LARGE CAP GROWTH EQUITY PORTFOLIO
(A series of The Rodney Square Strategic Equity Fund)
October 13, 1999
Dear Large Cap Growth Equity Portfolio Shareholder:
The attached proxy materials describe a proposal that Large
Cap Growth Equity Portfolio of The Rodney Square Strategic Equity Fund ("Growth
Equity Portfolio") reorganize and become part of Wilmington Large Cap Growth
Portfolio of WT Mutual Fund ("Wilmington Growth Portfolio"). If the proposal is
approved and implemented, each shareholder of Growth Equity Portfolio would
automatically become a shareholder of Wilmington Growth Portfolio.
Wilmington Growth Portfolio will operate as a "feeder" fund in
a "master/feeder" fund structure, which means that Wilmington Growth Portfolio
will invest all of its assets in a master fund that has an identical investment
objective and investment strategy. This arrangement offers the potential for
higher asset levels and economies of scale for your fund that could reduce total
operating expenses over time. Taking into account fee waivers and expense
reimbursements by the investment adviser, Wilmington Growth Portfolio's maximum
total operating expenses after the reorganization will not exceed the current
maximum total operating expenses of Growth Equity Portfolio after waivers and
reimbursements.
WILMINGTON GROWTH PORTFOLIO HAS AN IDENTICAL INVESTMENT
OBJECTIVE AND SIMILAR INVESTMENT STRATEGIES AND INVESTMENT RISKS AS GROWTH
EQUITY PORTFOLIO, HOWEVER THE REORGANIZATION WOULD RESULT IN A CHANGE IN THE
INVESTMENT ADVISER MANAGING YOUR FUND. Following the reorganization, you will
have access to substantially identical shareholder servicing arrangements with
Wilmington Growth Portfolio as you currently have with Growth Equity Portfolio.
Additionally, the reorganization offers you the opportunity to become part of a
larger and more diverse family of funds. You will be able to exchange your
shares among many of those funds, which may be useful if you wish to change your
asset allocations. The attached proxy materials provide more information about
the proposed reorganization.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE PROPOSED REORGANIZATION.
Your vote is important no matter how many shares you own.
Voting your shares early will permit Growth Equity Portfolio to avoid costly
follow-up mail and telephone solicitations. After reviewing the attached
materials, please complete, date and sign your proxy ballot and mail it in the
enclosed return envelope today.
Very truly yours,
Robert J. Christian
President
The Rodney Square Strategic Equity Fund
<PAGE>
WHAT YOU SHOULD KNOW ABOUT THIS PROPOSED FUND MERGER
Wilmington Trust Company ("WTC") and the Board of Trustees of The Rodney Square
Strategic Equity Fund encourage you to read the enclosed proxy statement
carefully. The following is a brief overview of the key issues.
WHY IS THE FUND HOLDING A SPECIAL SHAREHOLDERS MEETING?
The main reason for the meeting is so that shareholders of Growth Equity
Portfolio can decide whether or not to merge their fund into Wilmington Growth
Portfolio (each a "Fund"). If shareholders decide in favor of the proposal, you
will become a holder of Institutional class shares of Wilmington Growth
Portfolio.
WHAT ARE THE ADVANTAGES OF MERGING THE FUNDS?
The potential advantages of the reorganization are as follows :
(BULLET) The master/feeder fund structure of Wilmington Growth Portfolio
provides an opportunity for operating efficiencies. Management will
seek to attract other institutional investors as feeder funds and to
access additional distribution channels. This could lead to further
reductions in total operating expenses through economies of scale.
(BULLET) These lower costs may lead to stronger performance, since total return
to a fund's shareholders is net of fund expenses.
(BULLET) The reorganization is part of a plan to create a comprehensive family
of funds that will offer a wide variety of investment styles. WTC and
its affiliates are seeking to unify and streamline the operations of a
number of different mutual funds which they advise and to create an
efficient fund distribution system.
The potential benefits and possible disadvantages are explained in more detail
in the enclosed proxy statement.
HOW ARE THESE TWO FUNDS ALIKE?
The investment goals, principal investment strategies and investment risks of
the Funds are substantially identical. Both Funds seek superior long-term growth
of capital by investing in a diversified portfolio of U.S. equity (or related)
securities of corporations with a market capitalization of $2 billion or more,
which have above average earnings potential compared to the securities market as
a whole. Both Funds are subject to substantially similar investment limitations.
Although the Funds have different investment advisers, the Funds employ the same
administrator, independent auditor, legal counsel and transfer agent.
<PAGE>
WHAT HAPPENS IF SHAREHOLDERS DECIDE IN FAVOR OF A MERGER?
The effective date of the reorganization would be as of the close of business on
October 29, 1999 or as soon as possible thereafter. Shareholders will receive
full and fractional Institutional class shares of Wilmington Growth Portfolio
equal in value to the shares of Growth Equity Portfolio that they owned on the
closing date.
IF THE FUNDS MERGE, WILL THERE BE TAX CONSEQUENCES FOR ME?
The Funds will receive, as a condition of closing, an opinion of tax counsel
that the reorganization will not create taxable income to the Funds. The opinion
will also state that you will not recognize any gain or loss on your exchange of
Growth Equity Portfolio shares solely for shares in Wilmington Growth Portfolio.
However, you should consult your own tax advisor regarding any possible effect a
reorganization might have on you, given your personal circumstances -
particularly regarding state and local taxes.
WHO WILL PAY FOR THIS REORGANIZATION?
The expenses of the reorganization, including legal expenses, printing,
packaging and postage, plus the costs of any supplementary solicitation, will be
borne by the Funds. However, since WTC currently maintains an expense cap for
each Fund, it is anticipated that WTC will ultimately bear the costs of the
reorganization.
WHAT DOES GROWTH EQUITY PORTFOLIO'S BOARD OF TRUSTEES RECOMMEND?
The Board believes you should vote in favor of the reorganization. More
importantly, however, the Trustees recommend that you study the issues involved,
call us with any questions, and vote promptly to ensure that a quorum of Growth
Equity Portfolio shares will be represented at the special shareholders meeting.
WHERE DO I GET MORE INFORMATION ABOUT WILMINGTON GROWTH PORTFOLIO?
Please call The Rodney Square Strategic Equity Fund toll-free at 1-800-336-9970.
<PAGE>
LARGE CAP GROWTH EQUITY PORTFOLIO
(A series of The Rodney Square Strategic Equity Fund)
-------------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 29, 1999
-------------------
To the Shareholders:
A Special Meeting of Shareholders of Large Cap Growth Equity
Portfolio ("Growth Equity Portfolio"), a series of The Rodney Square Strategic
Equity Fund, will be held on October 29, 1999, at 10:00 a.m., local time, at the
offices of PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809 for the
following purposes:
1. To approve an Agreement and Plan of Reorganization that
provides for (1) the transfer of all the assets of Growth Equity Portfolio to
Wilmington Large Cap Growth Portfolio ("Wilmington Growth Portfolio"), a
newly-created "shell" series of WT Mutual Fund, in exchange for shares of equal
value of Wilmington Growth Portfolio; (2) the distribution of those Wilmington
Growth Portfolio shares to the shareholders of Growth Equity Portfolio; (3) the
investment of the assets acquired by Wilmington Growth Portfolio in its master
fund, WT Large Cap Growth Series, in accordance with Wilmington Growth
Portfolio's master/feeder fund structure; and (4) the dissolution of Growth
Equity Portfolio, all as described in the accompanying Prospectus/Proxy
Statement; and
2. To transact such other business as may properly come before
the Special Meeting or any adjournment thereof.
You are entitled to vote at the Special Meeting and any
adjournment thereof if you owned shares of Growth Equity Portfolio at the close
of business on September 28, 1999. If you attend the Special Meeting, you may
vote your shares in person. IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY BALLOT IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
By order of the Board of Trustees,
Gary M. Gardner
Secretary
The Rodney Square Strategic Equity Fund
October 13, 1999
Wilmington, Delaware
<PAGE>
LARGE CAP GROWTH EQUITY PORTFOLIO
(a series of The Rodney Square Strategic Equity Fund)
WILMINGTON LARGE CAP GROWTH PORTFOLIO
(a series of WT Mutual Fund)
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0000
(TOLL FREE) 1-800-336-9970
PROSPECTUS AND PROXY STATEMENT
dated October 13, 1999
This combined Prospectus/Proxy Statement ("Proxy Statement")
is being furnished to shareholders of Large Cap Growth Equity Portfolio ("Growth
Equity Portfolio"), a series of The Rodney Square Strategic Equity Fund, in
connection with the solicitation of proxies by its Board of Trustees (the
"Board") for use at a Special Meeting of Shareholders to be held on October 29,
1999, at 10:00 a.m., local time, and at any adjournment of the meeting, if the
meeting is adjourned for any reason. This Proxy Statement will first be mailed
to shareholders on or about October 13, 1999.
The Rodney Square Strategic Equity Fund is a diversified,
open-end investment company. The Board has called the Special Meeting to ask
shareholders to consider and vote on a proposal for the reorganization of Growth
Equity Portfolio (the "Reorganization"). Wilmington Large Cap Growth Portfolio
("Wilmington Growth Portfolio"), a newly-created shell series of WT Mutual Fund,
a diversified, open-end investment company, would acquire all of the assets of
Growth Equity Portfolio in exchange for shares of equal value of Wilmington
Growth Portfolio and assumption by Wilmington Growth Portfolio of substantially
all of the liabilities of Growth Equity Portfolio. Through the Reorganization,
shareholders of Growth Equity Portfolio would become shareholders of Wilmington
Growth Portfolio. Wilmington Growth Portfolio invests its assets entirely in a
corresponding master fund, WT Large Cap Growth Series ("WT Growth Series"), a
series of WT Investment Trust I ("WT Trust"), pursuant to a master/feeder fund
structure. As soon as practicable following the Reorganization, Growth Equity
Portfolio would be dissolved. For convenience, in this Proxy Statement, Growth
Equity Portfolio and Wilmington Growth Portfolio are referred to together as the
"Funds" and individually as a "Fund."
This Proxy Statement and the cooresponding Statement of
Additional Information delivered with this Proxy Statement set forth concisely
the information about the Reorganization and Wilmington Growth Portfolio that a
shareholder should know before voting
<PAGE>
on the proposal and should be retained for future reference.
Further inquiries may be made, by writing to PFPC Inc., 400
Bellevue Parkway, Wilmington, Delaware 19809, or by calling toll-free
1-800-336-9970.
The U.S. Securities and Exchange Commisiion (the "SEC")
maintains a website (http://www.sec.gov) where you may obtain further
information regarding The Rodney Square Strategic Equity Fund, the Growth Equity
Portfolio, WT Trust, WT Mutual Fund and Wilmington Growth Portfolio.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE SHARES OF
WILMINGTON GROWTH PORTFOLIO OR DETERMINED WHETHER THIS PROXY STATEMENT IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
PAGE
VOTING INFORMATION...........................................................1
PROPOSAL 1...................................................................2
Summary.............................................................2
Comparative Fee and Expense Information.............................5
Example of Effect on Fund Expenses..................................6
General Information about the Funds.................................7
Investment Adviser and Advisory Agreement...........................7
Comparison of Investment Objectives, Principal Strategies
and Other Policies..................................................8
Operations of Wilmington Growth Portfolio Following the
Reorganization ....................................................10
Comparison of Risk Factors.........................................10
Purchases, Redemptions and Exchanges of Shares.....................13
Dividends and Other Distributions..................................14
The Reorganization Transaction.....................................15
Objectives of the Reorganization...................................16
Trustees of WT Mutual Fund ........................................17
Description of Securities To Be Issued.............................21
Federal Income Tax Considerations..................................22
Capitalization ....................................................24
Board Consideration of the Reorganization .........................24
OTHER MATTERS...............................................................25
SERVICE PROVIDERS...........................................................25
MISCELLANEOUS...............................................................27
Appendix A - Principal Shareholders........................................A-1
Appendix B - Preliminary Prospectus of WT Mutual Fund......................B-1
Appendix C - Agreement and Plan of Reorganization..........................C-1
Appendix D - Prospectus of The Rodney Square Strategic Equity Fund.........D-1
Appendix E - Excerpts from The Rodney Square Strategic Equity Fund Annual
Report for the Fiscal Year Ended June 30, 1999................E-1
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<PAGE>
VOTING INFORMATION
A majority of Growth Equity Portfolio's shares outstanding on
September 28, 1999, represented in person or by proxy, shall constitute a quorum
and must be present for the transaction of business at the Meeting. If a quorum
is not present at the Meeting or a quorum is present but sufficient votes to
approve the proposal are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority of
those shares represented at the Meeting in person or by proxy. The persons named
as proxies will vote those proxies authorizing a vote "For" any proposal in
favor of such an adjournment, and they will vote those proxies authorizing a
vote "Against" any proposal against such adjournment.
The following shareholder voting rules apply to The Rodney
Square Strategic Equity Fund. Broker non-votes are shares held in street name
for which the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote and for which the broker
does not have discretionary voting authority. Abstentions and broker non-votes
will be counted as shares present for purposes of determining whether a quorum
is present but will not be voted for or against any adjournment or proposal.
Accordingly, abstentions and broker non-votes effectively will be a vote against
adjournment or against any proposal where the required vote is a percentage of
the shares present or outstanding. Abstentions and broker non-votes will not be
counted, however, as votes cast for purposes of determining whether sufficient
votes have been received to approve any proposal where the required vote is a
percentage of votes cast.
The individuals named as proxies on the enclosed proxy ballot
will vote in accordance with your directions as indicated on the proxy ballot,
if your proxy ballot is received properly executed by you or by your duly
appointed agent or attorney-in-fact. If you sign, date and return the proxy
ballot, but give no voting instructions, your shares will be voted in favor of
approval of a proposal. In addition, if you sign, date and return the proxy
ballot, but give no voting instructions, the duly appointed proxies may, in
their discretion, vote upon such other matters as may come before the Meeting.
The proxy ballot may be revoked by giving another proxy or by letter revoking
the initial proxy. To be effective, revocation must be received by Growth Equity
Portfolio prior to the Meeting. You may, if you wish, vote by ballot at the
Meeting, thereby canceling any proxy previously given.
In order to reduce costs, the notices to a shareholder having
more than one account in Growth Equity Portfolio listed under the same Social
Security number at a single address have been combined. The proxy ballots have
been coded so that a shareholder's votes will be counted for each such account.
As of September 28, 1999 ("Record Date"), Growth Equity
Portfolio had 8,431,571.04 shares of beneficial interest outstanding. Each
outstanding full share of Growth Equity Portfolio is entitled to one vote, and
each outstanding fractional share thereof is entitled to
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<PAGE>
a proportionate fractional share of one vote. Wilmington Growth Portfolio has
not commenced operations and has no shares outstanding.
The solicitation of proxies, the cost of which shall be borne
by Growth Equity Portfolio and Wilmington Growth Portfolio, will be made
primarily by mail but also may be made by telephone or oral communications by
representatives of Wilmington Trust Company, the Fund's sponsor, and Provident
Distributors, Inc., the distributor, who will not receive any compensation for
these activities from either Growth Equity Portfolio or Wilmington Growth
Portfolio.
Except as set forth in Appendix A, Wilmington Trust Company
does not know of any person who owns beneficially 5% or more of the shares of
Growth Equity Portfolio as of the Record date. Trustees and officers of The
Rodney Square Strategic Equity Fund own in the aggregate less than 1% of the
shares of Growth Equity Portfolio. As a new fund, Wilmington Growth Portfolio
does not currently have any shareholders.
VOTE REQUIRED. Approval of Proposal 1 requires the affirmative
vote of the holders of a "majority of the outstanding voting securities" of
Growth Equity Portfolio, as defined in the Investment Company Act of 1940 (the
"1940 Act"), represented at the meeting in person or by proxy ("1940 Act
Majority Vote"). A 1940 Act Majority Vote means the vote of (a) at least 67% of
the shares of a Portfolio present in person or by proxy, if more than 50% of the
shares of the Portfolio are represented at the meeting, or (b) more than 50% of
the outstanding shares of a Portfolio, whichever is less. If Proposal 1 is not
approved by the requisite vote of shareholders of Growth Equity Portfolio, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies.
PROPOSAL 1
TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION ("REORGANIZATION
PLAN") THAT PROVIDES FOR (1) THE TRANSFER OF ALL THE ASSETS OF GROWTH
EQUITY PORTFOLIO TO WILMINGTON GROWTH PORTFOLIO, IN EXCHANGE FOR SHARES
OF EQUAL VALUE OF WILMINGTON GROWTH PORTFOLIO; (2) THE DISTRIBUTION OF
THOSE WILMINGTON GROWTH PORTFOLIO SHARES TO THE SHAREHOLDERS OF GROWTH
EQUITY PORTFOLIO; (3) THE INVESTMENT OF THE ASSETS ACQUIRED BY
WILMINGTON GROWTH PORTFOLIO IN ITS MASTER FUND, WT GROWTH SERIES, IN
ACCORDANCE WITH WILMINGTON GROWTH PORTFOLIO'S MASTER/FEEDER FUND
STRUCTURE; AND (4) THE DISSOLUTION OF GROWTH EQUITY PORTFOLIO.
SUMMARY
The following is a summary of certain information contained
elsewhere in this Proxy Statement (including the appendices to this Proxy
Statement).
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<PAGE>
Shareholders should read this Proxy Statement (including the appendices)
carefully.
At a meeting held on May 13, 1999, the Board considered and
approved the Reorganization Plan, which provides for the merger of Growth Equity
Portfolio into Wilmington Growth Portfolio. Wilmington Growth Portfolio would
acquire all the assets of Growth Equity Portfolio in exchange for Institutional
class shares of equal value of Wilmington Growth Portfolio and assumption by
Wilmington Growth Portfolio of substantially all of the liabilities of Growth
Equity Portfolio. Then, Growth Equity Portfolio would distribute those shares to
its shareholders, so that each Growth Equity Portfolio shareholder receives the
number of full and fractional shares that is equal in aggregate value to the
value of the shareholder's holdings in Growth Equity Portfolio as of the day the
Reorganization is completed. Immediately following this exchange, Wilmington
Growth Portfolio would invest all of the assets it acquires from Growth Equity
Portfolio in its master fund, WT Growth Series, in accordance with Wilmington
Growth Portfolio's master/feeder structure. Once its assets have been
transferred in this manner, Growth Equity Portfolio would be dissolved as soon
as practicable.
Under the Wilmington Growth Portfolio's operating arrangement,
which is known as a "master/feeder" fund structure, the Portfolio (being a
"feeder fund") will pursue its existing investment objective through investment
in WT Growth Series (being a "master fund"), rather than through direct
investments in portfolio securities. WT Growth Series, in turn, will invest its
assets in accordance with the same objective, policies and limitations as
Wilmington Growth Portfolio. Shareholders will own shares of Wilmington Growth
Portfolio, and Wilmington Growth Portfolio will hold only the shares of WT
Growth Series. It is intended that WT Growth Series will serve as the investment
portfolio for various institutional investors, which may include other
registered mutual funds, private investment companies or other collective
investment vehicles, with the same investment objectives and policies as the
Series. Other mutual funds that may invest in WT Growth Series may have
different expenses and, therefore, different yields/returns than Wilmington
Growth Portfolio. The shares of WT Growth Series are not available for purchase
directly by members of the general public.
Wilmington Growth Portfolio will be implementing a multiple
share class structure beginning on the date of the Reorganization. Pursuant to
this multiple class structure, Institutional class shares and Investor class of
shares will be issued. The difference between these two share classes will be
that Investor shares will be subject to Rule 12b-1 fees which compensate the
Portfolio's distributor for distribution and shareholder servicing activities.
Institutional shares will not be subject to sales charges or Rule 12b-1 fees and
would be available only to limited investors. According to the Reorganization
Plan, Growth Equity Portfolio will receive Institutional shares of Wilmington
Growth Portfolio, and its shareholders would therefore become Institutional
class shareholders.
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<PAGE>
Growth Equity Portfolio and Wilmington Growth Portfolio,
through its investment in its master fund, have substantially identical
investment objectives, principal investment strategies and investment risks. The
objective of each Fund is to seek superior long-term growth of capital. The
principal strategy of each Fund is to invest in a diversified portfolio of
equity or related securities of U.S. corporations that are judged by the adviser
to have strong growth characteristics and have a market capitalization of $2
billion or higher at the time of purchase.
One substantial difference in your fund after the
Reorganization would be a change in the investment adviser. The investment
adviser for Growth Equity Portfolio is WTC while the investment adviser for
Wilmington Growth Portfolio will be Roxbury Capital Management, LLC ("Roxbury").
Otherwise, the service providers of your fund will be the same, and you will
have access to substantially identical shareholder servicing arrangements after
the Reorganization.
Following the Reorganization, the maximum total operating
expenses of Wilmington Growth Portfolio, after fee waivers and expense
reimbursements by the sponsor, WTC, would be no greater than Growth Equity
Portfolio's current maximum total expenses after waivers and reimbursements.
The principal risks associated with investment in Wilmington Growth Portfolio
are as follows:
(BULLET) The equity securities in which Wilmington Growth Portfolio invests
through its master fund are subject to market risk, which is the risk
that the market value of a security may move up or down, sometimes
rapidly and unpredictably. Also, growth-oriented investments may be
more volatile than the rest of the U.S. stock market.
(BULLET) Wilmington Growth Portfolio's performance will depend on whether or not
the adviser is successful in pursuing its investment strategy.
(BULLET) Wilmington Growth Portfolio's master/feeder structure is relatively new
and more complex. While this structure is designed to reduce fund
expenses, it may not do so, and the Portfolio might encounter
operational or other complications.
Other important facts that you should know about the Reorganization are:
(BULLET) For Federal income tax purposes, the exchange of shares in the
Reorganization is not expected to result in the recognition of gain or
loss by Growth Equity Portfolio or its shareholders.
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<PAGE>
(BULLET) If Proposal 1 is approved by shareholders, the Reorganization is
expected to occur as of the close of business on October 29, 1999, or
at a later date when the Reorganization is approved and all
contingencies have been met ("Closing Date").
(BULLET) Although Growth Equity Portfolio shareholders would have no appraisal
rights in connection with the Reorganization, shareholders may redeem
their shares at any time before, during or after the Reorganization.
For the reasons set forth herein under "Board Consideration of
the Reorganization," the Board, including the Trustees who are not "interested
persons," as that term is defined in the 1940 Act, of The Rodney Square
Strategic Equity Fund ,WTC or Roxbury ("Independent Trustees"), has determined
that the Reorganization is in the best interests of Growth Equity Portfolio,
that the terms are fair and reasonable and that the interests of shareholders
will not be diluted as a result of the Reorganization. Accordingly, the Board
recommends approval of the transaction. Additionally, the Board of Trustees of
WT Mutual Fund has approved the Reorganization for the Wilmington Growth
Portfolio.
COMPARATIVE FEE AND EXPENSE INFORMATION
As shown in the following tables, a shareholder pays no fees
to purchase Institutional shares of the Wilmington Growth Portfolio, to exchange
those shares for Institutional shares of another Portfolio of WT Mutual Fund, or
to sell shares. Institutional shares are not subject to Rule 12b-1 distribution
fees. The only costs a shareholder pays are annual fund operating expenses that
are deducted from fund assets. The current fees and expenses incurred for the
fiscal year ended June 30, 1999 by Growth Equity Portfolio and the pro forma
fees and expenses for Wilmington Growth Portfolio after the Reorganization are
set forth below. Since Wilmington Growth Portfolio will not commence operations
unless the Reorganization occurs, operating expenses for the Portfolio prior to
the Reorganization are not shown below.
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
Wilmington Growth Equity Combined
Growth Portfolio Portfolio Portfolio
---------------- ------------- ---------
<S> <C> <C> <C>
Sales charge (load) on purchases of shares None None None
Sales charge (load) on reinvested dividends None None None
Redemption fee or deferred sales charges (load) None None None
</TABLE>
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<PAGE>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)*
Combined
Portfolio
Wilmington Growth Growth Institutional
Portfolio Prior to Equity Shares
Reorganization Portfolio (Pro Forma)
------------------ --------- -------------
Management Fees NA 0.55% 0.55%
Distribution (12b-1) Fees NA None None
Other Expenses NA 0.30% 0.25%
------------------ --------- -------------
TOTAL ANNUAL OPERATING EXPENSES NA 0.85% 0.80%
Waivers/Reimbursements NA 0.10% 0.05%
Net Expenses NA 0.75%(1) 0.75%(2)
*For the Combined Portfolio, the table above and the Example below each reflect
the aggregate annual operating expenses of the Portfolio and its master fund, WT
Growth Series.
(1) Currently, WTC has agreed to waive its advisory fee and/or assume
Growth Equity Portfolio's expenses in order to limit the
Portfolio's total annual operating expenses to 0.75% of the Portfolio's
average net assets.
(2) Effective November 1, 1999, WTC, the sponsor of Wilmington Growth
Portfolio, has agreed to reimburse the Portfolio's expenses to the
extent total annual operating expenses exceed 0.75% of the Portfolio's
average net assets for Institutional class shares. This waiver will
remain in place until WT Mutual Fund's Board of Trustees approves its
termination.
EXAMPLE OF EFFECT OF FUND EXPENSES
This Example is intended to help you compare the cost of
investing in Growth Equity Portfolio with the cost of investing in Wilmington
Growth Portfolio assuming the Reorganization has been completed.
The Example assumes that you invest $10,000 in the specified
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year, that all dividends and other
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<PAGE>
distributions are reinvested and that the Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
Wilmington Growth Portfolio NA NA NA NA
Growth Equity Portfolio $87 $271 $471 $1,049
Combined Fund $82 $255 $444 $990
(Pro Forma)
GENERAL INFORMATION ABOUT THE FUNDS
Wilmington Growth Portfolio is a newly-created shell series of
WT Mutual Fund, an open-end, diversified management investment company organized
as a Delaware business trust on April 2, 1993. Until October 20, 1998, WT Mutual
Fund was named Kiewit Mutual Fund. Wilmington Growth Portfolio has not commenced
operations and does not currently have any assets. Information concerning
Wilmington Growth Portfolio is contained in the Preliminary Prospectus which is
attached to this Proxy Statement as Appendix B. Growth Equity Portfolio is a
series of The Rodney Square Strategic Equity Fund, an open-end, diversified
management investment company organized as a Massachusetts business trust on May
7, 1986. Further information about Growth Equity Portfolio is contained in the
Prospectus Supplement dated July 7, 1999, and the Prospectus dated May 1, 1999,
which are attached to this Proxy Statement as Appendix D, and the excerpt from
the Annual Report of The Rodney Square Strategic Equity Fund for the fiscal year
ended June 30, 1999, which is attached to this Proxy Statement as Appendix E.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Growth Equity Portfolio currently employs WTC as its
investment adviser. In this capacity, WTC supervises all aspects of the
Portfolio's investment operations and makes and implements all of their
investment decisions. For its services, WTC is currently paid a monthly
investment advisory fee, which is based upon a percentage of Growth Equity
Portfolio's average daily net assets. The advisory fee is computed by Growth
Equity Portfolio, at the annual rate of 0.55% of the Fund's average net assets.
For the fiscal year ended December 31, 1998 and the period from January 1, 1999
through June 30, 1999, WTC received investment advisory fees in the amounts of
$689,109 and $548,950, respectively, from Growth Equity Portfolio.
If the Reorganization is approved by shareholders, a change in
the investment adviser would occur for your fund. Roxbury, a growth manager,
would serve as the investment adviser to WT Growth Series. Roxbury's address is
100 Wilshire Boulevard, Suite 600, Santa Monica, California 90401. Roxbury is
engaged in a variety of investment advisory activities,
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<PAGE>
including the management of separate accounts and as of August 31, 1999 had
assets under management of $7,532,276,106. Roxbury does not currently advise any
other mutual funds. Anthony Hall Browne is Roxbury's principal executive
officer, and he owns a controlling interest in Roxbury. Roxbury's board members
and their principal occupations are as follows:
NAME OF BOARD MEMBER OCCUPATION
- ------------------------------------------------------------------------------
Anthony Hall Browne Chairman and Senior Managing Director of Roxbury
Henry Birks Wilson Vice Chairman and Senior Managing Director of Roxbury
Kevin Patrick Riley President and Senior Managing Director of Roxbury
David Charles Kahn Chief Operating Officer and Managing Director of
Roxbury
Clare Noreen McTernan Managing Director and Portfolio Manager of Roxbury
Ted T. Cecala Chief Executive Officer and Chairman of the Board of
WTC
David R. Gibson Senior Vice President & CEO of WTC
AFTER THE REORGANIZATION, THE RATE OF ADVISORY FEE TO BE PAID
BY WT GROWTH SERIES UNDER ITS ADVISORY CONTRACT WITH ROXBURY WILL NOT EXCEED THE
RATE PAYABLE BY GROWTH EQUITY PORTFOLIO UNDER ITS CURRENT ADVISORY CONTRACT. The
proposed investment advisory agreement on behalf of WT Growth Series provides
for the Series to pay Roxbury an annual advisory fee, payable monthly, in the
amount 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 in excess of $2 billion. Other than the
differences in compensation and effective dates, the terms of the proposed
investment advisory agreement for WT Growth Series are not materially different
from the terms of Growth Equity Portfolio's current advisory agreement.
The day-to-day management of WT Growth Series will be 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.
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL STRATEGIES AND OTHER POLICIES
-8-
<PAGE>
INVESTMENT OBJECTIVES. Wilmington Growth Portfolio and Growth
Equity Portfolio each seek to provide investors with superior long-term growth
of capital. Wilmington Growth Portfolio will seek to achieve superior long-term
growth of capital by exceeding the returns of the S&P 500 Stock Index rather
than the Russell 1000 Growth Index, which is the Growth Equity Portfolio's
current benchmark. There can be no assurance that either Fund will achieve its
investment objective.
