or the Service Organization to
transmit redemption orders and credit their customers' accounts with redemption
proceeds on a timely basis. Redemption checks are mailed on the next Business
Day following receipt by the Transfer Agent of redemption instructions, but
never later than 7 days following such receipt. Amounts redeemed by wire are
normally wired on the date of receipt of redemption instructions or the next
Business Day if received after 2:00 p.m. Eastern Time, or on a non-Business Day,
but never later than 7 days following such receipt. If you purchased your shares
through an account at WTC or a Service Organization, you should contact WTC or
the Service Organization for information relating to redemptions. The
Portfolio's name and your account number should accompany any redemption
requests.
By Mail: If you redeem your shares by mail, you should submit written
instructions with a "signature guarantee." A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public. You must
indicate the Portfolio name, your account number and your name. The written
instructions and signature guarantee should be mailed to:
14
<PAGE>
Regular mail: Overnight mail:
------------- ---------------
Wilmington Premier Money Wilmington Premier Money
Market Portfolio Market Portfolio
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Telephone: If you prefer to redeem your shares by telephone you may
elect to do so. However there are certain risks. The Portfolio has certain
safeguards and procedures to confirm the identity of callers and to confirm that
the instructions communicated are genuine. If such procedures are followed, you
will bear the risk of any losses.
Additional Information Regarding Redemptions: Redemption proceeds may be
wired to your predesignated bank account in any commercial bank in the United
States if the amount is $1,000 or more. The receiving bank may charge a fee for
this service. Proceeds may also be mailed to your bank or, for amounts of
$10,000 or less, mailed to your Portfolio account address of record if the
address has been established for at least 60 days. In order to authorize the
Transfer Agent to mail redemption proceeds to your Portfolio account address of
record, complete the appropriate section of the Application for Telephone
Redemptions or include your Portfolio account address of record when you submit
written instructions. You may change the account that you have designated to
receive amounts redeemed at any time. Any request to change the account
designated to receive redemption proceeds should be accompanied by a guarantee
of your signature by an eligible institution. A signature and a signature
guarantee are required for each person in whose name the account is registered.
Further documentation will be required to change the designated account when a
corporation, other organization, trust, fiduciary or other institutional
investor holds the Portfolio shares.
If the shares to be redeemed represent a recent investment made by a
check, the Portfolio reserves the right not to send the redemption proceeds
until it believes that the check has been collected (which could take up to 10
days).
Small Accounts: If the value of your Portfolio account falls below $500,
the Portfolio may ask you to increase your balance. If the account value is
still below $500 after 60 days, the Portfolio may close your account and send
you the proceeds. The Portfolio will not close your account if it falls below
$500 solely as a result of a reduction in your account's market value.
For additional information on other ways to redeem shares, please refer to
the Statement of Additional Information.
15
<PAGE>
- --------------------------------------------------------------------------------
EXCHANGE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund to another
fund within a family of funds.
================================================================================
You may exchange all or a portion of your shares in the Portfolio for
Institutional shares of the following Portfolios:
Wilmington Prime Money Market Portfolio
Wilmington U.S. Government Portfolio
Wilmington Tax-Exempt Portfolio
Wilmington Short/Intermediate Bond Portfolio
Wilmington Intermediate Bond Portfolio
Wilmington Municipal Bond Portfolio
Wilmington Large Cap Growth Portfolio
Wilmington Large Cap Core Portfolio
Wilmington Small Cap Core Portfolio
Wilmington International Multi-Manager Portfolio
Wilmington Large Cap Value Portfolio
Wilmington Mid Cap Value Portfolio
Wilmington Small Cap Value Portfolio
Redemption of shares through an exchange will be effected at the NAV per
share next determined after the Transfer Agent receives your request. A purchase
of shares through an exchange will be effected at the NAV per share determined
at that time or as next determined thereafter.
Exchange transactions will be subject to the minimum initial investment
and other requirements of the Portfolio into which the exchange is made. An
exchange may not be made if the exchange would leave a balance in a
shareholder's account of less than $500.
To obtain prospectuses of the other Portfolios, you may call (800)
336-9970. To obtain more information about exchanges, or to place exchange
orders, contact the Transfer Agent, or, if your shares are held in a trust
account with WTC or in an account with a Service Organization, contact WTC or
the Service Organization. The Portfolio may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. This exchange offer is valid only in those jurisdictions where the
sale of the Portfolio shares to be acquired through such exchange may be legally
made.
16
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest earned by a fund on its investments
less accrued expenses.
================================================================================
Distributions from the net investment income of the Portfolio are declared
daily as a dividend and paid monthly to you. Any net capital gain realized by
the Portfolio will be distributed annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. Shares become entitled to receive distributions
on the day after the shares are issued.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
As long as the Portfolio meets the requirements for being a "regulated
investment company," it pays no Federal income tax on the earnings and gains it
distributes to shareholders. The Portfolio's distributions of net investment
income (which include net short-term capital gains), whether received in cash or
reinvested in additional Portfolio shares, are taxable to you as ordinary
income. The Portfolio will notify you following the end of the calendar year of
the amount of dividends paid that year.
You will not recognize any gain or loss on the sale (redemption) or
exchange of shares of the Portfolio so long as the Portfolio maintains a stable
price of $1.00 a share.
State and Local Income Taxes: You should consult your tax advisers
concerning state and local taxes, which may have different consequences from
those of the Federal income law.
This section is only a summary of some important income tax considerations
that may affect your investment in the Portfolio. More information regarding
those considerations appears in our Statement of Additional Information. You are
urged to consult your tax adviser regarding the effects of an investment on your
tax situation.
17
<PAGE>
DISTRIBUTION ARRANGEMENTS
Provident Distributors, Inc. ("PDI") manages the Portfolio's distribution
efforts and provides assistance and expertise in developing marketing plans and
materials, enters into dealer agreement with broker-dealers to sell shares and
provides shareholder support services, directly or through affiliates. The
Portfolio does not charge any sales loads, deferred sales loads or other fees in
connection with the purchase of shares.
- --------------------------------------------------------------------------------
MASTER/FEEDER STRUCTURE
- --------------------------------------------------------------------------------
Other institutional investors, including other mutual funds, may invest in
the master funds. The master/feeder structure enables various institutional
investors, including the Portfolio, to pool their assets, which may be expected
to result in economies by spreading certain fixed costs over a larger asset
base. Each shareholder of a master fund, including the Portfolio, will pay its
proportionate share of the master fund's expenses.
For reasons relating to costs or a change in investment goal, among
others, the Portfolio could switch to another master fund or decide to manage
its assets itself. No Portfolio is currently contemplating such a move.
18
<PAGE>
FOR MORE INFORMATION
FOR INVESTORS WHO WANT MORE INFORMATION ON THE PORTFOLIO, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
Annual/Semi-Annual Reports: Contain performance data and information on
portfolio holdings and operating results for the Portfolio's most recently
completed fiscal year or half-year. The annual reports include a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance.
Statement of Additional Information (SAI): Provides a complete technical
and legal description of the Portfolio's policies, investment restrictions,
risks, and business structure. This prospectus incorporates the SAI by
reference.
Copies of these documents and answers to questions about the Portfolio may
be obtained without charge by contacting:
WT Mutual Fund
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) 336-9970
9:00 a.m. to 5:00 p.m., Eastern time
Information about the Portfolio (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Room of the SEC, Washington,
DC, 20549-6009. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-(800)-SEC-0330. Reports and other information
about the Portfolio may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)-336-9970.
The investment company registration number for WT Mutual Fund is 811-08648.
19
<PAGE>
TRUSTEES
Robert H. Arnold
Eric Brucker
Robert J. Christian
Louis Klein Jr.
Nicholas A. Giordano
Clement C. Moore, II
John J. Quindlen
William P. Richards
------------------------
OFFICERS
Robert J. Christian, President
Eric Cheung, Vice President
Gary M. Gardner, Secretary
Pat Colletti, Treasurer
------------------------
INVESTMENT ADVISER
Rodney Square Management Corporation
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken,PA 19428
------------------------
ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
------------------------
<PAGE>
WILMINGTON
FUNDS
Money Market
Portfolios
PROSPECTUS
November 1, 1999
<PAGE>
THE WILMINGTON PRIME MONEY MARKET PORTFOLIO
THE WILMINGTON U.S. GOVERNMENT PORTFOLIO
THE WILMINGTON TAX-EXEMPT PORTFOLIO
of WT Mutual Fund
Investor Shares
- --------------------------------------------------------------------------------
PROSPECTUS DATED NOVEMBER 1, 1999
This prospectus gives vital information about these money market mutual
funds, including information on investment policies, risks and fees. For your
own benefit and protection, please read it before you invest, and keep it on
hand for future reference.
Please note that these Portfolios:
o are not bank deposits
o are not obligations of, or guaranteed or endorsed by
Wilmington Trust Company or any of its affiliates
o are not federally insured
o are not obligations of, or guaranteed or endorsed or otherwise
supported by the U.S. Government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
governmental agency
o are not guaranteed to achieve their goal(s)
o may not be able to maintain a stable $1 share price
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
A look at the goals, Summary.........................................3
strategies, risks, Performance Information.........................5
expenses and financial Fees and Expenses...............................8
history of each Investment Objectives...........................9
portfolio. Primary Investment Strategies...................9
Additional Risk Information....................10
Financial Highlights...........................12
MANAGEMENT OF THE PORTFOLIOS
Details about the Investment Adviser.............................14
service providers. Service Providers..............................15
SHAREHOLDER INFORMATION
Policies and Pricing of Shares..............................16
instructions for Purchase of Shares.............................16
opening, maintaining Redemption of Shares...........................18
and closing an account Exchange of Shares.............................20
in any of the Distributions..................................21
portfolios. Taxes..........................................21
DISTRIBUTION ARRANGEMENTS
Details on distribution Rule 12b-1 Fees................................22
plans and the Master/Feeder Structure........................22
portfolios' Share Classes..................................22
master/feeder
arrangement.
FOR MORE INFORMATION...............................23
For information about key terms and concepts, look for our "Plain Talk"
explanations.
2
<PAGE>
THE WILMINGTON PRIME MONEY MARKET PORTFOLIO
THE WILMINGTON U.S. GOVERNMENT PORTFOLIO
THE WILMINGTON TAX-EXEMPT PORTFOLIO
Investor Shares
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
PLAIN TALK
================================================================================
WHAT ARE MONEY MARKET FUNDS?
Money market funds invest only in high quality, short-term debt securities,
commonly known as money market instruments. Money market funds follow strict
rules about credit risk, maturity and diversification of their investments. An
investment in a money market fund is not a bank deposit. Although a money market
fund seeks to keep a constant share price of $1.00, you may lose money by
investing in a money market fund.
================================================================================
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
Investment Objective o The Prime Money Market and U.S. Government
Portfolios each seek high current income,
while preserving capital and liquidity.
o The Tax Exempt Portfolio seeks high
current interest income exempt from
federal income taxes while preserving
principal.
- --------------------------------------------------------------------------------
Investment Focus o Money market instruments.
- --------------------------------------------------------------------------------
Share Price Volatility o Each Portfolio will strive to maintain a
stable $1.00 share price.
- --------------------------------------------------------------------------------
Principal Investment Strategy o Each Portfolio operates as a "feeder fund"
which means that the Portfolio does not
buy individual securities directly.
Instead, it invests in a corresponding
mutual fund or "master fund," which in
turn purchases investment securities. The
Portfolios invest all of their assets in
master funds, which are separate series of
WT Investment Trust I. Each Portfolio and
its corresponding Series have the same
investment objective, policies and
limitations.
o The U.S. Government Portfolio invests in
the U.S. Government Series, which invests
at least 65% of its assets in U.S.
Government obligations and repurchase
agreements collateralized by such
obligations.
3
<PAGE>
o The Prime Money Market Portfolio invests
in the Prime Money Market Series, which
invests in money market instruments,
including bank obligations, high quality
commercial paper and U.S. Government
obligations.
o The Tax-Exempt Portfolio invests in the
Tax-Exempt Series, which invests in high
quality municipal obligations, municipal
bonds and other instruments exempt from
federal income tax.
o In selecting securities for the Series,
the adviser seeks current income,
liquidity and safety of principal. The
adviser may sell securities if the
securities are downgraded to a lower
ratings category.
o Each of the U.S. Government Portfolio and
Prime Money Market Portfolio, through its
corresponding Series, may invest more than
25% of its total assets in the obligations
of banks and finance companies.
- --------------------------------------------------------------------------------
Principal Risks The Portfolios are subject to the following
risks summarized below which are further
described under "Additional Risk Information."
o An investment in a Portfolio is not a
deposit of Wilmington Trust Company or any
of its affiliates and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although each Portfolio
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in a
Portfolio.
o The obligations in which the Portfolios
invest through their corresponding Series
are subject to credit risk and interest
rate risk. Typically, when interest rates
rise, the market prices of debt securities
go down.
o The performance of a Portfolio will depend
on whether or not the adviser is
successful in pursuing an investment
strategy.
- --------------------------------------------------------------------------------
Investor Profile o Conservative
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Wilmington Prime Money Market Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, past performance is not
necessarily an indicator of how the Portfolio will perform in the future.
Annual Returns for the Past 10 Calendar Years
[The following table was depicted as a bar chart in the printed material.
Performance Years Returns
1989................. 9.14%
1990................. 8.04%
1991................. 6.08%
1992................. 3.61%
1993................. 2.86%
1994................. 3.89%
1995................. 5.63%
1996................. 5.08%
1997................. 5.22%
1998................. 5.17%
1999 Total Return as of September 30: 3.46%
This bar chart shows changes in the performance of the Portfolio's
Investor shares from calendar year to calendar year. Performance has been
calculated to include Rule 12b-1 distribution fees. If such amounts were not
included in the performance calculation, returns would be higher.
Best Quarter Worst Quarter
------------ -------------
2.36% 0.70%
(June 30, 1989) (June 30, 1993)
Average Annual Returns as of 12/31/98 1 Year 5 Year 10 Year
- ------------------------------------- ------ ------ -------
Prime Money Market Portfolio 5.17% 5.00% 5.46%
5
<PAGE>
The Wilmington U.S. Government Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, past performance is not
necessarily an indicator of how the Portfolio will perform in the future.
Annual Returns for the Past 10 Calendar Years
[The following table was depicted as a bar chart in the printed material.
Performance Years Returns
1989................. 8.96%
1990................. 7.86%
1991................. 5.73%
1992................. 3.38%
1993................. 2.82%
1994................. 3.82%
1995................. 5.51%
1996................. 4.99%
1997................. 5.12%
1998................. 5.07%
1999 Total Return as of September 30: 3.40%
This bar chart shows changes in the performance of the Portfolio's
Investor shares from calendar year to calendar year. Performance has been
calculated to include Rule 12b-1 distribution fees. If such amounts were not
included in the performance calculation, returns would be higher.
Best Quarter Worst Quarter
------------ -------------
2.31% 0.69%
(June 30, 1989) (March 31, 1993)
Average Annual Returns as of 12/31/98 1 Year 5 Year 10 Year
- ------------------------------------- ------ ------ -------
U.S. Government Portfolio 5.07% 4.90% 5.31%
6
<PAGE>
The Wilmington Tax-Exempt Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, past performance is not
necessarily an indicator of how the Portfolio will perform in the future.
Annual Returns for the Past 10 Calendar Years
[The following table was depicted as a bar chart in the printed material.
Performance Years Returns
1989................. 6.07%
1990................. 5.57%
1991................. 4.15%
1992................. 2.66%
1993................. 1.98%
1994................. 2.42%
1995................. 3.47%
1996................. 3.01%
1997................. 3.15%
1998................. 2.98%
1999 Total Return as of September 30: 2.98%
This bar chart shows changes in the performance of the Portfolio's
Investor shares from calendar year to calendar year. Performance has been
calculated to include Rule 12b-1 distribution fees. If such amounts were not
included in the performance calculation, returns would be higher.
Best Quarter Worst Quarter
------------ -------------
1.61% 0.47%
(June 30, 1989) (March 31, 1994)
Average Annual Returns as of 12/31/98 1 Year 5 Year 10 Year
- ------------------------------------- ------ ------ -------
Tax-Exempt Portfolio 2.98% 3.00% 3.54%
7
<PAGE>
PLAIN TALK
================================================================================
WHAT IS YIELD?
Yield is a measure of the income (interest) earned by the securities in a fund's
portfolio and paid to you over a specified time period. The annualized yield is
expressed as a percentage of the offering price per share on a specified date.
================================================================================
You may call (800) 336-9970 to obtain the Portfolio's current 7-day yield.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT ARE MUTUAL FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, distribution, administration and custody services. The
Portfolio's expenses in the table below are shown as a percentage of the
Portfolio's net assets. These expenses are deducted from Portfolio assets.
================================================================================
The table below describes the fees and expenses that you may pay if you
buy and hold shares of a Portfolio. No sales charges or other fees are paid
directly from your investment.
Investor Class
Annual Fund Operating Expenses (expenses that are deducted from Portfolio
assets)(1):
<TABLE>
<CAPTION>
The Prime Money The U.S. The Tax-Exempt
Market Portfolio Government Portfolio Portfolio
---------------- -------------------- --------------
<S> <C> <C> <C>
Management fees ............................ 0.45% 0.47% 0.47%
Distribution (12b-1) fees(2) ............... 0.05% 0.05% 0.05%
Other expenses ............................. 0.07% 0.07% 0.08%
Total Annual Operating Expenses ............ 0.57% 0.59% 0.60%
</TABLE>
(1) The table above and the Example below each reflect the aggregate annual
operating expenses of each Portfolio and the corresponding Series of the
Trust in which the Portfolio invests.
(2) While the Distribution (12b-1) Plan provides for reimbursement of up to
0.20% of each Portfolio's average net assets, the Boards of Trustees have
authorized annual payments of up to 0.05% of each Portfolio's average net
assets for the current fiscal year.
8
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The tables below
show what you would pay if you invested $10,000 over the various time frames
indicated. The example assumes that:
o you reinvested all dividends;
o the average annual return was 5%;
o the Portfolio's maximum total operating expenses are charged
and remain the same over the time periods; and
o you redeemed all of your investment at the end of the time
period.
Although your actual cost may be higher or lower, based on these
assumptions, your costs would be:
Investor Shares 1 Year 3 Years 5 Years 10 Years
- --------------- ------ ------- ------- --------
Prime Money Market Portfolio.... $58 $183 $318 $714
U.S. Government Portfolio....... $60 $189 $329 $738
Tax-Exempt Portfolio............ $61 $192 $335 $750
The above example is for comparison purposes only and is not a
representation of a Portfolio's actual expenses and returns, either past or
future.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
o The Prime Money Market Portfolio and U.S. Government Portfolio
each seek a high level of current income consistent with the
preservation of capital and liquidity.
o The Tax-Exempt Portfolio seeks as high a level of interest
income exempt from federal income tax as is consistent with
preservation of principal.
The investment objectives for each Portfolio may not be changed without
shareholder approval. Each Portfolio is a money market fund and intends to
maintain a stable $1 share price, although this may not be possible under
certain circumstances. There can be no guarantee that any Portfolio will achieve
its investment objective.
- --------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Prime Money Market Portfolio invests its assets in the Prime Money
Market Series, which in turn invests in:
o U.S. dollar-denominated obligations of major U.S. and foreign
banks and their branches located outside of the United States,
of U.S. branches of foreign banks, of foreign branches of
foreign banks, of U.S. agencies of foreign banks and
wholly-owned banking subsidiaries of foreign banks;
9
<PAGE>
o high quality commercial paper and corporate obligations;
o U.S. Government obligations;
o high quality municipal securities; and
o repurchase agreements that are fully collateralized by U.S.
Government obligations.
U.S. Government obligations are debt securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
The U.S. Government Portfolio invests its assets in the U.S. Government
Series, which in turn invests at least 65% of its total assets in:
o U.S. Government obligations; and
o repurchase agreements that are fully collateralized by such
obligations.
The Tax-Exempt Portfolio invests its assets in the Tax-Exempt Series,
which in turn invests in:
o high quality municipal obligations and municipal bonds;
o floating and variable rate obligations;
o participation interests;
o high quality tax-exempt commercial paper; and
o high quality short-term municipal notes.
The Tax-Exempt Series has adopted a policy that, under normal
circumstances, at least 80% of its annual income will be exempt from federal
income tax. Additionally, at least 80% of its annual income will not be a tax
preference item for purposes of the federal alternative minimum tax.
High quality securities include those that (1) are rated in one of the two
highest short-term rating categories by two nationally recognized statistical
rating organizations ("NRSRO"), such as S&P, Moody's and Fitch IBCA (or by one
NRSRO if only one NRSRO has issued a rating) or; (2) if unrated are issued by an
issuer with comparable outstanding debt that is rated or are otherwise unrated
and determined by the investment adviser to be of comparable quality.
Each Series also may invest in other securities, use other strategies and
engage in other investment practices, which are described in detail in our
Statement of Additional Information.
- --------------------------------------------------------------------------------
ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
The following is a list of certain risks that may apply to your investment
in a Portfolio. Further information about investment risks is available in our
Statement of Additional Information:
o Credit Risk: The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become
unable to honor a financial obligation.
10
<PAGE>
o Foreign Security Risk: The risk of losses due to political,
regulatory, economic, social or other uncontrollable forces in
a foreign country.
o Interest Rate Risk: The risk of market losses attributable to
changes in interest rates. With fixed-rate securities, a rise
in interest rates typically causes a fall in values, while a
fall in rates typically causes a rise in values. The yield
paid by a Portfolio will vary with changes in interest rates.
o Market Risk: The risk that the market value of a security may
move up and down, sometimes rapidly and unpredictably.
o Master/Feeder Risk: The Portfolios' master/feeder structure is
relatively new and more complex. While this structure is
designed to reduce costs, it may not do so, and the Portfolios
might encounter operational or other complications. For
example, large-scale redemptions by other feeders of their
shares of a master fund could have adverse effects on a
Portfolio such as requiring the liquidation of a substantial
portion of the master fund's holdings at a time when it could
be disadvantageous to do so. Also, other feeders of a master
fund may have a greater ownership interest in the master fund
than a Portfolio's interest and, therefore, could have
effective voting control over the operation of the master
fund.
o Prepayment Risk: The risk that a debt security may be paid off
and proceeds invested earlier than anticipated. Depending on
market conditions, the new investments may or may not carry
the same interest rate.
o Year 2000 Compliance Risk: Like other organizations around the
world, the Portfolios could be adversely affected if the
computer systems used by their various service providers (or
the market in general) do not properly operate after January
1, 2000. The Portfolios are taking steps to address the Year
2000 issue with respect to the computer systems that they rely
on. There can be no assurance, however, that these steps will
be sufficient to avoid a temporary service disruption or any
adverse impact on the Portfolios.
Additionally, if a company in which a Series is invested is
adversely affected by Year 2000 Problems, it is likely that
the price of that company's securities will also be adversely
affected. A decrease in one or more of a Series' holdings may
have a similar impact on the price of the Series' shares. The
Series' adviser will rely on public filings and other
statements by companies about their Year 2000 readiness.
Issuers in countries outside the U.S. present a greater Year
2000 readiness risk because they may not be required to make
the same level of disclosure about Year 2000 readiness as is
required in the U.S. The adviser is not able to audit any
company and its major suppliers to verify their Year 2000
readiness.
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past 5 years or since the inception of
the Portfolio, if shorter. Certain information reflects financial results for a
single Investor share of a Portfolio. The total returns in the table represent
the rate that you would have earned (or lost) on an investment in a Portfolio
(assuming reinvestment of all dividends and other distributions). Financial
highlights have been audited by Ernst & Young LLP, whose report, along with each
Portfolio's financial statements, is included in the Annual Report, which is
available without charge upon request.
<TABLE>
<CAPTION>
For the Period
October 1, 1998 For the Fiscal Years Ended September 30,
through
June 30, 1999 1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wilmington Prime Money Market Portfolio (1)
For a Share Outstanding Through Each Period:
Net Asset Value -- Beginning of Period .......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Investment Operations:
Net investment income ......................... 0.035 0.051 0.051 0.050 0.054 0.033
------------------------------------------------------------------------------
Distributions:
From net investment income .................... (0.035) (0.051) (0.051) (0.050) (0.054) (0.033)
------------------------------------------------------------------------------
Net Asset Value -- End of Period ................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==============================================================================
Total Return .................................... 3.51%* 5.26% 5.17% 5.17% 5.50% 3.37%
Ratios (to average net assets)/Supplemental Data:
Expenses ...................................... 0.52%** 0.53% 0.54% 0.53% 0.54% 0.53%
Net investment income ......................... 4.61%** 5.13% 5.06% 5.03% 5.37% 3.33%
Net assets, end of period (000 omitted) ......... $1,651,174 $1,702,734 $1,191,271 $980,856 $751,125 $606,835
</TABLE>
(1) Effective November 1, 1999, the Wilmington Prime Money Market Portfolio
acquired the assets and liabilities of The Rodney Square Fund -- Money
Market Portfolio, an open end mutual fund with substantially identical
investment objectives. Prior to November 1, 1999, the Wilmington Prime
Money Market Portfolio was not in operation. The financial highlights
presented herein are those of The Rodney Square Fund -- Money Market
Portfolio.
* Not annualized.
** Annualized.
12
<PAGE>
<TABLE>
<CAPTION>
For the Period
October 1, 1998 For the Fiscal Years Ended September 30,
through
June 30, 1999 1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wilmington U.S. Government Portfolio (1)
For a Share Outstanding Through Each Period:
Net Asset Value -- Beginning of Period ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Investment Operations:
Net investment income .......................... 0.034 0.051 0.050 0.050 0.052 0.033
------------------------------------------------------------------------------
Distributions:
From net investment income ..................... (0.034) (0.051) (0.050) (0.050) (0.052) (0.033)
------------------------------------------------------------------------------
Net Asset Value -- End of Period ................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==============================================================================
Total Return ..................................... 3.42%* 5.19% 5.07% 5.08% 5.37% 3.32%
Ratios (to average net assets)/ Supplemental Data:
Expenses ....................................... 0.54%** 0.54% 0.55% 0.55% 0.55% 0.53%
Net investment income .......................... 4.51%** 5.06% 4.96% 4.97% 5.25% 3.27%
Net assets, end of period (000 omitted) .......... $547,833 $802,153 $378,475 $341,426 $306,096 $336,766
</TABLE>
(1) Effective November 1, 1999, the Wilmington U.S. Government Portfolio
acquired the assets and liabilities of The Rodney Square Fund -- U.S.
Government Portfolio, an open end mutual fund with substantially identical
investment objectives. Prior to November 1, 1999, the Wilmington U.S.
Government Portfolio was not in operation. The financial highlights
presented herein are those of The Rodney Square Fund -- U.S. Government
Portfolio.
* Not annualized.
** Annualized.
<TABLE>
<CAPTION>
For the Period
October 1, 1998 For the Fiscal Years Ended September 30,
through
June 30, 1999 1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wilmington Tax-Exempt Portfolio (1)
For a Share Outstanding Through Each Period:
Net Asset Value -- Beginning of Period .......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------------------
Investment Operations:
Net investment income ......................... 0.019 0.031 0.030 0.031 0.033 0.021
------------------------------------------------------------------------------
Distributions:
From net investment income .................... (0.019) (0.031) (0.030) (0.031) (0.033) (0.021)
------------------------------------------------------------------------------
Net Asset Value -- End of Period ................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==============================================================================
Total Return .................................... 1.96%* 3.11% 3.09% 3.11% 3.36% 2.17%
Ratios (to average net assets)/Supplemental Data:
Expenses ...................................... 0.55%** 0.55% 0.57% 0.56% 0.54% 0.54%
Net investment income ......................... 2.58%** 3.05% 3.05% 3.08% 3.29% 2.13%
Net assets, end of period (000 omitted) ......... $451,509 $392,610 $280,864 $237,185 $318,213 $388,565
</TABLE>
(1) Effective November 1, 1999, the Wilmington Tax-Exempt Portfolio acquired
the assets and liabilities of The Rodney Square Tax-Exempt Fund, an open
end mutual fund with substantially identical investment objectives. Prior
to November 1, 1999, the Wilmington Tax-Exempt Portfolio was not in
operation. The financial highlights presented herein are those of The
Rodney Square Tax-Exempt Fund.
* Not annualized.
** Annualized.
13
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
The Board of Trustees for each Portfolio supervises the management,
activities and affairs of the Portfolio and has approved contracts with various
organizations to provide, among other services, the day-to-day management
required by the Portfolio and its shareholders.
PLAIN TALK
================================================================================
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a mutual fund and
continuously reviews, supervises and administers the fund's investment program.
The Board of Trustees supervises the investment adviser and establishes policies
that the adviser must follow in its management activities.
================================================================================
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Rodney Square Management Corporation, the Series' investment adviser, is
located at 1100 North Market Street, Wilmington, Delaware 19890. RSMC is a
wholly owned subsidiary of Wilmington Trust Company, which is wholly owned by
Wilmington Trust Corporation. RSMC also provides asset management services to
collective investment funds maintained by WTC. In the past, RSMC has provided
asset management services to individuals, personal trusts, municipalities,
corporations and other organizations.
Each of the U.S. Government Series, the Prime Money Market Series, and the
Tax-Exempt Series pays a monthly fee to RSMC at the annual rate of 0.47% of the
Series' first $1 billion of average daily net assets; 0.43% of the Series' next
$500 million of average daily net assets; 0.40% of the Series' next $500 million
of average daily net assets; and 0.37% of the Series' average daily net assets
in excess of $2 billion, as determined at the close of business on each day
throughout the month. Out of its fees, RSMC makes payments to PFPC Inc. for the
provision of administration, accounting and transfer agency services and to PFPC
Trust Company for provision of sub-custodial services.
For the twelve months ended June 30, 1999, the U.S. Government Series,
Prime Money Market Series and Tax-Exempt Series paid RSMC 0.47%, 0.45% and
0.47%, respectively, of the Series' average daily net assets for investment
advisory services.
14
<PAGE>
- --------------------------------------------------------------------------------
SERVICE PROVIDERS
- --------------------------------------------------------------------------------
The chart below provides information on the Portfolios' primary service
providers.
Asset
Management
- --------------------------------------------------------------------------------
Investment Adviser
Rodney Square Management Corp.
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Manages each Portfolio's investment activities.
- --------------------------------------------------------------------------------
Shareholder
Services
- --------------------------------------------------------------------------------
Transfer Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Handles shareholder services,
including recordkeeping and
statements, payment of distributions
and processing of buy and sell requests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WT MUTUAL FUND
Wilmington Prime Money Market Portfolio
Wilmington U.S. Government Portfolio
Wilmington Tax-Exempt Portfolio
- --------------------------------------------------------------------------------
Fund
Operations
- --------------------------------------------------------------------------------
Administrator and
Accounting Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Provides facilities, equipment and
personnel to carry out administrative
services related to each Portfolio and
calculates each Portfolio's NAV and
distributions.
- --------------------------------------------------------------------------------
Asset
Safe Keeping
- --------------------------------------------------------------------------------
Custodian
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890
Holds each Portfolio's assets, settles all
portfolio trades and collects most of the
valuation data required for calculating each
Portfolio's NAV per share.
- --------------------------------------------------------------------------------
Distribution
- --------------------------------------------------------------------------------
Distributor
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken, PA 19428
Distributes each Portfolio's shares.
- --------------------------------------------------------------------------------
15
<PAGE>
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
- --------------------------------------------------------------------------------
Each Portfolio uses its best effort to maintain its $1 constant share
price and values its securities at cost. This involves valuing a security
initially at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of fluctuating interest rates on
the market value of the security. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by, or under the direction of, the Board of Trustees.
PLAIN TALK
================================================================================
WHAT IS THE NET ASSET VALUE OR "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
================================================================================
PFPC determines the NAV per share of each Portfolio as of 12:00 p.m.
Eastern time for the Tax-Exempt Portfolio and as of 2:00 p.m. Eastern Time for
the U.S. Government Portfolio and the Prime Money Market Portfolio on each
Business Day (a day that the New York Stock Exchange, the Transfer Agent and the
Philadelphia branch of the Federal Reserve Bank are open for business). The NAV
is calculated by adding the value of all securities and other assets in a
Portfolio, deducting its liabilities and dividing the balance by the number of
outstanding shares in that Portfolio.
Shares will not be priced on those days the Portfolios are closed. As of
the date of this prospectus, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
HOW TO PURCHASE SHARES:
o Directly by mail or by wire
o As a client of WTC through a trust account or a corporate cash management
account
o As a client of a Service Organization
================================================================================
16
<PAGE>
Portfolio shares are offered on a continuous basis and are sold without
any sales charges. The minimum initial investment in Investor shares of the
Portfolios is $1,000. Additional investments in any Portfolio may be made in any
amount. You may purchase shares as specified below.
You may also purchase shares if you are a client of WTC through your trust
or corporate cash management accounts. If you are a client of an institution
(such as a bank or broker-dealer) that has entered into a servicing agreement
with the Portfolios' distributor ("Service Organization"), you may also purchase
shares through such Service Organization. You should also be aware that you may
be charged a fee by WTC or the Service Organization in connection with your
investment in the Portfolios. If you wish to purchase Portfolio shares through
your account at WTC or a Service Organization, you should contact that entity
directly for information and instructions on purchasing shares.
By Mail: You may purchase shares by sending a check drawn on a U.S. bank
payable to Wilmington Money Market Portfolios, indicating the name of the
Portfolio, along with a completed application (included at the end of this
prospectus). If a subsequent investment is being made, the check should also
indicate your Portfolio account number. When you make purchases by check, each
Portfolio may withhold payment on redemptions until it is reasonably satisfied
that the funds are collected (which can take up to 10 days). If you purchase
shares with a check that does not clear, your purchase will be canceled and you
will be responsible for any losses or fees incurred in that transaction. Send
the check and application to:
Regular mail: Overnight mail:
------------- ---------------
Wilmington Money Wilmington Money
Market Portfolios Market Portfolios
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Wire: You may purchase shares by wiring federal funds readily
available. Please call PFPC at (800) 336-9970 for instructions and to make
specific arrangements before making a purchase by wire, and if making an initial
purchase, to also obtain an account number.
Additional Information Regarding Purchases: Investments in a Portfolio are
accepted on the Business Day that federal funds are deposited for your account
on or before 12:00 p.m. Eastern time for the Tax-Exempt Portfolio and on or
before 2:00 p.m. Eastern Time for the U.S. Government Portfolio and the Prime
Money Market Portfolio. Monies immediately convertible to federal funds are
deposited for your account on or before 12:00 p.m. Eastern time for the
Tax-Exempt Portfolio and on or before 2:00 p.m. Eastern Time for the U.S.
Government Portfolio and the Prime Money Market Portfolio or checks deposited
for your account have been converted to federal funds (usually within two
Business Days after receipt). All investments in a Portfolio are credited to
your account as shares of the Portfolio immediately upon acceptance and become
entitled to dividends declared as of the day and time of investment.
Any purchase order may be rejected if a Portfolio determines that
accepting the order would not be in the best interest of the Portfolio or its
shareholders.
It is the responsibility of WTC or the Service Organization to transmit
orders for the purchase of shares by its customers to the Transfer Agent and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
For information on other ways to purchase shares, including through an
individual retirement account (IRA), an automatic investment plan or a payroll
investment plan, please refer to the Statement of Additional Information.
17
<PAGE>
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
HOW TO REDEEM (SELL) SHARES:
o By mail
o By telephone
o By check
================================================================================
You may sell your shares on any Business Day, as described below.
Redemptions are effected at the NAV next determined after the Transfer Agent has
received your redemption request. There is no fee when Portfolio shares are
redeemed. It is the responsibility of WTC or the Service Organization to
transmit redemption orders and credit their customers' accounts with redemption
proceeds on a timely basis. Redemption checks are mailed on the next Business
Day following receipt by the Transfer Agent of redemption instructions, but
never later than 7 days following such receipt. Amounts redeemed by wire are
normally wired on the date of receipt of redemption instructions or the next
Business Day if received after 12:00 p.m. Eastern time for the Tax-Exempt
Portfolio and after 2:00 p.m. Eastern time for the U.S. Government Portfolio and
the Prime Money Market Portfolio, or on a non-Business Day, but never later than
7 days following such receipt. If you purchased your shares through an account
at WTC or a Service Organization, you should contact WTC or the Service
Organization for information relating to redemptions. The Portfolio's name and
your account number should accompany any redemption requests.
By Mail: If you redeem your shares by mail, you should submit written
instructions with a "signature guarantee." A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public. You must
indicate the Portfolio name, your account number and your name. The written
instructions and signature guarantee should be mailed to:
Regular mail: Overnight mail:
------------- ---------------
Wilmington Money Wilmington Money
Market Portfolios Market Portfolios
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Telephone: If you prefer to redeem your shares by telephone you may
elect to do so. However there are certain risks. The Portfolio has certain
safeguards and procedures to confirm the identity of callers and to confirm that
the instructions communicated are genuine. If such procedures are followed, you
will bear the risk of any losses.
By Check: You may use the checkwriting option to redeem Portfolio shares
by drawing a check for $500 or more against a Portfolio account. When the check
is presented for payment, a sufficient number of shares will be redeemed from
your account to cover the amount of the check. This procedure enables you to
continue receiving dividends on those shares until the check is presented for
payment. Because the aggregate amount of Portfolio shares owned is likely to
change each day, you should not attempt to redeem all shares held in your
account by using the checkwriting procedure. Charges will be imposed for
specially imprinted checks, business checks,
18
<PAGE>
copies of canceled checks, stop payment orders, checks returned due to
"nonsufficient funds" and other returned checks. These charges will be paid by
redeeming automatically an appropriate number of Portfolio shares. Each
Portfolio and the Transfer Agent reserve the right to terminate or alter the
checkwriting service at any time. The Transfer Agent also reserves the right to
impose a service charge in connection with the checkwriting service. If you are
interested in the check writing service, contact the Transfer Agency for further
information. This service is generally not available for clients of WTC through
their trust or corporate cash management accounts, since it is already provided
for these customers through WTC. The service may also not be available for
Service Organization clients who are provided a similar service by those
organizations.
Additional Information Regarding Redemptions: Redemption proceeds may be
wired to your predesignated bank account in any commercial bank in the United
States if the amount is $1,000 or more. The receiving bank may charge a fee for
this service. Proceeds may also be mailed to your bank or, for amounts of
$10,000 or less, mailed to your Portfolio account address of record if the
address has been established for at least 60 days. In order to authorize the
Transfer Agent to mail redemption proceeds to your Portfolio account address of
record, complete the appropriate section of the Application for Telephone
Redemptions or include your Portfolio account address of record when you submit
written instructions. You may change the account that you have designated to
receive amounts redeemed at any time. Any request to change the account
designated to receive redemption proceeds should be accompanied by a guarantee
of your signature by an eligible institution. A signature and a signature
guarantee are required for each person in whose name the account is registered.
Further documentation will be required to change the designated account when a
corporation, other organization, trust, fiduciary or other institutional
investor holds the Portfolio shares.
If the shares to be redeemed represent a recent investment made by a
check, the Portfolio reserves the right not to send the redemption proceeds
until it believes that the check has been collected (which could take up to 10
days).
Small Accounts: If the value of your Portfolio account falls below $500,
the Portfolio may ask you to increase your balance. If the account value is
still below $500 after 60 days, the Portfolio may close your account and send
you the proceeds. The Portfolio will not close your account if it falls below
$500 solely as a result of a reduction in your account's market value.
For additional information on other ways to redeem shares, please refer to
the Statement of Additional Information.
19
<PAGE>
- --------------------------------------------------------------------------------
EXCHANGE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund to another
fund within a family of funds.
================================================================================
You may exchange all or a portion of your shares in a Portfolio for
Investor class shares of the following Portfolios:
Wilmington Prime Money Market Portfolio
Wilmington U.S. Government Portfolio
Wilmington Tax-Exempt Portfolio
Wilmington Short/Intermediate Bond Portfolio
Wilmington Intermediate Bond Portfolio
Wilmington Municipal Bond Portfolio
Wilmington Large Cap Growth Portfolio
Wilmington Large Cap Core Portfolio
Wilmington Small Cap Core Portfolio
Wilmington International Multi-Manager Portfolio
Wilmington Large Cap Value Portfolio
Wilmington Mid Cap Value Portfolio
Wilmington Small Cap Value Portfolio
Redemption of shares through an exchange will be effected at the NAV per
share next determined after the Transfer Agent receives your request. A purchase
of shares through an exchange will be effected at the NAV per share determined
at that time or as next determined thereafter.
Exchange transactions will be subject to the minimum initial investment
and other requirements of the Portfolio into which the exchange is made. An
exchange may not be made if the exchange would leave a balance in a
shareholder's account of less than $500.
To obtain prospectuses of the other Portfolios, you may call (800)
336-9970. To obtain more information about exchanges, or to place exchange
orders, contact the Transfer Agent, or, if your shares are held in a trust
account with WTC or in an account with a Service Organization, contact WTC or
the Service Organization. The Portfolios may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. This exchange offer is valid only in those jurisdictions where the
sale of the Portfolio shares to be acquired through such exchange may be legally
made.
20
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest earned by a fund on its investments
less accrued expenses.
================================================================================
Distributions from the net investment income of each Portfolio are
declared daily as a dividend and paid monthly to you. Any net capital gain
realized by a Portfolio will be distributed annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. Shares become entitled to receive distributions
on the day after the shares are issued.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
As long as a Portfolio meets the requirements for being a "regulated
investment company," it pays no Federal income tax on the earnings and gains it
distributes to shareholders. The Portfolios' distributions of net investment
income (which include net short-term capital gains), whether received in cash or
reinvested in additional Portfolio shares, are taxable to you as ordinary
income. Each Portfolio will notify you following the end of the calendar year of
the amount of dividends paid that year.
You will not recognize any gain or loss on the sale (redemption) or
exchange of shares of a Portfolio so long as that Portfolio maintains a stable
price of $1.00 a share. Dividend distributions by the Tax-Exempt Portfolio of
the excess of its interest income on tax-exempt securities over certain amounts
disallowed as deductions ("exempt-interest dividends") may be treated by you as
interest excludable from your gross income. The Tax-Exempt Portfolio intends to
distribute income that is exempt from federal income tax, though it may invest a
portion of its assets in securities that generate taxable income. Income exempt
from federal income tax may be subject to state and local income tax.
Additionally, any capital gains distributed by the Tax-Exempt Portfolio may be
taxable.
State and Local Income Taxes: You should consult your tax advisers
concerning state and local taxes, which may have different consequences from
those of the Federal income law.
This section is only a summary of some important income tax considerations
that may affect your investment in a Portfolio. More information regarding those
considerations appears in our Statement of Additional Information. You are urged
to consult your tax adviser regarding the effects of an investment on your tax
situation.
21
<PAGE>
DISTRIBUTION ARRANGEMENTS
Provident Distributors, Inc. ("PDI") manages the Portfolios' distribution
efforts and provides assistance and expertise in developing marketing plans and
materials, enters into dealer agreement with broker-dealers to sell shares and
provides shareholder support services, directly or through affiliates. The
Portfolios do not charge any sales loads, deferred sales loads or other fees in
connection with the purchase of shares.
- --------------------------------------------------------------------------------
RULE 12B-1 FEES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT ARE 12b-1 FEES?
12b-1 fees, charged by some funds, are deducted from fund assets to pay for
marketing and advertising expenses or, more commonly, to compensate sales
professionals for selling fund shares.
================================================================================
The Investor class of each Portfolio has adopted a distribution plan under
Rule 12b-1 that allows a Portfolio to pay a fee to PDI for the sale and
distribution of Investor class shares, and for services provided to Investor
class shareholders. Because these fees are paid out of a Portfolio's assets
continuously, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. For the current
fiscal year, the maximum distribution fees for Investor shares as a percentage
of average daily net assets are as follows:
Prime Money Market Portfolio - Investor Class ........ 0.05%
U.S. Government Portfolio - Investor Class ........... 0.05%
Tax-Exempt Portfolio - Investor Class ................ 0.05%
- --------------------------------------------------------------------------------
MASTER/FEEDER STRUCTURE
- --------------------------------------------------------------------------------
Other institutional investors, including other mutual funds, may invest in
the master funds. The master/feeder structure enables various institutional
investors, including a Portfolio, to pool their assets, which may be expected to
result in economies by spreading certain fixed costs over a larger asset base.
Each shareholder of a master fund, including a Portfolio, will pay its
proportionate share of the master fund's expenses.
For reasons relating to costs or a change in investment goal, among
others, a Portfolio could switch to another master fund or decide to manage its
assets itself. No Portfolio is currently contemplating such a move.
- --------------------------------------------------------------------------------
SHARE CLASSES
- --------------------------------------------------------------------------------
The Portfolios issue Investor and Institutional classes of shares. The
Institutional class is offered to retirement plans. The Investor class pays an
additional 12b-1 fee. Any investor may purchase the Investor class shares.
22
<PAGE>
FOR MORE INFORMATION
FOR INVESTORS WHO WANT MORE INFORMATION ON THE PORTFOLIOS, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
Annual/Semi-Annual Reports: Contain performance data and information on
portfolio holdings and operating results for a Portfolio's most recently
completed fiscal year or half-year. The annual reports include a discussion of
the market conditions and investment strategies that significantly affected a
Portfolio's performance.
Statement of Additional Information (SAI): Provides a complete technical
and legal description of a Portfolio's policies, investment restrictions, risks,
and business structure. This prospectus incorporates the SAI by reference.
Copies of these documents and answers to questions about the Portfolios
may be obtained without charge by contacting:
WT Mutual Fund
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) 336-9970
9:00 a.m. to 5:00 p.m., Eastern time
Information about the Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Room of the SEC, Washington,
DC, 20549-6009. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-(800)-SEC-0330. Reports and other information
about the Portfolios may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)336-9970.
The investment company registration number for WT Mutual Fund is 811-08648.
23
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
TRUSTEES
Robert H. Arnold
Eric Brucker
Robert J. Christian
Louis Klein Jr.
Nicholas A. Giordano
Clement C. Moore, II
John J. Quindlen
William P. Richards
------------------------
OFFICERS
Robert J. Christian, President
Eric Cheung, Vice President
Gary M. Gardner, Secretary
Pat Colletti, Treasurer
------------------------
INVESTMENT ADVISER
Rodney Square Management Corporation
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken,PA 19428
------------------------
ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
------------------------
<PAGE>
WILMINGTON
FUNDS
Equity Portfolios
PROSPECTUS
November 1, 1999
WEP-Pros-11/99
<PAGE>
The Wilmington Large Cap Growth Portfolio
The Wilmington Large Cap Core Portfolio
The Wilmington Small Cap Core Portfolio
The Wilmington Large Cap Value Portfolio
The Wilmington Mid Cap Value Portfolio
The Wilmington Small Cap Value Portfolio
The Wilmington International Multi-Manager Portfolio
of WT Mutual Fund
Institutional Shares
================================================================================
PROSPECTUS DATED NOVEMBER 1, 1999
This prospectus gives vital information about these mutual funds,
including information on investment policies, risks and fees. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.
Please note that these Portfolios:
o are not bank deposits
o are not obligations of, or guaranteed or endorsed by Wilmington
Trust Company or any of its affiliates
o are not federally insured
o are not obligations of, or guaranteed or endorsed or otherwise
supported by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental
agency
o are not guaranteed to achieve their goal(s)
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
A look at the goals, Summary ...................................... 3
strategies, risks,
expenses and financial Performance Information ...................... 6
history of each
portfolio. Fees and Expenses ............................ 12
Investment Objectives ........................ 13
Primary Investment Strategies ................ 14
Additional Risk Information .................. 21
Financial Highlights ......................... 23
MANAGEMENT OF THE PORTFOLIO
Details about the Investment Adviser ........................... 28
service providers.
Portfolio Managers ........................... 29
Sub-Advisers...... ........................... 30
Service Providers ............................ 32
Policies and SHAREHOLDER INFORMATION
instructions for
opening, maintaining Pricing of Shares ............................ 33
and closing an account
in any of the Purchase of Shares ........................... 33
portfolios.
Redemption of Shares ......................... 35
Exchange of Shares ........................... 37
Distributions ................................ 38
Taxes ........................................ 38
Details on the DISTRIBUTION ARRANGEMENTS
portfolio's
master/feeder Master/Feeder Structure ...................... 39
arrangements.
Share Classes ................................ 39
FOR MORE INFORMATION ............................. 40
For information about key terms and concepts, look for our "Plain Talk"
explanations.
2
<PAGE>
The Wilmington Large Cap Growth Portfolio
The Wilmington Large Cap Core Portfolio
The Wilmington Small Cap Core Portfolio
The Wilmington Large Cap Value Portfolio
The Wilmington Mid Cap Value Portfolio
The Wilmington Small Cap Value Portfolio
The Wilmington International Multi-Manager Portfolio
Institutional Shares
================================================================================
PORTFOLIO DESCRIPTION
PLAIN TALK
===================================================================
WHAT IS A MUTUAL FUND?
A mutual fund pools shareholders' money and, using a professional
investment manager, invests it in securities like stocks and bonds.
Each Portfolio is a separate mutual fund.
===================================================================
- --------------------------------------------------------------------------------
Summary
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
WHAT IS "CAP"?
Cap or the market capitalization of a company means the value of
the company's common stock in the stock market.
===================================================================
- --------------------------------------------------------------------------------
Investment Objective o The Large Cap Growth Portfolio and the Small Cap Core
Portfolio each seek superior long-term growth of
capital.
o The Large Cap Core Portfolio, the Large Cap Value
Portfolio, the Mid Cap Value Portfolio and the Small
Cap Value Portfolio each seek to achieve long-term
capital appreciation.
o The International Multi-Manager Portfolio seeks
superior long-term capital appreciation.
- --------------------------------------------------------------------------------
Investment Focus o Equity (or related) securities
- --------------------------------------------------------------------------------
Share Price Volatility o Moderate to high
- --------------------------------------------------------------------------------
3
<PAGE>
Principal Investment o Each Portfolio operates as a "feeder fund" which means
Strategy that the Portfolio does not buy individual securities
directly. Instead, it invests in a corresponding
mutual fund or "master fund," which in turn purchases
investment securities. The Portfolios invest all of
their assets in master funds which are separate series
of WT Investment Trust I. Each Portfolio and its
corresponding Series have the same investment
objective, policies and limitations.
o The Large Cap Growth Portfolio invests in the WT Large
Cap Growth Series, which invests at least 65% of its
total assets in a diversified portfolio of U.S. equity
(or related) securities of corporations with a market
cap of $2 billion or more, which have above average
earnings potential compared to the securities market
as a whole. The Series' adviser purchases stocks it
believes exhibit consistent, above-average earnings
growth, superior quality and attractive risk/reward
characteristics. The adviser analyzes the stocks of
over 2000 companies using a bottom-up approach to
search for high quality companies which are growing at
about double the market's average rate. The adviser
generally sells stocks when the risk/rewards of a
stock turn negative, when company fundamentals
deteriorate, and when a stock under performs the
market or its peer group.
o The Large Cap Core Portfolio invests in the Large Cap
Core Series, which invests at least 65% of its total
assets, under normal conditions, primarily in a
diversified portfolio of U.S. equity (or related)
securities of medium and large cap corporations. The
Series' investment adviser employs a combined growth
and value investment approach and invests in the
stocks of companies with the most attractive
combination of long-term earnings, growth and
valuation.
o The Small Cap Core Portfolio invests in the Small Cap
Core Series, which invests at least 65% of its total
assets in a diversified portfolio of U.S. equity (or
related) securities with a market cap of $2 billion or
less at the time of purchase. The Series' investment
adviser employs a combined growth and value investment
approach and invests in the stocks of companies with
the most attractive combination of long-term earnings,
growth and valuation.
o The International Multi-Manager Portfolio invests in
the International Multi-Manager Series, which invests
at least 85% of its total assets in a diversified
portfolio of equity (or related) securities of foreign
issuers. The Series' adviser allocates the Series'
assets among three sub-advisers; the sub-advisers
select stocks to be purchased or sold by the Series
based upon fundamental research, country and trend
analysis and whether the stocks are undervalued or
have above average growth potential.
o The Large Cap Value Portfolio invests in the Large Cap
Value Series, which invests at least 65% of its total
assets in a diversified portfolio of U.S. equity (or
related) securities with a market cap of $10 billion
or higher at the time of purchase. The Series invests
in securities believed to be undervalued as compared
to the company's potential profitability, and invests
in stocks which are ignored by financial analysts. The
Series' adviser looks for companies facing dynamic
changes such as merger or acquisition, restructuring,
change of management, or other type of change in
operation, financing or management. The Series'
adviser sets valuation parameters using relative
ratios and target prices. The adviser seeks stocks
believed to have a greater upside potential than
4
<PAGE>
downside risk over an 18 to 24 month holding period.
The Series' adviser sells a stock when its target
price has been reached, and when company fundamentals
do not change within the stock holding period to bring
the stock to its target price.
o The Mid Cap Value Portfolio invests in the Mid Cap
Value Series, which invests at least 65% of its total
assets in a diversified portfolio of U.S. equity (or
related) securities with a market cap between $1 and
$10 billion at the time of purchase. The Series
invests in securities believed to be undervalued as
compared to the company's potential profitability. The
Series' adviser buys and sells stocks based upon the
same considerations described above for Large Cap
Value Portfolio.
o The Small Cap Value Portfolio invests in the Small Cap
Value Series, which invests at least 65% of its total
assets in a diversified portfolio of U.S. equity (or
related) securities with a market cap of $1 billion or
less at the time of purchase. The Series invests in
securities believed to be undervalued as compared to
the company's potential profitability. The Series'
adviser buys and sells stocks based upon the same
considerations described above for Large Cap Value
Portfolio.
- --------------------------------------------------------------------------------
Principal Risks The Portfolios are subject to the following risks
summarized below which are further described under
"Additional Risk Information."
o An investment in a Portfolio is not a deposit of
Wilmington Trust Company or any of its affiliates and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
o It is possible to lose money by investing in a
Portfolio.
o A Portfolio's share price will fluctuate in response
to changes in the market value of the Portfolio's
investments. Market value changes result from business
developments affecting an issuer as well as general
market and economic conditions.
o Small cap companies may be more vulnerable than larger
companies to adverse business or economic
developments, and their securities may be less liquid
and more volatile than securities of larger companies.
o The International Multi-Manager Portfolio is subject
to foreign security risk and the risk of losses caused
by changes in foreign currency exchange rates.
o Growth-oriented investments may be more volatile than
the rest of the U.S. stock market as a whole.
o A value-oriented investment approach is subject to the
risk that a security believed to be undervalued does
not appreciate in value as anticipated.
o The performance of a Portfolio will depend on whether
or not the adviser or sub-adviser is successful in
pursuing an investment strategy.
- --------------------------------------------------------------------------------
Investor Profile o Investors who want the value of their investment to
grow and who are willing to accept more volatility for
the possibility of higher returns.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Wilmington Large Cap Growth Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
Annual Returns For The Past 10 Calendar Years
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1989 27.15%
1990 -7.15%
1991 41.54%
1992 5.95%
1993 14.57%
1994 -0.23%
1995 28.43%
1996 24.25%
1997 27.50%
1998 23.58%
1999 Total Return as of September 30: 4.75%
This bar chart shows changes in the performance of the Portfolio's
Institutional shares from calendar year to calendar year.
Best Quarter Worst Quarter
------------ -------------
25.34% 17.12%
(December 31, 1998) (September 30, 1990)
PLAIN TALK
===================================================================
WHAT IS AN INDEX?
An index is a broad measure of the market performance of a specific
group of securities in a particular market, or securities in a
market sector. You cannot invest directly in an index. An index
does not have an investment adviser and does not pay any commissions
or expenses. If an index had expenses, its performance would be lower.
===================================================================
Average Annual Returns as of 12/31/98 1 YEAR 5 YEARS 10 YEARS
------------------------------------- ------ ------- --------
Large Cap Growth Portfolio 23.58% 20.19% 17.67%
S&P 500 Index* 28.58% 24.06% 19.19%
* THE S&P 500 INDEX IS THE STANDARD AND POOR'S COMPOSITE INDEX OF 500
STOCKS, A WIDELY RECOGNIZED, UNMANAGED INDEX OF COMMON STOCK PRICES.
6
<PAGE>
PLAIN TALK
===================================================================
WHAT IS TOTAL RETURN?
Total return is a measure of the per-share change in the total
value of a fund's portfolio, including any distributions paid to
you. It is measured from the beginning to the end of a specific
time period.
===================================================================
Wilmington Large Cap Core Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, past performance does
not necessarily indicate how the Portfolio will perform in the future.
Annual Returns Since Inception
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1996 16.56%
1997 25.13%
1998 29.66%
1999 Total Return as of September 30: 5.68%
This bar chart shows changes in the performance of the Portfolio's
Institutional shares from calendar year to calendar year.
Best Quarter Worst Quarter
------------ ------------------
21.62% -9.56%
(December 31, 1998) (September 30, 1998)
SINCE INCEPTION
Average Annual Returns as of 12/31/98 1 YEAR (JANUARY 5, 1995)
------------------------------------- ------- -----------------
Large Cap Core Portfolio 29.66% 24.39%
S&P 500 Index* 28.58% 30.03%
* THE S&P 500 INDEX IS THE STANDARD AND POOR'S COMPOSITE INDEX OF 500
STOCKS, A WIDELY RECOGNIZED, UNMANAGED INDEX OF COMMON STOCK PRICES.
7
<PAGE>
Wilmington Small Cap Core Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio and its predecessor the Small Cap
Stock Fund, a collective investment fund. The Small Cap Stock Fund's performance
has been included for the periods prior to July 1, 1998 and has been adjusted to
reflect the annual deduction of fees and expenses applicable to shares of the
Small Cap Equity Portfolio (i.e. adjusted to reflect anticipated expenses,
absent investment advisory fees waivers). The Small Cap Stock Fund was not
registered as a mutual fund under Investment Company Act of 1940 and therefore
was not subject to certain investment restrictions, limitations and
diversification requirements imposed by the 1940 Act and the Internal Revenue
Service Code. If the Small Cap Stock Fund had been registered under the 1940
Act, its performance may have been different. Of course, past performance does
not necessarily indicate how the Portfolio will perform in the future.
Annual Return Since Inception
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1998 -2.32%
1999 Total Return as of September 30: -0.75%
This bar chart shows changes in the performance of the Portfolio's
Institutional shares from calendar year to calendar year.
Best Quarter Worst Quarter
------------ ------------------
20.59% -17.92%
(September 30, 1997) (June 30, 1998)
SINCE INCEPTION
Average Annual Returns as of 12/31/98 1 YEAR (APRIL 1, 1997)
---------------------------------- ------- ----------------
Small Cap Core Portfolio -2.32% 17.40%
Russell 2000 Index* -2.54% 13.99%
* THE RUSSELL 2000 INDEX IS A MARKET WEIGHTED INDEX COMPOSED OF 2000
COMPANIES WITH MARKET CAPITALIZATIONS FROM $50 MILLION TO $1.8 BILLION.
THE INDEX IS UNMANAGED AND REFLECTS THE REINVESTMENT OF DIVIDENDS.
8
<PAGE>
Wilmington International Multi-Manager Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio and its predecessor the
International Stock Fund, a collective investment fund. The International Stock
Fund's performance has been included for periods prior to July 1, 1998 and has
been adjusted to reflect the annual deduction of fees and expenses applicable to
shares of the International Equity Portfolio (i.e. adjusted to reflect
anticipated expenses, absent investment advisory fees waivers). The
International Stock Fund was not registered as a mutual fund under the 1940 Act
and therefore was not subject to certain investment restrictions, limitations
and diversification requirements imposed by the 1940 Act and the Internal
Revenue Code. If the International Stock Fund had been registered under the 1940
Act, its performance may have been different. Of course, the past performance
does not necessarily indicate how the Portfolio will perform in the future.
Annual Returns For The Past 10 Calendar Years
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1989 27.82%
1990 -15.39%
1991 14.63%
1992 -0.19%
1993 42.64%
1994 -1.36%
1995 7.30%
1996 8.80%
1997 3.43%
1998 13.48%
1999 Total Return as of September 30: 8.96%
This bar chart shows changes in the performance of the Portfolio's
Institutional shares from calendar year to calendar year
Best Quarter Worst Quarter
------------ ------------------
16.21% -22.76%
(September 30, 1989) (September 30, 1990)
Average Annual Returns as of 12/31/98 1 YEAR 5 YEARS 10 YEARS
---------------------------------- ------- -------- --------
International Multi-Manager Portfolio 13.48% 6.17% 9.06%
Morgan Stanley Capital International Europe,
Australasia and Far East Index (MSCI EAFE)* 20.00% 9.19% 5.54%
* THE EAFE INDEX IS AN UNMANAGED INDEX COMPRISED OF THE STOCKS OF
APPROXIMATELY 1,100 COMPANIES LISTED ON MAJOR STOCK EXCHANGES IN EUROPE,
AUSTRALASIA AND THE FAR EAST.
9
<PAGE>
Wilmington Large Cap Value Portfolio
The chart below shows the changes in annual total returns of complete
calendar years for the Portfolio, which commenced operations on June 29, 1998,
and for its predecessor the Value Stock Fund, a collective instrument fund,
whose assets were transferred into the Portfolio on June 29, 1998. The
information shows you how the Portfolio's performance has varied year by year
and provides some indication of the risks of investing in the Portfolio. The
Value Stock Fund's performance has been adjusted to reflect the annual deduction
of fees and expenses applicable to shares of the Portfolio (i.e., adjusted to
reflect anticipated expenses, absent investment advisory fees waivers). The
Value Stock Fund was not registered as a mutual fund under the Investment
Company Act of 1940, as amended, (the "1940 Act") and therefore was not subject
to certain investment restrictions, limitations and diversification requirements
imposed by the 1940 Act and the Internal Revenue Code of 1986, as amended (the
"Code"). If the Value Stock Fund had been registered under the 1940 Act, its
performance may have been different. Past performance is not necessarily an
indicator of how the Portfolio will perform in the future.
Annual Returns Since Inception
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1992 13.49%
1993 13.75%
1994 -1.64%
1995 34.38%
1996 21.86%
1997 24.55%
1998 -2.75%
1999 Total Return as of September 30: -7.63%
This bar chart shows changes in the performance of the Portfolio's
Institutional shares from calendar year to calendar year.
Best Quarter Worst Quarter
------------ ------------------
13.48% -10.62%
(June 30, 1997) (September 30, 1998)
SINCE INCEPTION
Average Annual Returns as of 12/31/98 1 YEAR 5 YEARS (DECEMBER 1, 1991)
---------------------------------- ------ ------- ------------------
Large Cap Core Portfolio -2.75% 14.30% 15.29%
Russell 1000 Index* 27.02% 23.37% 19.03%
* RUSSELL 1000 INDEX MEASURES THE PERFORMANCE OF THE 1,000 LARGEST COMPANIES
IN THE RUSSELL 3000 INDEX WHICH REPRESENTS APPROXIMATELY 92% OF THE TOTAL
MARKET CAPITALIZATION OF THE RUSSELL 3000.
10
<PAGE>
Wilmington Mid Cap Value Portfolio
The Portfolio has not been in operation for a full calendar year.
1999 Total Return as of September 30:
Average Annual Returns as of 12/31/98 SINCE INCEPTION (JANUARY 6, 1998)
---------------------------------- --------------------------------
Mid Cap Value Portfolio 6.73%
Russell Mid Cap Index* 9.91%
* THE RUSSELL MID CAP INDEX IS AN UNMANAGED INDEX THAT MEASURES THE
PERFORMANCE OF THE 800 SMALLEST COMPANIES IN THE RUSSELL 1000 INDEX, WHICH
REPRESENT APPROXIMATELY 35% OF THE TOTAL MARKET CAPITALIZATION OF THE
RUSSELL 1000 INDEX.
Wilmington Small Cap Value Portfolio
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, past performance does
not necessarily indicate how the Portfolio will perform in the future.
Annual Returns Since Inception
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1996 38.95%
1997 21.73%
1998 -12.21%
1999 Total Return as of September 30: 0.56%
This bar chart shows changes in the performance of the Portfolio's
Institutional shares from calendar year to calendar year.
Best Quarter Worst Quarter
------------ ------------------
17.64% -22.80%
(June 30, 1997) (September 30, 1998)
SINCE INCEPTION
Average Annual Returns as of 12/31/98 1 YEAR (JANUARY 6, 1998)
---------------------------------- ------- --------------
Mid Cap Value Portfolio -12.21% -2.24%
Russell Mid Cap Index* 15.40% 11.45%
* THE RUSSELL 2000 INDEX IS A MARKET WEIGHTED INDEX COMPOSED OF 2000
COMPANIES WITH MARKET CAPITALIZATIONS FROM $50 MILLION TO $1.8 BILLION.
THE INDEX IS UNMANAGED AND REFLECTS THE REINVESTMENT OF DIVIDENDS.
11
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
WHAT ARE FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay
for professional advisory, distribution, administration and custody
services. Each Portfolio's expenses in the table below are shown as
a percentage of its net assets. These expenses are deducted from
Portfolio assets.
===================================================================
The table below describes the fees and expenses that you may pay if you
buy and hold shares of a Portfolio. No sales charges or other fees are paid
directly from your investment.
Annual Fund Operating Expenses (expenses that are deducted from Portfolio
assets)(1):
<TABLE>
<CAPTION>
International
Large Cap Large Cap Small Cap Multi-Manager
Growth Portfolio Core Portfolio Core Portfolio Portfolio
---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Management fees .................. 0.55% 0.70% 0.60% 0.65%
Distribution (12b-1) fees ........ None None None None
Other Expenses ................... 0.21% 0.22% 0.28% 0.40%
Total Annual Operating Expenses(2) 0.76% 0.92% 0.88% 1.05%
Waivers/reimbursements ........... 0.01% 0.12% 0.08% 0.05%
Net Expenses ..................... 0.75% 0.80% 0.80% 1.00%
</TABLE>
<TABLE>
<CAPTION>
Large Cap Value Mid Cap Value Small Cap Value
Portfolio Portfolio Portfolio
--------------- ------------- ---------------
<S> <C> <C> <C>
Management fees .................. 0.55% 0.75% 0.75%
Distribution (12b-1) fees ........ None None None
Other Expenses ................... 0.26% 0.73% 0.40%
Total Annual Operating Expenses(2) 0.81% 1.48% 1.15%
Waivers/reimbursements ........... 0.06% 0.48% 0.15%
Net Expenses ..................... 0.75% 1.00% 1.00%
</TABLE>
(1) The table above and the Example below each reflect the aggregate annual
operating expenses of each Portfolio and the corresponding Series of the
Trust in which the Portfolio invests.
(2) For Institutional Shares, WTC has agreed to waive a portion of its
advisory fee or reimburse expenses to the extent total annual operating
expenses exceed 0.75% for the Large Cap Growth Portfolio; 0.80% for the
Large Core Portfolio; 0.75% for the Large Cap Value Portfolio; 0.80% for
the Small Cap Core Portfolio; 1.00% for the International Multi-Manager
Portfolio; 1.00% for the Mid Cap Value Portfolio; and 1.00% for the Small
Cap Value Portfolio. This waiver will remain in place until the Board of
Trustees approves its termination.
12
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The table below
shows what you would pay if you invested $10,000 over the various time frames
indicated. The example assumes that:
o you reinvested all dividends and other distributions;
o the average annual return was 5%;
o the Portfolio's maximum (without regard to waivers or
reimbursements) total operating expenses are charged and remain the
same over the time periods; and
o you redeemed all of your investment at the end of the time period.
Although your actual cost may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
Institutional Shares 1 Year 3 Years 5 Years 10 Years
- ------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Large Cap Growth Portfolio .......... $78 $243 $422 $942
Large Cap Core Portfolio ............ $94 $293 $509 $1,131
Small Cap Core Portfolio ............ $90 $281 $488 $1,084
International Multi-Manager Portfolio $107 $334 $579 $1,283
Large Cap Value Portfolio ........... $83 $259 $450 $1,002
Mid Cap Value Portfolio ............. $151 $468 $808 $1,768
Small Cap Value Portfolio ........... $117 $365 $633 $1,398
</TABLE>
The above example is for comparison purposes only and is not a
representation of a Portfolio's actual expenses and returns, either past or
future.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The Large Cap Growth Portfolio and the Small Cap Core Portfolio each seek
superior long-term growth of capital. The Large Cap Core Portfolio, the Large
Cap Value Portfolio, the Mid Cap Value Portfolio and the Small Cap Value
Portfolio each seek to achieve long-term capital appreciation. The INTERNATIONAL
MULTI-MANAGER PORTFOLIO seeks superior long-term capital appreciation. The
investment objectives for each Portfolio except Large Cap Core Portfolio may not
be changed without shareholder approval. There is no guarantee that a Portfolio
will achieve its investment objective.
For purposes of these investment objectives, "superior" long-term growth
of capital means to exceed the long-term growth of capital from an investment in
the securities comprising the S&P 500 Index (for the Large Cap Growth and Large
Cap Core Portfolios); the Russell 1000 Index for the Large Cap Value Portfolio;
the Russell 2000 Index, (for the Small Cap Core, and the Small Cap Value
Portfolios); and the Russell Mid Cap Index (for the Mid Cap Value Portfolio),
the Morgan Stanley Capital International Europe, Australasia and Far East Index
(for the International Multi-Manager Portfolio). For more information on the
specific Indexes, see the Section entitled "Primary Investment Strategies."
13
<PAGE>
- --------------------------------------------------------------------------------
Primary Investment Strategies
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
WHAT ARE GROWTH FUNDS?
Growth funds invest in the common stock of growth-oriented
companies seeking maximum growth of earnings and share price with
little regard for dividend earnings. Generally, companies with high
relative rates of growth tend to reinvest more of their profits
into the company and pay out less to shareholders in the form of
dividends. As a result, investors in growth funds tend to receive
most of their return in the form of capital appreciation.
===================================================================
The Large Cap Growth Portfolio invests its assets in the WT Large Cap
Growth Series, which, under normal market conditions, invests at least 65% of
its total assets in the following equity (or related) securities:
o common stocks of U.S. corporations that are judged by the adviser to
have strong growth characteristics and, with respect to at least 65%
of the Series' total assets, have a market capitalization of $2
billion or higher at the time of purchase;
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
o options on indexes of the common stock of U.S. corporations
described above; and
o contracts for either the future delivery, or payment in respect of
the future market value, of certain indexes of the common stock of
U.S. corporations described above, and options upon such futures
contracts.