PRINCIPAL INVESTMENT STRATEGIES. Wilmington Growth Portfolio
will seek to achieve its objective by investing all of its total assets in WT
Growth Series. WT Growth Series is a diversified portfolio which will invest at
least 65% of its total assets in the following equity (or related) securities:
(BULLET) 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;
(BULLET) options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
(BULLET) options on indexes of the common stock of U.S. corporations described
above; and
(BULLET) 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 future contracts.
Additionally, WT Growth Series may invest without limit in
commercial paper and other money market instruments rated investment grade in
response to adverse market, economic, political or other conditions, as a
temporary defensive position. The result of this action may be that the
Portfolio will be unable to achieve its investment objective.
In investing WT Growth Series' assets, the Series' 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'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. The
adviser generally sells stocks when the risk/reward
-9-
<PAGE>
characteristics of a stock turn negative, company fundamentals deteriorate or
the stock underperforms the market or its peer group.
Except for the differences noted below, Growth Equity
Portfolio currently employs the same principal investment strategies as those of
Growth Equity Portfolio. The following differences provide WT Growth Series with
greater flexibility than under your fund's existing strategies.
(BULLET) WT Growth Series will invest at least 65% (rather than 85% currently
for Growth Equity Portfolio) of its total assets in a diversified
portfolio of equity and related securities of U.S. companies and, with
respect to at least 65% of the Series' total assets, U.S. companies
with market capitalizations of $2 billion or more and above average
earnings potential compared to the securities market as a whole.
(BULLET) Unlike Growth Equity Portfolio, WT Growth Series is permitted to depart
from its principal investment strategies to temporarily pursue a
defensive investment policy during periods of adverse market
conditions.
OTHER POLICIES OF THE FUNDS.
The following is a summary of other investment policies of the
Funds. More detailed information about these policies is set forth in Appendix A
to the Statement of Additional Information deliverd with this Proxy Statement.
Each Fund may invest in cash and high quality money market
instruments, such as money market funds, U.S. government obligations, commercial
paper and bank obligations in order to manage cash flow in the Fund.
Each Fund may invest in convertible securities that are rated,
at the time of purchase, in the three highest categories by a nationally
recognized statistical ratings organization, or if unrated are determined by the
investment adviser to be of comparable 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 Portfolio to retain the
security.
Each Fund may engage in certain hedging strategies that
involve options and futures and may purchase securities on a when-issued or
delayed delivery basis -- that is, with settlement taking place up to 90 days in
the future.
Each Fund is authorized to lend up to 33 1/3% of the total
value of its portfolio securities to qualified brokers, dealers, banks or other
financial institutions that the adviser deems qualified. Both Funds may borrow
money for temporary or emergency purposes; although
-10-
<PAGE>
neither Growth Equity Portfolio or WT Growth Series may borrow in excess of 33
1/3% of net assets.
Each Fund may hold up to 15% of its net assets in illiquid
securities, and each Fund is authorized to invest in restricted securities that
may be sold only to institutional investors. The Funds also are permitted to
enter into repurchase agreements with commercial banks, registered
broker-dealers, and registered U.S. government securities dealers that are
deemed creditworthy by the Funds' Boards of Trustees.
Neither Funds' annual portfolio turnover rate is expected to
exceed 100%. However, the frequency of portfolio transactions of a Fund will
vary from year to year depending on many factors. Higher portfolio turnover
rates may result in increased brokerage costs to a Fund and a possible increase
in short-term capital gains or losses.
The fundamental investment restrictions for Wilmington Growth
Portfolio would be materially the same as the current restrictions of Growth
Equity Portfolio except for the following difference. Wilmington Growth
Portfolio's limitations contain an exception permitting the Portfolio to invest
all of its assets directly in another mutual fund such as WT Growth Series
pursuant to the Portfolio's master/feeder fund structure. By approving the
Reorganization Plan, you would be authorizing the inclusion of this exception in
your fund's fundamental investment restrictions, which will be stated as
follows:
"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."
COMPARISON OF RISK FACTORS
Each Fund is subject to the risks noted below, except that
master/feeder risk applies only to Wilmington Growth Portfolio. See the
discussions of investment policies and risk factors in Appendix A to the
Statement of Additional Information delivered with this Proxy Statement for
more information concerning investment risks.
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.
-11-
<PAGE>
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.
DERIVATIVES RISK. Some of the Funds' 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 Fund's total assets may at any time be
committed or exposed to derivative strategies.
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.
VALUATION RISK. The risk that a Fund has valued certain of its
securities at a higher price that it can sell them.
REPURCHASE AGREEMENTS. Wilmington Growth Portfolio may invest
money, for as short a time as overnight, using repurchase agreements ("repos").
With a repo, the Fund buys a debt instrument, agreeing simultaneously to sell it
back to the prior owner at an agreed-upon price and date. The Fund could incur
costs or delays in seeking to sell the security if the prior owner defaults on
its repurchase obligation. To reduce that risk, the securities that are the
subject of the repurchase agreement will be maintained with the Fund's custodian
in an amount at least equal to the repurchase price under the agreement
(including accrued interest). These agreements are entered into only with member
banks of the Federal Reserve System, registered brokers and dealers, and
registered U.S. government securities dealers that are deemed creditworthy under
standards set by the Fund's Board.
MASTER/FEEDER RISK . There are certain potential risks related
to Wilmington Growth Portfolio's master/feeder structure to which Growth Equity
Portfolio is not subject. For example, large-scale redemptions by other
investors of their interests in WT Growth Series could have adverse effects on
Wilmington Growth Portfolio, such as requiring the liquidation of a significant
portion of the master fund's holdings at a time when it could be disadvantageous
to do so. Moreover, the complexity of the master/feeder structure could result
in accounting or other operational difficulties. Or, other shareholders of WT
Growth Series may have a greater ownership interest in the master fund than
Wilmington Growth Portfolio's interest and, therefore, could have effective
voting control over the operation of the master fund.
In the event that Wilmington Growth Portfolio is required to
redeem its interests in WT Growth Series for any reason (for instance, because
its shareholders did not approve changes in the Wilmington Growth Portfolio's
investment policies parallel to changes approved
-12-
<PAGE>
for the master fund by a majority of its interest holders), Wilmington Growth
Portfolio's Board of Trustees might attempt to find an appropriate substitute
investment vehicle in which to invest Wilmington Growth Portfolio's assets. The
Board's inability to find a suitable substitute investment vehicle could have a
significant effect on the Wilmington Growth Portfolio's shareholders.
Wilmington Growth Portfolio may cease investing in WT Growth
Series only if its Board of Trustees were to determine that such action is in
the best interests of the Portfolio and its shareholders. In that event, the
Board of Trustees would consider alternative arrangements, including investing
all of Wilmington Growth Portfolio's assets in another investment company with
substantially the same investment objective, policies and restrictions as the
Portfolio.
YEAR 2000 READINESS RISK. Like other organizations around the
world, Wilmington Growth 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 it relies 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 WT Growth 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 or the Series' holdings may have a similar impact on the price of
the Series' shares. The 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.
OPERATIONS OF WILMINGTON GROWTH PORTFOLIO FOLLOWING THE REORGANIZATION
As indicated above, the investment objectives and policies of
Wilmington Growth Portfolio and its master fund after the Reorganization will be
substantially identical to those of Growth Equity Portfolio. All of the assets
held by Growth Equity Portfolio will be consistent with the investment policies
of WT Growth Series and thus can be transferred to and held by WT Growth Series
if the Reorganization is approved.
The following service providers presently are engaged by both
Funds, and they would continue to serve Wilmington Growth Portfolio and/or WT
Growth Series in the capacities indicated below.
Distributor: Provident Distributors, Inc.
Administrator: PFPC Inc.
-13-
<PAGE>
Accounting Agent: PFPC Inc.
Independent Auditors Ernst & Young LLP
Legal Counsel: Pepper Hamilton LLP
Transfer Agent: PFPC Inc.
The custodian for Growth Equity Portfolio is WTC, and PFPC
Trust Company serves as the Portfolio's sub-custodian. WTC will be the
custodian, and PFPC Trust Company will be sub-custodian, of Wilmington Growth
Portfolio and WT Growth Series. Consequently, there will be no change in your
fund's custodian resulting from the reorganization.
PURCHASES, REDEMPTIONS AND EXCHANGES OF SHARES
Following the Reorganization, as a Wilmington Growth Portfolio
shareholder, you will enjoy the same transaction and shareholder servicing
arrangements as you currently have as a Growth Equity Portfolio shareholder. In
addition you will have a greater number of funds in the WT Mutual Fund group in
which you can invest, including by exchange of your shares. For a more complete
discussion of share purchases, redemption procedures and exchange procedures,
see "Purchase of Shares", "Redemption of Shares" and "Exchange of Shares",
respectivley, in Growth Equity Portfolio's Prospectus, which is attached to this
Proxy Statement as Appendix D.
PURCHASES. Shares of Growth Equity Portfolio and, after the
Closing Date, Wilmington Growth Portfolio may be purchased by wire, telephone or
mail purchase. The shares of each Fund are sold on a continuous basis at the net
asset value ("NAV") per share next calculated after receipt of a purchase order
in good form. The NAV per share for each Fund is computed separately and is
determined once each day that the New York Stock Exchange is open ("Business
Day"), as of the close of regular trading, but may also be computed at other
times.
REDEMPTIONS. Shares of Growth Equity Portfolio and WT Bond
Fund may be redeemed by telephone, by mail, by exchange or by payment to a third
party. Such redemptions are made at the NAV per share next determined after a
request in proper form is received at the Fund's office. Normally, payments of
redemption proceeds will be mailed within seven days following receipt of the
required documents.
Growth Equity Portfolio shares will no longer be available for
purchase beginning on the next Business Day following the Closing Date.
Redemptions of Growth Equity Portfolio's shares may be effected until the
Closing Date.
-14-
<PAGE>
EXCHANGES. Shares of each Fund are exchangeable for shares of
other funds in the same fund family, on the basis of their respective NAVs at
the time of the exchange. After the Reorganization, shares of Wilmington Growth
Portfolio will be exchangeable for shares of the same class of a wide variety of
funds in the newly restructured Wilmington fund family.
DIVIDENDS AND OTHER DISTRIBUTIONS
Distributions from the net investment income of each Fund are
declared and paid annually to shareholders. Any net capital gain realized by a
Portfolio will be distributed annually. Distributions are automatically
reinvested in additional shares of a Fund at the net asset value on the
ex-dividend date unless otherwise requested. Therefore, there should be no
change in your fund's dividend policies resulting from the Reorganization.
THE REORGANIZATION TRANSACTION
The terms and conditions under which the proposed transaction
will be consummated are set forth in the Reorganization Plan. Significant
provisions of the Reorganization Plan are summarized below; however, this
summary is qualified in its entirety by reference to the Reorganization Plan,
which is attached as Appendix C to this Proxy Statement.
The Reorganization Plan provides for (a) the acquisition by
Wilmington Growth Portfolio on the Closing Date of all of the assets of Growth
Equity Portfolio in exchange for Institutional class shares of equal value of
Wilmington Growth Portfolio and the assumption by Wilmington Growth Portfolio of
substantially all of the liabilities of Growth Equity Portfolio and (b) the
distribution of those Wilmington Growth Portfolio shares to the shareholders of
Growth Equity Portfolio. The assets of Growth Equity Portfolio to be acquired by
Wilmington Growth Portfolio include all cash, cash equivalents, securities,
receivables, claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Growth Equity Portfolio's books and all other property owned
by Growth Equity Portfolio. Growth Equity Portfolio will use its best efforts to
discharge all of its known debts, liabilities, obligations and duties before the
Closing Date. Wilmington Growth Portfolio will issue its shares to the account
of Growth Equity Portfolio, which then will distribute those shares to the
accounts of Growth Equity Portfolio's shareholders.
The value of Growth Equity Portfolio's assets to be acquired
by Wilmington Growth Portfolio will be determined as of the close of regular
trading on the New York Stock Exchange on the business day immediately preceding
the Closing Date ("Valuation Time"),
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<PAGE>
using the valuation procedures described in Growth Equity Portfolio's current
Prospectus and Statement of Additional Information. Growth Equity Portfolio's
net value shall be the value of its assets to be acquired by Wilmington Growth
Portfolio, less the amount of Growth Equity Portfolio's liabilities, as of the
Valuation Time.
On, or as soon as practicable after, the Closing Date, Growth
Equity Portfolio will distribute the WT Growth Equity Portfolio shares it
receives pro rata to its shareholders of record as of the effective time of the
Reorganization, so that each shareholder will receive a number of full and
fractional Wilmington Growth Portfolio shares equal in aggregate value to the
shareholder's holdings in Growth Equity Portfolio. Growth Equity Portfolio will
be terminated as soon as practicable thereafter. The shares will be distributed
by opening accounts on the books of Wilmington Growth Portfolio in the names of
Growth Equity Portfolio shareholders and by transferring to those accounts the
shares previously credited to the account of Growth Equity Portfolio on those
books. Fractional shares in Wilmington Growth Portfolio will be rounded to the
third decimal place.
Any transfer taxes payable upon issuance of Wilmington Growth
Portfolio shares in a name other than that of the registered Growth Equity
Portfolio shareholder will be paid by the person to whom those shares are to be
issued as a condition of such transfer. Any reporting responsibility of Growth
Equity Portfolio to a public authority will continue to be its responsibility
until it is dissolved.
The costs of the Reorganization, including professional fees
and the cost of soliciting proxies for the Meeting, consisting principally of
printing and mailing expenses, together with the cost of any supplementary
solicitation, will be borne by Wilmington Growth Portfolio and Growth Equity
Portfolio. However, since WTC currently maintains an expense cap for each Fund,
it is anticipated that WTC will ultimately bear the costs of the Reorganization.
Consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Plan, some of which may be waived by
either Fund. In addition, the Reorganization Plan may be amended in any mutually
agreeable manner, except that no amendment may be made subsequent to the Meeting
that has a material adverse effect on the interests of Growth Equity Portfolio's
shareholders.
OBJECTIVES OF THE REORGANIZATION
The Reorganization has been proposed by the Board of Trustees
of Growth Equity Portfolio for the following reasons:
(BULLET) The Reorganization is part of WTC's initiative to create a
comprehensive family of mutual funds that will offer a wide variety of
investment styles. WTC and its affiliates are seeking to unify and
streamline the operations of a number of mutual funds which
-16-
<PAGE>
they advise and to create an efficient fund distribution system. The
Reorganization offers you the opportunity to become part of a larger
and more diverse family of mutual funds, and you will be able to
exchange your shares among many of these different funds.
(BULLET) The master/feeder structure provides an opportunity for management to
attract other institutional investors as feeder funds and to access
additional distribution channels to reach other investors who may not
otherwise have invested in Growth Equity Portfolio. This may lead to
reductions in your fund's total operating expenses through economies of
scale.
(BULLET) Lower fund operating costs may lead to stronger performance, since
total return to a fund's shareholders is net of fund expenses.
TRUSTEES OF WT MUTUAL FUND
Under Delaware law, the Board of Trustees of WT Mutual Fund is
responsible for establishing fund policies and for overseeing the management of
the fund. The Board also elects the officers who conduct the daily business of
WT Mutual Fund. The current Trustees and officers of WT Mutual Fund are set
forth below. Mr. Quindlen, a trustee of The Rodney Square Strategic Equity Fund,
was appointed to WT Mutual Fund's Board at a meeting held on August 12, 1999, to
replace Lawrence B. Thomas whose resignation was accepted on that date. WT
Mutual Fund will be holding a shareholder meeting in October 1999 to vote on the
proposed election of five nominees to the Board of Trustees. It is anticipated
that as of the Closing Date, the Board of Trustees will consist of the following
8 individuals, six of whom shall be independent Trustees: Eric Brucker, John J.
Quindlen, Louis Klein Jr., Clement C. Moore, II, William P. Richards, Robert H.
Arnold, Nicholas A. Giordano and Robert J. Christian.
The current Trustees and executive officers of WT Mutual Fund
are as follows:
<TABLE>
<CAPTION>
PRINCIPAL WT FUND
NAME AND AGE POSITION POSITION OCCUPATION SHARES OWNED
SINCE OR BENEFICIALLY
EMPLOYMENT 8/24/99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert H. Arnold Trustee 1997 Since 1989, Co-Manager of 0
55 years old R.H. Arnold & Co., Inc.,
an investment banking
company
John J. Quindlen Trustee 1999 Retired. Senior Vice 0
67 years old President-Finance of E.I.
du Pont de Nemours and
Company, Inc. (diversified
chemicals) from 1984 to
November
-17-
<PAGE>
1993. Chief Financial Officer
of E.I. du Pont de Nemours and
Company, Inc. from 1984 to
June 1993. Presently, a
director of St. Joe Paper
Co., Trustee of Kalmar
Pooled Investment Trust
and Trustee of the funds
in the Rodney Square group
of funds.
Nicholas A. Giordano Trustee 1998 Financial Services 0
56 years old Consultant 1997 to the
present; Interim
President of LaSalle
University from
July 1, 1998 to
June 30, 1999;
President and Chief
Executive Officer of
the Philadelphia
Stock Exchange from
1981 through August
1997
*Robert J. Christian Trustee and 1998 Chief Investment Officer 0
50 years old President of WTC and Director of
Rodney Square Management
Corporation since February
1996. Chairman and
Director of PNC Equity
Advisors Company and
President and Chief
Investment Officer of PNC
Asset Management Group,
Inc. from 1994-1996; Chief
Investment Officer of PNC
Bank from 1992-1996.
*Eric K. Cheung Vice President 1998 Since 1991, Division 0
43 years old Manager for all fixed
income products at
Wilmington Trust Company.
*Pat Colletti Treasurer 1999 Vice President and 0
41 years old Director of Investment
Accounting and
Administration of PFPC
Inc. since April 1999.
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<PAGE>
Controller for the
Reserve Funds from 1986 to
1999.
*Gary M. Gardner Secretary 1999 Senior Vice President of 0
48 years old PFPC Inc. since January
1994.
<FN>
* Interested Person of the Fund as defined in Section 2(a)(19) of the 1940 Act.
</FN>
</TABLE>
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<PAGE>
The following persons have been nominated for election to the Board of Trustees
of WT Mutual
Fund:
<TABLE>
<CAPTION>
WT FUND
SHARES OWNED
NAME AND AGE PRINCIPAL OCCUPATION FOR PAST 5 YEARS BENEFICIALLY
------------ ------------------------------------- 8/24/99
------------
<S> <C> <C>
Eric Brucker Dean of the College of Business, Public Policy and 0
58 years old Health at the University of Maine since September
1998. Dean of the School of Management at the
University of Michigan from June 1992 to September
1998. Professor of Economics, Trenton State College
from September 1989 to June 1992. Vice President for
Academic Affairs, Trenton State College from September
1989 to June 1991. Dean of College of Business and
Economics and Chairman of various committees at the
University of Delaware from 1976 to September 1989.
Trustee of the funds in the Rodney Square group of
funds.
John J. Quindlen See above description. 0
67 years old
Louis Klein Jr. Self employed financial consultant from 1991 to the 0
63 years old present. Has held the positions of Trustee, Manville
Personal Injury Settlement Trust; Director, Riverwood
International Corporation; and Director, Manville
Corporation since 1991. Trustee of The CRM Funds.
Clement C. Moore, II Managing Partner, Mariemont Holdings, LLC, a commercial 0
55 years old real estate holding and development company from 1980
to present. Trustee of The CRM Funds.
William P. Richards* Managing Director - Client Service and Portfolio 0
62 years old Communication, Roxbury Capital Management since 1998.
Formerly Senior Vice President and Partner, Van
Deventer & Hoch, an investment management firm.
<FN>
* Interested Person of the Fund as defined in Section 2(a)(19) of the 1940 Act.
</FN>
</TABLE>
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<PAGE>
The following chart provides certain information for the
fiscal year ended June 30, 1999 about the fees paid by WT Mutual Fund and WT
Trust to the Trustees:
<TABLE>
<CAPTION>
COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL FROM WT
NAME OF FROM WT AS PART OF FUND BENEFITS UPON FUND COMPLEX PAID TO
PERSON & POSITION MUTUAL FUND EXPENSES RETIREMENT TRUSTEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert H. Arnold $7,318 0 0 $14,637
Trustee
Lawrence B. Thomas $7,318 0 0 $14,637
Trustee
Nicholas A. Giordano $7,318 0 0 $14,637
Trustee
Robert J. Christian 0 0 0 0
President and
Trustee
</TABLE>
DESCRIPTION OF SECURITIES TO BE ISSUED
WT Mutual Fund is registered with the SEC as an open-end
management investment company. Shares of Wilmington Growth Portfolio entitle
their holders to one vote per full share and fractional votes for fractional
shares held. Wilmington Growth Portfolio will issue Investor class shares and
Institutional class shares. The difference between these two share classes is
that Investor Shares will be subject to Rule 12b-1 fees which compensate the
Portfolio's distributor for distribution and shareholder servicing activities.
Institutional shares will not be subject to Rule 12b-1 fees and are restricted
to certain investors. According to the Reorganization Plan, Growth Equity
Portfolio would receive Institutional shares of Wilmington Growth Portfolio on
the Closing Date; therefore, its shareholders would become Institutional class
shareholders. Such shareholders would not pay Rule 12b-1 fees and would be able
to purchase or redeem Institutional class shares without a sales charge.
Both WT Mutual Fund and WT Investment Trust I are business
trusts established under the Delaware Business Trust Act. The Rodney Square
Strategic Equity Fund is a business trust formed under the Massachusetts statute
governing business trusts. The Delaware Act provides a more comprehensive
statutory framework for the governance of business trusts than the Massachusetts
statute.
-21-
<PAGE>
Trusts formed under either statute can issue multiple classes
or series of shares and have an unlimited number of authorized shares. Both
forms of business trust permit such matters as election or removal of Trustees,
shareholder voting rights, shareholder meetings and quorum requirements to be
governed by a trust agreement. Also, both Delaware and Massachusetts business
trusts are permitted to grant broad powers to the Trustees, including the
authority to amend the trust agreement without shareholder approval. Generally,
the responsibilities, powers and fiduciary duties of trustees of Massachusetts
business trusts and Delaware business trusts are substantially the same.
However, the Delaware Act, as opposed to the Massachusetts
statute, expressly states that the debts, liabilities or obligations incurred by
a particular series of a multiple series business trust registered under the
1940 Act are enforceable only against the assets of such series so long as
certain minor conditions are met. This means that none of the other series
(portfolios) in a multiple series mutual fund like WT Mutual Fund may be charged
with the liabilities of another series (portfolio). Moreover, the Delaware Act
expressly states that the shareholders of a business trust shall be entitled to
the same limitation of personal liability extended to stockholders of
corporations. Lastly, the Delaware Act provides that a trustee (when acting as
such) shall not be personally liable to any person other than the business trust
or a beneficial owner for any act, omission, or obligation of the business trust
or any trustee thereof, unlike the Massachusetts statute.
Other than terms affected by the statutory differences between
Massachusetts and Delaware business trusts described in the preceding
paragraphs, the terms of the trust agreements of WT Mutual Fund and The Rodney
Square Strategic Equity Fund are not materially different.
Wilmington Growth Portfolio does not hold annual meetings of
shareholders. There normally will be no meetings of shareholders for the purpose
of electing Trustees unless fewer than a majority of the Trustees holding office
have been elected by shareholders, at which time the Trustees then in office
will call a shareholders' meeting for the election of Trustees. The Trustees
will call annual or special meetings of shareholders for action by shareholder
vote as may be required by the 1940 Act or WT Mutual Fund's trust agreement, or
at their discretion.
Whenever Wilmington Growth Portfolio, as a shareholder of its
master fund, is requested to vote on any matter submitted to the shareholders of
the master fund, the Portfolio will hold a meeting of its shareholders to
consider such matters. Wilmington Growth Portfolio will cast its votes in
proportion to the votes received from its shareholders. Shares for which
Wilmington Growth Portfolio receives no voting instructions will be treated as
having been voted in the same proportion as the votes received from Wilmington
Growth Portfolio shareholders.
FEDERAL INCOME TAX CONSIDERATIONS
-22-
<PAGE>
The following is a general summary of the material Federal
income tax consequences of the Reorganization and is based upon the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
existing Treasury regulations thereunder, current administrative rulings of the
Internal Revenue Service ("IRS") and judicial decisions, all of which are
subject to change. It is limited to shareholders who are individuals who hold
the Growth Equity Portfolio shares and who will hold the WT Fund shares, as
capital assets, and does not apply to shareholders who hold the stock as part of
a hedge, straddle or other financial investments, or who are subject to special
tax rules, such as dealers or traders in securities. The principal Federal
income tax consequences that are expected to result from the Reorganization,
under currently applicable law, are as follows:
(1) Wilmington Growth Portfolio's acquisition of Growth Equity
Portfolio's assets in exchange solely for Wilmington Growth
Portfolio shares, followed by Growth Equity Portfolio's
distribution of those shares pro rata to its shareholders in
exchange for their Growth Equity Portfolio shares, will
constitute a "reorganization" within the meaning of section
368(a) Code;
(2) Growth Equity Portfolio will recognize no gain or loss on the
transfer to Wilmington Growth Portfolio of its assets in
exchange solely for Wilmington Growth Portfolio Institutional
class shares and the assumption by the Wilmington Growth
Portfolio of any stated liabilities of the Value Growth
Portfolio;
(3) No gain or loss will be recognized by the Wilmington Growth
Portfolio or the WT Growth Series on its receipt of the
Wilmington Growth Portfolio's assets in exchange for the WT
Growth Series shares and the assumption by the WT Growth
Series of the Wilmington Growth Portfolio's liabilities;
(4) Wilmington Growth Portfolio's tax basis for the transferred
assets will be the same as the basis thereof in Growth Equity
Portfolio's hands immediately before the Reorganization, and
Wilmington Growth Portfolio's holding period for those assets
will include Growth Equity Portfolio's holding period
therefor;
(5) A Growth Equity Portfolio shareholder will recognize no gain
or loss on the constructive exchange of all its Growth Equity
Portfolio shares solely for Wilmington Growth Portfolio shares
pursuant to the Reorganization;
-23-
<PAGE>
(6) No gain or loss will be recognized to the shareholders on the
exchange of their Growth Equity Portfolio shares solely for
shares in Wilmington Growth Portfolio; and
(7) A Growth Equity Portfolio shareholder's aggregate tax basis
for the Wilmington Growth Portfolio shares to be received by
it in the Reorganization will be the same as the aggregate
basis for its Growth Equity Portfolio shares to be
constructively surrendered in exchange for those Wilmington
Growth Portfolio shares, and its holding period for those
Wilmington Growth Portfolio shares will include its holding
period for those Growth Equity Portfolio shares, provided they
are held as capital assets by the shareholder on the Closing
Date.
The consummation of the Reorganization is subject to the
receipt of a favorable tax opinion from Pepper Hamilton LLP as to these tax
consequences of the Reorganization. The opinion will be based on current law and
normal and customary assumptions and representations to be made by the Funds.
Shareholders of Growth Equity Portfolio should consult their
tax advisers regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Because the foregoing discussion only relates to
federal income tax consequences of the Reorganization, those shareholders also
should consult their tax advisers about state and local tax consequences, if
any, of the Reorganization.
CAPITALIZATION
The following table shows the capitalization of each Fund as
of June 30, 1999, and on a pro forma combined basis (unaudited) as of June 30,
1999, giving effect to the Reorganization:
<TABLE>
<CAPTION>
Wilmington Growth Combined Portfolio
Portfolio Growth Equity Portfolio Pro Forma 1
----------------- ----------------------- ------------------
<S> <C> <C> <C>
Net Assets $0 $222,537,799 $222,537,799
Net Asset Value Per Share $0 $25.76 $25.76
Shares Outstanding 0 8,637,571 8,637,571
</TABLE>
- --------------------------
1 Full pro forma financial statements are included in the Statement of
Additional Information to this Proxy Statement.
-24-
<PAGE>
BOARD CONSIDERATION OF THE REORGANIZATION
At a meeting held on May 13, 1999, the Board, including a
majority of the Independent Trustees, determined that the Reorganization is in
the best interests of Growth Equity Portfolio, that the terms of the
Reorganization are fair and reasonable and that the interests of the Portfolio's
shareholders will not be diluted as a result of the Reorganization.
In approving the Reorganization, the Board, including a
majority of the Independent Trustees, considered a number of factors, including
the following:
(1) the similarity of the Funds' investment objectives,
strategies, risks and restrictions;
(2) that the maximum total operating expenses of
Wilmington Growth Portfolio, after reimbursements by
WTC, will not exceed the current maximum total
operating expenses of Growth Equity Portfolio taking
into account waivers and reimbursements;
(3) the costs to be incurred by each Fund as a result of
the Reorganization;
(4) the anticipated tax-free nature of the Reorganization;
and
(5) the potential benefits of the Reorganization to
shareholders, as described above under
"Objectives of the Reorganization."
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
PROPOSAL 1.
OTHER MATTERS
The Board knows of no other business to be brought before the
Meeting. If, however, any other matters properly come before the Meeting, it is
the intention that proxies that do not contain specific instructions to the
contrary will be voted on such matters in accordance with the judgment of the
persons designated in the proxies.
SERVICE PROVIDERS
-25-
<PAGE>
WTC, located at 1100 North Market Street, Wilmington, Delaware
19890, serves as investment adviser to Growth Equity Portfolio. 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 is a state-chartered bank organized as a Delaware
corporation in 1903. WTC is wholly-owned by Wilmington Trust Corporation, a
publicly-held bank holding company. Ted T. Cecala is the principal executive
officer of WTC. The name and principal occupation of each director of WTC as of
September 1, 1999 were as follows:
NAME OF DIRECTOR OCCUPATION
- ---------------- ----------
Ted T. Cecala Chief Executive Officer and Chairman of the Board
of Wilmington Trust Corporation
Andrew B. Kirkpatrick Counsel to the law firm of Morris, Nichols, Arsht
and Tunnell
David P. Roselle President of the University of Delaware
Mary Jornlin-Theisen Civic leader
Charles S. Crompton, Jr. Partner of the law firm of Potter, Anderson &
Corroon
Edward B. du Pont Private investor
Stacey J. Mobley Senior Vice President, external affairs, E.I. Du
Pont de Nemours and Company
Carolyn S. Burger Principal of CB Associates, Inc., a consulting
firm
Robert V. A. Harra, Jr. President, Chief Operating Officer and Treasurer
of Wilmington Trust
Leonard W. Quill Retired
Richard R. Collins Chairman of Collins, Inc., a consulting firm
Hugh E. Miller Retired
Thomas P. Sweeney Partner in the law firm of Richards, Layton &
Finger, P.A.
H. Stewart Dunn, Jr. Partner in the law firm of Ivins, Phillips &
Barker
-26-
<PAGE>
NAME OF DIRECTOR OCCUPATION
- ---------------- ----------
R. Keith Elliot Chairman of the Board and Chief Executive Officer
of Hercules Incorporated
Walter D. Mertz Retired Senior Vice President of Wilmington Trust
Corporation and WTC; Associate Director
G. Burton Pearson Retired Senior Vice President of Wilmington Trust
Corporation and WTC; Associate Director
Rex L. Mears President of Ray S. Mears and Sons, Inc.
Robert W. Tunnell, Jr. Managing Partner of Tunnell Companies, L.P.
H. Rodney Sharp, III Retired
The address of each of the foregoing directors is 1100 North
Market Street, Wilmington, Delaware 19890.
Pursuant to separate Administrative Services Agreements
between PFPC Inc. and WT Mutual Fund and between PFPC and The Rodney Square
Strategic Equity Fund, PFPC provides administrative services to both Funds,
including accounting and recordkeeping services and functions. PFPC is located
at 400 Bellevue Parkway, Wilmington, Delaware 19809.
The underwriter of each Fund's shares is Provident
Distributors, Inc., located at Four Falls Corporate Center, 6th Floor, West
Conshohocken, PA 19428.
MISCELLANEOUS
AVAILABLE INFORMATION. Each Fund is subject to the information
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance is required to file reports, proxy material and other information
with the SEC. These reports, proxy material and other information can be
inspected and copied at the Public Reference Room maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, the Midwest Regional office of the
SEC, Northwest Atrium Center, 500 West Madison Street, Suite 400, Chicago,
Illinois 60611, and the Northeast Regional Office of the SEC, Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20459
at prescribed rates.
-27-
<PAGE>
LEGAL MATTERS Certain legal matters in connection with the
issuance of Wilmington Growth Portfolio shares as part of the Reorganization
will be passed upon by WT Mutual Fund's counsel, Pepper Hamilton LLP.
EXPERTS The audited financial statements of Growth Equity
Portfolio for the fiscal year ended June 30, 1999 included as Exhibit B to the
Statement of Additional Information delivered with this Proxy Statement, have
been audited by Ernst & Young LLP, auditors for The Rodney Square Strategic
Equity Fund. The financial statements have been incorporated herein by reference
in reliance on their reports given upon their authority as experts in auditing
and accounting matters.
Since Wilmington Growth Portfolio is a newly-created shell
fund, it has no assets, income or losses to report in a financial statement.
-28-
<PAGE>
APPENDIX A
PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of Growth Equity
Portfolio's outstanding equity securities as of September 28, 1999 by each owner
of 5% or more of a Fund's outstanding equity securities. Since Wilmington Growth
Portfolio has not yet commenced operations, there are no owners of its shares.
AMOUNT
OF OWNERSHIP NAME AND ADDRESS PERCENTAGE
------------ ---------------- ----------
GROWTH EQUITY PORTFOLIO 776,373.83 Wilmington Trust Company, Trustee 9.20%
for Wilmington Trust Company
Pension Trust
P.O. Box 8882
Wilmington, DE 19899
1,318,909.72 Wilmington Trust Company, Trustee 15.63%
for Wilmington Trust Company
401K Thrift Savings Plan
P.O. Box 8882
Wilmington, DE 19899
A-1
<PAGE>
APPENDIX B
PRELIMINARY PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE PORTFOLIOS' REGISTRATION STATEMENT FILED
WITH THE SECURITY EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE OFFERS OR SALES ARE NOT PERMITTED.
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
================================================================================
PROSPECTUS DATED______, 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 mutual funds:
[BULLET] are not bank deposits
[BULLET] are not obligations of, or guaranteed or endorsed by Wilmington Trust
Company or any of its affiliates
[BULLET] are not federally insured
[BULLET] 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
[BULLET] 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.
B-1
<PAGE>
TABLE OF CONTENTS
A LOOK AT THE GOALS, STRATEGIES, PORTFOLIO DESCRIPTION
RISKS, EXPENSES AND FINANCIAL Summary....................................3
HISTORY OF EACH PORTFOLIO. Performance Information....................5
Fees and Expenses..........................9
Investment Objectives.....................11
Primary Investment Strategies.............12
Additional Risk Information...............19
Financial Highlights......................21
DETAILS ABOUT THE SERVICE MANAGEMENT OF THE FUND
PROVIDERS. Investment Advisers.......................23
Portfolio Managers........................24
Service Providers.........................27
POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Shares.........................29
CLOSING AN ACCOUNT IN ANY OF Purchase of Shares........................29
THE PORTFOLIOS. Redemption of Shares......................31
Exchange of Shares........................32
Distributions.............................33
Taxes.....................................33
DETAILS ON DISTRIBUTION DISTRIBUTION ARRANGEMENTS
PLANS AND THE PORTFOLIOS' Rule 12b-1 Fees...........................34
MASTER/FEEDER FUND Master/Feeder Structure...................35
ARRANGEMENT. Share Class...............................35
FOR MORE INFORMATION..............back cover
For information about key terms and concepts, look for our "PLAIN TALK"
explanations.
B-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
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 [BULLET] The LARGE CAP GROWTH PORTFOLIO and
the SMALL CAP CORE PORTFOLIO each seek superior
long-term growth of capital.
[BULLET] 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.
[BULLET] The INTERNATIONAL MULTI-MANAGER PORTFOLIO seeks
superior long-term capital appreciation.
- --------------------------------------------------------------------------------
Investment Focus [BULLET] Equity (or related) securities
- --------------------------------------------------------------------------------
Share Price Volatility [BULLET] Moderate to high
- --------------------------------------------------------------------------------
Principal Investment [BULLET] Each Portfolio operates as a "feeder fund" which
Strategy 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.
[BULLET] 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 stock 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.
B-3
<PAGE>
- --------------------------------------------------------------------------------
[BULLET] 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 or medium
and large cap corporations with strong growth
and value characteristics.
[BULLET] 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.
[BULLET] 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.
[BULLET] 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 downside
risk over an 18 to 24 mouth holding period. The
Series 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.
(BULLET) 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.
[BULLET] 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.
- --------------------------------------------------------------------------------
Principal Risks The Portfolios are subject to the following risks
summarized below which are further described under
"Additional Risk Information."
[BULLET] 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.
[BULLET] It is possible to lose money by investing in a
Portfolio.
[BULLET] 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.
[BULLET] 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.
[BULLET] The International Multi-Manager Portfolio is
subject to foreign security risk and the risk of
losses caused by changes in foreign currency
exchange rates.
[BULLET] The International Multi-Manager Portfolio is not
authorized to depart from its primary investment
policies and temporarily pursue a defensive
investment policy, even during periods of
declining markets. Consequently, they are
subject to a greater risk of capital
- --------------------------------------------------------------------------------
B-4
<PAGE>
- --------------------------------------------------------------------------------
loss if adverse market conditions arise and
persist in the future than funds which are
permitted to adopt a defensive position.
[BULLET] Growth-oriented investments may be more volatile
than the rest of the U.S. stock market as a
whole.
[BULLET] A value-oriented investment approach is subject
to the risk that a security believed to be
undervalued does not appreciate in value as
anticipated.
[BULLET] 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 Investors who want the value of their investment to
grow and who are willing to accept more volatility
for the possibility of higher returns.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
WILMINGTON LARGE CAP GROWTH PORTFOLIO
The chart below shows the changes in annual total returns for the Large Cap
Growth Portfolio for the last 10 calendar years of the Portfolio through
December 31, 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. Until February 23, 1998, the Portfolio invested in both large and
small capitalization securities. The Portfolio's investment policy now calls for
investments to be made exclusively in large capitalization equity securities
with strong growth characteristics. Accordingly, the Portfolio's historical
performance may not reflect its current investment practices. Past performance
is not necessarily an indicator of how the Portfolio will perform in the future.
Bar Chart [Graphic Omitted]
EDGAR Representation of Data Points Used in Printed Graphic
CALENDAR YEAR TOTAL RETURNS
---------------------------
1989 27.15%
1990 (7.15)%
1991 41.54%
1992 5.95%
1993 14.57%
1994 (.23)%
1995 28.43%
1996 24.25%
1997 27.50%
1998 23.58%
B-5
<PAGE>
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
SHARES FROM CALENDAR YEAR TO CALENDAR YEAR. THE BAR CHART DOES NOT REFLECT
DEDUCTIONS FOR RULE 12B-1 DISTRIBUTION FEES, IF SUCH AMOUNTS WERE REFLECTED,
RETURNS WOULD BE LESS.
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.
-----------------------------------------------------------------------
Institutional Shares
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.
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.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
SHARES FROM CALENDAR YEAR TO CALENDAR YEAR. THE BAR CHART DOES NOT REFLECT
DEDUCTIONS FOR RULE 12B-1 DISTRIBUTION FEES, IF SUCH AMOUNTS WERE REFLECTED,
RETURNS WOULD BE LESS.
BEST QUARTER WORST QUARTER
--% --%
(___, 199_) (___, 199_)
B-6
<PAGE>
Institutional Shares SINCE INCEPTION
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR (JANUARY 1995)
- ------------------------------------- ------ --------------
Large Cap Core Portfolio
S&P 500 Index*
- -------------------------
* 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.
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.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
SHARES FROM CALENDAR YEAR TO CALENDAR YEAR. THE BAR CHART DOES NOT REFLECT
DEDUCTIONS FOR RULE 12B-1 DISTRIBUTION FEES, IF SUCH AMOUNTS WERE REFLECTED,
RETURNS WOULD BE LESS.
BEST QUARTER WORST QUARTER
20.59% -17.92%
(September 30, 1997) (June 30, 1998)
Institutional Shares 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.
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
B-7
<PAGE>
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.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
SHARES FROM CALENDAR YEAR TO CALENDAR YEAR. THE BAR CHART DOES NOT REFLECT
DEDUCTIONS FOR RULE 12B-1 DISTRIBUTION FEES, IF SUCH AMOUNTS WERE REFLECTED,
RETURNS WOULD BE LESS.
BEST QUARTER WORST QUARTER
16.21% -22.76%
(September 30, 1989) (September 30, 1990)
Institutional Shares
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 20.00% 9.19% 5.54%
- -------------------------
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.
Bar Chart [Graphic Omitted]
EDGAR Representation of Data Points Used in Printed Graphic
CALENDAR YEAR TOTAL RETURNS
1992 13.48%
1993 13.75%
1994 (1.64)%
1995 34.38%
B-8
<PAGE>
1996 21.86%
1997 24.55%
1998 (2.75)%
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
SHARES FROM CALENDAR YEAR TO CALENDAR YEAR. THE BAR CHART DOES NOT REFLECT
DEDUCTIONS FOR RULE 12B-1 DISTRIBUTION FEES, IF SUCH AMOUNTS WERE REFLECTED,
RETURNS WOULD BE LESS.
BEST QUARTER WORST QUARTER
13.48% -10.62%
(June 30, 1997) (September 30, 1998)
Institutional Shares SINCE INCEPTION
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR 5 YEARS (DECEMBER 1, 1991)
- ------------------------------------- ------ ------- ------------------
Large Cap Value Portfolio -2.75% 14.30% 15.29%
S&P 500 Index 28.58% 24.06% 21.08%
- -------------------------
WILMINGTON MID CAP VALUE PORTFOLIO
The Portfolio has not been in operation for a full calendar year.
Institutional Shares SINCE INCEPTION
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR (JANUARY 6, 1998)
- ------------------------------------- ------ -----------------
Mid Cap Value Portfolio _____% _____%
Russell Mid Cap Index* 10.10% _____%
- -------------------------
* 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.
THIS BAR CHART SHOWS CHANGES IN THE PERFORMANCE OF THE PORTFOLIO'S INSTITUTIONAL
SHARES FROM CALENDAR YEAR TO CALENDAR YEAR. THE BAR CHART DOES NOT REFLECT
DEDUCTIONS FOR RULE 12B-1 DISTRIBUTION FEES, IF SUCH AMOUNTS WERE REFLECTED,
RETURNS WOULD BE LESS.
BEST QUARTER WORST QUARTER
--% --%
(___, 199_) (___, 199_)
B-9
<PAGE>
Institutional Shares SINCE INCEPTION
AVERAGE ANNUAL RETURNS AS OF 12/31/98 1 YEAR (OCTOBER 1, 1995)
- ------------------------------------- ------ -----------------
Small Cap Value Portfolio -12.21% -2.24%
Russell 2000 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.
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.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
ANNUAL FUND OPERATING INTERNATIONAL
EXPENSES (EXPENSES THAT ARE LARGE CAP GROWTH LARGE CAP CORE SMALL CAP CORE MULTI-MANAGER
DEDUCTED FROM PORTFOLIO ASSETS) 1 PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Management fees 0.55% 0.70% 0.60% 0.65%
Distribution (12b-1) fees 0.00% 0.00% 0.00% 0.00%
Other expenses 0.25% % % %
TOTAL ANNUAL OPERATING EXPENSES 2 0.80% % % %
Waivers/reimbursements 0.05% % % %
Net expenses 0.75% 0.80% 0.80% 1.00%
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE LARGE CAP VALUE MID CAP VALUE SMALL CAP VALUE
DEDUCTED FROM PORTFOLIO ASSETS) 1 PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Management fees 0.55% 0.75% 0.75%
Distribution (12b-1) fees 0.00% 0.00% 0.00%
Other expenses 0.29% % %
TOTAL ANNUAL OPERATING EXPENSES 2 0.84% % %
Waivers/reimbursements 0.09% % %
Net expenses 0.75% 1.50% 1.38%
- -------------------------
<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 for
Institutional shares exceed 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 waiver will remain in place until the Board
of Trustees approves its termination. The management fees, other expenses
and total annual operating expenses reflected in the table above are based
on the Portfolios' actual expenses for the fiscal year ended June 30, 1999.
</FN>
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
INVESTOR SHARES
ANNUAL FUND OPERATING INTERNATIONAL
EXPENSES (EXPENSES THAT ARE LARGE CAP GROWTH LARGE CAP CORE SMALL CAP CORE MULTI-MANAGER
DEDUCTED FROM PORTFOLIO ASSETS) 1 PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Management fees 0.55% 0.70% 0.60% 0.65%
Distribution (12b-1) fees 0.25% 0.25% 0.25% 0.25%
Other expenses 0.25% % % %
TOTAL ANNUAL OPERATING EXPENSES 2 1.05% % % %
Waivers/reimbursements 0.05% % % %
Net expenses 1.00% 1.05% 1.05% 1.25%
</TABLE>
<TABLE>
<CAPTION>
INVESTOR SHARES CONTINUED....
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE LARGE CAP VALUE MID CAP VALUE SMALL CAP VALUE
DEDUCTED FROM PORTFOLIO ASSETS) 1 PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Management fees 0.55% 0.75% 0.75%
Distribution (12b-1) fees 0.25% 0.25% 0.25%
Other expenses 0.29% % %
TOTAL ANNUAL OPERATING EXPENSES 2 1.09% % %
Waivers/reimbursements 0.09% % %
Net expenses 1.00% 1.75% 1.63%
- -------------------------
<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 Investor Shares, WTC has agreed to waive a portion of its advisory fee
or reimburse expenses to the extent total annual operating expenses for
Investor shares exceed 1.00% for the Large Cap Growth Portfolio, 1.05% for
the Large Cap Core Portfolio, 1.05% for the Small Cap Core Portfolio, 1.25%
for the International Multi-Manager Portfolio and 1.00% for the Large Cap
Value Portfolio of Trustees. This waiver will remain in place until the
Board of Trustees approves its termination. The management fees, other
expenses and total annual operating expenses reflected in the table above
are based on the Portfolios' actual expenses for the fiscal year ended June
30, 1999.
</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:
[BULLET] you reinvested all dividends and other distributions;
[BULLET] the average annual return was 5%;
[BULLET] the Portfolio's maximum (without regard to waivers or expenses) total
operating expenses are charged and remain the same over the time
periods; and
[BULLET] you redeemed all of your investment at the end of the time period.
B-11
<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
- -------------------- ------ ------- ------- --------
Large Cap Growth Portfolio $82 $255 $444 $990
Large Cap Core Portfolio $ $ $ $
Small Cap Core Portfolio $ $ $ $
International Multi-Manager Portfolio $ $ $ $
Large Cap Value Portfolio $86 $268 $466 $1037
Mid Cap Value Portfolio $ $ $ $
Small Cap Value Portfolio $ $ $ $
INVESTOR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------- ------ ------- ------- --------
Large Cap Growth Portfolio $107 $334 $579 $1283
Large Cap Core Portfolio $ $ $ $
Small Cap Core Portfolio $ $ $ $
International Multi-Manager Portfolio $ $ $ $
Large Cap Value Portfolio $111 $347 $601 $1329
Mid Cap Value Portfolio $ $ $ $
Small Cap Value Portfolio $ $ $ $
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."
B-12
<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:
[BULLET] common stocks of U.S.corporations that are judged by the adviser to
have strong growth characteristicsand, 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;
[BULLET] options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
[BULLET] options on indexes of the common stock of U.S. corporations described
above; and
[BULLET] 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.
B-13
<PAGE>
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.
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.
LARGE CAP GROWTH STOCKS (over $5 billion in total market cap) - Up to 100%, but
not less than 65%, of the Series' total assets:
[BULLET] Mature, predictable businesses
[BULLET] Capital appreciation and income
[BULLET] Highest liquidity
MEDIUM CAP GROWTH STOCKS (between $1 and $5 billion in total market cap) - Up to
20% of the Series' total assets:
[BULLET] Superior long-term potential
[BULLET] Strong niche or franchise
[BULLET] Seasoned management
SPECIAL SITUATIONS GROWTH OPPORTUNITIES - Up to 20% of the Series' total assets:
[BULLET] Stable return, independent of the market
[BULLET] Unusually favorable risk/reward characteristics
[BULLET] 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:
[BULLET] securities of U.S. corporations that are judged by the adviser to have
strong growth and valuation characteristics;
[BULLET] options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
[BULLET] 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
B-14
<PAGE>
corporation; and
[BULLET] 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).
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:
[BULLET] 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;
[BULLET] options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
[BULLET] options on indexes of the common stock of U.S. corporations described
above; and
[BULLET] 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
B-15
<PAGE>
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
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:
[BULLET] common stocks of foreign issuers;
[BULLET] preferred stocks and/or debt securities that are convertible securities
of such foreign issuers; and
[BULLET] 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
B-16
<PAGE>
specific holdings and ongoing monitoring and evaluation of the Series. Series
holdings are sold when shares reach the target price, the fundamentals of a
company have deteriorated or when new companies with superior growth and
valuation characteristics have been identified.
Invista's investment approach focuses on identifying opportunities through a
fundamentally sound, economic value driven process applied evenly across all
international markets. Candidates for purchase are companies whose current price
is substantially below investment value as determined by Invista's estimate of
future free cash flows. Once this evaluation process is applied, purchases are
made among those companies that provide optimal combinations of valuation,
growth and risk. Series holdings are sold when the relative attractiveness of a
security is not as great as additions proposed by a member of the investment
team.
Scudder Kemper's investment approach involves a top-down/bottom-up approach with
a focus on fundamental research. Investment ideas are generated by regional
analysts, global industry analysts and portfolio managers through the
integration of three analytical disciplines; global themes (identification of
sectors and industries likely to gain or lose during specific phases of a
theme's cycle); country analysis (quantitative assessment of each country's
fundamental and political characteristics combined with an objective,
quantitative analysis of market and economic data); and company analysis
(identification of company opportunities by searching for unique attributes such
as franchise or monopoly, above average growth potential, innovation or
scarcity). Series holdings are sold when the analysts indicate that the
underlying fundamentals are no longer strong.
The Series utilizes this multiple sub-adviser arrangement to reduce volatility
through multiple investment approaches, a strategy used by many institutional
investors. For example, a particular investment approach used by a sub-adviser
may be successful in a bear (falling) market, while another 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.
B-17
<PAGE>
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, 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:
[BULLET] Financial models based principally upon projected cash flows
[BULLET] 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
[BULLET] The extent of management's ownership interest in the company
[BULLET] 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
B-18
<PAGE>
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:
[BULLET] 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;
[BULLET] options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
[BULLET] options on indexes of the common stock of U.S. corporations described
above;
[BULLET] 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
[BULLET] 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 ("NSRO"), 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:
[BULLET] 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;
B-19
<PAGE>
[BULLET] securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
[BULLET] warrants; and
[BULLET] 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:
[BULLET] 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;
[BULLET] securities convertible (such as convertible preferred stock and
convertible bonds) into, the common stock of U.S. corporations
described above;
[BULLET] warrants; and
[BULLET] without limit in commercial paper and other money market instruments
rated in one of the two highest rating categories by a NRSRO, in
response to adverse market conditions, as a temporary defensive
position. The result of this action may be that the Series will be
unable to achieve its investment objective.
The Small Cap Value Series is a diversified portfolio of large cap U.S. equity
(or related) securities that are deemed by the adviser to be undervalued as
compared to the company's profitability potential.
ALL 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.
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:
[BULLET] CURRENCY RISK: The risk related to investments denominated in foreign
currencies. Foreign
B-20
<PAGE>
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)
[BULLET] 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.
[BULLET] 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)
[BULLET] 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)
[BULLET] 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.
[BULLET] 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.
[BULLET] 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.
[BULLET] 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)
[BULLET] VALUATION RISK: The risk that a Series has valued certain of its
securities at a higher price than it can sell them
[BULLET] VALUE INVESTING RISK: The risk that a portfolio's investment in
companies whose securities are believed to be undervalued, relative to
their underlying profitability, do not appreciate in value as
anticipated. (Large Cap Value, Mid Cap Value, Small Cap Value and Small
Cap
B-21
<PAGE>
Core Portfolios)
[BULLET] 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. Each Series' adviser or sub-adviser will relay 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.
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, is shorter. Certain information reflects financial results for a
single 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). This
information has been audited by ______, whose report, along with each
Portfolio's financial statements, is included in the Annual Report, which is
available without charge upon request.
[FINANCIAL HIGHLIGHTS TABLES TO BE INSERTED IN FINAL PROSPECTUS]
B-22
<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 a Portfolio 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.
-----------------------------------------------------------------------
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 %
Large Cap Value Series %
Small Cap Core Series %
International Multi-Manager Series %
For the period from October 20, 1998 to June 30, 1999, WTC received advisory
fees of ___% from the Large Cap Core Series. The Series' previous adviser,
Kiewit Investment Management Corp., received advisory fees of ___% for the
period from July 1 to October 19, 1998.
B-23
<PAGE>
Cramer Rosenthal McGlynn, LLC, 707 Westchester Avenue, White Plains, New York
10604, serves as the investment adviser to the Large Cap Value Series, the Mid
Cap Value Series and the Small Cap Value Series. Subject to the supervision of
the Board of Trustees, CRM makes investment decisions for these Series. CRM and
its predecessors have managed equity investments, including a mutual fund, for
more than twenty-five years. As of September 30, 1999, CRM has over $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 0.55% of the
Series' average daily net assets over $2 billion. For the twelve months ended
June 30, 1999, CRM received advisory fees of ___% for the Large Cap Value
Series, ___% for Mid Cap Value Series and ___% for Small Cap Value Series, as a
percentage of the Series' average daily net assets.
Roxbury Capital Management, Inc., 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
in the management of separate accounts and, as of _______, 1999, has assets of
approximately $______ under management. 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 leads a "growth" team and 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 a
member of the "growth" team and is responsible for the co-management of the
Small Cap Core Series. Mr. Neale joined Wilmington Trust in 1986 as an
Institutional Multi-Manager Portfolio Manager. Currently he specializes in
managing taxable accounts for Delaware holding companies and has equity research
responsibilities following the insurance and brokerage industries.
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-
B-24
<PAGE>
Manager Series. Mr. Christian has been a Director of Wilmington Management
Corporation since February 1996, and was Chairman and Director of PNC Equity
Advisors Company, and President and Chief Investment Officer of PNC Asset
Management Group, Inc. from 1994 to 1996. He was Chief Investment Officer of PNC
Bank, N.A. from 1992 to 1996 and Director of Provident Capital Management from
1993 to 1996.
The day-to-day management of the Large Cap Value Series, the Mid Cap Value
Series and the Small Cap Value Series is shared by a team of individuals
employed by the CRM. Ronald H. McGlynn and Jay B. Abramson are responsible for
the overall management of these Series. In addition, Michael A. Prober is part
of the team responsible for the management of Mid Cap Value Series; Scott L.
Scher and Christopher Fox are part of the team responsible for the management of
Small Cap Value Series; and Kevin M. Chin and Adam L. Starr are part of the team
responsible for the management of the Large Cap Value Series. Each portfolio
manager's business experience and educational background is as follows:
RONALD H. MCGLYNN President and Chief Executive Officer since 1983 and Co-Chief
Investment Officer of CRM. He has been with CRM for twenty-five years and is
responsible for investment policy, portfolio management and investment research.
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
B-25
<PAGE>
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 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
B-26
<PAGE>
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.
SERVICE PROVIDERS
The chart below provides information on the Portfolios' primary service
providers.
Asset Shareholder
Management Services
- --------------------------- -------------------------------
INVESTMENT ADVISER 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,
including recordkeeping and
Manages each Portfolio's statements, payment of
business and investment distribution and processing of
activities. buy and sell requests.
- --------------------------- -------------------------------
Fund -------------------- Asset
Operations Safe Keeping
- -------------------------- THE WT MUTUAL FUND -----------------------------
ADMINISTRATOR AND CUSTODIAN
ACCOUNTING AGENT --------------------
PFPC INC. PFPC TRUST COMPANY
400 BELLEVUE PARKWAY 200 STEVENS DRIVE
WILMINGTON, DE 19809 LESTER, PA 19113
Provides facilities, Hold each Portfolio's
equipment and personnel assets, settle all
to carry out administrative portfolio trades and collect
services related to each most of the valuation data
Portfolio and calculates required for calculating
each Portfolio's NAV per each Portfolio's NAV
share and distributions. per share.
- -------------------------- -----------------------------
Distribution
-----------------------------------
DISTRIBUTOR
PROVIDENT DISTRIBUTORS INC.
FOUR FALLS CORPORATE CENTER
WEST CONSHOHOCKEN, PA 19428
Distributes each Portfolio's shares.
-----------------------------------
B-27
<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' offices 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:
[BULLET] Directly by mail or by wire
[BULLET] As a client of WTC through a trust account or a corporate cash
management account
[BULLET] 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 investment in Investor or Institutional class
shares of each Portfolio is $1,000, but additional investments may be made in
any amount. You may purchase shares as specified below.
B-28
<PAGE>
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 WT Mutual Fund, 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:
BY REGULAR MAIL: BY OVERNIGHT MAIL:
--------------- -----------------
WT Mutual Fund WT Mutual Fund
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box _____ 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) ______ 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.
B-29
<PAGE>
REDEMPTION OF SHARES
PLAIN TALK
-----------------------------------------------------------------------
HOW TO REDEEM (SELL) SHARES:
[BULLET] By mail
[BULLET] 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 (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 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:
BY REGULAR MAIL: BY OVERNIGHT MAIL:
--------------- -----------------
WT Mutual Fund WT Mutual Fund
c/o PFPC Inc. c/o PFPC Inc.
P.O. Box _____ 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
B-30
<PAGE>
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 shares to be redeemed represent a recent investment made by check, each
Portfolio 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 Portfolio account falls below $500, the
Portfolio may ask you to increase your balance. If the account value is still
below such amount 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 information on other ways to redeem shares, please refer to the Statement of
Additional Information.
EXCHANGE OF SHARES
PLAIN TALK
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WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one fund to
another fund within the family of funds.
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You may exchange all or a portion of your shares in a Portfolio for the same
class of shares of certain other Portfolios of the Fund. These other Portfolios
are:
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
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Wilmington Small Cap Core Portfolio
Wilmington Large Cap Value Portfolio
Wilmington Mid Cap Value Portfolio
Wilmington Small Cap Value Portfolio
Wilmington International Equity 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) ______ . 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.
DISTRIBUTIONS
PLAIN TALK
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WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest and dividends earned by a
fund on its investments less accrued expenses.
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Distributions from the net investment income of each Portfolio dividends 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 Portfolio 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
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of the calendar year of the amount of dividends and other distributions paid
that year.
Dividends you receive from the Portfolio, whether reinvested in Portfolio shares
or taken as cash, are generally taxable to you as ordinary income. The
Portfolios' distributions of a 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 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 tax 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.
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
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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.