The adviser looks for high quality, sustainable growth stocks while paying
careful attention to valuation. Research is bottom-up, emphasizing business
fundamentals, including financial statement analysis and industry and competitor
evaluations. The adviser selects stocks it believes exhibit consistent,
above-average earnings growth, superior quality and attractive risk/reward
characteristics. These dominant companies are expected to generate consistent
earnings growth in a variety of economic environments.
The adviser also seeks to provide a greater margin of safety and stability
in the Series. Superior earnings growth is expected to translate ultimately into
superior compounding of returns. Additionally, several valuation tools are used
to avoid over-paying for growth or chasing "hot" stocks. Over time, the adviser
believes these favorable characteristics will produce superior returns with less
risk than many growth styles.
The adviser's research team analyzes a broad universe of over 2,000
companies. Industry specialists search for high-quality companies growing at
roughly double the market's average. Approximately 150 stocks pass these initial
screens and are subject to thorough research. Dominant market share, strong
financials, the power to price, significant free cash flow and
shareholder-oriented management are critical variables.
Final purchase candidates are selected by the adviser's investment
committee based on attractive risk/reward characteristics and diversification
guidelines. Certain industries may be over or under-weighted by the adviser
based upon favorable growth rates or valuation parameters.
14
<PAGE>
The adviser attempts to maintain portfolio continuity by purchasing
sustainable growth companies that are less sensitive to short-term economic
trends than cyclical, low quality companies. The adviser generally sells stocks
when the risk/reward characteristics of a stock turn negative, company
fundamentals deteriorate, or the stock underperforms the market or its peer
group. The latter device is employed to minimize mistakes and protect capital.
The Series combines three distinct components, each of which is intended
to enhance returns and add balance.
The Large Cap Growth Stocks (over $5 billion in total market cap) -- Up to
100%, but not less than 65%, of the Series' total assets:
o Mature, predictable businesses
o Capital appreciation and income
o Highest liquidity
The Medium Cap Growth Stocks (between $1 and $5 billion in total market
cap) -- Up to 20% of the Series' total assets:
o Superior long-term potential
o Strong niche or franchise
o Seasoned management
The Special Situations Growth Opportunities -- Up to 20% of the Series'
total assets:
o Stable return, independent of the market
o Unusually favorable risk/reward characteristics
o Typically involve corporate restructuring
In order to respond to adverse market, economic, political or other
conditions, the Series may assume a temporary defensive position and invest
without limit in commercial paper and other money market instruments that are
rated investment grade. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Large Cap Core Portfolio invests its assets in the Large Cap Core
Series, which, under normal market conditions, invests at least 65% of its total
assets in the following equity (or related) securities:
o securities of U.S. corporations that are judged by the adviser to
have strong growth and valuation characteristics;
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
o receipts or American Depositary Receipts ("ADRs"), which are
typically issued by a U.S. bank or trust company as evidence of
ownership of underlying securities issued by a foreign corporation;
and
o cash reserves and money market instruments (including securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, repurchase agreements, certificates of deposit
and bankers' acceptances issued by banks or savings and loan
associations, and commercial paper).
15
<PAGE>
The Large Cap Core Series is a diversified portfolio of U.S. equity (or
related) securities, including common stocks, preferred stocks and securities
convertible into common stock of companies with market capitalizations of at
least $2 billion. Dividend income is an incidental consideration compared to
growth in capital in the selection of securities. The adviser seeks securities
that possess strong growth and value characteristics based on the evaluation of
the issuer's background, industry position, historical returns and the
experience and qualifications of the management team. The adviser may rotate the
Series' holdings among various market sectors based on economic analysis of the
overall business cycle.
As a temporary defensive investment policy, the Large Cap Core Series may
invest up to 100% of its assets in money market instruments and other short-term
debt instruments, rated investment grade or higher at the time of purchase, and
may hold a portion of its assets in cash. The result of this action may be that
the Series will be unable to achieve its investment objective.
PLAIN TALK
===================================================================
WHAT ARE SMALL CAP FUNDS?
Small cap funds invest in the common stock of companies with
smaller market capitalizations. Small cap stocks may provide the
potential for higher growth, but they also typically have greater
risk and more volatility.
===================================================================
The Small Cap Core Portfolio invests its assets in the Small Cap Core
Series, which, under normal market conditions, invests at least 65% of its total
assets in the following equity (or related) securities:
o common stocks of U.S. corporations that are judged by the adviser to
have strong growth characteristics or to be undervalued in the
marketplace relative to underlying profitability and have a market
capitalization of less than $2 billion at the time of purchase;
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
o options on indexes of the common stock of U.S. corporations
described above; and
o contracts for either the future delivery, or payment in respect of
the future market value, of certain indexes of the common stock of
U.S. corporations described above, and options upon such futures
contracts.
The Small Cap Core Series is a diversified portfolio of small cap U.S.
equity (or related) securities with a market capitalization of $2 billion or
less at the time of purchase. To achieve the Series' objective of long-term
growth of capital, the Series' adviser employs a combined growth and value
investment approach. The adviser uses proprietary quantitative research
techniques to find companies with long-term growth potential or that seem
undervalued. After analyzing those companies, the adviser invests the Series'
assets in the stocks of companies with the most attractive combination of
long-term earnings, growth and valuation. Securities will be sold to make room
for new companies with superior growth, valuation and projected return
characteristics or to preserve capital where the original assessment of the
company's growth prospects and earnings power has not proven optimistic.
In the Series' efforts to achieve its investment objective, it seeks to
outperform the Russell 2000 Index (assuming a similar investment in the
securities comprising this index would reinvest dividends and capital gains
16
<PAGE>
distributions). The Russell 2000 Index is a passive index of the smallest 2000
stocks in the Russell 3000 Index of the 3000 largest stocks in the U.S. as
measured by market capitalization.
PLAIN TALK
===================================================================
WHAT ARE INTERNATIONAL FUNDS?
International funds invest in securities traded in markets of at
least three different countries outside of the United States. An
investor in an international fund can avoid the hassles of
investing directly in foreign securities and let that fund's
adviser handle the foreign laws, trading practices, customs and
time zones of the foreign countries.
===================================================================
The International Multi-Manager Portfolio invests its assets in the
International Multi-Manager Series, which, at all times, invests at least 85% of
its total assets in the following equity (or related) securities:
o common stocks of foreign issuers;
o preferred stocks and/or debt securities that are convertible
securities of such foreign issuers; and
o open or closed-end investment companies (mutual funds) that invest
primarily in the equity securities of issuers in countries where it
is impossible or impractical to invest directly.
The International Multi-Manager Series is a diversified portfolio of
equity securities (including convertible securities) of issuers located outside
of the United States. The Series may use forward currency contracts, options,
futures contracts and options on futures contracts to attempt to hedge actual or
anticipated investment security positions. Three sub-advisers, Clemente Capital,
Inc., Invista Capital Management Inc., and Scudder Kemper Investments, Inc.,
manage the assets of the Series. The adviser allocates the Series' assets among
each sub-adviser in roughly equal portions and then allows each sub-adviser to
use its own investment approach and strategy to achieve the Series' objective.
Clemente's investment approach begins with a global outlook, identifying
the major forces (i.e., political events, social developments, trade and capital
flows) affecting the global environment and then identifying the themes (i.e.,
corporate restructuring, infrastructure spending, consumer's coming of age) that
are responding to the major forces. The third step is to decide which countries
or sectors will benefit from these themes and then seek companies with favorable
growth characteristics in those countries or sectors. The next steps are to
research and identify specific holdings and ongoing monitoring and evaluation of
the Series. Series holdings are sold when shares reach the target price, the
fundamentals of a company have deteriorated or when new companies with superior
growth and valuation characteristics have been identified.
Invista's investment approach focuses on identifying opportunities through
a fundamentally sound, economic value driven process applied evenly across all
international markets. Candidates for purchase are companies whose current price
is substantially below investment value as determined by Invista's estimate of
future free cash flows. Once this evaluation process is applied, purchases are
made among those companies that provide optimal combinations of valuation,
growth and risk. Series holdings are sold when the relative attractiveness of a
security is not as great as additions proposed by a member of the investment
team.
Scudder Kemper's investment approach involves a top-down/bottom-up
approach with a focus on fundamental research. Investment ideas are generated by
regional analysts, global industry analysts and portfolio
17
<PAGE>
managers through the integration of three analytical disciplines; global themes
(identification of sectors and industries likely to gain or lose during specific
phases of a theme's cycle); country analysis (quantitative assessment of each
country's fundamental and political characteristics combined with an objective,
quantitative analysis of market and economic data); and company analysis
(identification of company opportunities by searching for unique attributes such
as franchise or monopoly, above average growth potential, innovation or
scarcity). Series holdings are sold when the analysts indicate that the
underlying fundamentals are no longer strong.
The Series utilizes this multiple sub-adviser arrangement to reduce
volatility through multiple investment approaches, a strategy used by many
institutional investors. For example, a particular investment approach used by a
sub-adviser may be successful in a bear (falling) market, while another
investment approach used by a different sub-adviser may be more successful in a
bull (rising) market. The multiple investment approach is designed to soften the
impact of a single sub-adviser's performance in a market cycle during which that
sub-adviser's investment approach is less successful. Because each sub-adviser
has different investment approaches, the performance of one or more of the
sub-advisers is expected to offset the impact of any other sub-adviser's poor
performance, regardless of the market cycle. Unfortunately, this also works the
opposite way. The successful performance of a sub-adviser will be diminished by
the less successful performances of the other sub-advisers. There can be no
guarantee that the expected advantages of the multiple adviser technique will be
achieved.
In the Series' efforts to achieve its investment objective, it seeks to
outperform the Morgan Stanley Capital International Europe, Australasia & Far
East ("EAFE") Index (assuming a similar investment in the securities comprising
this index would reinvest dividends and capital gains distributions). The EAFE
Index is an unmanaged index comprised of the stocks of approximately 1100
companies, screened for liquidity, cross ownership and industry representation
and listed on major stock exchanges in Europe, Australasia and the Far East.
PLAIN TALK
===================================================================
WHAT ARE VALUE FUNDS?
Value funds invest in the common stock of companies that are
considered by the adviser to be undervalued relative to their
underlying profitability, or rather their stock price does not
reflect the value of the company..
===================================================================
The Value Portfolios: Through their investment in corresponding Series,
the Large Cap Value, Mid Cap Value and Small Cap Value Portfolios seek to invest
in stocks that are less expensive than comparable companies, as determined by
price/earnings ratios, cash flows or other measures. Value investing therefore
may reduce risk while offering potential for capital appreciation as a stock
gains favor among other investors and its price rises.
The Series are managed using investment ideas that the adviser has used
for over twenty-five years. The Series' adviser relies on selecting individual
stocks and does not try to predict when the stock market might rise or fall. It
seeks out those stocks that are undervalued and, in some cases, neglected by
financial analysts. The adviser evaluates the degree of analyst recognition by
monitoring the number of analysts who follow the company and recommend its
purchase or sale to investors.
The adviser starts by identifying early change in a company's operations,
finances or management. The adviser is attracted to companies which will look
different tomorrow -- operationally, financially, managerially -- when compared
to yesterday. This type of dynamic change often creates confusion and
misunderstandings and may lead to a drop in the company's stock price. Examples
of change include mergers, acquisitions, divestitures,
18
<PAGE>
restructuring, change of management, new market/product/means of
production/distribution, regulatory change, etc. Once change is identified, the
adviser evaluates the company on several levels. It analyzes:
o Financial models based principally upon projected cash flows
o The price of the company's stock in the context of what the market
is willing to pay for stock of comparable companies and what a
strategic buyer would pay for the whole company
o The extent of management's ownership interest in the company
o The company's market by corroborating its observations and
assumptions by meeting with management, customers and suppliers
The adviser also evaluates the degree of recognition of the business by
the investors by monitoring the number of sell side analysts who closely follow
the company and the nature of the shareholder base. Before deciding to purchase
a stock, the adviser conducts an extensive amount of business due diligence to
corroborate its observations and assumptions.
The identification of change comes from a variety of sources including the
private capital network which the adviser has established among its clients,
historical investments and intermediaries. The adviser also makes extensive use
of clipping services and regional brokers and bankers to identify elements of
change. The investment professionals regularly meet companies around the country
and sponsor more than 200 company/management meetings in its New York office.
By reviewing historical relationships and understanding the
characteristics of a business, the adviser establishes valuation parameters
using relative ratios or target prices. In its overall assessment, the adviser
seeks stocks that it believes have a greater upside potential than downside risk
over an 18 to 24-month holding period.
An important function of the adviser is to set a price target, that is,
the price at which the stock will be sold when there has been no fundamental
change in the investment case. The adviser constantly monitors the companies
held by the Series to determine if there have been any fundamental changes in
the reasons that prompted the initial purchase of the stock. If significant
changes for the better have not materialized, the stock will be sold. The
initial investment case for stock purchase, which has been documented, is
examined by the adviser's investment professionals. A final decision on selling
the stock is made after all such factors are analyzed.
The Large Cap Value Portfolio invests its assets in the Large Cap Value
Series, which, under normal conditions, invests at least 65% of its total assets
in the following equity (or related) securities:
o common stocks of U.S. corporations that are judged by the adviser to
be undervalued in the marketplace relative to underlying
profitability and have a market capitalization of $10 billion or
higher at the time of purchase;
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
o options on indexes of the common stock of U.S. corporations
described above;
o contracts for either the future delivery, or payment in respect of
the future market value, of certain indexes of the common stock of
U.S. corporations described above, and options upon such futures
contracts; and
19
<PAGE>
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a nationally
recognized statistical rating organization ("NRSRO"), in response to
adverse market conditions, as a temporary defensive position. The
result of this action may be that the Series will be unable to
achieve its investment objective.
The Large Cap Value Series is a diversified portfolio of large cap U.S.
equity (or related) securities that are deemed by the adviser to be undervalued
as compared to the company's profitability potential.
The Mid Cap Value Portfolio invests its assets in the Mid Cap Value
Series, which, under normal conditions, invests at least 65% of its total assets
in the following equity (or related) securities:
o common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization between $1
and $10 billion at the time of purchase;
o securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
o warrants; and
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Mid Cap Value Series is a diversified portfolio of medium cap U.S.
equity (or related) securities that are deemed by the adviser to be undervalued
as compared to the company's profitability potential.
The Small Cap Value Portfolio invests its assets in the Small Cap Value
Series, which, under normal conditions, invests at least 65% of its total assets
in the following equity (or related) securities:
o common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization of $1
billion or less at the time of purchase;
o securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
o warrants; and
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Small Cap Value Series is a diversified portfolio of small cap U.S.
equity (or related) securities that are deemed by the adviser to be undervalued
as compared to the company's profitability potential.
All Series. The frequency of portfolio transactions and a Series' turnover
rate will vary from year to year depending on the market. Increased turnover
rates incur the cost of additional brokerage commissions and may cause you to
receive larger capital gain distributions. Series turnover rate is normally
expected to be less than 100% for each of the Series.
20
<PAGE>
Each Series also may use other strategies and engage in other investment
practices, which are described in detail in our Statement of Additional
Information.
- --------------------------------------------------------------------------------
Additional Risk Information
- --------------------------------------------------------------------------------
The following is a list of certain risks that may apply to your investment
in a Portfolio, unless otherwise indicated. Further information about investment
risks is available in our Statement of Additional Information:
o Currency Risk: The risk related to investments denominated in
foreign currencies. Foreign securities are usually denominated in
foreign currency therefore changes in foreign currency exchange
rates can affect the net asset value of the International
Multi-Manager Portfolio. (International Multi-Manager Portfolio)
o Derivatives Risk: Some of the Series' investments may be referred to
as "derivatives" because their value depends on, or derives from,
the value of an underlying asset, reference rate or index. These
investments include options, futures contracts and similar
investments that may be used in hedging and related income
strategies. The market value of derivative instruments and
securities is sometimes more volatile than that of other
investments, and each type of derivative may pose its own special
risks. As a fundamental policy, no more than 15% of a Series' total
assets may at any time be committed or exposed to derivative
strategies.
o Foreign Security Risk: The risk of losses due to political,
regulatory, economic, social or other uncontrollable forces in a
foreign country not normally associated with investing in the U.S.
markets. (International Multi-Manager Portfolio and the Large Cap
Core Portfolio)
o Growth-Oriented Investing Risk: The risk that an investment in a
growth-oriented portfolio, which invests in growth-oriented
companies, will be more volatile than the rest of the U.S. market as
a whole. (Large Cap Growth, Large Cap Core and Small Cap Core
Portfolios)
o Market Risk: The risk that the market value of a security may move
up and down, sometimes rapidly and unpredictably. The prices of
equity securities change in response to many factors including the
historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
o Master/Feeder Risk: The Portfolios' master/feeder structure is
relatively new and more complex. While this structure is designed to
reduce costs, it may not do so, and the Portfolios might encounter
operational or other complications. For example, large-scale
redemptions by other feeders of their shares of a master fund could
have adverse effects on a Portfolio such as requiring the
liquidation of a substantial portion of the master fund's holdings
at a time when it could be disadvantageous to do so. Also, other
feeders of a master fund may have a greater ownership interest in
the master fund than a Portfolio's interest, and, therefore, could
have effective voting control over the operation of the master fund.
o Opportunity Risk: The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are
tied up in less advantageous investments.
21
<PAGE>
o Small Cap Risk: Small cap companies may be more vulnerable than
larger companies to adverse business or economic developments. Small
cap companies may also have limited product lines, markets or
financial resources, may be dependent on relatively small or
inexperienced management groups and may operate in industries
characterized by rapid technological obsolescence. Securities of
such companies may be less liquid and more volatile than securities
of larger companies and therefore may involve greater risk than
investing in larger companies. (Small Cap Core Portfolio)
o Valuation Risk: The risk that a Series has valued certain of its
securities at a higher price than it can sell them.
o Value Investing Risk: The risk that a Series' investment in
companies whose securities are believed to be undervalued, relative
to their underlying profitability, do not appreciate in value as
anticipated. (Large Cap Value, Mid Cap Value, Small Cap Value and
Small Cap Core Portfolios)
o Year 2000 Compliance Risk: Like other organizations around the
world, the Series could be adversely affected if the computer
systems used by their various service providers (or the market in
general) do not properly operate after January 1, 2000. The Series
are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance,
however, that these steps will be sufficient to avoid a temporary
service disruption or any adverse impact on the Series.
Additionally, if a company in which a Series is invested is
adversely affected by Year 2000 problems, it is likely that the
price of that company's securities will also be adversely affected.
A decrease in one or more of a Series' holdings may have a similar
impact on the price of the Series' shares. Each Series' adviser or
sub-adviser will rely on public filings and other statements made by
companies about their Year 2000 readiness. Issuers in countries
outside the U.S. present a greater Year 2000 readiness risk because
they may not be required to make the same level of disclosure about
Year 2000 readiness as is required in the U.S. The adviser is not
able to audit any company and its major suppliers to verify their
Year 2000 readiness.
22
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past 5 years or since the Portfolio's
inception, if shorter. Certain information reflects financial results for a
single Institutional share of a Portfolio. The total returns in the table
represent the rate that a shareholder would have earned (or lost) on an
investment in a Portfolio (assuming reinvestment of all dividends and other
distributions). Financial highlights (except those of Large Cap Core Portfolio
for the fiscal years ended June 30, 1998, 1997, 1996 and 1995 which were audited
by other auditors), have been audited by Ernst & Young, LLP, whose report, along
with each Portfolio's financial statements, is included in the Annual Report,
which is available without charge upon request.
<TABLE>
<CAPTION>
For the Period
January 1, 1999 For the Fiscal Years Ended December 31,
through
WILMINGTON LARGE CAP GROWTH PORTFOLIO(1) June 30, 1999 1998+ 1997 1996 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Period ............ $ 23.59 $ 21.37 $ 19.22 $ 17.41 $ 15.14 $ 16.39
-------- -------- ------- ------- ------- -------
Investment Operations:
Net investment loss(2) ........................ (0.02) (0.01) (0.19) (0.15) (0.10) (0.03)
Net realized and unrealized gain
(loss) on investments ....................... 2.19 5.02 5.44 4.37 4.38 (0.02)
-------- -------- ------- ------- ------- -------
Total from investment operations ............ 2.17 5.01 5.25 4.22 4.28 (0.05)
-------- -------- ------- ------- ------- -------
Distributions:
From net realized gain on investments ......... -- (2.79) (3.10) (2.41) (2.01) (1.20)
-------- -------- ------- ------- ------- -------
Net Asset Value - End of The Period .............. $ 25.76 $ 23.59 $ 21.37 $ 19.22 $ 17.41 $ 15.14
======== ======== ======= ======= ======= =======
TOTAL RETURN ................................ 9.20%* 23.58% 27.50% 24.25% 28.43% (0.23)%
Ratios (to average net assets)/
Supplemental Data:
Expenses (net of fee waivers) .................... 0.75%** 0.80% 1.38% 1.43% 1.43% 1.38%
Expenses (excluding fee waivers) ................. 0.80%** 0.92% N/A N/A N/A N/A
Net investment loss .............................. (0.14)%** (0.08)% (0.86)% (0.78)% (0.53)% (0.17)%
Portfolio turnover rate .......................... 15.50% 51.64% 28.05% 34.84% 49.12% 37.05%
Net assets at end of the period
($000 omitted) ................................ $222,538 $223,151 $91,445 $76,174 $66,311 $65,267
</TABLE>
- ----------
+ Effective February 23, 1998, Wilmington Trust Company (WTC) assumed the
responsibility of advisor to the Large Cap Growth Portfolio and with the
change in advisor the investment objective of the Portfolio was changed to
seek superior long term growth of capital by investing in large cap U.S.
equity securities that are judged by WTC to possess strong growth
characteristics. Prior to February 23, 1998, the Growth Portfolio sought
to achieve its investment objective by investing at market capitalization
of the issuers of such securities
(1) Effective November 1, 1999, the Wilmington Large Cap Growth Portfolio
acquired the assets and liabilities of the Rodney Square Strategic Equity
Fund -- Large Cap Growth Equity Portfolio, an open end mutual fund with
substantial identical investment objectives. Prior to November 1, 1999,
the Wilmington Large Cap Growth Portfolio was not in operation. The
financial highlights presented herein are those of the Rodney Square
Strategic Equity Fund -- Large Cap Growth Equity Portfolio.
(2) The net investment loss per share for the years ended December 31, 1996
and 1997 was calculated using average shares outstanding method.
* Not annualized
** Annualized
23
<PAGE>
<TABLE>
<CAPTION>
For the Period
For the Fiscal Years Ended June 30, January 5, 1995+
through
WILMINGTON LARGE CAP CORE PORTFOLIO(1) 1999++ 1998 1997 1996 June 30, 1995
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Period $ 18.72* $ 20.56 $ 16.58 $ 14.04 $ 12.50
-------- -------- ------- ------- -------
Investment Operations:
Net investment income ............ 0.12 0.16 0.13 0.13 0.11
Net realized and unrealized gain
(loss) on investments .......... 4.14 4.52 4.09 2.56 1.43
-------- -------- ------- ------- -------
Total from investment operations 4.26 4.68 4.22 2.69 1.54
-------- -------- ------- ------- -------
Distributions:
From net investment income ....... (0.14) (0.16) (0.15) (0.15) --
In excess of net realized gain on
investments .................... (0.34) (6.36) (0.09) -- --
-------- -------- ------- ------- -------
Total distributions ............ (0.48) (6.52) (0.24) (0.15) --
-------- -------- ------- ------- -------
Net Asset Value - End of Period ..... $ 22.50 $ 18.72 $ 20.56 $ 16.58 $ 14.04
======== ======== ======= ======= =======
TOTAL RETURN ................... 23.25% 29.09% 25.67% 19.24% 12.32%*
Ratios (to average net assets)/Supplemental Data:
Expenses (net of fee waivers)(2) . 0.80% 0.80% 0.80% 0.80% 0.80%**
Net investment income(2) ......... 0.65% 0.81% 0.80% 1.34% 3.06%**
Portfolio turnover rate ............. N/A N/A N/A 16.95% 0.00%**
Net assets at end of the period
($000 omitted) ................... $139,228 $110,052 $88,763 $66,137 $20,865
</TABLE>
- ----------
+ Commencement of operations.
++ Effective October 20, 1998 Wilmington Trust Company ("WTC") a wholly owned
subsidiary of Wilmington Trust Corporation, became the investment manager
to each Series of the Trust.
(1) Effective November 1, 1999, the Broad Market Equity Portfolio was renamed
the Wilmington Large Cap Core Portfolio.
(2) The annualized expense ratios, had there been no fees waived by the
advisor, would have been 0.91%, 0.93%, 0.94%, 1.05%, and 2.56% for the
fiscal years ended June 30, 1999, 1998, 1997, 1996, and for the period
ended June 30 1995, respectively. The annualized net investment income
ratios, had there been no fees waived by the adviser, would have been
0.53%, 0.68%, 0.66%, 1.09% and 1.30% for the fiscal years ended June 30,
1999, 1998, 1997, 1996, and for the period ended June 30, 1995,
respectively. The expense and net investment income ratios for the fiscal
years ended June 30, 1999, 1998, 1997 include expenses allocated from the
Series.
* Not annualized.
** Annualized.
24
<PAGE>
<TABLE>
<CAPTION>
For the Period For the Period
January 1, 1999 June 29, 1998+
through through
WILMINGTON LARGE CAP VALUE PORTFOLIO(1) June 30, 1999 December 31, 1998
--------------- -----------------
<S> <C> <C>
Net Asset Value - Beginning of the Period ............... $ 9.30 $ 10.00
------- -------
Investment Operations:
Net investment income ................................ 0.10 0.10
Net realized and unrealized gain (loss) on investments 0.42 (0.58)
------- -------
Total from investment operations ................... 0.52 (0.48)
------- -------
Distributions:
From net investment income ........................... -- (0.10)
In excess of net realized gain on investments ........ -- (0.12)
------- -------
Total distributions ................................ -- (0.22)
------- -------
Net Asset Value - End of the Period ..................... $ 9.82 $ 9.30
======= =======
TOTAL RETURN ............................................ 5.59%* (4.79)%*
Ratios (to average net assets)/Supplemental Data:
Expenses (net of fee waivers) ........................ 0.75%** 0.75%**
Expenses (excluding fee waivers) ..................... 0.84%** 0.88%**
Net investment income ................................ 1.92%** 2.07%**
Portfolio turnover rate ................................. 25.14% 36.78%
Net assets at end of the period ($000 omitted) .......... $79,060 $93,780
</TABLE>
- ----------
+ Commencement of operations.
(1) Effective November 1, 1999, the Wilmington Large Cap Value Portfolio
acquired the assets and liabilities of the Rodney Square Strategic Equity
Fund -- Large Cap Value Equity Portfolio, an open end mutual fund with
substantially identical investment objectives. Prior to November 1, 1999,
the Wilmington Large Cap Value Portfolio was not in operation. The
financial highlights presented herein are those of the Rodney Square
Strategic Equity Fund -- Large Cap Value Equity Portfolio.
* Not annualized.
** Annualized.
25
<PAGE>
<TABLE>
<CAPTION>
For the Period For the Period
January 1, 1999 June 29, 1998+
through through
WILMINGTON SMALL CAP CORE PORTFOLIO(1) June 30, 1999 December 31, 1998
--------------- -----------------
<S> <C> <C>
Net Asset Value - Beginning of the Period ............... $ 9.36 $ 10.00
------- -------
Investment Operations:
Net investment income ................................ 0.02 0.02
Net realized and unrealized gain (loss) on investments 0.13 (0.62)
------- -------
Total from investment operations ................... 0.15 (0.60)
------- -------
Distributions:
From net investment income ........................... -- (0.02)
In excess of net realized gain on investments ........ -- (0.02)
------- -------
Total distributions ................................ -- (0.04)
------- -------
Net Asset Value - End of the Period ..................... $ 9.51 $ 9.36
======= =======
TOTAL RETURN ............................................ 1.60%* (6.03)%*
Ratios (to average net assets)/Supplemental Data:
Expenses (net of fee waivers) ........................ 0.80%** 0.80%**
Expenses (excluding fee waivers) ..................... 0.90%** 0.95%**
Net investment income ................................ 0.39%** 0.45%**
Portfolio turnover rate ................................. 7.42% 9.81%
Net assets at end of the period ($000 omitted) .......... $76,316 $82,156
</TABLE>
- ----------
+ Commencement of operations.
(1) Effective November 1, 1999, the Wilmington Small Cap Core Portfolio
acquired the assets and liabilities of the Rodney Square Strategic Equity
Fund -- Small Cap Equity Portfolio, an open end mutual fund with
substantially identical investment objectives. Prior to November 1, 1999,
the Wilmington Small Cap Core Portfolio was not in operation. The
financial highlights presented herein are those of the Rodney Square
Strategic Equity Fund -- Small Cap Core Equity Portfolio.
* Not annualized
** Annualized
26
<PAGE>
<TABLE>
<CAPTION>
For the Period For the Period
January 1, 1999 June 29, 1998+
through through
WILMINGTON INTERNATIONAL MULTI-MANAGER PORTFOLIO(1) June 30, 1999 December 31, 1998
--------------- -----------------
<S> <C> <C>
Net Asset Value - Beginning of the Period ............... $ 9.82 $ 10.00
------- -------
Investment Operations:
Net investment income ................................ 0.06 0.02
Net realized and unrealized gain (loss) on investments 0.26 (0.09)
------- -------
Total from investment operations ................... 0.32 (0.07)
------- -------
Distributions:
From net investment income ........................... (0.11) (0.11)
------- -------
Net Asset Value - End of the Period ..................... $ 10.03 $ 9.82
======= =======
TOTAL RETURN ............................................ 3.29%* (0.70)%*
Ratios (to average net assets)/Supplemental Data:
Expenses (net of fee waivers) ........................ 1.00%** 1.00%**
Expenses (excluding fee waivers) ..................... 1.19%** 1.10%**
Net investment income ................................ 1.86%** 0.46%**
Portfolio turnover rate ................................. 33.02% 27.66%
Net assets at end of the period ($000 omitted) .......... $69,401 $73,784
</TABLE>
- ----------
+ Commencement of operations.
(1) Effective November 1, 1999, the Wilmington International Multi-Manager
Portfolio acquired the assets and liabilities of the Rodney Square
Strategic Equity Fund -- International Equity Portfolio, an open end
mutual fund with substantially identical investment objectives. Prior to
November 1, 1999, the Wilmington International Multi -- Manager Portfolio
was not in operation. The financial highlights presented herein are those
of the Rodney Square Strategic Equity Fund -- International Equity
Portfolio.
* Not annualized.
** Annualized.
27
<PAGE>
MANAGEMENT OF THE FUND
The Board of Trustees for each Portfolio supervises the management,
activities and affairs of the Portfolio and has approved contracts with various
financial organizations to provide, among other services, the day-to-day
management required by the Portfolio and its shareholders.
PLAIN TALK
===================================================================
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a mutual fund
and continuously reviews, supervises and administers the fund's
investment program. The Board of Trustees supervises the investment
adviser and establishes policies that the adviser must follow in
its management activities.
===================================================================
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Wilmington Trust Company, the investment adviser for the Large Cap Core
Series, the Small Cap Core Series and the International Multi-Manager Series, is
located at 1100 North Market Street, Wilmington, Delaware 19890. WTC is a wholly
owned subsidiary of Wilmington Trust Corporation, which is a publicly held bank
holding company. WTC, subject to the supervision of the Board of Trustees,
directs the investments of these Series in accordance with their respective
investment objectives, policies and limitations. For the International
Multi-Manager Series, WTC allocates the Series' assets equally among the
sub-advisers and then oversees their investment activities. In addition to
serving as investment adviser for the Series, WTC is engaged in a variety of
investment advisory activities, including the management of other mutual funds
and collective investment pools.
Under an advisory agreement, the Large Cap Core Series pays a monthly fee
to WTC at the annual rate of 0.70% of the Series' first $1 billion of average
daily net assets; 0.65% of the Series' next $1 billion of average daily net
assets; and 0.60% of the Series' average daily net assets over $2 billion. The
Small Cap Core Series pays WTC a monthly advisory fee at the annual rate of
0.60% of the Series' first $1 billion of average daily net assets; 0.55% of the
Series' next $1 billion of average daily net assets; and 0.50% of the Series'
average daily net assets over $2 billion. The International Multi-Manager Series
pays WTC a monthly advisory fee at the annual rate of 0.65% of the Series'
average daily net assets. Prior to November 1, 1999, WTC served as investment
adviser to the Large Cap Growth Series and the Large Cap Value Series. For the
twelve months ended June 30, 1999, WTC received the following fees (after fee
waivers), as a percentage of each Series' average daily net assets:
WT Large Cap Growth Series 0.45%
Large Cap Value Series 0.44%
Small Cap Core Series 0.48%
International Multi-Manager Series 0.50%
For the period from October 20, 1998 to June 30, 1999, WTC received
advisory fees of 0.59% of average daily net assets from the Large Cap Core
Series. The Series' previous adviser, Kiewit Investment Management Corp.,
received advisory fees of 0.59% of average daily net assets for the period from
July 1 to October 19, 1998.
Cramer Rosenthal McGlynn, LLC, 707 Westchester Avenue, White Plains, New
York 10604, serves as the investment adviser to the Large Cap Value Series, the
Mid Cap Value Series and the Small Cap Value Series. Subject to the supervision
of the Board of Trustees, CRM makes investment decisions for these Series. CRM
and
28
<PAGE>
its predecessors have managed equity investments, including a mutual fund, for
more than twenty-five years. As of September 30, 1999, CRM has over $3.4 billion
of assets under management.
Under the advisory agreement, the Large Cap Value Series pays a monthly
advisory fee to CRM at the annual rate of 0.55% of its first 1 billion of
average daily net assets; 0.50% of the Series' next $1 billion of average daily
net assets; and 0.45% of the Series' average daily net assets over $2 billion.
The Mid Cap Value Series and the Small Cap Value Series each pay CRM a monthly
advisory fee of 0.75% of the Series' first $1 billion of average daily net
assets; 0.70% of the Series' next $1 billion of average daily net assets; and
0.65% of the Series' average daily net assets over $2 billion. For the twelve
months ended June 30, 1999, CRM received advisory fees, after waivers, of 0.30%
for the Large Cap Value Series, 0.00% for Mid Cap Value Series and 0.75% for
Small Cap Value Series, as a percentage of the Series' average daily net assets.
Roxbury Capital Management, LLC, 100 Wilshire Boulevard, Suite 600, Santa
Monica, California 90401, serves as the investment adviser for the WT Large Cap
Growth Series. Roxbury is engaged in a variety of investment advisory activities
including the management of separate accounts and, as of August 31, 1999, had
assets under management of approximately 7.5 billion. Roxbury does not currently
advise any other mutual fund.
Under the advisory agreement, the WT Large Cap Growth Series pays a
monthly advisory fee to Roxbury at the annual rate of 0.55% of the Series' first
$1 billion of average daily net assets; 0.50% of the Series next $1 billion of
average daily net assets; and 0.45% of the Series' average daily net assets.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
E. Matthew Brown, Vice President of WTC is responsible for the day-to-day
management of the Large Cap Core Series. Mr. Brown joined WTC in October of
1996. Prior to joining WTC, he served as Chief Investment Officer of PNC Bank,
Delaware, from 1993 through 1996. Mr. Brown also is responsible for
co-management of the Small Cap Core Series.
Thomas P. Neale, CFA, Vice President, Equity Research Division of WTC is
responsible for the co-management of the Small Cap Core Series. Mr. Neale joined
Wilmington Trust in 1986 as an Institutional Multi-Manager Portfolio Manager.
Currently he specializes in managing taxable accounts for Delaware holding
companies and has equity research responsibilities following the insurance and
brokerage industries.
Robert J. Christian, Chief Investment Officer of WTC, or his delegate, is
primarily responsible for monitoring the day-to-day investment activities of the
sub-advisers to the International Multi-Manager Series. Mr. Christian has been a
Director of Rodney Square Management Corporation since February 1996, and was
Chairman and Director of PNC Equity Advisors Company, and President and Chief
Investment Officer of PNC Asset Management Group, Inc. from 1994 to 1996. He was
Chief Investment Officer of PNC Bank, N.A. from 1992 to 1996 and Director of
Provident Capital Management from 1993 to 1996.
The day-to-day management of the Large Cap Value Series, the Mid Cap Value
Series and the Small Cap Value Series is shared by a team of individuals
employed by the CRM. Ronald H. McGlynn and Jay B. Abramson are responsible for
the overall management of these Series. In addition, Michael A. Prober is part
of the team responsible for the management of Mid Cap Value Series; Scott L.
Scher and Christopher Fox are part of the team responsible for the management of
Small Cap Value Series; and Kevin M. Chin and Adam L. Starr are part of the team
responsible for the management of the Large Cap Value Series. Each portfolio
manager's business experience and educational background is as follows:
29
<PAGE>
Ronald H. McGlynn President and Chief Executive Officer since 1983 and
Co-Chief Investment Officer of CRM. He has been with CRM for twenty-five years
and is responsible for investment policy, portfolio management and investment
research. Prior to his association with CRM, Mr. McGlynn was a Portfolio Manager
at Oppenheimer & Co. He received a B.A. from Williams College and a M.B.A. from
Columbia University.
Jay B. Abramson, CPA Executive Vice President since 1989 and Director of
Research and Co-Chief Investment Officer of CRM. He has been with CRM for twelve
years and is responsible for investment research and portfolio management. Mr.
Abramson received a B.S.E. and J.D. from the University of Pennsylvania Wharton
School and Law School, respectively, and is a Certified Public Accountant.
Michael A. Prober Vice President of CRM since 1993 where he is responsible
for investment research. Prior to joining CRM in 1993, he worked in corporate
finance and commercial banking at Chase Manhattan Bank and as a Research Analyst
for Alpha Capital Venture Partners. Mr. Prober received a B.B.A. from the
University of Michigan and an M.M. from the Northwestern University J.L. Kellogg
Graduate School of Management.
Scott L. Scher, CFA Vice President of CRM since 1995 where he is
responsible for investment research. Prior to joining CRM in 1995, he worked as
an analyst/portfolio manager at The Prudential from 1988. Mr. Scher received a
B.A. from Harvard College, a M.B.A. from Columbia Business School and is a
Chartered Financial Analyst.
Kevin M. Chin is a Vice President at CRM. Kevin joined CRM in 1989. He is
responsible for investment research. Formerly, Kevin was a Financial Analyst for
the Mergers and Acquisitions Department of Morgan Stanley and a risk arbitrageur
with The First Boston Corporation. He received a BS from Columbia University
School of Engineering and Applied Science.
Christopher S. Fox, CFA joined CRM in 1999 as a Vice President and has
over fifteen years experience in the Investment business. In 1995 Chris
co-founded Schaenen Fox Capital Management, LLC, a hedge fund with small cap
value investments. He previously was at Schaenen Wood & Associates, Inc. as Vice
President and Senior Manager/Analyst; Chemical Bank's Private Banking Division
as a portfolio manager and analyst; and Drexel Burnham Lambert, Inc. as a
financial analyst. Chris earned a BA in Economics from the State University of
New York at Albany and an MBA in Finance from New York University's Stern School
of Business.
Adam L. Starr joined CRM in 1999 as a Vice President and is responsible
for investment research. Prior to CRM, he was a Partner and Portfolio Manager at
Weiss, Peck & Greer, LLC. Previously, he was an Analyst and Portfolio Manager at
Charter Oak Partners and First Manhattan Company. Adam earned an MBA from
Columbia University.
The day-to-day management of the Large Cap Growth Series is the
responsibility of Roxbury's Investment Committee. The Investment Committee meets
regularly to make investment decisions for the Series and relies on Roxbury's
research team.
- --------------------------------------------------------------------------------
SUB-ADVISERS
- --------------------------------------------------------------------------------
The International Multi-Manager Series has three sub-advisers, Clemente
Capital Inc., Invista Capital Management, Inc. and Scudder Kemper Investments,
Inc. Clemente, located at Carnegie Hall Tower, 152 West 57th Street, 25th Floor,
New York, New York 10019, registered as an investment adviser in 1979. Clemente
manages in excess of $500 million in assets. Leopoldo M. Clemente, President and
Chief Investment Officer serves as portfolio manager for the portion of the
International Multi-Manager Series' assets under Clemente's
30
<PAGE>
management. Mr. Clemente has been responsible for portfolio management and
security selection for the past eight years.
Invista, located at 1800 Hub Tower, 699 Walnut Street, Des Moines, Iowa
50309, is a registered investment adviser organized in 1984. Invista is an
indirect, wholly owned subsidiary of Principal Mutual Life Insurance Company.
Invista manages in excess of $26 billion in assets, of which approximately $3.8
billion are in foreign equities in separately managed accounts and mutual funds
for public funds, corporations, endowments and foundations, insurance companies
and individuals. Scott D. Opsal, CFA, Executive Vice President and lead
portfolio manager of international equities for Invista, is the portfolio
manager for the portion of the International Multi-Manager Series under
Invista's management. Mr. Opsal joined Invista at its inception in 1985 and
assumed his current responsibilities in 1993. Before 1993, his responsibilities
included security analysis and portfolio management activities for various U.S.
equity portfolios, managing the firm's convertible securities and overseeing
Invista's index fund and derivatives positions. Kurtis D. Spieler, CFA, Vice
President and manager of the firm's dedicated emerging market portfolios, is Mr.
Opsal's backup. Mr. Spieler has been Invista's emerging markets portfolio
manager since joining Invista in 1995.
Scudder Kemper, located at 345 Park Avenue, New York, New York 10154, was
founded as America's first independent investment counselor and has served as
investment adviser, administrator and distributor of mutual funds since 1928.
Scudder Kemper manages in excess of $200 billion in assets, with approximately
$30 billion of those assets in foreign investments in separately managed
accounts for pension funds, foundations, educational institutions and government
entities and in open-end and closed-end investment companies. Irene T. Cheng
serves as the lead portfolio manager for the portion of the International
Multi-Manager Series' assets under Scudder Kemper's management. Ms. Cheng has
been in the asset management business for over nine years and joined Scudder
Kemper as a portfolio manager in 1993.
31
<PAGE>
- --------------------------------------------------------------------------------
Service Providers
- --------------------------------------------------------------------------------
The chart below provides information on the Portfolios' primary service
providers.
Asset Shareholder
Management Services
- --------------------------------- --------------------------------
Investment Advisers Transfer Agent
Wilmington Trust Company PFPC Inc.
Rodney Square North 400 Bellevue Parkway
1100 N. Market Street Wilmington, DE 19809
Wilmington, DE 19890-0001
Handles shareholder services,
Cramer Rosenthal McGlynn, LLC including recordkeeping and
707 Westchester Avenue statements, payment of
White Plains, NY 10604 distributions and
processing of
Roxbury Capital Management, LLC buy and sell requests.
100 Wilshire Boulevard, Suite 600
Santa Monica, CA 90401
Manages each Portfolio's
investment activities.
- --------------------------------- --------------------------------
| |
| |
| |
| |
---------------------------------
WT MUTUAL FUND
---------------------------------
| | \
| | \
| | \
Fund | | Asset \
Operations | | Safe Keeping \
| | \
- ---------------------------------- | --------------------------------
Administrator and | Custodian
Accounting Agent |
| Wilmington Trust Company
PFPC Inc. | 1100 N. Market Street
400 Bellevue Parkway | Wilmington, DE 19890
Wilmington, DE 19809 |
| Holds each Portfolio's assets,
Provides facilities, equipment and | settles all portfolio trades
personnel to carry out | and collects most of the
administrative services related to | valuation data required for
each Portfolio and calculates each | calculating each Portfolio's NAV
Portfolio's NAV per share | per share.
and distributions. |
- ---------------------------------- | --------------------------------
|
|
|
Distribution |
|
------------------------------------
Distributor
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken, PA 19428
Distributes each Portfolio's Shares.
------------------------------------
32
<PAGE>
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
- --------------------------------------------------------------------------------
The Portfolios value their assets based on current market values when such
values are available. These prices normally are supplied by a pricing service.
Any assets held by a Portfolio that are denominated in foreign currencies are
valued daily in U.S. dollars at the foreign currency exchange rates that are
prevailing at the time that PFPC determines the daily net asset value. To
determine the value of those securities, PFPC may use a pricing service that
takes into account not only developments related to specific securities, but
also transactions in comparable securities. Securities that do not have a
readily available current market value are valued in good faith under the
direction of the Board of Trustees.
PLAIN TALK
===================================================================
WHAT IS THE NET ASSET VALUE OR "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
===================================================================
PFPC determines the NAV per share of each Portfolio as of the close of
regular trading on the New York Stock Exchange (currently 4:00 p.m. Eastern
time), on each Business Day (a day that the Exchange, the Transfer Agent and the
Philadelphia branch of the Federal Reserve Bank are open for business). The NAV
is calculated by adding the value of all securities and other assets in a
Portfolio, deducting its liabilities and dividing the balance by the number of
outstanding shares in that Portfolio.
Shares will not be priced on those days the Portfolios are closed. As of
the date of this prospectus, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
HOW TO PURCHASE SHARES:
o Directly by mail or by wire
o As a client of WTC through a trust account or a corporate
cash management account
o As a client of a Service Organization
===================================================================
33
<PAGE>
Portfolio shares are offered on a continuous basis and are sold without
any sales charges. The minimum initial investment in Institutional class shares
of each Portfolio is $1,000. Additional investments in any Portfolio may be made
in any amount. You may purchase shares as specified below.
You may also purchase shares if you are a client of WTC through your trust
or corporate cash management accounts. If you are a client of an institution
(such as a bank or broker-dealer) that has entered into a servicing agreement
with the distributor ("Service Organization"), you may also purchase shares
through such Service Organization. You should also be aware that you may be
charged a fee by WTC or the Service Organization in connection with your
investment in the Portfolios. If you wish to purchase Portfolio shares through
your account at WTC or a Service Organization, you should contact that entity
directly for information and instructions on purchasing shares.
By Mail: You may purchase shares by sending a check drawn on a U.S. bank
payable to Wilmington Equity Portfolios, indicating the name of the Portfolio,
along with a completed application (included at the end of this prospectus). If
a subsequent investment is being made, the check should also indicate your
Portfolio account number. When you make purchases by check, each Portfolio may
withhold payment on redemptions until it is reasonably satisfied that the funds
are collected (which can take up to 10 days). If you purchase shares with a
check that does not clear, your purchase will be canceled and you will be
responsible for any losses or fees incurred in that transaction. Send the check
and application to:
Regular mail: Overnight mail:
--------------- ------------------
Wilmington Equity Portfolios Wilmington Equity Portfolios
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Wire: You may purchase shares by wiring federal funds readily
available. Please call PFPC at (800) 336-9970 for instructions and to make
specific arrangements before making a purchase by wire, and if making an initial
purchase, to also obtain an account number.
Additional Information Regarding Purchases: Purchase orders received by
the Transfer Agent before the close of regular trading on the Exchange on any
Business Day will be priced at the NAV that is determined as of the close of
trading. Purchase orders received after the close of regular trading on the
Exchange will be priced as of the close of regular trading on the following
Business Day.
Any purchase order may be rejected if a Portfolio determines that
accepting the order would not be in the best interest of the Portfolio or its
shareholders.
It is the responsibility of WTC or the Service Organization to transmit
orders for the purchase of shares by its customers to the Transfer Agent and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
For information on other ways to purchase shares, including through an
individual retirement account (IRA), an automatic investment plan or a payroll
investment plan, please refer to the Statement of Additional Information.
34
<PAGE>
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
HOW TO REDEEM (SELL) SHARES:
o By mail
o By telephone
===================================================================
You may sell your shares on any Business Day, as described below.
Redemptions are effected at the NAV next determined after the Transfer Agent has
received your redemption request. There is no fee when Portfolio shares are
redeemed. It is the responsibility of WTC or the Service Organization to
transmit redemption orders and credit their customers' accounts with redemption
proceeds on a timely basis. Redemption checks are mailed on the next Business
Day following receipt by the Transfer Agent of redemption instructions, but
never later than 7 days following such receipt. Amounts redeemed by wire are
normally wired on the date of receipt of redemption instructions or the next
Business Day if received after 4:00 p.m. Eastern time, or on a non-Business Day,
but never later than 7 days following such receipt. If you purchased your shares
through an account at WTC or a Service Organization, you should contact WTC or
the Service Organization for information relating to redemptions. The
Portfolio's name and your account number should accompany any redemption
requests.
By Mail: If you redeem your shares by mail, you should submit written
instructions with a "signature guarantee." A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public. You must
indicate the Portfolio name, your account number and your name. The written
instructions and signature guarantee should be mailed to:
Regular mail: Overnight mail:
--------------- ------------------
Wilmington Equity Portfolios Wilmington Equity Portfolios
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Telephone: If you prefer to redeem your shares by telephone you may
elect to do so. However there are certain risks. The Portfolios have certain
safeguards and procedures to confirm the identity of callers and to confirm that
the instructions communicated are genuine. If such procedures are followed, you
will bear the risk of any losses.
Additional Information Regarding Redemptions: Redemption proceeds may be
wired to your predesignated bank account in any commercial bank in the United
States if the amount is $1,000 or more. The receiving bank may charge a fee for
this service. Proceeds may also be mailed to your bank or, for amounts of
$10,000 or less, mailed to your Portfolio account address of record if the
address has been established for at least 60 days. In order to authorize the
Transfer Agent to mail redemption proceeds to your Portfolio account address of
record, complete the appropriate section of the Application for Telephone
Redemptions or include your Portfolio account
35
<PAGE>
address of record when you submit written instructions. You may change the
account that you have designated to receive amounts redeemed at any time. Any
request to change the account designated to receive redemption proceeds should
be accompanied by a guarantee of your signature by an eligible institution. A
signature and a signature guarantee are required for each person in whose name
the account is registered. Further documentation will be required to change the
designated account when a corporation, other organization, trust, fiduciary or
other institutional investor holds the Portfolio shares.
If the shares to be redeemed represent a recent investment made by check,
the Portfolio reserves the right not to send the redemption proceeds until it
believes that the check has been collected (which could take up to 10 days).
Small Accounts: If the value of your Portfolio account falls below $500,
the Portfolio may ask you to increase your balance. If the account value is
still below $500 after 60 days, the Portfolio may close your account and
send you the proceeds. The Portfolio will not close your account if it falls
below $500 solely as a result of a reduction in your account's market value.
The Mid Cap Value, Small Cap Value and Large Cap Value Portfolios reserve
the right to make "redemptions in kind" -- payments of redemption proceeds in
portfolio securities rather than cash -- if the amount redeemed is large enough
to affect their respective Series' operations (for example, if it represents
more than 1% of the Series' assets).
For additional information on other ways to redeem shares, please refer to
the Statement of Additional Information.
36
<PAGE>
- --------------------------------------------------------------------------------
EXCHANGE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund
to another fund within a family of funds.
===================================================================
You may exchange all or a portion of your shares in a Portfolio for
Institutional class shares of the following Portfolios:
Wilmington Prime Money Market Portfolio
Wilmington U.S. Government Portfolio
Wilmington Tax-Exempt Portfolio
Wilmington Premier Money Market Portfolio
Wilmington Short/Intermediate Bond Portfolio
Wilmington Intermediate Bond Portfolio
Wilmington Municipal Bond Portfolio
Wilmington Large Cap Growth Portfolio
Wilmington Large Cap Core Portfolio
Wilmington Small Cap Core Portfolio
Wilmington Large Cap Value Portfolio
Wilmington Mid Cap Value Portfolio
Wilmington Small Cap Value Portfolio
Wilmington International Multi-Manager Portfolio
Redemption of shares through an exchange will be effected at the NAV per
share next determined after the Transfer Agent receives your request. A purchase
of shares through an exchange will be effected at the NAV per share determined
at that time or as next determined thereafter.
Exchange transactions will be subject to the minimum initial investment
and other requirements of the Portfolio into which the exchange is made. An
exchange may not be made if the exchange would leave a balance in a
shareholder's account of less than $500.
To obtain prospectuses of the other Portfolios, you may call (800)
336-9970. To obtain more information about exchanges, or to place exchange
orders, contact the Transfer Agent, or, if your shares are held in a trust
account with WTC or in an account with a Service Organization, contact WTC or
the Service Organization. The Portfolios may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. This exchange offer is valid only in those jurisdictions where the
sale of Portfolio shares to be acquired through such exchange may be legally
made.
37
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
PLAIN TALK
===================================================================
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest and dividends earned by
a fund on its investments less accrued expenses.
===================================================================
Distributions from the net investment income of each Portfolio are
declared and paid annually to you. Any net capital gain realized by a Portfolio
will be distributed annually. Net realized gains or losses from foreign currency
transactions in the International Multi-Manager Portfolio are included as a
component of net investment income.
Distributions are payable to the shareholders of record at the time the
distributions are declared (including holders of shares being redeemed, but
excluding holders of shares being purchased). All distributions are reinvested
in additional shares, unless you have elected to receive the distributions in
cash.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
As long as a Portfolio meets the requirements for being a "regulated
investment company," it pays no Federal income tax on the earnings and gains it
distributes to shareholders. While each Portfolio may invest in securities that
earn interest exempt from Federal income tax, the Portfolios invest primarily in
taxable securities. Each Portfolio will notify you following the end of the
calendar year of the amount of dividends and other distributions paid that year.
The Portfolios' distributions of net investment income, whether received
in cash or reinvested in additional Portfolio shares, are generally taxable to
you as ordinary income. The Portfolios' distributions of net capital gain,
whether received in cash or reinvested in additional Portfolio shares, are
taxable to you as long-term capital gain, regardless of the length of time you
have held your shares. You should be aware that if Portfolio shares are
purchased shortly before the record date for any dividend or net capital gain
distribution, you will pay the full price for the shares and will receive some
portion of the price back as a taxable distribution. Each of the Large Cap
Growth Portfolio, the Small Cap Core Portfolio and the International
Multi-Manager Portfolio anticipates the distribution of net capital gain. Each
of the Large Cap Value Portfolio, the Mid Cap Value Portfolio and the Small Cap
Value Portfolio anticipates the distribution of net investment income.
It is a taxable event for you if you sell or exchange shares of any
Portfolio. Depending on the purchase price and the sale price of the shares you
exchange, you may have a taxable gain or loss on the transaction. You are
responsible for any tax liability generated by your transactions.
STATE AND LOCAL INCOME TAXES: You should consult your tax advisers
concerning state and local taxes, which may have different consequences from
those of the Federal income law.
This section is only a summary of some important income tax considerations
that may affect your investment in a Portfolio. More information regarding those
considerations appears in our Statement of Additional Information. You are urged
to consult your tax adviser regarding the effects of an investment on your tax
situation.
38
<PAGE>
DISTRIBUTION ARRANGEMENTS
Provident Distributors, Inc. ("PDI") manages the Portfolios' distribution
efforts and provides assistance and expertise in developing marketing plans and
materials, enters into dealer agreement with broker-dealers to sell shares and
provides shareholder support services, directly or through affiliates. The
Portfolios do not charge any sales loads, deferred sales loads or other fees in
connection with the purchase of shares.
- --------------------------------------------------------------------------------
MASTER/FEEDER STRUCTURE
- --------------------------------------------------------------------------------
Other institutional investors, including other mutual funds, may invest in
the master funds. The master/feeder structure enables various institutional
investors, including a Portfolio, to pool their assets, which may be expected to
result in economies by spreading certain fixed costs over a larger asset base.
Each shareholder of a master fund, including a Portfolio, will pay its
proportionate share of the master fund's expenses.
For reasons relating to costs or a change in investment goal, among
others, a Portfolio could switch to another master fund or decide to manage its
assets itself. No Portfolio is currently contemplating such a move.
- --------------------------------------------------------------------------------
SHARE CLASSES
- --------------------------------------------------------------------------------
The Portfolios issue Investor and Institutional classes of shares. The
Institutional class is offered to retirement plans. The Investor class pays an
additional 12b-1 fee. Any investor may purchase Investor class shares.
39
<PAGE>
FOR MORE INFORMATION
FOR INVESTORS WHO WANT MORE INFORMATION ON THE PORTFOLIOS, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
Annual/Semi-Annual Reports: Contain performance data and information on
portfolio holdings, operating results and a discussion of the market conditions
and investment strategies that significantly affected a Portfolio's performance
for the most recently completed fiscal year or half-year.
Statement of Additional Information (SAI): Provides a complete technical
and legal description of a Portfolio's policies, investment restrictions,
risks, and business structure. This prospectus incorporates the SAI by
reference.
Copies of these documents and answers to questions about the Portfolios
may be obtained without charge by contacting:
WT Mutual Fund
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) 336-9970
9:00 a.m. to 5:00 p.m., Eastern time
Information about the Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Room of the SEC, Washington,
DC, 20549-6009. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-(800)-SEC-0330. Reports and other information
about the Portfolios may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)-336-9970.
The investment company registration number for WT Mutual Fund is 811-08648.
40
<PAGE>
TRUSTEES
Robert H. Arnold
Eric Brucker
Robert J. Christian
Louis Klein Jr.
Nicholas A. Giordano
Clement C. Moore, II
John J. Quindlen
William P. Richards
------------------------------
OFFICERS
Robert J. Christian, President
Eric Cheung, Vice President
Gary M. Gardner, Secretary
Pat Colletti, Treasurer
------------------------------
INVESTMENT ADVISER
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Cramer Rosenthal McGlynn, LLC
707 Westchester Avenue
White Plains, NY 10640
Roxbury Capital Management, LLC
100 Wilshire Blvd., Suite 600
Santa Monica, CA90401
------------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------------
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken,PA 19428
------------------------------
ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
------------------------------
<PAGE>
WILMINGTON
FUNDS
Fixed Income
Portfolios
PROSPECTUS
WFIP-Pros-11/99 November 1, 1999
<PAGE>
THE WILMINGTON SHORT/INTERMEDIATE BOND PORTFOLIO
THE WILMINGTON INTERMEDIATE BOND PORTFOLIO
THE WILMINGTON MUNICIPAL BOND PORTFOLIO
OF WT MUTUAL FUND
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
PROSPECTUS DATED NOVEMBER 1, 1999
This prospectus gives vital information about these mutual funds,
including information on investment policies, risks and fees. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.
Please note that these Portfolios:
o are not bank deposits
o are not obligations of, or guaranteed or endorsed by
Wilmington Trust Company or any of its affiliates
o are not federally insured
o are not obligations of, or guaranteed or endorsed or otherwise
supported by the U.S. Government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
governmental agency
o are not guaranteed to achieve their goal(s)
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
A LOOK AT THE GOALS, Summary.........................................3
STRATEGIES, RISKS, Performance Information.........................4
EXPENSES AND FINANCIAL Fees and Expenses...............................8
HISTORY OF EACH Investment Objectives...........................9
PORTFOLIO. Primary Investment Strategies...................9
Series Composition.............................11
Additional Risk Information....................12
Financial Highlights...........................14
MANAGEMENT OF THE PORTFOLIO
DETAILS ABOUT THE Investment Adviser.............................17
SERVICE PROVIDERS. Portfolio Managers ............................17
Service Providers..............................18
SHAREHOLDER INFORMATION
POLICIES AND Pricing of Shares..............................19
INSTRUCTIONS FOR Purchase of Shares.............................19
OPENING, MAINTAINING AND Redemption of Shares...........................21
CLOSING AN ACCOUNT IN Exchange of Shares.............................22
ANY OF THE PORTFOLIOS. Distributions..................................23
Taxes..........................................23
DISTRIBUTION ARRANGEMENTS
DETAILS ON THE Master/Feeder Structure........................25
PORTFOLIO'S Share Classes..................................25
MASTER/FEEDER
ARRANGEMENTS.
FOR MORE INFORMATION ..............................26
For information about key terms and concepts, look for our "PLAIN TALK"
explanations.
2
<PAGE>
THE WILMINGTON SHORT/INTERMEDIATE BOND PORTFOLIO
THE WILMINGTON INTERMEDIATE BOND PORTFOLIO
THE WILMINGTON MUNICIPAL BOND PORTFOLIO
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
PORTFOLIO DESCRIPTION
PLAIN TALK
=====================================================================
WHAT IS A MUTUAL FUND?
A mutual fund pools shareholders' money and, using a professional
investment manager, invests it in securities like stocks and bonds.
Each Portfolio described in this prospectus is a separate mutual
fund.
=====================================================================
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
Investment Objective o The SHORT/INTERMEDIATE BOND PORTFOLIO and
the INTERMEDIATE BOND PORTFOLIO each seeks
a high total return, consistent with high
current income.
o The MUNICIPAL BOND PORTFOLIO seeks a high
level of income exempt from federal income
tax, consistent with the preservation of
capital.
- --------------------------------------------------------------------------------
Investment Focus o Fixed income securities
- --------------------------------------------------------------------------------
Share Price Volatility o Moderate
- --------------------------------------------------------------------------------
Principal Investment Strategy o Each Portfolio operates as a "feeder fund"
which means that the Portfolio does not
buy individual securities directly.
Instead, it invests in a corresponding
mutual fund or "master fund," which in
turn purchases investment securities. The
Portfolios invest all of their assets in
master funds which are separate series of
WT Investment Trust I. Each Portfolio and
its corresponding Series have the same
investment objective, policies and
limitations.
o The SHORT/INTERMEDIATE BOND PORTFOLIO
invests in the Short/Intermediate Bond
Series, which invests at least 85% of its
total assets in various types of
investment grade fixed income securities.
o The INTERMEDIATE BOND PORTFOLIO invests in
the Intermediate Bond Series, which
invests at least 85% of its total assets
in various types of investment grade fixed
income securities.
3
<PAGE>
o The MUNICIPAL BOND PORTFOLIO invests in
the Municipal Bond Series, which invests
at least 80% of its net assets in
municipal securities that provide interest
exempt from federal income tax.
o The Series' adviser purchases securities
based on their yield or potential capital
appreciation, or both. The adviser may
sell securities in anticipation of market
declines or if the securities are
downgraded to below investment grade.
- --------------------------------------------------------------------------------
Principal Risks The Portfolios are subject to the following
risks summarized below which are further
described under "Additional Risk Information."
o An investment in a Portfolio is not a
deposit of Wilmington Trust Company or any
of its affiliates and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency.
o It is possible to lose money by investing
in a Portfolio.
o The fixed income securities in which the
Portfolios invest through their
corresponding Series are subject to credit
risk, prepayment risk, market risk,
liquidity risk and interest rate risk.
Typically, when interest rates rise, the
market prices of fixed income securities
go down.
o The performance of a Portfolio will depend
on whether or not the adviser is
successful in pursuing an investment
strategy.
- --------------------------------------------------------------------------------
Investor Profile o Investors who want income from their
investments without the volatility of an
equity portfolio.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
WHAT IS TOTAL RETURN?
Total return is a measure of the per-share change in the total value
of a fund's portfolio, including any distributions paid to you. It
is measured from the beginning to the end of a specific time period.
=====================================================================
WILMINGTON SHORT/INTERMEDIATE BOND PORTFOLIO
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
4
<PAGE>
ANNUAL RETURNS SINCE INCEPTION
[The following table was depicted as a bar chart in the printed material.]
Performance Years Returns
1995........... 14.38%
1996........... 3.40%
1997........... 8.12%
1998........... 8.10%
1999 Total Return as of September 30: 0.07%
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S
INSTITUTIONAL SHARES FROM CALENDAR YEAR TO CALENDAR YEAR.
BEST QUARTER WORST QUARTER
------------ -------------
4.54% -1.33%
(September 30, 1998) (March 31, 1996)
PLAIN TALK
=====================================================================
WHAT IS AN INDEX?
An index is a broad measure of the market performance of a specific
group of securities in a particular market, or securities in a
market sector. You cannot invest directly in an index. An index does
not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
=====================================================================
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR SINCE INCEPTION (DECEMBER 6, 1994)
- ------------------------------------- ------ ----------------------------------
<S> <C> <C>
Short/Intermediate Bond Portfolio 8.10% 7.23%
Merrill Lynch 1-10 Year U.S. Treasury Index* 8.63% 7.61%
Lehman Intermediate Government/Corporate Index** 8.44% 7.76%
<FN>
* The Merrill Lynch 1 to 10 Year U.S. Treasury Index is an unmanaged index
of fixed rate coupon bearing U.S. Treasury securities with a maturity
range of 1 to 10 years.
** The Lehman Intermediate Government/Corporate Index is an unmanaged index
of fixed rate U.S. Treasury Bonds and Notes, U.S. Government Agency
obligations and investment grade corporate debt obligations with
maturities between 1 to 10 years.
</FN>
</TABLE>
5
<PAGE>
WILMINGTON INTERMEDIATE BOND PORTFOLIO
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio and its predecessor, the Bond Fund,
a collective investment fund. The Bond Fund's performance has been included for
the periods prior to July 1, 1998 and has been adjusted to reflect the annual
deduction of fees and expenses applicable to shares of the Intermediate Bond
Portfolio (i.e. adjusted to reflect anticipated expenses, absent investment
advisory fees waivers). The Bond Fund was not registered as a mutual fund under
the Investment Company Act of 1940, and therefore was not subject to certain
investment restrictions, limitations and diversification requirements imposed by
the 1940 Act and the Internal Revenue Code. If the Bond Fund had been registered
under the 1940 Act, its performance may have been different. Of course, the
Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.
[The following table was depicted as a bar chart in the printed material.]
ANNUAL RETURNS SINCE INCEPTION
Performance Years Annual Returns
1991........... 14.36%
1992........... 6.82%
1993........... 10.60%
1994........... -4.20%
1995........... 18.90%
1996........... 1.73%
1997........... 9.06%
1998........... 8.73%
1999 Total Return as of September 30: -1.64%
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S
INSTITUTIONAL SHARES FROM CALENDAR YEAR TO CALENDAR YEAR.
BEST QUARTER WORST QUARTER
------------ -------------
6.54 % -3.41%
(June 30, 1995) (March 31, 1994)
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR 5 YEAR SINCE INCEPTION (DECEMBER 31, 1990)
- ------------------------------------- ------ ------ -----------------------------------
<S> <C> <C> <C>
Intermediate Bond Portfolio 8.73% 6.56% 8.03%
Merrill Lynch U.S. Treasury Master Index* 10.03% 7.22% 8.60%
Lehman Government/Corporate Index** 9.47% 7.30% 8.87%
<FN>
* The Merrill Lynch U.S. Treasury Master Index is an unmanaged index of
fixed rate coupon bearing U.S. Treasury securities with a maturity range
of 1 to 30 years.
** The Lehman Government/Corporate Index is an unmanaged index of fixed rate
U.S. Treasury Bonds and Notes, U.S. Government Agency obligations and
investment grade corporate debt obligations with maturities no less than 1
year.
</FN>
</TABLE>
6
<PAGE>
WILMINGTON MUNICIPAL BOND PORTFOLIO
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. Of course, the Portfolio's past
performance does not necessarily indicate how the Portfolio will perform in the
future.
ANNUAL RETURNS SINCE INCEPTION
[The following table was depicted as a bar chart in the printed material.]
Performance Years Annual Returns
1994........... -4.17%
1995........... 14.08%
1996........... 3.51%
1997........... 7.18%
1998........... 5.24%
1999 Total Return as of September 30: 0.62%
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S
INSTITUTIONAL SHARES FROM CALENDAR YEAR TO CALENDAR YEAR.
BEST QUARTER WORST QUARTER
------------ -------------
5.86 % -4.79%
(March 31, 1995) (March 31, 1994)
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR 5 YEAR SINCE INCEPTION (NOVEMBER 1, 1993)
- ------------------------------------- ------ ------ ----------------------------------
<S> <C> <C> <C>
Intermediate Bond Portfolio 5.24% 5.00% 5.11%
Merrill Lynch U.S. Treasury Master Index* 6.27% 5.76% 5.71%
<FN>
* The Merrill Lynch Intermediate Municipal Index is an unmanaged weighted
index including investment grade tax-exempt bonds with a maturity range of
0 to 22 years.
</FN>
</TABLE>
PLAIN TALK
=====================================================================
WHAT IS YIELD?
Yield is a measure of the income (dividends and interest) earned by
the securities in a fund's portfolio and paid to you over a
specified time period. The yield is expressed as a percentage of the
offering price per share on a specified date.
=====================================================================
You may call (800) 336-9970 to obtain a Portfolio's current yield.
7
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
WHAT ARE FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, shareholder distribution, administration and
custody services. Each Portfolio's expenses in the table below are
shown as a percentage of its net assets. These expenses are deducted
from Portfolio assets.
=====================================================================
The table below describes the fees and expenses that you may pay if you
buy and hold shares of a Portfolio. No sales charges or other fees are paid
directly from your investment.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO
ASSETS)(1):
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE INTERMEDIATE MUNICIPAL
BOND PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
------------------ -------------- --------------
<S> <C> <C> <C>
Management fees ............................... 0.35% 0.35% 0.35%
Distribution (12b-1) fees ..................... None None None
Other Expenses ................................ 0.24% 0.28% 0.41%
TOTAL ANNUAL OPERATING EXPENSES(2) ............ 0.59% 0.63% 0.76%
Waivers/reimbursements ........................ 0.04% 0.08% 0.01%
Net Expenses .................................. 0.55% 0.55% 0.75%
<FN>
(1) The table above and the Example below each reflect the aggregate annual
operating expenses of each Portfolio and the corresponding Series of the
Trust in which the Portfolio invests.
(2) For Institutional shares, WTC has agreed to waive a portion of its
advisory fee or reimburse expenses to the extent total annual operating
expenses exceed 0.55% for the Short/Intermediate Bond Portfolio; 0.55% for
the Intermediate Bond Portfolio; and 0.75% for the Municipal Bond
Portfolio. This waiver will remain in place until the Board of Trustees
approves its termination.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The table below
shows what you would pay if you invested $10,000 over the various time frames
indicated. The example assumes that:
o you reinvested all dividends and other distributions;
o the average annual return was 5%;
o the Portfolio's maximum (without regard to waivers or
reimbursements) total operating expenses are charged and
remain the same over the time periods; and
o you redeemed all of your investment at the end of the time
period.