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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
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you more than paying other types of sales charges. For the Investor class of
shares, the maximum distribution fees as a percentage of average daily net
assets are as follows:
Large Cap Growth Portfolio Investor Class 0.25%
Large Cap Core Portfolio Investor Class 0.25%
Small Cap Core Portfolio Investor Class 0.25%
International Multi-Manager Portfolio Investor Class 0.25%
Large Cap Value Portfolio Investor Class 0.25%
Mid Cap Value Portfolio Investor Class 0.25%
Small Cap Value Portfolio Investor Class 0.25%
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 CLASS
The Portfolios issue Investor and Institutional classes. The Institutional class
is offered to retirement plans. The Investor class pays an additional 12b-1 fee.
Other investors may purchase the Investor Class.
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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 affect the Portfolios' 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 Portfolios' 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) ______
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)-___-____.
The investment company registration number for the WT Mutual Fund is 811-08648.
<PAGE>
APPENDIX C
FORM OF
AGREEMENT AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"),
is made as of September __, 1999, by and between The Rodney Square Strategic
Equity Fund, a Massachusetts business trust (the "RS Fund"), on behalf of its
series of shares, the Large Cap Growth Equity Portfolio (the "RS Portfolio"), WT
Investment Trust I, a Delaware business trust ("WT Trust"), on behalf of its
series of shares, WT Large Cap Growth Series (the "WT Master Series"), and WT
Mutual Fund, a Delaware Business Trust ("WT Mutual Fund"), on behalf of its
series of shares, Wilmington Large Cap Growth Portfolio (the "WT Feeder
Portfolio").
WHEREAS, the RS Fund is a business trust organized under
Massachusetts law and a Declaration of Trust dated November 10, 1999; the RS
Fund is an open-end, management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); RS Fund has
authorized capital consisting of unlimited shares of beneficial interest, par
value $0.01 per share, of which it has allocated an unlimited number of shares
to the RS Portfolio; the RS Portfolio is a duly organized and a validly existing
series of RS Fund; and
WHEREAS, WT Trust is a business trust organized under Delaware
law and an Agreement and Declaration of Trust dated January 23, 1997; WT Trust
is an open-end, management investment company registered under the 1940 Act; WT
Trust has authorized capital consisting of unlimited shares of beneficial
interest, par value $.01 per share, of which it has allocated an unlimited
number of shares to the WT Master Series; and the WT Master Series is duly
organized and a validly existing series of WT Trust;
WHEREAS, WT Mutual Fund is a business trust organized under
Delaware law and an Agreement and Declaration of Trust dated July 19, 1994; WT
Mutual Fund is an open-end, management investment company registered under the
1940 Act; WT Mutual Fund has authorized capital consisting of unlimited shares
of beneficial interest, par value $.01 per share, of which it has allocated an
unlimited number of shares to the WT Feeder Portfolio; and the WT Feeder
Portfolio is duly organized and a validly existing series of WT Mutual Fund; and
WHEREAS, WT Trust and WT Mutual Fund together operate in a
master/feeder fund arrangement whereby each series of WT Mutual Fund is a feeder
fund investing substantially all of its assets in a corresponding series of WT
Trust,
NOW, THEREFORE, in consideration of the mutual premises and of
the covenants and agreements hereinafter set forth, the parties hereto agree at
the Effective Time (as
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defined in Section 10 of this Agreement) to effect (i) the transfer of all the
assets of the RS Portfolio to the WT Feeder Portfolio solely in exchange for (a)
the assumption by the WT Feeder Portfolio of all or substantially all of the
liabilities of the RS Portfolio and (b) shares of equal value of the WT Feeder
Portfolio, (ii) the distribution of such shares of WT Feeder Portfolio to the
holders of shares of the RS Portfolio in liquidation of the RS Portfolio and
(iii) the transfer by the WT Feeder Portfolio of the assets and liabilities
referenced in clause (i) above to WT Master Series solely in exchange for shares
of beneficial interest of WT Master Series on the terms and conditions
hereinafter set forth. For convenience, the shares of WT Feeder Portfolio that
are given in exchange for the assets of the RS Portfolio are referred to
hereinafter as the "WT Feeder Shares," and the shares of WT Master Series that
are given to WT Feeder Portfolios in exchange for assets and liabilities are
referred to hereinafter as the WT Master Shares. The parties hereto covenant and
agree as follows:
1. TRANSFER OF ASSETS AND LIABILITIES BY RS PORTFOLIO.
(a) At the Effective Time, the RS Portfolio will assign,
deliver and otherwise transfer all of its assets and good and marketable title
thereto, free and clear of all liens, encumbrances and adverse claims except as
provided in this Agreement, and assign all or substantially all of its
liabilities as are set forth in a statement of assets and liabilities, to be
prepared as of the Effective Time (the "Statement of Assets and Liabilities") to
the WT Feeder Portfolio, and the WT Feeder Portfolio shall acquire all such
assets, and shall assume all such liabilities of the RS Portfolio, in exchange
for delivery to the RS Portfolio of a number of WT Feeder Shares (both full and
fractional) equivalent in number and value to the RS Portfolio Shares
outstanding immediately prior to the Effective Time. The assets and stated
liabilities of the RS Portfolio, to be transferred shall be set forth in the
Statement of Assets and Liabilities attached hereto as Exhibit A.
(b) The assets of the RS Portfolio to be transferred pursuant
to this Section 1 shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable) as set
forth in the Statement of Assets and Liabilities, as well as any claims or
rights of action or rights to register shares under applicable securities laws,
any books or records of the RS Portfolio and other property owned by the RS
Portfolio at the Effective Time.
2. TRANSFER OF ASSETS AND LIABILITIES TO MASTER FUND.
Immediately upon the transfer of assets pursuant to Section 1
of this Agreement, WT Feeder Portfolio will assign, deliver and otherwise
transfer all of its assets and good and marketable title thereto, free and clear
of all liens, encumbrances and adverse claims except as provided in this
Agreement, and assign all or substantially all of its liabilities to the WT
Master Series, and the WT Master Series shall acquire all such assets, and shall
assume all such liabilities of the WT Feeder Portfolio, in exchange for delivery
to the WT Feeder Portfolio
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of a number of WT Master Shares (both full and fractional) equivalent in
aggregate value to the WT Feeder Shares outstanding immediately prior to such
transfer.
(a) The assets of the WT Feeder Portfolio to be transferred
pursuant to this Section 2 shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), as well as any claims or rights of action or rights to register
shares under applicable securities laws.
(b) Approval of this Agreement by the shareholders of the RS
Portfolio shall be deemed to authorize and direct the Board of Trustees of RS
Fund to execute a form of shareholder consent approving the Investment Advisory
Agreement between the WT Master Series and Roxbury Capital Management, L.L.C.
and the selection of the firm of Ernst & Young LLP to serve as the independent
auditors for WT Feeder Portfolio and WT Master Series for the fiscal year ending
June 30, 2000.
3. LIQUIDATION OF THE RS PORTFOLIO.
Promptly after the Effective Time, the RS Portfolio will
liquidate, and the WT Feeder Shares (both full and fractional) which were
acquired by the RS Portfolio pursuant to Section 1 of this Agreement will be
distributed to the shareholders of record of the RS Portfolio as of the
Effective Time in exchange for their respective RS Portfolio shares and in
complete liquidation of the RS Portfolio. Each shareholder of the RS Portfolio
will receive a number of WT Feeder Shares equal in number and value to the RS
Portfolio shares held by that shareholder, and each RS Portfolio share and WT
Feeder Share will be of equivalent net asset value per share. Such liquidation
and distribution will be accompanied by the establishment of an open account on
the share records of the WT Feeder Portfolio in the name of each shareholder of
record of the RS Portfolio and representing the respective number of WT Feeder
Shares due such shareholder. As soon as practicable after the Effective Time,
the RS Fund shall take all steps as shall be necessary and proper to effect a
complete termination of the RS Portfolio pursuant to the laws of Massachusetts.
After the Effective Time, the RS Portfolio shall not conduct any business except
in connection with its liquidation.
4. REPRESENTATIONS AND WARRANTIES OF WT MASTER SERIES.
WT Trust represents and warrants to the RS Portfolio and the
WT Feeder Portfolio as
follows:
(a) ORGANIZATION, EXISTENCE, ETC. WT Trust is a business trust
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the power to carry on its business as it is now being
conducted.
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(b) REGISTRATION AS INVESTMENT COMPANY. WT Trust has filed
registration and other forms to be registered under the 1940 Act as an open-end
management investment company; as of the Effective Time such registration shall
be in effect and shall not have been revoked or rescinded.
(c) FINANCIAL STATEMENTS. The audited financial statements of
WT Trust, dated as of June 30, 1999, which will be delivered to the RS Portfolio
and WT Feeder Portfolio at the Effective Time, fairly present the financial
position of the WT Trust as of the date thereof, and since June 30, 1999, there
has not been any material adverse change in the WT Trust's financial condition,
assets, liabilities or business other than changes occurring in the ordinary
course of its business.
(d) SHARES TO BE ISSUED UPON REORGANIZATION. The WT Master
Shares to be issued in connection with the Reorganization have been duly
authorized and upon consummation of the Reorganization as contemplated herein
will be validly issued, fully paid and nonassessable and exempt from
registration or qualification under the Securities Act of 1933 and the
securities laws of each state or other jurisdiction in which such shares have
been or are being offered for sale.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. WT Trust, on behalf
of the WT Master Series, has the power to enter into this Agreement and to carry
out its obligations hereunder. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly authorized by WT Trust's Board of Trustees, and no other proceedings
by the WT Trust are necessary to authorize its officers to effectuate this
Agreement and the transactions contemplated hereby. The WT Master Series is not
a party to or obligated under any charter, by-law, indenture or contract
provision or any other commitment or obligation, or subject to any order or
decree, which would be violated by its executing and carrying out this
Agreement.
(f) LIABILITIES. There are no liabilities of the WT Master
Series, whether or not determined or determinable, other than liabilities
previously disclosed to the RS Portfolio and WT Feeder Portfolio, none of which
will be materially adverse to the business, assets or results of operations of
the WT Master Series. The WT Trust's Registration Statement does not contain any
untrue statement of a material fact required to be stated therein or make the
statements therein not misleading.
(g) LITIGATION. Except as previously disclosed to the RS
Portfolio and WT Feeder Portfolio, there are no claims, actions, suits or
proceedings pending or, to the actual knowledge of WT Trust, threatened which
would materially adversely affect the WT Master Series or its assets or business
or which would prevent or hinder in any material respect consummation of the
transactions contemplated hereby.
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(h) CONTRACTS. Except for contracts and agreements disclosed
to the RS Portfolio and WT Feeder Portfolio, under which no default exists, and
the agreements pertaining to the conduct of the business of the WT Master Series
identified in Schedule 4(h), attached hereto, which are to be approved in
connection with this Reorganization, the WT Master Series is not a party to or
subject to any material contract, debt instrument, plan, lease, franchise,
license or permit of any kind or nature whatsoever.
(i) TAXES. As of the Effective Time, all Federal and other
tax returns and reports of the WT Master Series required by law to have been
filed shall have been filed, and all other taxes shall have been paid so far as
due, or provision shall have been made for the payment thereof, and to the best
of the WT Trust's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any of such returns.
5. REPRESENTATIONS AND WARRANTIES OF WT FEEDER PORTFOLIO.
WT Mutual Fund represents and warrants to the RS Portfolio and
WT Master Series as follows:
(a) ORGANIZATION, EXISTENCE, ETC. WT Mutual Fund is a business
trust duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the power to carry on its business as it is now
being conducted.
(b) REGISTRATION AS INVESTMENT COMPANY. WT Mutual Fund has
filed registration and other forms to be registered under the 1940 Act as an
open-end management investment company; as of the Effective Time such
registration shall be in effect and shall not have been revoked or rescinded.
(c) FINANCIAL STATEMENTS. The audited financial statements of
WT Mutual Fund, dated as of June 30, 1999, which will be delivered to the RS
Portfolio and WT Master Series as of the Effective Time, fairly present the
financial position of the WT Mutual Fund as of the date thereof and since June
30, 1999, there has not been any material adverse change in the WT Mutual Fund's
financial condition, assets, liabilities or business other than changes
occurring in the ordinary course of its business.
(d) SHARES TO BE ISSUED UPON REORGANIZATION. The WT Feeder
Shares to be issued in connection with the Reorganization have been duly
authorized and upon consummation of the Reorganization as contemplated herein
will be validly issued, fully paid and nonassessable. The WT Feeder Shares that
will be distributed to the RS Portfolio shareholders pursuant to Section 3 shall
be duly registered under the Securities Act of 1933 and will be duly registered,
qualified or are exempt from registration or qualification under the securities
laws of each state or other jurisdiction in which such shares have been or are
being offered for sale.
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(e) AUTHORITY RELATIVE TO THIS AGREEMENT. WT Mutual Fund, on
behalf of the WT Feeder Portfolio, has the power to enter into this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by WT Mutual Fund's Board of
Trustees, and no other proceedings by the WT Trust are necessary to authorize
its officers to effectuate this Agreement and the transactions contemplated
hereby. The WT Feeder Portfolio is not a party to or obligated under any
charter, by-law, indenture or contract provision or any other commitment or
obligation, or subject to any order or decree, which would be violated by its
executing and carrying out this Agreement.
(f) LIABILITIES. There are no liabilities of the WT Feeder
Portfolio, whether or not determined or determinable, other than liabilities
previously disclosed to the RS Portfolio and WT Master Series, none of which
will be materially adverse to the business, assets or results of operations of
the WT Feeder Portfolio. WT Mutual Fund's Registration Statement does not
contain any untrue statement of a material fact required to be stated therein or
make the statements therein not misleading.
(g) LITIGATION. Except as previously disclosed to the RS
Portfolio and WT Master Series, there are no claims, actions, suits or
proceedings pending or, to the actual knowledge of WT Mutual Fund, threatened
which would materially adversely affect the WT Feeder Portfolio or its assets or
business or which would prevent or hinder in any material respect consummation
of the transactions contemplated hereby.
(h) CONTRACTS. Except for contracts and agreements disclosed
to the RS Portfolio and WT Master Series, under which no default exists, and the
agreements pertaining to the conduct of the business of the WT Feeder Portfolio
identified in Schedule 5(h) attached hereto, which are to be approved in
connection with this Reorganization, the WT Feeder Portfolio is not a party to
or subject to any material contract, debt instrument, plan, lease, franchise,
license or permit of any kind or nature whatsoever.
(i) TAXES. As of the Effective Time, all Federal and other tax
returns and reports of the WT Feeder Portfolio required by law to have been
filed shall have been filed, and all other taxes shall have been paid so far as
due, or provision shall have been made for the payment thereof, and to the best
of WT Mutual Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any of such returns.
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6. REPRESENTATIONS AND WARRANTIES OF THE RS PORTFOLIO.
The RS Fund represents and warrants to the WT Master Series
and WT Feeder Portfolio as follows:
(a) ORGANIZATION, EXISTENCE, ETC. The RS Fund is a business
trust duly organized, validly existing and in good standing under the laws of
Massachusetts and has the power to carry on its business as it is now being
conducted.
(b) REGISTRATION AS INVESTMENT COMPANY. RS Fund is registered
under the 1940 Act as an open end management investment company; and such
registration has not been revoked or rescinded and is in full force and effect.
(c) FINANCIAL STATEMENTS. The audited financial statements of
the RS Fund relating to the RS Portfolio for the fiscal year ended June 30,
1999, as delivered to the WT Master Series and WT Feeder Portfolio, fairly
represent the financial position of the RS Portfolio as of the date thereof, and
since June 30, 1999, there has not been any material adverse change in the RS
Portfolio's financial condition, assets, liabilities or business other than
changes occurring in the ordinary course of its business.
(d) MARKETABLE TITLE TO ASSETS. The RS Portfolio will have at
the Effective Time, good and marketable title to, and full right, power and
authority to sell, assign, transfer and deliver, the assets to be transferred to
the WT Feeder Portfolio. Upon delivery and payment for such assets, the WT
Feeder Portfolio will have good and marketable title thereto without restriction
on the transfer thereof free and clear of all liens, encumbrances and adverse
claims.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. RS Fund, on behalf
of the RS Portfolio, has the power to enter into this Agreement and to carry out
its obligations hereunder. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly authorized by RS Fund's Board of Trustees, and other than approval by
the shareholders of the RS Portfolio who shall be entitled to vote on such
actions, no other proceedings by the RS Fund are necessary to authorize its
officers to effectuate this Agreement and the transactions contemplated hereby.
The RS Portfolio is not a party to or obligated under any charter, by-law,
indenture or contract provision or any other commitment or obligation, or
subject to any order or decree, which would be violated by its executing and
carrying out this Agreement.
(f) LIABILITIES. There are no liabilities of the RS Portfolio,
whether or not determined or determinable, other than liabilities disclosed or
provided for in the RS Portfolio's financial statements referenced in Section
6(c) hereof, and liabilities incurred in the ordinary course of business
subsequent to June 30, 1999, or otherwise previously disclosed to the
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WT Master Series and WT Feeder Portfolio, none of which has been materially
adverse to the business, assets or results of operations of the RS Portfolio. RS
Fund's registration statement, which is on file with the Securities and Exchange
Commission, does not contain any untrue statement of a material fact required to
be stated therein or necessary to make the statements therein not misleading.
(g) LITIGATION. Except as previously disclosed to the WT
Master Series and WT Feeder Portfolio, there are no claims, actions, suits or
proceedings pending or, to the knowledge of the RS Fund, threatened which would
materially adversely affect the RS Portfolio or its assets or business or which
would prevent or hinder in any material respect consummation of the transactions
contemplated hereby.
(h) CONTRACTS. Except for contracts and agreements disclosed
to the WT Master Series and WT Feeder Portfolio, under which no default exists,
the RS Portfolio is not a party to or subject to any material contract, debt
instrument, plan, lease, franchise, license or permit of any kind or nature
whatsoever.
(i) TAXES. As of the Effective Time, all Federal and other tax
returns and reports of the RS Portfolio required by law to have been filed shall
have been filed, and all other taxes shall have been paid so far as due, or
provision shall have been made for the payment thereof, and to the best of the
RS Fund's knowledge, no such return is currently under audit and no assessment
has been asserted with respect to any of such returns.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE WT MASTER SERIES
AND WT FEEDER PORTFOLIO.
(a) All representations and warranties of the RS Portfolio
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Effective Time, with the same force
and effect as if made on and as of the Effective Time.
(b) The WT Master Series and WT Feeder Portfolio shall have
received an opinion of qualified counsel, dated as of the Effective Time,
addressed to and in form and substance satisfactory to counsel for the WT Master
Series and WT Feeder Portfolio, to the effect that (i) the RS Portfolio is duly
organized and validly existing as a series of RS Fund under the laws of the
Commonwealth of Massachusetts; (ii) RS Fund is an open-end management investment
company registered under the 1940 Act; (iii) this Agreement and the
Reorganization provided for herein and the execution of this Agreement have been
duly authorized and approved by all requisite action of the RS Fund, on behalf
of the RS Portfolio, and this Agreement has been duly executed and delivered by
the RS Fund on behalf of the RS Portfolio and is a valid and binding obligation
of the RS Fund, on behalf of the RS Portfolio, subject to applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws or court decisions regarding
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enforcement of creditors' rights generally; and (iv) to the best of counsel's
knowledge after reasonable inquiry, no consent, approval, order or other
authorization of any Federal or state court or administrative or regulatory
agency is required for the RS Portfolio to enter into this Agreement or carry
out its terms that has not been obtained other than where the failure to obtain
any such consent, approval, order or authorization would not have a material
adverse effect on the operations of the WT Feeder Portfolio or WT Master Series.
(c) The RS Portfolio shall have delivered to the WT Feeder
Portfolio at the Effective Time the RS Portfolio's Statement of Assets and
Liabilities, prepared in accordance with generally accepted accounting
principles consistently applied, together with a certificate of the Treasurer of
the RS Portfolio as to the aggregate asset value of the RS Portfolio's portfolio
securities.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE RS PORTFOLIO.
(a) All representations and warranties of the WT Master Series
and WT Feeder Portfolio contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be affected
by the transactions contemplated by this Agreement, as of the Effective Time,
with the same force and effect as if made on and as of the Effective Time.
(b) The RS Portfolio shall have received an opinion of
qualified counsel, dated as of the Effective Time, addressed to and in form and
substance satisfactory to counsel for the RS Portfolio, to the effect that: (i)
WT Master Series is duly organized and a validly existing series of WT Trust and
WT Feeder Portfolio is duly organized and a validly existing series of WT Mutual
Fund under the laws of the State of Delaware; (ii) WT Trust and WT Mutual Fund
are each open-end management investment companies registered under the 1940 Act;
(iii) this Agreement and the Reorganization provided for herein and the
execution of this Agreement have been duly authorized and approved by all
requisite action of the WT Master Series and WT Feeder Portfolio and this
Agreement has been duly executed and delivered by the WT Trust and WT Mutual
Fund and is a valid and binding obligation of the WT Master Series and WT Feeder
Portfolio, subject to applicable bankruptcy, insolvency, fraudulent conveyance
and similar laws or court decisions regarding enforcement of creditors' rights
generally; (iv) to the best of counsel's knowledge, no consent, approval, order
or other authorization of any Federal or state court or administrative or
regulatory agency is required for the WT Master Series or WT Feeder Portfolio to
enter into this Agreement or carry out its terms that has not already been
obtained, other than where the failure to obtain any such consent, approval,
order or authorization would not have a material adverse effect on the
operations of the WT Master Series or WT Feeder Portfolio; and (v) the WT Master
Shares and WT Feeder Shares to be issued in the Reorganization have been duly
authorized and upon issuance thereof in accordance with this Agreement will be
validly issued, fully paid and nonassessable.
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(c) WT Feeder Portfolio shall have delivered to the RS
Portfolio at the Effective Time, a certificate of its Treasurer as to the value
of the aggregate assets of the WT Feeder Portfolio, if any.
9. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE RS
PORTFOLIO, WT MASTER SERIES AND WT FEEDER PORTFOLIO.
The obligations of the RS Portfolio, WT Master Series and WT
Feeder Portfolio to effectuate this Agreement shall be subject to the
satisfaction of each of the following conditions:
(a) Such authority from the United States Securities and
Exchange Commission (the "SEC") and state securities commissions as may be
necessary, in the opinion of the parties and their counsel, to permit the
parties to carry out the transactions contemplated by this Agreement shall have
been received.
(b) The Registration Statements on Form N-1A of WT Trust and
WT Mutual Fund shall be effective under the Securities Act of 1933, as amended
(the "1933 Act"), and, to the best knowledge of each such fund, such
effectiveness shall not be suspended and no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the 1933 Act.
(c) The RS Portfolio, WT Master Series and WT Feeder Portfolio
shall have received on or before the Effective Time an opinion of counsel
satisfactory to the RS Portfolio, WT Master Series and WT Feeder Portfolio which
opinion will be based on current law and normal and customary assumptions and
representations, substantially to the effect that for Federal income tax
purposes:
(1) The transactions described in Sections 1 and 3 of this
Agreement will constitute a reorganization as defined in Section 368(a) of the
Internal Revenue Code of 1986, as amended;
(2) No gain or loss will be recognized to the RS Portfolio
upon the transfer of its assets in exchange solely for the WT Feeder Shares and
the assumption by the WT Feeder Portfolio of the corresponding RS Portfolio's
stated liabilities;
(3) No gain or loss will be recognized by the WT Feeder
Portfolio the WT Master Series on its receipt of the WT Feeder Fund's assets in
exchange for the WT Master Shares and the assumption by the WT Master Series of
the WT Feeder Portfolio's liabilities;
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(4) The basis of the RS Portfolio's assets in the WT Master
Series' hands will be the same as the basis of those assets in the RS
Portfolio's hands immediately before the reorganization;
(5) The WT Master Series' holding period for the assets
transferred by the WT Feeder Portfolio will include the holding period of those
assets in the RS Portfolio's hands and the holding period of those assets in the
WT Feeder Portfolio's hands immediately before the reorganization;
(6) No gain or loss will be recognized to the RS Portfolio
on the distribution of the WT Feeder Shares to the RS Portfolio's shareholders
in exchange for their RS Portfolio shares;
(7) No gain or loss will be recognized to the RS Portfolio's
shareholders as a result of the RS Portfolio's distribution of WT Feeder Shares
to the RS Portfolio's shareholders in exchange for their shares of the RS
Portfolio's stock;
(8) The basis of the WT Feeder Shares received by a RS
Portfolio shareholder will be the same as the adjusted basis of that
shareholder's RS Portfolio shares surrendered in exchange therefor; and
(9) The holding period of the WT Feeder Shares received by
the RS Portfolio's shareholders will include the holding period of the shares of
the RS Portfolio exchanged therefor, provided that said RS Portfolio shares were
held as capital assets on the date of the conversion.
(d) A vote approving this Agreement and the Reorganization
contemplated hereby shall have been adopted by at least a majority of the
outstanding shares of the RS Portfolio entitled to vote at a special meeting of
shareholders.
(e) The Boards of WT Trust and WT Mutual Fund, at meetings
duly called for such purpose, shall have authorized the issuance of the WT
Master Shares and WT Feeder Shares, respectively, at the Effective Time in
accordance with this Agreement.
(f) Shareholders shall have authorized the RS Fund Board of
Trustees to vote to approve the Investment Advisory Agreement between the WT
Master Series and Roxbury Capital Management LLC and the Board of the RS Fund
shall have executed a consent for such purpose.
10. EFFECTIVE TIME OF THE REORGANIZATION.
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The exchange of the RS Portfolio's assets for WT Feeder Shares
and the subsequent exchange of the WT Feeder Portfolio's assets for WT Master
Shares shall be effective as of the close of business on October 29, 1999, or at
such other time and date as fixed by the mutual consent of the parties (the
"Effective Time").
11. TERMINATION.
This Agreement and the transactions contemplated hereby may be
terminated and abandoned without penalty by resolution of the Board of Trustees
of RS Fund, WT Trust or WT Mutual Fund at any time prior to the Effective Time,
if circumstances should develop that, in the opinion of such Board, make
proceeding with the Agreement inadvisable.
12. AMENDMENT AND WAIVER.
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed upon in writing by the parties; PROVIDED,
that no such amendment may have the effect of changing the provisions for
determining the number or value of WT Feeder Shares to be paid to the RS
Portfolio's shareholders under this Agreement to the detriment of the RS
Portfolio's shareholders without their further approval. Furthermore, either
party may waive any breach by the other party or the failure to satisfy any of
the conditions to its obligations (such waiver to be in writing and authorized
by the President or any Vice President of the waiving party with or without the
approval of such party's shareholders).
13. GOVERNING LAW.
This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware.
14. NOTICES.
Any notice, report, statement or demand required or permitted
by any provision of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail, internet or overnight express
courier addressed as follows:
if to the RS Fund:
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Robert J. Christian
if to WT Mutual Fund or WT Trust:
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c/o Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Robert J. Christian
with a copy to:
Joseph V. Del Raso, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
15. FEES AND EXPENSES.
(a) The RS Portfolio, WT Master Series and WT Feeder Portfolio
each represent and warrant to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
(b) Except as otherwise provided for herein, all expenses of
the transactions contemplated by this Agreement shall be incurred by RS
Portfolio, WT Master Series and WT Feeder Portfolio. Such expenses include,
without limitation, (i) expenses incurred in connection with the entering into
and the carrying out of the provisions of this Agreement; (ii) expenses
associated with the preparation and filing of the Proxy Statement under the
Securities Exchange Act of 1934, as amended; (iii) fees and expenses of
preparing and filing such forms as are necessary to comply with applicable state
securities laws; (iv) postage; (v) printing; (vi) accounting fees; (vii) legal
fees; and (viii) solicitation costs of the transaction. The WT Feeder Portfolio
shall pay its own federal securities law registration fees and any fees required
under state securities laws.
16. HEADINGS, COUNTERPARTS, ASSIGNMENT.
(a) The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, but
no assignment or transfer hereof or of any rights or obligations hereunder shall
be made by any party without the written
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consent of the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm or corporation other
than the parties hereto and their respective successors and assigns any rights
or remedies under or by reason of this Agreement.
17. ENTIRE AGREEMENT.
Each of WT Master Series, WT Feeder Portfolio and the RS
Portfolio agree that no party has made any representation, warranty or covenant
not set forth herein and that this Agreement constitutes the entire agreement
between the parties. The representations, warranties and covenants contained
herein or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
18. FURTHER ASSURANCES.
Each of WT Master Series, WT Feeder Portfolio and the RS
Portfolio shall take such further action as may be necessary or desirable and
proper to consummate the transactions contemplated hereby.
19. BINDING NATURE OF AGREEMENT.
As provided in each fund's charter documents, this Agreement
was executed by the undersigned officers of RS Fund, WT Trust and WT Mutual
Fund, on behalf of each of the RS Portfolio, WT Master Series and WT Feeder
Portfolio, respectively, as officers and not individually, and the obligations
of this Agreement are not binding upon the undersigned officers individually,
but are binding only upon the assets and property of each corporation. Moreover,
no series of a business trust shall be liable for the obligations of any other
series of that business trust.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
Attest: The Rodney Square Strategic Equity Fund, on
behalf of Large Cap Growth Equity Portfolio
- -------------------------- ---------------------------------------------
Attest: WT Investment Trust I, on behalf of WT Large
Cap Growth Series
- -------------------------- ---------------------------------------------
Attest: WT Mutual Fund, on behalf of Wilmington Large
Cap Growth Portfolio
- -------------------------- ---------------------------------------------
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APPENDIX D
This supplement supersedes and replaces any existing supplements to the
prospectus. This supplement provides new and additional information beyond that
contained in the prospectus. It should be retained and read in conjunction with
the prospectus.
Supplement dated July 7, 1999 to the
The Rodney Square Stategic Equity Fund
Prospectus dated May 1, 1999
The following replaces and supersedes the first paragraph relating to the Small
Cap Equity Portfolio under "Primary Investment Stategies" on pages 5 and 6 in
the prospectus:
The Small Cap Equity Portfolio 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 Portfolio's objective of long-term
growth of capital, the 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 these companies, the adviser invests the Portfolio's 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 in cases where a company's performance has not met our original
assesment of its growth prospects and earning power. In the Portfolio's efforts
to achieve its investment objective, it seeks to outperform the Russell 2000
Index (assuming that a similar investment in the securities comprising this
index would reinvest dividends and capital gains distributions). The Russell
2000 Index is a passive index of the smallest 2000 stocks in the Russell 3000
Index of the 3000 largest stocks in the U.S. as measured by market
capitalization.
The following supplements the "PURCHASE OF SHARES" section of the prospectus:
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 automatically
will 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, Investment Manager, or 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.
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[GRAPHIC OMITTED]
THE RODNEY SQUARE STRATEGIC EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
LARGE CAP VALUE EQUITY PORTFOLIO
SMALL CAP EQUITY PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
PROSPECTUS DATED MAY 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 mutual funds:
(BULLET) are not bank deposits
(BULLET) are not obligations of, or guaranteed or endorsed by Wilmington Trust
Company or any of its affiliates
(BULLET) are not federally insured
(BULLET) 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
(BULLET) are not guaranteed to achieve their goal(s)
Like all mutual fund shares, the Securities and Exchange Commission has not
approved or disapproved the Fund's shares or determined whether this prospectus
is accurate or complete. Anyone who tells you otherwise is committing a crime.
D-2
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TABLE OF CONTENTS
A LOOK AT THE GOALS, PORTFOLIO DESCRIPTION
STRATEGIES, RISKS, Investment Objectives...........................3
EXPENSES AND FINANCIAL Primary Investment Strategies...................4
HISTORY OF EACH Risk Factors Related to the Portfolios..........8
PORTFOLIO. Performance Information........................10
Fees and Expenses..............................14
Financial Highlights...........................16
DETAILS ABOUT THE SERVICE MANAGEMENT OF THE FUND
PROVIDERS. Investment Adviser.............................20
Portfolio Managers ............................20
Sub-Advisers ..................................21
Service Providers..............................22
POLICIES AND INSTRUCTIONS SHAREHOLDER INFORMATION
FOR OPENING, MAINTAINING Pricing of Shares..............................23
AND CLOSING AN ACCOUNT Purchase of Shares.............................24
IN ANY OF THE PORTFOLIOS. Redemption of Shares...........................25
Exchange of Shares.............................27
Dividends and Other Distributions..............28
Taxes..........................................28
FOR MORE INFORMATION...........................29
For information about key terms and concepts, look for our "PLAIN TALK"
explanations.
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THE RODNEY SQUARE
STRATEGIC EQUITY FUND
[BULLET] LARGE CAP GROWTH EQUITY PORTFOLIO
[BULLET] LARGE CAP VALUE EQUITY PORTFOLIO
[BULLET] SMALL CAP EQUITY PORTFOLIO
[BULLET] INTERNATIONAL EQUITY PORTFOLIO
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 in The
Rodney Square Strategic Equity Fund is a separate mutual fund.
- --------------------------------------------------------------------------------
The Rodney Square Strategic Equity Fund (the "Fund") consists of four
separate portfolios, the Large Cap Growth Equity Portfolio, the Large Cap Value
Equity Portfolio, the Small Cap Equity Portfolio and the International Equity
Portfolio (each a "Portfolio" and together "Portfolios").
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 OBJECTIVES
PLAIN TALK
- --------------------------------------------------------------------------------
WHAT IS AN INDEX?
An index measures the market prices 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.
- --------------------------------------------------------------------------------
The Large Cap Growth Equity Portfolio, the Large Cap Value Equity Portfolio
and the Small Cap Equity Portfolio each seek superior long-term growth of
capital. The International Equity Portfolio seeks superior long-term capital
appreciation. For purposes of these investment objectives, "superior" long-term
growth of capital
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means that which would exceed the long-term growth of capital from an investment
in the securities comprising the Russell 1000 Growth Index (for the Large Cap
Growth Equity Portfolio); the Russell 1000 Value Index (for the Large Cap Value
Equity Portfolio); the Russell 2000 Index, (for the Small Cap Equity Portfolio)
and the Morgan Stanley Capital International Europe, Australasia and Far East
Index (for the International Equity Portfolio). For more information on the
specific Indexes, see the Section entitled "Primary Investment Strategies."
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 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 EQUITY PORTFOLIO is a diversified portfolio of large
cap U.S. equity (or related) securities that have above average earnings
potential compared to the securities market as a whole. In the Portfolio's
efforts to achieve its investment objective, it seeks to outperform the Russell
1000 Growth Index (assuming a similar investment in the securities comprising
this index would reinvest dividends and capital gains distributions). The
Russell 1000 Growth Index is formed by assigning a style composite score to all
of the companies found in the Russell 1000 Index, a passive index of the largest
1000 stocks in the U.S. as measured by their market capitalization, to determine
their growth or value characteristics. Approximately 70% of those stocks are
placed in either the Growth or Value Index. The remaining stocks are placed in
both indexes with a weight proportional to their growth or value
characteristics. The adviser uses proprietary quantitative research techniques
to find companies with potentially attractive returns. After analyzing those
companies, the assets of the Portfolio are invested in the stocks of companies
with the most attractive combination of long-term earnings, growth and
valuation. Portfolio held securities are sold to make room for new companies
with compelling growth and valuation characteristics or to preserve capital
where fundamentals have deteriorated.
At all times, the Large Cap Growth Equity Portfolio will invest at least
85% of its total assets in the following equity (or related) securities:
(BULLET) common stocks of U.S. corporations that are judged by the adviser to
have strong growth characteristics and have a market capitalization of
$2 billion or higher at the time of purchase;
(BULLET) options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
(BULLET) options on indexes of the common stock of U.S. corporations described
above; and
(BULLET) 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.
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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 LARGE CAP VALUE EQUITY PORTFOLIO 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. In the
Portfolio's efforts to achieve its investment objective, it seeks to outperform
the Russell 1000 Value Index (assuming a similar investment in the securities
comprising this index would reinvest dividends and capital gains distributions).
The Russell 1000 Value Index is formed by assigning a style composite score to
all of the companies found in the Russell 1000 Index, a passive index of the
largest 1000 stocks in the U.S. as measured by their market capitalization, to
determine their growth or value characteristics. Approximately 70% of those
stocks are placed in either the Growth or Value Index. The remaining stocks are
placed in both indexes with a weight proportional to their growth or value
characteristics. The adviser uses proprietary quantitative research techniques
to find companies that seem undervalued. After analyzing those companies, the
assets of the Portfolio are invested in the stocks of companies with improving
earnings prospects and attractive valuation. Portfolio held securities are sold
to make room for new companies with compelling valuation characteristics and
improving fundamental prospects or if the securities have not met our investment
objective over a reasonable time period.
At all times, the Large Cap Value Equity Portfolio will invest at least 85%
of its total assets in the following equity (or related) securities:
(BULLET) 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 $2 billion or higher at the time
of purchase;
(BULLET) options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
(BULLET) options on indexes of the common stock of U.S. corporations described
above; and
(BULLET) 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.
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 volitility.
- --------------------------------------------------------------------------------
The SMALL CAP EQUITY PORTFOLIO 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 Portfolio's objective of
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long-term growth of capital, the adviser has delegated the Portfolio's
investment management responsibilities to two investment teams. One team is
growth-oriented, concentrating on investing in companies the adviser believesto
have growth potential and the second team is value-oriented, concentrating on
investing in companies the adviser believes to be undervalued. The growth
oriented team and the value-oriented team both use proprietary quantitative
research techniques to find companies with potentially attractive returns and
that seem undervalued, respectively. After analyzing those companies, the
growth-oriented team invests their portion of the Portfolio's assets in the
stocks of companies with the most attractive combination of long-term earnings,
growth and valuation, and the value-oriented team invests their portion of the
Portfolio's assets in the stocks of companies with improving earnings prospects
and attractive valuation. Portfolio held securities are sold to make room for
new companies with superior growth, valuation and projected return
characteristics or to preserve capital where our original assessment of the
company's growth prospects and earnings power has not proven optimistic. In the
Portfolio's efforts to achieve its investment objective, it seeks to outperform
the Russell 2000 Index (assuming a similar investment in the securities
comprising this index would reinvest dividends and capital gains distributions).
The Russell 2000 Index is a passive index of the smallest 2000 stocks in the
Russell 3000 Index of the 3000 largest stocks in the U.S. as measured by market
capitalization.
At all times, the Small Cap Equity Portfolio will invest at least 85% of
its total assets in the following equity (or related) securities:
(BULLET) 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;
(BULLET) options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of U.S.
corporations described above;
(BULLET) options on indexes of the common stock of U.S. corporations described
above; and
(BULLET) 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.
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 EQUITY PORTFOLIO is a diversified portfolio of equity
securities (including convertible securities) of issuers located outside of the
United States. In the Portfolio's 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.
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Under normal conditions, the Portfolio will invest at least 85% of its
total assets in the following equity (or related) securities:
(BULLET) common stocks of foreign issuers;
(BULLET) preferred stocks and/or debt securities that are convertible
securities of such foreign issuers; and
(BULLET) 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 Equity Portfolio 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. ("Clemente"), Invista Capital
Management Inc. ("Invista"), and Scudder Kemper Investments, Inc. ("Scudder
Kemper"), manage the assets of the International Equity Portfolio. The adviser
allocates the Portfolio's 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 Portfolio's 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 enviroment 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 portfolio. Portfolio 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. Portfolio holdings are sold when the relative attractiveness of
a security is not as great as portfolio additions proposed by a member of the
investment team.
Scudder Kemper's investment approach involves a top-down/bottom-up approach
with a focus on fundamental research. Investment ideas are generated by regional
analysts, global industry analysts and portfolio managers through the
integration of three analytical disciplines; global themes (identification of
sectors and industries likely to gain or lose during specific phases of a
theme's cycle); country analysis (quantitative assesment of each country's
fundamental and political characteristics combined with an objective,
quantitative analyisis 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). Portfolio holdings are sold when the analysts indicate that the
underlying fundamentals are no longer strong.
The Portfolio utilizes this multiple sub-adviser structure to reduce
portfolio 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
D-8
<PAGE>
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.
ALL PORTFOLIOS. The frequency of portfolio transactions and a Portfolio's
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. The Large Cap Growth Equity
Portfolio had a higher than normal portfolio turnover rate for its fiscal year
ending December 31, 1998 due to changes in its investment adviser and investment
policies. Portfolio securities that did not fit in the large capitalization
investment parameters were replaced. Portfolio turnover rate is normally
expected to be less than 100% for each of the Portfolios.
Each Portfolio also may use other strategies and engage in other investment
practices, which are described in detail in our Statement of Additional
Information.
RISK FACTORS RELATED TO THE PORTFOLIOS
- --------------------------------------------------------------------------------
The following is a list of the primary risks that apply to all Portfolios
unless otherwise indicated. Additional information about a Portfolio's
investments is available in our Statement of Additional Information:
(BULLET) An investment in a Portfolio is not a deposit of Wilmington Trust
Company ("WTC"), each Portfolio's investment adviser, any other bank,
or any of their affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
It is possible to lose money by investing in a Portfolio.
(BULLET) 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 Equity Portfolio.
(International Equity Portfolio)
(BULLET) EURO RISK: On January 1, 1999, the European Monetary Union introduced
a new single currency, the Euro, which replaces the national currency
for the eleven participating member countries. If a portfolio is
holding investments in countries with currencies replaced by the Euro,
the investment process, including trading, foreign exchange, payments,
settlements, cash accounts custody and accounting, will have been
affected. (International Equity Portfolio)
(BULLET) DERIVATIVES RISK: Some of the Portfolios' 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 Portfolio's total assets may at any time be committed or
exposed to derivative strategies.
(BULLET) 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 Equity Portfolio)
(BULLET) 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 Equity and Small Cap Portfolios)
D-9
<PAGE>
(BULLET) MANAGEMENT RISK: The risk that a strategy used by the adviser or a
sub- adviser may fail to produce the intended result.
(BULLET) 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.
(BULLET) NO TEMPORARY DEFENSIVE INVESTMENT POLICY: Unlike many other mutual
funds, the Portfolios do not reserve authority to depart from their
primary investment policies, even during declining markets, to
temporarily pursue defensive investment policies in an effort to
preserve capital. Each Portfolio will adhere to a policy of investing
not less that 85% of its total assets in equity (or related)
securities, during good and bad stock market conditions. Investors
should consider the risk of capital losses that may flow from this
policy should adverse market conditions arise and persist in the
future in the decision of whether to invest, or remain invested, in
the Portfolios.
(BULLET) 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.
(BULLET) 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 Equity Portfolio)
(BULLET) VALUATION RISK: The risk that a Portfolio has valued certain of its
securities at a higher price than it can sell them.
(BULLET) VALUE INVESTING RISK: The risk that a portfolio's investment in
companies whose securities are believed to be undervalued, relative to
their underlying profitability, do not appreciate in value as
anticipated. (Large Cap Value Equity and Small Cap Equity Portfolios)
(BULLET) YEAR 2000 COMPLIANCE RISK: Like other mutual funds, financial and
business organizations and individuals around the world, the
Portfolios could be adversely affected if the computer systems used by
the Fund's service providers do not properly process and calculate
date-related information and data on or after January 1, 2000. Many
existing application software products in the marketplace were
designed only to accommodate a two-digit date position, which
represents the year (e.g., "95" is stored on the system and represents
the year 1995). As a result, the year 1999 (i.e., "99") could be the
maximum date value these systems will be able to accurately process.
This is commonly known as the "Year 2000 Problem." The Fund is taking
steps that it believes are reasonably designed to address the Year
2000 Problem with respect to the computer systems that it uses, and to
obtain assurances that comparable steps are being taken by the Fund's
major service providers. At this time, however, there can be no
assurances that these steps will be sufficient to avoid any adverse
impact on the Portfolios. Additionally, if a company in which a
Portfolio 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 Portfolio's
holdings may have a similar impact on the price of the Portfolio's
shares. The 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
D-10
<PAGE>
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.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
LARGE CAP GROWTH EQUITY PORTFOLIO
The chart below shows the changes in annual total returns for the Large Cap
Growth Equity Portfolio for the last 10 calendar years of the Portfolio through
December 31, 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. Prior to February 23, 1998, the Large Cap Growth Equity Portfolio
was managed by 2 or 3 different portfolio advisers selected by the Portfolio's
former manager and administrator and operated under certain different investment
policies. Until February 23, 1998, the Portfolio invested in both large and
small capitalization securities. The Portfolio's investment policy now calls for
investments to be made exclusively in large capitalization equity securities
with strong growth characteristics. Accordingly, the Portfolio's historical
performance may not reflect its current investment practices. Past performance
is not necessarily an indicator of how the Portfolio will perform in the future.
EDGAR REPRESENTATITON OF DATA POINTS USED IN PRINTED GRAPHIC
Rodney Square Strategic Equity Fund
LARGE CAP GROWTH EQUITY PORTFOLIO
ANNUAL RETURNS FOR THE PAST 10 CALENDAR YEARS
Performance
Years Returns
- ------------------ --------------
12/31/88
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%
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.
- --------------------------------------------------------------------------------
The total return for the Large Cap Growth Portfolio for the quarter ended
March 31, 1999 was 3.65%. Over the past 10 calendar years, the highest quarter
total return was 25.34% (quarter ended December 31, 1998). Over the past 10
calendar years, the lowest quarter total return was -17.12% (quarter ended
September 30, 1990).
D-11
<PAGE>
The table below shows how the Large Cap Growth Equity Portfolio's average
annual total returns for the past 1, 5 and 10 calendar years compare with the
Russell 1000 Growth Index.
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
Large Cap Growth Equity Portfolio ... 23.58% 20.19% 17.67%
Russell 1000 Growth Index ........... 38.71% 25.70% 20.57%
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.
LARGE CAP VALUE EQUITY 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 investment 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 Large Cap Value Equity
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.
EDGAR REPRESENTATITON OF DATA POINTS USED IN PRINTED GRAPHIC
LARGE CAP VALUE EQUITY PORTFOLIO
CALENDAR YEAR RETURNS SINCE INCEPTION
Performance
Years Returns
------------ -----------
1992 13.49%
1993 13.75%
1994 -1.64%
1995 34.38%
1996 21.86%
1997 24.55%
1998 -2.75%
The total return for the Large Cap Value Equity Portfolio for the quarter
ended March 31, 1999 was -6.13%. Over the life of the Portfolio, the highest
quarter total return was 13.48% (quarter ended June 30, 1997). Over the life of
the Portfolio, the lowest quarter total return was -10.62% (quarter ended
September 30, 1998).
D-12
<PAGE>
The table below shows how the Large Cap Value Equity Portfolio's average
annual total returns for the past 1 and 5 calendar years and the period December
1, 1991 (commencement of operations) through December 31, 1998 compare with the
Russell 1000 Value Index.
1 YEAR 5 YEAR SINCE INCEPTION
------ ------ ---------------
Large Cap Value Equity Portfolio .... -2.75% 14.30% 15.29%
Russell 1000 Value Index ............ 15.63% 20.86% 20.54%
S&P 500 Index* ...................... 28.58% 24.06% 21.08%
* The S&P 500 Index is the Standard and Poor's Composite Index of 500 Stocks,
a widely recognized, unmanaged index of common stock pieces.
SMALL CAP EQUITY 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 Small Cap Stock Fund, a collective investment 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
Small Cap Stock Fund's performance 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 the 1940 Act and therefore was not subject to certain investment
restrictions, limitations and diversification requirements imposed by the 1940
Act and the Code. If the Small Cap 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.
EDGAR REPRESENTATITON OF DATA POINTS USED IN PRINTED GRAPHIC
SMALL CAP EQUITY PORTFOLIO
CALENDAR YEAR RETURNS SINCE INCEPTION
Performance
Year Returns
----------- ---------
1998 -2.32%
The total return for the Small Cap Equity Portfolio for the quarter ended
March 31, 1999 was -11.75%. Over the life of the Portfolio, the highest quarter
total return was 20.59% (quarter ended September 30, 1997). Over the life of the
Portfolio, the lowest quarter total return was -17.92% (quarter ended June 30,
1998).
D-13
<PAGE>
The table below shows how the Small Cap Equity Portfolio's average annual
total returns for the past calendar year and for the period April 1, 1997*
through December 31, 1998 compare with Russell 2000 Index.
1 YEAR SINCE APRIL 1, 1997
-------- -------------------
Small Cap Equity Portfolio ......... -2.32% 17.40%
Russell 2000 Index ................. -2.54% 13.99%
* The Small Cap Stock Fund's inception date was October 1991. Prior to April
1997 the fund was managed by an investment adviser unaffiliated with its
current adviser, which invested primarily in growth-oriented small cap
companies with market capitalization values of $500 million or less at time of
purchase. As of April 1997, Wilmington Trust Company (WTC) assumed management
of the Fund and assigned management responsibilities to two different WTC
portfolio management teams, one value-oriented and the other growth-oriented.
INTERNATIONAL EQUITY 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 International Stock Fund, a collective investment
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
International Stock Fund's performance 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 Code. If the International 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.
EDGAR REPRESENTATITON OF DATA POINTS USED IN PRINTED GRAPHIC
INTERNATIONAL EQUITY PORTFOLIO
ANNUAL RETURNS FOR THE PAST 10 CALENDAR YEARS
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 8.60%
1997 3.43%
1998 13.48%
The total return for the International Equity Portfolio for the quarter
ended March 31, 1999 was -0.41%. Over the past 10 calendar years, the highest
quarter total return was 16.21% (quarter ended September 30, 1989). Over the
past 10 calendar years, the lowest quarter total return was -22.76% (quarter
ended September 30, 1990).
D-14
<PAGE>
The table below shows how the International Equity Portfolio's average
annual total returns for the past 1, 5 and 10 calendar years through December
31, 1998 compare with the Morgan Stanley Capital International Europe,
Australasia and Far East Index.
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
International Equity Portfolio .............. 13.48% 6.17% 9.06%
Morgan Stanley Capital International Europe,
Australasia and Far East Index ............ 20.00% 9.19% 5.54%
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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO
ASSETS):
Large Cap Growth Large Cap Value Small Cap Equity International
Equity Portfolio Equity Portfolio Portfolio Equity Portfolio
---------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Management fees 1 ..................... 0.55% 0.55% 0.60% 0.65%
Distribution (12b-1) fees ............. 0.00% 0.00% 0.00% 0.00%
Other Expenses ........................ 0.33% 0.33% 0.35% 0.45%
TOTAL ANNUAL OPERATING EXPENSES 1 ..... 0.88% 0.88% 0.95% 1.10%
Fee Waiver ............................ 0.13% 0.13% 0.15% 0.10%
Net Expenses .......................... 0.75% 0.75% 0.80% 1.00%
<FN>
- -------------------------
1 WTC has agreed to waive a portion of its advisory fee or reimburse expenses
to the extent total operating expenses exceed 0.75% for the Large Cap
Growth Equity Portfolio; 0.75% for the Large Cap Value Equity Portfolio;
0.80% for the Small Cap Equity Portfolio; and 1.00% for the International
Equity Portfolio. This waiver will remain in place until the Board approves
its termination. The management fees, other expenses and total annual
operating expenses reflected in the table above for the Large Cap Growth
Equity Portfolio are based on the Portfolio's actual expenses for the
fiscal year ended December 31, 1998, adjusted to reflect current fee
arrangements. The Large Cap Value Equity, the Small Cap Equity and the
International Equity Portfolio have not completed a full year of operation.
The numbers are based on actual expenses of the Portfolios for the period
June 29, 1998 to December 31, 1998.
</FN>
</TABLE>
D-15
<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:
(BULLET) you reinvested all dividends andother distributions
(BULLET) the average annual return was 5%
(BULLET) the Portfolio's maximum (without regard to waivers or expenses) total
operating expenses are charged and remain the same over the time
periods
(BULLET) 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
------ ------- ------- --------
Large Cap Growth Equity Portfolio ..... $90 $281 $488 $1084
Large Cap Value Equity Portfolio ...... $90 $281 $488 $1084
Small Cap Equity Portfolio ............ $97 $303 $525 $1166
International Equity Portfolio ........ $112 $350 $606 $1340
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.
D-16
<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 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). This
information has 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.
LARGE CAP GROWTH EQUITY PORTFOLIO
FOR THE FISCAL YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
NET ASSET VALUE -
BEGINNING OF YEAR ................. $21.37 $19.22 $17.41 $15.14 $16.39
Investment Operations:
Net investment loss 1 ............. (0.01) (0.19) (0.15) (0.10) (0.03)
Net realized and unrealized
gain (loss) on investments ........ 5.02 5.44 4.37 4.38 -0.02
------ ------ ------ ------ ------
Total from investment
operations ................... 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 YEAR ................... $23.59 $21.37 $19.22 $17.41 $15.14
====== ====== ====== ====== ======
Total Return ......................... 23.58% 27.50% 24.25% 28.43% (0.23)%
RATIOS (TO AVERAGE NET ASSETS)
/SUPPLEMENTAL DATA:
Expenses (net of
fee waivers) ...................... 0.80% 1.38% 1.43% 1.43% 1.38%
Expenses (excluding
fee waivers) ...................... 0.92% N/A N/A N/A N/A
Net investment loss ............... (0.08)% (0.86)% (0.78)% (0.53)% (0.17)%
Portfolio turnover rate .............. 51.64% 28.05% 34.84% 49.12% 37.05%
Net assets at end of the period
($000 omitted) ....................$223,151 $91,445 $76,174 $66,311 $65,267
- ------------------------
1 The net investment loss per share for the years ended December 31, 1996 and
1997 was calculated using average shares outstanding method.
D-17
<PAGE>
LARGE CAP VALUE EQUITY PORTFOLIO
FOR THE FISCAL PERIOD JUNE 29, 1998
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31,
1998
-----------------------------------
NET ASSET VALUE -
BEGINNING OF THE PERIOD ........... $ 10.00
Investment Operations:
Net investment income ............. 0.10
Net realized and unrealized
gain (loss) on investments ........ (0.58)
-------
Total from investment
operations ................... (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 ................. $ 9.30
=======
Total Return 1 ....................... (4.79)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers) ..... 0.75%*
Expenses (excluding
fee waivers) .................... 0.88%*
Net investment income ............. 2.07%*
Portfolio turnover rate .............. 36.78%
Net assets at end of the period
($000 omitted) .................... $93,780
- ---------------------
1 Not annualized.
* Annualized.
D-18
<PAGE>
SMALL CAP EQUITY PORTFOLIO
FOR THE FISCAL PERIOD JUNE 29, 1998
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31,
1998
-----------------------------------
NET ASSET VALUE -
BEGINNING OF THE PERIOD .................. $ 10.00
Investment Operations:
Net investment income .................... 0.02
Net realized and unrealized
gain (loss) on investments ............... (0.62)
-------
Total from investment
operations .......................... (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 ........................ $ 9.36
=======
Total Return 1 .............................. (6.03)%
RATIOS (TO AVERAGE NET ASSETS)
/SUPPLEMENTAL DATA:
Expenses (net of fee waivers) ............ 0.80%*
Expenses (excluding
fee waivers) .......................... 0.95%*
Net investment income .................... 0.45%*
Portfolio turnover rate ..................... 9.81%
Net assets at end of the period
($000 omitted) ........................... $82,156
- ----------------------
1 Not annualized.
* Annualized.
D-19
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FOR THE FISCAL PERIOD JUNE 29, 1998
(COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31,
1998
-----------------------------------
NET ASSET VALUE -
BEGINNING OF THE PERIOD .................. $ 10.00
Investment Operations:
Net investment income .................... 0.02
Net realized and unrealized
gain (loss) on investments
and foriegn currencies ................... (0.09)
-------
Total from investment operations ...... (0.07)
-------
Distributions:
From net realized gain on
investments .............................. (0.11)
-------
NET ASSET VALUE -
END OF THE PERIOD ........................ $ 9.82
=======
Total Return 1 .............................. (0.70)%
RATIOS (TO AVERAGE NET ASSETS)
/SUPPLEMENTAL DATA:
Expenses (net of fee waivers) ............ 1.00%*
Expenses (excluding
fee waivers) ........................... 1.10%*
Net investment income .................... 0.46%*
Portfolio turnover rate ..................... 27.66%
Net assets at end of the period
($000 omitted) ........................... $73,784
- --------------------
1 Not annualized.
* Annualized.
D-20
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Board of Trustees 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 the
Portfolios and their shareholders.
PLAIN TALK
- --------------------------------------------------------------------------------
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a portfolio and
continuously reviews, supervises and administers the portfolio'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
WTC, the Fund's 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. Under an Advisory
Agreement with the Fund, WTC, subject to the supervision of the Board of
Trustees, directs the investments of each Portfolio in accordance with its
investment objective, policies and limitations. For the International Equity
Portfolio, WTC allocates the Portfolio's assets equally among the sub-advisers
and then oversees their investment activities. In addition to serving as
investment adviser for the Portfolios, WTC is engaged in a variety of investment
advisory activities, including the management of other mutual funds and
collective investment pools.
Under the Advisory Agreement, the Large Cap Growth Equity Portfolio and the
Large Cap Value Equity Portfolio each pays a monthly advisory fee to WTC at the
annual rate of 0.55% of the Portfolios' average daily net assets; the Small Cap
Equity Portfolio pays a monthly advisory fee to WTC at the annual rate of 0.60%
of the Portfolio's average daily net assets; and the International Equity
Portfolio pays a monthly advisory fee to WTC at the annual rate of 0.65% of the
Portfolio's average daily net assets. WTC has agreed to waive its fee or
reimburse each Portfolio monthly to the extent that expenses of the Portfolio
(excluding taxes, extraordinary expenses, brokerage commissions and interest)
exceed an annual rate of 0.75% of the average daily net assets of the Large Cap
Growth Equity Portfolio and the Large Cap Value Equity Portfolio, 0.80% of the
average daily net assets of the Small Cap Equity Portfolio, and 1.00% of the
average daily net assets of the International Equity Portfolio until further
notice. For the fiscal year ended December 31, 1998, WTC received the following
fees (after fee waivers), as a percentage of each Portfolio's average daily net
assets:
Large Cap Growth Equity Portfolio ............... 0.42%
Large Cap Value Equity Portfolio ................ 0.42%
Small Cap Equity Portfolio ...................... 0.45%
International Equity Portfolio .................. 0.55%
PORTFOLIO MANAGERS
E. Matthew Brown, Vice President, leads a "growth" team and is responsible
for the day-to-day management of the Large Cap Growth Equity Portfolio . 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.
D-21
<PAGE>
Mr. Brown also leads a "value" team and is responsible for the day-to-day
management of the Large Cap Value Equity Portfolio and the co-management of the
Small Cap Equity Portfolio.
Thomas P. Neale, CFA, Vice President, Equity Reasearch Division, is a
member of the "growth" team and is responsible for the co-management of the
Small Cap Equity Portfolio. Mr. Neale joined Wilmington Trust in 1986 as an
Institutional Equity 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 Equity Portfolio. 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.
SUB-ADVISERS
The International Equity Portfolio has three sub-advisers, Clemente Capital
Inc. ("Clemente"), Invista Capital Management, Inc. ("Invista") and Scudder
Kemper Investments, Inc. ("Scudder Kemper"). 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, and Thomas
J. Prapas, Director of Portfolio Management serve as portfolio managers for the
portion of the International Equity Portfolio's assets under Clemente's
management. Mr. Clemente has been responsible for portfolio management and
security selection for the past eight years, and Mr. Prapas has been a portfolio
manager with Clemente for eleven 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 Equity Portfolio 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 Equity
Portfolio's 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.