8
<PAGE>
Although your actual cost may be higher or lower, based on these
assumptions, your costs would be:
INSTITUTIONAL SHARES 1 Year 3 Years 5 Years 10 Years
- -------------------- ------ ------- ------- --------
Short/Intermediate Bond Portfolio ... $60 $189 $329 $738
Intermediate Bond Portfolio ......... $64 $202 $351 $786
Municipal Bond Portfolio ............ $78 $243 $422 $942
THE ABOVE EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A
REPRESENTATION OF A PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR
FUTURE.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The SHORT/INTERMEDIATE BOND PORTFOLIO and the INTERMEDIATE BOND PORTFOLIO
each seek a high total return, consistent with high current income. The
MUNICIPAL BOND PORTFOLIO seeks a high level of income exempt from federal income
tax, consistent with the preservation of capital. These investment objectives
may not be changed without shareholder approval. There is no guarantee that a
Portfolio will achieve its investment objective.
- --------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
WHAT ARE FIXED INCOME SECURITIES?
Fixed income securities are generally bonds, which is a type of
security that functions like a loan. Bonds are IOUs issued by
private companies, municipalities or government agencies. By
comparison, when you buy a stock, you are buying ownership in a
company. With a bond, your "loan" is for a specific period, usually
5 to 30 years. You receive regular interest payments at the rate
stated when you bought the bond. Hence, the term "fixed income"
security.
=====================================================================
The SHORT/INTERMEDIATE BOND PORTFOLIO invests its assets in the
Short/Intermediate Bond Series, which:
o will invest at least 85% of its total assets in various types
of investment grade fixed income securities;
o may invest up to 10% of its total assets in investment grade
fixed income securities of foreign issuers;
o will, as a matter of fundamental policy, maintain a
short-to-intermediate average duration (2 1/2 to 4 years); and
o the average dollar-weighted duration of securities held by the
Short/Intermediate Bond Series will normally fall within a
range of 2 1/2 to 4 years.
9
<PAGE>
PLAIN TALK
=====================================================================
WHAT IS DURATION?
Duration measures the sensitivity of fixed income securities held by
a Portfolio to a change in interest rates. The value of a security
with a longer duration will normally fluctuate to a greater degree
than will the value of a security with a shorter duration should
interest rates change. For example, if interest rates were to move
1%, a bond with a 3-year duration would experience approximately a
3% change in principal value. An identical bond with a 5-year
duration would experience approximately a 5% change in its principal
value.
=====================================================================
The INTERMEDIATE BOND PORTFOLIO invests its assets in the Intermediate
Bond Series, which:
o will invest at least 85% of its total assets in various types
of investment grade fixed income securities;
o may invest up to 10% of its total assets in investment grade
fixed income securities of foreign issuers;
o will, as a matter of fundamental policy, maintain an
intermediate average duration (4 to 7 years); and
o the average dollar-weighted duration of securities held by the
Intermediate Bond Series will normally fall within a range of
4 to 7 years.
PLAIN TALK
=====================================================================
WHAT ARE INVESTMENT GRADE SECURITIES?
Investment grade securities are securities that have been determined
by a rating agency to have a medium to high probability of being
paid, although there is always a risk of default. Investment grade
securities are rated BBB, A, AA or AAA by Standard & Poor's
Corporation or Baa, A, Aa or Aaa by Moody's Investors Service.
=====================================================================
PLAIN TALK
=====================================================================
WHAT ARE MUNICIPAL SECURITIES?
Municipal securities are bonds issued by state and local governments
to raise money for their activities.
=====================================================================
The MUNICIPAL BOND PORTFOLIO invests its assets in the Municipal Bond
Series, which:
o will, as a fundamental policy, invest substantially all (at
least 80%) of its net assets in a diversified portfolio of
municipal securities that provide interest that is exempt from
federal income tax;
o may invest up to 20% of its net assets in other types of fixed
income securities that provide income that is subject to
federal tax; and
o will, as a matter of fundamental policy, maintain an
intermediate average duration (4 to 8 years); and
o the average dollar-weighted duration of securities held by the
Municipal Bond Series will normally fall within a range of 4
to 8 years.
10
<PAGE>
The Municipal Bond Series may not invest more than 25% of its total assets
in any one industry. You should note that governmental issuers of municipal
securities are not considered part of any industry. The 25% limitation applies
to municipal securities backed by the assets and revenues of non-governmental
users, such as private operators of educational, hospital or housing facilities.
However, the investment adviser may decide that the yields available from
concentrating in obligations of a particular market sector or political
subdivision justify the risk that the performance of the Municipal Bond Series
may be adversely affected by such concentration. Under such market conditions,
the Municipal Bond Series may invest more than 25% of its assets in sectors of
the municipal securities market, such as health care or housing, or in
securities relating to one political subdivision, such as a given state or U.S.
territory. Under these conditions, the Municipal Bond Series' vulnerability to
any special risks that affects that sector or jurisdiction could have an adverse
impact on the value of an investment in the Series. There are no limitations on
the Municipal Bond Series' investment in any one of the three general categories
of municipal obligations: general obligation bonds, revenue (or special)
obligation bonds and private activity bonds.
- --------------------------------------------------------------------------------
SERIES COMPOSITION
- --------------------------------------------------------------------------------
The composition of each Series' holdings varies, depending upon the
investment adviser's analysis of the fixed income markets, the municipal
securities market and the expected trends in those markets. The securities
purchased by the Series may be purchased based upon their yield, the income
earned by the security, or their potential capital appreciation, the potential
increase in the security's value, or both. The investment adviser seeks to
protect the Series' principal value by reducing fluctuations in value relative
to those that may be experienced by fixed income funds with a longer average
duration. This strategy may reduce the level of income attained by the Series.
There is no guarantee that principal value can be protected during periods of
extreme interest volatility.
PLAIN TALK
=====================================================================
CORPORATE BONDS VS. GOVERNMENT BONDS:
Bonds issued by corporations generally pay a higher interest rate
than government bonds. That's because corporate bonds are somewhat
riskier than government bonds and the interest payments on
government bonds are exempt from some or all taxes. For example, if
you live in Delaware and buy a bond issued by the state of Delaware
or by any other government or municipal agency in Delaware, your
interest on the bond is exempt from state and federal income taxes.
But if your bond is issued by any state other than the one in which
you reside, the interest would only be exempt from federal income
tax and you would have to pay your state income tax. Interest
payments on U.S. Treasury bonds are exempt from state and local
taxes.
=====================================================================
The Series invest only in securities that are rated, at the time of
purchase, in the top four categories by a rating agency such as Moody's
Investors Service, Inc. or Standard & Poor's. If the securities are not rated,
then the investment adviser must determine that they are of comparable quality.
The table below shows each Series' principal investments. These are the
types of securities that will most likely help a Series achieve its investment
objective.
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
SHORT/INTERMEDIATE INTERMEDIATE MUNICIPAL
BOND BOND BOND
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset-Backed Securities /x/ /x/
- --------------------------------------------------------------------------------------------
Bank Obligations /x/ /x/
- --------------------------------------------------------------------------------------------
Corporate Bonds, Notes and Commercial Paper /x/ /x/
- --------------------------------------------------------------------------------------------
Mortgage-Backed Securities /x/ /x/
- --------------------------------------------------------------------------------------------
Municipal Securities /x/ /x/ /x/
- --------------------------------------------------------------------------------------------
Obligations Issued By Supranational Agencies /x/ /x/
- --------------------------------------------------------------------------------------------
</TABLE>
Each Series also may use other strategies and engage in other investment
practices, which are described in detail in our Statement of Additional
Information. The investments and strategies listed above and described
throughout this prospectus are those that we use under normal market conditions.
- --------------------------------------------------------------------------------
ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
The following is a list of certain risks that may apply to your investment
in a Portfolio. Further information about investment risks is available in our
Statement of Additional Information:
o CREDIT RISK: The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become
unable to honor a financial obligation.
o FOREIGN SECURITY RISK: The risk of losses due to political,
regulatory, economic, social or other uncontrollable forces in
a foreign country (Short/Intermediate Bond and Intermediate
Bond Series only).
o INTEREST RATE RISK: The risk of market losses attributable to
changes in interest rates. With fixed-rate securities, a rise
in interest rates typically causes a fall in values, while a
fall in rates typically causes a rise in values. The yield
earned by a Portfolio will vary with changes in interest
rates.
o LEVERAGE RISK: The risk associated with securities or
practices (such as when-issued and forward commitment
transactions) that multiply small market movements into larger
changes in value.
o LIQUIDITY RISK: The risk that certain securities may be
difficult or impossible to sell at the time and the price that
the seller would like.
o MARKET RISK: The risk that the market value of a security may
move up and down, sometimes rapidly and unpredictably.
12
<PAGE>
o MASTER/FEEDER RISK: The Portfolios' master/feeder structure is
relatively new and more complex. While this structure is
designed to reduce costs, it may not do so, and the Portfolios
might encounter operational or other complications. For
example, large-scale redemptions by other feeders of their
shares of a master fund could have adverse effects on a
Portfolio such as requiring the liquidation of a substantial
portion of the master fund's holdings at a time when it could
be disadvantageous to do so. Also, other feeders of a master
fund may have a greater ownership interest in the master fund
than a Portfolio's interest and, therefore, could have
effective voting control over the operation of the master
fund.
o OPPORTUNITY RISK: The risk of missing out on an investment
opportunity because the assets necessary to take advantage of
it are tied up in less advantageous investments.
o PREPAYMENT RISK: The risk that a debt security may be paid off
and proceeds invested earlier than anticipated. Depending on
market conditions, the new investments may or may not carry
the same interest rate.
o VALUATION RISK: The risk that a Series has valued certain of
its securities at a higher price than it can sell them for.
o YEAR 2000 READINESS RISK: Like other organizations around the
world, the Series could be adversely affected if the computer
systems used by their various service providers (or the market
in general) do not properly operate after January 1, 2000. The
Series are taking steps to address the Year 2000 issue with
respect to the computer systems that they rely on. There can
be no assurance, however, that these steps will be sufficient
to avoid a temporary service disruption or any adverse impact
on the Series.
Additionally, if a company in which a Series is invested is
adversely affected by Year 2000 problems, it is likely that
the price of that company's securities will also be adversely
affected. A decrease in one or more of a Series' holdings may
have a similar impact on the price of the Series' shares. The
Series' adviser will rely on public filings and other
statements made by companies about their Year 2000 readiness.
Issuers in countries outside the U.S. present a greater Year
2000 readiness risk because they may not be required to make
the same level of disclosure about their Year 2000 readiness
as is required in the U.S. The adviser is not able to audit
any company and its major suppliers to verify their Year 2000
readiness.
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past 5 years or since the Portfolio's
inception, if shorter. Certain information reflects financial results for a
single Institutional share of a Portfolio. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in a
Portfolio (assuming reinvestment of all dividends and other distributions).
Financial Highlights (except those of the Short/Intermediate Bond Portfolio for
the fiscal years ended June 30, 1998, 1997, 1996 and 1995 which were audited by
other auditors) have been audited by Ernst & Young LLP, whose report, along with
each Portfolio's financial statements, is included in the Annual Report, which
is available without charge upon request.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
--------------------------------------------------------------------
1999(1) 1998(2) 1997(2) 1996(2) 1995(2)+
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
WILMINGTON SHORT/INTERMEDIATE BOND PORTFOLIO
NET ASSET VALUE -- BEGINNING OF PERIOD ........... $10.40 $10.15 $10.05 $10.25 $10.00
------ ------ ------ ------ ------
Investment Operations:
Net investment income .......................... 0.54 0.59 0.65 0.65 0.60
Net realized and unrealized gain (loss) on
investments .................................. (0.14) 0.28 0.10 (0.20) 0.25
------ ------ ------ ------ ------
Total from investment operations ............. (0.40) 0.87 0.75 0.45 0.85
------ ------ ------ ------ ------
Distributions:
From net investment income ..................... (0.54) (0.59) (0.65) (0.65) (0.60)
From net realized gain on investments .......... (0.41) (0.03) -- -- --
------ ------ ------ ------ ------
Total distributions .......................... (0.95) (0.62) (0.65) (0.65) (0.60)
------ ------ ------ ------ ------
NET ASSET VALUE -- END OF PERIOD ................. $9.85 $10.40 $10.15 $10.05 $10.25
====== ====== ====== ====== ======
TOTAL RETURN ..................................... (3.86)% 8.68% 7.51% 4.48% 8.88%*
RATIOS (TO AVERAGE NET ASSETS)/ SUPPLEMENTAL DATA:
Expenses (net of fee waivers)(3) ............... 0.50% 0.50% 0.50% 0.50% 0.41%**
Net investment income(3)........................ 5.30% 5.63% 6.27% 6.37% 6.41%**
Portfolio turnover rate .......................... N/A N/A N/A% 86.06% 128.95%**
Net assets, end of period (000s omitted) ......... $64,887 $60,797 $108,314 $122,952 $105,020
</TABLE>
- ----------
+ For the period July 25, 1994 (commencement of operations) through June 30,
1995.
(1) Effective October 20, 1998, Wilmington Trust Company ("WTC"), a wholly
owned subsidiary of Wilmington Trust Corporation, became the investment
manager to each Series of the Trust.
(2) The per share data has been restated to reflect a 1 for 5 reverse stock
split which occurred on September 25, 1997.
(3) The annualized expense ratios, had there been no fees waived by the
adviser, would have been 0.72%, 0.58%, 0.58%, 0.57% and 0.53% for the
fiscal years ended June 30, 1999, 1998, 1997, 1996 and for the period
ended June 30, 1995, respectively. The annualized net investment income
ratios, had there been no fees waived by the adviser, would have been
5.07%, 5.55%, 6.19%, 6.30% and 6.29% for the fiscal years ended June 30,
1999, 1998, 1997, 1996 and for the period ended June 30, 1995,
respectively. The expense and net investment income ratios for the fiscal
years ended June 30, 1999, 1998 and 1997 include expenses allocated from
the Series.
* Not annualized.
** Annualized.
14
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 1, 1998 JUNE 29, 1998+
THROUGH THROUGH
JUNE 30, 1999 OCTOBER 31, 1998
------------- ----------------
<S> <C> <C>
WILMINGTON INTERMEDIATE BOND PORTFOLIO(1)
NET ASSET VALUE -- BEGINNING OF PERIOD .......... $10.19 $10.00
------ ------
Investment Operations:
Net investment income ......................... 0.38 0.20
Net realized and unrealized gain on
investments ................................. (0.53) 0.19
------ ------
Total from investment operations ............ (0.15) 0.39
------ ------
Distributions:
From net investment income .................... (0.38) (0.20)
From net realized gain on investments ......... (0.03) --
------ ------
Total distributions ......................... (0.41) (0.20)
------ ------
NET ASSET VALUE -- END OF PERIOD ................ $9.63 $10.19
====== ======
TOTAL RETURN .................................... (1.52%)* 3.89%*
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)(2) .............. 0.55%** 0.55%**
Expenses (excluding fee waivers) .............. 0.67%** 0.66%**
Net investment income(2)....................... 5.71%** 5.69%**
Portfolio turnover rate ......................... 18.23% 17.66%
Net assets at end of period (000 omitted) ....... $87,297 $93,002
<FN>
- ----------
+ Commencement of operations.
(1) Effective November 1, 1999, the Wilmington Intermediate Bond Portfolio
acquired the assets and liabilities of the Rodney Square Strategic
Fixed-Income Fund -- Intermediate Bond Portfolio, an open end murual fund
with substantially identical investment objectives. Prior to November 1,
1999, the Wilmington Intermediate Bond Portfolio was not in operation. The
financial highlights presented herein are those of the Rodney Square
Strategic Fixed-Income Fund -- Intermediate Bond Portfolio.
(2) The expense ratios reflects WTC's election to waive a portion of its
advisory fee or reimburse expenses to the extent that the Portfolio's
expenses (excluding taxes, extraordinary expenses, brokerage commissions
and interest) exceed an annual rate of 0.55% of the Portfolio's average
daily net assets through February 1999.
* Not annualized.
** Annualized.
</FN>
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 1, 1998 FOR THE FISCAL YEARS ENDED OCTOBER 31,
THROUGH
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WILMINGTON MUNICIPAL BOND PORTFOLIO(1)
NET ASSET VALUE -- BEGINNING OF PERIOD .......... $12.94 $12.74 $12.46 $12.49 $11.64 $12.50
------ ------ ------ ------ ------ ------
Investment Operations:
Net investment income ......................... 0.36 0.56 0.55 0.55 0.54 0.49
Net realized and unrealized gain (loss) on
investments ................................. (0.40) 0.20 0.28 (0.03) 0.85 (0.86)
------ ------ ------ ------ ------ ------
Total from investment operations ............ (0.04) 0.76 0.83 0.52 1.39 (0.37)
------ ------ ------ ------ ------ ------
Distributions:
From net investment income .................... (0.36) (0.56) (0.55) (0.55) (0.54) (0.49)
From net realized gain on investments ......... (0.06) -- -- -- -- --
------ ------ ------ ------ ------ ------
Total distribution .......................... (0.42) (0.56) (0.55) (0.55) (0.54) (0.49)
------ ------ ------ ------ ------ ------
NET ASSET VALUE -- END OF PERIOD ................ $12.48 $12.94 $12.74 $12.46 $12.49 $11.64
====== ====== ====== ====== ====== ======
TOTAL RETURN .................................... (0.30)%* 6.07% 6.85% 4.24% 12.23% (3.05)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)(2) .............. 0.75%** 0.75% 0.75% 0.75% 0.75% 0.75%
Expenses (excluding fee waivers) .............. 0.90%** 1.23% 1.52% 1.37% 1.45% 1.62%
Net investment income(2)....................... 4.29%** 4.35% 4.42% 4.41% 4.50% 4.13%
Portfolio turnover rate ......................... 19.13% 43.72% 28.56% 15.91% 42.08% 21.95%
Net assets at end of period (000 omitted) ....... $16,612 $17,579 $17,446 $16,619 $16,570 $14,283
</TABLE>
- ----------
(1) Effective November 1, 1999, the Wilmington Municipal Bond Portfolio
acquired the assets and liabilities of the Rodney Square Strategic
Fixed-Income Fund -- Municipal Bond Portfolio, an open end mutual fund
with substantially identical investment objectives. Prior to November 1,
1999, the Wilmington Municipal Bond Portfolio was not in operation. The
financial highlights presented herein are those of the Rodney Square
Strategic Fixed-Income Fund -- Municipal Bond Portfolio.
(2) The expense ratios reflect WTC's election to waive a portion of its
advisory fee or reimburse expenses to the extent that the Portfolio's
expenses (excluding taxes, extraordinary expenses, brokerage commissions
and interest) exceed an annual rate of 0.75% of the Portfolio's average
daily net assets. In addition, Rodney Square Management Corporation waived
a portion of its administration and accounting services fees for the
fiscal years ended October 31, 1998, 1997, 1996, 1995, and 1994.
* Not annualized.
** Annualized.
16
<PAGE>
MANAGEMENT OF THE PORTFOLIOS
The Board of Trustees for each Portfolio supervises the management,
activities and affairs of the Portfolio and has approved contracts with various
organizations to provide, among other services, day-to-day management required
by the Portfolio and its shareholders.
PLAIN TALK
=====================================================================
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a mutual fund
and continuously reviews, supervises and administers the fund's
investment program. The Board of Trustees supervises the investment
adviser and establishes policies that the adviser must follow in its
management activities.
=====================================================================
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Wilmington Trust Company, the Series' investment adviser, is located at
1100 North Market Street, Wilmington, Delaware 19890. WTC is a wholly owned
subsidiary of Wilmington Trust Corporation, which is a publicly held bank
holding company. WTC, subject to the supervision of the Board of Trustees,
directs the investments of each Series in accordance with its investment
objective, policies and limitations. In addition to serving as investment
adviser for the Series, WTC is engaged in a variety of investment advisory
activities, including the management of other mutual funds and collective
investment pools.
Each Series pays a monthly fee to WTC at the annual rate of 0.35% of the
Series' first $1 billion of average daily net assets; 0.30% of the Series' next
$1 billion of average daily net assets; and 0.25% of the Series' average daily
net assets in excess of $2 billion, as determined at the close of business on
each day throughout the month. For the twelve months ended June 30, 1999, WTC
received the following fees (after fee waivers) as a percentage of each Series'
average daily net assets for investment advisory services:
Short/Intermediate Bond Series ......0.22%
Intermediate Bond Series.............0.24%
Municipal Bond Series................0.14%
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
Eric K. Cheung, Vice President and Manager of the Fixed Income Management
Division, Clayton M. Albright, III, Vice President of the Fixed Income
Management Division and Dominick J. D'Eramo, CFA, Vice President of the Fixed
Income Management Division, all of the Asset Management Department of WTC, are
primarily responsible for the day-to-day management of the Short/Intermediate
Bond Series and the Intermediate Bond Series. From 1978 until 1986, Mr. Cheung
was the Portfolio Manager for fixed income assets of the Meritor Financial
Group. In 1986, Mr. Cheung joined WTC. In 1991, he became the Division Manager
for all fixed income products. Mr. Albright has been employed at WTC since 1976.
In 1987, he joined the Fixed Income Management Division and since then has
specialized in the management of intermediate and long-term fixed income
portfolios. Mr. D'Eramo began his career with WTC in 1986 as a fixed income
trader and was promoted to portfolio manager in 1990.
Lisa More, Assistant Vice President of Credit Research and Municipal
Trading within the Fixed Income Management Division of Asset Management
Department of WTC is primarily responsible for the day-to-day management of the
Municipal Bond Portfolio. Mrs. More has been employed at WTC since 1988. In
1990, she joined the Fixed Income Management Division specializing in the
management of municipal income portfolios.
17
<PAGE>
- --------------------------------------------------------------------------------
SERVICE PROVIDERS
- --------------------------------------------------------------------------------
The chart below provides information on the Portfolios' primary service
providers.
Asset
Management
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
WILMINGTON TRUST COMPANY
RODNEY SQUARE NORTH
1100 N. MARKET STREET
WILMINGTON, DE 19890-0001
Manages each Portfolio's
investment activities.
- --------------------------------------------------------------------------------
Shareholder
Services
- --------------------------------------------------------------------------------
TRANSFER AGENT
PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
Handles shareholder services, including
recordkeeping and statements, payment of
distributions and processing of
buy and sell requests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WT MUTUAL FUND
WILMINGTON SHORT/INTERMEDIATE BOND PORTFOLIO
WILMINGTON INTERMEDIATE BOND PORTFOLIO
WILMINGTON MUNICIPAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
Fund
Operations
- --------------------------------------------------------------------------------
ADMINISTRATOR AND
ACCOUNTING AGENT
PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
Provides facilities, equipment and
personnel to carry out administrative
services related to each Portfolio and
calculates each Portfolio's NAV per share
and distributions.
- --------------------------------------------------------------------------------
Asset
Safe Keeping
- --------------------------------------------------------------------------------
CUSTODIAN
WILMINGTON TRUST COMPANY
1100 N. MARKET STREET
WILMINGTON, DE 19890
Holds each Portfolio's assets, settles all
portfolio trades and collects most of the
valuation data required for calculating each
Portfolio's NAV per share.
- --------------------------------------------------------------------------------
Distribution
- --------------------------------------------------------------------------------
DISTRIBUTOR
PROVIDENT DISTRIBUTORS, INC.
FOUR FALLS CORPORATE CENTER
WEST CONSHOHOCKEN, PA 19428
Distributes each Portfolio's Shares.
- --------------------------------------------------------------------------------
18
<PAGE>
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
- --------------------------------------------------------------------------------
The Portfolios value their assets based on current market value when such
values are available. Prices for fixed income securities normally are supplied
by a pricing service. Fixed income securities maturing within 60 days of the
valuation date are valued at amortized cost. Any assets held by the
Short/Intermediate Bond Series and the Intermediate Bond Series that are
denominated in foreign currencies are valued daily in U.S. dollars at the
foreign currency exchange rates that are prevailing at the time that PFPC
determines the daily net asset value per share. Securities that do not have a
readily available current market value are valued in good faith, or under the
direction of, the Board of Trustees.
PLAIN TALK
=====================================================================
WHAT IS THE NET ASSET VALUE OR "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
=====================================================================
PFPC determines the NAV per share of each Portfolio as of the close of
regular trading on the New York Stock Exchange (currently 4:00 p.m. Eastern
time), on each Business Day (a day that the New York Stock Exchange, the
Transfer Agent and the Philadelphia branch of the Federal Reserve Bank are open
for business). The NAV is calculated by adding the value of all securities and
other assets in a Portfolio, deducting its liabilities and dividing the balance
by the number of outstanding shares in that Portfolio.
Shares will not be priced on those days the Portfolios are closed. As of
the date of this prospectus, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
HOW TO PURCHASE SHARES:
o Directly by mail or by wire
o As a client of WTC through a trust account or a corporate cash
management account
o As a client of a Service Organization
=====================================================================
19
<PAGE>
Portfolio shares are offered on a continuous basis and are sold without
any sales charges. The minimum initial investment in Institutional class shares
of the Portfolios is $1,000. Additional investments in any Portfolio may be made
in any amount. You may purchase shares as specified below.
You may also purchase shares if you are a client of WTC through your trust
or corporate cash management accounts. If you are a client of an institution
(such as a bank or broker-dealer) that has entered into a servicing agreement
with the Portfolios' distributor ("Service Organization"), you may also purchase
shares through such Service Organization. You should also be aware that you may
be charged a fee by WTC or the Service Organization in connection with your
investment in the Portfolios. If you wish to purchase Portfolio shares through
your account at WTC or a Service Organization, you should contact that entity
directly for information and instructions on purchasing shares.
BY MAIL: You may purchase shares by sending a check drawn on a U.S. bank
payable to Wilmington Fixed Income Portfolios, indicating the name of the
Portfolio, along with a completed application (included at the end of this
prospectus). If a subsequent investment is being made, the check should also
indicate your Portfolio account number. When you make purchases by check, each
Portfolio may withhold payment on redemptions until it is reasonably satisfied
that the funds are collected (which can take up to 10 days). If you purchase
shares with a check that does not clear, your purchase will be canceled and you
will be responsible for any losses or fees incurred in that transaction. Send
the check and application to:
Regular mail: Overnight mail:
------------- ---------------
Wilmington Fixed Income Portfolios Wilmington Fixed Income Portfolios
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
BY WIRE: You may purchase shares by wiring federal funds readily
available. Please call PFPC at (800) 336-9970 for instructions and to make
specific arrangements before making a purchase by wire, and if making an initial
purchase, to also obtain an account number.
ADDITIONAL INFORMATION REGARDING PURCHASES: Purchase orders received by
the Transfer Agent before the close of regular trading on the Exchange on any
Business Day will be priced at the NAV that is determined as of the close of
trading. Purchase orders received after the close of regular trading on the
Exchange will be priced as of the close of regular trading on the following
Business Day.
Any purchase order may be rejected if a Portfolio determines that
accepting the order would not be in the best interest of the Portfolio or its
shareholders.
It is the responsibility of WTC or the Service Organization to transmit
orders for the purchase of shares by its customers to the Transfer Agent and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
For information on other ways to purchase shares, including through an
individual retirement account (IRA), an automatic investment plan or a payroll
investment plan, please refer to the Statement of Additional Information.
20
<PAGE>
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
HOW TO REDEEM (SELL) SHARES:
o By mail
o By telephone
=====================================================================
You may sell your shares on any Business Days, as described below.
Redemptions are effected at the NAV next determined after the Transfer Agent has
received your redemption request. There is no fee when Portfolio shares are
redeemed. It is the responsibility of WTC or the Service Organization to
transmit redemption orders and credit their customers' accounts with redemption
proceeds on a timely basis. Redemption checks are mailed on the next Business
Day following receipt by the Transfer Agent of redemption instructions, but
never later than 7 days following such receipt. Amounts redeemed by wire are
normally wired on the date of receipt of redemption instructions or the next
Business Day if received after 4:00 p.m. Eastern time, or on a non-Business
Day, but never later than 7 days following such receipt. If you purchased your
shares through an account at WTC or a Service Organization, you should contact
WTC or the Service Organization for information relating to redemptions. The
Portfolio's name and your account number should accompany any redemption
requests.
BY MAIL: If you redeem your shares by mail, you should submit written
instructions with a "signature guarantee". A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public. You must
indicate the Portfolio name, your account number and your name. The written
instructions and signature guarantee should be mailed to:
Regular mail: Overnight mail:
------------- ---------------
Wilmington Fixed Income Portfolios Wilmington Fixed Income Portfolios
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8951 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
BY TELEPHONE: If you prefer to redeem your shares by telephone, you may
elect to do so. However there are certain risks. The Portfolios have certain
safeguards and procedures to confirm the identity of callers and to confirm that
the instructions communicated are genuine. If such procedures are followed, you
will bear the risk of any losses.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS: Redemption proceeds may be
wired to your predesignated bank account in any commercial bank in the United
States if the amount is $1,000 or more. The receiving bank may charge a fee for
this service. Proceeds may also be mailed to your bank or, for amounts of
$10,000 or less, mailed to your Portfolio account address of record if the
address has been established for at least 60 days. In order to authorize the
Transfer Agent to mail redemption proceeds to your Portfolio account address of
record, complete the appropriate section of the Application for Telephone
Redemptions or include your Portfolio account
21
<PAGE>
address of record when you submit written instructions. You may change the
account that you have designated to receive amounts redeemed at any time. Any
request to change the account designated to receive redemption proceeds should
be accompanied by a guarantee of your signature by an eligible institution. A
signature and a signature guarantee are required for each person in whose name
the account is registered. Further documentation will be required to change the
designated account when a corporation, other organization, trust, fiduciary or
other institutional investor holds the Portfolio shares.
If the shares to be redeemed represent a recent investment made by check,
the Portfolio reserves the right not to send the redemption proceeds until it
believes that the check has been collected (which could take up to 10 days).
SMALL ACCOUNTS: If the value of your Portfolio account falls below $500,
the Portfolio may ask you to increase your balance. If the account value is
still below $500 after 60 days, the Portfolio may close your account and send
you the proceeds. The Portfolio will not close your account if it falls below
$500 solely as a result of a reduction in your account's market value.
For additional information on other ways to redeem shares, please refer to
the Statement of Additional Information.
- --------------------------------------------------------------------------------
EXCHANGE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund to
another fund within a family of funds.
=====================================================================
You may exchange all or a portion of your shares in a Portfolio for
Institutional class shares of the following Portfolios:
Wilmington Prime Money Market Portfolio
Wilmington U.S. Government Portfolio
Wilmington Tax-Exempt Portfolio
Wilmington Premier Money Market Portfolio
Wilmington Short/Intermediate Bond Portfolio
Wilmington Intermediate Bond Portfolio
Wilmington Municipal Bond Portfolio
Wilmington Large Cap Growth Portfolio
Wilmington Large Cap Core Portfolio
Wilmington Small Cap Core Portfolio
Wilmington International Multi-Manager Portfolio
Wilmington Large Cap Value Portfolio
Wilmington Mid Cap Value Portfolio
The Wilmington Small Cap Value Portfolio
22
<PAGE>
Redemption of shares through an exchange will be effected at the NAV per
share next determined after the Transfer Agent receives your request. A purchase
of shares through an exchange will be effected at the NAV per share determined
at that time or as next determined thereafter.
Exchange transactions will be subject to the minimum initial investment
and other requirements of the Portfolio into which the exchange is made. An
exchange may not be made if the exchange would leave a balance in a
shareholder's account of less than $500.
To obtain prospectuses of the other Portfolios, you may call (800)
336-9970. To obtain more information about exchanges, or to place exchange
orders, contact the Transfer Agent, or, if your shares are held in a trust
account with WTC or in an account with a Service Organization, contact WTC or
the Service Organization. The Portfolios may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. This exchange offer is valid only in those jurisdictions where the
sale of the Portfolio shares to be acquired through such exchange may be legally
made.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
- --------------------------------------------------------------------------------
PLAIN TALK
=====================================================================
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest and dividends (and, in
the case of the Municipal Bond Portfolio, market discount on
tax-exempt securities) earned by a fund on its investments less
accrued expenses.
=====================================================================
Distributions from the net investment income of each Portfolio are
declared daily as a dividend and paid monthly to you. Any net capital gain
realized by a Portfolio will be distributed annually. The Short/Intermediate
Bond Portfolio and the Intermediate Bond Portfolio will distribute net realized
gains from foreign currency transactions, if any, after the end of the fiscal
year in which the gain was realized by them.
Distributions are payable to the shareholders of record at the time the
distributions are declared (including holders of shares being redeemed, but
excluding holders of shares being purchased). All distributions are reinvested
in additional shares, unless you elect to receive distributions in cash. Shares
become entitled to receive distributions on the day after the shares are issued.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
As long as a Portfolio meets the requirements for being a "regulated
investment company" it pays no Federal income tax on the earnings and gains it
distributes to shareholders. The Portfolios' distributions of net investment
income (which include net short-term capital gains), whether received in cash or
reinvested in additional Portfolio shares, are generally taxable to you as
ordinary income. Each Portfolio will notify you following the end of the
calendar year of the amount of dividends paid that year.
23
<PAGE>
Dividend distributions by the Municipal Bond Portfolio of the excess of
its interest income on tax-exempt securities over certain amounts disallowed as
deductions ("exempt-interest dividends") may be treated by you as interest
excludable from your gross income. The Municipal Bond Portfolio intends to
distribute income that is exempt from federal income tax, though it may invest a
portion of its assets in securities that generate taxable income. Income exempt
from federal income tax may be subject to state and local income tax.
Additionally, any capital gains distributed by the Municipal Bond Portfolio may
be taxable.
It is a taxable event for you if you sell or exchange shares of any
Portfolio, including the Municipal Bond Portfolio. Depending on the purchase
price and the sale price of the shares you exchange, you may have a taxable gain
or loss on the transaction. You are responsible for any tax liability generated
by your transactions.
STATE AND LOCAL INCOME TAXES: You should consult your tax advisers
concerning state and local taxes, which may have different consequences from
those of the Federal income law.
This section is only a summary of some important income tax considerations
that may affect your investment in a Portfolio. More information regarding those
considerations appears in our Statement of Additional Information. You are urged
to consult your tax adviser regarding the effects of an investment on your tax
situation.
24
<PAGE>
DISTRIBUTION ARRANGEMENTS
Provident Distributors, Inc. ("PDI") manages the Portfolios' distribution
efforts and provides assistance and expertise in developing marketing plans and
materials, enters into dealer agreement with broker-dealers to sell shares and
provides shareholder support services, directly or through affiliates. The
Portfolios do not charge any sales loads, deferred sales loads or other fees in
connection with the purchase of shares.
- --------------------------------------------------------------------------------
MASTER/FEEDER STRUCTURE
- --------------------------------------------------------------------------------
Other institutional investors, including other mutual funds, may invest in
the master funds. The master/feeder structure enables various institutional
investors, including a Portfolio, to pool their assets, which may be expected to
result in economies by spreading certain fixed costs over a larger asset base.
Each shareholder of a master fund, including a Portfolio, will pay its
proportionate share of the master fund's expenses.
For reasons relating to costs or a change in investment goal, among
others, a Portfolio could switch to another master fund or decide to manage its
assets itself. No Portfolio is currently contemplating such a move.
- --------------------------------------------------------------------------------
SHARE CLASSES
- --------------------------------------------------------------------------------
The Portfolios issue Investor and Institutional classes of shares. The
Institutional class is offered to retirement plans. The Investor class pays an
additional 12b-1 fee. Any investor may purchase Investor class shares.
25
<PAGE>
FOR MORE INFORMATION
FOR INVESTORS WHO WANT MORE INFORMATION ON THE PORTFOLIOS, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMI-ANNUAL REPORTS: Contain performance data and information on
portfolio holdings, operating results, and a discussion of the market conditions
and investment strategies that significantly affected a Portfolio's performance
for the most recently completed fiscal year or half-year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): Provides a complete technical
and legal description of a Portfolio's policies, investment restrictions, risks,
and business structure. This prospectus incorporates the SAI by reference.
Copies of these documents and answers to questions about the Portfolios
may be obtained without charge by contacting:
WT Mutual Fund
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) 336-9970
9:00 a.m. to 5:00 p.m., Eastern time
Information about the Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Room of the SEC, Washington,
DC, 20549-6009. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-(800)-SEC-0330. Reports and other information
about the Portfolios may be viewed on-screen or downloaded from the SEC's
Internet site at http://www.sec.gov.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)-336-9970.
The investment company registration number for WT Mutual Fund is 811-08648.
26
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
TRUSTEES
Robert H. Arnold
Eric Brucker
Robert J. Christian
Louis Klein Jr.
Nicholas A. Giordano
Clement C. Moore, II
John J. Quindlen
William P. Richards
------------------------
OFFICERS
Robert J. Christian, President
Eric Cheung, Vice President
Gary M. Gardner, Secretary
Pat Colletti, Treasurer
------------------------
INVESTMENT ADVISER
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
------------------------
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken, PA 19428
------------------------
ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
------------------------
<PAGE>
[LOGO]
CRM
-----
FUNDS
-----
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
NOVEMBER 1, 1999
CRM LARGE CAP
VALUE FUND
CRM MID CAP
VALUE FUND
CRM SMALL CAP
VALUE FUND
Institutional Shares
This prospectus gives vital information about these mutual funds, including
information on investment policies, risks and fees. For your own benefit and
protection, please read it before you invest, and keep it on hand for future
reference.
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
[GRAPHIC OMITTED]
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] TABLE OF CONTENTS
- --------------------------------------------------------------------------------
A look at the goals, FUND DESCRIPTION
strategies, risks,
expenses and financial SUMMARY.................................. 2
history of each fund. PERFORMANCE INFORMATION.................. 4
FEES AND EXPENSES........................ 7
INVESTMENT OBJECTIVES.................... 9
PRIMARY INVESTMENT STRATEGIES............ 9
ADDITIONAL RISK INFORMATION.............. 12
FINANCIAL HIGHLIGHTS..................... 14
Details about the service MANAGEMENT OF THE FUND
providers.
INVESTMENT ADVISER....................... 16
SERVICE PROVIDERS ....................... 19
Policies and instructions SHAREHOLDER INFORMATION
for opening, maintaining
and closing an account in PRICING OF SHARES ....................... 20
any of the funds. PURCHASE OF SHARES ...................... 21
REDEMPTION OF SHARES .................... 23
EXCHANGE OF SHARES ...................... 25
DIVIDENDS AND DISTRIBUTIONS ............. 26
TAXES ................................... 26
Details on the funds' DISTRIBUTION ARRANGEMENTS
share classes and
master/feeder MASTER/FEEDER STRUCTURE ................. 26
arrangement. SHARE CLASSES ........................... 28
FOR MORE INFORMATION ................... BACK COVER
For information about key terms and concepts, look
for our "Plain Talk" explanations.
<PAGE>
- --------------------------------------------------------------------------------
FUND DESCRIPTION [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
CRM MID CAP VALUE FUND
CRM SMALL CAP VALUE FUND
Institutional Shares
PLAIN TALK
================================================================================
WHAT IS A MUTUAL FUND?
A mutual fund pools shareholders' money and, using a professional investment
manager, invests it in securities like stocks and bonds. Each Fund is a separate
mutual fund.
================================================================================
SUMMARY
PLAIN TALK
================================================================================
WHAT IS "CAP"?
Cap or the market capitalization of a company means the value of the company's
common stock in the stock market.
================================================================================
Investment Objective o The Large Cap Value Fund, Mid Cap Value Fund and
Small Cap Value Fund each seek to achieve
long-term capital appreciation.
- --------------------------------------------------------------------------------
Investment Focus o Equity (or related) securities
- --------------------------------------------------------------------------------
Share Price Volatility o Moderate to high
- --------------------------------------------------------------------------------
Principal Investment o Each Fund operates as a "feeder fund," which
Strategy means that the Fund does not buy individual
securities directly. Instead, the Fund's invest
in a corresponding mutual fund or "master fund,"
which in turn purchases investment securities.
Each Fund invests all of its assets in a master
fund which is a separate series of another
mutual fund. The Funds and their corresponding
Series have the same investment objective,
policies and limitations.
o The Large Cap Value Fund will invest its assets
in the Large Cap Value Series, which invests at
least 65% of its total assets in a diversified
fund of U.S. equity (or related) securities with
a market cap of $10 billion or higher at the
time of purchase. The Series invests in
securities whose prices are low relative to
comparable companies. The Series' adviser looks
for companies facing dynamic changes such as
merger or acquisition, restructuring, change of
management,
2
<PAGE>
or other type of change in operation, financing
or management. The adviser seeks stocks believed
to have a greater upside potential than downside
risk over an 18-24 month holding period. An
important aspect of an investment case is
setting a price target. This target typically
reflects a risk/reward ratio of 50% appreciation
potential achievable over a two-year period
versus a perceived risk of no more than 10% of
capital. The achievement of the target price is
the Series' adviser's primary sell discipline.
In other words, if there has been no fundamental
change in the investment case, the stock will be
sold once the target price is met. Portfolio
companies are constantly monitored to determine
whether there is any fundamental change, for
better or worse, in the reasons for which the
stock was purchased. If the dynamics do not
appear to be materializing, the stock will be
sold.
o The Mid Cap Value Fund will invest its assets in
the Mid Cap Value Series, which invests at least
65% of its total assets in a diversified fund of
U.S. equity (or related) securities with a
market cap between $1 and $10 billion at the
time of purchase. The Series invests in
securities whose prices are low relative to
comparable companies. The Series' adviser buys
and sells stocks based upon the same
considerations described above for Large Cap
Value Fund.
o The Small Cap Value Fund will invest its assets
in the Small Cap Value Series, which invests at
least 65% of its total assets in a diversified
fund of U.S. equity (or related) securities with
a market cap of $1 billion or less at the time
of purchase. The Series invests in securities
whose prices are low relative to comparable
companies. The Series' adviser buys and sells
stocks based upon the same considerations
described above for Large Cap Value Fund.
- --------------------------------------------------------------------------------
Principal Risks The Funds are subject to the risks summarized below
which are further described under "Additional Risk
Information."
o It is possible to lose money by investing in a
Fund.
o A Fund's share price will fluctuate in response
to changes in the market value of the Fund's
investments. Market value changes result from
business developments affecting an issuer as
well as general market and economic conditions.
o A value-oriented investment approach is subject
to the risk that a security believed to be
undervalued does not appreciate in value as
anticipated.
o Small cap companies may be more vulnerable than
larger companies to adverse business or economic
developments, and their securities may be less
liquid and more volatile than securities of
larger companies.
o The performance of a Fund will depend on whether
or not the adviser is successful in pursuing an
investment strategy.
- --------------------------------------------------------------------------------
Investor Profile o Investors who want the value of their investment
to grow and who are willing to accept more
volatility for the possibility of higher
returns.
3
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION [GRAPHIC]
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
PAST PERFORMANCE CHART
[The following table was depicted as a bar chart in the printed material.]
AVERAGE ANNUAL TOTAL RETURN
1992 ......... 13.49%
1993 ......... 13.75%
1994 ......... -1.64%
1995 ......... 34.38%
1996 ......... 21.86%
1997 ......... 24.55%
1998 ......... -2.75%
Year-to-Date Total Return as of September 30, 1999: -7.63%
This bar chart shows changes in the performance from calendar year to calendar
year of the Large Cap Value Equity Portfolio of the Rodney Square Strategic
Equity Fund, which is one of the predecessors of the Fund's master series.
- --------------------------------------------------------------------------------
Best Quarter Worst Quarter
- --------------------------------------------------------------------------------
13.48% -10.62%
(June 30, 1997) (September 30, 1998)
PLAIN TALK
================================================================================
WHAT IS AN INDEX?
An index is a broad measure of the market performance of a specific group of
securities in a particular market or securities in a market sector. You cannot
invest directly in an index. An index does not have an investment adviser and
does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
================================================================================
4
<PAGE>
Institutional Shares
- --------------------------------------------------------------------------------
Year(s) Large Cap Value Fund Russell 1000 Index*
- --------------------------------------------------------------------------------
Average Annual Returns
as of 12/31/98
1 Year -2.75% 27.02%
5 Years 14.30% 23.37%
10 Years 15.29% 19.03%
* The Russell 1000 Index measures the performance of the 1000 largest
companies in the Russell 3000 Index which represents approximately 92% of
the total market capitalization of the Russell 3000 Index.
CRM MID CAP VALUE FUND
The Fund has not been in operation for a full calendar year.
Year-to-Date Total Return as of September 30, 1999: -12.00%
Institutional Shares
- --------------------------------------------------------------------------------
Year Mid Cap Value Fund Russell Mid Cap Index*
- --------------------------------------------------------------------------------
Average Annual Returns
as of 12/31/98
Since Inception
(January 6, 1998) 6.73% 9.91%
* The Russell Mid Cap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represent approximately 35% of
the total market capitalization of the Russell 1000 index.
CRM SMALL CAP VALUE FUND
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
PAST PERFORMANCE CHART
[The following table was depicted as a bar chart in the printed material.]
AVERAGE ANNUAL TOTAL RETURN
1996 ............. 38.95%
1997 ............. 21.73%
1998 ............. -12.21%
Year-to-Date Total Return as of September 30, 1999: 0.56%
This bar chart shows changes in the performance of the Fund's Investor shares
from calendar year to calendar year. The Institutional class commenced
operations on January 27, 1998 and does not have a full calendar year of
performance. Therefore, the bar chart reflects the performance of Investor class
shares.
5
<PAGE>
- --------------------------------------------------------------------------------
Best Quarter Worst Quarter
- --------------------------------------------------------------------------------
17.44% -22.80%
(June 30, 1997) (September 30, 1998)
Investor Shares*
- --------------------------------------------------------------------------------
Year(s) Small Cap Value Fund Russell 2000 Index**
- --------------------------------------------------------------------------------
Average Annual Returns
as of 12/31/98
1 Year -12.21% -2.24%
Since Inception
(October 1, 1995) 15.40% 11.45%
* The Institutional Class commenced operations on January 27, 1998 and does
not have a full calendar year of performance. Therefore, the table
reflects the performance of Investor class shares.
** The Russell 2000 Index is a market weighted index composed of 2000
companies with market capitalizations from $50 million to $1.8 billion.
The Index is unmanaged and reflects the reinvestment of dividends.
6
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] FEES AND EXPENSES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT ARE FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, distribution, administration and custody services. Each
Fund's expenses in the table below are shown as a percentage of its net assets.
These expenses are deducted from Fund assets.
================================================================================
The table below describes the fees and expenses that you may pay if you buy and
hold shares of a Fund. No sales charges or other fees are paid directly from
your investment.
Institutional Shares
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Large Cap Value Fund
- --------------------------------------------------------------------------------
Management fees 0.55%
Distribution (12b-1 fees) None
Other expenses 0.52%
Total annual operating expenses(2) 1.07%
Fee Waiver --
Net Expenses 1.07%
- --------------------------------------------------------------------------------
Mid Cap Value Fund
- --------------------------------------------------------------------------------
Management fees 0.75%
Distribution (12b-1 fees) None
Other expenses 0.73%
Total annual operating expenses(2) 1.48%
Fee Waiver 0.33%
Net Expenses 1.15%
- --------------------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------------------------------------
Management fees 0.75%
Distribution (12b-1 fees) None
Other expenses 0.31%
Total annual operating expenses(2) 1.06%
Fee Waiver --
Net Expenses 1.06%
(1) The table above and the Example below each reflect the aggregate annual
operating expenses of each Fund and the corresponding Series in which the
Fund invests.
(2) The adviser has voluntarily undertaken to waive a portion of its fees and
assume certain expenses of the above Funds to the extent that the total
annual operating expenses exceed 1.15% of net assets. This undertaking
will remain in place until the Board of Trustees approves its termination.
7
<PAGE>
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 table below shows what you
would pay if you invested $10,000 over the various time frames indicated. The
example assumes that:
o you reinvested all dividends and other distributions
o the average annual return was 5%
o the Fund's maximum (without regard to waivers or expenses) total
operating expenses are charged and remain the same over the time
periods
o you redeemed all of your investment at the end of the time period.
Although your actual cost may be higher or lower, based on these assumptions,
your costs would be:
Institutional Shares
- --------------------------------------------------------------------------------
Large Cap Mid Cap Small Cap
Value Fund Value Fund Value Fund
- --------------------------------------------------------------------------------
1 year $ 109 $ 151 $ 108
- --------------------------------------------------------------------------------
3 years $ 340 $ 468 $ 337
- --------------------------------------------------------------------------------
5 years $ 590 $ 808 $ 585
- --------------------------------------------------------------------------------
10 years $1,306 $1,768 $1,294
- --------------------------------------------------------------------------------
The above example is for comparison purposes only and is not a representation of
a Fund's actual expenses and returns, either past or future.
8
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The Large Cap Value Fund, Mid Cap Value Fund and Small Cap Value Fund each seek
to achieve long-term capital appreciation. These investment objectives may not
be changed without shareholder approval. There is no guarantee that a Fund will
achieve its investment objective.
PRIMARY INVESTMENT STRATEGIES
PLAIN TALK
================================================================================
WHAT ARE VALUE FUNDS?
Value funds invest in the common stock of companies that are considered by the
adviser to be undervalued relative to their underlying profitability, or rather
their stock price does not reflect the value of the company.
================================================================================
Value Investing. Through their investment in the corresponding Series, the Large
Cap Value, Mid Cap Value and Small Cap Value Funds seek to invest in stocks that
are less expensive than comparable companies, as determined by price/earnings
ratios, cash flows or other measures. Value investing therefore may reduce risk
while offering potential for capital appreciation as a stock gains favor among
other investors and its price rises.
The Series are managed using investment ideas that the adviser has used for over
twenty-five years. The Series' adviser relies on selecting individual stocks and
does not try to predict when the stock market might rise or fall. It seeks out
those stocks that are undervalued and, in some cases, neglected by financial
analysts. The adviser evaluates the degree of analyst recognition by monitoring
the number of analysts who follow the company and recommend its purchase or sale
to investors.
The Adviser's Process. The adviser starts by identifying early change in a
company's operations, finances or management. The adviser is attracted to
companies which will look different tomorrow -- operationally, financially,
managerially -- when compared to yesterday. This type of dynamic change often
creates confusion and misunderstanding and may lead to a drop in the company's
stock price. Examples of change include mergers, acquisitions, divestitures,
restructuring, change of management, new market/product/means of
production/distribution, regulatory change, etc. Once change is identified, the
adviser evaluates the company on several levels. It analyzes:
o Financial models based principally upon projected cash flows
o The price of the company's stock in the context of what the market
is willing to pay for stock of comparable companies and what a
strategic buyer would pay for the whole company
9
<PAGE>
o The extent of management's ownership interest in the company
o The company's market by corroborating its observations and
assumptions by meeting with management, customers and suppliers
The adviser also evaluates the degree of recognition of the business by
investors by monitoring the number of sell side analysts who closely follow the
company and nature of the shareholder base. Before deciding to purchase a stock,
the adviser conducts an extensive amount of business due diligence to
corroborate its observations and assumptions.
The identification of change comes from a variety of sources including the
private capital network which the adviser has established among its clients,
historical investments and intermediaries. The advisor also makes extensive use
of clipping services and regional brokers and bankers to identify elements of
change. The investment professionals regularly meet companies around the country
and sponsor more than 200 company/management meetings in its New York office.
In order to place a valuation on the proposed investment, the adviser will
consider the company's historic trading multiples, multiples of comparable
companies and multiples paid in private market transactions. In its overall
assessment, the adviser seeks stocks that it believes have a greater upside
potential than downside risk over an 18-24 month holding period.
An important function of the adviser is to set a price target, that is, the
price at which the stock will be sold when there has been no fundamental change
in the investment case. The adviser constantly monitors the companies held by
the Series to determine if there have been any fundamental changes in the
reasons that prompted the initial purchase of the stock. If significant changes
for the better have not materialized, the stock will be sold. The initial
investment case for stock purchase, which has been documented, is examined by
the adviser's investment professionals. A final decision on selling the stock is
made after all such factors are analyzed.
The Large Cap Value Fund invests its assets in the Large Cap Value Series,
which, under normal conditions, invests at least 65% of its total assets in the
following equity (or related) securities:
o common stocks of U.S. corporations that are judged by the adviser to
be undervalued in the marketplace relative to underlying
profitability and have a market capitalization of $10 billion or
higher at the time of purchase;
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
o options on indexes of the common stock of U.S. corporations
described above;
o contracts for either the future delivery, or payment in respect of
the future market value, of certain indexes of the common stock of
U.S. corporations described above, and options upon such futures
contracts; and
10
<PAGE>
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a nationally
recognized statistical rating organization ("NRSRO"), in response to
adverse market conditions, as a temporary defensive position. The
result of this action may be that the Series will be unable to
achieve its investment objective.
The Large Cap Value Series is a diversified fund of large cap U.S. equity (or
related) securities that are deemed by the adviser to be undervalued as compared
to the company's profitability potential.
The Mid Cap Value Fund invests its assets in the Mid Cap Value Series, which,
under normal conditions, invests at least 65% of its total assets in the
following equity (or related) securities:
o common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization between $1
and $10 billion at the time of purchase;
o securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
o warrants; and
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Mid Cap Value Series is a diversified fund of medium cap U.S. equity (or
related) securities that are deemed by the adviser to be undervalued as compared
to the company's profitability potential.
PLAIN TALK
================================================================================
WHAT ARE SMALL CAP FUNDS?
Small cap funds invest in the common stock of companies with smaller market
capitalizations. Small cap stocks may provide the potential for higher growth
but they also typically have greater risk and more volatility.
================================================================================
The Small Cap Value Fund invests its assets in the Small Cap Value Series,
which, under normal conditions, invests at least 65% of its total assets in the
following equity (or related) securities:
o common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization of $1
billion or less at the time of purchase;
11
<PAGE>
o securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
o warrants; and
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Small Cap Value Series is a diversified fund of large cap U.S. equity (or
related) securities that are deemed by the adviser to be undervalued as compared
to the company's profitability potential.
All Series. The frequency of fund transactions and a Series' turnover rate will
vary from year to year depending on the market. Increased turnover rates incur
the cost of additional brokerage commissions and may cause you to receive larger
capital gain distributions. Series turnover rate is normally expected to be less
than 100% for each of the Series.
Each Series also may use other strategies and engage in other investment
practices, which are described in detail in our Statement of Additional
Information.
ADDITIONAL RISK INFORMATION
The following is a list of certain risks that may apply to your investment in
the Funds unless otherwise indicated. Further information about a Fund's
investments is available in our Statement of Additional Information:
o Derivatives Risk: Some of the Series' investments may be referred to
as "derivatives" because their value depends on, or derives from,
the value of an underlying asset, reference rate or index. These
investments include options, futures contracts and similar
investments that may be used in hedging and related income
strategies. The market value of derivative instruments and
securities is sometimes more volatile than that of other
investments, and each type of derivative may pose its own special
risks. As a fundamental policy, no more than 15% of a Series' total
assets may at any time be committed or exposed to derivative
strategies.
o Market Risk: The risk that the market value of a security may move
up and down, sometimes rapidly and unpredictably. The prices of
equity securities change in response to many factors including the
historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
12
<PAGE>
o Master/Feeder Risk: The master/feeder structure is relatively new
and more complex. While this structure is designed to reduce costs,
it may not do so, and there may be operational or other
complications. For example, large-scale redemptions by other feeders
of their shares of a master fund could have adverse effects on a
Fund such as requiring the liquidation of a substantial portion of
the master fund's holdings at a time when it could be
disadvantageous to do so. Also, other feeders of a master fund may
have a greater ownership interest in the master fund than a Fund's
interest and, therefore, could have effective voting control over
the operation of the master fund.
o Opportunity Risk: The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are
tied up in less advantageous investments.
o Small Cap Risk: Small cap companies may be more vulnerable than
larger companies to adverse business or economic developments. Small
cap companies may also have limited product lines, markets or
financial resources, may be dependent on relatively small or
inexperienced management groups and may operate in industries
characterized by rapid technological obsolescence. Securities of
such companies may be less liquid and more volatile than securities
of larger companies and therefore may involve greater risk than
investing in larger companies. (Small Cap Value Fund)
o Valuation Risk: The risk that a Series has valued certain of its
securities at a higher price than it can sell them.
o Value Investing Risk: The risk that a Series' investment in
companies whose securities are believed to be undervalued, relative
to their underlying profitability, do not appreciate in value as
anticipated. (Large Cap Value, Mid Cap Value, Small Cap Value Funds)
o Year 2000 Compliance Risk: Like other organizations around the
world, the Series could be adversely affected if the computer
systems used by their various service providers (or the market in
general) do not properly operate after January 1, 2000. The Series
are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance,
however, that these steps will be sufficient to avoid a temporary
service disruption or any adverse impact on the Series.
Additionally, if a company in which a Series is invested is
adversely affected by Year 2000 problems, it is likely that the
price of that company's securities will also be adversely affected.
A decrease in one or more of a Series' holdings may have a similar
impact on the price of the Series' shares. The Series' adviser will
rely on public filings and other statements made by companies about
their Year 2000 readiness. The adviser is not able to audit any
company and its major suppliers to verify their Year 2000 readiness.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years or since the Fund's inception, if
shorter. Certain information reflects financial results for a single share of a
Fund. The total returns in the table represent the rate that a shareholder would
have earned (or lost) on an investment in a Fund (assuming reinvestment of all
dividends and other distributions). This information has been audited by Ernst &
Young LLP, whose report, along with each Fund's financial statements, is
included in the Annual Report, which is available without charge upon request.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
For the Period
October 1, 1998
through Period Ended
June 30, 1999 September 30, 1998(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMALL CAP VALUE PORTFOLIO(1)
Net Asset Value -- Beginning of Period ..................... $13.72 $15.99
------ ------
Investment Operations:
Net investment income .................................... 0.01 0.01
Net realized and unrealized gain (loss) on investments ... 1.38 (2.28)
------ ------
Total from investment operations ....................... 1.39 (2.27)
------ ------
Distributions:
Return of capital ........................................ --(3) --
------ ------
Total Distributions .................................... --
------ ------
Net Asset Value -- End of Period ........................... $15.11 $13.72
====== ======
Total Return ............................................... 10.16%(4) (14.20)%(4)
Ratios (To Average Net Assets)/Supplemental Data:
Expenses (net of fee waivers) ............................ 1.08%(5) 1.15%(5)
Expenses (excluding fee waivers) ......................... 1.09%(5) 1.23%(5)
Net investment income .................................... 0.11%(5) 0.08%(5)
Portfolio Turnover Rate .................................... 64% 57%
Net assets at end of period (000 omitted) .................. $90,051 $48,246
</TABLE>
(1) Effective November 1, 1999, the CRM Small Cap Value Fund acquired the
assets and liabilities of the CRM Funds -- Small Cap Value Fund, an open
end mutual fund with substantially identical investment objectives. Prior
to November 1, 1999, the CRM Small Cap Value Fund was not in operation.
The financial highlights herein are those of the CRM Funds -- Small Cap
Value Fund.
(2) For the period January 27, 1998 (inception of Institutional Share class)
through September 30, 1998.
(3) Less than $0.01 per share.
(4) Not annualized.
(5) Annualized.
14
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
For the Period
October 1, 1998 Period
through Ended
June 30, 1999 September 30, 1998(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MID CAP VALUE PORTFOLIO(1)
Net Asset Value -- Beginning of Period .................... $9.67 $10.00
------ ------
Investment Operations:
Net investment income .................................... 0.02 0.05
Net realized and unrealized gain (loss) on investments ... 1.53 (0.38)
------ ------
Total from investment operations ....................... 1.55 (0.33)
------ ------
Distributions:
From net investment income ............................... (0.05) --
Net realized gain on investments ......................... (0.04) --
------ ------
Total Distributions .................................... (0.09) --
------ ------
Net Asset Value -- End of Period .......................... $11.13 $9.67
====== ======
Total Return .............................................. 16.11%(3) (3.30)%(3)
Ratios (To Average Net Assets)/Supplemental Data:
Expenses (net of fee waivers) ............................ 1.15%(4) 1.15%(4)
Expenses (excluding fee waivers) ......................... 2.86%(4) 4.16%(4)
Net investment income .................................... 0.22%(4) 0.84%(4)
Portfolio Turnover Rate ................................... 118% 78%
Net assets at end of period (000 omitted) ................. $9,887 $5,338
</TABLE>
(1) Effective November 1, 1999, the CRM Mid Cap Value Fund acquired the assets
and liabilities of the CRM Funds -- Mid Cap Value Fund, an open end mutual
fund with substantially identical investment objectives. Prior to November
1, 1999, the CRM Mid Cap Value Fund was not in operation. The financial
highlights presented herein are those of the CRM Funds -- Mid Cap Value
Fund.
(2) For the period January 6, 1998 (commencement of operations) through
September 30, 1998.
(3) Not annualized.
(4) Annualized.
15
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
The Board of Trustees for each Fund supervises the management, activities and
affairs of the Fund and has approved contracts with various financial
organizations to provide, among other services, the day-to-day management
required by a Fund and its shareholders.
INVESTMENT ADVISER
PLAIN TALK
================================================================================
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a mutual fund and
continuously reviews, supervises and administers the fund's investment program.
The Board of Trustees supervises the investment adviser and establishes policies
that the adviser must follow in its management activities.
================================================================================
Cramer Rosenthal McGlynn, LLC, 707 Westchester Avenue, White Plains, New York
10604, serves as the investment adviser to the Large Cap Value Series, the Mid
Cap Value Series and the Small Cap Value Series. Subject to the general control
of the Board of Trustees, CRM makes investment decisions for these Series. CRM
and its predecessors have managed investments in small, medium and large
capitalization companies for more than twenty-five years. As of September 30,
1999, CRM had over $3.4 billion of assets under management.
Under the advisory agreement, the Large Cap Value Series pays a monthly advisory
fee to CRM at the annual rate of 0.55% of the Series' first $1 billion of
average daily net assets; 0.50% of the Series' next $1 billion of average daily
net assets; and 0.45% of the Series' average daily net assets over $2 billion.
The Mid Cap Value Series and the Small Cap Value Series each pay a monthly
advisory fee to CRM at the annual rate of 0.75% of the Series' first $1 billion
of average daily net assets; 0.70% of the Series' next $1 billion of average
daily net assets; and 0.65% of the Series' average daily net assets over $2
billion.
For the twelve months ended June 30, 1999, CRM received investment advisory
fees, after waivers, of 0.00% for the Large Cap Value Series, 0.30% for the Mid
Cap Value Series and 0.75% for the Small Cap Value Series, as a percentage of
the Series' average daily net assets.
16
<PAGE>
MID CAP VALUE STYLE PERFORMANCE INFORMATION
The following reflects the historical performance of the portfolios of all
institutional accounts managed by CRM that have investment objectives, policies
and strategies substantially similar to that of the CRM Mid Cap Value Fund. This
data does not reflect the performance of the Funds. This data compares the
performance of these private accounts against the Russell Midcap Index. This
performance data should not be considered as an indication of future performance
of any Fund or of CRM.
- --------------------------------------------------------------------------------
Period CRM Adviser(1) Russell Mid Cap Index(2)
- --------------------------------------------------------------------------------
20 Years: 1/1/79-9/30/99 16.56% 15.83%
15 Years: 1/1/84-9/30/99 15.30% 15.85%
10 Years: 1/1/89-9/30/99 12.67% 13.89%
5 Years: 1/1/94-9/30/99 12.80% 17.46%
3 Years: 1/1/96-9/30/99 8.15% 14.88%
1 Year: 1/1/98-9/30/99 1.01% 19.45%
(1) These results are a dollar weighted composite of tax-exempt, fully
discretionary, separately managed accounts that are over $1 million in
size and were under the Adviser's and its predecessor's management for at
least 3 months. As of September 30, 1999, the composite consists of 66
accounts with $1.533 billion in assets (78% of tax-exempt equity assets
and 44% of all equity assets) and has been calculated in accordance with
standards set by the Association for Investment Management and Research
(AIMR), since January 1, 1989. The Funds' performance will be calculated
using the method required by the SEC, which differs from the method used
to calculate the performance of the private accounts. The composite does
not reflect all of the assets under the Adviser's management and may not
accurately reflect the performance of all accounts it manages. The
separately managed accounts in the composite are not subject to the same
types of expenses to which the Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed
by the 1940 Act or Internal Revenue Code. All returns reflect the
deduction of advisory fees, brokerage commissions and execution costs paid
by the Adviser's private accounts, without provision for federal or state
income taxes. The net effect of the deduction of the operating expenses of
the Funds on the annualized performance, including the effect of
compounding over time, may be substantial. Consequently, the performance
results for the accounts could have been adversely affected if the
accounts included in the composite had been regulated as an investment
company under the federal securities law. In addition, the Fund's returns
would be reduced to the extent their fees and expenses are higher than the
fees and expenses incurred by the private accounts.
(2) As of the latest reconstitution, the average market capitalization of the
Russell Midcap Index was approximately $5.53 billion; the median market
capitalization was approximately $2.80 billion. The largest company in the
index had an approximate market capitalization of $21.28 billion.
FUND MANAGERS
The day-to-day management of the Large Cap Value Series, the Mid Cap Value
Series and the Small Cap Value Series is shared by a team of individuals
employed by CRM. Ronald H. McGlynn is responsible for the management of each of
these Series. In addition, Kevin M. Chin and Adam L. Starr are part of the team
responsible for the management of the Large Cap Value Fund; Jay B. Abramson and
Michael A. Prober are part of the team responsible for the management of the Mid
Cap Value Fund; and Scott L. Scher and Christopher S. Fox are part of the team
responsible for the management of the Small Cap Value Fund. Each fund manager's
business experience and educational background is as follows:
17
<PAGE>
Ronald H. McGlynn Chief Executive Officer and President of CRM. Bringing over 30
years of investment experience to the firm, Mr. McGlynn serves as Chief
Investment Officer and Portfolio Manager. Prior to co-founding CRM in 1973, Mr.
McGlynn was a Portfolio Manager at Oppenheimer & Co. He received a B.A. from
Williams College and an M.B.A. from Columbia University.
Jay B. Abramson, CPA Executive Vice President of CRM. Jay joined CRM in 1985 and
is responsible for investment research and portfolio management. Mr. Abramson
received a B.S.E. and J.D. from the University of Pennsylvania Wharton School
and Law School, respectively, and is a Certified Public Accountant.
Michael A. Prober Vice President of CRM. Michael joined the firm in 1993 and is
responsible for investment research. Prior to joining CRM, he worked in
corporate finance and commercial banking at Chase Manhattan Bank and as a
Research Analyst for Alpha Capital Venture Partners. Mr. Prober received a
B.B.A. from the University of Michigan and an M.M. from the Northwestern
University J.L. Kellogg Graduate School of Management.
Scott L. Scher, CFA Vice President of CRM. Scott joined the firm in 1995 and is
responsible for investment research. Prior to joining CRM, he worked as an
Analyst/Portfolio Manager at The Prudential. Mr. Scher received a B.A. from
Harvard College, an M.B.A. from Columbia Business School and is a Chartered
Financial Analyst.
Kevin M. Chin Vice President at CRM. Kevin joined the firm in 1989 and is
responsible for investment research. Prior to joining CRM, Kevin was a Financial
Analyst for the Mergers and Acquisitions Department of Morgan Stanley and a Risk
Arbitrageur with The First Boston Corporation. He received a B.S. from Columbia
University School of Engineering & Applied Science.
Christopher S. Fox, CFA Principal and Vice President at CRM. Chris joined the
firm in 1999 and is responsible for investment research. Chris co-founded
Schaenen Fox Capital Management, LLC, a hedge fund with small cap value
investments. He previously was at Schaenen Wood & Associates, Inc. as Vice
President and Senior Manager/Analyst; Chemical Bank's Private Banking Division
as a portfolio manager and analyst; and Drexel Burnham Lambert, Inc. as a
financial analyst. Chris earned a B.A. in Economics from the State University of
New York at Albany and an MBA in Finance from New York University's Stern School
of Business.
Adam L. Starr Vice President at CRM. Adam joined the firm in 1999 and is
responsible for investment research. Prior to joining CRM, he was a Partner and
Portfolio Manager at Weiss, Peck & Greer, LLC and an Analyst and Portfolio
Manager at Charter Oak Partners and First Manhattan Company. Adam earned a B.A.
in History from Clark University and an MBA from Columbia University.
18
<PAGE>
SERVICE PROVIDERS
The chart below provides information on the Funds' primary service providers.
Asset
Management
- --------------------------------------------------------------------------------
Investment Adviser
Cramer Rosenthall McGlynn, LLC
707 Westchester Avenue
White Plains, NY 10604
Manages each Fund's business and
investment activities.
- --------------------------------------------------------------------------------
Shareholder
Services
- --------------------------------------------------------------------------------
Transfer Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Handles shareholder services, including
recordkeeping and statements, payment of
distributions and processing of buy
and sell requests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE
CRM MID CAP VALUE
CRM SMALL CAP VALUE
- --------------------------------------------------------------------------------
Fund
Operations
- --------------------------------------------------------------------------------
Administrator and
Accounting Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Provides facilities, equipment and personnel
to carry out administrative services related
to each Fund and calculates each Fund's
NAV and distributions.
- --------------------------------------------------------------------------------
Asset
Safe Keeping
- --------------------------------------------------------------------------------
Custodian
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Hold each Fund's assets, settles all
portfolio trades and collects most of the
valuation data required for calculating each
Fund's NAV per share.
- --------------------------------------------------------------------------------
Distribution
- --------------------------------------------------------------------------------
Distributor
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken, PA 19428
Distributes each Fund's Shares.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PRICING OF SHARES
The Funds value their assets based on current market values when such values are
readily available. These prices normally are supplied by a pricing service. Any
assets held by a Fund that are denominated in foreign currencies are valued
daily in U.S. dollars at the foreign currency exchange rates that are prevailing
at the time that PFPC Inc. determines the daily net asset value. To determine
the value of those securities, PFPC may use a pricing service that takes into
account not only developments related to specific securities, but also
transactions in comparable securities. Securities that do not have a readily
available current market value are valued in good faith under the direction of
the Board of Trustees.
PLAIN TALK
================================================================================
WHAT IS THE NET ASSET VALUE or "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
================================================================================
PFPC determines the NAV per share of each Fund as of the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time), on
each Business Day (a day that the Exchange, the Transfer Agent and the
Philadelphia branch of the Federal Reserve Bank are open for business). The NAV
is calculated by adding the value of all securities and other assets in a Fund,
deducting its liabilities and dividing the balance by the number of outstanding
shares in that Fund.
Shares will not be priced on those days the Funds are closed. As of the date of
this prospectus, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
20
<PAGE>
PURCHASE OF SHARES
PLAIN TALK
================================================================================
HOW TO PURCHASE SHARES:
o Directly by mail or by wire
o As a client of a Third Party
================================================================================
Fund shares are offered on a continuous basis and are sold without any sales
charges. The minimum initial investment in the Fund's Institutional class shares
is $1,000,000 ($2,000 for IRA's or automatic investment plans). The Funds, in
their sole discretion, may waive the minimum initial amount to establish certain
Institutional share accounts. Additional investments may be made in any amount.
You may purchase shares as specified below.
You may also purchase shares if you are a client of a broker or other financial
institution, a "Third Party." The policies and fees charged by the Third Party
may be different than those charged by a Fund. Banks, brokers, retirement plans
and financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
By Mail: You may purchase shares by sending a check drawn on a U.S. bank payable
to CRM Funds, indicating the name of the Fund, along with a completed
application (included at the end of this prospectus). If a subsequent investment
is being made, the check should also indicate your Fund account number. When you
make purchases by check, each Fund may withhold payment on redemptions until it
is reasonably satisfied that the funds are collected (which can take up to 10
days). If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be responsible for any losses or fees incurred in
that transaction. Send the check and application to:
Regular mail: Overnight mail:
------------- ---------------
CRM Funds CRM Funds
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8742 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
21
<PAGE>
By Wire: You may purchase shares by wiring federal funds readily available.
Please call PFPC at (800) CRM-2883 before making a purchase by wire, and if
making an initial purchase, to also obtain an account number. Once you have an
account number, you should instruct your bank to wire funds to:
PFPC Trust Company
c/o PNC Bank
Philadelphia, PA
ABA #031-0000-53
DDA #86-0172-6591
Attention: The CRM Funds
Be sure to include your account number, the Fund name and your name. If you make
an initial purchase by wire, you must promptly forward a completed application
to the Transfer Agent at the address above. If you are making a subsequent
purchase, the wire should also indicate your Fund account number.
Additional Information Regarding Purchases: Purchase orders received by the
Transfer Agent before the close of regular trading on the Exchange on any
Business Day will be priced at the NAV that is determined as of the close of
trading. Purchase orders received after the close of regular trading on the
Exchange will be priced as of the close of regular trading on the following
Business Day.
Any purchase order may be rejected if a Fund determines that accepting the order
would not be in the best interest of the Fund or its shareholders. The Funds
will not accept third party checks.
It is the responsibility of the Third Party to transmit orders for the purchase
of shares by its customers to the Transfer Agent and to deliver required funds
on a timely basis, in accordance with the procedures stated above.
For information on other ways to purchase shares, including through an
individual retirement account (IRA), or an automatic investment plan, please
refer to the Statement of Additional Information.
22
<PAGE>
REDEMPTION OF SHARES
PLAIN TALK
================================================================================
HOW TO REDEEM (SELL) SHARES:
o By mail
o By telephone
================================================================================
You may sell your shares on any Business Day as described below. Redemptions are
effected at the NAV next determined after the Transfer Agent has received your
redemption request. There is no fee when Fund shares are redeemed. It is the
responsibility of the Third Party to transmit redemption orders and credit their
customers' accounts with redemption proceeds on a timely basis. Redemption
checks are mailed on the next Business Day following receipt by the Transfer
Agent of redemption instructions, but never later than 7 days following such
receipt. Amounts redeemed by wire are normally wired on the date of receipt of
redemption instructions (if received by the Transfer Agent before 4:00 p.m.
Eastern time), or the next Business Day (if received after 4:00 p.m. Eastern
time, or on a non-Business Day), but never later than 7 days following such
receipt. If you purchased your shares through an account at a Third Party, you
should contact the Third Party for information relating to redemptions. The
Fund's name and your account number should accompany any redemption requests.
By Mail: If you redeem your shares by mail, you should submit written
instructions with a "signature guarantee". A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public. You must
indicate the Fund name, your account number and your name. The written
instructions and signature guarantee should be mailed to:
Regular mail: Overnight mail:
------------- ---------------
CRM Funds CRM Funds
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8742 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Telephone: If you prefer to redeem your shares by telephone you may elect to
do so. However there are certain risks. The Fund has certain safeguards and
procedures to confirm the identity of callers and to confirm that the
instructions communicated are genuine. If such procedures are followed, you will
bear the risk of any losses.
23
<PAGE>
Automatic Redemptions: You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Automatic redemptions must
be for at least $250.
Additional Information Regarding Redemptions: Redemption proceeds may be wired
to your predesignated bank account in any commercial bank in the United States
if the amount is $1,000 or more. The receiving bank may charge a fee for this
service. Proceeds may also be mailed to your bank or, for amounts of $10,000 or
less, mailed to your Fund account address of record if the address has been
established for at least 60 days. In order to authorize the Transfer Agent to
mail redemption proceeds to your Fund account address of record, complete the
appropriate section of the Application for Telephone Redemptions or include your
Fund account address of record when you submit written instructions. You may
change the account that you have designated to receive amounts redeemed at any
time. Any request to change the account designated to receive redemption
proceeds should be accompanied by a guarantee of your signature, as the
shareholder, by an eligible institution. A signature and a signature guarantee
are required for each person in whose name the account is registered. Further
documentation will be required to change the designated account when a
corporation, other organization, trust, fiduciary or other institutional
investor holds the Fund shares.
If shares to be redeemed represent a recent investment made by check, each Fund
reserves the right not to make the redemption proceeds available until it has
reasonable grounds to believe that the check has been collected (which could
take up to 10 days).
Small Accounts: If the value of your Fund account falls below $1,000,000 for
Institutional share accounts ($2,000 for IRAs or automatic investment plans),
the Fund may ask you to increase your balance. If the account value is still
below such amounts after 60 days, the Fund may close your account and send you
the proceeds. The Fund will not close your account if it falls below these
amounts solely as a result of a reduction in your account's market value.
Redemptions in Kind: The Funds reserve the right to make "redemptions in kind"
- -- payments of redemption proceeds in fund securities rather than cash -- if the
amount redeemed is large enough to affect the Series' operations (for example,
if it represents more than 1% of a Series' assets).
24
<PAGE>
EXCHANGE OF SHARES
PLAIN TALK
================================================================================
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund to another
fund within a family of funds.
================================================================================
You may exchange all or a portion of your shares in a Fund for Institutional
class shares of the following funds:
Wilmington Prime Money Market Fund
Wilmington Tax-Exempt Fund
Wilmington Intermediate Bond Fund
Wilmington Municipal Bond Fund
CRM Large Cap Value Fund
CRM Mid Cap Value Fund
CRM Small Cap Value Fund
Redemption of shares through an exchange will be effected at the NAV per share
next determined after the Transfer Agent receives your request. A purchase of
shares through an exchange will be effected at the NAV per share determined at
that time or as next determined thereafter.
Exchange transactions will be subject to the minimum initial investment and
other requirements of the Fund into which the exchange is made. An exchange may
not be made if the exchange would leave a balance in a shareholder's account of
less than $1,000,000 for Institutional share accounts.
To obtain prospectuses of the other Funds, you may call (800) CRM-2883. To
obtain more information about exchanges, or to place exchange orders, contact
the Transfer Agent, or, if your shares are held in an account with a Third
Party, contact the Third Party. The Funds may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. This exchange offer is valid only in those jurisdictions where the
sale of Prospectus shares to be acquired through such exchange may be legally
made.
25
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
PLAIN TALK
================================================================================
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest and dividends earned by a fund on its
investments less accrued expenses.
================================================================================
As a shareholder of a Fund, you are entitled to dividends and other
distributions arising from the net investment income and net realized gains, if
any, earned on the investments held by the Funds. Dividends are declared and
paid annually to you. Each Fund expects to distribute any net realized gains
once a year.
Distributions are payable to the shareholders of record at the time the
distributions are declared (including holders of shares being redeemed, but
excluding holders of shares being purchased). All distributions are reinvested
in additional Fund shares unless you have elected to receive the distributions
in cash.
TAXES
Federal Income Tax: As long as a Fund meets the requirements for being a
"regulated investment company," it pays no Federal income tax on the earnings
and gains it distributes to shareholders. While each Fund may invest in
securities that earn interest exempt from Federal income tax, the Funds invest
primarily in taxable securities. Each Fund will notify you following the end of
the calendar year of the amount of dividends and other distributions paid that
year.
Dividends you receive from a Fund, whether reinvested in Fund shares or taken as
cash, are generally taxable to you as ordinary income. Distributions of a Fund's
net capital gain whether reinvested in Fund shares or taken as cash, when
designated as such, are taxable to you as long-term capital gain, regardless of
the length of time you have held your shares. You should be aware that if Fund
shares are purchased shortly before the record date for any dividend or capital
gain distribution, you will pay the full price for the shares and will receive
some portion of the price back as a taxable distribution. Each the Large Cap
Value Fund, the Mid Cap Value Fund and the Small Cap Value Fund, anticipates the
distribution of net investment income.
It is a taxable event for you if you sell or exchange shares of any Fund.
Depending on the purchase price and the sale price of the shares you exchange,
you may have a taxable gain or loss on the transaction. You are responsible for
any tax liability generated by your transactions.
26
<PAGE>
State and Local Income Taxes: You should consult your tax advisers concerning
state and local taxes, which may have different consequences from those of the
Federal income tax law.
This section is only a summary of some important income tax considerations that
may affect your investment in a Fund. More information regarding those
considerations appears in our Statement of Additional Information. You are urged
to consult your tax adviser regarding the effects of an investment on your tax
situation.
27
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION [GRAPHIC OMITTED]
ARRANGEMENTS
- --------------------------------------------------------------------------------
Provident Distributors, Inc. ("PDI") manages the Funds' distribution efforts and
provides assistance and expertise in developing marketing plans and materials,
enters into dealer agreement with broker-dealers to sell shares and provides
shareholder support services, directly or through affiliates. The Funds do not
charge any sales loads, deferred sales loads or other fees in connection with
the purchase of shares.
MASTER/FEEDER STRUCTURE
Other investors, including other mutual funds, may invest in the master funds.
The master/feeder structure enables various institutional investors, including a
Fund, to pool their assets, which may be expected to result in economies by
spreading certain fixed costs over a larger asset base. Each shareholder of a
master fund, including a Fund, will pay its proportionate share of the master
fund's expenses.
For reasons relating to costs or a change in investment goal, among others, a
Fund could switch to another master fund or decide to manage its assets itself.
No Fund is currently contemplating such a move.
SHARE CLASSES
Each Fund issues Investor and Institutional share classes, which have different
minimum investment requirements and fees. Institutional shares are offered only
to those investors who invest in the Fund through an intermediary (i.e. broker)
or through a consultant, and who invest $1,000,000 or more or where related
accounts total $1,000,000 or more when combined. Other investors investing
$10,000 or more may purchase Investor shares.
28
<PAGE>
- ------------------------------
FOR MORE INFORMATION
- ------------------------------
FOR INVESTORS WHO WANT MORE INFORMATION ON THE FUNDS, THE FOLLOWING DOCUMENTS
ARE AVAILABLE FREE UPON REQUEST:
Annual/Semi-Annual Reports
Contain performance data and information on fund holdings, operating
results and a discussion of the market conditions and investment
strategies that significantly affect the Funds' performance for the most
recently completed fiscal year or half-year.
Statement of Additional Information (SAI)
Provides a complete technical and legal description of the Funds'
policies, investment restrictions, risks, and business structure. This
prospectus incorporates the SAI by reference.
Copies of these documents and answers to questions about the Funds may be
obtained without charge by contacting:
CRM Funds
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) CRM-2883
9:00 a.m. to 5:00 p.m. Eastern time
Information about the Funds (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment
of a duplicating fee, by writing the Public Reference Room of the SEC,
Washington, DC, 20549-6009. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-(800)-SEC-0330.
Reports and other information about the Funds may be viewed on-screen or
downloaded from the SEC's Internet site at http://www.sec.gov.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)-CRM-2883.
The investment company registration number is 811-08648.
[LOGO]
CRM
-----
FUNDS
-----
CRM LARGE CAP
VALUE FUND
CRM MID CAP
VALUE FUND
CRM SMALL CAP
VALUE FUND
CRM Funds
c/o PFPC
400 Bellevue Parkway
Wilmington, DE 19809
800-CRM-2883
Web Site:
www.crmfunds.com
<PAGE>
[LOGO]
CRM
-----
FUNDS
-----
This prospectus gives vital information about these mutual funds, including
information on investment policies, risks and fees. For your own benefit and
protection, please read it before you invest, and keep it on hand for future
reference.
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
NOVEMBER 1, 1999
CRM LARGE CAP
VALUE FUND
CRM MID CAP
VALUE FUND
CRM SMALL CAP
VALUE FUND
Investor Shares
[GRAPHIC OMITTED]
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] TABLE OF CONTENTS
- --------------------------------------------------------------------------------
A look at the goals, FUND DESCRIPTION
strategies, risks,
expenses and financial SUMMARY.................................. 2
history of each fund. PERFORMANCE INFORMATION.................. 4
FEES AND EXPENSES........................ 7
INVESTMENT OBJECTIVES.................... 9
PRIMARY INVESTMENT STRATEGIES............ 9
ADDITIONAL RISK INFORMATION.............. 12
FINANCIAL HIGHLIGHTS..................... 14
Details about the MANAGEMENT OF THE FUND
service providers.
INVESTMENT ADVISER....................... 16
SERVICE PROVIDERS ....................... 19
Policies and SHAREHOLDER INFORMATION
instructions for
opening, maintaining and PRICING OF SHARES ....................... 20
closing an account in PURCHASE OF SHARES ...................... 21
any of the funds. REDEMPTION OF SHARES .................... 22
EXCHANGE OF SHARES ...................... 24
DIVIDENDS AND DISTRIBUTIONS ............. 25
TAXES ................................... 26
Details on the funds' DISTRIBUTION ARRANGEMENTS
share classes and
master/feeder MASTER/FEEDER STRUCTURE ................. 27
arrangement. SHARE CLASSES ........................... 27
FOR MORE INFORMATION ................... BACK COVER
For information about key terms and concepts, look
for our "Plain Talk" explanations.
<PAGE>
- --------------------------------------------------------------------------------
FUND DESCRIPTION [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
CRM MID CAP VALUE FUND
CRM SMALL CAP VALUE FUND
Investor Shares
PLAIN TALK
================================================================================
WHAT IS A MUTUAL FUND?
A mutual fund pools shareholders' money and, using a professional investment
manager, invests it in securities like stocks and bonds. Each Fund is a separate
mutual fund.
================================================================================
SUMMARY
PLAIN TALK
================================================================================
WHAT IS "CAP"?
Cap or the market capitalization of a company means the value of the company's
common stock in the stock market.
================================================================================
Investment Objective o The Large Cap Value Fund, Mid Cap Value Fund
and Small Cap Value Fund each seek to achieve
long-term capital appreciation.
- --------------------------------------------------------------------------------
Investment Focus o Equity (or related) securities
- --------------------------------------------------------------------------------
Share Price Volatility o Moderate to high
- --------------------------------------------------------------------------------
Principal Investment o Each Fund operates as a "feeder fund," which
Strategy means that the Fund does not buy individual
securities directly. Instead, the Fund's invest
in a corresponding mutual fund or "master
fund," which in turn purchases investment
securities. Each Fund invests all of its assets
in a master fund which is a separate series of
another mutual fund. The Funds and their
corresponding Series have the same investment
objective, policies and limitations.
o The Large Cap Value Fund will invest its assets
in the Large Cap Value Series, which invests at
least 65% of its total assets in a diversified
fund of U.S. equity (or related) securities
with a market cap of $10 billion or higher at
the time of purchase. The Series invests in
securities whose prices are low relative to
comparable companies. The Series' adviser looks
for companies facing dynamic changes such as
merger or acquisition, restructuring, change of
management,
- --------------------------------------------------------------------------------
2
<PAGE>
or other type of change in operation, financing
or management. The adviser seeks stocks
believed to have a greater upside potential
than downside risk over an 18-24 month holding
period. An important aspect of an investment
case is setting a price target. This target
typically reflects a risk/reward ratio of 50%
appreciation potential achievable over a
two-year period versus a perceived risk of no
more than 10% of capital. The achievement of
the target price is the Series' adviser's
primary sell discipline. In other words, if
there has been no fundamental change in the
investment case, the stock will be sold once
the target price is met. Portfolio companies
are constantly monitored to determine whether
there is any fundamental change, for better or
worse, in the reasons for which the stock was
purchased. If the dynamics do not appear to be
materializing, the stock will be sold.
o The Mid Cap Value Fund will invest its assets
in the Mid Cap Value Series, which invests at
least 65% of its total assets in a diversified
fund of U.S. equity (or related) securities
with a market cap between $1 and $10 billion at
the time of purchase. The Series invests in
securities whose prices are low relative to
comparable companies. The Series' adviser buys
and sells stocks based upon the same
considerations described above for Large Cap
Value Fund.
o The Small Cap Value Fund will invest its assets
in the Small Cap Value Series, which invests at
least 65% of its total assets in a diversified
fund of U.S. equity (or related) securities
with a market cap of $1 billion or less at the
time of purchase. The Series invests in
securities whose prices are low relative to
comparable companies. The Series' adviser buys
and sells stocks based upon the same
considerations described above for Large Cap
Value Fund.
- --------------------------------------------------------------------------------
Principal Risks The Funds are subject to the risks summarized below
which are further described under "Additional Risk
Information."
o It is possible to lose money by investing in a
Fund.
o A Fund's share price will fluctuate in response
to changes in the market value of the Fund's
investments. Market value changes result from
business developments affecting an issuer as
well as general market and economic conditions.
o A value-oriented investment approach is subject
to the risk that a security believed to be
undervalued does not appreciate in value as
anticipated.
o Small cap companies may be more vulnerable than
larger companies to adverse business or
economic developments, and their securities may
be less liquid and more volatile than
securities of larger companies.
o The performance of a Fund will depend on
whether or not the adviser is successful in
pursuing an investment strategy.
- --------------------------------------------------------------------------------
Investor Profile o Investors who want the value of their
investment to grow and who are willing to
accept more volatility for the possibility of
higher returns.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION [GRAPHIC]
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
PAST PERFORMANCE CHART
[The following table was depicted as a bar chart in the printed material.]
Average Annual Total Return
1992 ......... 13.49%
1993 ......... 13.75%
1994 ......... -1.64%
1995 ......... 34.38%
1996 ......... 21.86%
1997 ......... 24.55%
1998 ......... -2.75%
Year-to-Date Total Return as of September 30, 1999: -7.63%
This bar chart shows changes in the performance from calendar year to calendar
year of the Large Cap Value Equity Portfolio of the Rodney Square Strategic
Equity Fund, which is one of the predecessors of the Fund's master series. The
bar chart does not reflect deductions for shareholder services fees. If such
fees had been reflected, returns would be less than those shown below.
- --------------------------------------------------------------------------------
Best Quarter Worst Quarter
- --------------------------------------------------------------------------------
13.48% -10.62%
(June 30, 1997) (September 30, 1998)
PLAIN TALK
================================================================================
WHAT IS AN INDEX?
An index is a broad measure of the market performance of a specific group of
securities in a particular market or securities in a market sector. You cannot
invest directly in an index. An index does not have an investment adviser and
does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
================================================================================
4
<PAGE>
- --------------------------------------------------------------------------------
Year(s) Large Cap Value Fund Russell 1000 Index*
- --------------------------------------------------------------------------------
Average Annual Returns
as of 12/31/98
1 Year -2.75% 27.02%
5 Years 14.30% 23.37%
10 Years 15.29% 19.03%
* The Russell 1000 Index measures the performance of the 1,000 largest
companies in the Russell 3000 Index, which represents approximately 92% of
the total market capitalization of the Russell 3000 Index.
CRM MID CAP VALUE FUND
The Fund has not been in operation for a full calendar year.
Year-to-Date Total Return as of September 30, 1999: -12.00%
INVESTOR SHARES NOT OFFERED PRIOR TO NOVEMBER 1, 1999.
Institutional Shares
- --------------------------------------------------------------------------------
Year Mid Cap Value Fund Russell Mid Cap Index*
- --------------------------------------------------------------------------------
Average Annual Returns
as of 12/31/98
Since Inception
(January 6, 1998) 6.73% 9.91%
* The Russell Mid Cap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represent approximately 35% of
the total market capitalization of the Russell 1000 index.
CRM SMALL CAP VALUE FUND
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
PAST PERFORMANCE CHART
[The following table was depicted as a bar chart in the printed material.]
Average Annual Total Return
1996 ............. 38.95%
1997 ............. 21.73%
1998 ............. -12.21%
Year-to-Date Total Return as of September 30, 1999: 0.56%
5
<PAGE>
This bar chart shows changes in the performance of the Fund's Investor shares
from calendar year to calendar year. The bar chart does not reflect deductions
for shareholder services fees. If such fees had been reflected, returns would be
less than those shown below.
- --------------------------------------------------------------------------------
Best Quarter Worst Quarter
- --------------------------------------------------------------------------------
17.44% -22.80%
(June 30, 1997) (September 30, 1998)
Investor Shares
- --------------------------------------------------------------------------------
Year(s) Small Cap Value Fund Russell 2000 Index*
- --------------------------------------------------------------------------------
Average Annual Returns
as of 12/31/98
1 Year -12.21% -2.24%
Since Inception
(October 1, 1995) 15.40% 11.45%
* The Russell 2000 Index is a market weighted index composed of 2000
companies with market capitalizations from $50 million to $1.8 billion.
The Index is unmanaged and reflects the reinvestment of dividends.
6
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] FEES AND EXPENSES
- --------------------------------------------------------------------------------
PLAIN TALK
================================================================================
WHAT ARE FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, distribution, administration and custody services. Each
Fund's expenses in the table below are shown as a percentage of its net assets.
These expenses are deducted from Fund assets.
================================================================================
The table below describes the fees and expenses that you may pay if you buy and
hold shares of a Fund. No sales charges or other fees are paid directly from
your investment.
Investor Shares
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Large Cap Value Fund
- --------------------------------------------------------------------------------
Management fees 0.55%
Distribution (12b-1 fees) None
Other expenses 0.52%
Shareholder Servicing fees 0.25%
Total annual operating expenses(2) 1.32%
Fee Waiver --
Net Expenses 1.32%
- --------------------------------------------------------------------------------
Mid Cap Value Fund
- --------------------------------------------------------------------------------
Management fees 0.75%
Distribution (12b-1 fees) None
Other expenses 0.73%
Shareholder Servicing fees 0.25%
Total annual operating expenses(2) 1.73%
Fee Waiver 0.23%
Net Expenses 1.50%
- --------------------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------------------------------------
Management fees 0.75%
Distribution (12b-1 fees) None
Other expenses 0.31%
Shareholder Servicing fees 0.25%
Total annual operating expenses(2) 1.31%
Fee Waiver --
Net Expenses 1.31%
(1) The table above and the Example below each reflect the aggregate annual
operating expenses of each Fund and the corresponding Series in which the
Fund invests.
(2) The adviser has voluntarily undertaken to waive a portion of its fees and
assume certain expenses of the above Funds to the extent that the total
annual operating expenses exceed 1.50% of net assets. This undertaking
will remain in place until the Board of Trustees approves its termination.
7
<PAGE>
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 table below shows what you
would pay if you invested $10,000 over the various time frames indicated. The
example assumes that:
o you reinvested all dividends and other distributions
o the average annual return was 5%
o the Fund's maximum (without regard to waivers or expenses) total
operating expenses are charged and remain the same over the time
periods
o you redeemed all of your investment at the end of the time period.
Although your actual cost may be higher or lower, based on these assumptions,
your costs would be:
Investor Shares
- --------------------------------------------------------------------------------
Large Cap Mid Cap Small Cap
Value Fund Value Fund Value Fund
- --------------------------------------------------------------------------------
1 year $ 134 $ 176 $ 133
- --------------------------------------------------------------------------------
3 years $ 418 $ 545 $ 415
- --------------------------------------------------------------------------------
5 years $ 723 $ 939 $ 718
- --------------------------------------------------------------------------------
10 years $1,590 $2,041 $1,579
- --------------------------------------------------------------------------------
The above example is for comparison purposes only and is not a representation of
a Fund's actual expenses and returns, either past or future.
8
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The Large Cap Value Fund, Mid Cap Value Fund and Small Cap Value Fund each seek
to achieve long-term capital appreciation. These investment objectives may not
be changed without shareholder approval. There is no guarantee that a Fund will
achieve its investment objective.
PRIMARY INVESTMENT STRATEGIES
PLAIN TALK
================================================================================
WHAT ARE VALUE FUNDS?
Value funds invest in the common stock of companies that are considered by the
adviser to be undervalued relative to their underlying profitability, or rather
their stock price does not reflect the value of the company.
================================================================================
Value Investing. Through their investment in the corresponding Series, the Large
Cap Value, Mid Cap Value and Small Cap Value Funds seek to invest in stocks that
are less expensive than comparable companies, as determined by price/earnings
ratios, cash flows or other measures. Value investing therefore may reduce risk
while offering potential for capital appreciation as a stock gains favor among
other investors and its price rises.
The Series are managed using investment ideas that the adviser has used for over
twenty-five years. The Series' adviser relies on selecting individual stocks and
does not try to predict when the stock market might rise or fall. It seeks out
those stocks that are undervalued and, in some cases, neglected by financial
analysts. The adviser evaluates the degree of analyst recognition by monitoring
the number of analysts who follow the company and recommend its purchase or sale
to investors.
The Adviser's Process. The adviser starts by identifying early change in a
company's operations, finances or management. The adviser is attracted to
companies which will look different tomorrow -- operationally, financially,
managerially -- when compared to yesterday. This type of dynamic change often
creates confusion and misunderstanding and may lead to a drop in the company's
stock price. Examples of change include mergers, acquisitions, divestitures,
restructuring, change of management, new market/product/means of
production/distribution, regulatory change, etc. Once change is identified, the
adviser evaluates the company on several levels. It analyzes:
o Financial models based principally upon projected cash flows
o The price of the company's stock in the context of what the market
is willing to pay for stock of comparable companies and what a
strategic buyer would pay for the whole company
9
<PAGE>
o The extent of management's ownership interest in the company
o The company's market by corroborating its observations and
assumptions by meeting with management, customers and suppliers
The adviser also evaluates the degree of recognition of the business by
investors by monitoring the number of sell side analysts who closely follow the
company and nature of the shareholder base. Before deciding to purchase a stock,
the adviser conducts an extensive amount of business due diligence to
corroborate its observations and assumptions.
The identification of change comes from a variety of sources including the
private capital network which the adviser has established among its clients,
historical investments and intermediaries. The advisor also makes extensive use
of clipping services and regional brokers and bankers to identify elements of
change. The investment professionals regularly meet companies around the country
and sponsor more than 200 company/management meetings in its New York office.
In order to place a valuation on the proposed investment, the adviser will
consider the company's historic trading multiples, multiples of comparable
companies and multiples paid in private market transactions. In its overall
assessment, the adviser seeks stocks that it believes have a greater upside
potential than downside risk over an 18-24 month holding period.
An important function of the adviser is to set a price target, that is, the
price at which the stock will be sold when there has been no fundamental change
in the investment case. The adviser constantly monitors the companies held by
the Series to determine if there have been any fundamental changes in the
reasons that prompted the initial purchase of the stock. If significant changes
for the better have not materialized, the stock will be sold. The initial
investment case for stock purchase, which has been documented, is examined by
the adviser's investment professionals. A final decision on selling the stock is
made after all such factors are analyzed.
The Large Cap Value Fund invests its assets in the Large Cap Value Series,
which, under normal conditions, invests at least 65% of its total assets in the
following equity (or related) securities:
o common stocks of U.S. corporations that are judged by the adviser to
be undervalued in the marketplace relative to underlying
profitability and have a market capitalization of $10 billion or
higher at the time of purchase;
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
o options on indexes of the common stock of U.S. corporations
described above;
o contracts for either the future delivery, or payment in respect of
the future market value, of certain indexes of the common stock of
U.S. corporations described above, and options upon such futures
contracts; and
10
<PAGE>
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a nationally
recognized statistical rating organization ("NRSRO"), in response to
adverse market conditions, as a temporary defensive position. The
result of this action may be that the Series will be unable to
achieve its investment objective.
The Large Cap Value Series is a diversified fund of large cap U.S. equity (or
related) securities that are deemed by the adviser to be undervalued as compared
to the company's profitability potential.
The Mid Cap Value Fund invests its assets in the Mid Cap Value Series, which,
under normal conditions, invests at least 65% of its total assets in the
following equity (or related) securities:
o common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the marketplace relative to
underlying profitability and have a market capitalization between $1
and $10 billion at the time of purchase;
o securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
o warrants; and
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Mid Cap Value Series is a diversified fund of medium cap U.S. equity (or
related) securities that are deemed by the adviser to be undervalued as compared
to the company's profitability potential.
PLAIN TALK
================================================================================
WHAT ARE SMALL CAP FUNDS?
Small cap funds invest in the common stock of companies with smaller market
capitalizations. Small cap stocks may provide the potential for higher growth
but they also typically have greater risk and more volatility.
================================================================================
The Small Cap Value Fund invests its assets in the Small Cap Value Series,
which, under normal conditions, invests at least 65% of its total assets in the
following equity (or related) securities:
o common and preferred stocks of U.S. corporations that are judged by
the adviser to be undervalued in the market- place relative to
underlying profitability and have a market capitalization of $1
billion or less at the time of purchase;
11
<PAGE>
o securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
o warrants; and
o without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Small Cap Value Series is a diversified fund of large cap U.S. equity (or
related) securities that are deemed by the adviser to be undervalued as compared
to the company's profitability potential.
All Series. The frequency of fund transactions and a Series' turnover rate will
vary from year to year depending on the market. Increased turnover rates incur
the cost of additional brokerage commissions and may cause you to receive larger
capital gain distributions. Series turnover rate is normally expected to be less
than 100% for each of the Series.
Each Series also may use other strategies and engage in other investment
practices, which are described in detail in our Statement of Additional
Information.
ADDITIONAL RISK INFORMATION
The following is a list of certain risks that may apply to your investment in
the Funds unless otherwise indicated. Further information about a Fund's
investments is available in our Statement of Additional Information:
o Derivatives Risk: Some of the Series' investments may be referred to
as "derivatives" because their value depends on, or derives from,
the value of an underlying asset, reference rate or index. These
investments include options, futures contracts and similar
investments that may be used in hedging and related income
strategies. The market value of derivative instruments and
securities is sometimes more volatile than that of other
investments, and each type of derivative may pose its own special
risks. As a fundamental policy, no more than 15% of a Series' total
assets may at any time be committed or exposed to derivative
strategies.
o Market Risk: The risk that the market value of a security may move
up and down, sometimes rapidly and unpredictably. The prices of
equity securities change in response to many factors including the
historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
12
<PAGE>
o Master/Feeder Risk: The master/feeder structure is relatively new
and more complex. While this structure is designed to reduce costs,
it may not do so, and there may be operational or other
complications. For example, large-scale redemptions by other feeders
of their shares of a master fund could have adverse effects on a
Fund such as requiring the liquidation of a substantial portion of
the master fund's holdings at a time when it could be
disadvantageous to do so. Also, other feeders of a master fund may
have a greater ownership interest in the master fund than a Fund's
interest and, therefore, could have effective voting control over
the operation of the master fund.
o Opportunity Risk: The risk of missing out on an investment
opportunity because the assets necessary to take advantage of it are
tied up in less advantageous investments.
o Small Cap Risk: Small cap companies may be more vulnerable than
larger companies to adverse business or economic developments. Small
cap companies may also have limited product lines, markets or
financial resources, may be dependent on relatively small or
inexperienced management groups and may operate in industries
characterized by rapid technological obsolescence. Securities of
such companies may be less liquid and more volatile than securities
of larger companies and therefore may involve greater risk than
investing in larger companies. (Small Cap Value Fund)
o Valuation Risk: The risk that a Series has valued certain of its
securities at a higher price than it can sell them.
o Value Investing Risk: The risk that a Series' investment in
companies whose securities are believed to be undervalued, relative
to their underlying profitability, do not appreciate in value as
anticipated. (Large Cap Value, Mid Cap Value, Small Cap Value Funds)
o Year 2000 Compliance Risk: Like other organizations around the
world, the Series could be adversely affected if the computer
systems used by their various service providers (or the market in
general) do not properly operate after January 1, 2000. The Series
are taking steps to address the Year 2000 issue with respect to the
computer systems that they rely on. There can be no assurance,
however, that these steps will be sufficient to avoid a temporary
service disruption or any adverse impact on the Series.
Additionally, if a company in which a Series is invested is
adversely affected by Year 2000 problems, it is likely that the
price of that company's securities will also be adversely affected.
A decrease in one or more of a Series' holdings may have a similar
impact on the price of the Series' shares. The Series' adviser will
rely on public filings and other statements made by companies about
their Year 2000 readiness. The adviser is not able to audit any
company and its major suppliers to verify their Year 2000 readiness.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years or since the Fund's inception, if
shorter. Certain information reflects financial results for a single share of a
Fund. The total returns in the table represent the rate that a shareholder would
have earned (or lost) on an investment in a Fund (assuming reinvestment of all
dividends and other distributions). This information has been audited by Ernst &
Young LLP, whose report, along with each Fund's financial statements, is
included in the Annual Report, which is available without charge upon request.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
For the Year Ended,
September 30,
June 30, 1999(2) 1998 1997 1996(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SMALL CAP VALUE PORTFOLIO(1)
Net Asset Value -- Beginning of Period ................... $13.61 $17.68 $13.71 $10.00
------ ------ ------ ------
Investment Operations:
Net investment income .................................. (0.02) (0.06) (0.06) (0.02)
Net realized and unrealized gain (loss) on investments.. 1.35 (3.15) 4.89 3.73
------ ------ ------ ------
Total from investment operations ..................... 1.33 (3.21) 4.83 3.71
------ ------ ------ ------
Distributions:
From net investment income ............................. -- -- -- --(4)
Capital gains .......................................... --(4) (0.84) (0.86) --
Return of capital ...................................... -- (0.02) -- --
------ ------ ------ ------
Total distributions .................................. -- (0.86) (0.86) --
------ ------ ------ ------
Net Asset Value -- End of Period ......................... $14.94 $13.61 $17.68 $13.71
====== ====== ====== ======
Total Return ............................................. 9.80%(5) (18.81)% 37.14% 37.15%
Ratios (To Average Net Assets)/Supplemental Data:
Expenses (net of fee waivers) .......................... 1.42%(6) 1.38% 1.50% 1.49%
Expenses (excluding fee waivers) ...................... 1.46%(6) 1.38% 1.50% 1.98%
Net investment income .................................. (0.16)%(6) (0.34)% (0.56)% (0.40)%
Portfolio turnover rate .................................. 64% 57% 99% 111%
Net assets at end of period (000 omitted) ................ $94,806 $130,929 $144,001 $45,385
</TABLE>
(1) Effective November 1, 1999, the CRM Small Cap Value Fund acquired the
assets and liabilities of the CRM Funds -- Small Cap Value Fund, an open
end mutual fund with substantially identical investment objectives. Prior
to November 1, 1999, the CRM Small Cap Value Fund was not in operation.
The financial highlights presented herein are those of the CRM Funds --
Small Cap Value Fund.
(2) For the period October 1, 1998 through June 30, 1999.
(3) For the year October 1, 1995 (commencement of operations) through
September 30, 1996.
(4) Less than $0.01 per share.
(5) Not annualized.
(6) Annualized.
14
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
For the Period
October 1, 1998 Period Ended
through September 30,
June 30, 1999 1998(2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
LARGE CAP VALUE EQUITY PORTFOLIO(1)
Net Asset Value -- Beginning of Period ..................... $10.02 $10.00
------ ------
Investment Operations:
Net investment income .................................... 0.06 0.01
Net realized and unrealized gain (loss) on investments ... 2.16 0.01
------ ------
Total from investment operations ....................... 2.22 0.02
------ ------
Distributions:
From net investment income ............................... (0.06) --
In excess of Net realized gain on investments ............ (0.01) --
------ ------
Total distributions .................................... (0.07) --
------ ------
Net Asset Value -- End of Period ........................... $12.17 $10.02
====== ======
Total Return ............................................... 22.16%(3) 0.20%(3)
Ratios (To Average Net Assets)/Supplemental Data:
Expenses (net of fee waivers) ............................ 1.50%(4) 1.50%(4)
Expenses (excluding fee waivers) ......................... 1.92%(4) 3.95%(4)
Net investment income .................................... 0.63%(4) 1.78%(4)
Portfolio turnover rate .................................... 56% 7%
Net assets at end of period (000 omitted) .................. $30,936 $10,668
</TABLE>
(1) Effective November 1, 1999, the CRM Large Cap Value Fund acquired the
assets and liabilities of the CRM Funds -- Large Cap Value Fund, an open
end mutual fund with substantially identical investment objectives. Prior
to November 1, 1999, the CRM Large Cap Value Fund was not in operation.
The financial highlights presented herein are those of the CRM Funds --
Large Cap Value Fund.
(2) For the period August 25, 1998 (commencement of operations) through
September 30, 1998.
(3) Not annualized.
(4) Annualized.
15
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
The Board of Trustees for each Fund supervises the management, activities and
affairs of the Fund and has approved contracts with various financial
organizations to provide, among other services, the day-to-day management
required by a Fund and its shareholders.
INVESTMENT ADVISER
PLAIN TALK
================================================================================
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a mutual fund and
continuously reviews, supervises and administers the fund's investment program.
The Board of Trustees supervises the investment adviser and establishes policies
that the adviser must follow in its management activities.
================================================================================
Cramer Rosenthal McGlynn, LLC, 707 Westchester Avenue, White Plains, New York
10604, serves as the investment adviser to the Large Cap Value Series, the Mid
Cap Value Series and the Small Cap Value Series. Subject to the general control
of the Board of Trustees, CRM makes investment decisions for these Series. CRM
and its predecessors have managed investments in small, medium and large
capitalization companies for more than twenty-five years. As of September 30,
1999, CRM had over $3.4 billion of assets under management.
Under the advisory agreement, the Large Cap Value Series pays a monthly advisory
fee to CRM at the annual rate of 0.55% of the Series' first $1 billion of
average daily net assets; 0.50% of the Series' next $1 billion of average daily
net assets; and 0.45% of the Series' average daily net assets over $2 billion.
The Mid Cap Value Series and the Small Cap Value Series each pay a monthly
advisory fee to CRM at the annual rate of 0.75% of the Series' first $1 billion
of average daily net assets; 0.70% of the Series' next $1 billion of average
daily net assets; and 0.65% of the Series' average daily net assets over $2
billion.
For the twelve months ended June 30, 1999, CRM received investment advisory
fees, after waivers, of 0.00% for the Large Cap Value Series, 0.30% for the Mid
Cap Value Series and 0.75% for the Small Cap Value Series, as a percentage of
the Series' average daily net assets.
16
<PAGE>
MID CAP VALUE STYLE PERFORMANCE INFORMATION
The following reflects the historical performance of the portfolios of all
institutional accounts managed by CRM that have investment objectives, policies
and strategies substantially similar to that of the CRM Mid Cap Value Fund. This
data does not reflect the performance of the Funds. This data compares the
performance of these private accounts against the Russell Midcap Index. This
performance data should not be considered as an indication of future performance
of any Fund or of CRM.
- --------------------------------------------------------------------------------
Period CRM Adviser(1) Russell Mid Cap Index(2)
- --------------------------------------------------------------------------------
20 Years: 1/1/79-9/30/99 16.56% 15.83%
15 Years: 1/1/84-9/30/99 15.30% 15.85%
10 Years: 1/1/89-9/30/99 12.67% 17.46%
5 Years: 1/1/94-9/30/99 12.80% 13.89%
3 Years: 1/1/96-9/30/99 8.15% 14.88%
1 Year: 1/1/98-9/30/99 1.01% 19.45%
(1) These results are a dollar weighted composite of tax-exempt, fully
discretionary, separately managed accounts that are over $1 million in
size and were under the Adviser's and its predecessor's management for at
least 3 months. As of September 30, 1999, the composite consists of 66
accounts with $1.533 billion in assets (78% of tax-exempt equity assets
and 44% of all equity assets) and has been calculated in accordance with
standards set by the Association for Investment Management and Research
(AIMR), since January 1, 1989. The Funds' performance will be calculated
using the method required by the SEC, which differs from the method used
to calculate the performance of the private accounts. The composite does
not reflect all of the assets under the Adviser's management and may not
accurately reflect the performance of all accounts it manages. The
separately managed accounts in the composite are not subject to the same
types of expenses to which the Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed
by the 1940 Act or Internal Revenue Code. All returns reflect the
deduction of advisory fees, brokerage commissions and execution costs paid
by the Adviser's private accounts, without provision for federal or state
income taxes. The net effect of the deduction of the operating expenses of
the Funds on the annualized performance, including the effect of
compounding over time, may be substantial. Consequently, the performance
results for the accounts could have been adversely affected if the
accounts included in the composite had been regulated as an investment
company under the federal securities law. In addition, the Fund's returns
would be reduced to the extent their fees and expenses are higher than the
fees and expenses incurred by the private accounts.
(2) As of the latest reconstitution, the average market capitalization of the
Russell Midcap Index was approximately $5.53 billion; the median market
capitalization was approximately $2.80 billion. The largest company in the
index had an approximate market capitalization of $21.28 billion.
FUND MANAGERS
The day-to-day management of the Large Cap Value Series, the Mid Cap Value
Series and the Small Cap Value Series is shared by a team of individuals
employed by CRM. Ronald H. McGlynn is responsible for the management of each of
these Series. In addition, Kevin M. Chin and Adam L. Starr are part of the team
responsible for the management of Large Cap Value Fund; Jay Abramson and Michael
A. Prober are part of the team responsible for the management of Mid Cap Value
Fund; and Scott L. Scher and Christopher S. Fox are part of the team responsible
for the management of Small Cap Value Fund. Each fund manager's business
experience and educational background is as follows:
Ronald H. McGlynn Co-founder, Chief Executive Officer and President of CRM.
Bringing over 30 years of investment experience to the firm, Mr. McGlynn serves
as Chief Investment Officer and Portfolio Manager. Prior to co-founding
17
<PAGE>
CRM in 1973, Mr. McGlynn was a Portfolio Manager at Oppenheimer & Co. He
received a B.A. from Williams College and an M.B.A. from Columbia University.
Jay B. Abramson, CPA Executive Vice President of CRM. Jay joined CRM in 1985 and
is responsible for investment research and portfolio management. Mr. Abramson
received a B.S.E. and J.D. from the University of Pennsylvania Wharton School
and Law School, respectively, and is a Certified Public Accountant.
Michael A. Prober Vice President of CRM. Michael joined the firm in 1993 and is
responsible for investment research. Prior to joining CRM, he worked in
corporate finance and commercial banking at Chase Manhattan Bank and as a
Research Analyst for Alpha Capital Venture Partners. Mr. Prober received a
B.B.A. from the University of Michigan and an M.M. from the Northwestern
University J.L. Kellogg Graduate School of Management.
Scott L. Scher, CFA Vice President of CRM. Scott Joined the firm in 1995 and is
responsible for investment research. Prior to joining CRM, he worked as an
Analyst/Portfolio Manager at The Prudential. Mr. Scher received a B.A. from
Harvard College, an M.B.A. from Columbia Business School and is a Chartered
Financial Analyst.
Kevin M. Chin Vice President of CRM. Kevin joined the firm in 1989 and is
responsible for investment research. Prior to joining CRM, Kevin was a Financial
Analyst for the Mergers and Acquisitions Department of Morgan Stanley and a Risk
Arbitrageur with The First Boston Corporation. He received a B.S. from Columbia
University School of Engineering & Applied Science.
Christopher S. Fox, CFA Principal and Vice President at CRM. Chris joined the
firm in 1999 and is responsible for investment research. Chris co-founded
Schaenen Fox Capital Management, LLC, a hedge fund with small cap value
investments. He previously was at Schaenen Wood & Associates, Inc. as Vice
President and Senior Manager/Analyst; Chemical Bank's Private Banking Division
as a portfolio manager and analyst; and Drexel Burnham Lambert, Inc. as a
financial analyst. Chris earned a B.A. in Economics from the State University of
New York at Albany and an MBA in Finance from New York University's Stern School
of Business.
Adam L. Starr Vice President of CRM. Adam joined CRM in 1999 and is responsible
for investment research. Prior to joining CRM, he was a Partner and Portfolio
Manager at Weiss, Peck & Greer, LLC and an Analyst and Portfolio Manager at
Charter Oak Partners and First Manhattan Company. Adam earned a B.A. in History
from Clark University and an MBA from Columbia University.
18
<PAGE>
SERVICE PROVIDERS
The chart below provides information on the Funds' primary service providers.
Asset
Management
- --------------------------------------------------------------------------------
Investment Adviser
Cramer Rosenthall McGlynn, LLC
707 Westchester Avenue
White Plains, NY 10604
Manages each Fund's business and
investment activities.
- --------------------------------------------------------------------------------
Shareholder
Services
- --------------------------------------------------------------------------------
Transfer Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Handles shareholder services, including
recordkeeping and statements, payment of
distributions and processing of buy and
sell requests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE
CRM MID CAP VALUE
CRM SMALL CAP VALUE
- --------------------------------------------------------------------------------
Fund
Operations
- --------------------------------------------------------------------------------
Administrator and
Accounting Agent
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Provides facilities, equipment and personnel
to carry out administrative services related
to each Fund and calculates each Fund's
NAV and distributions.
- --------------------------------------------------------------------------------
Asset
Safe Keeping
- --------------------------------------------------------------------------------
Custodian
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Hold each Fund's assets, settles all
portfolio trades and collects most of the
valuation data required for calculating each
Fund's NAV per share.
- --------------------------------------------------------------------------------
Distribution
- --------------------------------------------------------------------------------
Distributor
Provident Distributors, Inc.
Four Falls Corporate Center
West Conshohocken, PA 19428
Distributes each Fund's Shares.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
PRICING OF SHARES
The Funds value their assets based on current market values when such values are
readily available. These prices normally are supplied by a pricing service. Any
assets held by a Fund that are denominated in foreign currencies are valued
daily in U.S. dollars at the foreign currency exchange rates that are prevailing
at the time that PFPC Inc. determines the daily net asset value. To determine
the value of those securities, PFPC may use a pricing service that takes into
account not only developments related to specific securities, but also
transactions in comparable securities. Securities that do not have a readily
available current market value are valued in good faith under the direction of
the Board of Trustees.
PLAIN TALK
================================================================================
WHAT IS THE NET ASSET VALUE or "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
================================================================================
PFPC determines the NAV per share of each Fund as of the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m., Eastern time), on
each Business Day (a day that the Exchange, the Transfer Agent and the
Philadelphia branch of the Federal Reserve Bank are open for business). The NAV
is calculated by adding the value of all securities and other assets in a Fund,
deducting its liabilities and dividing the balance by the number of outstanding
shares in that Fund.
Shares will not be priced on those days the Funds are closed. As of the date of
this prospectus, those days are:
New Year's Day Memorial Day Veterans Day
Martin Luther King, Jr. Day Independence Day Thanksgiving Day
President's Day Labor Day Christmas Day
Good Friday Columbus Day
20
<PAGE>
PURCHASE OF SHARES
PLAIN TALK
================================================================================
HOW TO PURCHASE SHARES:
o Directly by mail or by wire
o As a client of a Third Party
================================================================================
Fund shares are offered on a continuous basis and are sold without any sales
charges. The minimum initial investment in the Fund's Investor class shares is
$10,000 ($2,000 for IRAs or automatic investment plans). The Funds, in their
sole discretion, may waive the minimum initial amount to establish certain
Institutional share accounts. The minimum additional investment for all accounts
is $100. You may purchase shares as specified below.
You may also purchase shares if you are a client of a broker or other financial
institution, a "Third Party." The policies and fees charged by the Third Party
may be different than those charged by a Fund. Banks, brokers, retirement plans
and financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
By Mail: You may purchase shares by sending a check drawn on a U.S. bank payable
to CRM Funds, indicating the name of the Fund, along with a completed
application (included at the end of this prospectus). If a subsequent investment
is being made, the check should also indicate your Fund account number. When you
make purchases by check, each Fund may withhold payment on redemptions until it
is reasonably satisfied that the funds are collected (which can take up to 10
days). If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be responsible for any losses or fees incurred in
that transaction. Send the check and application to:
Regular mail: Overnight mail:
------------- ---------------
CRM Funds CRM Funds
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8742 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
21
<PAGE>
By Wire: You may purchase shares by wiring federal funds readily available.
Please call PFPC at (800) CRM-2883 before making a purchase by wire, and if
making an initial purchase, to also obtain an account number. Once you have an
account number, you should instruct your bank to wire funds to:
PFPC Trust Company
c/o PNC Bank
Philadelphia, PA
ABA #031-0000-53
DDA #86-0172-6591
Attention: The CRM Funds
Be sure to include your account number, the Fund name and your name. If you make
an initial purchase by wire, you must promptly forward a completed application
to the Transfer Agent at the address above. If you are making a subsequent
purchase, the wire should also indicate your Fund account number.
Additional Information Regarding Purchases: Purchase orders received by the
Transfer Agent before the close of regular trading on the Exchange on any
Business Day will be priced at the NAV that is determined as of the close of
trading. Purchase orders received after the close of regular trading on the
Exchange will be priced as of the close of regular trading on the following
Business Day.
Any purchase order may be rejected if a Fund determines that accepting the order
would not be in the best interest of the Fund or its shareholders. The Funds
will not accept third party checks.
It is the responsibility of the Third Party to transmit orders for the purchase
of shares by its customers to the Transfer Agent and to deliver required funds
on a timely basis, in accordance with the procedures stated above.
For information on other ways to purchase shares, including through an
individual retirement account (IRA), or an automatic investment plan, please
refer to the Statement of Additional Information.
REDEMPTION OF SHARES
PLAIN TALK
================================================================================
HOW TO REDEEM (SELL) SHARES:
o By mail
o By telephone
================================================================================
You may sell your shares on any Business Day as described below. Redemptions are
effected at the NAV next determined after the Transfer Agent has received your
redemption request. There is no fee when Fund shares are redeemed. It is the
responsibility of the Third Party to transmit redemption orders and credit their
customers' accounts with redemption pro-
22
<PAGE>
ceeds on a timely basis. Redemption checks are mailed on the next Business Day
following receipt by the Transfer Agent of redemption instructions, but never
later than 7 days following such receipt. Amounts redeemed by wire are normally
wired on the date of receipt of redemption instructions (if received by the
Transfer Agent before 4:00 p.m. Eastern time), or the next Business Day (if
received after 4:00 p.m. Eastern time, or on a non-Business Day), but never
later than 7 days following such receipt. If you purchased your shares through
an account at a Third Party, you should contact the Third Party for information
relating to redemptions. The Fund's name and your account number should
accompany any redemption requests.
By Mail: If you redeem your shares by mail, you should submit written
instructions with a "signature guarantee". A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public. You must
indicate the Fund name, your account number and your name. The written
instructions and signature guarantee should be mailed to:
Regular mail: Overnight mail:
------------- ---------------
CRM Funds CRM Funds
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box 8742 400 Bellevue Parkway, Suite 108
Wilmington, DE 19899 Wilmington, DE 19809
By Telephone: If you prefer to redeem your shares by telephone you may elect to
do so. However there are certain risks. The Fund has certain safeguards and
procedures to confirm the identity of callers and to confirm that the
instructions communicated are genuine. If such procedures are followed, you will
bear the risk of any losses.
Automatic Redemptions: You may redeem a specified amount of money from your
account once a month on a specified date. These payments are sent from your
account to a designated bank account by ACH payment. Automatic redemptions must
be for at least $250.
Additional Information Regarding Redemptions: Redemption proceeds may be wired
to your predesignated bank account in any commercial bank in the United States
if the amount is $1,000 or more. The receiving bank may charge a fee for this
service. Proceeds may also be mailed to your bank or, for amounts of $10,000 or
less, mailed to your Fund account address of record if the address has been
established for at least 60 days. In order to authorize the Transfer Agent to
mail redemption proceeds to your Fund account address of record, complete the
appropriate section of the Application for Telephone Redemptions or include your
Fund account address of record when you submit written instructions. You may
change the account that you have designated to receive amounts redeemed at any
time. Any request to change the account designated to receive redemption
proceeds should be accompanied by a guarantee of your signature, as the
shareholder, by an eligible institution. A signature and a signature guarantee
are required for each person in whose name the
23
<PAGE>
account is registered. Further documentation will be required to change the
designated account when a corporation, other organization, trust, fiduciary or
other institutional investor holds the Fund shares.
If shares to be redeemed represent a recent investment made by check, each Fund
reserves the right not to make the redemption proceeds available until it has
reasonable grounds to believe that the check has been collected (which could
take up to 10 days).
Small Accounts: If the value of your Fund account falls below $10,000 for
Investor share accounts ($2,000 for IRAs or automatic investment plans), the
Fund may ask you to increase your balance. If the account value is still below
such amounts after 60 days, the Fund may close your account and send you the
proceeds. The Fund will not close your account if it falls below these amounts
solely as a result of a reduction in your account's market value.
Redemptions in Kind: The Funds reserve the right to make redemptions in kind" --
payments of redemption proceeds in fund securities rather than cash -- if the
amount redeemed is large enough to affect the Series' operations (for example,
if it represents more than 1% of a Series' assets).
EXCHANGE OF SHARES
PLAIN TALK
================================================================================
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund to another
fund within a family of funds.
================================================================================
You may exchange all or a portion of your shares in a Fund for Investor class
shares of the following funds:
Wilmington Prime Money Market Fund
Wilmington Tax-Exempt Fund
Wilmington Intermediate Bond Fund
Wilmington Municipal Bond Fund
CRM Large Cap Value Fund
CRM Mid Cap Value Fund
CRM Small Cap Value Fund
24
<PAGE>
Redemption of shares through an exchange will be effected at the NAV per share
next determined after the Transfer Agent receives your request. A purchase of
shares through an exchange will be effected at the NAV per share determined at
that time or as next determined thereafter.
Exchange transactions will be subject to the minimum initial investment and
other requirements of the Fund into which the exchange is made. An exchange may
not be made if the exchange would leave a balance in a shareholder's account of
less than $10,000 for Investor share accounts.
To obtain prospectuses of the other Funds, you may call (800) CRM-2883. To
obtain more information about exchanges, or to place exchange orders, contact
the Transfer Agent, or, if your shares are held in an account with a Third
Party, contact the Third Party. The Funds may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. This exchange offer is valid only in those jurisdictions where the
sale of Prospectus shares to be acquired through such exchange may be legally
made.
DIVIDENDS AND OTHER DISTRIBUTIONS
PLAIN TALK
================================================================================
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest and dividends earned by a fund on its
investments less accrued expenses.
================================================================================
As a shareholder of a Fund, you are entitled to dividends and other
distributions arising from the net investment income and net realized gains, if
any, earned on the investments held by the Funds. Dividends are declared and
paid annually to you. Each Fund expects to distribute any net realized gains
once a year.
Distributions are payable to the shareholders of record at the time the
distributions are declared (including holders of shares being redeemed, but
excluding holders of shares being purchased). All distributions are reinvested
in additional Fund shares unless you have elected to receive the distributions
in cash.
25
<PAGE>
TAXES
Federal Income Tax: As long as a Fund meets the requirements for being a
"regulated investment company," it pays no Federal income tax on the earnings
and gains it distributes to shareholders. While each Fund may invest in
securities that earn interest exempt from Federal income tax, the Funds invest
primarily in taxable securities. Each Fund will notify you following the end of
the calendar year of the amount of dividends and other distributions paid that
year.
Dividends you receive from a Fund, whether reinvested in Fund shares or taken as
cash, are generally taxable to you as ordinary income. Distributions of a Fund's
net capital gain whether reinvested in Fund shares or taken as cash, when
designated as such, are taxable to you as long-term capital gain, regardless of
the length of time you have held your shares. You should be aware that if Fund
shares are purchased shortly before the record date for any dividend or capital
gain distribution, you will pay the full price for the shares and will receive
some portion of the price back as a taxable distribution. Each the Large Cap
Value Fund, the Mid Cap Value Fund and the Small Cap Value Fund, anticipates the
distribution of net investment income.
It is a taxable event for you if you sell or exchange shares of any Fund.
Depending on the purchase price and the sale price of the shares you exchange,
you may have a taxable gain or loss on the transaction. You are responsible for
any tax liability generated by your transactions.
State and Local Income Taxes: You should consult your tax advisers concerning
state and local taxes, which may have different consequences from those of the
Federal income tax law.
This section is only a summary of some important income tax considerations that
may affect your investment in a Fund. More information regarding those
considerations appears in our Statement of Additional Information. You are urged
to consult your tax adviser regarding the effects of an investment on your tax
situation.
26
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] DISTRIBUTION
ARRANGEMENTS
- --------------------------------------------------------------------------------
Provident Distributors, Inc. ("PDI") manages the Funds' distribution efforts and
provides assistance and expertise in developing marketing plans and materials,
enters into dealer agreement with broker-dealers to sell shares and provides
shareholder support services, directly or through affiliates. The Funds do not
charge any sales loads, deferred sales loads or other fees in connection with
the purchase of shares.
MASTER/FEEDER STRUCTURE
Other investors, including other mutual funds, may invest in the master funds.
The master/feeder structure enables various institutional investors, including a
Fund, to pool their assets, which may be expected to result in economies by
spreading certain fixed costs over a larger asset base. Each shareholder of a
master fund, including a Fund, will pay its proportionate share of the master
fund's expenses.
For reasons relating to costs or a change in investment goal, among others, a
Fund could switch to another master fund or decide to manage its assets itself.
No Fund is currently contemplating such a move.
SHARE CLASSES
Each Fund issues Investor and Institutional share classes, which have different
minimum investment requirements and fees. Institutional shares are offered only
to those investors who invest in the Fund through an intermediary (i.e. broker)
or through a consultant, and who invest $1,000,000 or more or where related
accounts total $1,000,000 or more when combined. Other investors investing
$10,000 or more may purchase Investor shares.
27
<PAGE>
- ------------------------------
FOR MORE INFORMATION
- ------------------------------
FOR INVESTORS WHO WANT MORE INFORMATION ON THE FUNDS,
THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
Annual/Semi-Annual Reports
Contain performance data and information on fund holdings, operating
results and a discussion of the market conditions and investment
strategies that significantly affect the Funds' performance for the most
recently completed fiscal year or half-year.
Statement of Additional Information (SAI)
Provides a complete technical and legal description of the Funds'
policies, investment restrictions, risks, and business structure. This
prospectus incorporates the SAI by reference.
Copies of these documents and answers to questions about the Funds may be
obtained without charge by contacting:
CRM Funds
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) CRM-2883
9:00 a.m. to 5:00 p.m. Eastern time
Information about the Funds (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment
of a duplicating fee, by writing the Public Reference Room of the SEC,
Washington, DC, 20549-6009. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-(800)-SEC-0330.
Reports and other information about the Funds may be viewed on-screen or
downloaded from the SEC's Internet site at http://www.sec.gov.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)-CRM-2883.
The investment company registration number is 811-08648.
[LOGO]
CRM
-----
FUNDS
-----
CRM LARGE CAP
VALUE FUND
CRM MID CAP
VALUE FUND
CRM SMALL CAP
VALUE FUND
CRM Funds
c/o PFPC
400 Bellevue Parkway
Wilmington, DE 19809
800-CRM-2883
Web Site:
www.crmfunds.com
<PAGE>
WT MUTUAL FUND
Wilmington Prime Money Market Portfolio
Wilmington Premier Money Market Portfolio
Wilmington U.S. Government Portfolio
Wilmington Tax-Exempt Portfolio
Wilmington Short/Intermediate Bond Portfolio
Wilmington Intermediate Bond Portfolio
Wilmington Municipal Bond Portfolio
Wilmington Large Cap Growth Portfolio
Wilmington Large Cap Core Portfolio
Wilmington Small Cap Core Portfolio
Wilmington International Multi-Manager Portfolio
Wilmington Large Cap Value Portfolio
Wilmington Mid Cap Value Portfolio
Wilmington Small Cap Value Portfolio
400 Bellevue Parkway
Wilmington, Delaware 19809
- --------------------------------------------------------------------------------
Statement of Additional Information
November 1, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Portfolios' current prospectus, dated November 1, 1999,
as amended from time to time. A copy of the current prospectus and annual report
may be obtained without charge, by writing to Provident Distributors, Inc.
("PDI"), Four Falls Corporate Center, West Conshohocken, PA 19428, and from
certain institutions such as banks or broker-dealers that have entered into
servicing agreements with PDI or by calling (800) 336-9970.
Each Portfolio and its corresponding master Series' audited financial statements
for the year ended June 30, 1999, included in the Annual Reports to
shareholders, are incorporated into this SAI by reference.
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION 1
INVESTMENT POLICIES 1
INVESTMENT LIMITATIONS 15
TRUSTEES AND OFFICERS 19
INVESTMENT ADVISORY AND OTHER SERVICES 22
SUB-ADVISORY SERVICES 25
DISTRIBUTION OF SHARES AND RULE 12B-1 PLAN 27
BROKERAGE ALLOCATION AND OTHER PRACTICES 28
CAPITAL STOCK AND OTHER SECURITIES 29
PURCHASE, REDEMPTION AND PRICING OF SHARES 29
DIVIDENDS 33
TAXATION OF THE PORTFOLIOS 33
CALCULATION OF PERFORMANCE INFORMATION 37
TAX-EQUIVALENT YIELD TABLE 39
FINANCIAL STATEMENTS 43
APPENDIX A -- OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES A-1
APPENDIX B -- DESCRIPTION OF RATINGS B-1
<PAGE>
GENERAL INFORMATION
WT Mutual Fund (the "Fund") is a diversified, open-end management investment
company organized as a Delaware business trust on June 1, 1994. The name of the
Fund was changed from Kiewit Mutual Fund to WT Mutual Fund on October 20, 1998.
The Fund has established the following Portfolios described in this Statement of
Additional Information: Wilmington Prime Money Market, Wilmington Premier Money
Market, Wilmington U.S. Government, Wilmington Tax-Exempt, Wilmington
Short/Intermediate Bond, Wilmington Intermediate Bond, Wilmington Municipal
Bond, Wilmington Large Cap Growth, Wilmington Large Cap Core, Wilmington Small
Cap Core, Wilmington International Multi-Manager, Wilmington Large Cap Value,
Wilmington Mid Cap Value and Wilmington Small Cap Value Portfolios. Each of
these Portfolios issues Institutional and Investor class shares, except for
Wilmington Premier Money Market which issues only Institutional class shares.
INVESTMENT POLICIES
The following information supplements the information concerning each
Portfolio's investment objective, policies and limitations found in the
prospectus. Unless otherwise indicated, it applies to the Portfolios through
their investment in corresponding master funds, which are series of WT
Investment Trust I (the "Series").
Money Market Portfolios
The "Money Market Portfolios" are the Prime Money Market, the Premier Money
Market, the U.S. Government and the Tax-Exempt Portfolios. Each has adopted a
fundamental policy requiring it to maintain a constant net asset value of $1.00
per share, although this may not be possible under certain circumstances. Each
Portfolio values its portfolio securities on the basis of amortized cost (see
"Purchase, Redemption and Pricing of Shares") pursuant to Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"). As conditions of that Rule, the
Board of Trustees has established procedures reasonably designed to stabilize
each Portfolio's price per share at $1.00 per share. Each Portfolio maintains a
dollar-weighted average portfolio maturity of 90 days or less; purchases only
instruments with effective maturities of 397 days or less; and invests only in
securities which are of high quality as determined by major rating services or,
in the case of instruments which are not rated, of comparable quality as
determined by the investment adviser, Rodney Square Management Corporation,
under the direction of and subject to the review of the Board of Trustees.
Bank Obligations. The Prime Money Market and the Premier Money Market Portfolios
may invest in U.S. dollar-denominated obligations of major banks, including
certificates of deposit, time deposits and bankers' acceptances of major U.S.
and foreign banks and their branches located outside of the United States, of
U.S. branches of foreign banks, of foreign branches of foreign banks, of U.S.
agencies of foreign banks and of wholly owned banking subsidiaries of such
foreign banks located in the United States.
Obligations of foreign branches of U.S. banks and U.S. branches of wholly owned
subsidiaries of foreign banks may be general obligations of the parent bank, of
the issuing branch or subsidiary, or both, or may be limited by the terms of a
specific obligation or by governmental regulation. Because such obligations are
issued by foreign entities, they are subject to the risks of foreign investing.
A brief description of some typical types of bank obligations follows:
o Bankers' Acceptances. The Prime Money Market, the Premier Money
Market and the Tax-Exempt Portfolios may invest in bankers'
acceptances, which are credit instruments evidencing the obligation
of a bank to pay a draft that has been drawn on it by a customer.
These instruments reflect the obligation of both the bank and the
drawer to pay the face amount of the instrument upon maturity.
o Certificates of Deposit. The Prime Money Market, the Premier Money
Market and the Tax-Exempt Portfolios may invest in certificates
evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually from 14
days to one year) at a stated or variable interest rate. Variable
rate certificates of deposit provide that the interest rate will
1
<PAGE>
fluctuate on designated dates based on changes in a designated base
rate (such as the composite rate for certificates of deposit
established by the Federal Reserve Bank of New York).
o Time Deposits. The Prime Money Market and the Premier Money Market
Portfolios may invest in time deposits, which are bank deposits for
fixed periods of time.
Certificates of Participation. The Tax-Exempt Portfolio may invest in
certificates of participation, which give the investor an undivided interest in
the municipal obligation in the proportion that the investor's interest bears to
the total principal amount of the municipal obligation.
Corporate Bonds, Notes and Commercial Paper. The Prime Money Market and the
Premier Money Market Portfolios may invest in corporate bonds, notes and
commercial paper. These obligations generally represent indebtedness of the
issuer and may be subordinated to other outstanding indebtedness of the issuer.
Commercial paper consists of short-term unsecured promissory notes issued by
corporations in order to finance their current operations. The Portfolios will
only invest in commercial paper rated, at the time of purchase, in the highest
category by a nationally recognized statistical rating organization ("NRSRO"),
such as Moody's or S&P or, if not rated, determined by the adviser to be of
comparable quality. See "Appendix B - Description of Ratings." The Portfolios
may invest in asset-backed commercial paper subject to Rule 2a-7 restrictions on
investments in asset-backed securities, which include a requirement that the
security must have received a rating from a NRSRO.
Foreign Securities. At the present time, portfolio securities of the Prime Money
Market and the Premier Money Market Portfolios that are purchased outside the
United States are maintained in the custody of foreign branches of U.S. banks.
To the extent that the Portfolios may maintain portfolio securities in the
custody of foreign subsidiaries of U.S. banks, and foreign banks or clearing
agencies in the future, those sub-custodian arrangements are subject to
regulations under the 1940 Act that govern custodial arrangements with entities
incorporated or organized in countries outside of the United States.
Illiquid Securities. Each Money Market Portfolio may not invest more than 10% of
the value of its net assets in securities that at the time of purchase have
legal or contractual restrictions on resale or are otherwise illiquid. Illiquid
securities are securities that cannot be disposed of within seven days at
approximately the value at which they are being carried on a Portfolio's books.
The Board of Trustees has the ultimate responsibility for determining whether
specific securities are liquid or illiquid. The Board has delegated the function
of making day to day determinations of liquidity to the adviser, pursuant to
guidelines approved by the Board. The adviser will monitor the liquidity of
securities held by a Portfolio and report periodically on such decisions to the
Board.
Investment Company Securities. The Money Market Portfolios may invest in the
securities of other money market mutual funds, within the limits prescribed by
the 1940 Act. These limitations currently provide, in part, that a Portfolio may
not purchase shares of an investment company if (a) such a purchase would cause
the Portfolio to own in the aggregate more than 3% of the total outstanding
voting stock of the investment company or (b) such a purchase would cause the
Portfolio to have more than 5% of its total assets invested in the investment
company or (c) more than 10% of the Portfolio's total assets to be invested in
the aggregate in all investment companies. As a shareholder in an investment
company, the Portfolio would bear its pro rata portion of the investment
company's expenses, including advisory fees, in addition to its own expenses.
The Portfolios' investments of their assets in the corresponding Series pursuant
to the master/feeder structure are excepted from the above limitations.
Municipal Securities. The Prime Money Market, the Premier Money Market and the
Tax-Exempt Portfolios each may invest in debt obligations issued by states,
municipalities and public authorities ("Municipal Securities") to obtain funds
for various public purposes. Yields on Municipal Securities are the product of a
variety of factors, including the general conditions of the money market and of
the municipal bond and municipal note markets, the size of a particular
offering, the maturity of the obligation and the rating of the issue. Although
the interest on Municipal Securities may be exempt from federal income tax,
dividends paid by a Portfolio to its shareholders may not be tax-exempt. A brief
description of some typical types of municipal securities follows:
2
<PAGE>
o General obligation securities are backed by the taxing power of the
issuing municipality and are considered the safest type of municipal
bond.
o Revenue or special obligation securities are backed by the revenues
of a specific project or facility - tolls from a toll bridge, for
example.
o Bond anticipation notes normally are issued to provide interim
financing until long-term financing can be arranged. The long-term
bonds then provide money for the repayment of the notes.
o Tax Anticipation Notes finance working capital needs of
municipalities and are issued in anticipation of various seasonal
tax revenues, to be payable for these specific future taxes.
o Revenue Anticipation Notes are issued in expectation of receipt of
other kinds of revenue, such as federal revenues available under the
Federal Revenue Sharing Program.
o Industrial Development Bonds ("IDBs") and Private Activity Bonds
("PABs") are specific types of revenue bonds issued on or behalf of
public authorities to finance various privately operated facilities
such as solid waste facilities and sewage plants. PABs generally are
such bonds issued after April 15, 1986. These obligations are
included within the term "municipal bonds" if the interest paid on
them is exempt from federal income tax in the opinion of the bond
issuer's counsel. IDBs and PABs are in most case revenue bonds and
thus are not payable from the unrestricted revenues of the issuer.