D-22
<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 business and investment activities.
INTERNATIONAL EQUITY
PORTFOLIO
SUB-ADVISERS
CLEMENTE CAPITAL, INC.
CARNEGIE HALL TOWER
152 WEST 57TH STREET, 25TH FL.
NEW YORK, NEW YORK 10019
INVISTA CAPITAL MANAGEMENT, INC.
1800 HUB TOWER
699 WALNUT STREET
DES MOINES, IOWA 50309
SCUDDER KEMPER INVESTMENTS, INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
Responsible for day-to-day portfolio
management of the International
Equity 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 dividends and distributions.
- --------------------------------------------------------------------------------
Shareholder
Services
- --------------------------------------------------------------------------------
TRANSFER AGENT
PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
Handles shareholder services, including
recordkeeping and statements, payment of
distribution of dividends and processing of buy and sell requests.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE RODNEY SQUARE STRATEGIC
EQUITY FUND
- --------------------------------------------------------------------------------
Distribution
- --------------------------------------------------------------------------------
DISTRIBUTOR
PROVIDENT DISTRIBUTORS, INC.
FOUR FALLS CORPORATE CENTER
WEST CONSHOHOCKEN, PA 19428
Distributes each Portfolio's Shares.
- --------------------------------------------------------------------------------
Asset
Safe Keeping
- --------------------------------------------------------------------------------
CUSTODIANS
WILMINGTON TRUST COMPANY
RODNEY SQUARE NORTH
1100 N. MARKET STREET
WILMINGTON, DE 19890-0001
PFPC TRUST COMPANY
200 STEVENS DRIVE
LESTER, PA 19113
Hold each Portfolio's assets, settle all
portfolio trades and collect most of
the valuation data required for
calculating each Portfolio's NAV
- --------------------------------------------------------------------------------
D-23
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
The Portfolios value their assets based on current market prices when
market quotations are readily available. These prices may be supplied by a
pricing service. The 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 Inc. ("PFPC") determines the
daily net asset value per share. 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 Fund's Board of Trustees.
PLAIN TALK
- --------------------------------------------------------------------------------
WHAT IS THE NET ASSET VALUE or "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
- --------------------------------------------------------------------------------
PFPC determines the net asset value (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 "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 Fund 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
D-24
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES:
(BULLET) Directly by mail or by wire
(BULLET) As a client of WTC through a trust account or a corporate cash
management account
(BULLET) 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 investment in any Portfolio is $1,000, but
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 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 Fund'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 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 The Rodney Square Strategic Equity Fund, indicating the Portfolio
that you have selected, along with a completed application (included at the end
of this prospectus). Send the check and application to The Rodney Square
Strategic Equity Fund, c/o PFPC Inc., P.O. Box 8951, Wilmington, DE 19899-9752.
Any purchase orders sent by overnight mail should be sent to The Rodney Square
Strategic Equity Fund, c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809. 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.
BY WIRE: You may purchase shares by wiring federal funds readily available.
You must advise PFPC at (800) 336-9970 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, c/o PFPC
Trust Company, Philadelphia, PA, ABA #031-0000-53, attention: The Rodney Square
Strategic Equity Fund, DDA# 86-0172-6591. Be sure to also include your account
number, the desired Portfolio 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 Portfolio account number.
D-25
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS: You may purchase shares of a Portfolio 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 to PFPC Trust Company.
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 theiroffering
price at the close of regular trading on the Exchange (currently 4:00 p.m.
Eastern time), on or about the 20th day of the month. For an application for the
AIP, 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, or clients of certain Service Organizations since a similar service is
provided through those organizations.
ADDITIONAL PURCHASE INFORMATION: 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.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
- --------------------------------------------------------------------------------
HOW TO REDEEM (SELL) SHARES:
(BULLET) By mail
(BULLET) By telephone
(BULLET) Through a Systematic Withdrawal Plan
- --------------------------------------------------------------------------------
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
D-26
<PAGE>
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 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 guarantee of your signature by an eligible institution
acceptable to the Transfer Agent. Eligible institutions include a domestic bank
or trust company, broker-dealer, clearing agency or savings association, who are
participants in a signature guarantee "medallion" program recognized by the
Securities Transfer Association. The three recognized medallion programs are
Securities Transfer Agents Medallion Program, Stock Exchanges Medallion Program,
and New York Stock Exchange, Inc. Medallion Signature Program. Signature
guarantees that are not part of these programs will not be accepted. The written
instructions and guarantees should be mailed to: The Rodney Square Strategic
Equity Fund, c/o PFPC Inc., P.O. Box 8951, Wilmington, DE 19899-9752. A
redemption order sent by overnight mail should be sent to The Rodney Square
Strategic Equity Fund, c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809. You must indicate the Portfolio name, your account number and your name.
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.
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 NAV at
4:00 p.m. Eastern time on or about the 25th day of the month. This service is
generally not available for WTC trust accounts or clients of certain Service
Organizations, since a similar service is provided through those organizations.
ADDITIONAL REDEMPTION INFORMATION: 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, 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 Portfolio shares.
D-27
<PAGE>
- --------------------------------------------------------------------------------
EXCHANGE OF SHARES
- --------------------------------------------------------------------------------
PLAIN TALK
- --------------------------------------------------------------------------------
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one Portfolio to
another Portfolio within the Rodney Square family of funds.
- --------------------------------------------------------------------------------
You may exchange all or a portion of your shares in a Portfolio for shares
of another Portfolio within the Rodney Square family of funds that is currently
being offered. The other Rodney Square funds are:
The Rodney Square Fund
The Money Market Portfolio
The U.S. Government Portfolio
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
Short/Intermediate Bond Portfolio
Intermediate Bond Portfolio
Municipal Bond 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. The NAV of The Rodney Square Fund
is determined at 2:00 p.m. Eastern time and The Rodney Square Tax-Exempt Fund is
determined at 12:00 p.m. Eastern time on each Business Day. The NAV of The
Rodney Square Strategic Fixed-Income Fund and The Rodney Square Strategic Equity
Fund is determined at the close of regular trading on the Exchange (currently,
4:00 p.m. Eastern time) on each Business Day.
Exchange transactions will be subject to the minimum initial investment and
other requirements of the fund or portfolio into which the exchange is made. An
exchange may not be made if the exchange would leave a balance in your account
of less than $500.
To obtain prospectuses of the other Rodney Square funds, 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 Rodney Square fund shares to be acquired through such exchange may
be legally made.
D-28
<PAGE>
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS
- --------------------------------------------------------------------------------
PLAIN TALK
- --------------------------------------------------------------------------------
WHAT IS NET INVESTMENT INCOME?
Net investment income consists of interest and dividends earned on its
investments less accrued expenses.
- --------------------------------------------------------------------------------
As a shareholder of a Portfolio, 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 Portfolios. Dividends are declared
and paid annually. Each Portfolio expects to distribute any net realized gains
once a year. Net realized gains or losses from foreign currency transactions in
the International Equity Portfolio are included as a component of net investment
income.
Each Portfolio's net investment income is determined by PFPC on each day
that the Portfolios's NAV is calculated.
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).
Distributions are automatically reinvested and are paid in the form of
additional Portfolio shares unless you have elected to receive the distributions
in cash.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX: As long as a Portfolio meets the requirements for being
a "regulated investment company," which each Portfolio has done and intends to
continue to do in the future, 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 subject to Federal income tax and securities that
earn interest exempt from that tax, under normal conditions 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.
Dividends you receive from a Portfolio, whether reinvested in Portfolio
shares or taken as cash, are generally taxable to you as ordinary income.
Distributions of a Portfolio's net capital gain whether reinvested in Portfolio
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 Portfolio 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 Growth Equity Portfolio, the
Small Cap Equity Portfolio and the International Equity Portfolio, anticipates
the distribution of net capital gain. The Large Cap Value Equity Portfolio
anticipates the distribution of net investment income.
D-29
<PAGE>
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 TAX 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.
- --------------------------------------------------------------------------------
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
each portfolio's holdings and operating results for the 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 Portfolios'
performance.
STATEMENT OF ADDITIONAL INFORMATION (SAI): Provides a complete technical
and legal description of the Portfolios' 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:
The Rodney Square Strategic Equity 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 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 Fund 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 The Rodney Square Strategic
Equity Fund is 811-4808.
D-30
<PAGE>
APPENDIX E
Reproduced below are excerpts of the dicussion on the performance of Large Cap
Growth Equity Portfolio for the year ended June 30, 1999, which was included in
the Annual Report of The Rodney Square Strategic Equity Fund for the fiscal year
ended June 30, 1999.
LARGE CAP GROWTH EQUITY PORTFOLIO
The Large Cap Growth Equity Portfolio (the "Growth Portfolio") returned
9.20% for the six-month period ended June 30, 1999. The S&P 500 Index, an
unmanaged, capitalization-weighted index of five hundred publicly traded stocks
achieved a gain of 12.38% for the same period. The Russell 1000 Growth Index
returned 10.45% for the same six-month period. The Russell 1000 Growth Index is
formed by assigning a style composite score to all of the companies in the
Russell 1000 Index, a passive index that that includes the largest 1000 stocks
in the U.S. as measured by market capitalization, to determine their growth or
value characteristics. Approximately 70% of the stocks are placed in either the
Growth or Value Index. The remaining stocks are placed in both indices with a
weight proportional to their growth or value characteristics.
The Growth Portfolio performance over the six-month period was enhanced due
to significant appreciation in selected technology stocks. Also contributing
were retail , financial and oil service stocks. The weakest performers were
those in the food and beverage, pharmaceutical and selected software companies.
The Fund's advisor, WTC, emphasizes the purchase of stocks that possess
above-average sustainable earnings growth rates at reasonable prices. As of the
date of this report, the Growth Portfolio is well diversified among all the
major sectors of the market with particular emphasis in the technology and
healthcare industries. As of June 30, 1999 the ten largest holdings in the Fund
were:
<TABLE>
<CAPTION>
10 LARGEST HOLDINGS PERCENT OF TOTAL ASSETS 10 LARGEST HOLDINGS PERCENT OF TOTAL ASSETS
---------------- ----------------------- ------------------- --------------------
<S> <C> <C> <C>
American International Group 4.3% Microsoft Corp. 3.5%
Cisco Systems Inc. 4.1 Home Depot Inc 3.3
MCI Worldcom Inc. 3.7 Merck & Co. 3.1
General Electric 3.7 Staples Inc 3.0
Intel Corp. 3.6 Tyco International 2.8
</TABLE>
E-1
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
- --------------------------------------------------------------------------------
The following graph compares the Growth Portfolio, the Russell 1000 Growth
Index and the S&P 500 Index, for the past 10 years ended June 30, 1999. In 1999,
the Growth Portfolio's fiscal year end changed from December 31 to June 30.
Therefore, account values have been presented at June 30, 1999, and as of June
30 in each prior year.
LARGE CAP GROWTH EQUITY PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT*
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
-------- -------- --------
Growth Portfolio 19.91% 23.50% 16.73%
Russell 1000 Growth
Index 21.92% 27.16% 18.48%
S&P 500 Index 22.76% 27.88% 18.76%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Growth Russell 1000 S&P 500
Portfolio Growth Index Index
6/30/89 $10,000 $10,000 $10,000
6/30/90 $11,374 $11,439 $11,640
6/30/91 $11,782 $12,307 $12,500
6/30/92 $13,033 $14,121 $14,184
6/30/93 $15,473 $16,279 $16,110
6/30/94 $16,358 $16,390 $16,326
6/30/95 $19,850 $20,565 $20,576
6/30/96 $24,681 $25,965 $25,936
6/30/97 $31,814 $34,341 $34,925
6/30/98 $39,185 $44,695 $45,476
6/30/99 $46,987 $54,492 $55,826
- --------------------------------------------------------------------------------
* Past performance is not necessarily indicative of future results. An
investment in the Portfolio is neither insured nor guaranteed by WTC or any
other banking institution, the U.S. Government, the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other
agency. The values shown reflect a hypothetical initial investment of
$10,000 with dividends reinvested. Returns are higher due to WTC's
maintenance of the Portfolio's expenses. The Russell 1000 Growth Index and
the S&P500 Index are unmanaged stock market indices without any associated
expenses and the returns assume reinvestment of all dividends. You cannot
invest in an index. Please read the prospectus carefully before investing.
Distributed by Provident Distributors, Inc. See Financial Highlights on
page 29.
E-2
<PAGE>
LARGE CAP GROWTH EQUITY PORTFOLIO
(a series of The Rodney Square Strategic Equity Fund)
WILMINGTON LARGE CAP GROWTH PORTFOLIO
(a series of WT Mutual Fund)
STATEMENT OF ADDITIONAL INFORMATION
October 13, 1999
This Statement of Additional Information relates specifically
to the proposed reorganization whereby WT Large Cap Growth Equity Portfolio
("Wilmington Growth Portfolio") would acquire all of the assets of Large Cap
Growth Equity Portfolio solely in exchange for shares of equal value of
Wilmington Growth Portfolio. This Statement of Additional Information consists
of this cover page, the pro forma financial statements of Wilmington Growth
Portfolio (giving effect to the reorganization) for the twelve month period
ended June 30, 1999, set forth on the following pages, and the following
described documents, each of which is attached as an exhibit:
(1) The Preliminary Statement of Additional Information of WT
Mutual Fund previously filed via EDGAR on August 12, 1999.
(2) The Schedule of Investments, Financial Statements and
Highlights, and accompanying notes of Large Cap Growth
Equity Portfolio from the Annual Report to Shareholders
of The Rodney Square Strategic Equity Fund for the fiscal
year ended June 30, 1999;
This Statement of Additional Information is not a prospectus
and should be read only in conjunction with the Prospectus/Proxy Statement dated
October 13, 1999 relating to the above-referenced matter. A copy of the
Prospectus/Proxy Statement may be obtained by calling toll-free 1-800-336-9970.
<PAGE>
PRO FORMA SCHEDULE OF INVESTMENTS
Wilmington Large Cap Growth Portfolio
Schedule Of Portfolio Investments (Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
Rodney Square Wilmington
Large Cap Growth Large Cap Growth Pro Forma
Equity Portfolio Portfolio Combined
Description Shares Market Value Market Value (1) Market Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK -- 99.3%
COMMUNICATION & BROADCASTING -- 3.7%
MCI WORLDCOM, INC. 94,000 $ 8,107,500 - $ 8,107,500
----------------------------------------------------
8,107,500 - 8,107,500
----------------------------------------------------
DRILLING OIL & GAS WELLS -- 0.5%
ENRON OIL & GAS, CORP 50,000 1,012,500 - 1,012,500
----------------------------------------------------
FINANCE & INSURANCE -- 8.0%
INSURANCE CARRIERS -- 6.0%
AMERICAN INT'L GROUP, INC 80,000 9,365,000 - 9,365,000
EQUITABLE COMPANIES, INC. 26,000 1,742,000 - 1,742,000
PROTECTIVE LIFE CORP. 65,000 2,145,000 - 2,145,000
----------------------------------------------------
13,252,000 - 13,252,000
----------------------------------------------------
STATE & NATIONAL BANKS -- 2.0%
CITIGROUP INC. 75,748 3,598,030 - 3,598,030
STATE STREET CORP. 10,000 853,750 - 853,750
----------------------------------------------------
4,451,780 - 4,451,780
----------------------------------------------------
Total Finance and Insurance 17,703,780 - 17,703,780
----------------------------------------------------
MANUFACTURING -- 47.1%
AIRCRAFT & AEROSPACE -- 3.4%
ALLIED-SIGNAL,INC. 60,000 3,780,000 - 3,780,000
UNITED TECHNOLOGIES CORP. 53,000 3,799,438 - 3,799,438
----------------------------------------------------
7,579,438 - 7,579,438
----------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT -- 10.3%
COMPUTER ASSOCIATES 60,250 3,313,750 - 3,313,750
DELL COMPUTER, CORP. 100,000 3,700,000 - 3,700,000
INTEL CORP. 134,000 7,973,000 - 7,973,000
MICROSOFT CORP.* 84,800 7,647,900 - 7,647,900
----------------------------------------------------
22,634,650 - 22,634,650
----------------------------------------------------
CONSUMER PRODUCTS -- 1.5%
FORTUNE BRANDS, INC. 60,000 2,482,500 - 2,482,500
PROCTER & GAMBLE COMPANY 9,000 803,250 - 803,250
----------------------------------------------------
3,285,750 - 3,285,750
----------------------------------------------------
ELECTRONICS -- 3.6%
ANALOG DEVICES, INC.* 120,000 6,022,500 - 6,022,500
MAXIM INTEGRATED PRODUCTS, INC 30,200 2,008,300 - 2,008,300
----------------------------------------------------
8,030,800 - 8,030,800
----------------------------------------------------
FOOD AND BEVERAGE -- 1.7%
COCA-COLA CO. 20,000 1,250,000 - 1,250,000
PEPSICO INC. 65,000 2,514,688 - 2,514,688
----------------------------------------------------
3,764,688 - 3,764,688
----------------------------------------------------
ELECTRICAL MACHINERY, EQUIP. & SUPPLIES -- 6.4%
GENERAL ELECTRIC CO. 71,000 8,023,000 - 8,023,000
TYCO INTERNATIONAL LTD. 64,000 6,064,000 - 6,064,000
----------------------------------------------------
14,087,000 - 14,087,000
----------------------------------------------------
INDUSTRIAL MACHINERY & EQUIPMENT -- 1.9%
ILLINOIS TOOL WORKS, INC. 50,000 4,100,000 - 4,100,000
----------------------------------------------------
MANUFACTURING INDUSTRIES -- 1.3%
AMERICAN HOME PRODUCTS CORP. 50,000 2,875,000 - 2,875,000
----------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
OIL FIELD MACHINERY & EQUIPMENT -- 1.1%
SCHLUMBERGER LTD. 36,384 2,317,206 - 2,317,206
----------------------------------------------------
PHARMACEUTICAL PREPARATIONS -- 8.4%
ABBOTT LABORATORIES 55,000 2,502,500 - 2,502,500
AMGEN, INC. 20,000 1,217,500 - 1,217,500
BIOGEN, INC. 14,000 900,375 - 900,375
BRISTOL-MEYERS 80,000 5,635,000 - 5,635,000
JOHNSON & JOHNSON 55,000 5,390,000 - 5,390,000
SCHERING-PLOUGH CORP. 53,000 2,809,000 - 2,809,000
----------------------------------------------------
18,454,375 - 18,454,375
----------------------------------------------------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES -- 2.5%
MEDTRONIC, INC. 35,000 2,725,625 - 2,725,625
GUIDANT 55,000 2,829,063 - 2,829,063
----------------------------------------------------
5,554,688 - 5,554,688
----------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.7%
LUCENT TECHNOLOGIES, INC. 40,000 2,697,500 - 2,697,500
TELLABS, INC. 40,000 2,702,500 - 2,702,500
UNIPHASE CORP. 17,000 2,822,000 - 2,822,000
----------------------------------------------------
8,222,000 - 8,222,000
----------------------------------------------------
TOBACCO -- 1.3%
PHILIP MORRIS COS,INC. 70,000 2,813,125 - 2,813,125
----------------------------------------------------
Total Manufacturing 95,319,219 - 103,718,719
----------------------------------------------------
SERVICES -- 27.5%
AMUSEMENT & RECREATIONAL SERVICES -- 2.6%
CARNIVAL CORP. 40,000 1,940,000 - 1,940,000
WARNER LAMBERT CO 54,000 3,746,250 - 3,746,250
----------------------------------------------------
5,686,250 - 5,686,250
----------------------------------------------------
BUSINESS SERVICES -- 7.9%
AUTOMATIC DATA PROCESSING, INC 61,000 2,684,000 - 2,684,000
BERKSHIRE HATHAWAY, INC. CL B 1,000 2,249,000 - 2,249,000
EQUIFAX INCORPORATED 36,000 1,284,750 - 1,284,750
HALLIBURTON COMPANU 59,500 2,692,375 - 2,692,375
MERCK & CO.,INC. 92,000 6,808,000 - 6,808,000
WILLIAMS COMPANIES, INC. 40,000 1,702,500 - 1,702,500
----------------------------------------------------
17,420,625 - 17,420,625
----------------------------------------------------
COMPUTER SERVICES -- 15.1%
ACXIOM CORP.* 70,000 1,745,625 - 1,745,625
AMERICAN MGMT SYSTEMS, INC. 58,100 1,862,831 - 1,862,831
AMERICAN ONLINE INC.* 40,000 4,420,000 - 4,420,000
CISCO SYSTEMS, INC.* 140,000 9,030,000 - 9,030,000
EMC CORP/MASS 60,000 3,300,000 - 3,300,000
IMS HEALTH INC. 93,000 2,906,250 - 2,906,250
NETWORK ASSOCIATES 60,000 881,250 - 881,250
ORACLE SYSTEMS CORP.* 135,000 5,011,875 - 5,011,875
PEOPLESOFT INC. 80,000 1,380,000 - 1,380,000
SUN MICROSYSTEMS INC 20,000 1,377,500 - 1,377,500
YAHOO! INC. 8,000 1,378,000 - 1,378,000
----------------------------------------------------
33,293,331 - 33,293,331
----------------------------------------------------
MEDICAL & HEALTH SERVICES -- 0.7%
HEALTHSOUTH CORP.* 100,000 1,493,750 - 1,493,750
----------------------------------------------------
SANITARY SERVICES -- 1.2%
WASTE MANAGEMENT, INC. 50,000 2,687,500 - 2,687,500
----------------------------------------------------
Total Services 56,835,206 - 60,581,456
----------------------------------------------------
WHOLESALE & RETAIL TRADE -- 12.5%
MISCELLANEOUS RETAIL STORES -- 2.5%
DAYTON-HUDSON CORP. 40,000 2,600,000 - 2,600,000
FAMILY DOLLAR STORES, INC. 120,000 2,880,000 - 2,880,000
----------------------------------------------------
5,480,000 - 5,480,000
----------------------------------------------------
RETAIL APPAREL & ACCESSORY STORES -- 2.8%
LINENS 'N THINGS, INC.* 75,000 3,281,250 - 3,281,250
ZALE CORP 70,000 2,800,000 - 2,800,000
-----------------------------------------------------
6,081,250 - 6,081,250
-----------------------------------------------------
RETAIL BUILDING MATERIAL -- 3.2%
HOME DEPOT, INC. 112,000 7,217,000 - 7,217,000
-----------------------------------------------------
WHOLESALE MISCELLANEOUS -- 3.0%
STAPLES, INC.* 215,250 6,659,297 - 6,659,297
-----------------------------------------------------
WHOLESALE - CHEMICALS & DRUGS -- 1.0%
CARDINAL HEALTH, INC. 33,467 2,146,071 - 2,146,071
-----------------------------------------------------
Total Wholesale and Retail Trade 27,583,618 - 27,583,618
-----------------------------------------------------
Total Common Stock 218,707,573 218,707,573
-----------------------------------------------------
SHORT TERM INVESTMENTS -- 0.7%
SANSOM STREET MONEY MARKET 722,172 722,172 - 722,172
TEMP CASH DOLLAR SERIES 722,171 722,171 - 722,171
-----------------------------------------------------
1,444,343 - 1,444,343
-----------------------------------------------------
-----------------------------------------------------
TOTAL INVESTMENTS (MARKET VALUE) -- 100.0% $208,006,166 - $220,151,916
=====================================================
Total Investments (Cost) $162,660,355 - $162,660,355
=====================================================
<FN>
(1) As of June 30, 1999, the Wilmington Large Cap Growth Portfolio had not
commenced operations.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PROFORMA STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
Rodney Square Wilmington Large
Large Cap Growth Cap Growth
Equity Portfolio Portfolio (1) Adjustments (2) Combined
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at market $ 220,151,916 - $(220,151,916) -
Investment in Master Series - 223,782,143 $223,782,143
Receivables:
Dividends and interest 118,115 - (118,115) -
Fund shares purchased 106,892 - 106,892
Investment securities sold 6,700,708 - (6,700,708) -
Other assets - - -
-------------------------------------------------------------------------------
Total assets 227,077,631 - (3,188,596) 223,889,035
-------------------------------------------------------------------------------
LIABILITIES:
Due to Manager 86,500 - (86,500) -
Payables:
Fund shares redeemed 1,152,744 - 1,152,744
Investment securities purchased 3,208,988 - (3,208,988) -
Payable for investment in
Master Series - - 106,892 106,892
Other accrued expenses 91,600 - 91,600
-------------------------------------------------------------------------------
Total liabilities 4,539,832 - (3,188,596) 1,351,236
-------------------------------------------------------------------------------
NET ASSETS $ 222,537,799 - $ - $222,537,799
===============================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 157,672,384 - $ - $157,672,384
Accumulated net realized gain on
investment transactions 7,373,854 - 7,373,854
Net unrealized appreciation of investments 57,491,561 - 57,491,561
-------------------------------------------------------------------------------
NET ASSETS $ 222,537,799 - - $222,537,799
===============================================================================
Shares of beneficial Interest outstanding 8,637,571 - - 8,637,571
-------------------------------------------------------------------------------
Net Asset Value, offering and
redemption price per share $25.76 - - $25.76
===============================================================================
<FN>
(1) As of June 30, 1999, the Wilmington Large Cap Growth Portfolio had not
commenced operations.
(2) Reflects the investment of the Rodney Square Large Cap Growth Equity
Portfolio investments, including related assets and liabilities, in the
Master Series.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PROFORMA STATEMENT OF OPERATIONS (Unaudited)
For the period July 1, 1998 through
June 30, 1999
<TABLE>
<CAPTION>
Rodney Square Wilmington
Large Cap Growth Large Cap Growth
Equity Portfolio Portfolio (1) Adjustments (2) Combined
---------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
INCOME
- ------
Interest and dividends $1,405,563 - $1,405,563
EXPENSES
- --------
MASTER EXPENSES
Management Fee 1,150,573 - 1,150,573
Admin/Acctg Fee (PFPC) 209,195 - 10,968 220,163
Custodian Fee 31,003 - 2,021 33,024
Trustees' Fees and Expenses 4,449 - 4,449
Professional Fees 211,403 - (49,000) 162,403
Other 21,958 - 21,958
FEEDER EXPENSES
Administration Fee - - -
Transfer Agent Fee 80,735 - 2,265 83,000
Trustees' Fees and Expenses - - -
Amort. of Organizational exp. - - -
Registration Fees 60,758 - (40,000) 20,758
Professional Fees - - -
Other - - -
Reorganization expenses - - 35,000 35,000
---------------- ---------------- ---------------- ------------
Gross Expenses 1,770,074 - (38,746) 1,731,328
Less: Mgmt. Fee Waiver/Reimb. (201,111) - 38,746 (162,365)
---------------- ---------------- ---------------- ------------
NET EXPENSES 1,568,963 - - 1,568,963
---------------- ---------------- ---------------- ------------
Net Investment Loss (163,400) - - (163,400)
---------------- ---------------- ---------------- ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain from investment
transactions (21,287,578) (21,287,578)
Change in unrealized appreciation of
investments 6,875,008 6,875,008
---------------- ---------------- ---------------- ------------
Net gain (loss) on investments (14,412,570) - - (14,412,570)
---------------- ---------------- ---------------- ------------
Net decrease in net assets
from operations ($14,575,970) $ (14,575,970) - $ - $(14,575,970)
================ ================ ================ ============
<FN>
(1) As of June 30, 1999, the Wilmington Large Cap Growth Portfolio had not
commenced operations.
(2) Reflects the anticipated costs and savings of the reorganization.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
WT Mutual Fund
Wilmington Large Cap Growth Portfolio
Notes to Pro Forma Financial Statements
June 30, 1999
(Unaudited)
NOTE 1 - DESCRIPTION OF THE FUND
The Wilmington Large Cap Growth Portfolio (the "Wilmington Growth Portfolio") is
a newly created "shell" series of WT Mutual Fund (the "Fund"), an open end,
management investment company organized as a Delaware business trust and
registered under the Investment Company Act of 1940. The Wilmington Growth
Portfolio offers two classes of shares, the Institutional class and the Investor
class. Investor shares are subject to Rule 12b-1 fees (distribution and
shareholder servicing fees). Institutional shares are not subject to sales
charges or 12b-1 fees.
Unlike other investment companies which directly acquire and manage their own
portfolio of securities, the Wilmington Growth Portfolio seeks to achieve its
investment objective by investing all of its investable assets in a
corresponding series of shares of WT Investment Trust I (the "Master Series") an
open end, management investment company having the same investment objective,
policies and limitations as the Wilmington Growth Portfolio.
NOTE 2 - BASIS OF PRO FORMA PRESENTATION
The pro forma financial statements, including the pro forma schedule of
investments, give effect to the proposed acquisition of the assets of Rodney
Square Strategic Equity Fund - Large Cap Growth Equity Portfolio (the "Growth
Equity Portfolio") by the Wilmington Growth Portfolio (the "Reorganization").
Under the terms of the Agreement and Plan of Reorganization, the combination of
the Wilmington Growth Portfolio and the Growth Equity Portfolio will be treated
as a tax-free business combination. The acquisition would be accomplished by an
exchange of Institutional class shares of Wilmington Growth Portfolio for the
net assets of the Growth Equity Portfolio and the distribution of Wilmington
Growth Portfolio Institutional class shares to the Growth Equity Portfolio
shareholders.