The credit quality of the IDBs and PABs is usually directly related
to the credit standing of the user of the facilities being financed,
or some form of credit enhancement such as a letter of credit.
o Tax-exempt commercial paper and short-term municipal notes provide
for short-term capital needs and usually have maturities of one year
or less. They include tax anticipation notes, revenue anticipation
notes and construction loan notes.
o Construction loan notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive
permanent financing through the Federal Housing Administration by
way of "Fannie Mae" (the Federal National Mortgage Association) or
"Ginnie Mae" (the Government National Mortgage Association).
o Put bonds are municipal bonds which give the holder the right to
sell the bond back to the issuer or a third party at a specified
price and exercise date, which is typically well in advance of the
bond's maturity date.
Repurchase Agreements. The Money Market Portfolios may invest in repurchase
agreements. A repurchase agreement is a transaction in which a Portfolio
purchases a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to a bank or dealer at an agreed
date and price reflecting a market rate of interest, unrelated to the coupon
rate or the maturity of the purchased security. While it is not possible to
eliminate all risks from these transactions (particularly the possibility of a
decline in the market value of the underlying securities, as well as delays and
costs to the Portfolio if the other party to the repurchase agreement becomes
bankrupt), it is the policy of a Portfolio to limit repurchase transactions to
primary dealers and banks whose creditworthiness has been reviewed and found
satisfactory by the adviser. Repurchase agreements maturing in more than seven
days are considered illiquid for purposes of a Portfolio's investment
limitations.
Securities Lending. The Money Market Portfolios may from time to time lend their
portfolio securities to brokers, dealers and financial institutions. Such loans
by a Portfolio will in no event exceed one-third of that Portfolio's total
assets and will be secured by collateral in the form of cash or securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
which will be maintained in an amount equal to the current market value of the
loaned securities at all times the loan is outstanding. Each Portfolio will make
loans of securities only to firms deemed credit worthy by the adviser.
3
<PAGE>
Standby Commitments. The Money Market Portfolios may invest in standby
commitments. It is expected that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary and advisable, the Portfolios may pay for standby commitments
either separately in cash or by paying a higher price for the obligations
acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). Standby commitments purchased by
the Portfolios will be valued at zero in determining net asset value and will
not affect the valuation of the obligations subject to the commitments. Any
consideration paid for a standby commitment will be accounted for as unrealized
depreciation and will be amortized over the period the commitment is held by a
Portfolio.
U.S. Government Obligations. The Money Market Portfolios may invest in debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Although all obligations of agencies and instrumentalities
are not direct obligations of the U.S. Treasury, payment of the interest and
principal on these obligations is generally backed directly or indirectly by the
U.S. Government. This support can range from securities supported by the full
faith and credit of the United States (for example, securities of the Government
National Mortgage Association), to securities that are supported solely or
primarily by the creditworthiness of the issuer, such as securities of the
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Tennessee Valley Authority, Federal Farm Credit Banks and the Federal Home Loan
Banks. In the case of obligations not backed by the full faith and credit of the
United States, a Portfolio must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitments.
Variable and Floating Rate Securities. The Money Market Portfolios may invest in
variable and floating rate securities. The terms of variable and floating rate
instruments provide for the interest rate to be adjusted according to a formula
on certain pre-determined dates. Certain of these obligations also may carry a
demand feature that gives the holder the right to demand prepayment of the
principal amount of the security prior to maturity. An irrevocable letter of
credit or guarantee by a bank usually backs the demand feature. Portfolio
investments in these securities must comply with conditions established by the
SEC under which they may be considered to have remaining maturities of 397 days
or less.
When-Issued Securities. The Money Market Portfolios may buy when-issued
securities or sell securities on a delayed-delivery basis. This means that
delivery and payment for the securities normally will take place approximately
15 to 90 days after the date of the transaction. The payment obligation and the
interest rate that will be received are each fixed at the time the buyer enters
into the commitment. During the period between purchase and settlement, the
purchaser makes no payment and no interest accrues to the purchaser. However,
when a security is sold on a delayed-delivery basis, the seller does not
participate in further gains or losses with respect to the security. If the
other party to a when-issued or delayed-delivery transaction fails to transfer
or pay for the securities, the Portfolio could miss a favorable price or yield
opportunity or could suffer a loss.
A Portfolio will make a commitment to purchase when-issued securities only with
the intention of actually acquiring the securities, but the Portfolio may
dispose of the commitment before the settlement date if it is deemed advisable
as a matter of investment strategy. A Portfolio may also sell the underlying
securities before they are delivered, which may result in gains or losses. A
separate account for each Portfolio is established at the custodian bank, into
which cash and/or liquid securities equal to the amount of when-issued purchase
commitments is deposited. If the market value of the deposited securities
declines additional cash or securities will be placed in the account on a daily
basis to cover the Portfolio's outstanding commitments.
When a Portfolio purchases a security on a when-issued basis, the security is
recorded as an asset on the commitment date and is subject to changes in market
value generally, based upon changes in the level of interest rates. Thus, upon
delivery, the market value of the security may be higher or lower than its cost,
and this may increase or decrease the Portfolio's net asset value. When payment
for a when-issued security is due, a Portfolio will meet its obligations from
then-available cash flow, the sale of the securities held in the separate
account, the sale of other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a when-issued purchase
obligation carries with it the potential for the realization of capital gains or
losses.
The Bond Portfolios
4
<PAGE>
The "Bond Portfolios" are the Short/Intermediate Bond, the Intermediate Bond and
the Municipal Bond Portfolios. Wilmington Trust Company, the investment adviser
for the Bond Portfolios, employs an investment process that is disciplined,
systematic and oriented toward a quantitative assessment and control of
volatility. The Bond Portfolios' exposure to credit risk is moderated by
limiting their investments to securities that, at the time of purchase, are
rated investment grade by a nationally recognized statistical rating
organization such as Moody's, S&P, or, if unrated, are determined by the adviser
to be of comparable quality. See "Appendix B - Description of Ratings." Ratings,
however, are not guarantees of quality or of stable credit quality. Not even the
highest rating constitutes assurance that the security will not fluctuate in
value or that a Portfolio will receive the anticipated yield on the security.
WTC continuously monitors the quality of the Portfolios' holdings, and should
the rating of a security be downgraded or its quality be adversely affected, WTC
will determine whether it is in the best interest of the affected Portfolio to
retain or dispose of the security.
The effect of interest rate fluctuations in the market on the principal value of
the Bond Portfolios is moderated by limiting the average dollar-weighted
duration of their investments -- in the case of the Short/Intermediate Bond
Portfolio to a range of 2 1/2 to 4 years, in the case of the Intermediate Bond
Portfolio to a range of 4 to 7 years, and in the case of the Municipal Bond
Portfolio to a range of 4 to 8 years. Investors may be more familiar with the
term "average effective maturity" (when, on average, the fixed income securities
held by the Portfolio will mature), which is sometimes used to express the
anticipated term of the Portfolios' investments. Generally, the stated maturity
of a fixed income security is longer than it's projected duration. Under normal
market conditions, the average effective maturity, in the case of the
Short/Intermediate Bond Portfolio, is expected to fall within a range of
approximately 3 to 5 years, in the case of the Intermediate Bond Portfolio,
within a range of approximately 7 to 12 years, and in the case of the Municipal
Bond Portfolio, within a range of approximately 5 to 10 years. In the event of
unusual market conditions, the average dollar-weighted duration of the
Portfolios may fall within a broader range. Under those circumstances, the
Short/Intermediate Bond and the Intermediate Bond Portfolios may invest in fixed
income securities with an average dollar-weighted duration of 1 to 6 years and 2
to 10 years, respectively.
WTC's goal in managing the Short/Intermediate Bond and the Intermediate Bond
Portfolios is to gain additional return by analyzing the market complexities and
individual security attributes which affect the returns of fixed income
securities. The Bond Portfolios are intended to appeal to investors who want a
thoughtful exposure to the broad fixed income securities market and the high
current returns that characterize the short-term to intermediate-term sector of
that market.
Given the average duration of the holdings of the Bond Portfolios and the
current interest rate environment, the Portfolios should experience smaller
price fluctuations than those experienced by longer-term bond and municipal bond
funds and a higher yield than fixed-price money market and tax-exempt money
market funds. Of course, the Portfolios will likely experience larger price
fluctuations than money market funds and a lower yield than longer-term bond and
municipal bond funds. Given the quality of the Portfolios' holdings, which must
be investment grade (rated within the top four categories) or comparable to
investment grade securities at the time of purchase, the Portfolios will accept
lower yields in order to avoid the credit concerns experienced by funds that
invest in lower quality fixed income securities. In addition, although the
Municipal Bond Portfolio expects to invest substantially all of its net assets
in municipal securities that provide interest income that is exempt from federal
income tax, it may invest up to 20% of its net assets in other types of fixed
income securities that provide federally taxable income.
The composition of each Portfolio's holdings varies depending upon WTC's
analysis of the fixed income markets and the municipal securities markets (for
the Municipal Bond Portfolio), including analysis of the most attractive
segments of the yield curve, the relative value of the different market sectors,
expected trends in those markets and supply versus demand pressures. Securities
purchased by the Portfolios may be purchased on the basis of their yield or
potential capital appreciation or both. By maintaining each Portfolio's
specified average duration, WTC seeks to protect the Portfolio's principal value
by reducing fluctuations in value relative to those that may be experienced by
bond funds with longer average durations. This strategy may reduce the level of
income attained by the Portfolios. Of course, there is no guarantee that
principal value can be protected during periods of extreme interest rate
volatility.
WTC may make frequent changes in the Portfolios' investments, particularly
during periods of rapidly fluctuating interest rates. These frequent changes
would involve transaction costs to the Portfolios and could result in taxable
capital gains.
5
<PAGE>
Asset-Backed Securities. The Bond Portfolios may purchase interests in pools of
obligations, such as credit card or automobile loan receivables, purchase
contracts and financing leases. Such securities are also known as "asset-backed
securities," and the holders thereof may be entitled to receive a fixed rate of
interest, a variable rate that is periodically reset to reflect the current
market rate or an auction rate that is periodically reset at auction.
Asset-backed securities are typically supported by some form of credit
enhancement, such as cash collateral, subordinated tranches, a letter of credit,
surety bond or limited guaranty. Credit enhancements do not provide protection
against changes in the market value of the security. If the credit enhancement
is exhausted or withdrawn, security holders may experience losses or delays in
payment if required payments of principal and interest are not made with respect
to the underlying obligations. Except in very limited circumstances, there is no
recourse against the vendors or lessors that originated the underlying
obligations.
Asset-backed securities are likely to involve unscheduled prepayments of
principal that may affect yield to maturity, result in losses, and may be
reinvested at higher or lower interest rates than the original investment. The
yield to maturity of asset-backed securities that represent residual interests
in payments of principal or interest in fixed income obligations is particularly
sensitive to prepayments.
The value of asset-backed securities may change because of changes in the
market's perception of the creditworthiness of the servicing agent for the pool
of underlying obligations, the originator of those obligations or the financial
institution providing credit enhancement.
Bank Obligations. The Bond Portfolios may invest in the same U.S.
dollar-denominated obligations of major banks as the Money Market Portfolios.
Corporate Bonds, Notes and Commercial Paper. The Bond Portfolios may invest in
corporate bonds, notes and commercial paper. These obligations generally
represent indebtedness of the issuer and may be subordinated to other
outstanding indebtedness of the issuer. Commercial paper consists of short-term
unsecured promissory notes issued by corporations in order to finance their
current operations. The Portfolios will only invest in commercial paper rated,
at the time of purchase, in the highest category by a nationally recognized
statistical rating organization, such as Moody's or S&P or, if not rated,
determined by WTC to be of comparable quality.
Fixed Income Securities with Buy-Back Features. Fixed income securities with
buy-back features enable the Bond Portfolios to recover principal upon tendering
the securities to the issuer or a third party. Letters of credit issued by
domestic or foreign banks often supports these buy-back features. In evaluating
a foreign bank's credit, WTC considers whether adequate public information about
the bank is available and whether the bank may be subject to unfavorable
political or economic developments, currency controls or other governmental
restrictions that could adversely affect the bank's ability to honor its
commitment under the letter of credit. The Municipal Bond Portfolio will not
acquire municipal securities with buy-back features if, in the opinion of
counsel, the existence of a buy-back feature would alter the tax-exempt nature
of interest payments on the underlying securities and cause those payments to be
taxable to that Portfolio and its shareholders.
Buy-back features include standby commitments, put bonds and demand features.
o Standby commitments. The Bond Portfolios may acquire standby
commitments from broker-dealers, banks or other financial
intermediaries to enhance the liquidity of portfolio securities. A
standby commitment entitles a Portfolio to same day settlement at
amortized cost plus accrued interest, if any, at the time of
exercise. The amount payable by the issuer of the standby commitment
during the time that the commitment is exercisable generally
approximates the market value of the securities underlying the
commitment. Standby commitments are subject to the risk that the
issuer of a commitment may not be in a position to pay for the
securities at the time that the commitment is exercised.
Ordinarily, a Portfolio will not transfer a standby commitment to a
third party, although the Portfolio may sell securities subject to a
standby commitment at any time. A Portfolio may purchase standby
commitments separate from or in conjunction with the purchase of the
securities subject to the commitments. In the latter case, the
Portfolio may pay a higher price for the securities acquired in
consideration for the commitment.
o Put bonds. A put bond (also referred to as a tender option or third
party bond) is a bond created by coupling an intermediate or
long-term fixed rate bond with an agreement giving the holder the
option of tendering the bond to receive its par value. As
consideration for
6
<PAGE>
providing this tender option, the sponsor of the bond (usually a
bank, broker-dealer or other financial intermediary) receives
periodic fees that equal the difference between the bond's fixed
coupon rate and the rate (determined by a remarketing or similar
agent) that would cause the bond, coupled with the tender option, to
trade at par. By paying the tender offer fees, a Portfolio in effect
holds a demand obligation that bears interest at the prevailing
short-term rate.
In selecting put bonds for the Bond Portfolios, WTC takes into
consideration the creditworthiness of the issuers of the underlying
bonds and the creditworthiness of the providers of the tender option
features. A sponsor may withdraw the tender option feature if the
issuer of the underlying bond defaults on interest or principal
payments, the bond's rating is downgraded or, in the case of a
municipal bond, the bond loses its tax-exempt status.
o Demand features. Many variable rate securities carry demand features
that permit the holder to demand repayment of the principal amount
of the underlying securities plus accrued interest, if any, upon a
specified number of days' notice to the issuer or its agent. A
demand feature may be exercisable at any time or at specified
intervals. Variable rate securities with demand features are treated
as having a maturity equal to the time remaining before the holder
can next demand payment of principal. The issuer of a demand feature
instrument may have a corresponding right to prepay the outstanding
principal of the instrument plus accrued interest, if any, upon
notice comparable to that required for the holder to demand payment.
Guaranteed Investment Contracts. A guaranteed investment contract ("GIC") is a
general obligation of an insurance company. A GIC is generally structured as a
deferred annuity under which the purchaser agrees to pay a given amount of money
to an insurer (either in a lump sum or in installments) and the insurer promises
to pay interest at a guaranteed rate (either fixed or variable) for the life of
the contract. Some GICs provide that the insurer may periodically pay
discretionary excess interest over and above the guaranteed rate. At the GIC's
maturity, the purchaser generally is given the option of receiving payment or an
annuity. Certain GICs may have features that permit redemption by the issuer at
a discount from par value.
Generally, GICs are not assignable or transferable without the permission of the
issuer. As a result, the acquisition of GICs is subject to the limitations
applicable to each Portfolio's acquisition of illiquid and restricted
securities. The holder of a GIC is dependent on the creditworthiness of the
issuer as to whether the issuer is able to meet its obligations. No Portfolio
intends to invest more than 5% of its net assets in GICs.
Illiquid Securities. Each Bond Portfolio may not invest more than 15% of the
value of its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid.
Money Market Funds. The Bond Portfolios may invest in the securities of money
market mutual funds, within the limits prescribed by the 1940 Act, as previously
described under "Investment Company Securities."
Mortgage-Backed Securities. Mortgage-backed securities are securities
representing interests in a pool of mortgages secured by real property.
Government National Mortgage Association ("GNMA") mortgage-backed securities are
securities representing interests in pools of mortgage loans to residential home
buyers made by lenders such as mortgage bankers, commercial banks and savings
associations and are either guaranteed by the Federal Housing Administration or
insured by the Veterans Administration. Timely payment of interest and principal
on each mortgage loan is backed by the full faith and credit of the U.S.
Government.
The Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC") both issue mortgage-backed securities that are
similar to GNMA securities in that they represent interests in pools of mortgage
loans. FNMA guarantees timely payment of interest and principal on its
certificates and FHLMC guarantees timely payment of interest and ultimate
payment of principal. FHLMC also has a program under which it guarantees timely
payment of scheduled principal as well as interest. FNMA and
7
<PAGE>
FHLMC guarantees are backed only by those agencies and not by the full faith and
credit of the U.S. Government.
In the case of mortgage-backed securities that are not backed by the U.S.
Government or one of its agencies, a loss could be incurred if the collateral
backing these securities is insufficient. This may occur even though the
collateral is U.S. Government-backed.
Most mortgage-backed securities pass monthly payment of principal and interest
through to the holder after deduction of a servicing fee. However, other payment
arrangements are possible. Payments may be made to the holder on a different
schedule than that on which payments are received from the borrower, including,
but not limited to, weekly, bi-weekly and semiannually. The monthly principal
and interest payments also are not always passed through to the holder on a pro
rata basis. In the case of collateralized mortgage obligations ("CMOs"), the
pool is divided into two or more tranches and special rules for the disbursement
of principal and interest payments are established.
CMO residuals are derivative securities that generally represent interests in
any excess cash flow remaining after making required payments of principal and
interest to the holders of the CMOs described above. Yield to maturity on CMO
residuals is extremely sensitive to prepayments. In addition, if a series of a
CMO includes a class that bears interest at an adjustable rate, the yield to
maturity on the related CMO residual also will be extremely sensitive to the
level of the index upon which interest rate adjustments are based.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities and may be issued by agencies or instrumentalities of the U.S.
Government or by private mortgage lenders. SMBS usually are structured with two
classes that receive different proportions of the interest and/or principal
distributions on a pool of mortgage assets. A common type of SMBS will have one
class of holders receiving all interest payments -- "interest only" or "IO" --
and another class of holders receiving the principal repayments -- "principal
only" or "PO." The yield to maturity of IO and PO classes is extremely sensitive
to prepayments on the underlying mortgage assets.
Municipal Securities. Municipal securities are debt obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their sub-divisions, agencies and instrumentalities, the
interest on which is, in the opinion of bond counsel, exempt from federal income
tax. These debt obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various privately owned or operated activities. The three
general categories of municipal securities are general obligation, revenue or
special obligation and private activity municipal securities. A brief
description of typical municipal securities follows:
o General obligation securities are backed by the taxing power of the
issuing municipality and are considered the safest type of municipal
bond. The proceeds from general obligation securities are used to
fund a wide range of public projects, including the construction or
improvement of schools, highways and roads, and water and sewer
systems.
o Revenue or special obligation securities are backed by the revenues
of a specific project or facility - tolls from a toll bridge, for
example. The proceeds from revenue or special obligation securities
are used to fund a wide variety of capital projects, including
electric, gas, water and sewer systems; highways, bridges and
tunnels; port and airport facilities; colleges and universities; and
hospitals. Many municipal issuers also establish a debt service
reserve fund from which principal and interest payments are made.
Further security may be available in the form of the state's
ability, without obligation, to make up deficits in the reserve
fund.
o Municipal lease obligations may take the form of a lease, an
installment purchase or a conditional sale contract issued by state
and local governments and authorities to acquire land, equipment and
facilities. Usually, the Portfolios will purchase a participation
interest in a municipal lease obligation from a bank or other
financial intermediary. The participation interest gives the holder
a pro rata, undivided interest in the total amount of the
obligation.
8
<PAGE>
Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. The interest
income from the lease obligation may become taxable if the lease is
assigned. Also, to free the municipal issuer from constitutional or
statutory debt issuance limitations, many leases and contracts
include non-appropriation clauses providing that the municipality
has no obligation to make future payments under the lease or
contract unless money is appropriated for that purpose by the
municipality on a yearly or other periodic basis. Finally, the lease
may be illiquid.
o Resource recovery bonds are affected by a number of factors, which
may affect the value and credit quality of these revenue or special
obligations. These factors include the viability of the project
being financed, environmental protection regulations and project
operator tax incentives.
o Private activity securities are specific types of revenue bonds
issued on behalf of public authorities to finance various privately
operated facilities such as educational, hospital or housing
facilities, local facilities for water supply, gas, electricity,
sewage or solid waste disposal, and industrial or commercial
facilities. The payment of principal and interest on these
obligations generally depends upon the credit of the private
owner/user of the facilities financed and, in certain instances, the
pledge of real and personal property by the private owner/user. The
interest income from certain types of private activity securities
may be considered a tax preference item for purposes of the federal
alternative minimum tax ("Tax Preference Item").
Short-term municipal securities in which the Portfolios may invest include Tax
Anticipation, Revenue Anticipation, Bond Anticipation and Construction Loan
Notes, which were previously described under "Money Market Portfolios -
Municipal Securities."
Options, Futures and Forward Currency Contract Strategies. Although the
Municipal Bond Portfolio has no current intention of so doing, each of the Bond
Portfolios may use options and futures contracts. The Short/Intermediate Bond
and the Intermediate Bond Portfolios may use forward currency contracts. For
additional information regarding such investment strategies, see Appendix A to
this Statement of Additional Information.
Participation Interests. The Bond Portfolios may invest in participation
interests in fixed income securities. A participation interest provides the
certificate holder with a specified interest in an issue of fixed income
securities.
Some participation interests give the holders differing interests in the
underlying securities, depending upon the type or class of certificate
purchased. For example, coupon strip certificates give the holder the right to
receive a specific portion of interest payments on the underlying securities;
principal strip certificates give the holder the right to receive principal
payments and the portion of interest not payable to coupon strip certificate
holders. Holders of certificates of participation in interest payments may be
entitled to receive a fixed rate of interest, a variable rate that is
periodically reset to reflect the current market rate or an auction rate that is
periodically reset at auction. Asset-backed residuals represent interests in any
excess cash flow remaining after required payments of principal and interest
have been made.
More complex participation interests involve special risk considerations. Since
these instruments have only recently been developed, there can be no assurance
that any market will develop or be maintained for the instruments. Generally,
the fixed income securities that are deposited in trust for the holders of these
interests are the sole source of payments on the interests; holders cannot look
to the sponsor or trustee of the trust or to the issuers of the securities held
in trust or to any of their affiliates for payment.
Participation interests purchased at a discount may experience price volatility.
Certain types of interests are sensitive to fluctuations in market interest
rates and to prepayments on the underlying securities. A rapid rate of
prepayment can result in the failure to recover the holder's initial investment.
The extent to which the yield to maturity of a participation interest is
sensitive to prepayments depends, in part, upon whether the interest was
purchased at a discount or premium, and if so, the size of that discount or
premium. Generally, if a participation interest is purchased at a premium and
principal distributions occur at a rate faster than that anticipated at the time
of purchase, the holder's actual yield to maturity will be lower than that
assumed at the time of purchase. Conversely, if a participation interest is
purchased at a discount and
9
<PAGE>
principal distributions occur at a rate faster than that assumed at the time of
purchase, the investor's actual yield to maturity will be higher than that
assumed at the time of purchase.
Participation interests in pools of fixed income securities backed by certain
types of debt obligations involve special risk considerations. The issuers of
securities backed by automobile and truck receivables typically file financing
statements evidencing security interests in the receivables, and the servicers
of those obligations take and retain custody of the obligations. If the
servicers, in contravention of their duty to the holders of the securities
backed by the receivables, were to sell the obligations, the third party
purchasers could acquire an interest superior to the interest of the security
holders. Also, most states require that a security interest in a vehicle must be
noted on the certificate of title and the certificate of title may not be
amended to reflect the assignment of the lender's security interest. Therefore,
the recovery of the collateral in some cases may not be available to support
payments on the securities. Securities backed by credit card receivables are
generally unsecured, and both federal and state consumer protection laws may
allow set-offs against certain amounts owed.
The Municipal Bond Portfolio will only invest in participation interests in
municipal securities, municipal leases or in pools of securities backed by
municipal assets if, in the opinion of counsel, any interest income on the
participation interest will be exempt from federal income tax to the same extent
as the interest on the underlying securities.
Repurchase Agreements. The Bond Portfolios may invest in repurchase agreements,
which were previously described under "Money Market Portfolios - Repurchase
Agreements."
Securities Lending. The Bond Portfolios may lend securities pursuant to
agreements, which require that the loans be continuously secured by collateral
equal to 100% of the market value of the loaned securities. Such collateral
consists of cash, securities of the U.S. Government or its agencies, or any
combination of cash and such securities. Such loans will not be made if, as a
result, the aggregate amount of all outstanding securities loans for a Portfolio
exceed one-third of the value of the Portfolio's total assets taken at fair
market value. A Portfolio will continue to receive interest on the securities
lent while simultaneously earning interest on the investment of the cash
collateral in U.S. Government securities. However, a Portfolio will normally pay
lending fees to such broker-dealers and related expenses from the interest
earned on invested collateral. There may be risks of delay in receiving
additional collateral or risks of delay in recovery of the securities and even
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the adviser to
be of good standing and when, in the judgment of the adviser, the consideration
that can be earned currently from such securities loans justifies the attendant
risk. Either party upon reasonable notice to the other party may terminate any
loan. The Municipal Bond Portfolio has no current intention of lending its
portfolio securities and would do so only under unusual market conditions since
the interest income that a Portfolio receives from lending its securities is
taxable.
U.S. Government Obligations. The Bond Portfolios may invest in the same debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities as the Money Market Portfolios. (See "Money Market Portfolios
- - U.S. Government Obligations.")
Variable and Floating Rate Securities. The Bond Portfolios may invest in
variable and floating rate securities. The terms of variable and floating rate
instruments provide for the interest rate to be adjusted according to a formula
on certain pre-determined dates. Certain of these obligations also may carry a
demand feature that gives the holder the right to demand prepayment of the
principal amount of the security prior to maturity. An irrevocable letter of
credit or guarantee by a bank usually backs the demand feature. Portfolio
investments in these securities must comply with conditions established by the
SEC under which they may be considered to have remaining maturities of 397 days
or less.
Each of the Bond Portfolios may also purchase inverse floaters that are floating
rate instruments whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the interest rate
paid on the inverse floater, with the result that the inverse floater's price is
considerably more volatile than that of a fixed rate security. For example, an
issuer may decide to issue two variable rate instruments instead of a single
long-term, fixed rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument (the
inverse floater) reflects the approximate rate the issuer would have paid on a
fixed rate bond multiplied by
10
<PAGE>
two minus the interest rate paid on the short-term instrument. Depending on
market availability, the two variable rate instruments may be combined to form a
fixed rate bond. The market for inverse floaters is relatively new.
When-Issued Securities. The Bond Portfolios may buy when-issued securities or
sell securities on a delayed-delivery basis. This means that delivery and
payment for the securities normally will take place approximately 15 to 90 days
after the date of the transaction. The payment obligation and the interest rate
that will be received are each fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, the purchaser
makes no payment and no interest accrues to the purchaser. However, when a
security is sold on a delayed-delivery basis, the seller does not participate in
further gains or losses with respect to the security. If the other party to a
when-issued or delayed-delivery transaction fails to transfer or pay for the
securities, the Portfolio could miss a favorable price or yield opportunity or
could suffer a loss.
A Portfolio will make a commitment to purchase when-issued securities only with
the intention of actually acquiring the securities, but the Portfolio may
dispose of the commitment before the settlement date if it is deemed advisable
as a matter of investment strategy. A Portfolio may also sell the underlying
securities before they are delivered, which may result in gains or losses. A
separate account for each Portfolio is established at the custodian bank, into
which cash and/or liquid securities equal to the amount of when-issued purchase
commitments is deposited. If the market value of the deposited securities
declines additional cash or securities will be placed in the account on a daily
basis to cover the Portfolio's outstanding commitments.
When a Portfolio purchases a security on a when-issued basis, the security is
recorded as an asset on the commitment date and is subject to changes in market
value generally, based upon changes in the level of interest rates. Thus, upon
delivery, the market value of the security may be higher or lower than its cost,
and this may increase or decrease the Portfolio's net asset value. When payment
for a when-issued security is due, a Portfolio will meet its obligations from
then-available cash flow, the sale of the securities held in the separate
account, the sale of other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a when-issued purchase
obligation carries with it the potential for the realization of capital gains or
losses.
The Municipal Bond Portfolio may purchase securities on a when-issued basis in
connection with the refinancing of an issuer's outstanding indebtedness
("refunding contracts"). These contracts require the issuer to sell and the
Portfolio to buy municipal obligations at a stated price and yield on a
settlement date that may be several months or several years in the future. The
offering proceeds are then used to refinance existing municipal obligations.
Although the Municipal Bond Portfolio may sell its rights under a refunding
contract, the secondary market for these contracts may be less liquid than the
secondary market for other types of municipal securities. The Portfolio
generally will not be obligated to pay the full purchase price if it fails to
perform under a refunding contract. Instead, refunding contracts usually provide
for payment of liquidated damages to the issuer (currently 15-20% of the
purchase price). The Portfolio may secure its obligation under a refunding
contract by depositing collateral or a letter of credit equal to the liquidated
damages provision of the refunding contract. When required by Securities and
Exchange Commission ("SEC") guidelines, the Portfolio will place liquid assets
in a segregated custodial account equal in amount to its obligations under
outstanding refunding contracts.
Zero Coupon Bonds. The Bond Portfolios may invest in zero coupon bonds of
governmental or private issuers that generally pay no interest to their holders
prior to maturity. Since zero coupon bonds do not make regular interest
payments, they allow an issuer to avoid the need to generate cash to meet
current interest payments and may involve greater credit risks than bonds paying
interest currently. Tax laws requiring the distribution of accrued discount on
the bonds, even though no cash equivalent thereto has been paid, may cause a
Portfolio to liquidate investments in order to make the required distributions.
Risk Factors Applicable to the Municipal Bond Portfolio:
Health Care Sector. The health care industry is subject to regulatory action by
a number of private and governmental agencies, including federal, state and
local governmental agencies. A major source of revenues for the industry is
payments from the Medicare and Medicaid programs. As a result, the industry is
sensitive to legislative changes and reductions in governmental spending for
those programs. Numerous other factors may affect the industry, such as general
and local economic conditions; demand for services; expenses (including
malpractice insurance premiums) and competition among health care providers. In
the future, the following may adversely affect the industry: adoption of
legislation proposing a national health insurance program; medical and
technological advances which alter the demand for health services or the way in
which such services are
11
<PAGE>
provided; and efforts by employers, insurers and governmental agencies to reduce
the costs of health insurance and health care services.
Health care facilities include life care facilities, nursing homes and
hospitals. The Municipal Bond Portfolio may invest in bonds to finance these
facilities which are typically secured by the revenues from the facilities and
not by state or local government tax payments. Moreover, in the case of life
care facilities, since a portion of housing, medical care and other services may
be financed by an initial deposit, there may be a risk of default in the payment
of principal or interest on a bond issue if the facility does not maintain
adequate financial reserves for debt service.
Housing Sector. The Municipal Bond Portfolio may invest in housing revenue bonds
which typically are issued by state, county and local housing authorities and
are secured only by the revenues of mortgages originated by those authorities
using the proceeds of the bond issues. Factors that may affect the financing of
multi-family housing projects include acceptable completion of construction,
proper management, occupancy and rent levels, economic conditions and changes in
regulatory requirements.
Since the demand for mortgages from the proceeds of a bond issue cannot be
precisely predicted, the proceeds may be in excess of demand, which would result
in early retirement of the bonds by the issuer. Since the cash flow from
mortgages cannot be precisely predicted, differences in the actual cash flow
from the assumed cash flow could have an adverse impact upon the issuer's
ability to make scheduled payments of principal and interest or could result in
early retirement of the bonds.
Scheduled principal and interest payments are often made from reserve or sinking
funds. These reserves are funded from the bond proceeds, assuming certain rates
of return on investment of the reserve funds. If the assumed rates of return are
not realized because of changes in interest rate levels or for other reasons,
the actual cash flow for scheduled payments of principal and interest on the
bonds may be inadequate.
Electric Utilities Sector. The electric utilities industry has experienced, and
may experience in the future: problems in financing large construction programs
in an inflationary period; cost increases and delays caused by environmental
considerations (particularly with respect to nuclear facilities); difficulties
in obtaining fuel at reasonable prices; the effects of conservation on the
demand for energy; increased competition from alternative energy sources; and
the effects of rapidly changing licensing and safety requirements.
Proposed Legislation. From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on debt obligations issued by states and their political
subdivisions. For example, federal tax law now limits the types and amounts of
tax-exempt bonds issuable for industrial development and other types of private
activities. These limitations may affect the future supply and yields of private
activity securities. Further proposals affecting the value of tax-exempt
securities may be introduced in the future. In addition, proposals have been
made, such as that involving the "flat tax," that could reduce or eliminate the
value of that exemption. If the availability of municipal securities for
investment or the value of the Municipal Bond Portfolio's holdings could be
materially affected by such changes in the law, the Trustees would reevaluate
the Portfolio's investment objective and policies or consider the Portfolio's
dissolution.
Portfolio Turnover. Portfolio turnover rates for the past 2 years, (or since the
date of inception, if applicable) were:
- --------------------------------------------------------------------------------
12 months ended 12 months ended
June 30, 1999 June 30, 1998
------------- -------------
- --------------------------------------------------------------------------------
Short/Intermediate Bond 34.40% 236.36%
- --------------------------------------------------------------------------------
Intermediate Bond 36.22% N/A
- --------------------------------------------------------------------------------
Municipal Bond 23.93% 28.56%
- --------------------------------------------------------------------------------
The Equity Portfolios
The "Equity Portfolios" are the Large Cap Growth, the Large Cap Core, the Small
Cap Core, the International Multi-Manager, the Large Cap Value, the Mid Cap
Value and the Small Cap Value Portfolios.
12
<PAGE>
American Depositary Receipts (ADRs) and European Depositary Receipts (EDRs). The
International Multi-Manager and Large Cap Core Portfolios each may invest in
ADRs and EDRs. ADRs and EDRs are securities, typically issued by a U.S.
financial institution or a non-U.S. financial institution in the case of an EDR
(a "depositary"). The institution has ownership interests in a security, or a
pool of securities, issued by a foreign issuer and deposited with the
depositary. ADRs and EDRs may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
security underlying the receipt and a depositary. An unsponsored facility may be
established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.
Cash Management. The Large Cap Growth, Small Cap Core and the International
Multi-Manager Portfolios each may invest no more than 15% of its total assets in
cash and cash equivalents including high-quality money market instruments and
money market funds in order to manage cash flow in the Portfolio. The other
Equity Portfolios are not subject to specific percentage limitations on such
investments. Certain of these instruments are described below.
o Money Market Funds. The Equity Portfolios may invest in the
securities of other money market mutual funds, within the limits
prescribed by the 1940 Act.
The International Multi-Manager Portfolio may invest in securities
of open-end and closed-end investment companies that invest
primarily in the equity securities of issuers in countries where it
is impossible or impractical to invest directly. Such investments
will be subject to the limits described above.
o U.S. Government Obligations. The Equity Portfolios may invest in the
same debt securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities as the Money Market Portfolios.
(See "Money Market Portfolios - U.S. Government Obligations.")
o Commercial Paper. The Equity Portfolios may invest in commercial
paper. Commercial paper consists of short-term (up to 270 days)
unsecured promissory notes issued by corporations in order to
finance their current operations. The Portfolios may invest only in
commercial paper rated A-1 or higher by S&P or Moody's or if not
rated, determined by the adviser or sub-adviser to be of comparable
quality.
o Bank Obligations. The Equity Portfolios may invest in the same
obligations of U.S. banks as the Money Market Funds. (See "Money
Market Portfolios - Bank Obligations." )
Convertible Securities. Convertible securities have characteristics similar to
both fixed income and equity securities. Because of the conversion feature, the
market value of convertible securities tends to move together with the market
value of the underlying stock. As a result, a Portfolio's selection of
convertible securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuers and any call provisions.
The Equity Portfolios may invest in convertible securities that are rated, at
the time of purchase, in the three highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") such as Moody's or S&P, or
if unrated, are determined by the adviser or a sub-adviser, as applicable, to be
of comparable quality. In addition, the International Multi-Manager Portfolio
may invest in non-convertible debt securities issued by foreign governments,
international agencies, and private foreign issuers that, at the time of
purchase, are rated A or better by a NRSRO, or, if not rated, are judged by the
adviser or one or more of the sub-advisers to be of comparable quality. Ratings
represent the rating agency's opinion regarding the quality of the security and
are not a guarantee of quality. Should the rating of a security be downgraded
subsequent to a Portfolio's purchase of the security, the adviser or a
sub-adviser, as applicable, will determine whether it is in the best interest of
the Portfolio to retain the security.
13
<PAGE>
Debt Securities. Debt securities represent money borrowed that obligates the
issuer (e.g., a corporation, municipality, government, government agency) to
repay the borrowed amount at maturity (when the obligation is due and payable)
and usually to pay the holder interest at specific times.
Hedging Strategies. The Equity Portfolios may engage in certain hedging
strategies that involve options, futures and, in the case of the International
Multi-Manager Portfolio, forward currency exchange contracts. These hedging
strategies are described in detail in Appendix A.
Illiquid Securities. Each of the Large Cap Value, Mid Cap Value and Small Cap
Value Portfolios may invest no more than 10% of its net assets in securities
that at the time of purchase have legal or contractual restrictions on resale or
are otherwise illiquid. Each of the Large Cap Growth, Large Cap Core, Small Cap
Core and International Multi-Manager Portfolios may invest no more than 15% of
its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid. If the limitations
on illiquid securities are exceeded, other than by a change in market values,
the condition will be reported by the Portfolio's investment adviser to the
Board of Trustees.
Options on Securities and Securities Indexes. The Large Cap Growth, Large Cap
Value and Small Cap Core Portfolios each may purchase call options on securities
that WTC intends to include in the Portfolios in order to fix the cost of a
future purchase or attempt to enhance return by, for example, participating in
an anticipated increase in the value of a security. The Portfolios may purchase
put options to hedge against a decline in the market value of securities held in
the Portfolios or in an attempt to enhance return. The Portfolios may write
(sell) put and covered call options on securities in which they are authorized
to invest. The Portfolios may also purchase put and call options, and write put
and covered call options on U.S. securities indexes. Stock index options serve
to hedge against overall fluctuations in the securities markets rather than
anticipated increases or decreases in the value of a particular security. Of the
percentage of the total assets of a Portfolio that are invested in equity (or
related) securities, the Portfolio may not invest more than 10% of such assets
in covered call options on securities and/or options on securities indices.
Repurchase Agreements. The Equity Portfolios may invest in repurchase
agreements, which were previously described under "Money Market Portfolios -
Repurchase Agreements."
Restricted Securities. Restricted securities are securities that may not be sold
to the public without registration under the Securities Act of 1933 or an
exemption from registration. Each of the Equity Portfolios is subject to a
Portfolio's investment limitations on the purchase of illiquid securities.
Restricted securities, including securities eligible for re-sale under 1933 Act
Rule 144A, that are determined to be liquid are not subject to this limitation.
This determination is to be made by the adviser or a sub-adviser pursuant to
guidelines adopted by the Board of Trustees. Under these guidelines, the adviser
or a sub-adviser will consider the frequency of trades and quotes for the
security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. In purchasing such restricted
securities, the adviser or a sub-adviser intends to purchase securities that are
exempt from registration under Rule 144A under the 1933 Act.
Securities Lending. The Equity Portfolios may lend securities subject to the
same conditions applicable to the Bond Portfolios, as described under "Bond
Portfolios - Securities Lending."
14
<PAGE>
Portfolio Turnover. Portfolio turnover rates for the past 2 years, (or since
inception, if applicable) were:
- --------------------------------------------------------------------------------
12 months ended 12 months ended
June 30, 1999 June 30, 1998
------------- -------------
- --------------------------------------------------------------------------------
Large Cap Growth 32.48% 39.04%
- --------------------------------------------------------------------------------
Large Cap Core 5.19% 93.08%
- --------------------------------------------------------------------------------
Small Cap Core 22.97% N/A
- --------------------------------------------------------------------------------
Large Cap Value 67.05% N/A
- --------------------------------------------------------------------------------
Mid Cap Value 118.00% N/A
- --------------------------------------------------------------------------------
Small Cap Value 64.00% 57.00%
- --------------------------------------------------------------------------------
International
Multi-Manager 67.05% N/A
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
Except as otherwise provided, the Portfolios and their corresponding master
series have adopted the investment limitations set forth below. Limitations
which are designated as fundamental policies may not be changed without the
affirmative vote of the lessor of (i) 67% or more of the shares of a Portfolio
present at a shareholders meeting if holders of more than 50% of the outstanding
shares of the Portfolio are present in person or by proxy or (ii) more than 50%
of the outstanding shares of a Portfolio. If any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of a Portfolio's assets or redemptions of shares will not be considered a
violation of the limitation.
Money Market Portfolios:
Each Portfolio will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of such issuer,
or the Portfolio would own or hold 10% or more of the outstanding voting
securities of that issuer, provided that (1) each Portfolio may invest up to 25%
of its total assets without regard to these limitations; and (2) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
2. purchase the securities of any issuer if, as a result, more than 25% of the
Portfolio's total assets would be invested in the securities of one or more
issuers having their principal business activities in the same industry,
provided, that each of the Prime Money Market and Premier Money Market
Portfolios may invest more than 25% of its total assets in the obligations of
banks;
3. borrow money, except (1) from a bank for temporary or emergency purposes (not
for leveraging or investment) or (2) by engaging in reverse repurchase
agreements if the Portfolio's borrowings do not exceed an amount equal to 33
1/3% of the current value of its assets taken at market value, less liabilities
other than borrowings;
4. make loans to other persons, except by (1) purchasing debt securities in
accordance with its investment objective, policies and limitations; (2) entering
into repurchase agreements; or (3) engaging in securities loan transactions
limited to 33 1/3% of the value of the Portfolio's total assets;
5. underwrite any issue of securities, except to the extent that the Portfolio
may be considered to be acting as underwriter in connection with the disposition
of any portfolio security;
6. purchase or sell real estate, provided that the Portfolio may invest in
obligations secured by real estate or interests therein or obligations issued by
companies that invest in real estate or interests therein;
15
<PAGE>
7. purchase or sell physical commodities or contracts, provided that currencies
and currency-related contracts will not be deemed physical commodities; or
8. issue senior securities, except as appropriate to evidence indebtedness that
the Portfolio is permitted to incur, provided that the Portfolio's use of
options, futures contracts and options thereon or currency-related contracts
will not be deemed to be senior securities for this purpose.
The investment limitations described above do not prohibit a Portfolio from
investing all or substantially all of its assets in the shares of another
registered open-end investment company such as the corresponding Series of WT
Investment Trust I.
With respect to the exclusion from the investment limitation described in number
2 above, the Fund has been advised that it is the SEC staff's current position,
that the exclusion may be applied only to U.S. bank obligations; the Prime Money
Market and Premier Money Market Portfolios, however, will consider both foreign
and U.S. bank obligations within this exclusion.
The following non-fundamental policies apply to each Money Market Portfolio
unless otherwise indicated, and the Board of Trustees may change them without
shareholder approval.
Each Portfolio will not:
1. make short sales of securities except short sales against the box;
2. purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio securities;
3. purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets, and if at any time the Portfolio's bank borrowings
exceed its fundamental borrowing limitations due to a decline in net assets,
such borrowings will be promptly (within 3 days) reduced to the extent necessary
to comply with such limitations;
4. make loans of portfolio securities unless such loans are fully collateralized
by cash, securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or any combination of cash and securities, marked to market
daily; or
5. with respect to the U.S. Government, Prime Money Market and Premier Money
Market Portfolios only, purchase the securities of any one issuer if as a result
more than 5% of the Portfolio's total assets would be invested in the securities
of such issuer, provided that this limitation does not apply to securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
Bond Portfolios:
Each Portfolio will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of such issuer,
or the Portfolio would own or hold 10% or more of the outstanding voting
securities of that issuer, provided that (1) each Portfolio may invest up to 25%
of its total assets without regard to these limitations; and (2) these
limitations do not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
2. purchase the securities of any issuer if, as a result, more than 25% of the
Portfolio's total assets would be invested in the securities of one or more
issuers having their principal business activities in the same industry,
provided that this limitation does not apply to securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities (including repurchase
agreements fully collateralized by U.S. Government obligations) or to tax-exempt
municipal securities;
16
<PAGE>
3. borrow money, provided that the Portfolio may borrow money from banks for
temporary or emergency purposes (not for leveraging or investment) or by
engaging in reverse repurchase agreements if the Portfolio's borrowings do not
exceed an amount equal to 33 1/3% of the current value of its assets taken at
market value, less liabilities other than borrowings;
4. make loans to other persons, except by (1) purchasing debt securities in
accordance with its investment objective, policies and limitations; (2) entering
into repurchase agreements; or (3) engaging in securities loan transactions
limited to 33 1/3% of the value of the Portfolio's total assets;
5. underwrite any issue of securities, except to the extent that the Portfolio
may be considered to be acting as underwriter in connection with the disposition
of any portfolio security;
6. purchase or sell real estate or real estate limited partnership interests,
provided that the Portfolio may invest in obligations secured by real estate or
interests therein or obligations issued by companies that invest in real estate
or interests therein, including real estate investment trusts;
7. purchase or sell physical commodities or commodities contracts except
financial and foreign currency futures contracts and options thereon, options on
foreign currencies and forward currency contracts; or
8. issue senior securities, except as appropriate to evidence indebtedness that
the Portfolio is permitted to incur, provided that futures, options and forward
currency transactions will not be deemed to be senior securities for purposes of
this limitation.
The investment limitations described above do not prohibit a Portfolio from
investing all or substantially all of its assets in the shares of another
registered open-end investment company such as the corresponding Series of WT
Investment Trust I.
The following non-fundamental policies apply to each Portfolio and may be
changed by the Board of Trustees without shareholder approval. Each Portfolio
will not:
1. pledge, mortgage or hypothecate its assets, except the Portfolio may pledge
securities having a market value at the time of the pledge not exceeding 33 1/3%
of the value of its total assets to secure borrowings, and the Portfolio may
deposit initial and variation margin in connection with transactions in futures
contracts and options on futures contracts;
2. make short sales of securities except short sales against the box;
3. purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio securities,
provided that the Portfolio may make initial and variation margin deposits in
connection with permitted transactions in options or futures;
4. purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets;
5. when engaging in options, futures and forward currency contract strategies, a
Portfolio will either: (1) set aside cash or liquid securities in a segregated
account with the Fund's custodian in the prescribed amount; or (2) hold
securities or other options or futures contracts whose values are expected to
offset ("cover") its obligations thereunder. Securities, currencies or other
options or futures contracts used for cover cannot be sold or closed out while
the strategy is outstanding, unless they are replaced with similar assets;
6. purchase or sell non-hedging futures contracts or related options if
aggregate initial margin and premiums required to establish such positions would
exceed 5% of the Portfolio's total assets. For purposes of this limitation,
unrealized profits and unrealized losses on any open contracts are taken into
account, and the in-the-money amount of an option that is in-the-money at the
time of purchase is excluded; or
17
<PAGE>
7. write put or call options having aggregate exercise prices greater than 25%
of the Portfolio's net assets, except with respect to options attached to or
acquired with or traded together with their underlying securities and securities
that incorporate features similar to options.
Equity Portfolios:
Each Portfolio will not as a matter of fundamental policy:
1. purchase the securities of any one issuer, if as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of such issuer,
or the Portfolio would own or hold 10% or more of the outstanding voting
securities of that issuer, provided that (1) each Portfolio may invest up to 25%
of its total assets without regard to these limitations; (2) these limitations
do not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; and (3) for the Large Cap Growth, Large Cap Core,
Small Cap Core and International Multi-Manager Portfolios, repurchase agreements
fully collateralized by U.S. Government obligations will be treated as U.S.
Government obligations;
2. purchase securities of any issuer if, as a result, more than 25% of the
Portfolio's total assets would be invested in the securities of one or more
issuers having their principal business activities in the same industry,
provided, that (1) for the Large Cap Value, Small Cap Value and Mid Cap Value
Portfolios, this limitation does not apply to investments in short-term
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (2) the Large Cap Growth, Large Cap Core, Small Cap Core
and International Multi-Manager Portfolios, this limitation does not apply to
debt obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;
3. borrow money, provided that (1) each of the Large Cap Value, Small Cap Value
and Mid Cap Value Portfolios may borrow money for temporary or emergency
purposes, including the meeting of redemption requests, in amounts up to 33 1/3%
of a Portfolio's assets; and (2) each of the Large Cap Growth, Large Cap Core,
Small Cap Core and International Multi-Manager Portfolios may borrow money for
temporary or emergency purposes, and then in an aggregate amount not in excess
of 10% of a Portfolio's total assets;
4. make loans to other persons, except by (1) purchasing debt securities in
accordance with its investment objective, policies and limitations; (2) entering
into repurchase agreements; or (3) engaging in securities loan transactions;
5. underwrite any issue of securities, except to the extent that the Portfolio
may be considered to be acting as underwriter in connection with the disposition
of any portfolio security;
6. purchase or sell real estate, provided that (1) the Large Cap Value, Small
Cap Value and Mid Cap Value Portfolios additionally may not invest in any
interest in real estate except securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such as
mortgage pass-throughs and collateralized mortgage obligations, or issued by
companies that invest in real estate or interests therein; (2) the Large Cap
Growth, Large Cap Core, Small Cap Core and International Multi-Manager
Portfolios each may invest in obligations secured by real estate or interests
therein or obligations issued by companies that invest in real estate or
interests therein, including real estate investment trusts;
7. purchase or sell physical commodities, provided that (1) the Large Cap Value,
Small Cap Value and Mid Cap Value Portfolios additionally are restricted from
purchasing or selling contracts, options or options on contracts to purchase or
sell physical commodities and (2) the Large Cap Growth, Large Cap Core, Small
Cap Core and International Multi-Manager Portfolios each may invest in purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other derivative financial instruments; or
8. issue senior securities, except to the extent permitted by the 1940 Act,
provided that each of the Large Cap Value, Small Cap Value and Mid Cap Value
Portfolios may borrow money subject to its investment limitation on borrowing.
18
<PAGE>
The investment limitations described above do not prohibit a Portfolio from
investing all or substantially all of its assets in the shares of another
registered open-end investment company such as the corresponding Series of WT
Investment Trust I.
The following non-fundamental policies apply to each Portfolio unless otherwise
indicated, and the Board of Trustees may change them without shareholder
approval. Each Portfolio will not:
1. pledge, mortgage or hypothecate its assets except to secure indebtedness
permitted to be incurred by the Portfolio, provided that (1) this limitation
does not apply to the Large Cap Growth, Large Cap Core and Small Cap Core
Portfolios; and (2) with respect to the Large Cap Value, Small Cap Value, Mid
Cap Value and International Multi-Manager Portfolios, the deposit in escrow of
securities in connection with the writing of put and call options,
collateralized loans of securities and collateral arrangements with respect to
margin for future contracts are not deemed to be pledges or hypothecations for
this purpose;
2. make short sales of securities except short sales against the box;
3. purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio securities,
provided that Large Cap Value, Small Cap Value and Mid Cap Value Portfolios may
make initial and variation margin deposits in connection with permitted
transactions in options without violating this limitation;
4. purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets, provided that (1) the Large Cap Value, Small Cap
Value and Mid Cap Value Portfolios may not borrow for purposes other than
meeting redemptions in an amount exceeding 5% of the value of its total assets
at the time the borrowing is made;
TRUSTEES AND OFFICERS
The Board of Trustees supervises the Portfolios' activities and reviews
contractual arrangements with the Portfolios' service providers. The Trustees
and officers are listed below. All persons named as Trustees and officers also
serve in a similar capacity for WT Investment Trust I. An asterisk (*) indicates
those Trustees who are "interested persons".
- --------------------------------------------------------------------------------
Name, Address and Position(s)
Date of Birth Held
with the Principal Occupation(s) During the Past
Fund Five Years
- --------------------------------------------------------------------------------
ROBERT ARNOLD In 1989, Mr. Arnold founded, and currently
152 W. 57th Street, co-manages, R. H. Arnold & Co., Inc., an
44th Floor investment banking company. Prior to
New York, NY 10019 forming R. H. Arnold & Co., Inc., Mr.
Date of Birth: 3/44 Trustee Arnold was Executive Vice President and a
director to Cambrian Capital Corporation,
an investment banking firm he co-founded
in 1987.
- --------------------------------------------------------------------------------
ROBERT J. CHRISTIAN* Mr. Christian has been Chief Investment
Rodney Square North Officer of Wilmington Trust Company since
1100 N. Market February 1996 and Director of Rodney
Street Square Management Corporation since 1996.
Wilmington, DE 19890 Trustee, He was Chairman and Director of PNC Equity
Date of Birth: 2/49 President Advisors Company, and President and Chief
Investment Officer of PNC Asset Management
Group Inc. from 1994 to 1996. He was
Chief Investment Officer of PNC Bank from
1992 to 1996 and Director of Provident
Capital Management from 1993 to 1996.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Name, Address and Position(s)
Date of Birth Held
with the Principal Occupation(s) During the Past
Fund Five Years
- --------------------------------------------------------------------------------
NICHOLAS A. GIORDANO Trustee Mr. Giordano served as interim President
LaSalle University of LaSalle University from July 1, 1998 to
Philadelphia, PA June 1999, and was a consultant for
19141 financial services organizations from late
Date of Birth: 3/43 1997 through 1998. He served as president
and chief executive officer of the
Philadelphia Stock Exchange from 1981
through August 1997, and also served as
chairman of the board of the exchange's
two subsidiaries: Stock Clearing
Corporation of Philadelphia and
Philadelphia Depository Trust Company.
Before joining the Philadelphia Stock
Exchange, Mr. Giordano served as chief
financial officer at two brokerage firms
(1968-1971). A certified public
accountant, he began his career at Price
Waterhouse in 1965.
- --------------------------------------------------------------------------------
JOHN J. Trustee Mr. Quindlen has retired as Senior Vice
QUINDLEN President - Finance of E.I. duPont de
313 Southwinds Nemours & Company, Inc. (diversified
1250 W. Southwinds chemicals), a position held from 1984 to
Blvd. November 30, 1993. He served as Chief
Vero Beach, FL Financial Officer of E.I. duPont de
32963 Nemours & Company from 1984 through June
Date of Birth: 5/32 1993. He also serves as a Director of St.
Joe Paper Co. and as a Trustee of Kalmar
Pooled Investment Trust.
- --------------------------------------------------------------------------------
LOUIS Trustee Self employed financial consultant from
KLEIN, JR. 1991 to the present. Trustee of Manville
80 Butternut Lane Personal Injury Settlement Trust since
Stamford, CT 06903 1991.
Date of Birth: 5/35
- --------------------------------------------------------------------------------
CLEMENT C. Trustee Managing Partner, Mariemont Holdings, LLC,
MOORE, II a commercial real estate holding and
10 Rockefeller Plaza development company since 1980.
New York, NY 10004
Date of Birth: 9/44
- --------------------------------------------------------------------------------
ERIC Trustee Dean of the College of Business, Public
BRUCKER Policy and Health at the University of
University of Maine Maine since September 1998. Dean of the
Orono, ME 04469 School of Management at the University of
Date of Birth: 12/41 Michigan from 1992 to 1998.
- --------------------------------------------------------------------------------
WILLIAM P. Trustee Managing Director - Client Service and
RICHARDS Portfolio Communication, Roxbury Capital
100 Wilshire Management since 1998. Formerly, Senior
Boulevard Vice President and Partner at Van
Suite 600 Deventer, Hoch an investment management
Santa Monica, CA 90401 firm.
Date of Birth: 11/36
- --------------------------------------------------------------------------------
ERIC K. CHEUNG Vice From 1978 to 1986, Mr. Cheung was the
Rodney Square North President Portfolio Manager for fixed income assets
1100 N. Market of the Meritor Financial Group. In 1986,
Street Mr. Cheung joined Wilmington Trust Company
Wilmington, DE 19890 and in 1991, he became the Division
Date of Birth: 12/54 Manager for all fixed income products.
- --------------------------------------------------------------------------------
PAT COLLETTI Vice Mr. Colletti is Vice President and
400 Bellevue Parkway President Director of Investment Accounting and
Wilmington, DE 19809 and Administration of PFPC Inc. since April
Date of Birth: 11/58 Treasurer 1999. Prior to joining PFPC, Mr. Colletti
was Controller for the Reserve Funds since
1986.
- --------------------------------------------------------------------------------
GARY M. GARDNER 400 Secretary Mr. Gardner has been a Senior Vice
Bellevue Parkway President of PFPC Inc. since January
Wilmington, DE 19809 1994. Previously, Mr. Gardner had
provided legal and regulatory advice to
mutual funds and their
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
Name, Address and Position(s)
Date of Birth Held
with the Principal Occupation(s) During the Past
Fund Five Years
- --------------------------------------------------------------------------------
Date of Birth: 2/51 management for more than twenty years at
Federated Investors, Inc., SunAmerica Asset
Management Corp. and The Boston Company,
Inc.
- --------------------------------------------------------------------------------
On October 29, 1999, the Trustees and officers of the Fund, as a group, owned
beneficially, or may be deemed to have owned beneficially, less than 1% of the
outstanding shares of each Portfolio.
The fees and expenses of the Trustees who are not "interested persons" of the
Fund ("Independent Trustees"), as defined in the 1940 Act are paid by each
Portfolio. The following table shows the fees paid during the fiscal year ended
June 30, 1999 to the Independent Trustees for their service to the Fund and the
total compensation paid to the Trustees by the WT Fund Complex, which consists
of the Fund and WT Investment Trust I.
Trustees Fees for the Fiscal Year Ended June 30, 1999
Total
Aggregate Compensation
Compensation from the WT
Independent Trustee from the Fund Fund Complex
- ------------------- ------------- ------------
Robert Arnold $10,500 $21,000
Nicholas Giordano $7,500 $15,000
Lawrence Thomas* $10,500 $21,000
*Mr. Thomas resigned as Trustee effective August 12, 1999.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Persons or organizations beneficially owning 25% or more of the outstanding
shares of a Portfolio may be presumed to "control" the Portfolio. As a result,
those persons or organizations could have the ability to vote a majority of the
shares of the Portfolio on any matter requiring the approval of the shareholders
of that Portfolio. As of October 29, 1999, the following entities were known to
own beneficially 5% or more of the outstanding shares the Premier Money Market
Portfolio:
Kiewit Construction Company 34.77%
One Thousand Kiewit Plaza
Omaha, NE 68131
Global Surety & Insurance Co. 5.88%
One Thousand Kiewit Plaza
Omaha, NE 68131
Kiewit Coal Properties, Inc. 8.12%
One Thousand Kiewit Plaza
Omaha, NE 68131
Wasatch Construction AJV 16.71%
One Thousand Kiewit Plaza
Omaha, NE 68131
Gilbert/Black & Veatch Texas LP 7.26%
One Thousand Kiewit Plaza
Omaha, NE 68131
21
<PAGE>
As of October 29, 1999, the following entities have a 5% or larger position in
the Short/Intermediate Bond Portfolio and may be deemed to be a controlling
person of the Portfolio under the 1940 Act.
Northern Trust Company 42.11%
Trustee for Continental Kiewit Inc. Pension Plan
P.O. Box 92956
Chicago, IL 60675
Decker Coal Reclamation 24.13%
One Thousand Kiewit Plaza
Omaha, NE 68131
Wilmington Trust Company 8.97%
Trustee for Black Butte Coal Co. Pension Plan
1100 N. Market Street
Wilmington, DE 19890
Wilmington Trust Company 8.26%
Trustee for Kiewit Construction
Corp Retirement Savings Plan
1100 N. Market Street
Wilmington, DE 19890
Wilmington Trust Company 8.89%
Trustee for Decker Coal Co. Pension Plan
1100 N. Market Street
Wilmington, DE 19890
As of October 29, 1999, the following entities were known to own beneficially 5%
or more of the outstanding shares of the Large Cap Core Portfolio.
Northern Trust Company 32.44%
Trustee for Continental Kiewit Inc. Pension Plan
P.O. Box 92956
Chicago, IL 60675
Decker Coal Reclamation 12.64%
One Thousand Kiewit Plaza
Omaha, NE 68131
Wilmington Trust Company 38.58%
Trustee for Kiewit Construction
Corp Retirement Savings Plan
1100 N. Market Street
Wilmington, DE 19890
Wilmington Trust Company 7.33%
Trustee for Decker Coal Co. Pension Plan
1100 N. Market Street
Wilmington, DE 19890
INVESTMENT ADVISORY AND OTHER SERVICES
Rodney Square Management Corporation
RSMC serves as the investment adviser to the Prime Money Market, Premier Money
Market, the U.S. Government and the Tax-Exempt Series. RSMC is a Delaware
corporation organized on September 17, 1981. It is a wholly owned subsidiary of
WTC, a state-chartered bank organized as a Delaware corporation in 1903.
22
<PAGE>
WTC is a wholly owned subsidiary of Wilmington Trust Corporation, a publicly
held bank holding company. RSMC may occasionally consult, on an informal basis,
with personnel of WTC's investment departments.
Several affiliates of RSMC are also engaged in the investment advisory business.
Wilmington Trust FSB and Wilmington Brokerage Services Company, both wholly
owned subsidiaries of WTC, are registered investment advisers. In addition, WBSC
is a registered broker-dealer.
WTC previously served as the investment advisor of the Premier Money Market
Series until November 1, 1999. For information regarding the fees WTC received,
and waived, for its services, please see below.
For its services as adviser, RSMC received the following fees:
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
Prime Money Market
Series $7,672,029 $5,078,193 $4,055,663
U.S. Government Series $3,076,718 $2,001,355 $1,404,822
Tax-Exempt Series $2,047,289 $1,246,730 $1,103,443
Wilmington Trust Company
Wilmington Trust Company, the parent of RSMC, is a state-chartered bank
organized as a Delaware corporation in 1903. WTC is a wholly owned subsidiary of
Wilmington Trust Corporation, a publicly held bank holding company. WTC is
engaged in a variety of investment advisory activities, including the management
of collective investment pools, and has nearly a century of experience managing
the personal investments of high net-worth individuals. WTC presently manages
over $7 billion in fixed income assets and approximately $15.5 billion in equity
assets for clients.
WTC serves as the adviser to the Short/Intermediate Bond Series, the
Intermediate Bond Series, the Municipal Bond Series, the Large Cap Core Series,
the Small Cap Core Series and the International Multi-Manager Series.
For WTC's services as investment adviser to each Series, WTC received the
following fees:
October 20, 1998 12 months 12 months 12 months
to June 30, ended ended ended
1999 6/30/99 6/30/98 6/30/97
-------- ------- ------- -------
Premier Money Market Series $518,578 N/A N/A N/A
Short/Intermediate Bond
Series $177,376 N/A N/A N/A
Large Cap Core Series $568,176 N/A N/A N/A
Intermediate Bond Series N/A $322,428 N/A N/A
Municipal Bond Series N/A $61,687 $86,841 $84,035
Large Cap Growth Series N/A $1,150,375 N/A $742,064
International
Multi-Manager Series N/A $447,808 $755,902 N/A
For its services as adviser, WTC waived the following fees:
October 20, 1998 12 months 12 months 12 months
to June 30, ended ended ended
1999 6/30/99 6/30/98 6/30/97
-------- ------- ------- -------
Premier Money Market Series $281,704 N/A N/A N/A
Short/Intermediate Bond
Series $98,480 N/A N/A N/A
Large Cap Core Series $94,401 N/A N/A N/A
Intermediate Bond Series N/A $103,995 N/A N/A
Municipal Bond Series N/A $36,996 $81,481 $84,035
Large Cap Growth Series N/A $201,147 $8,138 $0
International
Multi-Manager Series N/A $102,850 N/A N/A
Prior to October 19, 1998, Kiewit Investment Management Corp. served as
investment adviser to the Premier Money Market, Short/Intermediate Bond and
Large Cap Core Series. Pursuant to investment management agreements then in
effect, the following fees were payable to the Series' previous investment
adviser, Kiewit, for:
July 1, 1998 to the fiscal year the fiscal year
October 19, ended June 30, ended June 30,
1998 1998 1997
---- ---- ----
Premier Money Market
Series $228,204 $983,634 $833,621
23
<PAGE>
Short/Intermediate Bond
Series $78,062 $579,830 $544,147
Large Cap Core Series $250,050 $695,586 $517,000
Kiewit Investment Management Corp., waived the following amounts for:
July 1, 1998 to the fiscal year the fiscal year
October 19, ended June 30, ended June 30,
1998 1998 1997
---- ---- ----
Premier Money Market
Series $123,952 $519,887 $334,909
Short/Intermediate Bond
Series $43,340 $115,748 $92,541
Large Cap Core Series $40,225 $126,953 $109,204
For Institutional shares, WTC has agreed to reimburse expenses to the extent
total operating expenses exceed 0.20% for the Premier Money Market Portfolio,
0.55% for the Short/Intermediate Bond Portfolio; 0.55% for the Intermediate Bond
Portfolio; 0.75% for the Municipal Bond Portfolio, 0.75% for the Large Cap
Growth Portfolio; .80% for the Large Core Portfolio; 0.75% for the Large Cap
Value Portfolio; 0.80% for the Small Cap Core Portfolio; and 1.00% for the
International Multi-Manager Portfolio. This undertaking will remain in place
until the Board of Trustees approves its termination.
Cramer Rosenthal McGlynn, LLC
CRM serves as investment adviser to the Large Cap Value, the Mid Cap Value and
the Small Cap Series. CRM and its predecessors have managed investments in small
and medium capitalization companies for over 25 years. CRM is 67% owned (and
therefore controlled) by Cramer, Rosenthal, McGlynn, Inc. ("CRM") and its
shareholders. CRM is registered as an investment adviser with the SEC.
For its services as adviser, CRM received the following fees:
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
Large Cap Value Series $128,702 $6,174 N/A
Mid Cap Value Series $40,525 N/A N/A
Small Cap Value Series $985,563 1,434,005 N/A
For its services as adviser, CRM waived the following fees.
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
Large Cap Value Series $61,969 $6,174 N/A
Mid Cap Value Series $40,525 N/A N/A
Small Cap Value Series N/A N/A N/A
Roxbury Capital Management
Roxbury serves as the investment adviser to the corresponding Series of the
Large Cap Growth Portfolio.
The Large Cap Growth Series pays a monthly advisory fee to Roxbury at the annual
rate of 0.55% of the Series' first $1 billion of average daily net assets; .50%
of the Series' next $1 billion of average daily net assets; and .45% of the
Series, average daily net assets over $2 billion.
Advisory Services. Under the terms of advisory agreements, each adviser agrees
to: (a) direct the investments of each Series, subject to and in accordance with
the Series' investment objective, policies and limitations set forth in the
Prospectus and this Statement of Additional Information; (b) purchase and sell
for each Series, securities and other investments consistent with the Series'
objectives and policies; (c) supply office facilities, equipment and personnel
necessary for servicing the investments of the Series; (d) pay the salaries of
all personnel of the Series and the adviser performing services relating to
research, statistical and investment activities on behalf of the Series; (e)
make available and provide such information as the Series and/or its
administrator may reasonably request for use in the preparation of its
registration statement, reports and other documents required by any applicable
federal, foreign or state statutes or regulations; (f) make its officers and
employees available to the Trustees and officers of the Fund for consultation
and discussion regarding the management of each Series and its investment
activities. Additionally, each adviser agrees to create and maintain
24
<PAGE>
all necessary records in accordance with all applicable laws, rules and
regulations pertaining to the various functions performed by it and not
otherwise created and maintained by another party pursuant to contract with the
Fund. Each adviser may at any time or times, upon approval by the Board of
Trustees, enter into one or more sub-advisory agreements with a sub-advisor
pursuant to which the adviser delegates any or all of its duties as listed.
The agreements provide that each adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Series in connection
with the matters to which the agreement relates, except to the extent of a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its obligations and duties under the agreement.
The salaries of any officers and the interested Trustees of the Funds who are
affiliated with an adviser and the salaries of all personnel of each adviser
performing services for each Fund relating to research, statistical and
investment activities are paid by the adviser.
Sub-Advisory Services
International Multi-Manager Series Only:
The sub-advisers to the Series are:
Clemente Capital, Inc. is located at Carnegie Hall Tower, 152 West 57th Street,
New York, New York 10019. Clemente has been a registered investment adviser
since 1979. Scudder Kemper Investments, Inc. is located at 345 Park Avenue, New
York, New York 10154. Scudder Kemper was founded as America's first independent
investment counselor and has served as investment adviser, administrator and
distributor of mutual funds since 1928. Invista Capital Management, Inc., a
registered investment adviser since 1984, is located at 1800 Hub Tower, 699
Walnut Street, Des Moines, Iowa 50309. Invista is an indirect, wholly owned
subsidiary of Principal Mutual Life Insurance Company.
Sub-Advisory Agreements. For services furnished pursuant to each Sub-Advisory
Agreement, WTC pays each sub-adviser a monthly portfolio management fee at an
annual rate of 0.50% of the average daily net assets under the sub-adviser's
management. For the fiscal year ended June 30, 1999, WTC paid sub-advisory fees
in the amount of $113,601 to Clemente, $114,343 to Investa and $118,271 to
Scudder Kemper.
Each Sub-Advisory Agreement provides that the sub-adviser has discretionary
investment authority (including the selection of brokers and dealers for the
execution of the Series' portfolio transactions) with respect to the portion of
the Series' assets allocated to it by WTC, subject to the restrictions of the
1940 Act, the Internal Revenue Code of 1986, as amended, applicable state
securities laws, applicable statutes and regulations of foreign jurisdictions,
the Series' investment objective, policies and restrictions and the instructions
of the Board of Trustees and WTC.
Each Sub-Advisory Agreement provides that the sub-adviser will not be liable for
any action taken, omitted or suffered to be taken except if such acts or
omissions are the result of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. Each Agreement continues in effect for two years and
then from year to year so long as continuance of each such Agreement is approved
at least annually (i) by the vote of a majority of the Independent Trustees at a
meeting called for the purpose of voting on such approval and (ii) by the vote
of a majority of the Trustees or by the vote of a majority of the outstanding
voting securities of the Portfolio. Each Sub-Advisory Agreement terminates
automatically in the event of its assignment and is terminable on written notice
by the Fund (without penalty, by action of the Board of Trustees or by vote of a
majority of the Portfolio's outstanding voting securities) or by WTC or the
sub-adviser. Each Agreement provides that written notice of termination must be
provided sixty days prior to the termination date, absent mutual agreement for a
shorter notice period.
25
<PAGE>
Administration and Accounting Services
Under separate Administration and Accounting Services Agreements, PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809 performs certain administrative and
accounting services for WT Mutual Fund and WT Investment Trust I. These services
include preparing shareholder reports, providing statistical and research data,
assisting the advisers in compliance monitoring activities, and preparing and
filing federal and state tax returns on behalf of the Fund and the Trust. In
addition, PFPC prepares and files various reports with the appropriate
regulatory agencies and prepares materials required by the SEC or any state
securities commission having jurisdiction over the Fund. The accounting services
performed by PFPC include determining the net asset value per share of each
Portfolio and maintaining records relating to the securities transactions of the
Fund. The Administration and Accounting Services Agreements provides that PFPC
and its affiliates shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or its Portfolios, except to the extent
of a loss resulting from willful misfeasance, bad faith or gross negligence on
their part in the performance of their obligations and duties under the
Administration and Accounting Services Agreements.
For its administrative and accounting services, PFPC received the following
fees:
12 months ended For the period
6/30/99 2/2/98 to 6/30/98
------- -----------------
Prime Money Market Series $1,461,311 $522,138
U.S. Government Series $654,621 $250,138
Tax-Exempt Series $435,593 $141,809
Short/Intermediate Bond Series $92,602 $13,311
Intermediate Bond Series $92,122 N/A
Municipal Bond Series $17,625 $7,176
Large Cap Growth Series $209,159 $39,617
Large Cap Value Series $87,657 N/A
Small Cap Core Series $75,035 N/A
International Multi-Manager
Series $68,894 N/A
Prior to February 2, 1998, RSMC provided administrative and accounting services
and was paid the following fees:
For the period 12 months ended
7/1/97 to 2/2/98 6/30/97
---------------- -------
Prime Money Market Series $658,454 $942,505
U.S. Government Series $245,039 $313,211
Tax-Exempt Series $170,197 $278,255
Short/Intermediate Bond Series $44,273 $75,310
Intermediate Bond Series N/A N/A
Municipal Bond Series $37,574 $62,977
Large Cap Growth Series $64,109 $109,402
Large Cap Value Series N/A N/A
Small Cap Core Series N/A N/A
International Multi-Manager
Series N/A N/A
For its administrative and accounting services, PFPC received the following
fees:
12 months ended For the period
6/30/99 1/5/98 to 6/30/98
------- -----------------
Premier Money Market Series $179,591 $48,157
Short/Intermediate Bond Series $105,262 $13,601
Large Cap Core Series $117,964 $8,951
26
<PAGE>
Prior to January 5, 1998, RSMC provided administrative and accounting services
and was paid the following fees:
For the period 12 months ended
7/1/97 to 1/4/98 6/30/97
---------------- -------
Premier Money Market Series $49,952 $57,980
Short/Intermediate Bond Series $15,308 $67,133
Large Cap Core Series $10,893 $64,211
ADDITIONAL SERVICE PROVIDERS
Independent Auditors. Ernst & Young LLP, serves as the independent auditor to
the Fund, and WT Investment Trust I, providing services which include (1)
auditing the annual financial statements for the Portfolios, (2) assistance and
consultation in connection with SEC filings and (3) preparation of the annual
federal income tax returns filed on behalf of each Portfolio.
Legal Counsel. Pepper Hamilton LLP, 3000 Two Logan Square, 18th and Arch
Streets, Philadelphia, PA 19103, serves as counsel to the Fund and WT Investment
Trust I.
Custodian. Wilmington Trust Company, 1100 North Market Street, Wilmington, DE
19890, serves as the Custodian.
Transfer Agent. PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19890-0001,
serves as the Transfer Agent and Dividend Paying Agent.
DISTRIBUTION OF SHARES AND RULE 12B-1 PLAN
Provident Distributors, Inc. Four Falls Corporate Center, West Conshohocken, PA
19428, serves as the underwriter of the Portfolios' shares pursuant to a
Distribution Agreement with the Fund. Pursuant to the terms of the Distribution
Agreement, PDI is granted the right to sell the shares of the Portfolios as
agent for the Fund. Shares of the Portfolios are offered continuously.
Under the terms of the Distribution Agreement, PDI agrees to use all reasonable
efforts to secure purchasers for Investor class shares of the Portfolios and to
pay expenses of printing and distributing prospectuses, statements of additional
information and reports prepared for use in connection with the sale of Investor
class shares and any other literature and advertising used in connection with
the offering, out of the compensation it receives pursuant to the Portfolios'
Plans of Distribution adopted pursuant to Rule 12b-1 under the 1940 Act (the
"12b-1 Plans"). PDI receives no underwriting commissions or Rule 12b-1 fees in
connection with the sale of the Portfolios' Institutional class shares.
The Distribution Agreement provides that PDI, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Agreements, will not be liable to the Portfolios or their shareholders for
losses arising in connection with the sale of Portfolio shares.
The Distribution Agreement became effective as of February 25, 1998 and
continues in effect for a period of two years. Thereafter, the agreement may
continue in effect for successive annual periods provided such continuance is
approved at least annually by a majority of the Trustees, including a majority
of the Independent Trustees. The Distribution Agreement terminates automatically
in the event of an assignment. The Agreement is also terminable without payment
of any penalty with respect to any Portfolio (i) (by vote of a majority of the
Trustees of the Portfolio who are not interested persons of the Portfolio and
who have no direct or indirect financial interest in the operation of any Rule
12b-1 Plan of the Portfolio or any agreements related to a 12b-1 Plan, or by
vote of a majority of the outstanding voting securities of the applicable
Portfolio) on sixty (60) days' written notice to PDI; or (ii) by PDI on sixty
(60) days' written notice to the Portfolio.
27
<PAGE>
PDI will be compensated for distribution services according to the Investor
class 12b-1 Plan which became effective on November 1, 1999 regardless of PDI's
expenses. The Investor class 12b-1 Plan provides that PDI will be paid for
distribution activities such as public relations services, telephone services,
sales presentations, media charges, preparation, printing and mailing
advertising and sales literature, data processing necessary to support a
distribution effort and printing and mailing of prospectuses to prospective
shareholders. Additionally, PDI may pay certain financial institutions such as
banks or broker-dealers who have entered into servicing agreements with PDI
("Service Organizations") and other financial institutions for distribution and
shareholder servicing activities.
The Investor class 12b-1 Plan further provides that payment shall be made for
any month only to the extent that such payment does not exceed (i) 0.25% on an
annualized basis of the Investor Class shares of each Portfolio's average net
assets; and (ii) limitations set from time to time by the Board of Trustees. The
Board of Trustees has only authorized implementation of each 12b-1 Plan for
annual payments of up to 0.05% of the Investor class shares of each of the Money
Market Portfolio's average net assets to reimburse PDI for making payments to
certain Service Organizations who have sold Investor class shares of the
Portfolios and for other distribution expenses.
Under the Investor class 12b-1 Plans, if any payments made by the adviser out of
its advisory fee, not to exceed the amount of that fee, to any third parties
(including banks), including payments for shareholder servicing and transfer
agent functions, were deemed to be indirect financing by each Portfolio of the
distribution of its Investor class shares, such payments are authorized. Each
Series may execute portfolio transactions with and purchase securities issued by
depository institutions that receive payments under the 12b-1 Plans. No
preference for instruments issued by such depository institutions is shown in
the selection of investments.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The advisers and sub-advisers place all portfolio transactions on behalf of each
Series. Debt securities purchased and sold by the Series are generally traded on
the dealer market on a net basis (i.e., without commission) through dealers
acting for their own account and not as brokers, or otherwise involve
transactions directly with the issuer of the instrument. This means that a
dealer (the securities firm or bank dealing with a Series) makes a market for
securities by offering to buy at one price and sell at a slightly higher price.
The difference between the prices is known as a spread. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.
The primary objective of the advisers and sub-advisers in placing orders on
behalf of the Series for the purchase and sale of securities is to obtain best
execution at the most favorable prices through responsible brokers or dealers
and, where the spread or commission rates are negotiable, at competitive rates.
In selecting a broker or dealer, each adviser considers, among other things: (i)
the price of the securities to be purchased or sold; (ii) the rate of the spread
or commission; (iii) the size and difficulty of the order; (iv) the nature and
character of the spread or commission for the securities to be purchased or
sold; (v) the reliability, integrity, financial condition, general execution and
operational capability of the broker or dealer; and (vi) the quality of any
research or statistical services provided by the broker or dealer to the Series
or to the advisers.
The advisers cannot readily determine the extent to which spreads or commission
rates or net prices charged by brokers or dealers reflect the value of their
research, analysis, advice and similar services. In such cases, each adviser
receives services it otherwise might have had to perform itself. The research,
analysis, advice and similar services provided by brokers or dealers can be
useful to the advisers in serving its other clients, as well as in serving the
Series. Conversely, information provided to the advisers by brokers or dealers
who have executed transaction orders on behalf of other clients of the adviser
may be useful in providing services to the Series. During the twelve-month
periods ended June 30, 1999, 1998 and 1997, the Series paid the following
brokerage commissions:
28
<PAGE>
<TABLE>
<CAPTION>
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
<S> <C> <C> <C>
Premier Money Market Series N/A N/A N/A
Prime Money Market Series N/A N/A N/A
U.S. Government Series N/A N/A N/A
Tax-Exempt Series N/A N/A N/A
Short/Intermediate Bond Series N/A N/A N/A
Intermediate Bond Series N/A N/A N/A
Municipal Bond Series N/A N/A N/A
Large Cap Growth Series $196,083 $378,000 $58,000
Large Cap Core Series $15,538 $115,000 $61,188
Small Cap Core Series $67,932 N/A N/A
Large Cap Value Series $234,362 N/A N/A
Mid Cap Value Series $52,621 $16,841 N/A
Small Cap Value Series $424,842 $397,058 $594,021
International Multi-Manager
Series $227,743 N/A N/A
</TABLE>
Some of the advisers' other clients have investment objectives and programs
similar to that of the Series. Occasionally, recommendations made to other
clients may result in their purchasing or selling securities simultaneously with
the Series. Consequently, the demand for securities being purchased or the
supply of securities being sold may increase, and this could have an adverse
effect on the price of those securities. It is the policy of the advisers not to
favor one client over another in making recommendations or in placing orders. In
the event of a simultaneous transaction, purchases or sales are averaged as to
price, transaction costs are allocated between a Series and other clients
participating in the transaction on a pro rata basis and purchases and sales are
normally allocated between the Series and the other clients as to amount
according to a formula determined prior to the execution of such transactions.
CAPITAL STOCK AND OTHER SECURITIES
The Fund issues two separate classes of shares, Institutional and Investor
shares, for each Portfolio, except Premier Money Market Portfolio, with a par
value of $.01 per share. The shares of each Portfolio, when issued and paid for
in accordance with the prospectus, will be fully paid and non-assessable shares,
with equal voting rights and no preferences as to conversion, exchange,
dividends, redemption or any other feature.
The separate classes of shares each represent interests in the same portfolio of
investments, have the same rights and are identical in all respects, except that
the Investor class shares bear Rule 12b-1 distribution expenses, and have
exclusive voting rights with respect to the Rule 12b-1 Plan pursuant to which
the distribution fee may be paid. The net income attributable to Investor shares
and the dividends payable on Investor shares will be reduced by the amount of
the distribution fees; accordingly, the net asset value of the Investor shares
will be reduced by such amount to the extent the Portfolio has undistributed net
income.
Shares of a Portfolio entitle holders to one vote per share and fractional votes
for fractional shares held. Shares have non-cumulative voting rights, do not
have preemptive or subscription rights and are transferable. Each Portfolio and
class takes separate votes on matters affecting only that Portfolio or class.
For example, a change in the fundamental investment policies for a Portfolio
would be voted upon only by shareholders of that Portfolio.
The Portfolios do not hold annual meetings of shareholders. The Trustees are
required to call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee when requested in writing to do so by the
shareholders of record owning not less than 10% of a Portfolio's outstanding
shares.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase of Shares. Information regarding the purchase of shares is discussed in
the "Purchase of Shares" section of the prospectus. Additional methods to
purchase shares are as follows:
29
<PAGE>
Individual Retirement Accounts: You may purchase shares of the Portfolios for a
tax-deferred retirement plan such as an individual retirement account ("IRA").
To order an application for an IRA and a brochure describing a Portfolio IRA,
call the Transfer Agent at (800) 336-9970. PFPC Trust Company, as custodian for
each IRA account receives an annual fee of $10 per account, paid directly to
PFPC Trust Company by the IRA shareholder. If the fee is not paid by the due
date, the appropriate number of Portfolio shares owned by the IRA will be
redeemed automatically as payment.
Automatic Investment Plan: You may purchase Portfolio shares through an
Automatic Investment Plan ("AIP"). Under the AIP, the Transfer Agent, at regular
intervals, will automatically debit your bank checking account in an amount of
$50 or more (after the $1,000 minimum initial investment). You may elect to
invest the specified amount monthly, bimonthly, quarterly, semiannually or
annually. The purchase of Portfolio shares will be effected at their offering
price at 12:00 p.m. Eastern time for the Tax-Exempt Portfolio, at 2:00 p.m.
Eastern Time for the Prime Money Market, Premier Money Market and U.S.
Government Portfolios, or at the close of regular trading on the New York Stock
Exchange ("Exchange") (currently 4:00 p.m., Eastern time), for the Bond and
Equity Portfolios, on or about the 20th day of the month. For an application for
the Automatic Investment Plan, check the appropriate box of the application or
call the Transfer Agent at (800) 336-9970. This service is generally not
available for WTC trust account clients, since similar services are provided
through WTC. This service also may not be available for Service Organization
clients who are provided similar services through those organizations.
Payroll Investment Plan: The Payroll Investment Plan ("PIP") permits you to make
regularly scheduled purchases of Portfolio shares through payroll deductions. To
open a PIP account, you must submit a completed account application, payroll
deduction form and the minimum initial deposit to your employer's payroll
department. Then, a portion of your paychecks will automatically be transferred
to your PIP account for as long as you wish to participate in the plan. It is
the sole responsibility of your employer, not the Fund, the distributor, the
advisers or the transfer agent, to arrange for transactions under the PIP. The
Fund reserves the right to vary its minimum purchase requirements for employees
participating in a PIP.
Redemption of Shares. Information regarding the redemption of shares is
discussed in the "Redemption of Shares" section of the prospectus. Additional
methods to redeem shares are as follows:
By Check: You may utilize the check writing option to redeem shares of the Prime
Money Market, the U.S. Government and the Tax-Exempt Portfolios by drawing a
check for $500 or more against a Portfolio account. When the check is presented
for payment, a sufficient number of shares will be redeemed from your Portfolio
account to cover the amount of the check. This procedure enables you to continue
receiving dividends on those shares until the check is presented for payment.
Because the aggregate amount of Portfolio shares owned is likely to change each
day, you should not attempt to redeem all shares held in your account by using
the check writing procedure. Charges will be imposed for specially imprinted
checks, business checks, copies of canceled checks, stop payment orders, checks
returned due to "nonsufficient funds" and returned checks. These charges will be
paid by redeeming an appropriate number of Portfolio shares automatically. Each
Portfolio and the Transfer Agent reserve the right to terminate or alter the
check writing service at any time. The Transfer Agent also reserves the right to
impose a service charge in connection with the check writing service. If you are
interested in the check writing service, contact the Transfer Agency for further
information. This service is generally not available for clients of WTC through
their trust or corporate cash management accounts, since it is already provided
for these customers through WTC. The service may also not be available for
Service Organization clients who are provided a similar service by those
organizations.
By Wire: Redemption proceeds may be wired to your predesignated bank account in
any commercial bank in the United States if the amount is $1,000 or more. The
receiving bank may charge a fee for this service. Proceeds may also be mailed to
your bank or, for amounts of $10,000 or less, mailed to your Portfolio account
address of record if the address has been established for at least 60 days. In
order to authorize the Transfer Agent to mail redemption proceeds to your
Portfolio account address of record, complete the appropriate section of the
Application for Telephone Redemptions or include your Portfolio account address
of record when you submit written instructions. You may change the account that
you have designated to receive amounts redeemed at any time. Any request to
change the account designated to receive redemption proceeds should be
accompanied by a
30
<PAGE>
guarantee of the shareholder's signature by an eligible institution. A signature
and a signature guarantee are required for each person in whose name the account
is registered. Further documentation will be required to change the designated
account when a corporation, other organization, trust, fiduciary or other
institutional investor holds the Portfolio shares.
Systematic Withdrawal Plan: If you own shares of a Portfolio with a value of
$10,000 or more you may participate in the Systematic Withdrawal Plan ("SWP").
Under the SWP, you may automatically redeem a portion of your account monthly,
bimonthly, quarterly, semiannually or annually. The minimum withdrawal available
is $100. The redemption of Portfolio shares will be effected at the NAV
determined on or about the 25th day of the month. This service is generally not
available for WTC trust accounts or certain Service Organizations, because a
similar service is provided through those organizations.
Additional Information Regarding Redemptions: To ensure proper authorization
before redeeming shares of the Portfolios, the Transfer Agent may require
additional documents such as, but not restricted to, stock powers, trust
instruments, death certificates, appointments as fiduciary, certificates of
corporate authority and waivers of tax required in some states when settling
estates.
Clients of WTC who have purchased shares through their trust accounts at WTC and
clients of Service Organizations who have purchased shares through their
accounts with those Service Organizations should contact WTC or the Service
Organization prior to submitting a redemption request to ensure that all
necessary documents accompany the request. When shares are held in the name of a
corporation, other organization, trust, fiduciary or other institutional
investor, RSMC requires, in addition to the stock power, certified evidence of
authority to sign the necessary instruments of transfer. These procedures are
for the protection of shareholders and should be followed to ensure prompt
payment. Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within 7 days of acceptance of
shares tendered for redemption. Delay may result if the purchase check has not
yet cleared, but the delay will be no longer than required to verify that the
purchase check has cleared, and the Funds will act as quickly as possible to
minimize delay.
The value of shares redeemed may be more or less than the shareholder's cost,
depending on the net asset value at the time of redemption. Redemption of shares
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of a redemption may be subject to backup withholding.
A shareholder's right to redeem shares and to receive payment therefore may be
suspended when (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted, (c) an emergency
exists as a result of which it is not reasonably practicable to dispose of a
Portfolio's securities or to determine the value of a Portfolio's net assets, or
(d) ordered by a governmental body having jurisdiction over a Portfolio for the
protection of the Portfolio's shareholders, provided that applicable rules and
regulations of the SEC (or any succeeding governmental authority) shall govern
as to whether a condition described in (b), (c) or (d) exists. In case of such
suspension, shareholders of the affected Portfolio may withdraw their requests
for redemption or may receive payment based on the net asset value of the
Portfolio next determined after the suspension is lifted.
Each Portfolio reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part with readily marketable securities chosen by the Fund and valued in the
same way as they would be valued for purposes of computing the net asset value
of the applicable Portfolio. If payment is made in securities, a shareholder may
incur transaction expenses in converting these securities into cash. Each
Portfolio has elected, however, to be governed by Rule 18f-1 under the 1940 Act,
as a result of which a Portfolio is obligated to redeem shares solely in cash if
the redemption requests are made by one shareholder account up to the lesser of
$250,000 or 1% of the net assets of the applicable Portfolio during any 90-day
period. This election is irrevocable unless the SEC permits its withdrawal.
Pricing of Shares. Each of the Money Market Portfolios' securities is valued on
the basis of the amortized cost valuation technique. This involves valuing a
security initially at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of fluctuating interest rates
on the market value of the security. The valuation of a Money Market Portfolio's
securities based upon their amortized cost and the
31
<PAGE>
accompanying maintenance of each Portfolio's per share net asset value of $1.00
is permitted in accordance with Rule 2a-7 under the 1940 Act. Certain conditions
imposed by that Rule are set forth under "Investment Policies." In connection
with the use of the amortized cost valuation technique, each Portfolio's Board
of Trustees has established procedures delegating to the adviser the
responsibility for maintaining a constant net asset value per share. Such
procedures include a daily review of each Portfolio's holdings to determine
whether a Portfolio's net asset value, calculated based upon available market
quotations, deviates from $1.00 per share. Should any deviation exceed 1/2 of 1%
of $1.00, the Trustees will promptly consider whether any corrective action
should be initiated to eliminate or reduce material dilution or other unfair
results to shareholders. Such corrective action may include selling of portfolio
securities prior to maturity to realize capital gains or losses, shortening
average portfolio maturity, withholding dividends, redeeming shares in kind and
establishing a net asset value per share based upon available market quotations.
Should a Money Market Portfolio incur or anticipate any unusual expense or loss
or depreciation that would adversely affect its net asset value per share or
income for a particular period, the Trustees would at that time consider whether
to adhere to the current dividend policy or to revise it in light of the then
prevailing circumstances. For example, if a Portfolio's net asset value per
share were reduced, or were anticipated to be reduced, below $1.00, the Trustees
could suspend or reduce further dividend payments until the net asset value
returned to $1.00 per share. Thus, such expenses or losses or depreciation could
result in investors receiving no dividends or reduced dividends for the period
during which they held their shares or in their receiving upon redemption a
price per share lower than that which they paid.
For the Bond Portfolios and the Equity Portfolios, the net asset value per share
of each Portfolio is determined by dividing the value of the Portfolio's net
assets by the total number of Portfolio shares outstanding. This determination
is made by PFPC, as of the close of regular trading on the Exchange (currently
4:00 p.m., Eastern Time) each day the Portfolios are open for business. The
Portfolios are open for business on days when the Exchange, PFPC and the
Philadelphia branch office of the Federal Reserve are open for business.
In valuing a Portfolio's assets, a security listed on the Exchange (and not
subject to restrictions against sale by the Portfolio on the Exchange) will be
valued at its last sale price on the Exchange on the day the security is valued.
Lacking any sales on such day, the security will be valued at the mean between
the closing asked price and the closing bid price. Securities listed on other
exchanges (and not subject to restriction against sale by the Portfolio on such
exchanges) will be similarly valued, using quotations on the exchange on which
the security is traded most extensively. Unlisted securities that are quoted on
the National Association of Securities Dealers' National Market System, for
which there have been sales of such securities on such day, shall be valued at
the last sale price reported on such system on the day the security is valued.
If there are no such sales on such day, the value shall be the mean between the
closing asked price and the closing bid price. The value of such securities
quoted on the NASDAQ Stock Market System, but not listed on the National Market
System, shall be valued at the mean between the closing asked price and the
closing bid price. Unlisted securities that are not quoted on the NASDAQ Stock
Market System and for which over-the-counter market quotations are readily
available will be valued at the mean between the current bid and asked prices
for such security in the over-the-counter market. Other unlisted securities (and
listed securities subject to restriction on sale) will be valued at fair value
as determined in good faith under the direction of the Board of Trustees
although the actual calculation may be done by others. Short-term investments
with remaining maturities of less than 61 days are valued at amortized cost.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each Business Day. In addition, European or Far Eastern securities trading
generally or in a particular country or countries may not take place on all
Business Days. Furthermore, trading takes place in Japanese markets on certain
Saturdays and in various foreign markets on days which are not Business Days and
on which the International Multi-Manager Portfolio's net asset value is not
calculated and investors will be unable to buy or sell shares of the Portfolio.
Calculation of the Portfolio's net asset value does not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when the Portfolio's net asset value is calculated, such
securities may be valued at fair value as determined in good faith by or under
the direction of the Board of Trustees.
32
<PAGE>
DIVIDENDS
Dividends from the Money Market Portfolios are declared on each Business Day.
The dividend for a Business Day immediately preceding a weekend or holiday
normally includes an amount equal to the net income for the subsequent
non-Business Days on which dividends are not declared. However, no such dividend
includes any amount of net income earned in a subsequent semiannual accounting
period. A portion of the dividends paid by the U.S. Government Portfolio may be
exempt from state taxes.
Dividends from the Bond Portfolios' net investment income are declared on each
Business Day and paid to shareholders ordinarily on the first Business Day of
the following month. The dividend for a Business Day immediately preceding a
weekend or holiday normally includes an amount equal to the net income expected
for the subsequent non-Business Days on which dividends are not declared.
However, no such dividend included any amount of net income earned in a
subsequent semiannual period. Net short-term capital gain and net capital gain
(the excess of net long-term capital gain over the short-term capital loss)
realized by each Portfolio, after deducting any available capital loss
carryovers, are declared and paid annually.
Dividends from the Equity Portfolios' net investment income and distributions of
(1) net short-term capital gain and net capital gain (the excess of net
long-term capital gain over the short-term capital loss) realized by each
Portfolio, after deducting any available capital loss carryovers, and (2) in the
case of the International Multi-Manager Portfolio, net gains realized from
foreign currency transactions are declared and paid to its shareholders
annually.
TAXATION OF THE PORTFOLIOS
General. Each Portfolio is treated as a separate corporation for federal income
tax purposes. To qualify or continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"), each Portfolio must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income, net short-term capital gain and, in the case
of the International Multi-Manager Portfolio, net gains from certain foreign
currency transactions) and must meet several additional requirements. For each
Portfolio, these requirements include the following: (1) the Portfolio must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including gains from options, futures and forward contracts) derived with
respect to its business of investing in securities or those currencies; (2) at
the close of each quarter of the Portfolio's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs and other securities, with these
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Portfolio's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and (3)
at the close of each quarter of the Portfolio's taxable year, not more than 25%
of the value of its total assets may be invested in securities (other than U.S.
Government securities or the securities of other RICs) of any one issuer.
If a Portfolio failed to qualify for treatment as a RIC in any taxable year, it
would be subject to tax on its taxable income at corporate rates and all
distributions from earnings and profits, including any distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), would be taxable to its shareholders as ordinary income. In
addition, the Portfolio could be required to recognize unrealized gains, pay
substantial taxes and interest and make substantial distributions before
qualifying again for RIC treatment.
Each Portfolio will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and other distributions declared by a Portfolio in October, November
or December of any year and payable to shareholders of record on a date in one
of those months will be deemed to have been paid by the Portfolio and received
by the shareholders on December 31 of that year if they are paid by the
Portfolio during
33
<PAGE>
the following January. Accordingly, such distributions will be taxed to the
shareholders for the year in which that December 31 falls.
Investors should be aware that if Portfolio shares are purchased shortly before
the record date for any dividend (other than an exempt-interest dividend) or
capital gain distribution, the shareholder will pay full price for the shares
and will receive some portion of the price back as a taxable distribution.
If a Portfolio makes a distribution to shareholders in excess of its current and
accumulated earnings and profits in any taxable year, the excess distribution
will be treated by each shareholder as a return of capital to the extent of the
shareholder's tax basis and thereafter as capital gain.
Money Market Portfolios:
With respect to the U.S. Government Portfolio, Premier Money Market Portfolio
and Prime Money Market Portfolio, distributions from a Portfolio's investment
company taxable income, if any, are taxable to its shareholders as ordinary
income to the extent of the Portfolio's earnings and profits. Because each of
the Portfolios' net investment income is derived from interest rather than
dividends, no portion of the distributions thereof is eligible for the
dividends-received deduction allowed to corporations.
Bond Portfolios:
Each Bond Portfolio may acquire zero coupon securities issued with original
issue discount. As a holder of those securities, a Portfolio must take into
account the original issue discount that accrues on the securities during the
taxable year, even if it receives no corresponding payment on them during the
year. Because each Portfolio annually must distribute substantially all of its
investment company taxable income and net tax-exempt income, including any
original issue discount, to satisfy the distribution requirements for RICs under
the Code and (except with respect to tax-exempt income) avoid imposition of the
Excise Tax, a Portfolio may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from a Portfolio's cash assets or
from the proceeds of sales of portfolio securities, if necessary. A Portfolio
may realize capital gains or losses from those sales, which would increase or
decrease its investment company taxable income and/or net capital gain.
Tax-Exempt Portfolio and Municipal Bond Portfolio: Each of these Portfolios will
be able to pay exempt-interest dividends to its shareholders only if, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of obligations the interest on which is excludable from
gross income under section 103(a) of the Code; both Portfolios intend to
continue to satisfy this requirement. Distributions that a Portfolio properly
designates as exempt-interest dividends are treated by its shareholders as
interest excludable from their gross income for federal income tax purposes but
may be tax preference items. The aggregate dividends excludable from the
shareholders' gross income may not exceed a Portfolio's net tax-exempt income.
The shareholders' treatment of dividends from a Portfolio under state and local
income tax laws may differ from the treatment thereof under the Code. In order
to qualify to pay exempt-interest dividends, each Portfolio may be limited in
its ability to engage in taxable transactions such as repurchase agreements,
options and futures strategies and portfolio securities lending.
Tax-exempt interest attributable to certain "private activity bonds" ("PABs")
(including, in the case of a RIC receiving interest on those bonds, a
proportionate part of the exempt-interest dividends paid by the RIC) is a tax
preference item. Furthermore, even interest on tax-exempt securities held by a
Portfolio that are not PABs, which interest otherwise would not be a tax
preference item, nevertheless may be indirectly subject to the federal
alternative minimum tax in the hands of corporate shareholders when distributed
to them by the Portfolio. PABs are issued by or on behalf of public authorities
to finance various privately operated facilities. Entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development bonds or PABs should consult their tax
advisers before purchasing a Portfolio's shares. For these purposes, the term
"substantial user" is defined generally to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of such bonds.
Up to 85% of Social Security and railroad retirement benefits may be included in
taxable income for recipients whose adjusted gross income (including income from
tax-exempt sources such as the Tax-Exempt and Municipal Bond Portfolios) plus
50% of their benefits exceeds certain base amounts. Exempt-interest dividends
from each Portfolio still are tax-exempt to the extent described in the
prospectus; they are only included in the calculation of whether a recipient's
income exceeds the established amounts.
34
<PAGE>
If a Portfolio invests in any instruments that generate taxable income, under
the circumstances described in the prospectus, distributions of the interest
earned thereon will be taxable to its shareholders as ordinary income to the
extent of its earnings and profits. Moreover, if a Portfolio realizes capital
gain as a result of market transactions, any distribution of that gain will be
taxable to its shareholders.
The Municipal Bond Portfolio may invest in municipal bonds that are purchased
with "market discount." For these purposes, market discount is the amount by
which a bond's purchase price is exceeded by its stated redemption price at
maturity or, in the case of a bond that was issued with original issue discount
("OID"), the sum of its issue price plus accrued OID, except that market
discount less than the product of (1) 0.25% of the redemption price at maturity
times and (2) the number of complete years to maturity after the taxpayer
acquired the bond is disregarded. Market discount generally is accrued ratably,
on a daily basis, over the period from the acquisition date to the date of
maturity. Gain on the disposition of such a bond (other than a bond with a fixed
maturity date within one year from its issuance) generally is treated as
ordinary (taxable) income, rather than capital gain, to the extent of the bond's
accrued market discount at the time of disposition. In lieu of treating the
disposition gain as above, the Municipal Bond Portfolio may elect to include
market discount in its gross income currently, for each taxable year to which it
is attributable.
The Tax-Exempt and Municipal Bond Portfolios inform shareholders within 60 days
after their fiscal year-end (August 31) of the percentage of its income
distributions designated as exempt-interest dividends. The percentage is applied
uniformly to all distributions made during the year, so the percentage
designated as tax-exempt for any particular distribution may be substantially
different from the percentage of a Portfolio's income that was tax-exempt during
the period covered by the distribution.
Short/Intermediate Bond Portfolio and the Intermediate Bond Portfolio: Interest
and dividends received by the Short/Intermediate Bond Portfolio and the
Intermediate Bond Portfolio, and gains realized thereby, may be subject to
income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield and/or total return on their securities.
Tax conventions between certain countries and the United States may reduce or
eliminate these taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.
Equity Portfolios:
It is anticipated that all or a portion of the dividends from the net investment
income of each Equity Portfolio other than the International Multi-Manager
Portfolio will qualify for the dividends-received deduction allowed to
corporations. The qualifying portion may not exceed the aggregate dividends
received by the Portfolio from U.S. corporations. However, dividends received by
a corporate shareholder and deducted by it pursuant to the dividends-received
deduction are subject indirectly to the federal alternative minimum tax.
Moreover, the dividends-received deduction will be reduced to the extent the
shares with respect to which the dividends are received are treated as
debt-financed and will be eliminated if those shares are deemed to have been
held for less than 46 days. Distributions of net short-term capital gain and net
capital gain are not eligible for the dividends-received deduction.
Any loss realized by a shareholder on the redemption of shares within six months
from the date of their purchase will be treated as a long-term, instead of a
short-term, capital loss to the extent of any capital gain distributions to that
shareholder with respect to those shares.
Foreign Securities. Dividends and interest received, and gains realized, by the
International Multi-Manager Portfolio may be subject to income, withholding or
other taxes imposed by foreign countries or U.S. possessions (collectively,
"foreign taxes") that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate foreign
taxes, however, and many foreign countries do not impose taxes on capital gains
in respect of investments by foreign investors.
If more than 50% of the value of the International Multi-Manager Portfolio's
total assets at the close of its taxable year consists of securities of foreign
corporations, the Portfolio will be eligible to, and may, file an election with
the Internal Revenue Service that will enable its shareholders, in effect, to
benefit from any foreign tax credit or deduction that is available with respect
to foreign taxes paid by the Portfolio. If the election is made, the Portfolio
will treat those taxes as dividends paid to its shareholders and each
shareholder (1) will be required to include in gross income, and treat as paid
by the shareholder, a proportionate share of those taxes, (2) will be
35
<PAGE>
required to treat that share of those taxes and of any dividend paid by the
Portfolio that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources and (3) may either deduct the taxes
deemed paid by the shareholder in computing taxable income or, alternatively,
use the foregoing information in calculating the foreign tax credit against the
shareholder's federal income tax. The Portfolio will report to its shareholders
shortly after each taxable year their respective shares of its income from
sources within, and taxes paid to, foreign countries and U.S. possessions if it
makes this election. If the Portfolio makes this election, individuals who have
no more than $300 ($600 for married persons filing jointly) of creditable
foreign taxes included on Forms 1099 and all of whose foreign source income is
"qualified passive income" may elect each year to be exempt from the extremely
complicated foreign tax credit limitation and will be able to claim a foreign
tax credit without having to file the detailed Form 1116 that otherwise is
required.
The International Multi-Manager Portfolio may invest in the stock of passive
foreign investment companies ("PFICs"). A PFIC is a foreign corporation -- other
than a "controlled foreign corporation" (i.e., a foreign corporation in which,
on any day during its taxable year, more than 50% of the total voting power of
all voting stock therein or the total value of all stock therein is owned,
directly, indirectly, or constructively, by "U.S. shareholders," defined as U.S.
persons that individually own, directly, indirectly, or constructively, at least
10% of that voting power) as to which the Portfolio is a U.S. shareholder --
that, in general, meets either of the following tests: (a) at least 75% of its
gross income is passive or (b) an average of at least 50% of its assets produce,
or are held for the production of, passive income. If the Portfolio acquires
stock in a PFIC and holds the stock beyond the end of the year of acquisition,
the Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the stock
(collectively, "PFIC income"), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders.
If the International Multi-Manager Portfolio invests in a PFIC and elects to
treat the PFIC as a "qualified electing fund" ("QEF"), then in lieu of the
foregoing tax and interest obligation, the Portfolio will be required to include
in income each year its pro rata share of the QEF's annual ordinary earnings and
net capital gain, even if they are not distributed to the Portfolio by the QEF;
those amounts most likely would have to be distributed by the Fund to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax. It may be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
The International Multi-Manager Portfolio may elect to "mark to market" its
stock in any PFIC. "Marking-to-market," in this context, means including in
ordinary income each taxable year the excess, if any, of the fair market value
of the stock over the Portfolio's adjusted basis therein as of the end of that
year. Pursuant to the election, the Portfolio also will be allowed to deduct (as
an ordinary, not capital, loss) the excess, if any, of its adjusted basis in
PFIC stock over the fair market value thereof as of the taxable year-end, but
only to the extent of any net mark-to-market gains with respect to that stock
included in income by the Portfolio for prior taxable years. The Portfolio's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Hedging Transactions. The use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward currency
contracts, involves complex rules that will determine for federal income tax
purposes the amount, character and timing of recognition of the gains and losses
a Portfolio realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations) and gains from options, futures and foreign currency contracts
derived by a Portfolio with respect to its business of investing in securities
qualify as permissible income under the Income Requirement.
Futures and foreign currency contracts that are subject to section 1256 of the
Code (other than such contracts that are part of a "mixed straddle" with respect
to which a Portfolio has made an election not to have the following rules apply)
("Section 1256 Contracts") and that are held by a Portfolio at the end of its
taxable year generally will be "marked-to-market" (that is, deemed to have been
sold for their market value) for federal income tax purposes. Sixty percent of
any net gain or loss recognized on these deemed sales, and 60% of any net
realized gain or loss from any actual sales of Section 1256 Contracts, will be
treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss. As of the date of this Statement of Additional
36
<PAGE>
Information, it is not entirely clear whether that 60% portion will qualify for
the reduced maximum tax rates on non-corporate taxpayers' net capital gain
enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months. However, technical correction legislation passed by the
House of Representatives late in 1997 would clarify that the lower rates apply.
Section 1256 Contracts also may be marked-to-market for purposes of the Excise
Tax.
Section 988 of the Code also may apply to forward currency contracts and options
on foreign currencies. Under section 988, each foreign currency gain or loss
generally is computed separately and treated as ordinary income or loss. In the
case of overlap between sections 1256 and 988, special provisions determine the
character and timing of any income, gain or loss. The International
Multi-Manager Portfolio attempts to monitor its section 988 transactions to
minimize any adverse tax impact.
Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which a Portfolio may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Under
section 1092, any loss from the disposition of a position in a straddle
generally may be deducted only to the extent the loss exceeds the unrealized
gain on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If a Portfolio makes certain
elections, the amount, character and timing of the recognition of gains and
losses from the affected straddle positions would be determined under rules that
vary according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences to a
Portfolio of straddle transactions are not entirely clear.
If a Portfolio has an "appreciated financial position" -- generally, an interest
(including an interest through an option, futures or forward contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Portfolio will be treated as having made an actual sale thereof,
with the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
futures or forward contract entered into by a Portfolio or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing tax discussion is a summary included for general informational
purposes only. Each shareholder is advised to consult its own tax adviser with
respect to the specific tax consequences to it of an investment in a Portfolio,
including the effect and applicability of state, local, foreign and other tax
laws and the possible effects of changes in federal or other tax laws.
Shortly after the end of each year, PFPC calculates the federal income tax
status of all distributions made during the year. In addition to federal income
tax, shareholders may be subject to state and local taxes on distributions from
a Portfolio. Shareholders should consult their tax advisers regarding specific
questions relating to federal, state and local taxes.
CALCULATION OF PERFORMANCE INFORMATION
The performance of a Portfolio may be quoted in terms of its yield and its total
return in advertising and other promotional materials. Performance data quoted
represents past performance and is not intended to indicate future performance.
Performance of the Portfolios will vary based on changes in market conditions
and the level of each Portfolio's expenses. These performance figures are
calculated in the following manner:
37
<PAGE>
Money Market Portfolios:
A. Yield for a money market fund is the net annualized yield for a
specified 7 calendar days calculated at simple interest rates. Yield
is calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts,
and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return. The
yield is annualized by multiplying the base period return by 365/7.
The yield figure is stated to the nearest hundredth of one percent.
The yield for the 7-day period ended June 30, 1999 was:
U.S. Government Portfolio 4.43%
Prime Money Market Portfolio 4.49%
Premier Money Market Portfolio 4.84%
Tax-Exempt Portfolio 2.93%
B. Effective Yield is the net annualized yield for a specified 7
calendar days assuming reinvestment of income or compounding.
Effective yield is calculated by the same method as yield except the
yield figure is compounded by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective yield = [(Base Period Return + 1) 365/7] - 1.
The effective yield for the 7-day period ended June 30, 1999 was:
U.S. Government Portfolio 4.53%
Prime Money Market Portfolio 4.59%
Premier Money Market Portfolio 4.95%
Tax-Exempt Portfolio 2.97%
C. Tax-Equivalent Yield is the net annualized taxable yield needed to
produce a specified tax-exempt yield at a given tax rate based on a
specified 7-day period assuming a reinvestment of all dividends paid
during such period. Tax-equivalent yield is calculated by dividing
that portion of the Tax-Exempt Portfolio's yield (computed as in the
yield description above) which is tax-exempt by 1 minus a stated
income tax rate and adding the quotient to that portion, if any, of
the yield of the Tax-Exempt Portfolio that is not tax-exempt.
The Tax-Exempt Portfolio's tax-equivalent yield for the 7-day period
ended June 30, 1999 was:
28% tax bracket 4.07%
31% tax bracket 4.25%
36% tax bracket 4.58%
39.6% tax bracket 4.80%
The following table, which is based upon federal income tax rates in
effect on the date of this Statement of Additional Information,
illustrates the yields that would have to be achieved on taxable
investments to produce a range of hypothetical tax-equivalent yields:
38
<PAGE>
TAX-EQUIVALENT YIELD TABLE
Federal Marginal
Income Tax Bracket Tax-Equivalent Yields Based on Tax-Exempt Yields of:
- ------------------ ----------------------------------------------------
2% 3% 4% 5% 6% 7% 8%
-- -- -- -- -- -- --
28% 2.8 4.2 5.6 6.9 8.3 9.7 11.1
31% 2.9 4.3 5.8 7.2 8.7 10.1 11.6
36% 3.1 4.7 6.3 7.8 9.4 10.9 12.5
39.6% 3.3 5.0 6.6 8.3 9.9 11.6 13.2
All Portfolios:
A. Average Annual Total Return is the average annual compound rate of
return for the periods of one year, five years, ten years and the
life of a Portfolio, where applicable, all ended on the last day of
a recent calendar quarter. Average annual total return quotations
reflect changes in the price of a Portfolio's shares, if any, and
assume that all dividends during the respective periods were
reinvested in Portfolio shares. Average annual total return is
calculated by finding the average annual compound rates of return of
a hypothetical investment over such periods, according to the
following formula (average annual total return is then expressed as
a percentage):
T = (ERV/P)1/n - 1
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
39
<PAGE>
Average Annual Total Return for periods ended June 30, 1999
- -----------------------------------------------------------------------------
1 Year 5 Year 10 Year
------ ------ -------
- -----------------------------------------------------------------------------
U.S. Government 4.74% 5.03% 5.08%
- -----------------------------------------------------------------------------
Prime Money Market 4.85% 5.13% 5.22%
- -----------------------------------------------------------------------------
Premier Money Market 5.15% N/A N/A
- -----------------------------------------------------------------------------
Tax-Exempt 2.72% 3.05% 3.35%
- -----------------------------------------------------------------------------
Short/Intermediate Bond 3.86% 6.60% N/A
- -----------------------------------------------------------------------------
Intermediate Bond 2.08% 7.13% N/A
- -----------------------------------------------------------------------------
Municipal Bond 2.19% 5.63% N/A
- -----------------------------------------------------------------------------
Large Cap Growth 19.91% 23.50% 16.71%
- -----------------------------------------------------------------------------
Large Cap Core 23.25% N/A N/A
- -----------------------------------------------------------------------------
Small Cap Core (5.47)% N/A N/A
- -----------------------------------------------------------------------------
International
Multi-Manager 1.55% 7.00% 8.88%
- -----------------------------------------------------------------------------
Large Cap Value (0.26)% 16.62% N/A
- -----------------------------------------------------------------------------
Mid Cap Value (2.35)% N/A N/A
- -----------------------------------------------------------------------------
Small Cap Value (14.94)% N/A N/A
- -----------------------------------------------------------------------------
B. Yield Calculations. From time to time, an Equity or Bond Portfolio may
advertise its yield. Yield for these Portfolios is calculated by dividing the
Portfolio's investment income for a 30-day period, net of expenses, by the
average number of shares entitled to receive dividends during that period
according to the following formula:
YIELD = 2[((a-b)/cd + 1)6-1]
where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day
of the period.
The result is expressed as an annualized percentage (assuming semiannual
compounding) of the maximum offering price per share at the end of the period.
Except as noted below, in determining interest earned during the period
(variable "a" in the above formula), pfpc calculates the interest earned on each
debt instrument held by a Portfolio during the period by: (i) computing the
instrument's yield to maturity, based on the value of the instrument (including
actual accrued interest) as of the last business day of the period or, if the
instrument was purchased during the period, the purchase price plus accrued
interest; (ii) dividing the yield to maturity by 360; and (iii) multiplying the
resulting quotient by the value of the instrument (including actual accrued
interest). Once interest earned is calculated in this fashion for each debt
instrument held by the Portfolio, interest earned during the period is then
determined by totaling the interest earned on all debt instruments held by the
Portfolio.
For purposes of these calculations, the maturity of a debt instrument with
one or more call provisions is assumed to be the next date on which the
instrument reasonably can be expected to be called or, if none, the maturity
date. In general, interest income is reduced with respect to debt instruments
trading at a premium over
40
<PAGE>
their par value by subtracting a portion of the premium from income on a daily
basis, and increased with respect to debt instruments trading at a discount by
adding a portion of the discount to daily income.
In determining dividends earned by any preferred stock or other equity
securities held by a Portfolio during the period (variable "a" in the above
formula), PFPC accrues the dividends daily at their stated dividend rates.
Capital gains and losses generally are excluded from yield calculations.
Because yield accounting methods differ from the accounting methods used
to calculate net investment income for other purposes, a Portfolio's yield may
not equal the dividend income actually paid to investors or the net investment
income reported with respect to the Portfolio in the Fund's financial
statements.
Yield information may be useful in reviewing a Portfolio's performance and
in providing a basis for comparison with other investment alternatives. However,
the Portfolios' yields fluctuate, unlike investments that pay a fixed interest
rate over a stated period of time. Investors should recognize that in periods of
declining interest rates, the Portfolios' yields will tend to be somewhat higher
than prevailing market rates, and in periods of rising interest rates, the
Portfolios' yields will tend to be somewhat lower. Also, when interest rates are
falling, the inflow of net new money to the Portfolios from the continuous sale
of their shares will likely be invested in instruments producing lower yields
than the balance of the Portfolios' holdings, thereby reducing the current
yields of the Portfolios. In periods of rising interest rates, the opposite can
be expected to occur.
Comparison of Portfolio Performance. A comparison of the quoted performance
offered for various investments is valid only if performance is calculated in
the same manner. Since there are many methods of calculating performance,
investors should consider the effects of the methods used to calculate
performance when comparing performance of a Portfolio with performance quoted
with respect to other investment companies or types of investments. For example,
it is useful to note that yields reported on debt instruments are generally
prospective, contrasted with the historical yields reported by a Portfolio.
In connection with communicating its performance to current or prospective
shareholders, a Portfolio also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
From time to time, in marketing and other literature, a Money Market Portfolio's
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities such as the IBC First
Tier Money Market Index for the Prime and Premier Money Market Portfolios, the
IBC U.S. Government and Agency Index for the U.S. Government Portfolio and the
IBC Stockbroker and general purpose funds for the Tax-Exempt Portfolio. Yield
and performance over time may also be compared to the performance of bank money
market deposit accounts and fixed-rate insured certificates of deposit (CDs), or
unmanaged indices of securities that are comparable to money market funds in
their terms and intent, such as Treasury bills, bankers' acceptances, negotiable
order of withdrawal accounts, and money market certificates. Most bank CDs
differ from money market funds in several ways: the interest rate is fixed for
the term of the CD, there are interest penalties for early withdrawal of the
deposit from a CD, and the deposit principal in a CD is insured by the FDIC.
From time to time, in marketing and other literature, the Bond and Equity
Portfolios' performance may be compared to the performance of broad groups of
comparable mutual funds or unmanaged indexes of comparable securities with
similar investment goals, as tracked by independent organizations such as
Investment Company Data, Inc. (an organization which provides performance
ranking information for broad classes of mutual funds), Lipper Analytical
Services, Inc. ("Lipper") (a mutual fund research firm which analyzes over 1,800
mutual funds), CDA Investment Technologies, Inc. (an organization which provides
mutual fund performance and ranking information), Morningstar, Inc. (an
organization which analyzes over 2,400 mutual funds) and other independent
organizations. When Lipper's tracking results are used, a Portfolio will be
compared to Lipper's appropriate fund category, that is, by fund objective and
portfolio holdings. Rankings may be listed among one or more of the asset-size
classes as determined by Lipper. When other organizations' tracking results are
used, a Portfolio will be compared to the appropriate fund category, that is, by
fund objective and portfolio holdings, or to the appropriate volatility
grouping, where volatility is a measure of a fund's risk.
41
<PAGE>
Since the assets in all funds are always changing, a Portfolio may be ranked
within one asset-size class at one time and in another asset-size class at some
other time. In addition, the independent organization chosen to rank a Portfolio
in marketing and promotional literature may change from time to time depending
upon the basis of the independent organization's categorizations of mutual
funds, changes in a Portfolio's investment policies and investments, a
Portfolio's asset size and other factors deemed relevant. Advertisements and
other marketing literature will indicate the time period and Lipper asset-size
class or other performance ranking company criteria, as applicable, for the
ranking in question.
Evaluations of Portfolio performance made by independent sources may also be
used in advertisements concerning a Portfolio, including reprints of or
selections from, editorials or articles about the Portfolio. Sources for
performance information and articles about a Portfolio may include the
following:
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
CDA Investment Technologies, Inc., an organization that provides performance and
ranking information through examining the dollar results of hypothetical mutual
fund investments and comparing these results against appropriate market indices.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
IBC's Money Fund Report, a weekly publication of IBC/Donoghue, Inc., of Ashland,
Massachusetts, reporting on the performance of the nation's money market funds,
summarizing money market fund activity, and including certain averages as
performance benchmarks, specifically "IBC's Money Fund Average," and "IBC's
Government Money Fund Average."
IBC's Money Fund Directory, an annual directory ranking money market mutual
funds.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
42
<PAGE>
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
USA Today, the nation's number one daily newspaper.
U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper that regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.
FINANCIAL STATEMENTS
The audited financial statements and financial highlights of the Wilmington
Premier Money Market Portfolio (formerly Money Market Portfolio), Wilmington
Short/Intermediate Bond Portfolio (formerly Short/Intermediate Bond Portfolio)
and Wilmington Large Cap Core Portfolio (formerly Broad Market Equity
Portfolio), including each of their corresponding Series for the fiscal year
ended June 30, 1999, as set forth in WT Mutual Fund's annual report to
shareholders, including the notes thereto and the report of Ernst & Young LLP
thereon, are incorporated herein by reference.
The audited financial statements and financial highlights of the Rodney Square
Fund Money Market Portfolio (accounting survivor of WT Mutual Fund - Wilmington
Prime Money Market Portfolio), the Rodney Square Fund - U.S. Government
Portfolio (accounting survivor of WT Mutual Fund - Wilmington U.S. Government
Portfolio) and the Rodney Square Tax-Exempt Fund (accounting survivor of WT
Mutual Fund - Wilmington Tax-Exempt Portfolio) for the period October 1, 1998
through June 30, 1999, as set forth in the combined Rodney Square Fund and
Rodney Square Tax-Exempt Fund annual report to shareholders, including the notes
thereto and the report of Ernst & Young LLP thereon, are incorporated herein by
reference.
The audited financial statements and financial highlights of the Rodney Square
Strategic Fixed-Income Fund - Intermediate Bond Portfolio (accounting survivor
of WT Mutual Fund - Wilmington Intermediate Bond Portfolio) and the Rodney
Square Strategic Fixed-Income Fund - Municipal Bond Portfolio (accounting
survivor of WT Mutual Fund - Wilmington Municipal Bond Portfolio) for the period
November 1, 1998 through June 30, 1999, as set forth in the Rodney Square
Strategic Fixed-Income Fund's annual report to shareholders, including the notes
thereto and the report of Ernst & Young LLP thereon, are incorporated herein by
reference.
The audited financial statements and financial highlights of the Rodney Square
Strategic Equity Fund - Large Cap Growth Equity Portfolio (accounting survivor
of WT Mutual Fund - Wilmington Large Cap Growth Portfolio), the Rodney Square
Strategic Equity Fund - Large Cap Value Equity Portfolio (accounting survivor of
WT Mutual Fund - Wilmington Large Cap Value Portfolio), the Rodney Square
Strategic Equity Fund - Small Cap Equity Portfolio (accounting survivor of WT
Mutual Fund - Wilmington Small Cap Core Portfolio) and the Rodney Square
Strategic Equity Fund - International Equity Portfolio (accounting survivor of
WT Mutual Fund - Wilmington International Multi-Manager Portfolio) for the
period January 1, 1999 through June 30, 1999, as set forth in the Rodney Square
Strategic Equity Fund's annual report to shareholders, including the notes
thereto and the report of Ernst & Young LLP thereon, are incorporated herein by
reference.
43
<PAGE>
The audited financial statements and financial highlights of CRM Funds - Small
Cap Value Fund (accounting survivor of WT Mutual Fund - CRM Small Cap Value
Fund) and CRM Funds Mid Cap Value Fund (accounting survivor of WT Mutual Fund -
CRM Mid Cap Value Fund) for the period October 1, 1998 through June 30, 1999, as
set forth in CRM Funds annual reports to shareholders, including the notes
thereto and the reports of Ernst & Young LLP thereon, are incorporated herein by
reference.
44
<PAGE>
APPENDIX A
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES
Regulation of the Use of Options, Futures and Forward Currency Contract
Strategies. As discussed in the prospectus, in managing a Portfolio's
corresponding Series, the adviser or the sub-advisers (for International
Multi-Manager Series) may engage in certain options, futures and forward
currency contract strategies for certain bona fide hedging, risk management or
other portfolio management purposes. Certain special characteristics of and
risks associated with using these strategies are discussed below. Use of
options, futures and forward currency contracts is subject to applicable
regulations and/or interpretations of the SEC and the several options and
futures exchanges upon which these instruments may be traded. The Board of
Trustees has adopted investment guidelines (described below) reflecting these
regulations.
In addition to the products, strategies and risks described below and in the
prospectus, the adviser expects to discover additional opportunities in
connection with options, futures and forward currency contracts. These new
opportunities may become available as new techniques develop, as regulatory
authorities broaden the range of permitted transactions and as new options,
futures and forward currency contracts are developed. These opportunities may be
utilized to the extent they are consistent with each Portfolio's investment
objective and limitations and permitted by applicable regulatory authorities.
The registration statement for the Portfolios will be supplemented to the extent
that new products and strategies involve materially different risks than those
described below and in the prospectus.
Cover Requirements. The Series will not use leverage in their options, futures,
and in the case of the International Multi-Manager Series, its forward currency
contract strategies. Accordingly, the Series will comply with guidelines
established by the SEC with respect to coverage of these strategies by either
(1) setting aside cash or liquid, unencumbered, daily marked-to-market
securities in one or more segregated accounts with the custodian in the
prescribed amount; or (2) holding securities or other options or futures
contracts whose values are expected to offset ("cover") their obligations
thereunder. Securities, currencies, or other options or futures contracts used
for cover cannot be sold or closed out while these strategies are outstanding,
unless they are replaced with similar assets. As a result, there is a
possibility that the use of cover involving a large percentage of the Series'
assets could impede portfolio management, or the Series' ability to meet
redemption requests or other current obligations.
Options Strategies. With the exception of the International Multi-Manager
Series, a Series may purchase and write (sell) only those options on securities
and securities indices that are traded on U.S. exchanges. Exchange-traded
options in the U.S. are issued by a clearing organization affiliated with the
exchange, on which the option is listed, which, in effect, guarantees completion
of every exchange-traded option transaction. The International Multi-Manager
Series may purchase and write (sell) options only on securities and securities
indices that are traded on foreign exchanges.
Each Series may purchase call options on securities in which it is authorized to
invest in order to fix the cost of a future purchase. Call options also may be
used as a means of enhancing returns by, for example, participating in an
anticipated price increase of a security. In the event of a decline in the price
of the underlying security, use of this strategy would serve to limit the
potential loss to the Series to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Series either sells or exercises the option, any profit eventually realized
would be reduced by the premium paid.
Each Series may purchase put options on securities that it holds in order to
hedge against a decline in the market value of the securities held or to enhance
return. The put option enables the Series to sell the underlying security at the
predetermined exercise price; thus, the potential for loss to the Series below
the exercise price is limited to the option premium paid. If the market price of
the underlying security is higher than the exercise price of the put option, any
profit the Series realizes on the sale of the security is reduced by the premium
paid for the put option less any amount for which the put option may be sold.
A-1
<PAGE>
Each Series may on certain occasions wish to hedge against a decline in the
market value of securities that it holds at a time when put options on those
particular securities are not available for purchase. At those times, the Series
may purchase a put option on other carefully selected securities in which it is
authorized to invest, the values of which historically have a high degree of
positive correlation to the value of the securities actually held. If the
adviser's judgment is correct, changes in the value of the put options should
generally offset changes in the value of the securities being hedged. However,
the correlation between the two values may not be as close in these transactions
as in transactions in which a Series purchases a put option on a security that
it holds. If the value of the securities underlying the put option falls below
the value of the portfolio securities, the put option may not provide complete
protection against a decline in the value of the portfolio securities.
Each Series may write covered call options on securities in which it is
authorized to invest for hedging purposes or to increase return in the form of
premiums received from the purchasers of the options. A call option gives the
purchaser of the option the right to buy, and the writer (seller) the obligation
to sell, the underlying security at the exercise price during the option period.
The strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Series declines, the amount of the decline
will be offset wholly or in part by the amount of the premium received by the
Series. If, however, there is an increase in the market price of the underlying
security and the option is exercised, the Series will be obligated to sell the
security at less than its market value.
Each Series may also write covered put options on securities in which it is
authorized to invest. A put option gives the purchaser of the option the right
to sell, and the writer (seller) the obligation to buy, the underlying security
at the exercise price during the option period. So long as the obligation of the
writer continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring it to make payment of
the exercise price against delivery of the underlying security. The operation of
put options in other respects, including their related risks and rewards, is
substantially identical to that of call options. If the put option is not
exercised, the Series will realize income in the amount of the premium received.
This technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying securities would decline below the exercise price less the
premiums received, in which case the Series would expect to suffer a loss.
Each Series may purchase put and call options and write covered put and call
options on indexes in much the same manner as the more traditional options
discussed above, except that index options may serve as a hedge against overall
fluctuations in the securities markets (or a market sector) rather than
anticipated increases or decreases in the value of a particular security. An
index assigns values to the securities included in the index and fluctuates with
changes in such values. Settlements of index options are effected with cash
payments and do not involve delivery of securities. Thus, upon settlement of an
index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
index. The effectiveness of hedging techniques using index options will depend
on the extent to which price movements in the index selected correlate with
price movements of the securities in which a Series invests. Perfect correlation
is not possible because the securities held or to be acquired by the Series will
not exactly match the composition of indexes on which options are purchased or
written.
Each Series may purchase and write covered straddles on securities or indexes. A
long straddle is a combination of a call and a put purchased on the same
security where the exercise price of the put is less than or equal to the
exercise price on the call. The Series would enter into a long straddle when the
adviser believes that it is likely that prices will be more volatile during the
term of the options than is implied by the option pricing. A short straddle is a
combination of a call and a put written on the same security where the exercise
price on the put is less than or equal to the exercise price of the call where
the same issue of the security is considered "cover" for both the put and the
call. The Series would enter into a short straddle when the adviser believes
that it is unlikely that prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Series will set
aside cash and/or liquid, unencumbered securities in a segregated account with
its custodian equivalent in value to the amount, if any, by which the put is
"in-the-money," that is, that amount by which the exercise price of the put
exceeds the current market value of the underlying security. Because straddles
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
A-2
<PAGE>
Each Series may purchase put and call warrants with values that vary depending
on the change in the value of one or more specified indexes ("index warrants").
An index warrant is usually issued by a bank or other financial institution and
gives the Series the right, at any time during the term of the warrant, to
receive upon exercise of the warrant a cash payment from the issuer of the
warrant based on the value of the underlying index at the time of exercise. In
general, if a Series holds a call warrant and the value of the underlying index
rises above the exercise price of the warrant, the Series will be entitled to
receive a cash payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the warrant; if the
Series holds a put warrant and the value of the underlying index falls, the
Series will be entitled to receive a cash payment from the issuer upon exercise
based on the difference between the exercise price of the warrant and the value
of the index. The Series holding a call warrant would not be entitled to any
payments from the issuer at any time when the exercise price is greater than the
value of the underlying index; the Series holding a put warrant would not be
entitled to any payments when the exercise price is less than the value of the
underlying index. If the Series does not exercise an index warrant prior to its
expiration, then the Series loses the amount of the purchase price that it paid
for the warrant.
Each Series will normally use index warrants as it may use index options. The
risks of the Series' use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options, however, index
warrants are issued in limited amounts and are not obligations of a regulated
clearing agency, but are backed only by the credit of the bank or other
institution which issues the warrant. Also, index warrants generally have longer
terms than index options. Index warrants are not likely to be as liquid as index
options backed by a recognized clearing agency. In addition, the terms of index
warrants may limit the Series' ability to exercise the warrants at any time or
in any quantity.
Options Guidelines. In view of the risks involved in using the options
strategies described above, each Series has adopted the following investment
guidelines to govern its use of such strategies; these guidelines may be
modified by the Board of Trustees without shareholder approval:
(1) each Series will write only covered options, and each such
option will remain covered so long as the Series is obligated
thereby; and
(2) no Series will write options (whether on securities or
securities indexes) if aggregate exercise prices of previous
written outstanding options, together with the value of assets
used to cover all outstanding positions, would exceed 25% of
its total net assets.
Special Characteristics and Risks of Options Trading. A Series may effectively
terminate its right or obligation under an option by entering into a closing
transaction. If a Series wishes to terminate its obligation to purchase or sell
securities under a put or a call option it has written, the Series may purchase
a put or a call option of the same series (that is, an option identical in its
terms to the option previously written). This is known as a closing purchase
transaction. Conversely, in order to terminate its right to purchase or sell
specified securities under a call or put option it has purchased, a Series may
sell an option of the same series as the option held. This is known as a closing
sale transaction. Closing transactions essentially permit a Series to realize
profits or limit losses on its options positions prior to the exercise or
expiration of the option. If a Series is unable to effect a closing purchase
transaction with respect to options it has acquired, the Series will have to
allow the options to expire without recovering all or a portion of the option
premiums paid. If a Series is unable to effect a closing purchase transaction
with respect to covered options it has written, the Series will not be able to
sell the underlying securities or dispose of assets used as cover until the
options expire or are exercised, and the Series may experience material losses
due to losses on the option transaction itself and in the covering securities.
In considering the use of options to enhance returns or for hedging purposes,
particular note should be taken of the following:
(1) The value of an option position will reflect, among other things,
the current market price of the underlying security or index, the
time remaining until expiration, the relationship of the exercise
price to the market price, the historical price volatility of the
underlying security or index, and general market conditions. For
this reason, the successful use of options depends upon the
adviser's ability to forecast the direction of price fluctuations in
the underlying
A-3
<PAGE>
securities markets or, in the case of index options, fluctuations in
the market sector represented by the selected index.
(2) Options normally have expiration dates of up to three years. An
American style put or call option may be exercised at any time
during the option period while a European style put or call option
may be exercised only upon expiration or during a fixed period prior
to expiration. The exercise price of the options may be below, equal
to or above the current market value of the underlying security or
index. Purchased options that expire unexercised have no value.
Unless an option purchased by the Series is exercised or unless a
closing transaction is effected with respect to that position, the
Series will realize a loss in the amount of the premium paid and any
transaction costs.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options.
Although the Series intends to purchase or write only those
exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary
market will exist for any particular option at any particular time.
A liquid market may be absent if: (i) there is insufficient trading
interest in the option; (ii) the exchange has imposed restrictions
on trading, such as trading halts, trading suspensions or daily
price limits; (iii) normal exchange operations have been disrupted;
or (iv) the exchange has inadequate facilities to handle current
trading volume.
(4) With certain exceptions, exchange listed options generally settle by
physical delivery of the underlying security. Index options are
settled exclusively in cash for the net amount, if any, by which the
option is "in-the-money" (where the value of the underlying
instrument exceeds, in the case of a call option, or is less than,
in the case of a put option, the exercise price of the option) at
the time the option is exercised. If the Series writes a call option
on an index, the Series will not know in advance the difference, if
any, between the closing value of the index on the exercise date and
the exercise price of the call option itself and thus will not know
the amount of cash payable upon settlement. If the Series holds an
index option and exercises it before the closing index value for
that day is available, the Series runs the risk that the level of
the underlying index may subsequently change.
(5) A Series' activities in the options markets may result in a higher
Series turnover rate and additional brokerage costs; however, the
Series also may save on commissions by using options as a hedge
rather than buying or selling individual securities in anticipation
of, or as a result of, market movements.
Futures and Related Options Strategies. Each Series may engage in futures
strategies for certain non-trading bona fide hedging, risk management and
portfolio management purposes.
Each Series may sell securities index futures contracts in anticipation of a
general market or market sector decline that could adversely affect the market
value of the Series' securities holdings. To the extent that a portion of a
Series' holdings correlate with a given index, the sale of futures contracts on
that index could reduce the risks associated with a market decline and thus
provide an alternative to the liquidation of securities positions. For example,
if a Series correctly anticipates a general market decline and sells index
futures to hedge against this risk, the gain in the futures position should
offset some or all of the decline in the value of the Series' holdings. A Series
may purchase index futures contracts if a significant market or market sector
advance is anticipated. Such a purchase of a futures contract would serve as a
temporary substitute for the purchase of the underlying securities, which may
then be purchased, in an orderly fashion. This strategy may minimize the effect
of all or part of an increase in the market price of securities that a Series
intends to purchase. A rise in the price of the securities should be in part or
wholly offset by gains in the futures position.
As in the case of a purchase of an index futures contract, a Series may purchase
a call option on an index futures contract to hedge against a market advance in
securities that the Series plans to acquire at a future date. The Series may
write covered put options on index futures as a partial anticipatory hedge, and
may write covered call options on index futures as a partial hedge against a
decline in the prices of securities held by the Series. This is
A-4
<PAGE>
analogous to writing covered call options on securities. The Series also may
purchase put options on index futures contracts. The purchase of put options on
index futures contracts is analogous to the purchase of protective put options
on individual securities where a level of protection is sought below which no
additional economic loss would be incurred by the Series.
The International Multi-Manager Series may sell foreign currency futures
contracts to hedge against possible variations in the exchange rates of foreign
currencies in relation to the U.S. dollar. In addition, the Series may sell
foreign currency futures contracts when a sub-adviser anticipates a general
weakening of foreign currency exchange rates that could adversely affect the
market values of the Series' foreign securities holdings. In this case, the sale
of futures contracts on the underlying currency may reduce the risk to the
Series of a reduction in market value caused by foreign currency exchange rate
variations and, by so doing, provide an alternative to the liquidation of
securities positions and resulting transaction costs. When a sub-adviser
anticipates a significant foreign currency exchange rate increase while
intending to invest in a security denominated in that currency, the Series may
purchase a foreign currency futures contract to hedge against that increase
pending completion of the anticipated transaction. Such a purchase would serve
as a temporary measure to protect the Series against any rise in the foreign
exchange rate that may add additional costs to acquiring the foreign security
position. The Series may also purchase call or put options on foreign currency
futures contracts to obtain a fixed foreign exchange rate at limited risk. The
Series may purchase a call option on a foreign currency futures contract to
hedge against a rise in the foreign exchange rate while intending to invest in a
security denominated in that currency. The Series may purchase put options on
foreign currency futures contracts as a partial hedge against a decline in the
foreign exchange rates or the value of its foreign portfolio securities. The
Series may write a call option on a foreign currency futures contract as a
partial hedge against the effects of declining foreign exchange rates on the
value of foreign securities.
Futures and Related Options Guidelines. In view of the risks involved in using
the futures strategies that are described above, each Series has adopted the
following investment guidelines to govern its use of such strategies. The Board
of Trustees may modify these guidelines without shareholder vote.
(1) The Series will engage only in covered futures transactions,
and each such transaction will remain covered so long as the
Series is obligated thereby.
(2) The Series will not write options on futures contracts if
aggregate exercise prices of previously written outstanding
options (whether on securities or securities indexes),
together with the value of assets used to cover all
outstanding futures positions, would exceed 25% of its total
net assets.