As of June 30, 1999, the Wilmington Growth Portfolio had not commenced
operations and had no assets. It is anticipated that the Wilmington Growth
Portfolio will not commence operations unless the Reorganization occurs. The
information contained herein is based on the historical experience of the Growth
Equity Portfolio and is designed to permit the shareholders to evaluate the
financial effect of the proposed Reorganization. They should be read in
conjunction with the financial statements of the Growth Equity Portfolio which
are included in its Annual Reports dated December 31, 1998 and June 30, 1999
(Growth Equity Portfolio changed its fiscal year end from December to June
effective June 30, 1999).
The pro forma statement of assets and liabilities reflects the Reorganization as
if it had taken place on June 30, 1999, the fiscal year end of WT Mutual Fund.
The pro forma statement of operations reflects adjustments as if the combination
took place on July 1, 1998, in order to present 12 months of operating results.
The adjustments reflect changes in expenses relating to the master-feeder
structure of the Wilmington Growth Portfolio and other contractual changes that
will not be effective until November 1, 1999 and reductions in other expenses
for duplicated services which will be recurring in nature. In addition,
estimated (non-recurring) expenses related to the Reorganization which will be
borne by the Portfolios have been included.
The following notes refer to the pro forma financial statements as if the above
mentioned combination and contractual changes took place on July 1, 1998.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
<PAGE>
Significant Accounting Policies. The following is a summary of the significant
accounting policies of the Wilmington Growth Portfolio:
SECURITY VALUATION. Valuation of the Wilmington Growth Portfolio is based on
the underlying securities held in the Master Series. The Wilmington Growth
Portfolio is allocated its portion of the Master Series securities' market
value based upon its ownership interest. Securities held by the Master Series
which are listed on a securities exchange and for which market quotations are
available are valued at the last quoted sales price, or, if there is no such
reported sale, are valued at the mean between the most recent bid and asked
prices. Securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value, unless the Board of Trustees
determines that this does not represent fair value. Securities that do not
have a readily available current market value are valued in good faith under
the direction of the Board of Trustees.
FEDERAL INCOME TAXES. The Wilmington Growth Portfolio intends to continue to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended, and to distribute all of its
taxable and tax-exempt income to its shareholders. Therefore, no federal
income tax provision has been made in the financial statements. The Master
Series is treated as a partnership for Federal income tax purposes. Income,
expenses and investment gains and losses are deemed to be "passed through" to
each partner. Accordingly, no tax provision is required for the Master
Series.
INVESTMENT INCOME AND DIVIDENDS TO SHAREHOLDERS. Interest and dividend are
accrued as earned. Investment security transactions are accounted for on a
trade date basis. The specific identification method is used for determining
realized gain and loss on investments for both financial and federal income
tax reporting purposes.
All of the Master Series net investment income and realized and unrealized
gains (losses) from security transactions are allocated pro rata to each
partner. Distributions to Wilmington Growth Portfolio shareholders of from
net investment income and net realized gains on investments, if any, are
declared and paid annually in December.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 4 - MANAGEMENT FEES
Wilmington Trust Company ("WTC"), a wholly owned subsidiary of Wilmington Trust
Corporation, provided advisory and other services to the Growth Equity Portfolio
for the period July 1, 1998 through June 30, 1999. In conjunction with the
Reorganization, Roxbury Capital Management, LLC will serve as investment advisor
to the Wilmington Growth Portfolio.
For advisory services, the Wilmington Growth Portfolio pays a fee at the annual
rate of .55% of the first $1 billion of average daily net assets, of .50% of the
next $1 billion of average daily net assets and .45% of average daily net assets
in excess of $2 billion. The advisor has agreed to waive all or a portion of its
fee and assume certain portfolio operating expenses (excluding taxes,
extraordinary expenses, brokerage commissions and interest) in an amount that
will limit annual operating expenses to not more than .75% of average daily net
assets of the Institutional class and 1.00% of average daily net assets of the
Investor class.
PFPC Inc. provides administration, accounting and transfer agent services to the
Wilmington Growth Portfolio and the Master Series pursuant to separate
Administration, Accounting and Transfer Agent agreements.
<PAGE>
EXHIBIT A
THIS STATEMENT OF ADDITIONAL INFORMATION CORRESPONDS TO THE PRELIMINARY
PROSPECTUS OF WT MUTUAL FUND INCLUDED AS APPENDIX B TO THE PROSPECTUS/PROXY
STATEMENT. THIS STATEMENT OF ADDITIONAL INFORMATION AND PRELIMINARY PROSPECTUS
WERE BOTH FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12,
1999.
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
_______, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Portfolios' current prospectus, dated ______, 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) _____.
Each Portfolio's audited financial statements for the year ended June 30, 1999,
included in the Annual Report to shareholders, are incorporated into this SAI by
reference.
EXHIBIT A-1
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION 3
INVESTMENT POLICIES 3
INVESTMENT LIMITATIONS 17
TRUSTEES AND OFFICERS 21
INVESTMENT ADVISORY AND OTHER SERVICES 24
DISTRIBUTION OF SHARES AND RULE 12B-1 PLAN 29
BROKERAGE ALLOCATION AND OTHER PRACTICES 30
CAPITAL STOCK AND OTHER SECURITIES 31
PURCHASE, REDEMPTION AND PRICING OF SHARES 31
DIVIDENDS 34
TAXATION OF THE PORTFOLIOS 35
CALCULATION OF PERFORMANCE INFORMATION 39
TAX-EQUIVALENT YIELD TABLE 41
FINANCIAL STATEMENTS 45
APPENDIX A - OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES 46
APPENDIX B - DESCRIPTION OF RATINGS 55
EXHIBIT A-2
<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 deposits, 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:
(BULLET) 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.
(BULLET) 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
EXHIBIT A-3
<PAGE>
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).
(BULLET) 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 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. The Money Market Portfolios 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
EXHIBIT A-4
<PAGE>
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:
(BULLET) GENERAL OBLIGATION SECURITIES are backed by the taxing power of
the issuing municipality and are considered the safest type of
municipal bond.
(BULLET) REVENUE OR SPECIAL OBLIGATION SECURITIES are backed by the
revenues of a specific project or facility tolls from a toll
bridge, for example.
(BULLET) 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.
(BULLET) 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.
(BULLET) 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.
(BULLET) 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.
(BULLET) 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.
(BULLET) 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).
(BULLET) 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.
EXHIBIT A-5
<PAGE>
SECURITIES LENDING. The Money Market Portfolios may from time to time lend its
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.
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.
EXHIBIT A-6
<PAGE>
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
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.
EXHIBIT A-7
<PAGE>
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.
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.
(See "Bank Obligations.")
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.
EXHIBIT A-8
<PAGE>
(BULLET) 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.
(BULLET) 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 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.
(BULLET) 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
EXHIBIT A-9
<PAGE>
the issuer is able to meet its obligations. No Portfolio intends to invest more
than 5% of its net assets in GICs.
ILLIQUID SECURITIES. The Bond Portfolios 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. (See
"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 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
EXHIBIT A-10
<PAGE>
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:
(BULLET) 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.
(BULLET) 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.
(BULLET) 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.
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.
(BULLET) 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.
(BULLET) 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. These were previously described for the Money Market Portfolios. (See
"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.
EXHIBIT A-11
<PAGE>
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 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 the same repurchase
agreements as the Money Market Portfolios. (See "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
EXHIBIT A-12
<PAGE>
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 "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 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,
EXHIBIT A-13
<PAGE>
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 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.
EXHIBIT A-14
<PAGE>
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 % %
- ----------------------- --------------------------- ----------------------------
Intermediate Bond % %
- ----------------------- --------------------------- ----------------------------
Municipal Bond % %
- ----------------------- --------------------------- ----------------------------
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.
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.
EXHIBIT A-15
<PAGE>
(BULLET) 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.
(BULLET) 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 "U.S. Government Obligations.")
(BULLET) 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.
(BULLET) BANK OBLIGATIONS. The Equity Portfolios may invest in the same
obligations of U.S. banks as the Money Market Portfolios. (See
"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.
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 the Appendix.
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.
EXHIBIT A-16
<PAGE>
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 the adviser 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 85% 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 the same repurchase
agreements as the Money Market Portfolios. (See "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 may invest up to 15%
of its net assets in illiquid securities, 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. (See "Securities Lending.")
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 % %
- --------------------------- -------------------------- -------------------------
Large Cap Core % %
- --------------------------- -------------------------- -------------------------
Small Cap Core % %
- --------------------------- -------------------------- -------------------------
Large Cap Value % %
- --------------------------- -------------------------- -------------------------
Mid Cap Value % %
- --------------------------- -------------------------- -------------------------
Small Cap Value % %
- --------------------------- -------------------------- -------------------------
International Multi-Manager % %
- --------------------------- -------------------------- -------------------------
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
EXHIBIT A-17
<PAGE>
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;
7. purchase or sell physical commodities or contracts, provided that currencies
and currency-related contracts will not be deemed physical commodities; or
8. with respect to the Tax-Exempt Portfolio only, 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;
EXHIBIT A-18
<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 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;
3. borrow money, provided that the Portfolio may borrow money from banks for
temporary or emergency services (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.
EXHIBIT A-19
<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 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
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
EXHIBIT A-20
<PAGE>
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.
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
EXHIBIT A-21
<PAGE>
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".
- -------------------------- ------------- ---------------------------------------
POSITION(S) PRINCIPAL OCCUPATION(S) DURING THE PAST
NAME, ADDRESS AND DATE OF HELD WITH FIVE YEARS
BIRTH THE FUND
- -------------------------- ------------- ---------------------------------------
ROBERT ARNOLD Trustee In 1989, Mr. Arnold founded, and
152 W. 57th Street, 44th currently co-manages, R. H. Arnold &
Floor Co., Inc., an investment banking
New York, NY 10019 company. Prior to forming R. H. Arnold
Date of Birth: 3/44 & Co., Inc., Mr. Arnold was 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
Rodney Square North President Officer of Wilmington Trust Company
1100 N. Market Street since February 1996 and Director of
Wilmington, DE 19890 Rodney Square Management Corporation
Date of Birth: 2/49 since 1996. He 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 from 1992 to 1996 and
Director of Provident Capital
Management from 1993 to 1996.
- -------------------------- ------------- ---------------------------------------
NICHOLAS A. GIORDANO Trustee Mr. Giordano was appointed interim
LaSalle University President of LaSalle University on July
Philadelphia, PA 19141 1, 1998 and was a consultant for
Date of Birth: 3/43 financial services organizations from
late 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.
- ------------------------- ------------- ----------------------------------------
LAWRENCE B. THOMAS Trustee Mr. Thomas retired in October 1996,
7813 Pierce Circle after having served in numerous
Omaha, NE 68124 financial positions at ConAgra, Inc.
Date of Birth: 3/46 (an international food company)
including Treasurer, Secretary, Risk
Officer, and Senior Vice
President-Finance (Principal Financial
Officer). In his thirty-six years at
ConAgra, he also served as director and
officer of its numerous subsidiaries.
- -------------------------- ------------- ---------------------------------------
EXHIBIT A-22
<PAGE>
- -------------------------- ------------- ---------------------------------------
POSITION(S) PRINCIPAL OCCUPATION(S) DURING THE PAST
NAME, ADDRESS AND DATE OF HELD WITH FIVE YEARS
BIRTH THE FUND
- -------------------------- ------------- ---------------------------------------
ERIC K. CHEUNG Vice From 1978 to 1986, Mr. Cheung was the
Rodney Square North President Portfolio Manager for fixed income
1100 N. Market Street assets of the Meritor Financial Group.
Wilmington, DE 19890 In 1986, Mr. Cheung joined Wilmington
Date of Birth: 12/54 Trust Company and in 1991, he became
the Division 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 Treasurer Administration of PFPC Inc. since April
Date of Birth: 11/58 1999. Prior to joining PFPC, Mr.
Colletti was Controller for the Reserve
Funds since 1986.
- -------------------------- ------------- ---------------------------------------
GARY M. GARDNER Secretary Mr. Gardner has been a Senior Vice
400 Bellevue Parkway President of PFPC Inc. since January
Wilmington, DE 19809 1994. Previously, Mr. Gardner had
Date of Birth: 2/51 provided legal and regulatory advice to
mutual funds and their management for
more than twenty years at Federated
Investors, Inc., SunAmerica Asset
Management Corp. and The Boston
Company, Inc.
- -------------------------- ------------- ---------------------------------------
On July 1, 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
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM THE FROM THE WT FUND
INDEPENDENT TRUSTEE FUND COMPLEX
- ------------------- ---- -------
Robert Arnold $ $
Nicholas Giordano $ $
Lawrence Thomas $ $
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 July 1, 1999, the following entities were known to own
beneficially 5% or more of the outstanding shares the Premier Money Market
Portfolio:
Kiewit Construction Company 15.84%
One Thousand Kiewit Plaza
Omaha, NE 68131
Global Surety & Insurance Co. 6.90%
One Thousand Kiewit Plaza
Omaha, NE 68131
EXHIBIT A-23
<PAGE>
Peter Kiewit Sons Inc. 5.93%
One Thousand Kiewit Plaza
Omaha, NE 68131
Wasatch Construction AJV 20.49%
One Thousand Kiewit Plaza
Omaha, NE 68131
Kiewit-Granite AJV 5.45%
One Thousand Kiewit Plaza
Omaha, NE 68131
Gilbert/Black & Veatch Texas LP 10.89%
One Thousand Kiewit Plaza
Omaha, NE 68131
As of July 1, 1999, the following entities were known to own beneficially 5% or
more of the outstanding shares of the Short/Intermediate Bond Portfolio:
Northern Trust Company 33.64%
Trustee for Continental Kiewit Inc. Pension Plan
P.O. Box 92956
Chicago, IL 60675
Decker Coal Reclamation 38.44%
One Thousand Kiewit Plaza
Omaha, NE 68131
Wilmington Trust Company 7.16%
Trustee for Black Butte Coal Co. Pension Plan
1100 N. Market Street
Wilmington, DE 19890
Wilmington Trust Company 7.02%
Trustee for Kiewit Construction Corp Retirement
Savings Plan
1100 N. Market Street
Wilmington, DE 19890
Wilmington Trust Company 7.10%
Trustee for Decker Coal Co. Pension Plan
1100 N. Market Street
Wilmington, DE 19890
As of July 1, 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 28.58%
Trustee for Continental Kiewit Inc. Pension Plan
P.O. Box 92956
Chicago, IL 60675
Decker Coal Reclamation 22.27%
One Thousand Kiewit Plaza
Omaha, NE 68131
Wilmington Trust Company 34.64%
EXHIBIT A-24
<PAGE>
Trustee for Kiewit Construction Corp Retirement
Savings Plan
1100 N. Market Street
Wilmington, DE 19890
Wilmington Trust Company 6.45%
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. 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 adviser of the Premier Money Market
Series until ______, 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
U.S. Government Series
Tax-Exempt Series
For its services as adviser, RSMC waived 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
U.S. Government Series
Tax-Exempt Series
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 also manages over
$3.8 billion in fixed income assets and $1.4 billion in equity assets for
various other institutional 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:
<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>
Premier Money Market Series $ N/A N/A N/A
EXHIBIT A-25
<PAGE>
Short/Intermediate Bond Series $ N/A N/A N/A
Large Cap Core Series $ N/A N/A N/A
Intermediate Bond Series N/A $ $ $
Municipal Bond Series N/A $ $ $
WT Large Cap Growth Series N/A $ $ $
Small Cap Core Series N/A $ $ $
International Multi-Manager Series N/A $ $ $
</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>
Premier Money Market Series $ N/A N/A N/A
Short/Intermediate Bond Series $ N/A N/A N/A
Large Cap Core Series $ N/A N/A N/A
Intermediate Bond Series N/A $ $ $
Municipal Bond Series N/A $ $ $
WT Large Cap Growth Series N/A $ $ $
Small Cap Core Series N/A $ $ $
International Multi-Manager Series N/A $ $ $
</TABLE>
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 Kiewit:
<TABLE>
<CAPTION>
JULY 1, 1998 TO THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED
OCTOBER 19, 1998 JUNE 30, 1998 JUNE 30, 1997
---------------- ------------- -------------
<S> <C> <C> <C>
Premier Money Market Series $ $983,634 $833,621
Short/Intermediate Bond Series $ $579,830 $544,147
Large Cap Core Series $ $695,586 $517,000
</TABLE>
Kiewit Investment Management Corp., waived the following fees for:
<TABLE>
<CAPTION>
JULY 1, 1998 TO THE FISCAL YEAR ENDED THE FISCAL YEAR ENDED
OCTOBER 19, 1998 JUNE 30, 1998 JUNE 30, 1997
---------------- ------------- -------------
<S> <C> <C> <C>
Premier Money Market Series $ $519,887 $334,909
Short/Intermediate Bond Series $ $115,748 $ 92,541
Large Cap Core Series $ $126,953 $109,204
</TABLE>
For Institutional shares, WTC, or RSMC , as applicable, have agreed to waive a
portion of their advisory fees or reimburse expenses to the extent total
operating expenses exceed 0.20% for the Premier Money Market Series, 0.55% for
the Short/Intermediate Bond Series; 0.55% for the Intermediate Bond Series;
0.75% for the Municipal Bond Series, 0.75% for the Large Cap Growth Series; .80%
for the Large Core Series; 0.75% for the Large Cap Value Series; 0.80% for the
Small Cap Core Series; and 1.00% for the International Multi-Manager Series.
This waiver 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 76% 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
EXHIBIT A-26
<PAGE>
Mid Cap Value Series
Small Cap Value Series
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
Mid Cap Value Series
Small Cap Value Series
For Institutional shares, CRM has voluntarily undertaken to waive a portion of
its fees and assume certain expenses of the above Series to the extent that the
total annual operating expenses exceed 1.40% of net assets.
This undertaking may be terminated at any time.
ROXBURY CAPITAL MANAGEMENT Roxbury serves as the investment adviser to the
corresponding Series of the Large Cap Growth Portfolio.
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; .50% of the Series' next $1 billion of average daily net assets; and
.45% of the Series average daily net assets over $2 billion.
For Institutional shares, Roxbury has agreed to waive a portion of its advisory
fee or reimburse expenses to the extent total operating expenses exceed 0.75%
for the WT Large Cap Growth Series. This waiver 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.
SUB-ADVISORY SERVICES
INTERNATIONAL MULTI-MANAGER SERIES ONLY:
The sub-advisers to the Series are:
EXHIBIT A-27
<PAGE>
CLEMENTE CAPITAL, INC. is located at Carnegie Hall Tower, 152 West 57th Street,
New York, New York 10019. Clemente has been a registered investment adviser
since 1979. SCUDDER KEMPER INVESTMENTS, INC. is located at 345 Park Avenue, New
York, New York 10154. Scudder Kemper was founded as America's first independent
investment counselor and has served as investment adviser, administrator and
distributor of mutual funds since 1928. INVISTA CAPITAL MANAGEMENT, 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.
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.
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
U.S. Government Series
Tax-Exempt Series
Short/Intermediate Bond Series
Intermediate Bond Series
EXHIBIT A-28
<PAGE>
Municipal Bond Series
WT Large Cap Growth Series
Large Cap Value Series
Small Cap Core Series
International Multi-Manager Series
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
U.S. Government Series
Tax-Exempt Series
Short/Intermediate Bond Series
Intermediate Bond Series
Municipal Bond Series
WT Large Cap Growth Series
Large Cap Value Series
Small Cap Core Series
International Multi-Manager Series
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
Short/Intermediate Bond Series
Large Cap Core Series
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
Short/Intermediate Bond Series
Large Cap Core Series
ADDITIONAL SERVICE PROVIDERS
INDEPENDENT AUDITORS. _________________________________, serves as the
independent auditor, 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. PFPC Trust Company, 200 Stevens Drive, Lester, PA 19113, serves as
the Custodian.
TRANSFER AGENT. PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19890-0001,
serves as the Transfer Agent and Dividend Paying Agent.
EXHIBIT A-29
<PAGE>
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.
PDI will be compensated for distribution services according to the Investor
class 12b-1 Plan, which became effective _____, 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.
PAYMENTS MADE PURSUANT TO THE PRIME MONEY MARKET U.S.GOVERNMENT TAX-EXEMPT
12B-1 PLAN FOR THE 12 MONTHS ENDED MARKET SERIES SERIES SERIES
6/30/99
Trail Commissions: $ $ $
Preparation and Distribution of $ $ $
Marketing Materials:
Total: $ $ $
EXHIBIT A-30
<PAGE>
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:
12 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED
6/30/99 6/30/98 6/30/97
------- ------- -------
Premier Money Market Series
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
WT Large Cap Growth Series
Large Cap Core Series
Small Cap Core Series
Large Cap Value Series
Mid Cap Value Series
Small Cap Value Series
International Multi-Manager Series
EXHIBIT A-31
<PAGE>
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:
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) _____. 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
EXHIBIT A-32
<PAGE>
or call the Transfer Agent at (800) _____. 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 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
EXHIBIT A-33
<PAGE>
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, 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
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 Portfolio 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 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.
EXHIBIT A-34
<PAGE>
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.
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
EXHIBIT A-35
<PAGE>
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 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.
EXHIBIT A-36
<PAGE>
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.
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
EXHIBIT A-37
<PAGE>
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
EXHIBIT A-38
<PAGE>
proportionate share of those taxes, (2) will be 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
EXHIBIT A-39
<PAGE>
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. 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
EXHIBIT A-40
<PAGE>
conditions and the level of each Portfolio's expenses. These performance figures
are calculated in the following manner:
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 %
Prime Money Market Portfolio %
Premier Money Market Portfolio %
Tax-Exempt Portfolio %
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 %
Prime Money Market Portfolio %
Premier Money Market Portfolio %
Tax-Exempt Portfolio %
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 %
31% tax bracket %
36% tax bracket %
39.6% tax bracket %
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:
EXHIBIT A-41
<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.
EXHIBIT A-42
<PAGE>
AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR
- -------------------- -------- -------- -------
U.S. Government % % %
- -------------------- -------- -------- -------
Prime Money Market % % %
- -------------------- -------- -------- -------
Premier Money Market % % %
- -------------------- -------- -------- -------
Tax-Exempt % % %
- -------------------- -------- -------- -------
Short/Intermediate % % N/A
Bond
- -------------------- -------- -------- -------
Intermediate Bond % % N/A
- -------------------- -------- -------- -------
Municipal Bond % % N/A
- -------------------- -------- -------- -------
WT Large Cap Growth % % %
- -------------------- -------- -------- -------
Large Cap Core % % %
- -------------------- -------- -------- -------
Small Cap Core % N/A N/A
- -------------------- -------- -------- -------
International % % %
Multi-Manager
- -------------------- -------- -------- -------
Large Cap Value % % N/A
- -------------------- -------- -------- -------
Mid Cap Value % N/A N/A
- -------------------- -------- -------- -------
Small Cap Value % 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
EXHIBIT A-43
<PAGE>
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 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
EXHIBIT A-44
<PAGE>
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.
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.
EXHIBIT A-45
<PAGE>
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
Each Portfolio's audited financial statements and the audited financial
statements of its corresponding Series for the fiscal year ended June 30, 1999,
including notes thereto and the report of __________thereon, are incorporated
herein by reference to the Portfolio's Annual Report to Shareholders.
EXHIBIT A-46
<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.
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
EXHIBIT A-47
<PAGE>
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.
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
EXHIBIT A-48
<PAGE>
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 securities
markets or, in the case of index options, fluctuations in the
market sector represented by the selected index.
EXHIBIT A-49
<PAGE>
(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 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
EXHIBIT A-50
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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.
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
EXHIBIT A-51
<PAGE>
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.
EXHIBIT A-52
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(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.
EXHIBIT A-53
<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
EXHIBIT A-54
<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.
EXHIBIT A-55
<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:
(BULLET) Leading market positions in well-established industries.
(BULLET) High rates of return on funds employed.
(BULLET) Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
(BULLET) Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
(BULLET) Well-established access to a range of financial markets and
assured sources of alternate liquidity.
EXHIBIT A-56
<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+.
EXHIBIT A-57
<PAGE>
EXHIBIT B
Reported below are the Schedule of Investments, Financial Statements and
Highlights, and accompanying notes of Large Cap Growth Portfolio for the year
ended June 30, 1999, which was included in the Annual Report of The Rodney
Square Strategic Equity Fund for the fiscal year ended June 30, 1999.
THE RODNEY SQUARE STRATEGIC EQUITY FUND -- LARGE CAP GROWTH EQUITY PORTFOLIO
- ----------------------------------------------------------------------------
INVESTMENTS / JUNE 30, 1999
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
-------- ----------
COMMON STOCK -- 98.3%
COMMUNICATION & BROADCASTING -- 3.6%
MCI Worldcom, Inc. ............................... 94,000 $ 8,107,500
------------
TOTAL COMMUNICATION & BROADCASTING ...................... 8,107,500
------------
DRILLING OIL & GAS WELLS -- 0.5%
Enron Oil & Gas Co. .............................. 50,000 1,012,500
------------
TOTAL DRILLING OIL & GAS WELLS .......................... 1,012,500
------------
FINANCE & INSURANCE -- 8.0%
INSURANCE CARRIERS -- 6.0%
American International Group, Inc. ............... 80,000 9,365,000
Equitable Cos., Inc. ............................. 26,000 1,742,000
Protective Life Corp. ............................ 65,000 2,145,000
------------
13,252,000
------------
STATE & NATIONAL BANKS -- 2.0%
Citigroup, Inc. .................................. 75,748 3,598,030
State Street Corp. ............................... 10,000 853,750
------------
4,451,780
------------
TOTAL FINANCE & INSURANCE ............................... 17,703,780
------------
MANUFACTURING -- 46.6%
AIRCRAFT & AEROSPACE -- 3.4%
AlliedSignal, Inc. ............................... 60,000 3,780,000
United Technologies Corp. ........................ 53,000 3,799,437
------------
7,579,437
------------
COMPUTERS & OFFICE EQUIPMENT -- 10.2%
Computer Associates International, Inc. .......... 60,250 3,313,750
Dell Computer Corp. .............................. 100,000 3,700,000
Intel Corp. ...................................... 134,000 7,973,000
Microsoft Corp ................................... 84,800 7,647,900
------------
22,634,650
------------
CONSUMER PRODUCTS -- 1.5%
Fortune Brands, Inc. ............................. 60,000 2,482,500
Procter & Gamble Co. ............................. 9,000 803,250
------------
3,285,750
------------
ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES -- 6.3%
General Electric Co. ............................. 71,000 8,023,000
Tyco International Ltd. .......................... 64,000 6,064,000
------------
14,087,000
------------
ELECTRONICS -- 3.6%
Analog Devices, Inc. ............................. 120,000 6,022,500
Maxim Integrated Products, Inc. .................. 30,200 2,008,300
------------
8,030,800
------------
VALUE
SHARES (NOTE 2)
-------- ----------
FOOD & BEVERAGE -- 1.7%
Coca-Cola Co. .................................... 20,000 $ 1,250,000
PepsiCo, Inc. .................................... 65,000 2,514,688
------------
3,764,688
------------
INDUSTRIAL MACHINERY & EQUIPMENT -- 1.8%
Illinois Tool Works, Inc. ........................ 50,000 4,100,000
------------
MANUFACTURING INDUSTRIES -- 1.3%
American Home Products Corp. ..................... 50,000 2,875,000
------------
OIL FIELD MACHINERY & EQUIPMENT -- 1.0%
Schlumberger Ltd. ................................ 36,384 2,317,206
------------
PHARMACEUTICAL PREPARATIONS-- 8.3%
Abbott Laboratories .............................. 55,000 2,502,500
Amgen, Inc. ...................................... 20,000 1,217,500
Biogen, Inc. ..................................... 14,000 900,375
Bristol-Meyers Squibb Co. ........................ 80,000 5,635,000
Johnson & Johnson Co. ............................ 55,000 5,390,000
Schering-Plough Corp. ............................ 53,000 2,809,000
------------
18,454,375
------------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES -- 2.5%
Guidant Corp. .................................... 55,000 2,829,063
Medtronic, Inc. .................................. 35,000 2,725,625
------------
5,554,688
------------
TELECOMMUNICATIONS EQUIPMENT-- 3.7%
Lucent Technologies, Inc. ........................ 40,000 2,697,500
Tellabs, Inc. .................................... 40,000 2,702,500
Uniphase Corp. ................................... 17,000 2,822,000
------------
8,222,000
------------
TOBACCO -- 1.3%
Philip Morris Cos., Inc. ......................... 70,000 2,813,125
------------
TOTAL MANUFACTURING ..................................... 103,718,719
------------
SERVICES -- 27.2%
AMUSEMENT & RECREATIONAL SERVICES -- 2.5%
Carnival Corp., (A Shares) ....................... 40,000 1,940,000
Warner-Lambert Co. ............................... 54,000 3,746,250
------------
5,686,250
------------
BUSINESS SERVICES -- 7.8%
Automatic Data Processing, Inc. .................. 61,000 2,684,000
Berkshire Hathaway, Inc., (B Shares)* ............ 1,000 2,249,000
Equifax, Inc. .................................... 36,000 1,284,750
Halliburton Co. .................................. 59,500 2,692,375
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-1
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND -- LARGE CAP GROWTH EQUITY PORTFOLIO
- ----------------------------------------------------------------------------
INVESTMENTS -- CONTINUED
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
-------- ----------
Merck & Co., Inc. ................................ 92,000 $ 6,808,000
Williams Cos., Inc. .............................. 40,000 1,702,500
------------
17,420,625
------------
COMPUTER SERVICES -- 15.0%
Acxiom Corp. ..................................... 70,000 1,745,625
America Online, Inc. ............................. 40,000 4,420,000
American Management Systems, Inc. ................ 58,100 1,862,831
Cisco Systems, Inc. .............................. 140,000 9,030,000
EMC Corp. ........................................ 60,000 3,300,000
IMS Health Inc. .................................. 93,000 2,906,250
Network Associates, Inc. ......................... 60,000 881,250
Oracle Corp. ..................................... 135,000 5,011,875
Peoplesoft, Inc. ................................ 80,000 1,380,000
Sun Microsystems, Inc. ........................... 20,000 1,377,500
Yahoo! Inc. ...................................... 8,000 1,378,000
------------
33,293,331
------------
MEDICAL & HEALTH SERVICES -- 0.7%
Healthsouth Corp. ................................ 100,000 1,493,750
------------
SANITARY SERVICES -- 1.2%
Waste Management, Inc. ........................... 50,000 2,687,500
------------
TOTAL SERVICES .......................................... 60,581,456
-----------
WHOLESALE & RETAIL TRADE -- 12.4%
MISCELLANEOUS RETAIL STORES -- 2.5%
Dayton Hudson Corp. .............................. 40,000 2,600,000
Family Dollar Stores, Inc. ....................... 120,000 2,880,000
------------
5,480,000
------------
RETAIL APPAREL & ACCESSORY STORES -- 2.7%
Linens 'N Things, Inc. ........................... 75,000 3,281,250
Zale Corp. ....................................... 70,000 2,800,000
------------
6,081,250
------------
RETAIL BUILDING MATERIAL-- 3.2%
Home Depot, Inc. ................................. 112,000 7,217,000
------------
RETAIL OFFICE SUPPLIES -- 3.0%
Staples, Inc. .................................... 215,250 6,659,297
------------
WHOLESALE CHEMICALS & DRUGS -- 1.0%
Cardinal Health, Inc. ............................ 33,467 2,146,071
------------
TOTAL WHOLESALE & RETAIL TRADE .......................... 27,583,618
------------
TOTAL COMMON STOCK
(COST $161,216,012) ................................... 218,707,573
------------
VALUE
SHARES (NOTE 2)
-------- ----------
SHORT-TERM INVESTMENTS -- 0.6%
Samson Street Fund -
Money Market Portfolio ......................... 722,172 722,172
Temp Cash Fund - Dollar Series ................... 722,171 722,171
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $1,444,343) ....................................... 1,444,343
------------
TOTAL INVESTMENTS -- 98.9%
(COST $162,660,355) .......................................... 220,151,916
OTHER ASSETS AND
LIABILITIES, NET-- 1.1% ...................................... 2,385,883
------------
NET ASSETS-- 100.0% ............................................. $222,537,799
============
* Non-income producing security.