Special Characteristics and Risks of Futures and Related Options Trading. No
price is paid upon entering into a futures contract. Instead, upon entering into
a futures contract, a Series is required to deposit with its custodian, in a
segregated account in the name of the futures broker through whom the
transaction is effected, an amount of cash, U.S. Government securities or other
liquid instruments generally equal to 10% or less of the contract value. This
amount is known as "initial margin." When writing a call or a put option on a
futures contract, margin also must be deposited in accordance with applicable
exchange rules. Unlike margin in securities transactions, initial margin on
futures contracts does not involve borrowing to finance the futures
transactions. Rather, initial margin on a futures contract is in the nature of a
performance bond or good-faith deposit on the contract that is returned to a
Series upon termination of the transaction, assuming all obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, a
Series may be required by a futures exchange to increase the level of its
initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures or options position varies, a process known as "marking
to market." For example, when a Series purchases a contract and the value of the
contract rises, the Series receives from the broker a variation margin payment
equal to that increase in value. Conversely, if the value of the futures
position declines, a Series is required to make a variation margin payment to
the broker equal to the decline in value. Variation margin does not involve
borrowing to finance the futures transaction, but rather represents a daily
settlement of a Series' obligations to or from a clearing organization.
A-5
<PAGE>
Buyers and sellers of futures positions and options thereon can enter into
offsetting closing transactions, similar to closing transactions on options on
securities, by selling or purchasing an offsetting contract or option. Futures
contracts or options thereon may be closed only on an exchange or board of trade
providing a secondary market for such futures contracts or options.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses, because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the Series to close a
position and, in the event of adverse price movements, the Series would have to
make daily cash payments of variation margin (except in the case of purchased
options). However, if futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, there is no guarantee that the price of the securities will, in fact,
correlate with the price movements in the contracts and thus provide an offset
to losses on the contracts.
In considering a Series' use of futures contracts and related options,
particular note should be taken of the following:
(1) Successful use by a Series of futures contracts and related options
will depend upon the adviser's ability to predict movements in the
direction of the securities markets, which requires different skills
and techniques than predicting changes in the prices of individual
securities. Moreover, futures contracts relate not only to the
current price level of the underlying securities, but also to
anticipated price levels at some point in the future. There is, in
addition, the risk that the movements in the price of the futures
contract will not correlate with the movements in the prices of the
securities being hedged. For example, if the price of an index
futures contract moves less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective,
but if the price of the securities being hedged has moved in an
unfavorable direction, a Series would be in a better position than
if it had not hedged at all. If the price of the securities being
hedged has moved in a favorable direction, the advantage may be
partially offset by losses in the futures position. In addition, if
a Series has insufficient cash, it may have to sell assets to meet
daily variation margin requirements. Any such sale of assets may or
may not be made at prices that reflect a rising market.
Consequently, a Series may need to sell assets at a time when such
sales are disadvantageous to the Series. If the price of the futures
contract moves more than the price of the underlying securities, a
Series will experience either a loss or a gain on the futures
contract that may or may not be completely offset by movements in
the price of the securities that are the subject of the hedge.
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in
the futures position and the securities being hedged, movements in
the prices of futures contracts may not correlate perfectly with
movements in the prices of the hedged securities due to price
distortions in the futures market. There may be several reasons
unrelated to the value of the underlying securities that cause this
situation to occur. First, as noted above, all participants in the
futures market are subject to initial and variation margin
requirements. If, to avoid meeting additional margin deposit
requirements or for other reasons, investors choose to close a
significant number of futures contracts through offsetting
transactions, distortions in the normal price relationship between
the securities and the futures markets may occur. Second, because
the margin deposit requirements in the futures market are less
onerous than margin requirements in the securities market, there may
be increased participation by speculators in the futures market.
Such speculative activity in the futures market also may cause
temporary price distortions. As a result, a correct forecast of
general market trends may not result in successful hedging through
the use of futures contracts over the short term. In addition,
activities of large traders in both the futures and securities
markets involving arbitrage and other investment strategies may
result in temporary price distortions.
A-6
<PAGE>
(3) Positions in futures contracts may be closed out only on an exchange
or board of trade that provides a secondary market for such futures
contracts. Although each Series intends to purchase and sell futures
only on exchanges or boards of trade where there appears to be an
active secondary market, there is no assurance that a liquid
secondary market on an exchange or board of trade will exist for any
particular contract at any particular time. In such event, it may
not be possible to close a futures position, and in the event of
adverse price movements, a Series would continue to be required to
make variation margin payments.
(4) Like options on securities, options on futures contracts have
limited life. The ability to establish and close out options on
futures will be subject to the development and maintenance of liquid
secondary markets on the relevant exchanges or boards of trade.
There can be no certainty that such markets for all options on
futures contracts will develop.
(5) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount and the transaction costs are all
that is at risk. Sellers of options on futures contracts, however,
must post initial margin and are subject to additional margin calls
that could be substantial in the event of adverse price movements.
In addition, although the maximum amount at risk when the Series
purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of
an option on a futures contract would result in a loss to the Series
when the use of a futures contract would not, such as when there is
no movement in the level of the underlying index value or the
securities or currencies being hedged.
(6) As is the case with options, a Series' activities in the futures
markets may result in a higher portfolio turnover rate and
additional transaction costs in the form of added brokerage
commissions. However, a Series also may save on commissions by using
futures contracts or options thereon as a hedge rather than buying
or selling individual securities in anticipation of, or as a result
of, market movements.
Hedging Strategies. The International Multi-Manager Series' sub-advisers may use
forward currency contracts, options and futures contracts and related options to
attempt to hedge securities held by the Series. There can be no assurance that
such efforts will succeed. Hedging strategies, if successful, can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investment.
The International Multi-Manager Series may enter into forward currency contracts
either with respect to specific transactions or with respect to the Series'
positions. When WTC or a sub-adviser believes that a particular currency may
decline compared to the U.S. dollar, the Series may enter into a forward
contract to sell the currency that the adviser or the sub-adviser expects to
decline in an amount approximating the value of some or all of the Series'
securities denominated in that currency. Such contracts may only involve the
sale of a foreign currency against the U.S. dollar. In addition, when the Series
anticipates purchasing or selling a security, it may enter into a forward
currency contract in order to set the rate (either relative to the U.S. dollar
or another currency) at which a currency exchange transaction related to the
purchase or sale will be made.
The International Multi-Manager Series also may sell (write) and purchase put
and call options and futures contracts and related options on foreign currencies
to hedge against movements in exchange rates relative to the U.S. dollar. In
addition, the Series may write and purchase put and call options on securities
and stock indexes to hedge against the risk of fluctuations in the prices of
securities held by the Series or which the adviser or a sub-adviser intends to
include in the portfolio. Stock index options serve to hedge against overall
fluctuations in the securities markets rather than anticipated increases or
decreases in the value of a particular security. The Series also may sell and
purchase stock index futures contracts and related options to protect against a
general stock market decline that could adversely affect the Series' securities
or to hedge against a general stock market or market sector advance to lessen
the cost of future securities acquisitions. The Series may use interest rate
futures contracts and related options thereon to hedge the debt portion of its
portfolio against changes in the general level of interest rates.
A-7
<PAGE>
The International Multi-Manager Series will not enter into an options, futures
or forward currency contract transaction that exposes the Series to an
obligation to another party unless the Series either (i) owns an offsetting
("covered") position in securities, currencies, options, futures or forward
currency contracts or (ii) has cash, receivables and liquid securities with a
value sufficient at all times to cover its potential obligations to the extent
not covered as provided in (i) above.
Special Risks Related to Foreign Currency Options and Futures Contracts
Options and futures contracts on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally. The
value of a foreign currency option or futures contract depends upon the value of
the underlying currency relative to the U.S. dollar. As a result, the price of
the International Multi-Manager Series' position in a foreign currency option or
currency contract may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a foreign
security. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the use of foreign currency options or futures transactions, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
available is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (that
is, less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options or futures markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options or
futures markets until they reopen.
As with other options and futures positions, the International
Multi-Manager Series' ability to establish and close out such positions in
foreign currencies is subject to the maintenance of a liquid secondary market.
Trading of some such positions is relatively new. Although the Series will not
purchase or write such positions unless and until, in the adviser's or the
sub-adviser's opinion, the market for them has developed sufficiently to ensure
that the risks in connection with such positions are not greater than the risks
in connection with the underlying currency, there can be no assurance that a
liquid secondary market will exist for a particular option or futures contract
at any specific time. Moreover, the Series will not enter into OTC options that
are illiquid if, as a result, more than 15% of its net assets would be invested
in illiquid securities.
Settlement of a foreign currency futures contract must occur within the country
issuing the underlying currency. Thus, the Series must accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
restrictions or regulations regarding the maintenance of foreign banking
arrangements by U.S. residents, and it may be required to pay any fees, taxes
and charges associated with such delivery that are assessed in the issuing
country.
Forward Currency Contracts. The International Multi-Manager Series may use
forward currency contracts to protect against uncertainty in the level of future
foreign currency exchange rates.
The Series may enter into forward currency contracts with respect to specific
transactions. For example, when the Series enters into a contract for the
purchase or sale of a security denominated in a foreign currency or anticipates
the receipt in a foreign currency of dividend or interest payments on a security
that it holds or anticipates purchasing, the Series may desire to "lock in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such payment,
as the case may be, by entering into a forward contract for the sale, for a
fixed amount of U.S. dollars, of the amount of foreign currency involved in the
underlying transaction. The Series will thereby be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.
The Series also may hedge by using forward currency contracts in connection with
portfolio positions to lock in the U.S. dollar value of those positions or to
increase its exposure to foreign currencies that the adviser or the
A-8
<PAGE>
sub-advisers believe may rise in value relative to the U.S. dollar. For example,
when the adviser or the sub-advisers believe that the currency of a particular
foreign country may suffer a substantial decline relative to the U.S. dollar, it
may enter into a forward contract to sell the amount of the former foreign
currency approximating the value of some or all of the Series' securities
holdings denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Series to purchase additional foreign currency on the spot (that is, cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Series is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the security holding if
the market value of the security exceeds the amount of foreign currency the
Series is obligated to deliver. The projection of short-term currency market
movements is extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements might not be accurately predicted, causing the
Series to sustain losses on these contracts and transaction costs. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the longer-term investment decisions made with regard to
overall diversification strategies. However, the adviser and the sub-advisers
believe that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Series will be
served.
At or before the maturity date of a forward contract requiring the Series to
sell a currency, the Series may either sell a security holding and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Series will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Series
may close out a forward contract requiring it to purchase a specified currency
by entering into a second contract entitling it to sell the same amount of the
same currency on the maturity date of the first contract. The Series would
realize a gain or loss as a result of entering into such an offsetting forward
currency contract under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the execution dates of the
first contract and the offsetting contract.
The cost to the Series of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
prices of the underlying securities the Series owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
Although the Series values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Series may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Series at one rate, while offering a lesser rate of exchange should the Series
desire to resell that currency to the dealer.
A-9
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
Moody's and S&P are private services that provide ratings of the credit quality
of debt obligations. A description of the ratings assigned by Moody's and S&P to
the securities in which the Portfolios' corresponding Series may invest is
discussed below. These ratings represent the opinions of these rating services
as to the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. The advisers and sub-advisers attempt to discern variations in credit
rankings of the rating services and to anticipate changes in credit ranking.
However, subsequent to purchase by a Series, an issue of securities may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Series. In that event, an adviser or sub-adviser will consider
whether it is in the best interest of the Series to continue to hold the
securities.
Moody's Ratings
Corporate and Municipal Bonds.
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risk appear somewhat larger than the Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa: Bonds that are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Corporate and Municipal Commercial Paper. The highest rating for corporate and
municipal commercial paper is "P-1" (Prime-1). Issuers rated P-1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. P-1 repayment ability will often be evidenced by many of the
following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
B-1
<PAGE>
Municipal Notes. The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2" and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3"
in the case of an issue having a variable-rate demand feature). Notes rated "MIG
1" or "VMIG 1" are judged to be of the best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing. Notes rated "MIG 2" or "VMIG 2"
are of high quality, with margins of protection that are ample although not so
large as in the preceding group. Notes rated "MIG 3" or "VMIG 3" are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow protection
may be narrow, and market access for refinancing is likely to be less well
established.
S&P Ratings
Corporate and Municipal Bonds.
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay interest and repay principal.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Corporate and Municipal Commercial Paper. The "A-1" rating for corporate and
municipal commercial paper indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics will be rated "A-1+."
Municipal Notes. The "SP-1" rating reflects a very strong or strong capacity to
pay principal and interest. Those issues determined to possess overwhelming
safety characteristics will be rated "SP-1+." The "SP-2" rating reflects a
satisfactory capacity to pay principal and interest.
Fitch Ratings
Description of Fitch's highest state and municipal notes rating.
AAA - Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA.
F-1+ - Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
F-1 - Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
B-2
<PAGE>
WT MUTUAL FUND
CRM Prime Money Market Fund
CRM Tax-Exempt Fund
CRM Intermediate Bond Fund
CRM Municipal Bond Fund
CRM Large Cap Value Fund
CRM Mid Cap Value Fund
CRM Small Cap Value Fund
400 Bellevue Parkway
Wilmington, Delaware 19809
- --------------------------------------------------------------------------------
Statement of Additional Information
November 1, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Funds' current prospectus, dated November 1, 1999, as
amended from time to time. A copy of the current prospectus and annual report
may be obtained without charge, by writing to Provident Distributors, Inc.
("PDI"), Four Falls Corporate Center, West Conshohocken, PA 19428, and from
certain institutions such as banks or broker-dealers that have entered into
servicing agreements with PDI or by calling (800) CRM-2883.
The Funds' audited financial statements for the year ended June 30, 1999,
included in the Annual Reports to shareholders, are incorporated into this SAI
by reference.
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION 2
INVESTMENT POLICIES 2
INVESTMENT LIMITATIONS 15
TRUSTEES AND OFFICERS 19
INVESTMENT ADVISORY AND OTHER SERVICES 21
Distribution of shares 24
BROKERAGE ALLOCATION AND OTHER PRACTICES 25
CAPITAL STOCK AND OTHER SECURITIES 25
PURCHASE, REDEMPTION AND PRICING OF SHARES 26
DIVIDENDS 29
TAXATION OF THE FUNDS 29
CALCULATION OF PERFORMANCE INFORMATION 33
FINANCIAL STATEMENTS 37
APPENDIX A -- OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES A-1
APPENDIX B -- DESCRIPTION OF RATINGS B-1
i
<PAGE>
GENERAL INFORMATION
WT Mutual Fund (the "Fund") is a diversified, open-end management investment
company organized as a Delaware business trust on June 1, 1994. The name of the
Fund was changed from Kiewit Mutual Fund to WT Mutual Fund on October 20, 1998.
The Fund has established the following Funds described in this Statement of
Additional Information: CRM Prime Money Market, CRM Tax-Exempt, CRM Intermediate
Bond, CRM Municipal Bond, CRM Large Cap Value, CRM Mid Cap Value and CRM Small
Cap Value Funds. feeders?]Each of these Funds issues Institutional and Investor
class shares.
INVESTMENT POLICIES
The following information supplements the information concerning each Fund's
investment objective, policies and limitations found in the prospectus. Unless
otherwise indicated, it applies to the Funds through their investment in
corresponding master funds, which are series of WT Investment Trust I (the
"Series").
Money Market Funds
The "Money Market Funds" are the Prime Money Market Fund and the Tax-Exempt
Fund. Each has adopted a fundamental policy requiring it to maintain a constant
net asset value of $1.00 per share, although this may not be possible under
certain circumstances. Each Fund values its portfolio securities on the basis of
amortized cost (see "Purchase, Redemption and Pricing of Shares") pursuant to
Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"). As
conditions of that Rule, the Board of Trustees has established procedures
reasonably designed to stabilize each Fund's price per share at $1.00 per share.
Each Fund maintains a dollar-weighted average portfolio maturity of 90 days or
less; purchases only instruments with effective maturities of 397 days or less;
and invests only in securities which are of high quality as determined by major
rating services or, in the case of instruments which are not rated, of
comparable quality as determined by the investment adviser, Rodney Square
Management Corporation, under the direction of and subject to the review of the
Board of Trustees.
Bank Obligations. The Prime Money Market Fund may invest in U.S.
dollar-denominated obligations of major banks, including certificates of
deposit, time deposits and bankers' acceptances of major U.S. and foreign banks
and their branches located outside of the United States, of U.S. branches of
foreign banks, of foreign branches of foreign banks, of U.S. agencies of foreign
banks and of wholly owned banking subsidiaries of such foreign banks located in
the United States.
Obligations of foreign branches of U.S. banks and U.S. branches of wholly owned
subsidiaries of foreign banks may be general obligations of the parent bank, of
the issuing branch or subsidiary, or both, or may be limited by the terms of a
specific obligation or by governmental regulation. Because such obligations are
issued by foreign entities, they are subject to the risks of foreign investing.
A brief description of some typical types of bank obligations follows:
o Bankers' Acceptances. The Prime Money Market Fund may invest in
bankers' acceptances, which are credit instruments evidencing the
obligation of a bank to pay a draft that has been drawn on it by a
customer. These instruments reflect the obligation of both the bank
and the drawer to pay the face amount of the instrument upon
maturity.
o Certificates of Deposit. The Prime Money Market Fund may invest in
certificates evidencing the indebtedness of a commercial bank to
repay funds deposited with it for a definite period of time (usually
from 14 days to one year) at a stated or variable interest rate.
Variable rate certificates of deposit provide that the interest rate
will fluctuate on designated dates based on changes in a designated
base rate (such as the composite rate for certificates of deposit
established by the Federal Reserve Bank of New York).
2
<PAGE>
o Time Deposits. The Prime Money Market Fund may invest in time
deposits, which are bank deposits for fixed periods of time.
Certificates of Participation. The Tax-Exempt Fund may invest in certificates of
participation, which give the investor an undivided interest in the municipal
obligation in the proportion that the investor's interest bears to the total
principal amount of the municipal obligation.
Corporate Bonds, Notes and Commercial Paper. The Prime Money Market Fund may
invest in corporate bonds, notes and commercial paper. These obligations
generally represent indebtedness of the issuer and may be subordinated to other
outstanding indebtedness of the issuer. Commercial paper consists of short-term
promissory notes issued by corporations in order to finance their current
operations. The Fund will only invest in commercial paper rated, at the time of
purchase, in the highest category by a nationally recognized statistical rating
organization ("NRSRO"), such as Moody's or S&P or, if not rated, determined by
the adviser to be of comparable quality. See "Appendix B - Description of
Ratings." The Funds may invest in asset-backed commercial paper subject to Rule
2a-7 restrictions on investments in asset-backed securities, which include a
requirement that the security must have received a rating from a NRSRO.
Foreign Securities. At the present time, portfolio securities of the Prime Money
Market Fund that are purchased outside the United States are maintained in the
custody of foreign branches of U.S. banks. To the extent that the Fund may
maintain portfolio securities in the custody of foreign subsidiaries of U.S.
banks, and foreign banks or clearing agencies in the future, those sub-custodian
arrangements are subject to regulations under the 1940 Act that govern custodial
arrangements with entities incorporated or organized in countries outside of the
United States.
Illiquid Securities. Each Money Market Fund may not invest more than 10% of the
value of its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid. Illiquid
securities are securities that cannot be disposed of within seven days at
approximately the value at which they are being carried on a Fund's books.
The Board of Trustees has the ultimate responsibility for determining whether
specific securities are liquid or illiquid. The Board has delegated the function
of making day to day determinations of liquidity to the adviser, pursuant to
guidelines approved by the Board. The adviser will monitor the liquidity of
securities held by a Fund and report periodically on such decisions to the
Board.
Investment Company Securities. The Money Market Funds may invest in the
securities of other money market mutual funds, within the limits prescribed by
the 1940 Act. These limitations currently provide, in part, that a Fund may not
purchase shares of an investment company if (a) such a purchase would cause the
Fund to own in the aggregate more than 3% of the total outstanding voting stock
of the investment company or (b) such a purchase would cause the Fund to have
more than 5% of its total assets invested in the investment company or (c) more
than 10% of the Fund's total assets to be invested in the aggregate in all
investment companies. As a shareholder in an investment company, the Fund would
bear its pro rata portion of the investment company's expenses, including
advisory fees, in addition to its own expenses. Each Fund's investments of its
assets in the corresponding Series pursuant to the master/feeder structure are
excepted from the above limitations.
Municipal Securities. The Money Market Funds each may invest in debt obligations
issued by states, municipalities and public authorities ("Municipal Securities")
to obtain funds for various public purposes. Yields on Municipal Securities are
the product of a variety of factors, including the general conditions of the
money market and of the municipal bond and municipal note markets, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
Although the interest on Municipal Securities may be exempt from federal income
tax, dividends paid by a Fund to its shareholders may not be tax-exempt. A brief
description of some typical types of municipal securities follows:
o General obligation securities are backed by the taxing power of the
issuing municipality and are considered the safest type of municipal
bond.
3
<PAGE>
o Revenue or special obligation securities are backed by the revenues
of a specific project or facility - tolls from a toll bridge, for
example.
o Bond anticipation notes normally are issued to provide interim
financing until long-term financing can be arranged. The long-term
bonds then provide money for the repayment of the notes.
o Tax Anticipation Notes finance working capital needs of
municipalities and are issued in anticipation of various seasonal
tax revenues, to be payable for these specific future taxes.
o Revenue Anticipation Notes are issued in expectation of receipt of
other kinds of revenue, such as federal revenues available under the
Federal Revenue Sharing Program.
o Industrial Development Bonds ("IDBs") and Private Activity Bonds
("PABs") are specific types of revenue bonds issued on or behalf of
public authorities to finance various privately operated facilities
such as solid waste facilities and sewage plants. PABs generally are
such bonds issued after April 15, 1986. These obligations are
included within the term "municipal bonds" if the interest paid on
them is exempt from federal income tax in the opinion of the bond
issuer's counsel. IDBs and PABs are in most case revenue bonds and
thus are not payable from the unrestricted revenues of the issuer.
The credit quality of the IDBs and PABs is usually directly related
to the credit standing of the user of the facilities being financed,
or some form of credit enhancement such as a letter of credit.
o Tax-exempt commercial paper and short-term municipal notes provide
for short-term capital needs and usually have maturities of one year
or less. They include tax anticipation notes, revenue anticipation
notes and construction loan notes.
o Construction loan notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive
permanent financing through the Federal Housing Administration by
way of "Fannie Mae" (the Federal National Mortgage Association) or
"Ginnie Mae" (the Government National Mortgage Association).
o Put bonds are municipal bonds which give the holder the right to
sell the bond back to the issuer or a third party at a specified
price and exercise date, which is typically well in advance of the
bond's maturity date.
Repurchase Agreements. The Money Market Funds may invest in repurchase
agreements. A repurchase agreement is a transaction in which a Fund purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to a bank or dealer at an agreed date and price
reflecting a market rate of interest, unrelated to the coupon rate or the
maturity of the purchased security. While it is not possible to eliminate all
risks from these transactions (particularly the possibility of a decline in the
market value of the underlying securities, as well as delays and costs to the
Fund if the other party to the repurchase agreement becomes bankrupt), it is the
policy of a Fund to limit repurchase transactions to primary dealers and banks
whose creditworthiness has been reviewed and found satisfactory by the adviser.
Repurchase agreements maturing in more than seven days are considered illiquid
for purposes of a Fund's investment limitations.
Securities Lending. The Money Market Funds may from time to time lend their
portfolio securities to brokers, dealers and financial institutions. Such loans
by a Fund will in no event exceed one-third of that Fund's total assets and will
be secured by collateral in the form of cash or securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, which will be
maintained in an amount equal to the current market value of the loaned
securities at all times the loan is outstanding. Each Fund will make loans of
securities only to firms deemed credit worthy by the adviser.
4
<PAGE>
Standby Commitments. The Money Market Funds may invest in standby commitments.
It is expected that stand-by commitments will generally be available without the
payment of any direct or indirect consideration. However, if necessary and
advisable, the Funds may pay for standby commitments either separately in cash
or by paying a higher price for the obligations acquired subject to such a
commitment (thus reducing the yield to maturity otherwise available for the same
securities). Standby commitments purchased by the Funds will be valued at zero
in determining net asset value and will not affect the valuation of the
obligations subject to the commitments. Any consideration paid for a standby
commitment will be accounted for as unrealized depreciation and will be
amortized over the period the commitment is held by a Fund.
U.S. Government Obligations. The Money Market Funds may invest in debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Although all obligations of agencies and instrumentalities
are not direct obligations of the U.S. Treasury, payment of the interest and
principal on these obligations is generally backed directly or indirectly by the
U.S. Government. This support can range from securities supported by the full
faith and credit of the United States (for example, securities of the Government
National Mortgage Association), to securities that are supported solely or
primarily by the creditworthiness of the issuer, such as securities of the
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Tennessee Valley Authority, Federal Farm Credit Banks and the Federal Home Loan
Banks. In the case of obligations not backed by the full faith and credit of the
United States, a Fund must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments.
Variable and Floating Rate Securities. The Money Market Funds may invest in
variable and floating rate securities. The terms of variable and floating rate
instruments provide for the interest rate to be adjusted according to a formula
on certain pre-determined dates. Certain of these obligations also may carry a
demand feature that gives the holder the right to demand prepayment of the
principal amount of the security prior to maturity. An irrevocable letter of
credit or guarantee by a bank usually backs the demand feature. Fund investments
in these securities must comply with conditions established by the SEC under
which they may be considered to have remaining maturities of 397 days or less.
When-Issued Securities. The Money Market Funds may buy when-issued securities or
sell securities on a delayed-delivery basis. This means that delivery and
payment for the securities normally will take place approximately 15 to 90 days
after the date of the transaction. The payment obligation and the interest rate
that will be received are each fixed at the time the buyer enters into the
commitment. During the period between purchase and settlement, the purchaser
makes no payment and no interest accrues to the purchaser. However, when a
security is sold on a delayed-delivery basis, the seller does not participate in
further gains or losses with respect to the security. If the other party to a
when-issued or delayed-delivery transaction fails to transfer or pay for the
securities, the Fund could miss a favorable price or yield opportunity or could
suffer a loss.
A Fund will make a commitment to purchase when-issued securities only with the
intention of actually acquiring the securities, but the Fund may dispose of the
commitment before the settlement date if it is deemed advisable as a matter of
investment strategy. A Fund may also sell the underlying securities before they
are delivered, which may result in gains or losses. A separate account for each
Fund is established at the custodian bank, into which cash and/or liquid
securities equal to the amount of when-issued purchase commitments is deposited.
If the market value of the deposited securities declines additional cash or
securities will be placed in the account on a daily basis to cover the Fund's
outstanding commitments.
When a Fund purchases a security on a when-issued basis, the security is
recorded as an asset on the commitment date and is subject to changes in market
value generally, based upon changes in the level of interest rates. Thus, upon
delivery, the market value of the security may be higher or lower than its cost,
and this may increase or decrease the Fund's net asset value. When payment for a
when-issued security is due, a Fund will meet its obligations from
then-available cash flow, the sale of the securities held in the separate
account, the sale of other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a when-issued purchase
obligation carries with it the potential for the realization of capital gains or
losses.
5
<PAGE>
The Bond Funds
The "Bond Funds" are the Intermediate Bond and the Municipal Bond Funds.
Wilmington Trust Company, the investment adviser for the Bond Funds, employs an
investment process that is disciplined, systematic and oriented toward a
quantitative assessment and control of volatility. The Bond Funds' exposure to
credit risk is moderated by limiting their investments to securities that, at
the time of purchase, are rated investment grade by a nationally recognized
statistical rating organization such as Moody's, S&P, or, if unrated, are
determined by the adviser to be of comparable quality. See "Appendix B -
Description of Ratings." Ratings, however, are not guarantees of quality or of
stable credit quality. Not even the highest rating constitutes assurance that
the security will not fluctuate in value or that a Fund will receive the
anticipated yield on the security. WTC continuously monitors the quality of the
Funds' holdings, and should the rating of a security be downgraded or its
quality be adversely affected, WTC will determine whether it is in the best
interest of the affected Fund to retain or dispose of the security.
The effect of interest rate fluctuations in the market on the principal value of
the Bond Funds is moderated by limiting the average dollar-weighted duration of
their investments -- in the case of the Intermediate Bond Fund to a range of54
to 7 years, and in the case of the Municipal Bond Fund to a range of 4 to 8
years. Investors may be more familiar with the term "average effective maturity"
(when, on average, the fixed income securities held by the Fund will mature),
which is sometimes used to express the anticipated term of the Funds'
investments. Generally, the stated maturity of a fixed income security is longer
than it's projected duration. Under normal market conditions, the average
effective maturity, in the case of the Intermediate Bond Fund, within a range of
approximately 7 to 12 years, and in the case of the Municipal Bond Fund, within
a range of approximately 5 to 10 years. In the event of unusual market
conditions, the average dollar-weighted duration of the Funds may fall within a
broader range. Under those circumstances, the Intermediate Bond Fund may invest
in fixed income securities with an average dollar-weighted duration of 2 to 10
years.
WTC's goal in managing the Intermediate Bond Fund is to gain additional return
by analyzing the market complexities and individual security attributes which
affect the returns of fixed income securities. The Intermediate Bond Fund is
intended to appeal to investors who want a thoughtful exposure to the broad
fixed income securities market and the high current returns that characterize
the short-term to intermediate-term sector of that market.
Given the average duration of the holdings of the Bond Fund and the current
interest rate environment, the Fund should experience smaller price fluctuations
than those experienced by longer-term bond and municipal bond funds and a higher
yield than fixed-price money market and tax-exempt money market funds. Of
course, the Fund will likely experience larger price fluctuations than money
market funds and a lower yield than longer-term bond and municipal bond funds.
Given the quality of the Fund's holdings, which must be investment grade (rated
within the top four categories) or comparable to investment grade securities at
the time of purchase, the Funds will accept lower yields in order to avoid the
credit concerns experienced by funds that invest in lower quality fixed income
securities. In addition, although the Municipal Bond Fund expects to invest
substantially all of its net assets in municipal securities that provide
interest income that is exempt from federal income tax, it may invest up to 20%
of its net assets in other types of fixed income securities that provide
federally taxable income.
The composition of each Fund's holdings varies depending upon WTC's analysis of
the fixed income markets and the municipal securities markets (for the Municipal
Bond Fund), including analysis of the most attractive segments of the yield
curve, the relative value of the different market sectors, expected trends in
those markets and supply versus demand pressures. Securities purchased by the
Funds may be purchased on the basis of their yield or potential capital
appreciation or both. By maintaining each Fund's specified average duration, WTC
seeks to protect the Fund's principal value by reducing fluctuations in value
relative to those that may be experienced by bond funds with longer average
durations. This strategy may reduce the level of income attained by the Funds.
Of course, there is no guarantee that principal value can be protected during
periods of extreme interest rate volatility.
6
<PAGE>
WTC may make frequent changes in the Funds' investments, particularly during
periods of rapidly fluctuating interest rates. These frequent changes would
involve transaction costs to the Funds and could result in taxable capital
gains.
Asset-Backed Securities. The Bond Funds may purchase interests in pools of
obligations, such as credit card or automobile loan receivables, purchase
contracts and financing leases. Such securities are also known as "asset-backed
securities," and the holders thereof may be entitled to receive a fixed rate of
interest, a variable rate that is periodically reset to reflect the current
market rate or an auction rate that is periodically reset at auction.
Asset-backed securities are typically supported by some form of credit
enhancement, such as cash collateral, subordinated tranches, a letter of credit,
surety bond or limited guaranty. Credit enhancements do not provide protection
against changes in the market value of the security. If the credit enhancement
is exhausted or withdrawn, security holders may experience losses or delays in
payment if required payments of principal and interest are not made with respect
to the underlying obligations. Except in very limited circumstances, there is no
recourse against the vendors or lessors that originated the underlying
obligations.
Asset-backed securities are likely to involve unscheduled prepayments of
principal that may affect yield to maturity, result in losses, and may be
reinvested at higher or lower interest rates than the original investment. The
yield to maturity of asset-backed securities that represent residual interests
in payments of principal or interest in fixed income obligations is particularly
sensitive to prepayments.
The value of asset-backed securities may change because of changes in the
market's perception of the creditworthiness of the servicing agent for the pool
of underlying obligations, the originator of those obligations or the financial
institution providing credit enhancement.
Bank Obligations. The Bond Funds may invest in the same U.S. dollar-denominated
obligations of major banks as the Money Market Fund. (See "Money Market Funds -
Bank Obligations.")
Corporate Bonds, Notes and Commercial Paper. The Bond Funds may invest in
corporate bonds, notes and commercial paper. These obligations generally
represent indebtedness of the issuer and may be subordinated to other
outstanding indebtedness of the issuer. Commercial paper consists of short-term
unsecured promissory notes issued by corporations in order to finance their
current operations. The Funds will only invest in commercial paper rated, at the
time of purchase, in the highest category by a nationally recognized statistical
rating organization, such as Moody's or S&P or, if not rated, determined by WTC
to be of comparable quality.
Fixed Income Securities with Buy-Back Features. Fixed income securities with
buy-back features enable the Bond Funds to recover principal upon tendering the
securities to the issuer or a third party. lettersLetters of credit issued by
domestic or foreign banks often supports these buy-back features. In evaluating
a foreign bank's credit, WTC considers whether adequate public information about
the bank is available and whether the bank may be subject to unfavorable
political or economic developments, currency controls or other governmental
restrictions that could adversely affect the bank's ability to honor its
commitment under the letter of credit. The Municipal Bond Fund will not acquire
municipal securities with buy-back features if, in the opinion of counsel, the
existence of a buy-back feature would alter the tax-exempt nature of interest
payments on the underlying securities and cause those payments to be taxable to
that Fund and its shareholders.
Buy-back features include standby commitments, put bonds and demand features.
o Standby commitments. The Bond Funds may acquire standby commitments
from broker-dealers, banks or other financial intermediaries to
enhance the liquidity of portfolio securities. A standby commitment
entitles a Fund to same day settlement at amortized cost plus
accrued interest, if any, at the time of exercise. The amount
payable by the issuer of the standby commitment during the time that
the commitment is exercisable generally approximates the market
value of the securities underlying the commitment. Standby
commitments are subject to the risk that the issuer of a commitment
may not be in a position to pay for the securities at the time that
the commitment is exercised.
7
<PAGE>
Ordinarily, a Fund will not transfer a standby commitment to a third
party, although the Fund may sell securities subject to a standby
commitment at any time. A Fund may purchase standby commitments
separate from or in conjunction with the purchase of the securities
subject to the commitments. In the latter case, the Fund may pay a
higher price for the securities acquired in consideration for the
commitment.
o Put bonds. A put bond (also referred to as a tender option or third
party bond) is a bond created by coupling an intermediate or
long-term fixed rate bond with an agreement giving the holder the
option of tendering the bond to receive its par value. As
consideration for providing this tender option, the sponsor of the
bond (usually a bank, broker-dealer or other financial intermediary)
receives periodic fees that equal the difference between the bond's
fixed coupon rate and the rate (determined by a remarketing or
similar agent) that would cause the bond, coupled with the tender
option, to trade at par. By paying the tender offer fees, a Fund in
effect holds a demand obligation that bears interest at the
prevailing short-term rate.
In selecting put bonds for the Bond Funds, WTC takes into
consideration the creditworthiness of the issuers of the underlying
bonds and the creditworthiness of the providers of the tender option
features. A sponsor may withdraw the tender option feature if the
issuer of the underlying bond defaults on interest or principal
payments, the bond's rating is downgraded or, in the case of a
municipal bond, the bond loses its tax-exempt status.
o Demand features. Many variable rate securities carry demand features
that permit the holder to demand repayment of the principal amount
of the underlying securities plus accrued interest, if any, upon a
specified number of days' notice to the issuer or its agent. A
demand feature may be exercisable at any time or at specified
intervals. Variable rate securities with demand features are treated
as having a maturity equal to the time remaining before the holder
can next demand payment of principal. The issuer of a demand feature
instrument may have a corresponding right to prepay the outstanding
principal of the instrument plus accrued interest, if any, upon
notice comparable to that required for the holder to demand payment.
Guaranteed Investment Contracts. A guaranteed investment contract ("GIC") is a
general obligation of an insurance company. A GIC is generally structured as a
deferred annuity under which the purchaser agrees to pay a given amount of money
to an insurer (either in a lump sum or in installments) and the insurer promises
to pay interest at a guaranteed rate (either fixed or variable) for the life of
the contract. Some GICs provide that the insurer may periodically pay
discretionary excess interest over and above the guaranteed rate. At the GIC's
maturity, the purchaser generally is given the option of receiving payment or an
annuity. Certain GICs may have features that permit redemption by the issuer at
a discount from par value.
Generally, GICs are not assignable or transferable without the permission of the
issuer. As a result, the acquisition of GICs is subject to the limitations
applicable to each Fund's acquisition of illiquid and restricted securities. The
holder of a GIC is dependent on the creditworthiness of the issuer as to whether
the issuer is able to meet its obligations. No Fund intends to invest more than
5% of its net assets in GICs.
Illiquid Securities. Each Bond Fund may not invest more than 15% of the value of
its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid.
Money Market Funds. The Bond Funds may invest in the securities of money market
mutual funds, within the limits prescribed by the 1940 Act. (See "Money Market
Funds - Investment Company Securities.")
8
<PAGE>
Mortgage-Backed Securities. Mortgage-backed securities are securities
representing interests in a pool of mortgages secured by real property.
Government National Mortgage Association ("GNMA") mortgage-backed securities are
securities representing interests in pools of mortgage loans to residential home
buyers made by lenders such as mortgage bankers, commercial banks and savings
associations and are either guaranteed by the Federal Housing Administration or
insured by the Veterans Administration. Timely payment of interest and principal
on each mortgage loan is backed by the full faith and credit of the U.S.
Government.
The Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC") both issue mortgage-backed securities that are
similar to GNMA securities in that they represent interests in pools of mortgage
loans. FNMA guarantees timely payment of interest and principal on its
certificates and FHLMC guarantees timely payment of interest and ultimate
payment of principal. FHLMC also has a program under which it guarantees timely
payment of scheduled principal as well as interest. FNMA and FHLMC guarantees
are backed only by those agencies and not by the full faith and credit of the
U.S. Government.
In the case of mortgage-backed securities that are not backed by the U.S.
Government or one of its agencies, a loss could be incurred if the collateral
backing these securities is insufficient. This may occur even though the
collateral is U.S. Government-backed.
Most mortgage-backed securities pass monthly payment of principal and interest
through to the holder after deduction of a servicing fee. However, other payment
arrangements are possible. Payments may be made to the holder on a different
schedule than that on which payments are received from the borrower, including,
but not limited to, weekly, bi-weekly and semiannually. The monthly principal
and interest payments also are not always passed through to the holder on a pro
rata basis. In the case of collateralized mortgage obligations ("CMOs"), the
pool is divided into two or more tranches and special rules for the disbursement
of principal and interest payments are established.
CMO residuals are derivative securities that generally represent interests in
any excess cash flow remaining after making required payments of principal and
interest to the holders of the CMOs described above. Yield to maturity on CMO
residuals is extremely sensitive to prepayments. In addition, if a series of a
CMO includes a class that bears interest at an adjustable rate, the yield to
maturity on the related CMO residual also will be extremely sensitive to the
level of the index upon which interest rate adjustments are based.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities and may be issued by agencies or instrumentalities of the U.S.
Government or by private mortgage lenders. SMBS usually are structured with two
classes that receive different proportions of the interest and/or principal
distributions on a pool of mortgage assets. A common type of SMBS will have one
class of holders receiving all interest payments -- "interest only" or "IO" --
and another class of holders receiving the principal repayments -- "principal
only" or "PO." The yield to maturity of IO and PO classes is extremely sensitive
to prepayments on the underlying mortgage assets.
Municipal Securities. Municipal securities are debt obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their sub-divisions, agencies and instrumentalities, the
interest on which is, in the opinion of bond counsel, exempt from federal income
tax. These debt obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various privately owned or operated activities. The three
general categories of municipal securities are general obligation, revenue or
special obligation and private activity municipal securities. A brief
description of typical municipal securities follows:
o General obligation securities are backed by the taxing power of the
issuing municipality and are considered the safest type of municipal
bond. The proceeds from general obligation securities are used to
fund a wide range of public projects, including the construction or
improvement of schools, highways and roads, and water and sewer
systems.
9
<PAGE>
o Revenue or special obligation securities are backed by the revenues
of a specific project or facility - tolls from a toll bridge, for
example. The proceeds from revenue or special obligation securities
are used to fund a wide variety of capital projects, including
electric, gas, water and sewer systems; highways, bridges and
tunnels; port and airport facilities; colleges and universities; and
hospitals. Many municipal issuers also establish a debt service
reserve fund from which principal and interest payments are made.
Further security may be available in the form of the state's
ability, without obligation, to make up deficits in the reserve
fund.
o Municipal lease obligations may take the form of a lease, an
installment purchase or a conditional sale contract issued by state
and local governments and authorities to acquire land, equipment and
facilities. Usually, the Funds will purchase a participation
interest in a municipal lease obligation from a bank or other
financial intermediary. The participation interest gives the holder
a pro rata, undivided interest in the total amount of the
obligation.
Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. The interest
income from the lease obligation may become taxable if the lease is
assigned. Also, to free the municipal issuer from constitutional or
statutory debt issuance limitations, many leases and contracts
include non-appropriation clauses providing that the municipality
has no obligation to make future payments under the lease or
contract unless money is appropriated for that purpose by the
municipality on a yearly or other periodic basis. Finally, the lease
may be illiquid.
o Resource recovery bonds are affected by a number of factors, which
may affect the value and credit quality of these revenue or special
obligations. These factors include the viability of the project
being financed, environmental protection regulations and project
operator tax incentives.
o Private activity securities are specific types of revenue bonds
issued on behalf of public authorities to finance various privately
operated facilities such as educational, hospital or housing
facilities, local facilities for water supply, gas, electricity,
sewage or solid waste disposal, and industrial or commercial
facilities. The payment of principal and interest on these
obligations generally depends upon the credit of the private
owner/user of the facilities financed and, in certain instances, the
pledge of real and personal property by the private owner/user. The
interest income from certain types of private activity securities
may be considered a tax preference item for purposes of the federal
alternative minimum tax ("Tax Preference Item").
Short-term municipal securities in which the Funds may invest include Tax
Anticipation, Revenue Anticipation, Bond Anticipation and Construction Loan
Notes. These were previously described for the Money Market Funds (See "Money
Market Funds - Municipal Securities.")
Options, Futures and Forward Currency Contract Strategies. Although the
Municipal Bond Fund has no current intention of so doing, each of the Bond Fund
may use options and futures contracts. The Intermediate Bond Funds may use
forward currency contracts. For additional information regarding such investment
strategies, see Appendix A to this Statement of Additional Information.
Participation Interests. The Bond Funds may invest in participation interests in
fixed income securities. A participation interest provides the certificate
holder with a specified interest in an issue of fixed income securities.
Some participation interests give the holders differing interests in the
underlying securities, depending upon the type or class of certificate
purchased. For example, coupon strip certificates give the holder the right to
receive a specific portion of interest payments on the underlying securities;
principal strip certificates give the holder the right to receive principal
payments and the portion of interest not payable to coupon strip certificate
holders. Holders of certificates of participation in interest payments may be
entitled to receive a fixed rate of interest, a variable rate that is
periodically reset to reflect the current market rate or an auction
10
<PAGE>
rate that is periodically reset at auction. Asset-backed residuals represent
interests in any excess cash flow remaining after required payments of principal
and interest have been made.
More complex participation interests involve special risk considerations. Since
these instruments have only recently been developed, there can be no assurance
that any market will develop or be maintained for the instruments. Generally,
the fixed income securities that are deposited in trust for the holders of these
interests are the sole source of payments on the interests; holders cannot look
to the sponsor or trustee of the trust or to the issuers of the securities held
in trust or to any of their affiliates for payment.
Participation interests purchased at a discount may experience price volatility.
Certain types of interests are sensitive to fluctuations in market interest
rates and to prepayments on the underlying securities. A rapid rate of
prepayment can result in the failure to recover the holder's initial investment.
The extent to which the yield to maturity of a participation interest is
sensitive to prepayments depends, in part, upon whether the interest was
purchased at a discount or premium, and if so, the size of that discount or
premium. Generally, if a participation interest is purchased at a premium and
principal distributions occur at a rate faster than that anticipated at the time
of purchase, the holder's actual yield to maturity will be lower than that
assumed at the time of purchase. Conversely, if a participation interest is
purchased at a discount and principal distributions occur at a rate faster than
that assumed at the time of purchase, the investor's actual yield to maturity
will be higher than that assumed at the time of purchase.
Participation interests in pools of fixed income securities backed by certain
types of debt obligations involve special risk considerations. The issuers of
securities backed by automobile and truck receivables typically file financing
statements evidencing security interests in the receivables, and the servicers
of those obligations take and retain custody of the obligations. If the
servicers, in contravention of their duty to the holders of the securities
backed by the receivables, were to sell the obligations, the third party
purchasers could acquire an interest superior to the interest of the security
holders. Also, most states require that a security interest in a vehicle must be
noted on the certificate of title and the certificate of title may not be
amended to reflect the assignment of the lender's security interest. Therefore,
the recovery of the collateral in some cases may not be available to support
payments on the securities. Securities backed by credit card receivables are
generally unsecured, and both federal and state consumer protection laws may
allow set-offs against certain amounts owed.
The Municipal Bond Fund will only invest in participation interests in municipal
securities, municipal leases or in pools of securities backed by municipal
assets if, in the opinion of counsel, any interest income on the participation
interest will be exempt from federal income tax to the same extent as the
interest on the underlying securities.
Repurchase Agreements. The Bond Funds may invest in the same repurchase
agreements, as the Money Market Funds. (See "Money Market Funds - Repurchase
Agreements.")
Securities Lending. The Bond Funds may lend securities pursuant to agreements,
which require that the loans be continuously secured by collateral equal to 100%
of the market value of the loaned securities. Such collateral consists of cash,
securities of the U.S. Government or its agencies, or any combination of cash
and such securities. Such loans will not be made if, as a result, the aggregate
amount of all outstanding securities loans for a Fund exceed one-third of the
value of the Fund's total assets taken at fair market value. A Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of the cash collateral in U.S. Government securities.
However, a Fund will normally pay lending fees to such broker-dealers and
related expenses from the interest earned on invested collateral. There may be
risks of delay in receiving additional collateral or risks of delay in recovery
of the securities and even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans are made only to borrowers
deemed by the adviser to be of good standing and when, in the judgment of the
adviser, the consideration that can be earned currently from such securities
loans justifies the attendant risk. Either party upon reasonable notice to the
other party may terminate any loan. The Municipal Bond Fund has no current
intention of lending its portfolio securities and would do so only under unusual
market conditions since the interest income that a Fund receives from lending
its securities is taxable.
11
<PAGE>
U.S. Government Obligations. The Bond Funds may invest in the same debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities as the Money Market Fund. (See "Money Market Funds - U.S.
Government Obligations.")
Variable and Floating Rate Securities. The Bond Funds may invest in variable and
floating rate securities. The terms of variable and floating rate instruments
provide for the interest rate to be adjusted according to a formula on certain
pre-determined dates. Certain of these obligations also may carry a demand
feature that gives the holder the right to demand prepayment of the principal
amount of the security prior to maturity. An irrevocable letter of credit or
guarantee by a bank usually backs the demand feature. Fund investments in these
securities must comply with conditions established by the SEC under which they
may be considered to have remaining maturities of 397 days or less.
Each of the Bond Funds may also purchase inverse floaters that are floating rate
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index. Changes in the interest rate
on the other security or index inversely affect the interest rate paid on the
inverse floater, with the result that the inverse floater's price is
considerably more volatile than that of a fixed rate security. For example, an
issuer may decide to issue two variable rate instruments instead of a single
long-term, fixed rate bond. The interest rate on one instrument reflects
short-term interest rates, while the interest rate on the other instrument (the
inverse floater) reflects the approximate rate the issuer would have paid on a
fixed rate bond multiplied by two minus the interest rate paid on the short-term
instrument. Depending on market availability, the two variable rate instruments
may be combined to form a fixed rate bond. The market for inverse floaters is
relatively new.
When-Issued Securities. The Bond Funds may buy when-issued securities or sell
securities on a delayed-delivery basis. This means that delivery and payment for
the securities normally will take place approximately 15 to 90 days after the
date of the transaction. The payment obligation and the interest rate that will
be received are each fixed at the time the buyer enters into the commitment.
During the period between purchase and settlement, the purchaser makes no
payment and no interest accrues to the purchaser. However, when a security is
sold on a delayed-delivery basis, the seller does not participate in further
gains or losses with respect to the security. If the other party to a
when-issued or delayed-delivery transaction fails to transfer or pay for the
securities, the Fund could miss a favorable price or yield opportunity or could
suffer a loss.
A Fund will make a commitment to purchase when-issued securities only with the
intention of actually acquiring the securities, but the Fund may dispose of the
commitment before the settlement date if it is deemed advisable as a matter of
investment strategy. A Fund may also sell the underlying securities before they
are delivered, which may result in gains or losses. A separate account for each
Fund is established at the custodian bank, into which cash and/or liquid
securities equal to the amount of when-issued purchase commitments is deposited.
If the market value of the deposited securities declines additional cash or
securities will be placed in the account on a daily basis to cover the Fund's
outstanding commitments.
When a Fund purchases a security on a when-issued basis, the security is
recorded as an asset on the commitment date and is subject to changes in market
value generally, based upon changes in the level of interest rates. Thus, upon
delivery, the market value of the security may be higher or lower than its cost,
and this may increase or decrease the Fund's net asset value. When payment for a
when-issued security is due, a Fund will meet its obligations from
then-available cash flow, the sale of the securities held in the separate
account, the sale of other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a when-issued purchase
obligation carries with it the potential for the realization of capital gains or
losses.
The Municipal Bond Fund may purchase securities on a when-issued basis in
connection with the refinancing of an issuer's outstanding indebtedness
("refunding contracts"). These contracts require the issuer to sell and the Fund
to buy municipal obligations at a stated price and yield on a settlement date
that may be several months or several years in the future. The offering proceeds
are then used to refinance existing municipal obligations. Although the
Municipal Bond Fund may sell its rights under a refunding contract, the
secondary market for these contracts may be less liquid than the secondary
market for other types of municipal securities. The Fund generally will not be
obligated to pay the full purchase price if it
12
<PAGE>
fails to perform under a refunding contract. Instead, refunding contracts
usually provide for payment of liquidated damages to the issuer (currently
15-20% of the purchase price). The Fund may secure its obligation under a
refunding contract by depositing collateral or a letter of credit equal to the
liquidated damages provision of the refunding contract. When required by
Securities and Exchange Commission ("SEC") guidelines, the Fund will place
liquid assets in a segregated custodial account equal in amount to its
obligations under outstanding refunding contracts.
Zero Coupon Bonds. The Bond Funds may invest in zero coupon bonds of
governmental or private issuers that generally pay no interest to their holders
prior to maturity. Since zero coupon bonds do not make regular interest
payments, they allow an issuer to avoid the need to generate cash to meet
current interest payments and may involve greater credit risks than bonds paying
interest currently. Tax laws requiring the distribution of accrued discount on
the bonds, even though no cash equivalent thereto has been paid, may cause a
Fund to liquidate investments in order to make the required distributions.
Risk Factors Applicable to the Municipal Bond Fund:
Health Care Sector. The health care industry is subject to regulatory action by
a number of private and governmental agencies, including federal, state and
local governmental agencies. A major source of revenues for the industry is
payments from the Medicare and Medicaid programs. As a result, the industry is
sensitive to legislative changes and reductions in governmental spending for
those programs. Numerous other factors may affect the industry, such as general
and local economic conditions; demand for services; expenses (including
malpractice insurance premiums) and competition among health care providers. In
the future, the following may adversely affect the industry: adoption of
legislation proposing a national health insurance program; medical and
technological advances which alter the demand for health services or the way in
which such services are provided; and efforts by employers, insurers and
governmental agencies to reduce the costs of health insurance and health care
services.
Health care facilities include life care facilities, nursing homes and
hospitals. The Municipal Bond Fund may invest in bonds to finance these
facilities which are typically secured by the revenues from the facilities and
not by state or local government tax payments. Moreover, in the case of life
care facilities, since a portion of housing, medical care and other services may
be financed by an initial deposit, there may be a risk of default in the payment
of principal or interest on a bond issue if the facility does not maintain
adequate financial reserves for debt service.
Housing Sector. The Municipal Bond Fund may invest in housing revenue bonds
which typically are issued by state, county and local housing authorities and
are secured only by the revenues of mortgages originated by those authorities
using the proceeds of the bond issues. Factors that may affect the financing of
multi-family housing projects include acceptable completion of construction,
proper management, occupancy and rent levels, economic conditions and changes in
regulatory requirements.
Since the demand for mortgages from the proceeds of a bond issue cannot be
precisely predicted, the proceeds may be in excess of demand, which would result
in early retirement of the bonds by the issuer. Since the cash flow from
mortgages cannot be precisely predicted, differences in the actual cash flow
from the assumed cash flow could have an adverse impact upon the issuer's
ability to make scheduled payments of principal and interest or could result in
early retirement of the bonds.
Scheduled principal and interest payments are often made from reserve or sinking
funds. These reserves are funded from the bond proceeds, assuming certain rates
of return on investment of the reserve funds. If the assumed rates of return are
not realized because of changes in interest rate levels or for other reasons,
the actual cash flow for scheduled payments of principal and interest on the
bonds may be inadequate.
Electric Utilities Sector. The electric utilities industry has experienced, and
may experience in the future: problems in financing large construction programs
in an inflationary period; cost increases and delays caused by environmental
considerations (particularly with respect to nuclear facilities); difficulties
in obtaining fuel at reasonable prices; the effects of conservation on the
demand for energy; increased competition from alternative energy sources; and
the effects of rapidly changing licensing and safety requirements.
Proposed Legislation. From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on debt obligations issued by states and their political
subdivisions. For example, federal tax law now limits the types and amounts of
13
<PAGE>
tax-exempt bonds issuable for industrial development and other types of private
activities. These limitations may affect the future supply and yields of private
activity securities. Further proposals affecting the value of tax-exempt
securities may be introduced in the future. In addition, proposals have been
made, such as that involving the "flat tax," that could reduce or eliminate the
value of that exemption. If the availability of municipal securities for
investment or the value of the Municipal Bond Fund's holdings could be
materially affected by such changes in the law, the Trustees would reevaluate
the Fund's investment objective and policies or consider the Fund's dissolution.
Fund Turnover. Fund turnover rates for the past 2 years, (or since the date of
inception, if applicable) were:
- --------------------------------------------------------------------------------
12 months ended 12 months ended
June 30, 1999 June 30, 1998
------------- -------------
- --------------------------------------------------------------------------------
Intermediate Bond 36.22% N/A
- --------------------------------------------------------------------------------
Municipal Bond 23.93% 28.56%
- --------------------------------------------------------------------------------
The Equity Funds
The "Equity Funds" are the Large Cap Value, the Mid Cap Value and the Small Cap
Value Funds.
Cash Management. The Equity Fund may invest in cash and cash equivalents,
including high-quality money market instruments and money market funds in order
to manage cash flow. Certain of these instruments are described below.
o Money Market Funds. The Equity Funds may invest in the securities of
other money market mutual funds, within the limits prescribed by the
1940 Act.
o U.S. Government Obligations. The Equity Funds may invest in the same
debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities as the Money Market Funds. (See "Money
Market Funds - U.S. Government Obligations.")
o Commercial Paper. The Equity Funds may invest in commercial paper.
Commercial paper consists of short-term (up to 270 days) unsecured
promissory notes issued by corporations in order to finance their
current operations. The Funds may invest only in commercial paper
rated A-1 or higher by S&P or Moody's or if not rated, determined by
the adviser or sub-adviser to be of comparable quality.
o Bank Obligations. The Equity Funds may invest in the same
obligations of U.S. banks as the Money Market Funds. (See "Money
Market Funds - Bank Obligations.")
Convertible Securities. Convertible securities have characteristics similar to
both fixed income and equity securities. Because of the conversion feature, the
market value of convertible securities tends to move together with the market
value of the underlying stock. As a result, a Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuers and any call provisions.
The Equity Funds may invest in convertible securities that are rated, at the
time of purchase, in the three highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") such as Moody's or S&P, or
if unrated, are determined by the adviser to be of comparable quality. Ratings
represent the rating agency's opinion regarding the quality of the security and
are not a guarantee of quality. Should the rating of a security be downgraded
subsequent to a Fund's purchase of the security, the adviser will determine
whether it is in the best interest of the Fund to retain the security.
14
<PAGE>
Debt Securities. Debt securities represent money borrowed that obligates the
issuer (e.g., a corporation, municipality, government, government agency) to
repay the borrowed amount at maturity (when the obligation is due and payable)
and usually to pay the holder interest at specific times.
Hedging Strategies. The Equity Funds may engage in certain hedging strategies
that involve options and futures. These hedging strategies are described in
detail in Appendix A.
Illiquid Securities. Each of the Funds may invest no more than 10% of its net
assets in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. If the limitations on illiquid
securities are exceeded, other than by a change in market values, the condition
will be reported by the Fund's investment adviser to the Board of Trustees.
Options on Securities and Securities Indexes. The Large Cap Value Fund may
purchase call options on securities that the adviser intends to include in the
Fund in order to fix the cost of a future purchase or attempt to enhance return
by, for example, participating in an anticipated increase in the value of a
security. The Fund may purchase put options to hedge against a decline in the
market value of securities held in the Fund or in an attempt to enhance return.
The Fund may write (sell) put and covered call options on securities in which
they are authorized to invest. The Fund may also purchase put and call options,
and write put and covered call options on U.S. securities indexes. Stock index
options serve to hedge against overall fluctuations in the securities markets
rather than anticipated increases or decreases in the value of a particular
security. Of the 65% of the total assets of the Fund that are invested in equity
(or related) securities, the Fund may not invest more than 10% of such assets in
covered call options on securities and/or options on securities indices.
Repurchase Agreements. The Equity Funds may invest in the same repurchase
agreements, as the Money Market Funds. (See "Money Market Funds - Repurchase
Agreements.")
Restricted Securities. Restricted securities are securities that may not be sold
to the public without registration under the Securities Act of 1933 or an
exemption from registration. Each of the Equity Funds may invest up to 10% of
its net assets in illiquid securities. Restricted securities, including
securities eligible for re-sale under 1933 Act Rule 144A, that are determined to
be liquid are not subject to this limitation. This determination is to be made
by the adviser or a sub-adviser pursuant to guidelines adopted by the Board of
Trustees. Under these guidelines, the adviser or a sub-adviser will consider the
frequency of trades and quotes for the security, the number of dealers in, and
potential purchasers for, the securities, dealer undertakings to make a market
in the security, and the nature of the security and of the marketplace trades.
In purchasing such restricted securities, the adviser or a sub-adviser intends
to purchase securities that are exempt from registration under Rule 144A under
the 1933 Act.
Securities Lending. The Equity Funds may lend securities subject to the same
conditions applicable to the Bond Funds. (See "Bond Funds - Securities
Lending.")
Fund Turnover. Fund turnover rates for the past 2 years, (or since inception, if
applicable) were:
- --------------------------------------------------------------------------------
12 months ended 12 months ended
June 30, 1999 June 30, 1998
------------- -------------
- --------------------------------------------------------------------------------
Large Cap Value 67.05% N/A
- --------------------------------------------------------------------------------
Mid Cap Value 118.00% N/A
- --------------------------------------------------------------------------------
Small Cap Value 64.00% 57.00%
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
Except as otherwise provided, the Funds and their corresponding master series
have adopted the investment limitations set forth below. Limitations which are
designated as fundamental policies may not be changed without the affirmative
vote of the lessor of (i) 67% or more of the shares of a Fund present at a
15
<PAGE>
shareholders meeting if holders of more than 50% of the outstanding shares of
the Fund are present in person or by proxy or (ii) more than 50% of the
outstanding shares of a Fund. If any percentage restriction on investment or
utilization of assets is adhered to at the time an investment is made, a later
change in percentage resulting from a change in the market values of a Fund's
assets or redemptions of shares will not be considered a violation of the
limitation.
Money Market Funds:
Each Fund will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of such issuer, or
the Fund would own or hold 10% or more of the outstanding voting securities of
that issuer, provided that (1) the Fund may invest up to 25% of its total assets
without regard to these limitations; and (2) these limitations do not apply to
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;
2. purchase the securities of any issuer if, as a result, more than 25% of the
Fund's total assets would be invested in the securities of one or more issuers
having their principal business activities in the same industry, however, the
Fund may invest more than 25% of its total assets in the obligations of banks;
3. borrow money, except (1) from a bank for temporary or emergency purposes (not
for leveraging or investment) or (2) by engaging in reverse repurchase
agreements if the Fund's borrowings do not exceed an amount equal to 33 1/3% of
the current value of its assets taken at market value, less liabilities other
than borrowings;
4. make loans to other persons, except by (1) purchasing debt securities in
accordance with its investment objective, policies and limitations; (2) entering
into repurchase agreements; or (3) engaging in securities loan transactions
limited to 33 1/3% of the value of the Fund's total assets;
5. underwrite any issue of securities, except to the extent that the Fund may be
considered to be acting as underwriter in connection with the disposition of any
portfolio security;
6. purchase or sell real estate, provided that the Fund may invest in
obligations secured by real estate or interests therein or obligations issued by
companies that invest in real estate or interests therein;
7. purchase or sell physical commodities or contracts, provided that currencies
and currency-related contracts will not be deemed physical commodities; or
8. issue senior securities, except as appropriate to evidence indebtedness that
the Fund is permitted to incur, provided that the Fund's use of options, futures
contracts and options thereon or currency-related contracts will not be deemed
to be senior securities for this purpose.
The investment limitations described above do not prohibit a Fund from investing
all or substantially all of its assets in the shares of another registered
open-end investment company such as the corresponding Series of WT Investment
Trust I.
With respect to the exclusion from the investment limitation described in number
2 above, the Fund has been advised that it is the SEC staff's current position,
that the exclusion may be applied only to U.S. bank obligations; the Premier
Money Market Fund, however, will consider both foreign and U.S. bank obligations
within this exclusion.
The following non-fundamental policies apply to the Fund unless otherwise
indicated, and the Board of Trustees may change them without shareholder
approval.
Each Fund will not:
1. make short sales of securities except short sales against the box;
16
<PAGE>
2. purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio securities;
3. purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets, and if at any time the Fund's bank borrowings exceed
its fundamental borrowing limitations due to a decline in net assets, such
borrowings will be promptly (within 3 days) reduced to the extent necessary to
comply with such limitations;
4. make loans of portfolio securities unless such loans are fully collateralized
by cash, securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or any combination of cash and securities, marked to market
daily; or
5. purchase the securities of any one issuer if as a result more than 5% of the
Fund's total assets would be invested in the securities of such issuer, provided
that this limitation does not apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
Bond Funds:
Each Fund will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more than 5% of
the Fund's total assets would be invested in the securities of such issuer, or
the Fund would own or hold 10% or more of the outstanding voting securities of
that issuer, provided that (1) each Fund may invest up to 25% of its total
assets without regard to these limitations; and (2) these limitations do not
apply to securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;
2. purchase the securities of any issuer if, as a result, more than 25% of the
Fund's total assets would be invested in the securities of one or more issuers
having their principal business activities in the same industry, provided that
this limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including repurchase agreements
fully collateralized by U.S. Government obligations) or to tax-exempt municipal
securities;
3. borrow money, provided that the Fund may borrow money from banks for
temporary or emergency purposes (not for leveraging or investment) or by
engaging in reverse repurchase agreements if the Fund's borrowings do not exceed
an amount equal to 33 1/3% of the current value of its assets taken at market
value, less liabilities other than borrowings;
4. make loans to other persons, except by (1) purchasing debt securities in
accordance with its investment objective, policies and limitations; (2) entering
into repurchase agreements; or (3) engaging in securities loan transactions
limited to 33 1/3% of the value of the Fund's total assets;
5. underwrite any issue of securities, except to the extent that the Fund may be
considered to be acting as underwriter in connection with the disposition of any
portfolio security;
6. purchase or sell real estate or real estate limited partnership interests,
provided that the Fund may invest in obligations secured by real estate or
interests therein or obligations issued by companies that invest in real estate
or interests therein, including real estate investment trusts;
7. purchase or sell physical commodities or commodities contracts except
financial and foreign currency futures contracts and options thereon, options on
foreign currencies and forward currency contracts; or
8. issue senior securities, except as appropriate to evidence indebtedness that
the Fund is permitted to incur, provided that futures, options and forward
currency transactions will not be deemed to be senior securities for purposes of
this limitation.
17
<PAGE>
The investment limitations described above do not prohibit a Fund from investing
all or substantially all of its assets in the shares of another registered
open-end investment company such as the corresponding Series of WT Investment
Trust I.
The following non-fundamental policies apply to each Fund and may be changed by
the Board of Trustees without shareholder approval. Each Fund will not:
1. pledge, mortgage or hypothecate its assets, except the Fund may pledge
securities having a market value at the time of the pledge not exceeding 33 1/3%
of the value of its total assets to secure borrowings, and the Fund may deposit
initial and variation margin in connection with transactions in futures
contracts and options on futures contracts;
2. make short sales of securities except short sales against the box;
3. purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio securities,
provided that the Fund may make initial and variation margin deposits in
connection with permitted transactions in options or futures;
4. purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets;
5. when engaging in options, futures and forward currency contract strategies, a
Fund will either: (1) set aside cash or liquid securities in a segregated
account with the Fund's custodian in the prescribed amount; or (2) hold
securities or other options or futures contracts whose values are expected to
offset ("cover") its obligations thereunder. Securities, currencies or other
options or futures contracts used for cover cannot be sold or closed out while
the strategy is outstanding, unless they are replaced with similar assets;
6. purchase or sell non-hedging futures contracts or related options if
aggregate initial margin and premiums required to establish such positions would
exceed 5% of the Fund's total assets. For purposes of this limitation,
unrealized profits and unrealized losses on any open contracts are taken into
account, and the in-the-money amount of an option that is in-the-money at the
time of purchase is excluded; or
7. write put or call options having aggregate exercise prices greater than 25%
of the Fund's net assets, except with respect to options attached to or acquired
with or traded together with their underlying securities and securities that
incorporate features similar to options.
Equity Funds:
Each Fund will not as a matter of fundamental policy:
1. purchase the securities of any one issuer, if as a result, more than 5% of
the Fund's total assets would be invested in the securities of such issuer, or
the Fund would own or hold 10% or more of the outstanding voting securities of
that issuer, provided that (1) each Fund may invest up to 25% of its total
assets without regard to these limitations and (2) these limitations do not
apply to securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;
2. purchase securities of any issuer if, as a result, more than 25% of the
Fund's total assets would be invested in the securities of one or more issuers
having their principal business activities in the same industry, however this
limitation does not apply to investments in short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;
3. borrow money, however the Funds may borrow money for temporary or emergency
purposes, including the meeting of redemption requests, in amounts up to 33 1/3%
of a Fund's assets;
18
<PAGE>
4. make loans to other persons, except by (1) purchasing debt securities in
accordance with its investment objective, policies and limitations; (2) entering
into repurchase agreements; or (3) engaging in securities loan transactions;
5. underwrite any issue of securities, except to the extent that the Fund may be
considered to be acting as underwriter in connection with the disposition of any
portfolio security;
6. purchase or sell real estate. The Funds additionally may not invest in any
interest in real estate except securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such as
mortgage pass-throughs and collateralized mortgage obligations, or issued by
companies that invest in real estate or interests therein;
7. purchase or sell physical commodities. The Funds additionally are restricted
from purchasing or selling contracts, options or options on contracts to
purchase or sell physical commodities; or
8. issue senior securities, except to the extent permitted by the 1940 Act,
however the Funds may borrow money subject to their investment limitation on
borrowing.
The investment limitations described above do not prohibit a Fund from investing
all or substantially all of its assets in the shares of another registered
open-end investment company such as the corresponding Series of WT Investment
Trust I.
The following non-fundamental policies apply to each Fund unless otherwise
indicated, and the Board of Trustees may change them without shareholder
approval. Each Fund will not:
1. pledge, mortgage or hypothecate its assets except to secure indebtedness
permitted to be incurred by the Fund, provided that the deposit in escrow of
securities in connection with the writing of put and call options,
collateralized loans of securities and collateral arrangements with respect to
margin for future contracts are not deemed to be pledges or hypothecations for
this purpose;
2. make short sales of securities except short sales against the box;
3. purchase securities on margin except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio securities,
however the Funds may make initial and variation margin deposits in connection
with permitted transactions in options without violating this limitation;
4. purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets.
TRUSTEES AND OFFICERS
The Board of Trustees supervises the Funds' activities and reviews contractual
arrangements with the Funds' service providers. The Trustees and officers are
listed below. All persons named as Trustees and officers also serve in a similar
capacity for WT Investment Trust I. An asterisk (*) indicates those Trustees who
are "interested persons".
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Position(s)
Held with
Name, Address and Date of Birth the Fund Principal Occupation(s) During the Past Five Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ROBERT ARNOLD Trustee In 1989, Mr. Arnold founded, and currently co-manages, R.
152 W. 57th Street, 44th Floor H. Arnold & Co., Inc., an investment banking company.
New York, NY 10019 Prior to forming R. H. Arnold & Co., Inc., Mr. Arnold was
Date of Birth: 3/44 Executive Vice President and a director to Cambrian
Capital Corporation, an investment banking firm he
co-founded in 1987.
- -------------------------------------------------------------------------------------------------------------
ROBERT J. CHRISTIAN* Trustee, Mr. Christian has been Chief Investment Officer of
- -------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Position(s)
Held with
Name, Address and Date of Birth the Fund Principal Occupation(s) During the Past Five Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rodney Square North President Wilmington Trust Company since February 1996 and Director
1100 N. Market Street of Rodney Square Management Corporation since 1996. He
Wilmington, DE 19890 was Chairman and Director of PNC Equity Advisors Company,
Date of Birth: 2/49 and President and Chief Investment Officer of PNC Asset
Management Group Inc. from 1994 to 1996. He was Chief
Investment Officer of PNC Bank from 1992 to 1996 and
Director of Provident Capital Management from 1993 to 1996.