(DAGGER) The cost for Federal income tax purposes. At June 30, 1999, net
unrealized appreciation was $57,491,561. This consisted of aggregate gross
unrealized appreciation for all securities for which there was an excess of
market value over tax cost of $64,141,363, and aggregate gross unrealized
depreciation for all securities for which there was an excess of tax cost
over market value of $6,649,802.
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-2
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities (identified cost $162,660,355,
$70,828,138, $66,360,953 and $60,325,877,
respectively), at value ........................... $220,151,916 $78,850,895 $77,248,743 $67,542,584
Cash in interest bearing account ..................... -- -- -- 2,100,363
Receivables:
Dividends and interest ............................ 118,115 142,234 52,526 160,403
Fund shares sold .................................. 106,892 30,373 41,366 13,902
Foreign taxes ..................................... -- -- -- 174,995
Investment securities sold ........................ 6,700,708 2,386,635 359,363 694,092
Unrealized appreciation on forward foreign currency
exchange contracts (Note 7) .................... -- -- -- 18,965
Other assets .. ...................................... -- 33,877 31,402 48,295
------------ ----------- ----------- -----------
Total assets . .................................... 227,077,631 81,444,014 77,733,400 70,753,599
------------ ----------- ----------- -----------
LIABILITIES:
Due to Manager ....................................... 86,500 21,083 21,098 21,802
Payables:
Fund shares redeemed .............................. 1,152,744 2,320,753 1,367,166 449,554
Investment securities purchased ................... 3,208,988 -- -- 834,552
Other accrued expenses ............................... 91,600 42,118 28,838 46,477
------------ ----------- ----------- -----------
Total liabilities ................................. 4,539,832 2,383,954 1,417,102 1,352,385
------------ ----------- ----------- -----------
NET ASSETS. .......................................... $222,537,799 $79,060,060 $76,316,298 $69,401,214
============ =========== =========== ===========
NET ASSETS CONSIST OF:
Paid-in capital ...................................... 157,672,384 74,479,517 65,106,243 58,300,277
Undistributed net investment income .................. -- 798,378 147,136 427,375
Accumulated net realized gain (loss) on:
Investment transactions ........................... 7,373,854 (4,240,592) 175,129 3,454,951
Net unrealized appreciation on:
Investments ....................................... 57,491,561 8,022,757 10,887,790 7,216,707
Translations of assets and liabilities in
foreign currencies ............................. -- -- -- 1,904
------------ ----------- ----------- -----------
NET ASSETS ........................................... $222,537,799 $79,060,060 $76,316,298 $69,401,214
============ =========== =========== ===========
Shares of beneficial interest outstanding ............ 8,637,571 8,051,614 8,027,246 6,920,853
------------ ----------- ----------- -----------
NET ASSET VALUE, offering and redemption
price per share (Net assets/outstanding
shares of beneficial interest) .................... $25.76 $9.82 $9.51 $10.03
====== ===== ===== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-3
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Period January 1, 1999 through June 30, 1999
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ 615,996 $1,049,492 $ 395,262 $1,020,441
Interest .......................................... 53,025 60,135 45,314 65,439
Foreign taxes withheld ............................ -- -- -- (73,429)
----------- ---------- --------- -----------
669,021 1,109,627 440,576 1,012,451
----------- ---------- --------- -----------
EXPENSES:
Management fee .................................... 600,471 228,750 221,269 230,202
Accounting and administration fee ................. 109,176 41,590 36,878 35,416
Custodian fee ..................................... 17,655 7,433 6,576 77,711
Transfer agent fee ................................ 37,816 16,927 15,473 12,349
Trustees' fees and expenses ....................... 1,740 1,708 1,708 1,708
Professional fees ................................. 71,094 25,715 19,199 19,240
Registration fees ................................. 11,640 15,695 18,001 12,801
Amortization of organizational expenses ........... -- 4,163 3,855 5,953
Other expenses .................................... 20,753 8,776 9,793 24,648
----------- ---------- --------- -----------
Total expenses ................................. 870,345 350,757 332,752 420,028
Managment fee waived ........................... (51,521) (38,825) (37,727) (65,871)
----------- ---------- --------- -----------
Total expenses, net ......................... 818,824 311,932 295,025 354,157
----------- ---------- --------- -----------
Net investment income (loss) ......................... (149,803) 797,695 145,551 658,294
----------- ---------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain (loss) from:
Investment transactions ........................ 7,373,854 (262,776) 508,263 3,480,044
Foreign currency related transactions .......... -- -- -- (230,919)
----------- ---------- --------- -----------
Total net realized gain (loss) .............. 7,373,854 (262,776) 508,263 3,249,125
----------- ---------- --------- -----------
Change in unrealized appreciation (depreciation) of:
Investments .................................... 12,232,542 3,283,988 (347,702) (1,809,343)
Foreign currency ............................... -- -- -- 121,478
----------- ---------- --------- -----------
Total change in unrealized appreciation
(depreciation) ........................... 12,232,542 3,283,988 (347,702) (1,687,865)
----------- ---------- --------- -----------
Net gain on investments and
foreign currency ............................... 19,606,396 3,021,212 160,561 1,561,260
----------- ---------- --------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $19,456,593 $3,818,907 $ 306,112 $ 2,219,554
=========== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-4
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO(DAGGER) PORTFOLIO(DAGGER) PORTFOLIO(DAGGER)
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................................... $ 866,051 $ 1,167,170 $ 374,818 $ 383,770
Interest .......................................... 193,635 145,317 108,913 119,313
Foreign taxes withheld ............................ -- -- -- (10,822)
----------- ----------- ----------- -----------
1,059,686 1,312,487 483,731 492,261
----------- ----------- ----------- -----------
EXPENSES:
Management fee .................................... 868,191 256,307 231,603 219,865
Accounting and administration fee ................. 150,210 46,601 38,600 33,825
Custodian fee ..................................... 33,056 9,656 9,109 41,750
Transfer agent fee ................................ 51,598 19,590 18,555 14,858
Trustees' fees .................................... 5,230 1,554 1,554 1,554
Professional fees ................................. 172,635 30,331 26,421 25,347
Registration fees ................................. 58,282 30,768 25,448 21,475
Amortization of organizational expenses ........... -- 3,938 3,617 5,287
Other expenses .................................... 17,353 10,447 10,419 9,623
----------- ----------- ----------- -----------
Total expenses ................................. 1,356,555 409,192 365,326 373,584
Management fee waived .......................... (179,082) (59,683) (56,522) (35,331)
----------- ----------- ----------- -----------
Total expenses, net ......................... 1,177,473 349,509 308,804 338,253
----------- ----------- ----------- -----------
Net investment income (loss) ......................... (117,787) 962,978 174,927 154,008
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain (loss) from:
Investment transactions ........................ 23,800,207 (2,789,214) (188,829) 1,568,013
Foreign currency related transactions .......... -- -- -- (190,404)
----------- ----------- ----------- -----------
Total net realized gain (loss) .............. 23,800,207 (2,789,214) (188,829) 1,377,609
----------- ----------- ----------- -----------
Change in unrealized appreciation (depreciation) of:
Investments .................................... 7,975,088 (2,689,372) (4,659,464) (1,333,735)
Foreign currency ............................... -- -- -- (119,574)
----------- ----------- ----------- -----------
Total change in unrealized appreciation
(depreciation) ........................... 7,975,088 (2,689,372) (4,659,464) (1,453,309)
----------- ----------- ----------- -----------
Net gain (loss) on investments and
foreign currency ............................... 31,775,295 (5,478,586) (4,848,293) (75,700)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ................................... $31,657,508 $(4,515,608) $(4,673,366) $ 78,308
=========== =========== =========== ===========
<FN>
(DAGGER) Commenced operations on June 29, 1998.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-5
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
FOR THE PERIOD JANUARY 1, 1999
THROUGH JUNE 30, 1999
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss) ...................... $ (149,803) $ 797,695 $ 145,551 $ 658,294
Net realized gain (loss) from investment and
foreign currency transactions .................. 7,373,854 (262,776) 508,263 3,249,125
Change in unrealized appreciation (depreciation) of
investments and foreign currency ............... 12,232,542 3,283,988 (347,702) (1,687,865)
------------ ------------ ----------- -----------
Net increase in net assets resulting from
operations ........................................ 19,456,593 3,818,907 306,112 2,219,554
------------ ------------ ----------- -----------
Distributions to shareholders:
From net realized gains on investments ......... -- -- -- (780,343)
Decrease in net assets from Fund share
transactions (Note 5) ............................. (20,070,270) (18,538,419) (6,145,338) (5,822,443)
------------ ------------ ----------- -----------
Decrease in net assets ............................... (613,677) (14,719,512) (5,839,226) (4,383,232)
Net Assets:
Beginning of period ............................... 223,151,476 93,779,572 82,155,524 73,784,446
------------ ------------ ----------- -----------
End of period ..................................... $222,537,799 $ 79,060,060 $76,316,298 $69,401,214
============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of th financial statements.
EXHIBIT B-6
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL
GROWTH EQUITY VALUE EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO(DAGGER) PORTFOLIO(DAGGER) PORTFOLIO(DAGGER)
------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss) ...................... $ (117,787) $ 962,978 $ 174,927 $ 154,008
Net realized gain (loss) from investment and
foreign currency transactions .................. 23,800,207 (2,789,214) (188,829) 1,377,609
Change in unrealized appreciation (depreciation) of
investments and foreign currency ............... 7,975,088 (2,689,372) (4,659,464) (1,453,309)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations ................................... 31,657,508 (4,515,608) (4,673,366) 78,308
------------ ------------ ----------- -----------
Distributions to shareholders:
Net investment income ............................. -- (962,296) (173,342) --
Net realized gains ................................ (23,800,865) -- -- (812,763)
In excess of net realized gains ................... -- (1,188,602) (144,305) --
------------ ------------ ----------- -----------
Total Distributions ......................... (23,800,865) (2,150,898) (317,647) (812,763)
------------ ------------ ----------- -----------
Increase in net assets from Fund share
transactions (Note 5) ............................. 123,849,693 100,446,078 87,146,537 74,518,901
------------ ------------ ----------- -----------
Increase in net assets ............................... 131,706,336 93,779,572 82,155,524 73,784,446
Net Assets:
Beginning of year ................................. 91,445,140 -- -- --
------------ ------------ ----------- -----------
End of year ....................................... $223,151,476 $ 93,779,572 $82,155,524 $73,784,446
============ ============ =========== ===========
</TABLE>
FOR THE YEAR ENDED DECEMBER 31, 1997
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ............................... $ (720,844)
Net realized gain on investment transactions ...... 12,134,827
Net change in unrealized appreciation of
investments during the year .................... 8,815,986
------------
Net increase in net assets resulting from
operations ......................................... 20,229,969
------------
Distributions to shareholders from:
Net realized gains ................................ (11,758,959)
------------
Increase in net assets from Fund share
transactions (Note 5) ............................. 6,800,389
------------
Increase in net assets ............................... 15,271,399
------------
Net Assets:
Beginning of year ................................. 76,173,741
------------
End of year ....................................... $ 91,445,140
============
(DAGGER) Commenced operations on June 29, 1998.
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-7
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND -- LARGE CAP GROWTH EQUITY PORTFOLIO
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1999 FOR THE YEARS ENDED DECEMBER 31,
THROUGH -----------------------------------------------------
JUNE 30, 1999 1998(DAGGER) 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 1 ............................. (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 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 period (000 omitted) ............ $222,538 $223,151 $91,445 $76,174 $66,311 $65,267
<FN>
(DAGGER) Effective February 23, 1998, Wilmington Trust Company (WTC) assumed the
responsibility of Adviser to the Large Cap Growth Portfolio and with
the change in Adviser 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 ojective by investing at
least 65% of total assets in equity securities without regard to the
market capitalization of the issuers of such securities.
1 The net investment loss per share for the years ended December 31, 1996
and 1997 was calculated using average shares outstanding method.
* Annualized.
** Not Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
EXHIBIT B-8
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND. The Rodney Square Strategic Equity Fund (the "Fund")
is a diversified, open-end, management investment company organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Fund consists of four separate
portfolios (the "Portfolios"): the Large Cap Growth Equity Portfolio, the
Large Cap Value Equity Portfolio, the Small Cap Equity Portfolio and the
International Equity Portfolio.
The Large Cap Growth Equity Portfolio (the "Growth Portfolio") seeks superior
long-term growth of capital by investing in large cap U.S. equity securities
that are judged by the Portfolio's adviser, Wilmington Trust Company ("WTC"
or "Adviser"), to possess strong growth characteristics.
The Large Cap Value Equity Portfolio (the "Value Portfolio") seeks superior
long-term growth of capital by investing in large cap U.S. equity securities
that are judged by WTC to be undervalued in the marketplace relative to
underlying profitability.
The Small Cap Equity Portfolio (the "Small Cap Portfolio") seeks superior
long-term growth of capital by investing in small cap U.S. equity securities
that are judged by WTC to either possess strong growth characteristics or to
be undervalued in the marketplace relative to underlying profitability.
The International Equity Portfolio (the "International Portfolio") seeks
superior long-term capital appreciation by investing primarily in equity
securities of issuers located outside the United States.
Effective June 30, 1999, the Fund changed its fiscal year end from December
31 to June 30 for financial reporting and federal income tax purposes.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund:
SECURITY VALUATION. Portfolio securities, except short-term investments with
remaining maturities of 60 days or less, are valued at their market value as
determined by their last sale price in the principal market in which these
securities are normally traded. Lacking any sales, such securities are valued
at the mean between the closing bid and ask price. Short-term investments
with remaining maturities of 60 days or less are valued at amortized cost,
which approximates market value, unless the Fund's Board of Trustees
determines that this does not represent fair value. The value of all other
securities is determined in good faith under the direction of the Board of
Trustees.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the International
Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
EXHIBIT B-9
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
The International Portfolio does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the International Portfolio's books,
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities, other than investments in securities at the end of
the fiscal period, resulting from changes in exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International Portfolio may enter into forward foreign currency exchange
contracts. Additionally, from time to time the International Portfolio may
enter into these contracts to hedge certain foreign currency assets. Foreign
currency exchange contracts are recorded at market value. Certain risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized gains or losses
arising from such transactions are included in net realized gain (loss) from
foreign currency transactions.
FEDERAL INCOME TAXES. The Portfolios are treated as separate entities which
intend to continue to qualify for treatment as "regulated investment
companies" under Subchapter M of the Internal Revenue Code of 1986, as
amended, and to distribute all of their taxable income to their shareholders.
Therefore, no federal income tax provision has been made in the financial
statements. As of June 30, 1999 the Value portfolio had a net tax basis
capital loss carryforward available to offset future capital gains of
approximately $4,210,000 which will expire June 30, 2007.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions of net investment income earned
and net capital gains realized by the Portfolios, if any, will be made
annually in December. An additional distribution may be made, if necessary.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
DEFERRED ORGANIZATION COSTS. Costs incurred by the Value Portfolio, Small Cap
Portfolio and the International Portfolio in connection with their initial
registration and public offering of shares have been deferred and are being
amortized on a straight-line basis over a five-year period beginning on the
date the Portfolios commenced operations.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
EXHIBIT B-10
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
OTHER. Investment security transactions are accounted for on a trade date
basis. The Portfolios use the specific identification method for determining
realized gain or loss on investments for both financial and federal income
tax reporting purposes. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income and expenses are reported
on the accrual basis.
3. PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period January 1, 1999
through June 30, 1999, purchases and sales of investment securities
(excluding short-term investments) by the Portfolios were as follows:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO VALUE PORTFOLIO SMALL CAP PORTFOLIO INTERNATIONAL PORTFOLIO
------------------ --------------- ------------------- ------------------------
<S> <C> <C> <C> <C>
Purchases $33,796,678 $20,180,329 $5,416,134 $22,386,963
Sales 54,563,224 33,230,202 9,465,722 26,665,499
</TABLE>
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES. WTC, a wholly owned
subsidiary of Wilmington Trust Corporation, serves as Investment Adviser to
the Fund. Under the Advisory Agreement, WTC directs the investments of each
Portfolio in accordance with that Portfolio's investment objectives, policies
and limitations. In addition, WTC recommends sub-advisers for the
International Equity Portfolio, allocates assets among the sub-advisers, and
monitors and evaluates the sub-advisers' performance. For services provided
under the Advisory Agreement to the Growth Portfolio, Value Portfolio, Small
Cap Portfolio and International Portfolio, WTC receives a fee at the annual
rates of 0.55%, 0.55%, 0.60% and 0.65%, respectively, of the average daily
net assets of each Portfolio. WTC has agreed to waive its fee or reimburse
each Portfolio monthly to the extent that expenses of the Portfolio
(excluding taxes, extraordinary expenses, brokerage commissions and interest)
exceed an annual rate of 0.75% of the average daily net assets of the Growth
Portfolio, 0.75% of the average daily net assets of the Value Portfolio,
0.80% of the average daily net assets of the Small Cap Portfolio and 1.00% of
the average daily net assets of the International Portfolio.
Prior to February 23, 1998, the Fund employed Rodney Square Management
Corporation ("RSMC"), a wholly owned subsidiary of WTC, to provide asset
management, consulting services and other services to the Fund. For
management services to the Fund, RSMC received an annual fee equal to 1.00%
of the average daily net assets of the Growth Portfolio up to $200 million of
Fund net assets and 0.95% of the average daily net assets in excess of $200
million. RSMC had agreed to waive its fees or reimburse the Growth Portfolio
monthly to the extent that operating expenses (excluding taxes, extraordinary
expenses, brokerage commissions and interest) exceeded an annual rate of
1.50% of average daily net assets.
WTC also serves as custodian of the assets of the Growth Portfolio, Value
Portfolio and Small Cap Portfolio and receives a fee for this service. PFPC
Trust Company ("PFPCTrust") serves as sub-custodian to the assets of these
Portfolios, and is paid by WTC out of its fee. Bankers Trust Company serves
as Custodian of the International Portfolio's assets, and employs foreign
sub-custodians to maintain the International Portfolio's assets outside the
United States.
EXHIBIT B-11
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
PFPC Inc. ("PFPC") performs certain administrative and accounting services,
including determining the net asset value per share of each Portfolio,
pursuant to an Administration and Accounting Services Agreement with the
Fund. For the services provided, the Fund pays PFPC an annual fee equal to
the amount derived from the following schedule: 0.10% of each Portfolio's
first $1 billion of average daily net assets; 0.075% of each Portfolio's next
$500 million in average net assets; 0.05% of each Portfolio's next $500
million of average daily net assets; and 0.035% of each Portfolio's average
daily nets assets in excess of $2 billion. In addition, any related
out-of-pocket expenses incurred by PFPC in the provision of services to a
Portfolio are borne by that Portfolio.
Prior to February 2, 1998, RSMC served as Administrator to the Fund pursuant
to an Administration Agreement with the Fund on behalf of the Growth
Portfolio. For the services provided, RSMC received a monthly administration
fee from the Fund at an annual rate of 0.09% of the Growth Portfolio's
average daily net assets.
Prior to February 2, 1998, RSMC determined the net asset value per share of
the Growth Portfolio and provided accounting services to the Fund pursuant to
an Accounting Services Agreement with the Fund on behalf of the Growth
Portfolio. For its services, RSMC received an annual fee of $45,000, plus an
amount equal to 0.02% of that portion of the Growth Portfolio's average daily
net assets in excess of $100 million.
PFPC also serves as transfer and dividend disbursing agent to the Fund. For
these services, the Fund pays PFPC an annual fee of 0.03% of the Fund's
average daily net assets, plus transaction charges and out-of-pocket
expenses. Prior to February 2, 1998, RSMC served as transfer and dividend
disbursing agent to the Fund. For its services, the Fund paid RSMC $7 per
shareholder account per year, plus various other transaction fees, subject to
a minimum of $1,000 per month, plus out-of-pocket expenses.
Pursuant to a Distribution Agreement with the Fund, Provident Distributors
("PDI") manages the Fund's distribution efforts and provides assistance and
expertise in developing marketing plans and materials and receives no
compensation from the Fund. Prior to January 26, 1998, the Fund's Board of
Trustees had authorized, pursuant to a Rule 12b-1 plan of distribution, a
payment of up to 0.25% of the Growth Portfolio's average daily net assets
annually to reimburse the distributor for expenses incurred in connection
with distribution activities. Effective January 26, 1998, the Fund's Rule
12b-1 plan was terminated.
The salaries of all officers of the Fund, the Trustees who are "interested
persons" of the Fund, PFPC, PDI, WTC and PFPC Trust or their affiliates and
all personnel of the Fund, PFPC, PDI, WTC or PFPC Trust performing services
related to research, statistical and investment activities are paid by PFPC,
PDI, WTC or PFPC Trust or their affiliates.
EXHIBIT B-12
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
5. FUND SHARES. At June 30, 1999, there was an unlimited number of shares of
beneficial interest, $0.01 par value, authorized. The following table
summarizes the activity in shares of the Portfolios:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FISCAL FOR THE FISCAL
JANUARY 1, 1999 YEAR ENDED YEAR ENDED
THE GROWTH PORTFOLIO THROUGH JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold ................. 422,168 $10,293,120 601,227 $ 13,986,641 179,170 $ 3,907,003
Shares issued in
exchange for securities
transferred in-kind
(Note 6) ................. -- -- 4,749,182 113,362,975 -- --
Shares issued to
shareholders in
reinvestment of
distributions ............ -- -- 972,651 22,740,589 490,664 10,372,625
Shares redeemed ............. (1,246,131) (30,363,390) (1,141,100) (26,240,512) (354,225) (7,479,239)
---------- ------------ ---------- ------------ ---------- -----------
Net increase (decrease) ..... (823,963) $ 20,070,270 5,181,960 $123,849,693 315,609 $ 6,800,389
============ ============ ===========
Beginning of year ........... 9,461,534 4,279,574 3,963,965
---------- ---------- ----------
End of year ................. 8,637,571 9,461,574 4,279,574
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 1, 1999 FOR THE PERIOD JUNE 29, 1998(DAGGER)
THE VALUE PORTFOLIO THROUGH JUNE 30, 1999 THROUGH DECEMBER 31, 1998
------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold ............................ 448,376 $ 4,123,795 998,364 $ 9,377,897
Shares issued in exchange for
securities transferred in-kind
(Note 6) ............................ -- -- 9,470,838 94,708,383
Shares issued to shareholders in
reinvestment of distributions ....... -- -- 231,206 2,124,787
Shares redeemed ........................ (2,479,068) (22,662,214) (618,102) (5,764,989)
----------- ------------ ----------- ------------
Net increase (decrease) ................ (2,030,692) $(18,538,419) 10,082,306 $100,446,078
============ ============
Shares outstanding:
Beginning of period .................... 10,082,306 --
----------- -----------
End of period .......................... 8,051,614 10,082,306
=========== ===========
<FN>
(DAGGER) Commencement of operations.
</FN>
</TABLE>
EXHIBIT B-13
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
6. TRANSFERS IN-KIND AND COMMENCEMENT OF NEW PORTFOLIOS. Effective June 29,
1998, the Wilmington Trust Growth Stock Fund ("Growth Stock Fund"), the
Wilmington Trust Value Stock Fund ("Value Stock Fund"), the Wilmington Trust
Small Cap Fund ("Small Cap Fund") and the Wilmington Trust International Fund
("International Fund"), each a Wilmington Trust Collective Investment Fund
("WTCIF"), transferred all of their net assets, including their securities,
to the Growth Portfolio, the Value Portfolio, the Small Cap Portfolio and the
International Portfolio, respectively. The shareholders of each WTCIF
received shares of the respective Portfolios based on the net assets
transferred divided by the net asset value of the respective Portfolio.
The transfer was conducted on a taxable basis with respect to the Growth
Stock Fund, whereby any unrealized appreciation or depreciation on the
securities on the date of transfer was recognized by the Growth Stock Fund
and the Growth Portfolio's basis in the securities reflect their market value
as of the date of transfer.
The transfer of securities was conducted on a tax-free basis with respect to
the Value Stock Fund, the Small Cap Fund and the International Fund, whereby
any unrealized appreciation or depreciation on the securities on the date of
transfer was not treated as a taxable event by the Value Stock Fund, Small
Cap Fund and the International Fund. The Value Portfolio's, the Small Cap
Portfolio's and the International Portfolio's basis in the securities reflect
their historical cost basis as of the date of transfer.
The following table summarized the aforementioned transactions:
THE WILMINGTON TRUST COLLECTIVE INVESTMENT FUNDS
NET ASSET UNREALIZED
SHARES AT VALUE AT APPRECIATION
FUND NAME 6/28/98 6/28/98 AT 6/28/98
------------ --------- ------------ -------------
Growth Stock Fund 1,696,889 $113,362,975 $30,345,500
Value Stock Fund 2,046,297 94,708,383 7,428,141
Small Cap Fund 2,559,982 79,041,552 15,894,957
International Fund 2,152,552 63,534,185 10,359,785
THE RODNEY SQUARE STRATEGIC EQUITY FUND
COMBINED
SHARES NET ASSETS NAV
ISSUED IN AFTER PER
PORTFOLIO NAME EXCHANGE EXCHANGE SHARE
------------ --------- ------------ -------
Growth Portfolio 4,749,182 $209,657,472 $23.87
Value Portfolio 9,470,838 94,708,383 10.00
Small Cap Portfolio 7,904,155 79,041,552 10.00
International Portfolio 6,353,419 63,534,185 10.00
EXHIBIT B-14
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
7. COMMITMENTS. As of June 30, 1999, the International Portfolio had entered
into forward foreign currency exchange contracts which contractually obligate
the Portfolio to deliver or receive currencies at specified future dates. The
open contracts were as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
SETTLEMENT CONTRACT VALUE AT APPRECIATION
DATE CURRENCY PURCHASED AMOUNT 6/30/99 (DEPRECIATION)
--------- ----------------------- --------- --------- ---------------
<S> <C> <C> <C> <C>
7/1/99 856 British Pound $ 1,365 $ 1,349 $ (16)
7/1/99 9,055 British Pound 14,440 14,273 (167)
7/2/99 564 British Pound 898 889 (9)
7/1/99 13,582,038 Japanese Yen 111,971 112,215 244
NET UNREALIZED
SETTLEMENT CONTRACT VALUE AT APPRECIATION
DATE CURRENCY SOLD AMOUNT 6/30/99 (DEPRECIATION)
--------- ----------------------- --------- --------- ---------------
<S> <C> <C> <C> <C>
7/1/99 43,298 British Pound $ 68,670 $ 68,250 $ 420
7/1/99 68,124 Eurodollars 70,952 70,255 697
7/1/99 40,280 Eurodollars 41,682 41,539 143
7/6/99 54,291 Eurodollars 56,181 55,989 192
9/7/99 75,655,669 Japanese Yen 649,405 631,944 17,461
</TABLE>
EXHIBIT B-15
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
- ---------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Trustees of the Rodney Square Strategic Equity Fund:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Rodney Square Strategic Equity Fund
(comprised of the Large Cap Growth Equity, Large Cap Value Equity, Small Cap
Equity and International Equity Portfolios) (the "Fund") as of June 30, 1999,
and the related statements of operations, the statements of changes in net
assets and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1999, by correspondence with the Funds'
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Rodney Square Strategic Equity
Fund at June 30, 1999, and the results of their operations, the changes in their
net assets, and their financial highlights for each of the periods indicated
therein, in conformity with generally 7accepted accounting principles.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
August 9, 1999
EXHIBIT B-16