- -------------------------------------------------------------------------------------------------------------
NICHOLAS A. GIORDANO Trustee Mr. Giordano served as interim President of LaSalle
LaSalle University University from July 1, 1998 to June 1999 and was a
Philadelphia, PA 19141 consultant for financial services organizations from late
Date of Birth: 3/43 1997 through 1998. He served as president and chief
executive officer of the Philadelphia Stock Exchange from
1981 through August 1997, and also served as chairman of
the board of the exchange's two subsidiaries: Stock
Clearing Corporation of Philadelphia and Philadelphia
Depository Trust Company. Before joining the
Philadelphia Stock Exchange, Mr. Giordano served as chief
financial officer at two brokerage firms (1968-1971). A
certified public accountant, he began his career at Price
Waterhouse in 1965.
- -------------------------------------------------------------------------------------------------------------
JOHN J. QUINDLEN Trustee Mr. Quindlen has retired as Senior Vice President -
313 Southwinds Finance of E.I. duPont de Nemours & Company, Inc.
1250 W. Southwinds Blvd. (diversified chemicals), a position held from 1984 to
Vero Beach, FL 32963 November 30, 1993. He served as Chief Financial Officer
Date of Birth: 5/32 of E.I. duPont de Nemours & Company from 1984 through
June 1993. He also serves as a Director of St. Joe Paper
Co. and as a Trustee of Kalmar Pooled Investment Trust.
- -------------------------------------------------------------------------------------------------------------
LOUIS KLEIN JR. Trustee Self-employed financial consultant from 1991 to the
80 Butternut Lane present. Trustee of Manville Personal Injury Settlement
Stamford, CT 06903 Trust since 1991.
Date of Birth: 5/35
- -------------------------------------------------------------------------------------------------------------
CLEMENT C. MOORE, II Trustee Managing Partner, Mariemont Holdings, LLC, a commercial
10 Rockefeller Plaza real estate holding and development company since 1980.
New York, NY 10004
Date of Birth: 9/44
- -------------------------------------------------------------------------------------------------------------
ERIC BRUCKER Trustee Dean of the College of Business, Public Policy and Health
University of Maine at the University of Southern Maine since September
Orono, ME 04469 1998. Dean of the School of Management at the University
Date of Birth: 12/41 of Michigan from 1992 to 1998.
- -------------------------------------------------------------------------------------------------------------
WILLIAM P. RICHARDS* Trustee Managing Director - Client Service and Portfolio
100 Wilshire Boulevard Communication, Roxbury Capital Management since 1998.
Suite 600 Formerly, Senior Vice President and Partner at Van
Santa Monica, CA 90401 Deventer Hoch, investment management firm.
Date of Birth: 11/36
- -------------------------------------------------------------------------------------------------------------
ERIC K. CHEUNG Vice From 1978 to 1986, Mr. Cheung was the Portfolio Manager
Rodney Square North President for fixed income assets of the Meritor Financial Group.
1100 N. Market Street In 1986, Mr. Cheung joined Wilmington Trust Company and
Wilmington, DE 19890 in 1991, he became the Division Manager for all fixed
Date of Birth: 12/54 income products.
- -------------------------------------------------------------------------------------------------------------
PAT COLLETTI Vice Mr. Colletti is Vice President and Director of Investment
400 Bellevue Parkway President Accounting and Administration of PFPC Inc. since April
- -------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Position(s)
Held with
Name, Address and Date of Birth the Fund Principal Occupation(s) During the Past Five Years
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wilmington, DE 19809 and Treasurer 1999. Prior to joining PFPC, Mr. Colletti was Controller
Date of Birth: 11/58 for the Reserve Funds since 1986.
- -------------------------------------------------------------------------------------------------------------
GARY M. GARDNER Secretary Mr. Gardner has been a Senior Vice President of PFPC Inc.
400 Bellevue Parkway since January 1994. Previously, Mr. Gardner had provided
Wilmington, DE 19809 legal and regulatory advice to mutual funds and their
Date of Birth: 2/51 management for more than twenty years at Federated
Investors, Inc., SunAmerica Asset Management Corp. and
The Boston Company, Inc.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
On October 29, 1999, the Trustees and officers of the Fund, as a group, owned
beneficially, or may be deemed to have owned beneficially, less than 1% of the
outstanding shares of each Fund.
The fees and expenses of the Trustees who are not "interested persons" of the
Fund ("Independent Trustees"), as defined in the 1940 Act are paid by each Fund.
The following table shows the fees paid during the fiscal year ended June 30,
1999 to the Independent Trustees for their service to the Fund and the total
compensation paid to the Trustees by the WT Fund Complex, which consists of the
Fund and WT Investment Trust I.
Trustees Fees for the Fiscal Year Ended June 30, 1999
Aggregate Total Compensation
Compensation from from the WT Fund
Independent Trustee the Fund Complex
- ------------------- -------- -------
Robert Arnold $10,500 $21,000
Nicholas Giordano $7,500 $15,000
Lawrence Thomas* $10,500 $21,000
*Mr. Thomas resigned as Trustee effective August 12, 1999.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Persons or organizations beneficially owning 25% or more of the outstanding
shares of a Fund may be presumed to "control" the Fund. As a result, those
persons or organizations could have the ability to vote a majority of the shares
of the Fund on any matter requiring the approval of the shareholders of that
Fund. As of October 29, 1999, no entities were known to own beneficially 5% or
more of the outstanding shares of any Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
Rodney Square Management Corporation
RSMC serves as the investment adviser to the Prime Money Market Series and the
Tax-Exempt Series. RSMC is a Delaware corporation organized on September 17,
1981. It is a wholly owned subsidiary of WTC, a state-chartered bank organized
as a Delaware corporation in 1903. WTC is a wholly owned subsidiary of
Wilmington Trust Corporation, a publicly held bank holding company. RSMC may
occasionally consult, on an informal basis, with personnel of WTC's investment
departments.
Several affiliates of RSMC are also engaged in the investment advisory business.
Wilmington Trust FSB and Wilmington Brokerage Services Company, both wholly
owned subsidiaries of WTC, are registered investment advisers. In addition, WBSC
is a registered broker-dealer.
21
<PAGE>
For its services as adviser, RSMC received the following fees:
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
Prime Money Market Series $7,672,029 $5,078,193 $4,055,663
Tax-Exempt Series $2,047,289 $1,246,730 $1,103,443
Wilmington Trust Company
Wilmington Trust Company, the parent of RSMC, is a state-chartered bank
organized as a Delaware corporation in 1903. WTC is a wholly owned subsidiary of
Wilmington Trust Corporation, a publicly held bank holding company. WTC is
engaged in a variety of investment advisory activities, including the management
of collective investment pools, and has nearly a century of experience managing
the personal investments of high net-worth individuals. WTC presently manages
over $7 billion in fixed income assets and approximately $15.5 billion in equity
assets for clients.
WTC serves as the adviser to the Short/Intermediate Bond Series, the
Intermediate Bond Series, the Municipal Bond Series, the Large Cap Core Series,
the Small Cap Core Series and the International Multi-Manager Portfolios.Series.
WTC also served as the adviser to the Premier Money Market Series until November
1, 1999.
For WTC's services as investment adviser to each Series, WTC received the
following fees:
<TABLE>
<CAPTION>
October 20, 1998 to 12 months ended 12 months ended 12 months ended
June 30, 1999 6/30/99 6/30/98 6/30/97
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Intermediate Bond Series N/A $322,428 N/A N/A
Municipal Bond Series N/A $61,687 $86,481 $84,035
</TABLE>
For its services as adviser, WTC waived the following fees:
<TABLE>
<CAPTION>
October 20, 1998 to 12 months ended 12 months ended 12 months ended
June 30, 1999 6/30/99 6/30/98 6/30/97
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Intermediate Bond Series N/A $103,995 N/A N/A
Municipal Bond Series N/A $36,996 $81,481 $84,035
</TABLE>
For Institutional shares, CRM has agreed to reimburse expenses to the extent
total operating expenses exceed 0.80% for the Intermediate Bond Fund and 1.00%
for the Municipal Bond Fund. This undertaking will remain in place until the
Board of Trustees approves its termination.
Cramer Rosenthal McGlynn, LLC
CRM serves as investment adviser to the Large Cap Value, the Mid Cap Value and
the Small Cap Series. CRM and its predecessors have managed investments in small
and medium capitalization companies for over 25 years. CRM is 67% owned (and
therefore controlled) by Cramer, Rosenthal, McGlynn, Inc. ("CRM") and its
shareholders. CRM is registered as an investment adviser with the SEC.
Portfolios.For its services as adviser, CRM received the following fees:
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
Large Cap Value Series $128,702 $6,174 N/A
Mid Cap Value Series $40,525 N/A N/A
Small Cap Value Series $985,563 $1,434,005 N/A
For its services as adviser, CRM waived the following fees.
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
Large Cap Value Series $61,969 $6,174 N/A
Mid Cap Value Series $40,525 N/A N/A
Small Cap Value Series N/A N/A N/A
22
<PAGE>
For Institutional shares, CRM has voluntarily undertaken to waive a portion of
its fees and assume certain expenses of the above Funds to the extent that the
total annual operating expenses exceed 1.15% of net assets. This undertaking
will remain in place until the Board of Trustees approves its termination..
Advisory Services. Under the terms of advisory agreements, each adviser agrees
to: (a) direct the investments of each Series, subject to and in accordance with
the Series' investment objective, policies and limitations set forth in the
Prospectus and this Statement of Additional Information; (b) purchase and sell
for each Series, securities and other investments consistent with the Series'
objectives and policies; (c) supply office facilities, equipment and personnel
necessary for servicing the investments of the Series; (d) pay the salaries of
all personnel of the Series and the adviser performing services relating to
research, statistical and investment activities on behalf of the Series; (e)
make available and provide such information as the Series and/or its
administrator may reasonably request for use in the preparation of its
registration statement, reports and other documents required by any applicable
federal, foreign or state statutes or regulations; (f) make its officers and
employees available to the Trustees and officers of the Fund for consultation
and discussion regarding the management of each Series and its investment
activities. Additionally, each adviser agrees to create and maintain all
necessary records in accordance with all applicable laws, rules and regulations
pertaining to the various functions performed by it and not otherwise created
and maintained by another party pursuant to contract with the Fund. Each adviser
may at any time or times, upon approval by the Board of Trustees, enter into one
or more sub-advisory agreements with a sub-advisor pursuant to which the adviser
delegates any or all of its duties as listed.
The agreements provide that each adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by a Series in connection
with the matters to which the agreement relates, except to the extent of a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its obligations and duties under the agreement.
The salaries of any officers and the interested Trustees of the Funds who are
affiliated with an adviser and the salaries of all personnel of each adviser
performing services for each Fund relating to research, statistical and
investment activities are paid by the adviser.
Administration and Accounting Services
Under separate Administration and Accounting Services Agreements, PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809 performs certain administrative and
accounting services for WT Mutual Fund and WT Investment Trust I. These services
include preparing shareholder reports, providing statistical and research data,
assisting the advisers in compliance monitoring activities, and preparing and
filing federal and state tax returns on behalf of the Fund and the Trust. In
addition, PFPC prepares and files various reports with the appropriate
regulatory agencies and prepares materials required by the SEC or any state
securities commission having jurisdiction over the Fund. The accounting services
performed by PFPC include determining the net asset value per share of each Fund
and maintaining records relating to the securities transactions of the Fund. The
Administration and Accounting Services Agreements provides that PFPC and its
affiliates shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or its Funds, except to the extent of a loss
resulting from willful misfeasance, bad faith or gross negligence on their part
in the performance of their obligations and duties under the Administration and
Accounting Services Agreements.
For its administrative and accounting services, PFPC received the following
fees:
12 months ended For the period
6/30/99 2/2/98 to 6/30/98
------- -----------------
Intermediate Bond Series $92,122 N/A
Municipal Bond Series $17,625 $7,176
Large Cap Value Series $87,657 N/A
23
<PAGE>
Prior to February 2, 1998, RSMC provided administrative and accounting services
and was paid the following fees:
For the period 12 months ended
7/1/97 to 2/2/98 6/30/97
---------------- -------
Intermediate Bond Series N/A N/A
Municipal Bond Series $37,574 $62,977
Large Cap Value Series N/A N/A
For its administrative and accounting services, PFPC received the following
fees:
12 months ended For the period
6/30/99 1/5/98 to 6/30/98
------- -----------------
Prime Money Market Series $1,461,311 $522,138
Tax-Exempt Series $435,593 $141,809
Prior to January 5, 1998, RSMC provided administrative and accounting services
and was paid the following fees:
For the period 12 months ended
7/1/97 to 1/4/98 6/30/97
---------------- -------
Prime Money Market Series $658,459 $942,505
Tax-Exempt Series $170,976 $278,255
Additional Service Providers
Independent Auditors. Ernst & Young LLP serves as the independent auditor to the
Funds and the Series providing services which include (1) auditing the annual
financial statements for the Funds, (2) assistance and consultation in
connection with SEC filings and (3) preparation of the annual federal income tax
returns filed on behalf of each Fund.
Legal Counsel. Pepper Hamilton LLP, 3000 Two Logan Square, 18th and Arch
Streets, Philadelphia, PA 19103, serves as counsel to the Fund and WT Investment
Trust I.
Custodian. Wilmington Trust Company, 1100 North Market Street, Wilmington DE
19890, serves as the Custodian.
Transfer Agent. PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19890-0001,
serves as the Transfer Agent and Dividend Paying Agent.
Distribution of shares
Provident Distributors, Inc. Four Falls Corporate Center, West Conshohocken, PA
19428, serves as the underwriter of the Funds' shares pursuant to a Distribution
Agreement with the Fund. Pursuant to the terms of the Distribution Agreement,
PDI is granted the right to sell the shares of the Funds as agent for the Fund.
Shares of the Funds are offered continuously.
Under the terms of the Distribution Agreement, PDI agrees to use all reasonable
efforts to secure purchasers for Investor class shares of the Funds. PDI
receives no underwriting commissions in connection with the sale of the Funds'
shares.
The Distribution Agreement provides that PDI, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Agreements, will not be liable to the Funds or their shareholders for losses
arising in connection with the sale of Fund shares.
24
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
The advisers place all portfolio transactions on behalf of each Series. Debt
securities purchased and sold by the Series are generally traded on the dealer
market on a net basis (i.e., without commission) through dealers acting for
their own account and not as brokers, or otherwise involve transactions directly
with the issuer of the instrument. This means that a dealer (the securities firm
or bank dealing with a Series) makes a market for securities by offering to buy
at one price and sell at a slightly higher price. The difference between the
prices is known as a spread. When securities are purchased in underwritten
offerings, they include a fixed amount of compensation to the underwriter.
The primary objective of the advisers in placing orders on behalf of the Series
for the purchase and sale of securities is to obtain best execution at the most
favorable prices through responsible brokers or dealers and, where the spread or
commission rates are negotiable, at competitive rates. In selecting a broker or
dealer, each adviser considers, among other things: (i) the price of the
securities to be purchased or sold; (ii) the rate of the spread or commission;
(iii) the size and difficulty of the order; (iv) the nature and character of the
spread or commission for the securities to be purchased or sold; (v) the
reliability, integrity, financial condition, general execution and operational
capability of the broker or dealer; and (vi) the quality of any research or
statistical services provided by the broker or dealer to the Series or to the
advisers.
The advisers cannot readily determine the extent to which spreads or commission
rates or net prices charged by brokers or dealers reflect the value of their
research, analysis, advice and similar services. In such cases, each adviser
receives services it otherwise might have had to perform itself. The research,
analysis, advice and similar services provided by brokers or dealers can be
useful to the advisers in serving its other clients, as well as in serving the
Series. Conversely, information provided to the advisers by brokers or dealers
who have executed transaction orders on behalf of other clients of the adviser
may be useful in providing services to the Series. During the twelve-month
periods ended June 30, 1999, 1998 and the Series paid the following brokerage
commissions:
12 months ended 12 months ended 12 months ended
6/30/99 6/30/98 6/30/97
------- ------- -------
Prime Money Market Series N/A N/A N/A
Tax-Exempt Series N/A N/A N/A
Intermediate Bond Series N/A N/A N/A
Municipal Bond Series N/A N/A N/A
Large Cap Value Series $234,362 N/A N/A
Mid Cap Value Series $52,621 $16,841 N/A
Small Cap Value Series $424,842 $397,058 $594,021
Some of the advisers' other clients have investment objectives and programs
similar to that of the Series. Occasionally, recommendations made to other
clients may result in their purchasing or selling securities simultaneously with
the Series. Consequently, the demand for securities being purchased or the
supply of securities being sold may increase, and this could have an adverse
effect on the price of those securities. It is the policy of the advisers not to
favor one client over another in making recommendations or in placing orders. In
the event of a simultaneous transaction, purchases or sales are averaged as to
price, transaction costs are allocated between a Series and other clients
participating in the transaction on a pro rata basis and purchases and sales are
normally allocated between the Series and the other clients as to amount
according to a formula determined prior to the execution of such transactions.
CAPITAL STOCK AND OTHER SECURITIES
The Fund issues two separate classes of shares, Institutional and Investor
shares, for each Fund with a par value of $.01 per share. The shares of each
Fund, when issued and paid for in accordance with the
25
<PAGE>
prospectus, will be fully paid and non-assessable shares, with equal voting
rights and no preferences as to conversion, exchange, dividends, redemption or
any other feature.
The separate classes of shares each represent interests in the same portfolio of
investments, have the same rights and are identical in all respects, except that
the Investor class shares bear shareholder services fees. The net income
attributable to Investor shares and the dividends payable on Investor shares
will be reduced by the amount of the shareholder services fees; accordingly, the
net asset value of the Investor shares will be reduced by such amount to the
extent the Fund has undistributed net income.
Shares of a Fund entitle holders to one vote per share and fractional votes for
fractional shares held. Shares have non-cumulative voting rights, do not have
preemptive or subscription rights and are transferable. Each Fund and class
takes separate votes on matters affecting only that Fund or class. For example,
a change in the fundamental investment policies for a Fund would be voted upon
only by shareholders of that Fund.
The Funds do not hold annual meetings of shareholders. The Trustees are required
to call a meeting of shareholders for the purpose of voting upon the question of
removal of any Trustee when requested in writing to do so by the shareholders of
record owning not less than 10% of a Fund's outstanding shares.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase of Shares. Information regarding the purchase of shares is discussed in
the "Purchase of Shares" section of the prospectus. Additional methods to
purchase shares are as follows:
Individual Retirement Accounts: You may purchase shares of the Funds for a
tax-deferred retirement plan such as an individual retirement account ("IRA").
To order an application for an IRA and a brochure describing a Fund IRA, call
the Transfer Agent at (800) CRM-2883. PFPC Trust Company, as custodian for each
IRA account receives an annual fee of $10 per account, paid directly to PFPC
Trust Company by the IRA shareholder. If the fee is not paid by the due date,
the appropriate number of Fund shares owned by the IRA will be redeemed
automatically as payment.
Automatic Investment Plan: You may purchase Fund shares through an Automatic
Investment Plan ("AIP"). Under the AIP, the Transfer Agent, at regular
intervals, will automatically debit your bank checking account in an amount of
$50 or more (after the $1,000 minimum initial investment). You may elect to
invest the specified amount monthly, bimonthly, quarterly, semiannually or
annually. The purchase of Fund shares will be effected at their offering price
at 12:00 p.m. Eastern time for the Tax-Exempt Fund, at 2:00 p.m. Eastern Time
for the Prime Money Market, Premier Money Market and U.S. Government Funds, or
at the close of regular trading on the New York Stock Exchange ("Exchange")
(currently 4:00 p.m., Eastern time), for the Bond and Equity Funds, on or about
the 20th day of the month. For an application for the Automatic Investment Plan,
check the appropriate box of the application or call the Transfer Agent at (800)
CRM-2883.
Payroll Investment Plan: The Payroll Investment Plan ("PIP") permits you to make
regularly scheduled purchases of Fund shares through payroll deductions. To open
a PIP account, you must submit a completed account application, payroll
deduction form and the minimum initial deposit to your employer's payroll
department. Then, a portion of your paychecks will automatically be transferred
to your PIP account for as long as you wish to participate in the plan. It is
the sole responsibility of your employer, not the Fund, the distributor, the
advisers or the transfer agent, to arrange for transactions under the PIP. The
Fund reserves the right to vary its minimum purchase requirements for employees
participating in a PIP.
Redemption of Shares. Information regarding the redemption of shares is
discussed in the "Redemption of Shares" section of the prospectus. Additional
methods to redeem shares are as follows:
By Check: You may utilize the check writing option to redeem shares of the Prime
Money Market and the Tax-Exempt Funds by drawing a check for $500 or more
against a Fund account. When the check is
26
<PAGE>
presented for payment, a sufficient number of shares will be redeemed from your
Fund account to cover the amount of the check. This procedure enables you to
continue receiving dividends on those shares until the check is presented for
payment. Because the aggregate amount of Fund shares owned is likely to change
each day, you should not attempt to redeem all shares held in your account by
using the check writing procedure. Charges will be imposed for specially
imprinted checks, business checks, copies of canceled checks, stop payment
orders, checks returned due to "nonsufficient funds" and returned checks. These
charges will be paid by automatically redeeming an appropriate number of Fund
shares. Each Fund and the Transfer Agent reserve the right to terminate or alter
the check writing service at any time. The Transfer Agent also reserves the
right to impose a service charge in connection with the check writing service.
If you are interested in the check writing service, contact the Transfer Agency
for further information. This service is generally not available for Service
Organization clients who are provided a similar service by those organizations.
By Wire: Redemption proceeds may be wired to your predesignated bank account in
any commercial bank in the United States if the amount is $1,000 or more. The
receiving bank may charge a fee for this service. Proceeds may also be mailed to
your bank or, for amounts of $10,000 or less, mailed to your Fund account
address of record if the address has been established for at least 60 days. In
order to authorize the Transfer Agent to mail redemption proceeds to your Fund
account address of record, complete the appropriate section of the Application
for Telephone Redemptions or include your Fund account address of record when
you submit written instructions. You may change the account that you have
designated to receive amounts redeemed at any time. Any request to change the
account designated to receive redemption proceeds should be accompanied by a
guarantee of the shareholder's signature by an eligible institution. A signature
and a signature guarantee are required for each person in whose name the account
is registered. Further documentation will be required to change the designated
account when a corporation, other organization, trust, fiduciary or other
institutional investor holds the Fund shares.
Systematic Withdrawal Plan: If you own shares of a Fund with a value of $10,000
or more you may participate in the Systematic Withdrawal Plan ("SWP"). Under the
SWP, you may automatically redeem a portion of your account monthly, bimonthly,
quarterly, semiannually or annually. The minimum withdrawal available is $100.
The redemption of Fund shares will be effected at the NAV determined on or about
the 25th day of the month.
Additional Information Regarding Redemptions: To ensure proper authorization
before redeeming shares of the Funds, the Transfer Agent may require additional
documents such as, but not restricted to, stock powers, trust instruments, death
certificates, appointments as fiduciary, certificates of corporate authority and
waivers of tax required in some states when settling estates.
Clients of Service Organizations who have purchased shares through their
accounts with those Service Organizations should contact the Service
Organization prior to submitting a redemption request to ensure that all
necessary documents accompany the request. When shares are held in the name of a
corporation, other organization, trust, fiduciary or other institutional
investor, the Transfer Agent requires, in addition to the stock power, certified
evidence of authority to sign the necessary instruments of transfer. These
procedures are for the protection of shareholders and should be followed to
ensure prompt payment. Redemption requests must not be conditional as to date or
price of the redemption. Proceeds of a redemption will be sent within 7 days of
acceptance of shares tendered for redemption. Delay may result if the purchase
check has not yet cleared, but the delay will be no longer than required to
verify that the purchase check has cleared, and the Funds will act as quickly as
possible to minimize delay.
The value of shares redeemed may be more or less than the shareholder's cost,
depending on the net asset value at the time of redemption. Redemption of shares
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of a redemption may be subject to backup withholding.
A shareholder's right to redeem shares and to receive payment therefore may be
suspended when (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted, (c) an emergency
exists as a result of which it is not reasonably practicable to dispose of a
Fund's securities or to determine the value of a Fund's net assets, or (d)
ordered by a governmental body
27
<PAGE>
having jurisdiction over a Fund for the protection of the Fund's shareholders,
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether a condition described in (b),
(c) or (d) exists. In case of such suspension, shareholders of the affected Fund
may withdraw their requests for redemption or may receive payment based on the
net asset value of the Fund next determined after the suspension is lifted.
Each Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part with readily marketable securities chosen by the Fund and valued in the
same way as they would be valued for purposes of computing the net asset value
of the applicable Fund. If payment is made in securities, a shareholder may
incur transaction expenses in converting these securities into cash. Each Fund
has elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a
result of which a Fund is obligated to redeem shares solely in cash if the
redemption requests are made by one shareholder account up to the lesser of
$250,000 or 1% of the net assets of the applicable Fund during any 90-day
period. This election is irrevocable unless the SEC permits its withdrawal.
Pricing of Shares. The Premier Money Market Fund's securities are valued on the
basis of the amortized cost valuation technique. This involves valuing a
security initially at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of fluctuating interest rates
on the market value of the security. The valuation of the Fund's securities
based upon their amortized cost and the accompanying maintenance of the Fund's
per share net asset value of $1.00 is permitted in accordance with Rule 2a-7
under the 1940 Act. Certain conditions imposed by that Rule are set forth under
"Investment Policies." In connection with the use of the amortized cost
valuation technique, each Fund's Board of Trustees has established procedures
delegating to the adviser the responsibility for maintaining a constant net
asset value per share. Such procedures include a daily review of the Fund's
holdings to determine whether the Fund's net asset value, calculated based upon
available market quotations, deviates from $1.00 per share. Should any deviation
exceed 1/2 of 1% of $1.00, the Trustees will promptly consider whether any
corrective action should be initiated to eliminate or reduce material dilution
or other unfair results to shareholders. Such corrective action may include
selling of portfolio securities prior to maturity to realize capital gains or
losses, shortening average portfolio maturity, withholding dividends, redeeming
shares in kind and establishing a net asset value per share based upon available
market quotations.
Should the Premier Money Market Fund incur or anticipate any unusual expense or
loss or depreciation that would adversely affect its net asset value per share
or income for a particular period, the Trustees would at that time consider
whether to adhere to the current dividend policy or to revise it in light of the
then prevailing circumstances. For example, if the Fund's net asset value per
share were reduced, or were anticipated to be reduced, below $1.00, the Trustees
could suspend or reduce further dividend payments until the net asset value
returned to $1.00 per share. Thus, such expenses or losses or depreciation could
result in investors receiving no dividends or reduced dividends for the period
during which they held their shares or in their receiving upon redemption a
price per share lower than that which they paid.
For the Bond Funds and the Equity Funds, the net asset value per share of each
Fund is determined by dividing the value of the Fund's net assets by the total
number of Fund shares outstanding. This determination is made by PFPC, as of the
close of regular trading on the Exchange (currently 4:00 p.m., Eastern Time)
each day the Funds are open for business. The Funds are open for business on
days when the Exchange, PFPC and the Philadelphia branch office of the Federal
Reserve are open for business.
In valuing a Fund's assets, a security listed on the Exchange (and not subject
to restrictions against sale by the Fund on the Exchange) will be valued at its
last sale price on the Exchange on the day the security is valued. Lacking any
sales on such day, the security will be valued at the mean between the closing
asked price and the closing bid price. Securities listed on other exchanges (and
not subject to restriction against sale by the Fund on such exchanges) will be
similarly valued, using quotations on the exchange on which the security is
traded most extensively. Unlisted securities that are quoted on the National
Association of Securities Dealers' National Market System, for which there have
been sales of such securities on such day, shall be valued at the last sale
price reported on such system on the day the security is valued. If there are no
such sales on such day, the value shall be the mean between the closing asked
price and the closing bid
28
<PAGE>
price. The value of such securities quoted on the NASDAQ Stock Market System,
but not listed on the National Market System, shall be valued at the mean
between the closing asked price and the closing bid price. Unlisted securities
that are not quoted on the NASDAQ Stock Market System and for which
over-the-counter market quotations are readily available will be valued at the
mean between the current bid and asked prices for such security in the
over-the-counter market. Other unlisted securities (and listed securities
subject to restriction on sale) will be valued at fair value as determined in
good faith under the direction of the Board of Trustees although the actual
calculation may be done by others. Short-term investments with remaining
maturities of less than 61 days are valued at amortized cost.
DIVIDENDS
Dividends from the Premier Money Market Fund are declared on each Business Day.
The dividend for a Business Day immediately preceding a weekend or holiday
normally includes an amount equal to the net income for the subsequent
non-Business Days on which dividends are not declared. However, no such dividend
includes any amount of net income earned in a subsequent semiannual accounting
period. A portion of the dividends paid by the U.S. Government Fund may be
exempt from state taxes.
Dividends from the Bond Funds' net investment income are declared on each
Business Day and paid to shareholders ordinarily on the first Business Day of
the following month. The dividend for a Business Day immediately preceding a
weekend or holiday normally includes an amount equal to the net income expected
for the subsequent non-Business Days on which dividends are not declared.
However, no such dividend included any amount of net income earned in a
subsequent semiannual period. Net short-term capital gain and net capital gain
(the excess of net long-term capital gain over the short-term capital loss)
realized by each Fund, after deducting any available capital loss carryovers,
are declared and paid annually.
Dividends from the Equity Funds' net investment income and distributions of net
short-term capital gain and net capital gain (the excess of net long-term
capital gain over the short-term capital loss) realized by each Fund, after
deducting any available capital loss carryovers are declared and paid to its
shareholders annually.
TAXATION OF THE FUNDS
General. Each Fund is treated as a separate corporation for federal income tax
purposes. To qualify or continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"), each Fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain and must meet several
additional requirements. For each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures and forward
contracts) derived with respect to its business of investing in securities or
those currencies; (2) at the close of each quarter of the Fund's taxable year,
at least 50% of the value of its total assets must be represented by cash and
cash items, U.S. Government securities, securities of other RICs and other
securities, with these other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of any
one issuer.
If a Fund failed to qualify for treatment as a RIC in any taxable year, it would
be subject to tax on its taxable income at corporate rates and all distributions
from earnings and profits, including any distributions from net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
would be taxable to its shareholders as ordinary income. In addition, the Fund
could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before qualifying again for RIC
treatment.
29
<PAGE>
Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
Dividends and other distributions declared by a Fund in October, November or
December of any year and payable to shareholders of record on a date in one of
those months will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if they are paid by the Fund during the
following January. Accordingly, such distributions will be taxed to the
shareholders for the year in which that December 31 falls.
Investors should be aware that if Fund shares are purchased shortly before the
record date for any dividend (other than an exempt-interest dividend) or capital
gain distribution, the shareholder will pay full price for the shares and will
receive some portion of the price back as a taxable distribution.
If a Fund makes a distribution to shareholders in excess of its current and
accumulated earnings and profits in any taxable year, the excess distribution
will be treated by each shareholder as a return of capital to the extent of the
shareholder's tax basis and thereafter as capital gain.
Money Market Funds:
Distributions from the Funds' investment company taxable income, if any, are
taxable to its shareholders as ordinary income to the extent of the Funds'
earnings and profits. Because the Funds' net investment income is derived from
interest rather than dividends, no portion of the distributions thereof is
eligible for the dividends-received deduction allowed to corporations.
Bond Funds:
Each Bond Fund may acquire zero coupon securities issued with original issue
discount. As a holder of those securities, a Fund must take into account the
original issue discount that accrues on the securities during the taxable year,
even if it receives no corresponding payment on them during the year. Because
each Fund annually must distribute substantially all of its investment company
taxable income and net tax-exempt income, including any original issue discount,
to satisfy the distribution requirements for RICs under the Code and (except
with respect to tax-exempt income) avoid imposition of the Excise Tax, a Fund
may be required in a particular year to distribute as a dividend an amount that
is greater than the total amount of cash it actually receives. Those
distributions will be made from a Fund's cash assets or from the proceeds of
sales of portfolio securities, if necessary. A Fund may realize capital gains or
losses from those sales, which would increase or decrease its investment company
taxable income and/or net capital gain.
Tax-Exempt Fund and Municipal Bond Fund: Each of these Funds will be able to pay
exempt-interest dividends to its shareholders only if, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets
consists of obligations the interest on which is excludable from gross income
under section 103(a) of the Code; both Funds intend to continue to satisfy this
requirement. Distributions that a Fund properly designates as exempt-interest
dividends are treated by its shareholders as interest excludable from their
gross income for federal income tax purposes but may be tax preference items.
The aggregate dividends excludable from the shareholders' gross income may not
exceed the Fund's net tax-exempt income. The shareholders' treatment of
dividends from a Fund under state and local income tax laws may differ from the
treatment thereof under the Code. In order to qualify to pay exempt-interest
dividends, each Fund may be limited in its ability to engage in taxable
transactions such as repurchase agreements, options and futures strategies and
portfolio securities lending.
Tax-exempt interest attributable to certain "private activity bonds" ("PABs")
(including, in the case of a RIC receiving interest on those bonds, a
proportionate part of the exempt-interest dividends paid by the RIC) is a tax
preference item. Furthermore, even interest on tax-exempt securities held by a
Fund that are not PABs, which interest otherwise would not be a tax preference
item, nevertheless may be indirectly subject to the federal alternative minimum
tax in the hands of corporate shareholders when distributed to them by the Fund.
PABs are issued by or on behalf of public authorities to finance various
privately operated facilities. Entities or persons who are "substantial users"
(or persons related to "substantial users") of facilities financed by industrial
development bonds or PABs should consult their tax advisers before purchasing a
Fund's shares. For these purposes, the term "substantial user" is defined
generally to
30
<PAGE>
include a "non-exempt person" who regularly uses in trade or business a part of
a facility financed from the proceeds of such bonds.
Up to 85% of Social Security and railroad retirement benefits may be included in
taxable income for recipients whose adjusted gross income (including income from
tax-exempt sources such as the Tax-Exempt Municipal Bond Funds) plus 50% of
their benefits exceeds certain base amounts. Exempt-interest dividends from each
Fund still are tax-exempt to the extent described in the prospectus; they are
only included in the calculation of whether a recipient's income exceeds the
established amounts.
If a Fund invests in any instruments that generate taxable income, under the
circumstances described in the prospectus, distributions of the interest earned
thereon will be taxable to its shareholders as ordinary income to the extent of
its earnings and profits. Moreover, if a Fund realizes capital gain as a result
of market transactions, any distribution of that gain will be taxable to its
shareholders.
The Municipal Bond Fund may invest in municipal bonds that are purchased with
"market discount." For these purposes, market discount is the amount by which a
bond's purchase price is exceeded by its stated redemption price at maturity or,
in the case of a bond that was issued with original issue discount ("OID"), the
sum of its issue price plus accrued OID, except that market discount less than
the product of (1) 0.25% of the redemption price at maturity times and (2) the
number of complete years to maturity after the taxpayer acquired the bond is
disregarded. Market discount generally is accrued ratably, on a daily basis,
over the period from the acquisition date to the date of maturity. Gain on the
disposition of such a bond (other than a bond with a fixed maturity date within
one year from its issuance) generally is treated as ordinary (taxable) income,
rather than capital gain, to the extent of the bond's accrued market discount at
the time of disposition. In lieu of treating the disposition gain as above, the
Municipal Bond Fund may elect to include market discount in its gross income
currently, for each taxable year to which it is attributable.
The Tax-Exempt Municipal Bond Funds informs shareholders within 60 days after
its fiscal year-end (October(August 31) of the percentage of its income
distributions designated as exempt-interest dividends. The percentage is applied
uniformly to all distributions made during the year, so the percentage
designated as tax-exempt for any particular distribution may be substantially
different from the percentage of the Fund's income that was tax-exempt during
the period covered by the distribution.
Intermediate Bond Fund: Interest and dividends received by the Intermediate Bond
Fund, and gains realized thereby, may be subject to income, withholding or other
taxes imposed by foreign countries and U.S. possessions that would reduce the
yield and/or total return on their securities. Tax conventions between certain
countries and the United States may reduce or eliminate these taxes, however,
and many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.
Equity Funds:
It is anticipated that all or a portion of the dividends from the net investment
income of each Equity Fund will qualify for the dividends-received deduction
allowed to corporations. The qualifying portion may not exceed the aggregate
dividends received by the Fund from U.S. corporations. However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the federal alternative
minimum tax. Moreover, the dividends-received deduction will be reduced to the
extent the shares with respect to which the dividends are received are treated
as debt-financed and will be eliminated if those shares are deemed to have been
held for less than 46 days. Distributions of net short-term capital gain and net
capital gain are not eligible for the dividends-received deduction.
Any loss realized by a shareholder on the redemption of shares within six months
from the date of their purchase will be treated as a long-term, instead of a
short-term, capital loss to the extent of any capital gain distributions to that
shareholder with respect to those shares.
Hedging Transactions. The use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward currency
contracts, involves complex rules that will determine for federal income tax
purposes the amount, character and timing of recognition of the gains and
31
<PAGE>
losses a Fund realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations) and gains from options, futures and foreign currency contracts
derived by a Fund with respect to its business of investing in securities
qualify as permissible income under the Income Requirement.
Futures and foreign currency contracts that are subject to section 1256 of the
Code (other than such contracts that are part of a "mixed straddle" with respect
to which a Fund has made an election not to have the following rules apply)
("Section 1256 Contracts") and that are held by a Fund at the end of its taxable
year generally will be "marked-to-market" (that is, deemed to have been sold for
their market value) for federal income tax purposes. Sixty percent of any net
gain or loss recognized on these deemed sales, and 60% of any net realized gain
or loss from any actual sales of Section 1256 Contracts, will be treated as
long-term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. As of the date of this Statement of Additional
Information, it is not entirely clear whether that 60% portion will qualify for
the reduced maximum tax rates on non-corporate taxpayers' net capital gain
enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months. However, technical correction legislation passed by the
House of Representatives late in 1997 would clarify that the lower rates apply.
Section 1256 Contracts also may be marked-to-market for purposes of the Excise
Tax.
Section 988 of the Code also may apply to forward currency contracts and options
on foreign currencies. Under section 988, each foreign currency gain or loss
generally is computed separately and treated as ordinary income or loss. In the
case of overlap between sections 1256 and 988, special provisions determine the
character and timing of any income, gain or loss.
Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which a Fund may invest. Section 1092 defines a
"straddle" as offsetting positions with respect to personal property; for these
purposes, options and futures contracts are personal property. Under section
1092, any loss from the disposition of a position in a straddle generally may be
deducted only to the extent the loss exceeds the unrealized gain on the
offsetting position(s) of the straddle. Section 1092 also provides certain "wash
sale" rules, which apply to transactions where a position is sold at a loss and
a new offsetting position is acquired within a prescribed period, and "short
sale" rules applicable to straddles. If a Fund makes certain elections, the
amount, character and timing of the recognition of gains and losses from the
affected straddle positions would be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences to a Fund of straddle
transactions are not entirely clear.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, futures or forward contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
futures or forward contract entered into by a Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing tax discussion is a summary included for general informational
purposes only. Each shareholder is advised to consult its own tax adviser with
respect to the specific tax consequences to it of an investment in a Fund,
including the effect and applicability of state, local, foreign and other tax
laws and the possible effects of changes in federal or other tax laws.
Shortly after the end of each year, PFPC calculates the federal income tax
status of all distributions made during the year. In addition to federal income
tax, shareholders may be subject to state and local taxes on
32
<PAGE>
distributions from a Fund. Shareholders should consult their tax advisers
regarding specific questions relating to federal, state and local taxes.
CALCULATION OF PERFORMANCE INFORMATION
The performance of a Fund may be quoted in terms of its yield and its total
return in advertising and other promotional materials. Performance data quoted
represents past performance and is not intended to indicate future performance.
Performance of the Funds will vary based on changes in market conditions and the
level of each Fund's expenses. These performance figures are calculated in the
following manner:
Money Market Funds:
A. Yield for a money market fund is the net annualized yield for a
specified 7 calendar days calculated at simple interest rates. Yield
is calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts,
and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return. The
yield is annualized by multiplying the base period return by 365/7.
The yield figure is stated to the nearest hundredth of one percent.
The yield for the 7-day period ended June 30, 1999 was:
Prime Money Market Fund 4.49%
Tax-Exempt Fund 2.93%
B. Effective Yield is the net annualized yield for a specified 7
calendar days assuming reinvestment of income or compounding.
Effective yield is calculated by the same method as yield except the
yield figure is compounded by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective yield = [(Base Period Return + 1) 365 divided by 7] - 1.
The effective yield for the 7-day period ended June 30, 1999 was:
Prime Money Market Fund 4.59%
Tax-Exempt Fund 2.97%
All Funds:
A. Average Annual Total Return is the average annual compound rate of
return for the periods of one year, five years, ten years and the
life of a Fund, where applicable, all ended on the last day of a
recent calendar quarter. Average annual total return quotations
reflect changes in the price of a Fund's shares, if any, and assume
that all dividends during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by finding
the average annual compound rates of return of a hypothetical
investment over such periods, according to the following formula
(average annual total return is then expressed as a percentage):
33
<PAGE>
T = (ERV divided by P)1 divided by n - 1
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end
of the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.
Average Annual Total Return for periods ended June 30, 1999
- --------------------------------------------------------------------------------
1 Year 5 Year 10 Year
------ ------ -------
- --------------------------------------------------------------------------------
Prime Money Market 4.85% 5.13% 5.22%
- --------------------------------------------------------------------------------
Tax-Exempt Money Market 2.72% 3.05% 3.35%
- --------------------------------------------------------------------------------
Intermediate Bond 2.08% 7.13% N/A
- --------------------------------------------------------------------------------
Municipal Bond 2.19% 5.63% N/A
- --------------------------------------------------------------------------------
Large Cap Value (0.26)% 16.62% N/A
- --------------------------------------------------------------------------------
Mid Cap Value 2.35% N/A N/A
- --------------------------------------------------------------------------------
Small Cap Value (14.94)% N/A N/A
- --------------------------------------------------------------------------------
B. Yield Calculations. From time to time, an Equity or Bond Fund may
advertise its yield. Yield for these Funds is calculated by dividing the Fund's
investment income for a 30-day period, net of expenses, by the average number of
shares entitled to receive dividends during that period according to the
following formula:
YIELD = 2[((a-b) divided by cd + 1)6-1]
where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
and
d = the maximum offering price per share on the last day
of the period.
The result is expressed as an annualized percentage (assuming semiannual
compounding) of the maximum offering price per share at the end of the period.
Except as noted below, in determining interest earned during the period
(variable "a" in the above formula), pfpc calculates the interest earned on each
debt instrument held by a Fund during the period by: (i) computing the
instrument's yield to maturity, based on the value of the instrument (including
actual accrued interest) as of the last business day of the period or, if the
instrument was purchased during the period, the purchase price plus accrued
interest; (ii) dividing the yield to maturity by 360; and (iii) multiplying the
resulting quotient by the value of the instrument (including actual accrued
interest). Once interest earned is calculated in this fashion for each debt
instrument held by the Fund, interest earned
34
<PAGE>
during the period is then determined by totaling the interest earned on all debt
instruments held by the Fund.
For purposes of these calculations, the maturity of a debt instrument with
one or more call provisions is assumed to be the next date on which the
instrument reasonably can be expected to be called or, if none, the maturity
date. In general, interest income is reduced with respect to debt instruments
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and increased with respect to debt
instruments trading at a discount by adding a portion of the discount to daily
income.
In determining dividends earned by any preferred stock or other equity
securities held by a Fund during the period (variable "a" in the above formula),
PFPC accrues the dividends daily at their stated dividend rates. Capital gains
and losses generally are excluded from yield calculations.
Because yield accounting methods differ from the accounting methods used
to calculate net investment income for other purposes, a Fund's yield may not
equal the dividend income actually paid to investors or the net investment
income reported with respect to the Fund in the Fund's financial statements.
Yield information may be useful in reviewing a Fund's performance and in
providing a basis for comparison with other investment alternatives. However,
the Funds' yields fluctuate, unlike investments that pay a fixed interest rate
over a stated period of time. Investors should recognize that in periods of
declining interest rates, the Funds' yields will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the Funds'
yields will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the Funds from the continuous sale of their
shares will likely be invested in instruments producing lower yields than the
balance of the Funds' holdings, thereby reducing the current yields of the
Funds. In periods of rising interest rates, the opposite can be expected to
occur.
Comparison of Fund Performance. A comparison of the quoted performance offered
for various investments is valid only if performance is calculated in the same
manner. Since there are many methods of calculating performance, investors
should consider the effects of the methods used to calculate performance when
comparing performance of a Fund with performance quoted with respect to other
investment companies or types of investments. For example, it is useful to note
that yields reported on debt instruments are generally prospective, contrasted
with the historical yields reported by a Fund.
In connection with communicating its performance to current or prospective
shareholders, a Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
From time to time, in marketing and other literature, a Money Market Fund's
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities such as the IBC First
Tier Money Market Index for the Premier Money Market Funds. Yield and
performance over time may also be compared to the performance of bank money
market deposit accounts and fixed-rate insured certificates of deposit (CDs), or
unmanaged indices of securities that are comparable to money market funds in
their terms and intent, such as Treasury bills, bankers' acceptances, negotiable
order of withdrawal accounts, and money market certificates. Most bank CDs
differ from money market funds in several ways: the interest rate is fixed for
the term of the CD, there are interest penalties for early withdrawal of the
deposit from a CD, and the deposit principal in a CD is insured by the FDIC.
From time to time, in marketing and other literature, the Bond and Equity Funds'
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities with similar
investment goals, as tracked by independent organizations such as Investment
Company Data, Inc. (an organization which provides performance ranking
information for broad classes of mutual funds), Lipper Analytical Services, Inc.
("Lipper") (a mutual fund research firm which analyzes over 1,800 mutual funds),
CDA Investment Technologies, Inc. (an organization which provides mutual fund
performance and ranking information), Morningstar, Inc. (an organization which
35
<PAGE>
analyzes over 2,400 mutual funds) and other independent organizations. When
Lipper's tracking results are used, a Fund will be compared to Lipper's
appropriate fund category, that is, by fund objective and portfolio holdings.
Rankings may be listed among one or more of the asset-size classes as determined
by Lipper. When other organizations' tracking results are used, a Fund will be
compared to the appropriate fund category, that is, by fund objective and
portfolio holdings, or to the appropriate volatility grouping, where volatility
is a measure of a fund's risk.
Since the assets in all funds are always changing, a Fund may be ranked within
one asset-size class at one time and in another asset-size class at some other
time. In addition, the independent organization chosen to rank a Fund in
marketing and promotional literature may change from time to time depending upon
the basis of the independent organization's categorizations of mutual funds,
changes in a Fund's investment policies and investments, a Fund's asset size and
other factors deemed relevant. Advertisements and other marketing literature
will indicate the time period and Lipper asset-size class or other performance
ranking company criteria, as applicable, for the ranking in question.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning a Fund, including reprints of or selections from,
editorials or articles about the Fund. Sources for performance information and
articles about a Fund may include the following:
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
CDA Investment Technologies, Inc., an organization that provides performance and
ranking information through examining the dollar results of hypothetical mutual
fund investments and comparing these results against appropriate market indices.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
IBC's Money Fund Report, a weekly publication of IBC/Donoghue, Inc., of Ashland,
Massachusetts, reporting on the performance of the nation's money market funds,
summarizing money market fund activity, and including certain averages as
performance benchmarks, specifically "IBC's Money Fund Average," and "IBC's
Government Money Fund Average."
IBC's Money Fund Directory, an annual directory ranking money market mutual
funds.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
36
<PAGE>
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
USA Today, the nation's number one daily newspaper.
U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper that regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.
FINANCIAL STATEMENTS
The audited financial statements and financial highlights of CRM Funds - Small
Cap Value Fund (accounting survivor of WT Mutual Fund - CRM Small Cap Value
Fund), CRM Funds - Mid Cap Value Fund (accounting survivor of WT Mutual Fund -
CRM Mid Cap Value Fund), and CRM Funds - Large Cap Value Fund (accounting
survivor of WT Mutual Fund - CRM Large Cap Value Fund) for the period October 1,
1998 through June 30, 1999, as set forth in CRM Funds annual reports to
shareholders, including the notes thereto and the reports of Ernst & Young LLP
thereon, are incorporated herein by reference.
The audited financial statements and financial highlights of the Rodney Square
Fund - Money Market Portfolio (accounting survivor of WT Mutual Fund -
Wilmington Prime Money Market Portfolio) and the Rodney Square Tax-Exempt Fund
(accounting survivor of WT Mutual Fund - Wilmington Tax-Exempt Portfolio) for
the period October 1, 1998 through June 30, 1999, as set forth in the combined
Rodney Square Fund and Rodney Square Tax-Exempt Fund annual report to
shareholders, including the notes thereto and the report of Ernst & Young LLP
thereon, are incorporated herein by reference.
The audited financial statements and financial highlights of the Rodney Square
Strategic Fixed-Income Fund - Intermediate Bond Portfolio (accounting survivor
of WT Mutual Fund - Wilmington Intermediate Bond Portfolio) and the Rodney
Square Strategic Fixed-Income Fund - Municipal Bond Portfolio (accounting
survivor of WT Mutual Fund - Wilmington Municipal Bond Portfolio) for the period
November 1, 1998 through June 30, 1999, as set forth in the Rodney Square
Strategic Fixed-Income Fund's annual report to shareholders, including the notes
thereto and the report of Ernst & Young LLP thereon, are incorporated herein by
reference.
37
<PAGE>
APPENDIX A
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES
Regulation of the Use of Options, Futures and Forward Currency Contract
Strategies. As discussed in the prospectus, in managing a Fund's corresponding
Series, the adviser may engage in certain options, futures and forward currency
contract strategies for certain bona fide hedging, risk management or other
portfolio management purposes. Certain special characteristics of and risks
associated with using these strategies are discussed below. Use of options,
futures and forward currency contracts is subject to applicable regulations
and/or interpretations of the SEC and the several options and futures exchanges
upon which these instruments may be traded. The Board of Trustees has adopted
investment guidelines (described below) reflecting these regulations.
In addition to the products, strategies and risks described below and in the
prospectus, the adviser expects to discover additional opportunities in
connection with options, futures and forward currency contracts. These new
opportunities may become available as new techniques develop, as regulatory
authorities broaden the range of permitted transactions and as new options,
futures and forward currency contracts are developed. These opportunities may be
utilized to the extent they are consistent with each Fund's investment objective
and limitations and permitted by applicable regulatory authorities. The
registration statement for the Funds will be supplemented to the extent that new
products and strategies involve materially different risks than those described
below and in the prospectus.
Cover Requirements. The Series will not use leverage in their options and
futures. Accordingly, the Series will comply with guidelines established by the
SEC with respect to coverage of these strategies by either (1) setting aside
cash or liquid, unencumbered, daily marked-to-market securities in one or more
segregated accounts with the custodian in the prescribed amount; or (2) holding
securities or other options or futures contracts whose values are expected to
offset ("cover") their obligations thereunder. Securities, currencies, or other
options or futures contracts used for cover cannot be sold or closed out while
these strategies are outstanding, unless they are replaced with similar assets.
As a result, there is a possibility that the use of cover involving a large
percentage of the Series' assets could impede portfolio management, or the
Series' ability to meet redemption requests or other current obligations.
Options Strategies. A Series may purchase and write (sell) only those options on
securities and securities indices that are traded on U.S. exchanges.
Exchange-traded options in the U.S. are issued by a clearing organization
affiliated with the exchange, on which the option is listed, which, in effect,
guarantees completion of every exchange-traded option transaction.
Each Series may purchase call options on securities in which it is authorized to
invest in order to fix the cost of a future purchase. Call options also may be
used as a means of enhancing returns by, for example, participating in an
anticipated price increase of a security. In the event of a decline in the price
of the underlying security, use of this strategy would serve to limit the
potential loss to the Series to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Series either sells or exercises the option, any profit eventually realized
would be reduced by the premium paid.
Each Series may purchase put options on securities that it holds in order to
hedge against a decline in the market value of the securities held or to enhance
return. The put option enables the Series to sell the underlying security at the
predetermined exercise price; thus, the potential for loss to the Series below
the exercise price is limited to the option premium paid. If the market price of
the underlying security is higher than the exercise price of the put option, any
profit the Series realizes on the sale of the security is reduced by the premium
paid for the put option less any amount for which the put option may be sold.
Each Series may on certain occasions wish to hedge against a decline in the
market value of securities that it holds at a time when put options on those
particular securities are not available for purchase. At those times, the Series
may purchase a put option on other carefully selected securities in which it is
authorized to invest, the values of which historically have a high degree of
positive correlation to the value of the securities actually held. If the
adviser's judgment is correct, changes in the value of the put options should
generally offset changes in the
A-1
<PAGE>
value of the securities being hedged. However, the correlation between the two
values may not be as close in these transactions as in transactions in which a
Series purchases a put option on a security that it holds. If the value of the
securities underlying the put option falls below the value of the portfolio
securities, the put option may not provide complete protection against a decline
in the value of the portfolio securities.
Each Series may write covered call options on securities in which it is
authorized to invest for hedging purposes or to increase return in the form of
premiums received from the purchasers of the options. A call option gives the
purchaser of the option the right to buy, and the writer (seller) the obligation
to sell, the underlying security at the exercise price during the option period.
The strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Series declines, the amount of the decline
will be offset wholly or in part by the amount of the premium received by the
Series. If, however, there is an increase in the market price of the underlying
security and the option is exercised, the Series will be obligated to sell the
security at less than its market value.
Each Series may also write covered put options on securities in which it is
authorized to invest. A put option gives the purchaser of the option the right
to sell, and the writer (seller) the obligation to buy, the underlying security
at the exercise price during the option period. So long as the obligation of the
writer continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring it to make payment of
the exercise price against delivery of the underlying security. The operation of
put options in other respects, including their related risks and rewards, is
substantially identical to that of call options. If the put option is not
exercised, the Series will realize income in the amount of the premium received.
This technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying securities would decline below the exercise price less the
premiums received, in which case the Series would expect to suffer a loss.
Each Series may purchase put and call options and write covered put and call
options on indexes in much the same manner as the more traditional options
discussed above, except that index options may serve as a hedge against overall
fluctuations in the securities markets (or a market sector) rather than
anticipated increases or decreases in the value of a particular security. An
index assigns values to the securities included in the index and fluctuates with
changes in such values. Settlements of index options are effected with cash
payments and do not involve delivery of securities. Thus, upon settlement of an
index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
index. The effectiveness of hedging techniques using index options will depend
on the extent to which price movements in the index selected correlate with
price movements of the securities in which a Series invests. Perfect correlation
is not possible because the securities held or to be acquired by the Series will
not exactly match the composition of indexes on which options are purchased or
written.
Each Series may purchase and write covered straddles on securities or indexes. A
long straddle is a combination of a call and a put purchased on the same
security where the exercise price of the put is less than or equal to the
exercise price on the call. The Series would enter into a long straddle when the
adviser believes that it is likely that prices will be more volatile during the
term of the options than is implied by the option pricing. A short straddle is a
combination of a call and a put written on the same security where the exercise
price on the put is less than or equal to the exercise price of the call where
the same issue of the security is considered "cover" for both the put and the
call. The Series would enter into a short straddle when the adviser believes
that it is unlikely that prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Series will set
aside cash and/or liquid, unencumbered securities in a segregated account with
its custodian equivalent in value to the amount, if any, by which the put is
"in-the-money," that is, that amount by which the exercise price of the put
exceeds the current market value of the underlying security. Because straddles
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Each Series may purchase put and call warrants with values that vary depending
on the change in the value of one or more specified indexes ("index warrants").
An index warrant is usually issued by a bank or other financial institution and
gives the Series the right, at any time during the term of the warrant, to
receive upon exercise of the warrant a cash payment from the issuer of the
warrant based on the value of the underlying index at the time of exercise. In
general, if a Series holds a call warrant and the value of the underlying index
rises above the
A-2
<PAGE>
exercise price of the warrant, the Series will be entitled to receive a cash
payment from the issuer upon exercise based on the difference between the value
of the index and the exercise price of the warrant; if the Series holds a put
warrant and the value of the underlying index falls, the Series will be entitled
to receive a cash payment from the issuer upon exercise based on the difference
between the exercise price of the warrant and the value of the index. The Series
holding a call warrant would not be entitled to any payments from the issuer at
any time when the exercise price is greater than the value of the underlying
index; the Series holding a put warrant would not be entitled to any payments
when the exercise price is less than the value of the underlying index. If the
Series does not exercise an index warrant prior to its expiration, then the
Series loses the amount of the purchase price that it paid for the warrant.
Each Series will normally use index warrants as it may use index options. The
risks of the Series' use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options, however, index
warrants are issued in limited amounts and are not obligations of a regulated
clearing agency, but are backed only by the credit of the bank or other
institution which issues the warrant. Also, index warrants generally have longer
terms than index options. Index warrants are not likely to be as liquid as index
options backed by a recognized clearing agency. In addition, the terms of index
warrants may limit the Series' ability to exercise the warrants at any time or
in any quantity.
Options Guidelines. In view of the risks involved in using the options
strategies described above, each Series has adopted the following investment
guidelines to govern its use of such strategies; these guidelines may be
modified by the Board of Trustees without shareholder approval:
(1) each Series will write only covered options, and each such
option will remain covered so long as the Series is obligated
thereby; and
(2) no Series will write options (whether on securities or
securities indexes) if aggregate exercise prices of previous
written outstanding options, together with the value of assets
used to cover all outstanding positions, would exceed 25% of
its total net assets.
Special Characteristics and Risks of Options Trading. A Series may effectively
terminate its right or obligation under an option by entering into a closing
transaction. If a Series wishes to terminate its obligation to purchase or sell
securities under a put or a call option it has written, the Series may purchase
a put or a call option of the same series (that is, an option identical in its
terms to the option previously written). This is known as a closing purchase
transaction. Conversely, in order to terminate its right to purchase or sell
specified securities under a call or put option it has purchased, a Series may
sell an option of the same series as the option held. This is known as a closing
sale transaction. Closing transactions essentially permit a Series to realize
profits or limit losses on its options positions prior to the exercise or
expiration of the option. If a Series is unable to effect a closing purchase
transaction with respect to options it has acquired, the Series will have to
allow the options to expire without recovering all or a portion of the option
premiums paid. If a Series is unable to effect a closing purchase transaction
with respect to covered options it has written, the Series will not be able to
sell the underlying securities or dispose of assets used as cover until the
options expire or are exercised, and the Series may experience material losses
due to losses on the option transaction itself and in the covering securities.
In considering the use of options to enhance returns or for hedging purposes,
particular note should be taken of the following:
(1) The value of an option position will reflect, among other things,
the current market price of the underlying security or index, the
time remaining until expiration, the relationship of the exercise
price to the market price, the historical price volatility of the
underlying security or index, and general market conditions. For
this reason, the successful use of options depends upon the
adviser's ability to forecast the direction of price fluctuations in
the underlying securities markets or, in the case of index options,
fluctuations in the market sector represented by the selected index.
(2) Options normally have expiration dates of up to three years. An
American style put or call option may be exercised at any time
during the option period while a European style put or call
A-3
<PAGE>
option may be exercised only upon expiration or during a fixed
period prior to expiration. The exercise price of the options may be
below, equal to or above the current market value of the underlying
security or index. Purchased options that expire unexercised have no
value. Unless an option purchased by the Series is exercised or
unless a closing transaction is effected with respect to that
position, the Series will realize a loss in the amount of the
premium paid and any transaction costs.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options.
Although the Series intends to purchase or write only those
exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary
market will exist for any particular option at any particular time.
A liquid market may be absent if: (i) there is insufficient trading
interest in the option; (ii) the exchange has imposed restrictions
on trading, such as trading halts, trading suspensions or daily
price limits; (iii) normal exchange operations have been disrupted;
or (iv) the exchange has inadequate facilities to handle current
trading volume.
(4) With certain exceptions, exchange listed options generally settle by
physical delivery of the underlying security. Index options are
settled exclusively in cash for the net amount, if any, by which the
option is "in-the-money" (where the value of the underlying
instrument exceeds, in the case of a call option, or is less than,
in the case of a put option, the exercise price of the option) at
the time the option is exercised. If the Series writes a call option
on an index, the Series will not know in advance the difference, if
any, between the closing value of the index on the exercise date and
the exercise price of the call option itself and thus will not know
the amount of cash payable upon settlement. If the Series holds an
index option and exercises it before the closing index value for
that day is available, the Series runs the risk that the level of
the underlying index may subsequently change.
(5) A Series' activities in the options markets may result in a higher
Series turnover rate and additional brokerage costs; however, the
Series also may save on commissions by using options as a hedge
rather than buying or selling individual securities in anticipation
of, or as a result of, market movements.
Futures and Related Options Strategies. Each Series may engage in futures
strategies for certain non-trading bona fide hedging, risk management and
portfolio management purposes.
Each Series may sell securities index futures contracts in anticipation of a
general market or market sector decline that could adversely affect the market
value of the Series' securities holdings. To the extent that a portion of a
Series' holdings correlate with a given index, the sale of futures contracts on
that index could reduce the risks associated with a market decline and thus
provide an alternative to the liquidation of securities positions. For example,
if a Series correctly anticipates a general market decline and sells index
futures to hedge against this risk, the gain in the futures position should
offset some or all of the decline in the value of the Series' holdings. A Series
may purchase index futures contracts if a significant market or market sector
advance is anticipated. Such a purchase of a futures contract would serve as a
temporary substitute for the purchase of the underlying securities, which may
then be purchased, in an orderly fashion. This strategy may minimize the effect
of all or part of an increase in the market price of securities that a Series
intends to purchase. A rise in the price of the securities should be in part or
wholly offset by gains in the futures position.
As in the case of a purchase of an index futures contract, a Series may purchase
a call option on an index futures contract to hedge against a market advance in
securities that the Series plans to acquire at a future date. The Series may
write covered put options on index futures as a partial anticipatory hedge, and
may write covered call options on index futures as a partial hedge against a
decline in the prices of securities held by the Series. This is analogous to
writing covered call options on securities. The Series also may purchase put
options on index futures contracts. The purchase of put options on index futures
contracts is analogous to the purchase of protective put options on individual
securities where a level of protection is sought below which no additional
economic loss would be incurred by the Series.
A-4
<PAGE>
Futures and Related Options Guidelines. In view of the risks involved in using
the futures strategies that are described above, each Series has adopted the
following investment guidelines to govern its use of such strategies. The Board
of Trustees may modify these guidelines without shareholder vote.
(1) The Series will engage only in covered futures transactions,
and each such transaction will remain covered so long as the
Series is obligated thereby.
(2) The Series will not write options on futures contracts if
aggregate exercise prices of previously written outstanding
options (whether on securities or securities indexes),
together with the value of assets used to cover all
outstanding futures positions, would exceed 25% of its total
net assets.
Special Characteristics and Risks of Futures and Related Options Trading. No
price is paid upon entering into a futures contract. Instead, upon entering into
a futures contract, a Series is required to deposit with its custodian, in a
segregated account in the name of the futures broker through whom the
transaction is effected, an amount of cash, U.S. Government securities or other
liquid instruments generally equal to 10% or less of the contract value. This
amount is known as "initial margin." When writing a call or a put option on a
futures contract, margin also must be deposited in accordance with applicable
exchange rules. Unlike margin in securities transactions, initial margin on
futures contracts does not involve borrowing to finance the futures
transactions. Rather, initial margin on a futures contract is in the nature of a
performance bond or good-faith deposit on the contract that is returned to a
Series upon termination of the transaction, assuming all obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, a
Series may be required by a futures exchange to increase the level of its
initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures or options position varies, a process known as "marking
to market." For example, when a Series purchases a contract and the value of the
contract rises, the Series receives from the broker a variation margin payment
equal to that increase in value. Conversely, if the value of the futures
position declines, a Series is required to make a variation margin payment to
the broker equal to the decline in value. Variation margin does not involve
borrowing to finance the futures transaction, but rather represents a daily
settlement of a Series' obligations to or from a clearing organization.
Buyers and sellers of futures positions and options thereon can enter into
offsetting closing transactions, similar to closing transactions on options on
securities, by selling or purchasing an offsetting contract or option. Futures
contracts or options thereon may be closed only on an exchange or board of trade
providing a secondary market for such futures contracts or options.
Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses, because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the Series to close a
position and, in the event of adverse price movements, the Series would have to
make daily cash payments of variation margin (except in the case of purchased
options). However, if futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, there is no guarantee that the price of the securities will, in fact,
correlate with the price movements in the contracts and thus provide an offset
to losses on the contracts.
In considering a Series' use of futures contracts and related options,
particular note should be taken of the following:
(1) Successful use by a Series of futures contracts and related options
will depend upon the adviser's ability to predict movements in the
direction of the securities markets, which requires different skills
and techniques than predicting changes in the prices of individual
securities. Moreover, futures contracts relate not only to the
current price level of the underlying
A-5
<PAGE>
securities, but also to anticipated price levels at some point in
the future. There is, in addition, the risk that the movements in
the price of the futures contract will not correlate with the
movements in the prices of the securities being hedged. For example,
if the price of an index futures contract moves less than the price
of the securities that are the subject of the hedge, the hedge will
not be fully effective, but if the price of the securities being
hedged has moved in an unfavorable direction, a Series would be in a
better position than if it had not hedged at all. If the price of
the securities being hedged has moved in a favorable direction, the
advantage may be partially offset by losses in the futures position.
In addition, if a Series has insufficient cash, it may have to sell
assets to meet daily variation margin requirements. Any such sale of
assets may or may not be made at prices that reflect a rising
market. Consequently, a Series may need to sell assets at a time
when such sales are disadvantageous to the Series. If the price of
the futures contract moves more than the price of the underlying
securities, a Series will experience either a loss or a gain on the
futures contract that may or may not be completely offset by
movements in the price of the securities that are the subject of the
hedge.
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in
the futures position and the securities being hedged, movements in
the prices of futures contracts may not correlate perfectly with
movements in the prices of the hedged securities due to price
distortions in the futures market. There may be several reasons
unrelated to the value of the underlying securities that cause this
situation to occur. First, as noted above, all participants in the
futures market are subject to initial and variation margin
requirements. If, to avoid meeting additional margin deposit
requirements or for other reasons, investors choose to close a
significant number of futures contracts through offsetting
transactions, distortions in the normal price relationship between
the securities and the futures markets may occur. Second, because
the margin deposit requirements in the futures market are less
onerous than margin requirements in the securities market, there may
be increased participation by speculators in the futures market.
Such speculative activity in the futures market also may cause
temporary price distortions. As a result, a correct forecast of
general market trends may not result in successful hedging through
the use of futures contracts over the short term. In addition,
activities of large traders in both the futures and securities
markets involving arbitrage and other investment strategies may
result in temporary price distortions.
(3) Positions in futures contracts may be closed out only on an exchange
or board of trade that provides a secondary market for such futures
contracts. Although each Series intends to purchase and sell futures
only on exchanges or boards of trade where there appears to be an
active secondary market, there is no assurance that a liquid
secondary market on an exchange or board of trade will exist for any
particular contract at any particular time. In such event, it may
not be possible to close a futures position, and in the event of
adverse price movements, a Series would continue to be required to
make variation margin payments.
(4) Like options on securities, options on futures contracts have
limited life. The ability to establish and close out options on
futures will be subject to the development and maintenance of liquid
secondary markets on the relevant exchanges or boards of trade.
There can be no certainty that such markets for all options on
futures contracts will develop.
(5) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount and the transaction costs are all
that is at risk. Sellers of options on futures contracts, however,
must post initial margin and are subject to additional margin calls
that could be substantial in the event of adverse price movements.
In addition, although the maximum amount at risk when the Series
purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of
an option on a futures contract would result in a loss to the Series
when the use of a futures contract would not, such as when there is
no movement in the level of the underlying index value or the
securities or currencies being hedged.
A-6
<PAGE>
(6) As is the case with options, a Series' activities in the futures
markets may result in a higher portfolio turnover rate and
additional transaction costs in the form of added brokerage
commissions. However, a Series also may save on commissions by using
futures contracts or options thereon as a hedge rather than buying
or selling individual securities in anticipation of, or as a result
of, market movements.
A-7
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
Moody's and S&P are private services that provide ratings of the credit quality
of debt obligations. A description of the ratings assigned by Moody's and S&P to
the securities in which the Portfolios' corresponding Series may invest is
discussed below. These ratings represent the opinions of these rating services
as to the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. The advisers and sub-advisers attempt to discern variations in credit
rankings of the rating services and to anticipate changes in credit ranking.
However, subsequent to purchase by a Series, an issue of securities may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Series. In that event, an adviser or sub-adviser will consider
whether it is in the best interest of the Series to continue to hold the
securities.
Moody's Ratings
Corporate and Municipal Bonds.
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risk appear somewhat larger than the Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa: Bonds that are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Corporate and Municipal Commercial Paper. The highest rating for corporate and
municipal commercial paper is "P-1" (Prime-1). Issuers rated P-1 (or supporting
institutions) have a superior ability for repayment of senior short-term debt
obligations. P-1 repayment ability will often be evidenced by many of the
following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
B-1
<PAGE>
Municipal Notes. The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2" and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3"
in the case of an issue having a variable-rate demand feature). Notes rated "MIG
1" or "VMIG 1" are judged to be of the best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing. Notes rated "MIG 2" or "VMIG 2"
are of high quality, with margins of protection that are ample although not so
large as in the preceding group. Notes rated "MIG 3" or "VMIG 3" are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow protection
may be narrow, and market access for refinancing is likely to be less well
established.
S&P Ratings
Corporate and Municipal Bonds.
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay interest and repay principal.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Corporate and Municipal Commercial Paper. The "A-1" rating for corporate and
municipal commercial paper indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics will be rated "A-1+."
Municipal Notes. The "SP-1" rating reflects a very strong or strong capacity to
pay principal and interest. Those issues determined to possess overwhelming
safety characteristics will be rated "SP-1+." The "SP-2" rating reflects a
satisfactory capacity to pay principal and interest.
Fitch Ratings
Description of Fitch's highest state and municipal notes rating.
AAA - Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA.
F-1+ - Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
F-1 - Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
B-2
